This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
The addition of a party to an instrument as co-obligor is generally held to be a material alteration which discharges prior makers who have not assented to such addition.1 While it is not necessary to prove that an alteration is prejudicial to the party discharged thereby in order to show that it is material, the possibility of prejudice in case of such addition of a new party has been suggested to be that such alteration, if valid, might change the jurisdiction before which the original obligor could be brought.2 The courts are nearly unanimous in their application of this principle to the case of sureties. If A executes an instrument as principal and B executes it as a co-obligor, as surety for A, the addition of a new party to the instrument as co-obligor without B's consent discharges B.3 Some exceptions exist to this rule. If the law provides for additional sureties, the prior sureties are presumed to contract with full knowledge that subsequent sureties may be added, and they are therefore not discharged by such addition. Thus where the statute authorized the county board to require either an additional bond or additional sureties on the original bond of the county treasurer, and additional sureties are required and sign their names, the original sureties are not released.4 In some cases the fact that the additional sureties signed as sureties for all prior parties and not as co-sureties with the original sureties,5 or that they signed as guarantors,6 has been held not to discharge a prior surety. Whether the addition of a surety or co-obligor without the consent of the principal avoids the contract as to him is a question upon which the courts have divided. The weight of authority is that such alteration discharges the principal.7 The party signing last is, of course, bound even if the principal resists liability successfully, provided such party understood the circumstances under which he signed.8 Still less does such addition release the party last signing if the principal does not resist the enforcement of liability against himself.9 Other authorities hold that the addition of a surety without the principal's consent does not discharge the principal.10 The English courts at first held that such addition did not discharge the original maker;11 but this case was subsequently overruled and the view that the principal was discharged was adhered to.12 The Supreme Court of the United States has laid down the rule that the addition of the name of a surety does not discharge the principal.13 The real question involved was whether such alteration discharged a mortgage given to secure such altered note, and it was held that the mortgage was not discharged. Accordingly the holding in Mersmanv. Wergeshas subsequently been treated as an obiter by the circuit court ;14 but this case was reversed by the circuit court of appeals.15 The additional signature in this case was, however, that of a guarantor, which is not a material alteration.
11 Hence recovery could be had thereon after it was restored to its original form. James v. Tilton, 183 Mass. 275; 67 N. E. 326.
1 Gardner v. Walsh, 5 El. & Bl. 83; Reid v. Humphrey, 6 Ont. App. 403; Hochmark v. Richler, 16 Colo. 263; 26 Pac. 818; Hamilton v. Hooper, 46 la. 515; 26 Am. Rep. 161; Browning v. Gosnell, 91 la. 448; 59 N. W. 340; Sullivan v. Ru-disill, 63 la. 158; 18 N. W. 856; Allen v. Dornan, 57 Mo. App. 288; Bank v. Myers, 50 Mo. App. 157;
Harper v. Stroud, 41 Tex. 367.
2 Shipp v. Suggett, 9 B. Mon. (Ky.) 15; Wallace v. Jewell, 21 0. S. 163; 8 Am. Rep. 48.
3 Houck v. Graham, 106 Ind. 195; 55 Am. Rep. 727; 6 N. E. 594; Browning v. Gosnell, 91 la. 448; 59 N. W. 340; Hall v. McHenry, 19 la. 521; 87 Am. Dec. 451; Wallace v. Jewell, 21 O. S. 163; 8 Am. Rep. 48. Contra, Brey v. Hagan, 110 Ky. 566; 96 Am. St. Rep. 464; 62 S. W. 1.
4 Holt County v. Scott, 53 Neb,
176; 73 N. W. 681 (especially where the later sureties are rejected).
5 Bowser v. Rendell. 31 Ind. 128.
6 McCaughey v. Smith, 27 N. Y. 39. (Held by a divided court, a majority of which did not agree on any legal proposition not to discharge an indorser.)
7 Brown v. Johnson, 127 Ala. 292; 85 Am. St. Rep. 134; 51 L. R. A. 403; 28 So. 579; (overruling Montgomery Railroad Co. v. Hurst, 9 Ala. 513; Rudulph v. Brewer, 96 Ala. 189; 11 So. 314); Soaps v. Eiehberg, 42 111. App. 375; Nicholson v. Combs, 90 Ind. 515; 46 Am. Rep. 229; Singleton v. McQuerry, 85 Ky. 41; 2 S. W. 652; Shipp v. Suggett, 9 B. Mon. (Ky.) 5; Lunt v. Silver, 5 Mo. App. 186; Harper v. Stroud, 41 Tex. 367; Ford v.
Bank (Tex. Civ. App.), 34 S. W. 684.
8 Favorite v. Stidham, 84 Ind. 423; Browning v. Gosnell, 91 la. 448; 59 N. W. 340; Hamilton v. Hooper, 46 la. 515; 26 Am. Bep. 161.
9 Brownell v. Winnie, 29 N. Y. 400; 86 Am. Dec. 314.
10 Rudulph v. Brewer, 96 Ala. 189; 11 So. 314; R. R. Co. v. Hurst, 9 Ala. 513; Evans v. Partin (Ky.), 56 S. W. 648; Union Banking Co. v. Martin, 113 Mich. 521; 71 N. W. 867; Royse v. Bank, 50 Neb. 16; 69 N. W. 301; Bank v. Job, 48 Neb. 774; 67 N. W. 781.
11 Catton v. Simpson, 8 Ad. & El. 136.
12 Gardner v. Walsh, 5 El. & Bl. 83.
13 Mersman v. Werges, 112 U. S.