Story Case

A bill of exchange which had been accepted by Weston Underwood was payable at his office at 92 Broad Street. On the morning of the day of its maturity, being reminded by an entry of that fact in his diary, he sent to his bank for gold to the amount of the bill and instructed his cashier to hold it in readiness until the bill should be presented. No demand for payment was made that day and the money was again deposited. Six months later, a person wholly unknown to Underwood, a Francis Mansfield, started a suit against Underwood on this bill, alleging that he purchased it from the owner five months after its maturity. He asked judgment for the face amount of the bill, with interest to the date of judgment, and also costs of the suit. Is he entitled to a judgment and for how much?

Ruling Court Case. Carter Vs. Smith, Volume 9 Gushing Reports, Massachusetts, Page 321

George Smith, the defendant in this action, signed and delivered to Carter a note in the following words: "$601.

For value received, I promise to pay C. S. Carter, agent of the Protection Life Insurance Company of New Jersey, or order, six hundred and one dollars, in fourteen months from date, at either of the banks in Portland." Carter, without making any demand, or presenting the note for acceptance at any bank, began suit upon this, after it fell due. The defense of Smith consisted in the fact that he was not liable, since no presentment or demand for payment was made before this action was begun.

Decision: Although a bill or note must be presented for payment, in order to charge a party of secondary liability, it is not necessary as to a person who is primarily liable upon such an instrument. Since Smith, the maker, was a primary party to this instrument, no demand for payment was necessary to entitle Carter to sue.

Mr. Chief Justice Shaw, who delivered the opinion of the court, said in part: "The essence of the liability of the promisor is his indebtedness to the holder of the note. The note is considered as an admission of debt, and that debt is not discharged merely by the omission to demand payment of it. The want of demand has its effect with regard to parties collaterally liable, like a drawer or an indorser; to charge them, the holder must present his note to the acceptor or maker when it is due, and give them notice if it is not paid." Judgment was given for Carter.

Ruling Law. Story Case Answer

We have seen heretofore that a maker of a promissory note and the acceptor of a bill of exchange are parties of primary liability. By becoming a party to the instrument, each undertakes to pay at all events, according to the tenor of the instrument. But they cannot complain if the holder does not choose to present the instrument for payment at the time and place appointed. However, if the party of primary liability is ready and willing to pay at the time and place appointed, his readiness and willingness constitute a good tender; this will relieve him of any liability for interest after that time; he will not be charged with the costs which are necessary in the suit upon the instrument; and any damages which result by the failure of the holder to present for payment will be chargeable, not to the party of primary liability, but to the holder of the instrument.

Since the bill has never been paid by Underwood, Mansfield is entitled to a judgment for the face amount. But because Underwood was ready on the day of maturity, at the specified place of payment, with the necessary amount in legal tender, he is not to be penalized for the delay in the payment. Costs are in the nature of an indemnity for having made it necessary for the other party to bring the suit, but here the suit was not made necessary by Underwood, and he should not be made to repay the expense of it to Mansfield. Interest, the payment for being deprived of the use of the money, should not be exacted from Underwood when he is not responsible for the fact that the bill was not paid. Therefore, the court should give judgment for Mansfield for the amount of the bill only, and should not add interest nor the costs of the suit.