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.
At common law, a material alteration renders the contract void.1 In negotiable instruments, before the Negotiable Instruments Law, the defense that the instrument was materially altered after the delivery, could be set up against a bona fide holder for value, where it was not the negligence of the maker that made such alteration possible.2 He may show that he had marked out the words of negotiability and that such mark has been erased.3 If the negligence of the maker has made such alteration possible,4 as where he has left blanks in the instrument which have been filled so as to make an apparent contract different from the real contract entered into by the maker,5 or where he has written a material part of the contract on such a part of the paper that it can be detached from the rest of the paper easily and without chance of detection,66e has been held liable to a bona fide holder on principles of estoppel. Some authorities, however, hold that even if the maker is negligent in giving opportunity for alteration, he is not liable in case of material alteration even to a bona fide holder.7 The ultimate view of some courts, however, seems to be that negligence on the part of the maker may estop him, in case an altered note passes to a bona fide holder, but that leaving a blank in a note is not negligence as a matter of law, but is merely a circumstance to be considered in determining the presence or absence of negligence.8
Indiana. Ruddell v. Fhalor, 72 Ind. 533, 37 Am. Rep. 177.
Iowa. Wright v. Flinn, 33 Ia. 159.
Nebraska. Willard v. Nelson, 3.5 Neb. 651, 37 Am. St. Rep. 455, 33 N. W. 572.
Ohio. Ross v. Doland, 20 O. S. 473.
Wisconsin. Keller v. Schmidt, 104 Wis. 596, 80 N. W. 935.
18 Keller v. Schmidt, 104 Wis. 596, 80 N. W. 935.
19 Burrows v. Telegraph Co., 86 Minn. 499, 91 Am. St. Rep. 380, 58 L. R. A. 433, 90 N. W. 1111.
1 See ch. LXXXV.
2 United States. Exchange National Bank v. Bank. 58 Fed. 140, 22 L. R. A.
Arkansas. Fordyoe v. Kosnrinski, 49 Ark. 40, 4 Am. St. Rep. 18, 3 S. W. 892; Arnold v. Wood, 127 Ark. 234, 191 S. W. 900.
Indiana. Young v. Baker, 29 lnd. App. 130, 64 N. E. 54.
Michigan. Stevens v. Venema. 202 Mich. 232, 168 N. W. 531.
Mississippi. Simmons v. Lampton Co., 69 Miss. 862, 23 L. R. A. 599, 12 So. 263.
Nebraska. Erickson v. Bank, 44 Neb. 622, 28 L. R. A. 577, 62 N. W. 1078.
North Dakota. Porter v. Hardy, 10 N. D. 551, 8S N. W. 458; Aamofch v. Hunter, 33 N. D. 582, 157 N. W. 299.
Ohio. Newman v. King, 54 O. S. 273, 56 Am. St. Rep. 705, 35 L. R. A. 471, 43 N. E. 683.
Oklahoma. Cox v. Kirkwood, - Okla. - , 158 Pac. 930; Wayne County National Bank v. Kneeland, - Okla. - , 161 Pac. 193; Voris v. Birdsall, - Okla. - , 162 Pac. 961.
Pennsylvania. Citizens' National Bank v. Williams, 174 Pa. St. 66, 35 L. R. A. 464, 34 Atl. 303.
The Negotiable Instruments Law provides: "Where a negotiable instrument is materially altered without the assent of all parties liable thereon, it is avoided, except as against a party who has himself made, authorized, or assented to the alteration, and subsequent indorsers. But 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."9 Under this section of the Negotiable Instruments Law, a holder in due course, who was not a party to the alteration, may enforce payment of the instrument according to its original tenor.10 He can not recover in accordance with the altered terms of the contract.11 Under this statute it has been held that the fact that the maker leaves blanks in a check when he delivers it to the payee, does not prevent him from recovering from the bank if the bank has paid such check after it has been altered fraudulently by inserting a larger amount than that which the maker inserted, since by this statute such an alteration makes the instrument absolutely void.12 If, however, the maker has received the benefit of the instrument as it was originally executed, he must allow the bank credit for the original amount.13 It is said that one who is not a bona fide holder can not recover upon a contract which has been altered materially.14 This section does not apply to an alteration in an overdue note.15 If the instrument has been altered after maturity by changing its date so as to make it appear that it is not yet due, a bona fide holder can not recover on such instrument against a maker who has paid it.18 This section does not apply to a holder who required that a fictitious payment be indorsed on the instrument before he would discount it;17 and it has been held not to apply to a case in which the payee takes for a pre-existing debt a note in which blanks have been filled in violation of instructions.18
3 Aamoth v. Hunter, 33 N. D. 582, 157 N. W. 299.
4 Merritt v. Boyden, 191 111. 136, 85 Am. St. Rep. 246, 60 N. E. 907; Trigg v. Taylor, 27 Mo. 245, 72 Am. Dec. 263; Garrard v. Hadden, 67 Pa. St. 82, 5 Am. Rep. 412.
