Story Case

The Salt Lake Distributing Company sold an order of miscellaneous merchandise to Oliphant Young, the keeper of the general store in Eureka, Utah. After thirty days, the company drew a bill, for the amount of the invoice, upon Young, payable thirty days after sight. After discount and indorsement by various holders, the bill came to the Merchants' Bank at Eureka and was by it presented to Oliphant Young. Young felt that the drawing of the bill was a reflection upon his credit and gave expression to this feeling by writing across the face of the bill, "I bought these goods from the Salt Lake Distributing Company and I will pay nobody else. You will get your money when I am ready. Oliphant Young." Thirty days after this was written on the bill, the Merchants' Bank demanded payment and brought suit against Young. It contended that there was a written admission of the debt, and a signature placed on the instrument. Young denied that this constituted an acceptance, and that the admission of his debt to the distributing company could support an action by another person. Is Young liable?

Ruling Court Case. National Bank Of Rockville Vs. Second National Bank Of Lafayette, Volume 69 Indiana Reports, Page 479

A. T. Colton drew a check upon the Second National Bank of Lafayette, payable to the National Bank of Rockville. It was never presented for acceptance, and when it was presented for payment, the Second National Bank of Lafayette refused to pay it, notwithstanding the fact that it had money on deposit of Colton, the maker of the note. This action was brought by the National Bank of Rockville to recover from the Second National Bank of Lafayette.

It was contended by the latter that it was not liable upon such check until it had accepted it.

Mr. Justice Biddle, who delivered the opinion of the court, said in part: "A bank check has all the requisites of a bill of exchange, except that it is due on demand, without days of grace, and if dishonored, requires no protest for non-acceptance or non-payment. There is no implied contract in favor of the payee, against the drawee, that he will either accept or pay the check. The drawee is no party to the check until he accepts it: and a party cannot be sued on an express contract before he enters into it. The fact that the drawee has funds in his hands, belonging to the drawer, sufficient to pay the check, does not change the rule." Judgment was given for the Second National Bank of Lafayette.

Ruling Law. Story Case Answer

We have just seen that an acceptance virtually amounts to the making of a contract, by which the acceptor agrees to pay the amount, named in the instrument, to a certain person. Therefore, until he accepts the bill he is under no obligation whatever to the person named as payee. He may be under an obligation to the drawer to accept, when presented to him; but this obligation to the drawer confers no benefit upon the payee. This is not altered by reason of the fact that the drawee may have funds in his possession with which he might pay the bill after acceptance.

As pointed out in the last case, acceptance is an assent to the order as drawn. Since Young has shown very clearly, in the Story Case, that he does not agree to pay to the order of his creditor, his signature does not constitute an acceptance. Even a promise to the holder to pay the amount of the bill is not an acceptance if it fixes a new time for payment, a different rate of interest, or in any other way refuses to accept the terms of the bill as drawn. It is then a "qualified acceptance," which may be treated as a dishonor. It is therefore clear that when Young rejected all the terms of the order, his mere admission of the debt is not an acceptance. As in the Ruling Court Case, the existence of a debt to the drawer does not confer on the payee a legal right to collect. The payee or indorsee of the bill of exchange has no action against the drawee, but must look to the drawer or the person from whom the bill was purchased. The Merchants' Bank can not recover from Young. Judgment will be given for the defendant.