Story Case

M. Rodin, a purchasing agent for the French Government, bought a quantity of blankets from the firm of Massey & Company and gave in payment a bill drawn by him, as agent, upon Morgan & Company, bankers, who held funds for the French Government. It was originally payable in ninety days, but Massey and Company fraudulently altered it so that it read thirty days. After this charge they discounted it with a note broker, and he transferred it to the First State Bank of Lowden. It was forwarded to New York by the bank and there presented to and accepted by Morgan & Company. When the officials of the French Government were notified that their account had been drawn against by a thirty-day bill, they at once investigated the discrepancy, and notified Morgan & Company that the bill must have been altered after its issue. Consequently, payment at the end of the thirty days was refused by Morgan & Company, on the ground that there had been a forgery. Morgan & Company were sued by the First State Bank of Lowden. What should be the result?

Ruling Court Case. Bass Vs. Clive, Volume 4 Maule And Selwyn, Page 13

Ellis, alone, was conducting a business under the firm name of Ellis, Needham, Jr., & Company. In the course of his business he drew the following bill upon Clive, the defendant herein:

"£380. London, February 25, 1914.

Three months after, pay to our order, three hundred eighty pounds, value received.

Ellis, Needham Jr. & Co." "To Mr. T. Clive." It was accepted by Clive. Ellis then indorsed it and it came into the hands of Bass, who sues upon it as if it were made by several persons trading under the name of Ellis, Needham Jr. & Co.

It was objected by Clive that the action was improperly brought, because it should have been declared against one person only.

Lord Ellenborough said: "When a drawer, on presentation, accepts an instrument drawn upon him, he promises to pay it according to its tenor. That is, he promises to pay it as it is written. In this case the instrument on its face, as accepted by Clive, indicated that it was drawn by several persons. This he cannot now dispute."

Ruling Law. Story Case Answer

The drawee of an instrument is the one who is ordered by the drawer to pay a given amount to the order of the payee. Until he accepts, the drawee is under no liability to the payee. When he does accept, he becomes the party primarily liable to the payee and to all subsequent holders. He undertakes or promises to pay the instrument according to the tenor of his acceptance, or as it was when, and in the manner in which, he accepted. The liability of an acceptor is like the liability of the maker of a note. It follows, therefore, that the holder is under no obligation to present the instrument for payment, if it has previously been accepted, but he may bring suit immediately on it. But the readiness and willingness of the acceptor to pay, at the time and place of payment, constitutes a good tender. This will relieve him of the duty of paying interest thereafter; and he will not be liable for the costs of the suit upon the note; and if any damage results from the failure to present for payment, this damage must be borne by the holder and not by the acceptor.

Since the fraudulent alteration occurred before the bill was acquired by the First State Bank, and before the acceptance by Morgan & Company, it does not bar a recovery in this case. Morgan & Company gave its promise to pay in thirty days, and the state bank, in reliance on this, has let pass all the action which it might otherwise have taken, if Morgan & Company had refused to accept. Having promised the bona fide holders, Morgan & Company is bound, by the terms of its promise, however misguided it may have been in making it. Morgan & Company is liable for the amount of the bill after thirty days.