Gary Darnall and Emilie Darnall v. Bernard Petersen and Kay Petersen

Promissory Note - Alteration Of Instruments - On February 10, 1995, the Darnalls filed a lawsuit against
the Petersens alleging that on January 26, 1989, the Petersens
executed a promissory note for $55,000 plus interest. The note
was due on demand and provided for 13 percent interest and 18
percent default interest. The Darnalls alleged that they had
received only two payments, one payment for principal and
interest in the amount of $45,000 and another payment for
interest in the amount of $2,500.

The Petersens' answer, filed March 9, 1995, generally denied
the allegations and alleged that when they signed the note, the
blanks for the interest rate and the default interest rate were
not filled in. The Petersens further alleged that the parties had
agreed on a variable interest rate, the terms of which were to be
filled in at a later date. The Petersens also contended that the
default rate of interest was usurious.

The Petersens' attorney subsequently withdrew, and on
November 28, 1995, Kay, represented by a new attorney, filed a
second answer. Kay alleged that when the note was presented to
her, no interest rate was shown on the note and that it was her
understanding that no interest would be charged on the note. Kay
further alleged that the interest rate on the note was usurious
and prayed that the court find that the Darnalls should not be
permitted to collect interest and that the amount due and owing
on the note was $7,500.

On December 5, 1995, Kay filed a "Motion to File an Amended
Answer," with the pleading attached as an exhibit. In addition to
the allegations set forth above, Kay's amended
answer contained allegations that the note had been materially
altered without any authority and that no interest or due date
was specified on the note she originally signed. While our record does
not contain an order sustaining Kay's motion, it is apparent from the
proceeding that followed its filing that the district court and
parties treated the motion as having been granted.

Trial was held February 26, 1996. Bernard did not appear at
trial nor did counsel appear on his behalf. Counsel for the
Darnalls read certain "admissions" of Bernard into the record
that were deemed to be admitted because of Bernard's failure to
respond to requests for admissions. Bernard "admitted," inter
alia, that the note he and Kay originally signed specified an
interest rate of 13 percent and a default rate of 18 percent.

The promissory note was admitted into evidence. In a space
obviously intended for such purpose, the preprinted note form
reflects handwritten interest rate figures of 13 percent per
annum from date until due and 18 percent from maturity until
paid. In another space, the note contains a handwritten due date
of "on demand." The two payments that were received from the
Petersens are also indicated on the front side of the note.
Emilie testified that she had made notations of the payments on
the note.

Gary testified that he and Bernard discussed the interest
rate prior to execution of the promissory note and that at the
time the Petersens signed the note, the blanks for the interest
rate, the default interest rate, and the due date contained the
terms agreed to by the parties. Gary also testified that it was
his understanding that this was a business loan to be used for
the purchase of a flower shop that the Petersens were purchasing
in Gering, Nebraska.

Bernard made a $2,500 payment toward the loan on March 1,
1990. Bernard made another payment of $45,000 on November 1. In
November 1994, the Darnalls made demand for the remainder of the
moneys owed. In January 1995, counsel for the Darnalls wrote the
Petersens a letter demanding that payment be made and threatening
legal action if the note was not paid. Bernard responded with a
letter to Gary stating that the interest rate, default rate, and
due date were not "filled in, nor agreed
upon at the time of borrowing." Bernard asserted that the parties
had agreed upon a "fluctuating CD rate, simple interest, without
demand." Bernard asked Gary to recalculate the principal and
interest according to their agreement.

Gary testified that he has received no additional payments
from the Petersens. According to Gary, as of the date of trial,
the principal and interest owing on the note was $34,068.87. Gary
arrived at this figure using a 13-percent interest rate.

Albert Lyter III, a forensic chemist, was called to testify
on behalf of the Darnalls. Lyter has a bachelor's degree in
chemistry and biology and a master's degree in forensic science.
Prior to opening his own business in 1981, Lyter worked for the
U.S. Treasury Department in the Bureau of Alcohol, Tobacco, and
Firearms laboratory.

Lyter conducted both physical examinations and chemical
tests on the promissory note. Based upon his physical
examinations of the document and the chemical tests performed,
Lyter opined that the terms of the document were all written
during the "same time period."

During cross-examination, Lyter testified that depending on
the ink, "same time period" could be a matter of days. Lyter
further acknowledged that if the same pen was used to write the
initial terms of the document and then later used to add the
additional terms, then, depending on the circumstances, there
might be a situation where he could not detect an alteration made
6 months later. However, he reiterated that based upon the fact
that the same ink was used and the fact that he found no
differences in the relative dryness of the ink, "the simplest
conclusion is that they were all done at the same time."

Andrew Bradley, a document examiner, was next called to
testify. Bradley worked as a document examiner for the Arapahoe
County Sheriff's Department from 1968 through 1993. Bradley has
also done work for the Secret Service and the Federal Bureau of
Investigation. Bradley examined the handwriting on the promissory
note using microscopic equipment.

Based upon a reasonable degree of forensic certainty,
Bradley opined that all of the terms of the promissory note were
written by the same person at the same time. During
cross-examination Bradley admitted that he could not rule out that
some of the terms were written at a different time but
stated that based upon his experience and training, he believed
that they were written at the same time.

Kay admitted that she signed the promissory note but
testified that when she signed it several terms were missing,
including the interest rate, the default rate, and the due date.
According to Kay, she questioned Bernard as to why the interest
rate was left blank and he explained to her that he and Gary were
going to work out an interest rate based on CD rates. She stated
that she did not authorize Bernard or the Petersens to fill in
the interest rate. Prior to receiving the notice from the
Darnalls, Kay was unaware that the loan had not been paid.

Counsel for Kay also read several portions of Bernard's
deposition into the record. At the time of his deposition,
Bernard was living in Colorado. Bernard testified that when he
signed the promissory note, the interest terms and due date were
not on the document.

The parties rested, and the court took the case under
advisement. Several weeks later, prior to the court's decision,
Bernard filed a suggestion of bankruptcy and the proceedings were
stayed. Following Bernard's discharge in bankruptcy, the Darnalls
filed a motion to proceed against Kay on April 4, 1997. The
motion was granted, and on October 7, the court rendered its
opinion.

Plaintiff's verdict for $7,500 which included the remaining principal, but not interest.

Albert Lyter, III a forensic chemist, Bachelor's degree in both Chemistry and Biology, Master's degree in Forensic Science; prior to opening his own business in 1981, he worked for the U.S. Treasury Department in the Alcohol, Tobacco, and Firearms laboratory and
Andrew Bradley a document examiner, worked for the Arapahoe County Sheriff's Department from 1968 to 1993; also worked for the Secret Service and Federal Bureau of Investigation.

Unknown

Affirmed in part, and in part reversed and remanded with directions by the Court of Appeals of Nebraska. See: N.W.2d 505, 8 Neb.App. 185, (Neb.App. 1999). The above date reflects the appellate court decision date, not the original trial date. Reported by kkm.