The addition of the signature of a surety to a promissory note,
without the consent of the maker, does not discharge him.
A mortgage executed by husband and wife of her land, for the
accommodation of a partnership of which the husband is a member,
and as security for the payment of a negotiable promissory note
made by the husband to his partner and endorsed by the partner for
the same purpose, and to which note the partner, before negotiating
it, adds the wife's name as a maker, without the consent or
knowledge of herself or her husband, is not thereby avoided as
against one who, in ignorance of the note having been so altered,
lends money to the partnership upon the security of the note and
mortgage.
Under the Act of March 3, 1875, c. 137, the circuit court has
jurisdiction of a suit between citizens of different states to
foreclose a mortgage made to secure the payment of a negotiable
promissory note of which the plaintiff is endorsee, although the
payee and mortgagee is a citizen of the same state with the
defendant.
This is a bill in equity, filed in the Circuit Court of the
United States for the District of Iowa by Joseph J. Mersman, a
citizen of Missouri, against Caspar A. Werges and wife, citizens of
Iowa, to foreclose a mortgage of her land in Iowa, executed on
September 1, 1870, by the husband and wife to E. H. Krueger,
likewise a citizen of Iowa,
"to be void upon condition that the said Caspar A. Werges shall
pay to the said E. H. Krueger the sum of six thousand dollars as
follows,
viz., one year from date, with ten percent
interest thereon, according to the tenor and effect of his
promissory note of even date herewith."
The bill originally set forth the note as signed by both husband
and wife, but, after the coming in of the answer, was amended by
leave of court so as to allege it to be the note of the husband
only. The case was heard upon pleadings and proofs, by which it
appeared to be as follows:
The husband and Krueger were members of a partnership engaged in
carrying on a mill, Krueger being the active partner, and Werges
and his wife living on a farm which belonged
Page 112 U. S. 140
to her. The plaintiff agreed with Krueger to lend to the
husband, for the benefit of the partnership, six thousand dollars
on the security of the farm, and the wife agreed, for the
accommodation of the partnership, to execute a mortgage of the
farm. The husband signed a note, payable to Krueger, or order, and
corresponding in terms with the mortgage, and the husband and wife
executed the mortgage, and delivered the note and mortgage to
Krueger. While they were in Krueger's hands, the name of the wife
was subscribed to the note, under that of the husband, by Krueger
or by his procurement, without the knowledge or consent of either
husband or wife. Krueger endorsed the note, and delivered the note
and mortgage to the plaintiff, who thereupon, not knowing that the
wife had not herself signed the note, advanced the money to him for
the partnership. The circuit court held that the addition of the
wife's name to the husband's note was a material alteration of the
note, and made void the mortgage, and dismissed the bill.
See 3 F. 378. The plaintiff appealed.
Page 112 U. S. 141
MR. JUSTICE GRAY delivered the opinion of the Court. He stated
the facts in the foregoing language and continued:
This Court is of opinion that the decree of the circuit court
cannot be sustained. The difference of opinion is not upon the
facts of the case, but upon their legal effect.
A material alteration of a written contract by a party to it
discharges a party who does not authorize or consent to the
alteration, because it destroys the identity of the contract, and
substitutes a different agreement for that into which he entered.
In the application of this rule, it is not only well settled that a
material alteration of a promissory note by the payee or holder
discharges the maker, even as against a subsequent innocent
endorsee for value, but it has been adjudged by this Court that a
material alteration of a note before its delivery to the payee by
one of two joint makers without the consent of the other makes it
void as to him, and that any change which alters the defendant's
contract, whether increasing or diminishing his liability, is
material, and therefore the substitution of a later date, delaying
the time of payment, is a material alteration.
Wood v.
Steele, 6 Wall. 80.
See also Angle v.
Northwestern Insurance Co., 92 U. S. 330;
Greenfield Savings Bank v. Stowell, 123 Mass. 196, and
cases there cited.
The present case is not one of a change in the terms of the
contract as to amount or time of payment, but simply of the effect
of adding another signature, without otherwise altering or defacing
the note. An erasure of the name of one of several obligors is a
material alteration of the contract of the others, because it
increases the amount which each of them may be held to contribute.
