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terest at the rate of 10 per cent. per annum. The defendant has brought a writ of error. The declaration of the plaintiff avers the adoption by the city council of the motion of August 21, 1878, and sets forth a copy thereof and of the circular letter, and alleges that one of the circulars was sent to the plaintiff, and one to each of the other holders of the defendant's bonds; that thus the defendant fully acknowledged and recognized the plaintiff's bonds as valid and subsisting obligations of the defendant; and that, on the eighth of November, 1875, the defendant recognized the existence and validity of the plaintiff's bonds by paying to him that day $290 on account thereof. The answer avers that the $290 was paid and credited wholly on bond No. 78; that there is due on that bond $434, which sum the defendant offers to pay and brings into court; that more than five years elapsed after the maturity of the other bonds before this suit was brought, and it is barred by the statutes of limitation of Kansas; that the defendant never acknowledged or recognized the plaintiff's bonds as subsisting obligations, as alleged in the declaration; and that the circular was never sent to the plaintiff by the city, or by its clerk, or by any of its officers, and the plaintiff never received it from the city, or from any party on behalf of the city. To this answer there is a reply containing a general denial.
The statute of Kansas in force when this suit was commenced (Gen. St. Kan. c. 80, art. 3, § 18, subd. 1, p. 633) provided that an action on any agreement, contract, or promise in writing could only be brought within five years after the cause of action accrued, and not afterwards. Consequently, this suit was barred as to all the bonds, unless saved under the following provisions of the statute, (Id. § 24, p. 634:) "In any case founded on contract, when any part of the principal or interest shall have been paid, or an acknowledgment of an existing liability, debt, or claim, or any promise to pay the same, *shall have been made, an action may be brought in such case within the period prescribed for the same, after such payment, acknowledgment, or promise; but such acknowledgment or promise must be in writing, signed by the party to be charged thereby." The construction of section 24 by the supreme court of Kansas, in Elder v. Dyer, 26 Kan. 604, is that a case may be taken out of the operation of section 18 in three ways: (1) By the payment of part of the principal or interest; (2) by an acknowledgment in writing of an existing liability, debt or claim, signed by the party to be charged; (3) by a promise of payment, in writing, signed by the party to be charged; that it is not necessary all these things should co-exist, but only requisite that one of them should exist; and that it is not necessary the acknowledgment should amount to a new promise. But it is also held by the same court that the acknowledgment, to be effective, must be made, not to a stranger, but to the creditor, or to some one acting for or representing him. Sibert v. Wilder, 16 Kan. 176; Schmucker v. Sibert, 18 Kan. 104; Clawson v. McCune's Adm'r, 20 Kan. 337.
In the present case, the circuit court finds that the committee, in its report, recommended that the circular letter should "be sent to each person holding city and school-district bonds, except Macadam bonds;" that the report stated that the committee made no report about Macadam bonds; that, on the report, the city council adopted a motion instructing the city clerk to have 100 copies printed of the circular letter, with the report, to be sent to the holders of the city bonds; and that the clerk caused to be printed 100 copies of the circular letter, and sent a copy of the same to each of the holders of the bonds of the city, except to the holders of the special improvement or Macadam bonds, but did not send the circular to the plaintiff, or to any agent or representative of his, or to any other holder of the special improvement or Macadam bonds. It is not found that any copy of the circular was received from the city, or from any one acting for it, by any holder of any Macadam bond, or his agent or representative. The recommendation of the committee, and
its statement that it made no report about the Macadam bonds, and the fact that the circular letter offers no compromise as to those bonds, was a sufficient reason for not communicating with the holders of those bonds. In this connection, it may be observed that, by the report of the case of U.S. v. Fort Scott, 99 U. S. 152, it appears that, in that case, the city of Fort Scott, at October term, 1878, contested, in this court, its obligation to impose a tax on all the taxable property of the city to pay like bonds of the same issue, claiming that it was bound to levy a tax only on property benefited, and that this court reversed the decision of the circuit court of the United States for the district of Kansas, which had decided in favor of the city, and against a holder of Macadam bonds, as to that question. That decision by this court was announced after the report of the committee was made, and after the date of the circular letter.
