Story Case

In July, 1914, payment of a bill rendered by the Middie States Grain Company to the importing firm of Strauss & Pfederkranz, of Hamburg, was made by-means of a bill of exchange, payable on demand, accepted by the firm of Kreuzer & Sons, bankers of Hamburg, and indorsed by Strauss & Pfederkranz. This bill was sold by the Middle States Grain Company upon the market to Simon Lederer. The day after he purchased it, war was begun in Europe and before he could make any arrangements for collecting the bill, communication with Germany became impossible. He could not dispose of the bill, and still retained it when the war was finally ended. He then sent it to a representative at Hamburg for presentation and collection. The firm of Kreuzer & Sons had been ruined by the war and could not take up the bill; as a consequence, suit was brought against the indorser, Strauss & Pfederkranz. Their defense consisted in the fact that a demand bill should be presented at once, or that otherwise indorsers were discharged, and that they should not remain liable on an instrument to which they were secondary parties merely, which they had a right to believe had been retired from circulation years before. Is this an answer to the suit?

Ruling Court Case. Field Vs. Nickerson, Volume 13 Massachusetts Reports, Page 131

On January 31, Redfield and Beers made a note, payable to Nickerson, or order, upon demand. On the same day, Nickerson indorsed the note to Field. On September 23, eight months after the date of the note, Field presented it to Eedfield and Beers, the makers, who refused to pay it. Field thereupon brings this suit against Nickerson, seeking to charge him as an indorser.

Nickerson contended that he was no longer liable as indorser, because Field had waited an unreasonable length of time in presenting it to the makers, who were primarily liable upon the note.

Decision: A bill or a note upon demand must be presented within a reasonable length of time to the party of primary liability in order to charge the parties of secondary liability, in case the instrument is not paid by the former. What constitutes a reasonable length of time depends upon the circumstances of each case. No definite rule can be formulated to govern all cases, but as a matter of safety such an instrument should be presented for payment at the earliest possible moment. In this case the court was of the opinion that a delay of eight months for which no reason was given was unreasonable, and that Nickerson, as indorser, was discharged.

Mr. Chief Justice Parker said: "As it respects the promisor himself, he is answerable immediately to the promisee or indorsees: and he may be sued the instant he has given his signature, even without a previous demand; but the condition upon which the indorser is liable is that payment shall be demanded within a reasonable time, and the earliest notice possible given of refusal. This time may, therefore, vary according to the circumstances and situation of the parties, to be determined by the jury under the direction of the court." Judgment was given for Nickerson.

Ruling Law. Story Case Answer

In order to charge a party of secondary liability, the holder of the instrument must exercise due diligence to procure payment from the party of primary liability; that is, he must make presentment for payment at the time and place appointed, and notice, known as notice of dishonor, must be given immediately to the party of secondary liability, in case the party of primary liability refuses to pay the instrument. Unless the holder does exercise due diligence, in the manner just indicated, the party of secondary liability is discharged of his liability upon the instrument. When an instrument is made payable on demand, the holder must present such an instrument for payment within a reasonable time; if he fails in this, all parties of secondary liability are relieved of any liability thereon. What constitutes a reasonable time depends upon the facts and circumstances of each case; no definite rule can be laid down which will govern all cases.

In the circumstances given in the Story Case, there appears no lack of due diligence on the part of Lederer. It is not to be expected that the same course can be followed while war is in progress which would be pursued in time of peace. The presentment has been made with reasonable promptness, in view of the facts. Therefore, Strauss & Pfederkranz are not discharged. Lederer should have judgment.