Martin v.
Thomas, 24 How. 315;
Smith v.
United States, 2 Wall. 219. And the addition of a
new person
Page 112 U. S. 142
as a principal maker of a promissory note, rendering all the
promisors, apparently, jointly and equally liable not only to the
holder but also as between themselves, and so far tending to lessen
the ultimate liability of the original maker or makers, has been
held in the courts of some of the states to be a material
alteration.
Shipp v. Suggett, 9 B.Monroe 5;
Henry v.
Coats, 17 Ind. 161;
Wallace v. Jewell, 21 Ohio St.
163;
Hamilton v. Hooper, 46 Ia. 515. However that may be,
yet where the signature added, although in form that of a joint
promisor, is in fact that of a surety or guarantor only, the
original maker is, as between himself and the surety, exclusively
liable for the whole amount, and his ultimate liability to pay that
amount is neither increased nor diminished, and, according to the
general current of the American authorities, the addition of the
name of a surety, whether before or after the first negotiation of
the note is not such an alteration as discharges the maker.
Montgomery Railroad v. Hurst, 9 Ala. 513, 518;
Stone
v. White, 8 Gray 589;
McCaughey v. Smith, 27 N.Y. 39;
Brownell v. Winnie, 29 N.Y. 400;
Wallace v.
Jewell, 21 Ohio St. 172;
Miller v. Finley, 26 Mich.
249.
The English cases afford no sufficient ground for a different
conclusion. In the latest decision at law, indeed, Lord Campbell
and Justices Erle, Wightman, and Crompton held that the signing of
a note by an additional surety without the consent of the original
makers prevented the maintenance of an action on the note against
them.
Gardner v. Walsh, 5 El. & Bl. 83. But in an
earlier decision of perhaps equal weight, Lord Denman and Justices
Littledale, Patteson, and Coleridge held that in such a case, the
addition did not avoid the note or prevent the original surety, on
paying the note, from recovering of the principal maker the amount
paid.
Catton v. Simpson, 8 Ad. & El. 136;
S.C. 3 Nev. & Per. 248.
See also Gilbert on
Evidence 109. And in a later case, in the Court of Chancery upon an
appeal in bankruptcy, Lords Justices Knight Bruce and Turner held
that the addition of a surety was not a material alteration of the
original contract.
Ex Parte Yates, 2 De G. & Jon. 191;
S.C. 27 Law Journal (N.S.), Bankr. 9.
The case at bar, being on the equity side of the court, is
to
Page 112 U. S. 143
be dealt with according to the actual relation of the parties to
the transaction, which was as follows:
The note, though in form made by the husband to his partner,
Krueger, and endorsed by Krueger, was without consideration as
between them, and was in fact signed by both of them for the
benefit of the partnership. The mortgage of the wife's land was
executed and delivered by her and her husband to Krueger, for the
same purpose. The name of the wife was signed to the note by
Krueger, or by his procurement, before it was negotiated for value.
The plaintiff received the note and mortgage from Krueger and
advanced his money upon the security thereof in good faith and in
ignorance that the note had been altered. If the wife had herself
signed the note, she would have been an accommodation maker, and,
in equity at least, a surety for the other signers, and neither the
liability of the husband as maker of the note nor the effect of the
mortgage executed by the wife, as well as by the husband, to secure
the payment of that note would have been materially altered by the
addition of her signature. There appears to us, therefore, to be no
reason why the plaintiff, as endorsee of the note, seeking no
decree against the wife personally, should not enforce the note
against the husband, and the mortgage against the land of the
wife.
This suit being between citizens of different states and founded
on a negotiable promissory note, the endorsement of which to the
plaintiff carried with it as an incident, in equity, the mortgage
made to secure its payment, was within the jurisdiction of the
circuit court, under the Act of March 3, 1875,c. 137, although
Krueger, the payee and mortgagee, could not have maintained a suit
in that court. 18 Stat. 470;
Sheldon v.
Sill, 8 How. 441,
49 U. S. 450;
Tredway v. Sanger, 107 U. S. 323.
Decree reversed.
