Story Case

William Lacey purchased five shares of P. and S. W. Railway stock from Howard Leonard and gave him the following note as payment:

"$450. December 14,1914.

I promise to pay to Howard Leonard, or order, four hundred and fifty dollars, in thirty days from date at the Second National Bank, Chicago.

(Signed) William Lacey."

On January 10, 1915, Lacey deposited four hundred and fifty dollars in the Second National Bank, with instructions to the bank to pay the note on its presentment. Leonard did not present the note on the day it was due, and had failed to present it by February 1, 1915, when the government closed the bank for insolvency. Thereafter, Leonard tried to collect from Lacey, personally, and the latter refused to pay more than two hundred dollars, the amount finally allowed by the receiver of the bank. Leonard contended that the face value of the note was due, because there was no duty on his part to present the note at the bank as against Lacey, a party primarily liable. Is this correct?

Ruling Court Case. Ripka Vs. Pape, Volume 5 Louisiana Annual Reports, Page 579

This was an action upon three promissory notes, made in Pennsylvania. Pape was maker and Ripka was payee, or the one to whom the notes were payable. In one of them no place of payment is designated; in the other two there was the expression "Payable at the Philadelphia Bank." It was neither proved nor stated by Kipka that any of the notes were presented at any time at the Philadelphia Bank, nor to the makers anywhere before this action was brought. For Pape it was argued that he was not liable, without proof that presentment for payment was made, especially since in two of the three notes the place of payment was designated.

Decision: The liability of the maker of a note is primary. He promises absolutely to pay the instrument, according to its tenor as made. Consequently, a holder at maturity is under no duty to present for payment. But he may sue immediately upon maturity of the instrument. If, however, it appears that the maker had funds at the designated place of payment, and at the time for payment, it is unfair that he should have to pay interest after maturity and the costs of the action.

Mr. Justice Hidell quotes from Mr. Story's work on promissory notes: "The received doctrine in America seems to be this, as to the acceptor of a bill of exchange, and the maker of a promissory note, payable at a bank or other specified place, that is, that no presentment or demand of payment need be made at the specified place on the day when the bill or note becomes due, or afterwards, in order to maintain a suit against the maker or acceptor; and, of course, that there need be no averment in the declaration in any suit brought thereon, or any proof at the trial of any such presentment or demand. But that the omission or neglect is a matter of defense on the part of the maker or acceptor. If maker or acceptor had funds at the appointed place, at the time, to pay the bill or note, and it was not duly presented, he will in the suit be exonerated: not indeed from the payment of the principal sum, but from payment of all damages and costs in that suit. If by such omission or neglect of presentment and demand, he has sustained any loss or injury, as if the bill or note were payable at a bank, and the acceptor or maker had funds there at the time, which have been lost by the failure of the bank, then and in such a case, the acceptor or maker will be exonerated from liability to the extent of the loss or injury so sustained." Judgment was given for Ripka.

Ruling Law. Story Case Answer

The liability of a maker of a note is primary. He undertakes or promises to pay the instrument at all events, according to the tenor of the instrument. Since he is a party of primary liability, the holder of an instrument, in order to bring suit thereon, is under no obligation to make a presentment for payment. However, if the maker was ready and willing at the time and place appointed to pay the note, and no presentment for payment was made, this will constitute a good tender. Thereafter, he cannot be held for interest on the note; nor can he be held for the costs of the suit on the note. Furthermore, in case he has suffered any damage by failure of the holder to make presentment for payment, he may maintain this by way of defense to an action upon the note. Therefore, in the Story Case, Lacey is correct and Leonard cannot collect more than $200.