It is plain that the city made no acknowledgment to the plaintiff. It held no communication with him. It sent no copy of the circular letter to him. It intentionally refrained from doing so. It had a cogent reason for refraining in the decision which had been so made in its favor. He received no circular letter from the city. Nor did the exhibition to him of the circular letter by persons who held other bonds than Macadam bonds amount to an acknowledgment by the city to him. The circular letter states that the city council addresses it to each person holding bonds of the city; but it also states that this is done with a view to a compromise, and then it proposes compromises as to other bonds, not including the Macadam bonds. So, also, the circular letter, at its close, asks that each bondholder will express his views fully, stating the amount and kinds of bonds he holds. But this applies, necessarily, only to those who hold bonds which are to be compromised and refunded. There is nothing in the circular letter which makes, or which evinces any intention of making, an acknowledgment to holders of Macadam bonds. In view of all this, the placing in the list, under the heading "A statement of our indebtedness," of the item, "city special improvement bonds and accrued interest, 45,000," cannot be held to amount to an acknowledgment to the plaintiff of any then existing liability to him on the Macadam bonds he held. It was merely a statement that the city had issued that amount of special improvement or Macadam bonds, which it classed generally as "indebtedness," which others might claim was valid indebtedness against it, but which it carefully omitted from any proposal of compromise, and said no more about in the circular.
Although an acknowledgment need not, under the Kansas statute, amount to a new promise, yet the rule is applicable: that an acknowledgment cannot be regarded as an admission of indebtedness where the accompanying circumstances are such as to repel that inference, or to leave it in doubt whether the party intended to prolong the time of legal limitation. Roscoe v. Hale, 7 Gray, 274. Nor is there any ground for holding that what was entered upon the records of the city council is to be regarded as having been addressed to all the holders of bonds, including the plaintiff, and as having been in that way a sufficient acknowledgment to him without the sending to him of a copy of the circular letter; for that record states distinctly that no report is made about Macadam bonds, and that the circular letter is not to be sent to their holders; and the observations before made as to the contents of the circular letter, and as to the circumstances attending what is said in it about the indebtedness on the Macadam bonds, apply with even more force to this branch of the case. The record, taken as a whole, did not amount to an acknowledgment to the plaintiff as a holder of the Macadam bonds. It is not found that the plaintiff ever knew of the record till after he brought this suit.
The settled doctrine in Kansas, and the weight of authority elsewhere, is that statutes of limitation are statutes of repose, and not merely statutes of
presumption of payment. Therefore, to deprive a debtor of the benefit of such a statute by an acknowledgment of indebtedness, there must be an acknowledgment to the creditor as to the particular claim, and it must be shown to have been intentional. Roscoe v. Hale, before cited. "An acknowledgment of an existing liability, debt, or claim," within the meaning of the Kansas statute, implies a meeting of minds, the right of the creditor to take what is written as an acknowledgment to him of the existence of the debt, as well as the intention of the debtor, as deduced from the contents of the writing and all the facts accompanying it, to make such acknowledgment. In Wetzell v. Bussard, 11 Wheat. 309, 315, Chief Justice MARSHALL said: "An acknowledgment which will revive the original cause of action must be unqualified and unconditional. It must show positively that the debt is due in whole or in part." To the same effect are Bell v. Morrison, 1 Pet. 351, 362, and Moore v. Bank of Columbia, 6 Pet. 86, 92. In Barlow v. Barner, 1 Dill. 418, this statute of Kansas was under consideration by Mr. Justice MILLEF and Judge DILLON, and the court said: "Courts, by their decisions as to the effect of loose and unsatisfactory oral admissions and new promises, had almost frittered away the statute of limitations, and, to remedy this, statutes similar to the one in force in this state have been quite generally enacted. The statute of Kansas requires the acknowledgment to be in writing, and signed by the party; and the acknowledgment must be of an existing liability with respect to the contract upon which a recovery is sought."
