White v. Harris

The opinion of the Court was delivered by Mr. Chiee Justice Pope.

The defendants made their joint and several notes to Camp and Cross on the 22d May, 1901, in these words:

“$125.00. Union, South_ Carolina, May 22, 1901.

“September 1st, 1901, after date, we either of us promise to pay to the order of Camp and Cross-, one hundred and twenty-five dollars at the banking house of Wm. A. Nicholson & Son, bankers, at Union, S. C., value received with interest after maturity at the rate of eight per cent, per annum until paid. We agree in default of payment after maturity, to pay ten per cent, for attorneys’ fees for collection. J. S. Harris, W. C. Nelson and R. N. Harris.”

“$125.00. Union, South Carolina, May 22d, 1901.

“November 1st, 1901, after date, we or either of us promise to- pay to the order of Camp and Cross one hundred and twenty-five dollars at the banking house of Wm. A. Nicholson & Son, bankers, Union, S. C., value received with *68 interest after maturity at the rate of eight per cent, per annum until paid. We agree, in default of payment, after maturity, to pay ten per cent, attorneys’ fees for collection. J. S. Harris, W. C. Nelson and R. N. Harris,”

On the 14th of June, 1901, Camp and Cross, for value received, in writing, indorsed said two notes to- T. H. White and M. S. Lewis. A few days after said notes had been transferred to T. H. White and M. S. Lewis, one Cross, of the firm of Camp and Cross, who had indorsed the two notes to' White and Lewis, came to White and stated that he had seen in the Charleston News and Courier, a newspaper printed in the city of Charleston, S. C., that the words, “We agree in default of payment after maturity to- pay ten per cent, attorneys’ fees for collection,” inserted in a note, otherwise negotiable, would render such note unnegotiable. Cross then stated that he did not wish to have any trouble about this in the future, and that if White and Lewis would turn over the two notes b> him, he would go to Union, S. C., and obtain those words stricken out from each note by the makers of said notes. He receipted to White and Lewis for the two notes, and went to Union to' see the makers. He only saw one of the makers, as hereinafter mentioned. But Cross did not go any further as to the makers, but with his own hand ran the pen through those words in each note and carried the notes thus altered to the new holders, White and Lewis, and delivered them up. Both White and Lewis always protested that, if the words erased was not the act of the makers, they disclaimed any right thereto. Not being paid at maturity, White and Lewis had the notes duly protested for non-payment, and they thereafter brought this action against the three makers, as defendants. These defendants denied their liability, insisting that the notes had been altered after they signed them, by striking out the words frorii said notes; we have already described — which words in the two notes rendered them unnegotiable. The defendants also claimed that being unnegotiable notes, they were entitled to show that the same in the hands of the *69 present plaintiffs were subject to any defense they had against Camp and Cross, and they pleaded that said notes were procured by gross misrepresentation and fraud. So that the matters came on for trial before Judge Buchanan and a jury. Both sides to the controversy asked the Judge to instinct the jury to- bring a verdict for the plaintiffs or defendants, respectively. The Judge directed the jury to return a verdict for the plaintiffs for principal and interest and the costs of protest. This was done and judgment was entered upon such verdict. The defendants now appeal. The grounds of exception will be reported.

1

It must be apparent that this whole controversy is mainly hinged upon the determination of the question: Were these two notes negotiable or non-negotiable? The decisions of the Supreme Court of this State have not as yet settled what effect the insertion of the words, “we agree in default of payment after maturity to pay ten per cent, attorneys’ fee for collection,” in a note, will have upon it — that is, whether it is still a negotiable note or does it become an unnegotiable note. In the case of Sylvester, Bleckley & Co.

v. Alewine et al., 48 S. C., 308, 26 S. E., 609 , this identical question was presented. Two Justices, Mr. Justice Gary and'Mr. Chief Justice Mclver, there held that the note becomes unnegotiable, while Mr. Justice Jones held to the contrary, and Mr. Justice Pope expressed no opinion on this question, holding that a new trial had to be ordered because of the mistake of the trial Judge in improperly sustaining a demurrer. The two decisions of Bank v. Gary, 18 S. C., 282, and Bank v. Strother, 28 S. C., 505, 6 S. E., 313 , are in no way decisive of this question. A promissory note is said, in 2 A. & E. Ency., 314, to be “a written engagement by one person to pay another absolutely and unconditionally a certain sum of money at a time specified therein.” These two notes here sued on certainly fill all the requirements of promissory notes down to the words we have already quoted. Do these words change the character of these notes ? AVe think not. The ten per cent, attorneys’

