FIRST NAT. BANK OF BUTTE v. WEIDENBECK et al., 97 F. 896

CALDWELL, Circuit Judge (after stating the facts as above). Formerly it was held that any alteration of a contract, whether material or immaterial, by a party claiming under it, avoided the contract. But the modern doctrine is that an immaterial alteration of a contract by a party claiming under it does not avoid the contract. 2 Pars. Gont. 717-720; Rand. Com. Paper, § 1748; Daniels, Neg. Inst. 1898.

The principal and most important question in this case is, did the addition of Tong’s name to the note as guarantor, and its subsequent erasure therefrom, in the manner and under the circumstances stated in the complaint, constitute a material alteration of the note which avoids it? The learned counsel for the plaintiff in error and the defendants in error, respectively, have furnished us with a full citation and exhaustive discussion of the authorities on both sides of this interesting subject. But, in view of the decision of the supreme court of the United States in the case of Mersman v. Werges, 112 U.

S. 139, 5 Sup. Ct. 65, 28 L. Ed. 641, we do not feel called upon to indulge in any general discussion of the question. We think all thait is there said by the court was fairly called for by the facts of that case, and that this court would not be justified in treating it as obiter dicta.

Treating the opinion in that case as authoritative, as the courts and law writers who have had occasion to discuss this question have very generally done, we are constrained to hold that placing Tong’s name on the note as a guarantor, and its subsequent erasure under the circumstances stated in the complaint, was not a material alteration of the note which avoided it. The court in that case said: “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 tlie 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 tbe contract of the others, because it increases the amount which each of them may be held to contribute. Martin v. Thomas, 24 How. 315, 16 L. Ed. 689; Smith v. U. S., 2 Wall. 219, 17 L. Ed. 788.

And tbe addition of a new person as a principal maker of a promissory note, rendering all tbe 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 he, 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 tbe surety, exclusively liable for tbe 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. Railroad 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. 163, 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 Erie, Wightmau. and Crompton held that the signing of a note by an additional surety, without tbe 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 ovoid 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, 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. Ex parte Yates, 2 De Gex & J. 191, 27 Law J.

Bankr. 9.” To the same effect are the following cases; Stone v. White, 8 Gray, 589; Miller v. Finley, 26 Mich. 249; Gano v. Heath, 36 Mich. 441; McCaughey v. Smith, 27 N. Y. 39; Barnes v. Van Keuren, 31 Neb. 165, 47 N. W. 848; Royse v. Bank, 50 Neb. 16, 69 N. W. 301; Ryan v. Bank, 148 Ill. 349, 35 N. E. 1120. These authorities support the doctrine that the addition of the name of a guarantor to a note is not a material alteration, and does not release those primarily bound. It does not in any way change or affect their rights.

It is an independent contract made with a third party, to which the consent of the obligors is unnecessary. Their liability is neither increased nor diminished by the addition of the name of the guarantor, and he has no right of contribution or exoneration.

The rights of the obligors are no more affected by the guaranty placed on the note than they would be by a guaranty placed on a separate instrument It is claimed by the defendants in error that the statute creating the liability upon which the action is founded has been repealed, and that, though the plaintiff’s right of action accrued before the repeal, he cannot recover in consequence. The statute has not been repealed, but only re-enacted in the new code of laws enacted by the legislature, with an added provision which in no way affects the plaintiff's cause of action. Fitzgerald v. Weidenbeck (C.

C.) 76 Fed. 695. The new enactment is substantially the same as the old, and was obviously intended as a mere continuation of the old law, with the slight addition thereto which in no manner affects this case.

Section 4653 of the Civil Code of Montana, which contains the new enactment, declares that “the provisions of this Code, so far as they are substantially the same as existing statutes or common law, must be construed as continuations thereof, and not as new enactments.” The provisions of the Code on this subject being “substantially the same” as the former statute, it must, under this provision of the Code, be held to be a continuation thereof. Moreover,

section 4654 of the Code provides that “no action or proceeding commenced before this Code takes effect, and no right accrued, is affected by its provisions.” The right of action in this case accrued before the Code took effect, and is therefore not affected by its provisions. We do not consider whether it is a right of action for a penalty, and, if so, the nature or character of that penalty. It is enough to say that it was a right which accrued before the Code took effect, and is therefore saved by the

section of the Code last quoted. Undoubtedly, if this action had been commenced before the Code took effect, it would have been saved by this section, and “an action commenced” and a “right accrued” are by the terms of the

section put on the same footing, — both as saved. It is very clear that it was the manifest purpose of the provisions of the Code which we have quoted to preserve all rights, and to permit all actions to be maintained, that could have been maintained bad not the Code been adopted. We agree with the learned counsel for the plaintiff in error that it is unreasonable to suppose that the legislature intended to take away the right from those creditors in whose favor it had already accrued, and give it to those who should occupy a similar position in the future.

Another contention of the defendants in error is that the statute on which the action is founded was annulled by the constitution of the state.

Section 11 of

article 15 of the constitution of Montana provides as follows: “And no company or corporation formed under the laws of any other country, state or territory shall have, or be allowed to exercise or enjoy within this state any greater rights or privileges than those possessed or enjoyed by corporations of the same or similar character created under the laws of the stated The contention is that, under this provision of the constitution, a statute imposing any duty or obligation on a domestic corporation, which is not also imposed on foreign corporations doing business in the state, is unconstitutional.

The position is untenable. One sufficient answer to it is that the liability in this case is imposed upon the officers of the corporation individually, and not upon the corporation, But, if a foreign corporation were given greater rights and privileges in the state than were enjoyed by domestic corporations, it is not perceived how that fact would annul all laws in the state applicable to domestic corporations. In the very nature of things, it is impossible to provide exactly the same system of laws for foreign as for domestic corporations. It is never done.

The constitutional provision quoted contemplated no such thing. It is an inhibition against the grant of powers and privileges to foreign corporations that are not granted to, or cannot be enjoyed by, domestic corporations under like conditions. It does not nullify all laws for the government of domestic corporations when those laws are not or cannot be applied to foreign corporations. The case of Huntington v. Attrill, 146 U. S. 657, 13 Sup. Ct. 224, 36 L. Ed. 1123, answers the contention that the suit cannot be maintained outside the state of Montana. The action is not barred.

The filing of the original complaint arrested the running of the statute. The amended complaint counts on the same cause of action as was set up in the original complaint. But the case cited by counsel for the defendants in error in support of the contention that the action is one for a penalty, and is barred in three years, under the Minnesota statute of limitation (Merchants’ Nat. Bank of Chicago v. Northwestern Manufacturing & Car Co., 48 Minn. 349, 51 N. W. 117), has been overruled (Flowers v. Bartlett, 66 Minn. 213, 68 N. W. 976).

The judgment of the circuit court is reversed, and the cause is remanded, with instructions to overrule the demurrer to the complaint, and permit the defendants to answer.