5 Winter v. Pool, 104 Ala. 580, 16 So. 543; Merritt v. Boyden, 191 111. 136, 85 Am. St. Rep. 246, 60 N. E. 907; Kramer v. Schnitzer, 268 111. 603, 109 N. E. 695; Cason v. Bank, 97 Ky. 487, 53 Am. St. Rep. 418, 31 S. W. 40; Weidman v. Symes, 120 Mich. 657, 77 Am. St. Rep. 603, 79 N. W. 894.
6 Noll v. Smith, 64 Ind. 511, 31 Am. Rep. 131; Brown v. Reed, 79 Pa. St. 370, 21 Am. Rep. 75.
Contra, Wait v. Pomeroy, 20 Mich. 425, 4 Am. Rep. 395.
7 Fordyce v. Kosminski, 49 Ark. 40, 4 Am. St. Rep. 18, 3 S. W. 892; Rnox-ville National Bank v. Clark, 51 Ia. 264, 33 Am. Rep. 129, 1 N. W. 491; Burrows v. Klunk, 70 Md. 451, 14 Am. St. Rep. 371, 3 L. R. A. 576, 17 Atl. 378; Searles v. Seipp, 6 S. D. 472, 61 N. W. 804.
8 See also, National Exchange Bank v. Lester, 194 N. Y. 461, 21 L. R. A. (N.S.) 402, 87 N. E. 779; Conger v. Crabtree, 88 Ia. 536, 45 Am. St. Rep. 249, 55 N. W. 335. If alteration by stranger to contract, bona fide holder may recover on original consideration. Walsh v. Hunt, 120 Cal. 46, 39 L. R. A. 697, 52 Pac. 115. If by party, no recovery. Schwartz v. Wilmer, 90 Md. 136, 44 Atl. 1059; Moss v. Maddux, 108 Tenn. 405, 67 S. W. 855.
An immaterial alteration does not affect the validity of a non-negotiable instrument,19 and it does not affect the validity of a negotiable instrument.20 A memorandum to the effect that "this note is to fulfill a certain agreement," is not a material part of the instrument, and the fact that it is erased does not render the instrument invalid in the hands of a bona fide holder.
9 Section 124 of the Negotiable Instruments Law.
10 Arnold v. Wood, 127 Ark. 234, 191 S. W. 060; Public Bank v. Burchard. 135 Minn. 171 [sub nomine, Public Bank v. Knox-Burchard Mercantile Co., 160 X. W. 667]; Bothell v. Schweitzer, 84 Neb. 271, 22 L. R. A. (N.S.) 263, 120 X. W. 1129; Zehr v. Champlin, - Okla. - , 159 Pac. 1185: Conqueror Trust Co. v. Simmon, - Okla. - , 162 Pac. 1098.
11 Bothell v. Schweitzer, 84 Neb. 271, 22 L. R. A. (N.S.) 203, 120 N. W. 1129.
12 Commercial Bank v. Arden, 177 Ky. 520, L. R. A. 1918B, 320, 197 S. W. 951.
13 Commercial Bank v. Arden, 177 Ky. 520, L. R. A. 1918B, 320, 197 S. W. 951.
14 Zehr v. Champlin, 60 Okla. 242, 159 Pac. 1185.
15 Pensacola State Bank v. Melton, 210 Fed. 57; Fairfield Countv National Bank v. Hammer, 89 Conn. 592, L. R. A. 1918E, 163, 95 Atl. 31.
16 Fairfield County National Bank v. Hammer, 89 Conn. 592, L. R. A. 1918E, 163, 95 Atl. 31.
17 Washington Finance Corporation v. Glass, 74 Wash. 653, 46 L. R. A (N.S.) 1043, 134 Pac. 480.
18 Vandor Ploeg v. Van Zuuk, 135 la. 350, 13 L. R. A. (N.S.) 490, 112 N. W. 807.
19 See ch. LXXXV.
If the maker has authorized a change in the form of an instrument, such change is not an alteration,21 and it does not affect the validity of the negotiable instrument.22 Filling in blanks as to the amount of attorney's fees, to be paid in case of action, with "ten per cent.," does not render the note invalid.23 A maker who has left blanks in an instrument and has given authority to fill them, but in a specified manner, is liable, although they are filled up in a manner in which he does not specify.24 If a note is attached to an order and authority is given to detach the note upon acceptance, the maker of such note is liable to a bona fide holder after such note is detached from such order, although the maker attempted to countermand such order.25