*70 fees are not to- be paid until after the maturity of the notes. Besides, it has always been held in this State that a provision in a note for the payment of protest fees, never alters the character of a promissory note. It is true, that it is held in this State that a provision in a promissory note for the payment of the cost of exchange will change it to- a nonnegotiable note, why? Because the cost of exchange is an ever-varying matter. But look at these words: “We agree if this note is not paid at maturity, we will pay ten per cent, attorneys’ fees.” Are they not definite and certain? Very different are these words from those used in Bank v. Strother, supra, where a provision was inserted in the note to pay reasonable attorneys’ fees and costs.

Nothing could be more uncertain than the words used in the latter case. Now, we would use words of iro uncertain sound or meaning. We wish to1 hold a definite and distinct promise to' pay five or ten per cent, attorneys’ fees in an otherwise clear promissory note will not change its character from a promissory note.

2

With reference to exceptions alleging error in holding- that striking out said provisions for attorneys’ fees is not a material alteration. The material alteration of a note extinguishes all liability thereon as against parties not consenting.

Sanders v. Bagwell, 32 S. C., 238, 10 S. E., 946 . AYhatever changes the legal effect of the instrument is a material alteration. “The test is not whether an alteration increases or reduces a party’s liability, but whether the instrument expresses the same contract— whether it will have the same legal effect and operation after the alteration as before.” 2 A. & E. Ency. Law, 2

ed., 224, 225, and notes. The stipulation as to attorney fees is not material, in so far as the question of negotiability is concerned, but it is certainly material, in so far as the contract liability of the parties is concerned. To' add such words to a contract would certainly be a material change; to strike them out must also be material, if the test is whether the legal effect of the instrument is altered. In 2 Ency. Law, 238, it *71 is stated: “Any alteration in the amount of the principal of an instrument conditioned for the payment of money is material, whether such alteration increases or decreases the amount. Thus it has been considered a material alteration of an instrument to insert therein (Monroe v. Paddock,. 7 Ind., 422 ), or erase therefrom (Bank v. Laughlin, 4 N. Dak., 391), a provision for the payment of attorneys’ fees in the case of suit brought, or to chang'e the amount of the fee which is provided for in such clause (Burwell v. Orr, 84 Ill., 465 ).” See, also, Coburn v. Webb, 56 Ind., 96 ; 26 Am. Rep., 15 ; 2 Daniel Neg. Inst., 3ed., sec. 1375;

Sanders v. Bagwell, supra.

Now, with reference to whether the case should have been submitted to the jury. It does not appear that there was any evidence that defendants, J. S. Harris and R. N. Harris, ever consented to the alteration of the note by Cross, but it was a matter proper for the jury to consider whether defendant, W. C. Nelson, consented to such alteration. It is true, he testified that he did not consent, but, on the other hand, he testified to the effect that the change was made by Cross in his presence, and that he told Cross, “if he wanted, to' change it.” It was for the jury to1 say whether Cross made the change in the presence of W. C. Nelson and with his acquiescence. If so, Nelson would be bound, whether the other defendants are released or not.

Furthermore, touching- the question, whether the .change in the notes was an alteration or a spoliation, the case should have been submitted to the jury, under proper instructions as to the law. Contrary to' the rule in England, the authorities in the United States generally hold that if a stranger to the contract, without any complicity with the grantee or obligee, ¡materially alters an instrument in writing, that is a spoliation, and does not prevent a recovery on the original contract. 2 Dan. Neg. Inst., 3d ed., sec. 1373; 2 Ency. Daw, 2d ed.,'214. Was Cross a stranger to the contract; having indorsed the same to the plaintiff? What was the character of the indorsement, was it without recourse, and *72 was he liable to pay the notes in any contingency at the time he made the change ? . Then, if we should suppose that Cross was a stranger to the contract, it must still be determined whether there was any privity between plaintiffs and Cross with respect to such alteration, a question proper for the jury in this case.

For these reasons we think the judgment should be reversed and the case remanded for a new trial, and it is so adjudged.