Commercial Credit Co. v. Giles

Although it was determined as a fact that the appellant purchased the note before maturity, for a valuable consideration, without notice of a fraud, the court concluded, as a matter of law, that the detachment and separation of the note sued on were void, and that the appellant was not entitled to have judgment against the appellee, who was the maker of the note. Appellant challenges this conclusion and asks the reversal of this judgment of the court. There does not appear any erasure or addition or subtraction of terms of the notes. The facts relied on to show alteration are only that the notes were cut and detached from the same piece of paper upon which the order contract was written, and then circulated. The contract order referred to the notes in the following words only:

"3. Terms: All the above-named goods to be included in the purchase price of $900.00. Three per cent. off cash in ten days. By special agreement the above can be paid in six installments of one hundred and fifty dollars ($150.00) each, in three, four, five, six, seven and eight months if the notes attached hereto properly signed accompany this order. The attached notes are executed and tendered in settlement of this order, and Partin Mfg. Co. is authorized to detach same on acceptance of this order. If the order is not accepted notes are to be canceled and returned to purchaser."

The notes are worded as follows:

"$150.00% (8) P. O. Leonard; State, Texas

"Date, Apr. 13th, 1916.

"Eight months after date for value received I promise to pay to the order of Partin Manufacturing Company, Incorporated, one hundred and fifty dollars ($150.00) at First State Bank, Leonard, Texas. [Signed] Ellis Giles."

It is evident from the face of the contract order that the maker contemplated that the attached notes would, in a certain event, be detached from the contract order; and it appears from the face of the note that it is a negotiable promissory note. The contract order and the notes together appear simply contemporaneous agreements, and; with no terms or conditions in the contract order qualifying, varying, or affecting the terms of the notes, and there is no repugnancy between them. And the separation of the notes from the contract order presented no different situation, either in fact or in legal effect, than, for illustration, had the notes been written upon a distinct and separate sheet of paper and pinned to the order contract. The mere recital in the contract order that the purchase price of the goods can be paid in notes does not make the obligation a conditional one. It is well settled that any material alteration of an instrument destroys the obligation of the contract and renders it unenforceable; and unquestionably any alteration which causes the instrument to speak different, in legal effect, from that which it spoke originally, is a material alteration. 3 Page on Contracts, § 1511; 3 Elliott on Contracts, § 2012. But, on the contrary, if there is no such change in language or meaning, and the legal validity and operation of the instrument, or its apparent regularity, is not affected, then there is not a material alteration rendering the instrument void. 2 Daniel on Negotiable Instruments (5th Ed.) § 1398; 1 R.C.L. par. 4, p. 967; Tutt v. Thornton, 57 Tex. 35. And it is believed the facts of the instant case do not warrant the conclusion of law that there was such material alteration as rendered the notes absolutely void. The case of Spencer v. Triplett, 184 S.W. 712, is, it is thought, distinguishable from this case. There the court stated that:

"The note, when construed in connection with the remainder of the contract, was not negotiable."

This construction implies that the court concluded from the record that the order to the Acme Sales Company contained agreements qualifying the terms of the note. And the authorities cited by the court show that In the writing there were agreements qualifying the terms of the notes, and that their consequent separation legally affected and changed the liability of the maker of the notes. Therefore the facts therein would amount to an alteration and have that legal effect.

The note not being void upon the contention of alteration, the maker would be liable to an innocent holder, as the court finds the appellant to be, although the order contract and the notes were canceled and revoked in the hands of the Partin Manufacturing Company, and the Partin Manufacturing Company could not maintain an action thereon against the maker. For, as said in Greneaux v. Wheeler, 6 Tex. 515:

"The title is derived from the instrument itself, and not from the title, which the party has who transfers it. The possession of the note gives the holder disposing power over the same. The note passes as a species of currency, without inquiry as to the title of the holder. It is immaterial whether the vendor be an attorney at law, or not; or whether he has obtained it * * * by fraud, by finding, or upon trust. The title of the transferee depends upon the possession of the vendor, but on none of the circumstances under which it was obtained. This possession gives him authority to sell; and if the buyer has acted in good faith, and paid a valuable consideration, his title cannot be impugned."

Appellee contends the judgment should be affirmed under the authority of Van Winkle Gin Mach. Co. v. Citizens' Bank of Buffalo,89 Tex. 147, 33 S.W. 862. It is believed that the facts here are essentially different, and that the same principle of that case does not apply here.

It is concluded that the judgment should be reversed, and that Judgment should be here now rendered in favor of the appellant; but, in view of the finding of the court that the appellant paid only 76 per cent. of the face of the note and contracted with the Partin Manufacturing Company not to pay the balance of 24 per cent. until that sum of money was paid over by the maker, a recovery, in the special facts of this case, may be allowed, it is thought, only to the extent of 76 per cent of the face of the note. The costs of the trial court and of this court will be taxed against the appellee.