The statement of the city treasurer to the agents of the city in New York in his letter of August 6, 1875, that special improvement bonds of certain numbers, which included those now sued on, were then unpaid, can avail nothing, for it was not a letter to the plaintiff or to his agent. The same remark is true as to the letter of August 11, 1875, and it remits $500 to apply on Macadam bonds generally. As to the payment of the $290, it was paid on bond No. 78 only, as is found, no others of the bonds sued on having been presented to that date. It was not a payment on any other bond or on the bonds as a whole. It follows from these considerations that the conclusion of law made by the circuit court on the facts found was erroneous. It ought to have rendered judgment for the defendant except as to bond No. 78. Its special finding of facts is, under section 649 of the Revised Statutes, equivalent to the special verdict of a jury, (Norris v. Jackson, 9 Wall. 125; Copelin v. Insurance Co. Id. 461, 467; Insurance Co. v. Folsom, 18 Wall. 237, 249; Retzer v. Wood, 109 U. S. 185; S. C. 3 SUP. CT. REP. 164;) and as such special finding covers all the issues raised by the pleadings, this court has the power, under section 701 of the Revised Statutes, to direct such judgment to be entered as the special finding requires. In cases like the present one the proper practice is to direct a judgment for the defendant, instead of awarding a new trial. National Bank v. Insurance Co. 95 U. S. 673, 679; Fairfield v. County of Gallatin, 100 U. S. 47; Wright v. Blakeslee, 101 U. S. 174; People's Bank v. National Bank, Id. 181; Warnock v. Davis, 104 U. S. 775; Lincoln v. French, 105 U. S. 614; Ottawa v. Carey, 108 U. S. 110; S. C. 2 SUP. CT. REP. 361; Kirkbride v. Lafayette Co. Id. 208; S. C. 2 SUP. CT. REP. 501; Retzer v. Wood, 109 U. S. 185; S. C. 3 SUP. CT. REP. 164; Canada Southern R. Co. v. Gebhard, Id. 527; S. C. 3 SUP. CT. REP.363; East St. Louis v. Zebley, 110 U.S. 321; S. C. 4 SUP. CT. REP. 21. The trial being without error, if the finding is sufficient, the same judgment is to be given as would be given on a special verdict. Where the special finding embraces only a part of the issues, as in Ex parte French, 91 U. S. 423, a different rule prevails. Accordingly, the judgment of the circuit court is reversed, and the case is remanded to that court, with direction to enter a judgment for the plaintiff on bond No. 78 for $500, with proper interest thereon, less a credit on said bond of $290, of the date of November 8, 1875; and, as to the other bonds sued on, to enter a judgment for the defendant, with costs.
(112 U. S. 139)
MERSMAN v. WERGES and another.1
1. PROMISSORY NOTE-SURETY-DISCHARGE.
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 indorsed 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.
8. JURISDICTION OF CIRCUIT COURT-FORECLOSURE OF 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 indorsee, although the payee and mortgagee is a citizen of the same state with the defendant.
Appeal from the Circuit Court of the United States for the District of Iowa. C. H. Gatch, for appellant. Galusha Parsons, for appellee.
GRAY, J. 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 per cent. 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 the 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 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 indorsed 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 1 McCrary, 528; S. C. 3 Fed. Rep.878. The plaintiff appealed.
18. C. 3 Fed. Rep. 378.
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, be
cause it destroys the identity of the contract, and substitutes a different agree ment 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 indorsee 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 Ins. 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. U. S. 2 Wall. 219. And the addition of a new person 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. Mon. 5; Henry v. Coats, 17 Ind. 161; Wallace v. Jewell, 21 Ohio St. 163; Hamilton v. Hooper, 46 Iowa, 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 R. Co. 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 Adol. & E. 136: S. C. 3 Nev. & P. 248. See, also, Gilb. Ev. 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. Farte Yates, 2 De G. & J. 191; S. C. 27 Law J. (N. S.) Bankr. 9.
The case at bar, being on the equity side of the court, is to 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 indorsed 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 ad