Colonial National Bank of Cleveland v. Duerr

Majority

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The Colonial National Bank of Cleveland, Ohio, Respondent, v. Henry O. Duerr, the Name "Henry" Being Fictitious, etc., and John Fleming, Defendants, Impleaded with Charles A. Brown, Appellant.

Headnote

A note dated and payable and having its inception in a State is a contract of said State — when indorsed in another State the contract of indorsement is governed by the laws thereof—effect of an alteration thereof on the indorser suability.

A promissory note, dated and payable in the State of Ohio, and which has its first inception as a legal contract when discounted in that State, is an Ohio contract, and the validity thereof is determined by the laws of that State.

Where such note is indorsed in the State of New York, prior to its being discounted in the State of Ohio, the contract of indorsement is a New York contract, and the obligation of the indorser is determined by the laws of the State of New York.

The fact that after the indorsement of the note, the maker of the note at the request of the payee thereof, and without the knowledge or consent of the indorser, inserted in the body of the note the words “ with interest at 8# per annum after due until paid," which insertion was made in the State of New York, does not operate to relieve the indorser from liability on the note in the ■ hands of a person who subsequently in the State of Ohio discounted said note for value before maturity and without notice of the alteration.

Under section 205 of the Negotiable Instruments Law (Laws of 1897, chap. 612) the indorser, notwithstanding-the alteration, is liable upon the note according to its original tenor.

Appeal by the defendant, Charles A. Brown, from a judgment of the Supreme Court in favor of the plaintiff and against the defendants Duerr and Brown, entered in the office of the clerk of the county of New York on the 27th day of March, 1905, upon the verdict of a jury against said defendants rendered by direction of the court, but dismissing the complaint as to the defendant John Fleming, and also from an order entered in said clerk’s office on the 24th day of March, 1905, denying the appellant’s motion for a new trial made upon the minutes.

Frederick W. Park, for the appellant.

Allan McCulloh, for the respondent.

The action is upon a promissory note, the appellant Brown being an indorser thereof. The note was as follows :

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$25000.00 , Cleveland, Ohio, Dec. o i si, 1900.

“ One year after date I promise to pay to the order of hi. A. 'Lozier, Sr., Twenty-five thousand Dollars at. the office of the Dime Savings & Banking Co. Cleveland, Ohio.

“Value received, with interest at 8% per annum after' due until paid. _ ' II. Ó. DUERR.

“ No. 51. '

“ Due Dec. 31.

“Endorsements: “Brown & Fleming, Mar. 6, 1901.

“$1,500.00..- H. A. LOZIER.’'!

The evidence is undisputed that this note was taken by the payee to the plaintiff, a' banking corporation in Cleveland, O., and discounted by the bank, the proceeds, less interest, being credited to the payee and by him subsequently withdrawn. When due, the note was duly presented for payment, payment refused and protest duly made.. As a defense the appellant proved that a week or' two after he had indorsed .the note the maker made a material altération by adding at the end of the note as it was when .indorsed the words, “ With interest at %% per annum after due until paid,”"' and that this clause was added to the note without his knowledge, privity or consent. There is no allegation in the complaint as to the law of the State of Ohio ■ in 'relation to' an altered negotiable instrument. Upon the trial the defendant, after proving this, alteration, called an attorney at law of Cleveland, O., and offered to prove the law'of the State of Ohio .applying to the ¿Iteration .of negotiable instruments affecting the, note in suit, claiming that the1 indorsement of Brown & Fleming was an Ohio contract, and' that', the case should be decided as to Brown under the Oliio law; to which the Court replied, “You have' Hot pleaded it, and I deiiy your request;” and to that the defendant Brown excepted. At the end of the case, counsel for the defendant Brown moved to dismiss the complaint upon the ground that a material alteration had been proved and that the instrument was avoided- thereby. • That ■ motion was denied and the. appellant excepted ; whereupon, on motion, of the plaintiff, the court directed a verdict for the plaintiff, with interest at six per" cent from the date that the note became due, ' There was no request by the defendant to submit any. ques

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tion. to the jury, and the only question presented is, whether the alteration avoided the note as to the indorser.

I think that the note was an Ohio contract. It was dated in Ohio, was to be paid in Ohio, and its first inception as a legal contract was when it was discounted by the plaintiff in the State of Ohio. The indorsement, however, was made in the State of New York, and the validity of the indorsement depends upon the law of the State of New York, although the validity of the note itself would be determined by the law of the State of Ohio. By the note the maker agreed to pay a sum of money in the State of Ohio, the contract being dated in Ohio. This obligation upon the face of the • note is entirely distinct from that assumed by the indorser. Such an obligation is contingent upon the failure of the. maker to pay at maturity ; the due protest of the note and notice thereof to the indorser and his contingent liability must be determined by the law of the place where the indorsement was actually made. (22 Am. & Eng. Ency. of Law [2d ed.], 1347,1348, and cases cited.) 0Wlien the note was indorsed in this State, the obligation of the indorser became fixed by the law of this State. [| Its subsequent alteration in this State did not at all affect the indorser’s liability. Section 205 of the Negotiable Instruments Lp-w (Laws of 1897,- chap.' 612) provides that “ when an instrument has been materially altered and is in the hands of a holder in due course, not a party to the alteration, he may enforce payment thereof according to its original tenor.” With this law in force, the appellant having indorsed the note in the State of New York, the maker of the note, with the knowledge and at the request of the payee, made the alteration. That alteration in the note having been made here, whether the note was a valid instrument or whether the alteration made it void was to be determined by the law of this State. It had not at that time been discounted, and the evidence is conclusive that no consideration had been paid for it, and in the hands of the payee there could have been no recovery against either the maker or the indorser. The effect of the alteration must, I think, be determined by the law of the State of New York; and if, under the law of this State, the note did not become void, certainly it did not j-jecome void upon its subsequent discount by the plaintiff in the State of Ohio, where the plaintiff in good faith, discounted the note for value before maturity and

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without notice. It, therefore, seems to me clear that, notwithstanding the alteration; the plaintiff, the bona fide holder for value before maturity,.was entitled to enforce it.

As this was the only question presented upon the trial, we think tlie learned-trial judge Was clearly right,, and it follows that .the judgment and. order appealed'from must be affirmed, with costs»

O’Brien, P. J., Patterson and McLaughlin, JJ., concurred.

Judgment and order affirmed, with costs.