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THE RIGHTS AND DUTIES OF THE MAKER.
The maker of a note or the acceptor of a bill is bound to pay the same at its maturity, and at any time thereafter, unless the action be barred by the statute of limitations, or he has some other defence under the general law of contracts. As between himself and the payee of the note or bill, he maj make any defences which he could make on any debt arising from simple contract; as want or failure of consideration; payment in whole or in part ; set-off ; accord and satisfaction ; or the like. The peculiar characteristics of negotiable paper do not begin to operate, so to speak, until the paper has passed into the hands of third parties. Then, the party liable on the note or bill can make none of these defences, unless the time or manner in which it came into the possession of the holder lays him open to these defences. But the law on this subject may better be presented in our next section.
THE RIGHTS AND DUTIES OF THE HOLDER OF NEGOTIABLE PAPER.
1. What A HOLDER MAY DO WITH A Bill Or Note.—An indorsee has a right of action against all whose names are on the bill when he received it. And if one delivers a bill or note which he ought to indorse and does not, the holder has an action against him for not indorsing, or may proceed in a court of equity to compel him to indorse. If a bill comes back to a previous indorser, he may strike out the intermediate indorsements and sue in his own name, as indorsee; but he has, in general, no remedy against the intermediate parties, because, if he made them pay as indorsers to him, they would make him pay as indorser to them. If, however, the circumstances are such that they, if compelled to pay, would have no right against him as an indorser to them, as, for example, if he indorsed it "without recourse," then he may have a claim against them.
The holder of a bill indorsed and deposited with him for collection, or only as a trustee, can use it only in conformity
with the trust. And if the indorsement express that it is to be collected for the indorser's use, or use any equivalent language, this is notice to any one who discounts it; and the party discounting the paper against this notice will be obliged to deliver the note, or pay its contents, if collected, to the indorser. Thus, Mr. Sigourney, a merchant in Boston, remitted to Williams, a London banker, for collection, a bill of exchange indorsed by him, and over his name was written, “Pay to Williams or order for my use.
Williams had the bill discounted for his own benefit by his bankers, and failed; and the English court held that the indorsement showed that the bill did not belong to Williams, and that the discounters had no right to discount it for him; and they were obliged to pay the amount of it to Sigourney.
2. OF A TRANSFER AFTER DISHONOR OF NEGOTIABLE PAPER. -So long as a note remains due, everybody has a right to believe that it has not been paid, and will be paid at maturity, and may purchase it in that belief. But as soon as it is overdue, the date shows it, and every person must know that it is either paid, and so extinguished, or that it has not been paid, and therefore is dishonored, and that there may be good reasons why it was not paid, or good defences against it. He therefore now takes it at his own peril; and therefore a holder who took the note after it became due is open to many of the defences which the promisor could have made against the party from whom the holder took it; because, having notice that the bill or note is dishonored, he ought to have ascertained whether any, and, if so, what defence could be set up.
So, too, if an indorsee takes the note or bill before it is due, but with notice or knowledge of fraud or other good defence which could be made against his endorser if he sued it, it is a general rule that the same defence may be made against him.
A note payable on demand is considered as not overdue, unless very old indeed, without some evidence of demand of payment and refusal, but in some States this has been changed by statute. But it is not so with a check; for this should be presented without unreasonable delay.
3. OF PRESENTMENT FOR ACCEPTANCE.-It is most important to the holder of negotiable paper to know distinctly what his
duties are in relation to presentment for acceptance or payment, and notice to others interested in case of non-acceptance or rano payment.
It is always prudent for the holder of a bill to present it for acceptance without delay; for if it be accepted, he has new security; if not, the former parties are immediately liable; and it is but just to the drawer to give him as early an opportunity as may be to withdraw his funds or obtain indemnity from a debtor who will not honor his bills. And if a bill is payable at sight, or at a certain period after sight, there is not only no right of action against anybody until presentment, but, if this be delayed beyond a reasonable time, the holder loses his remedy against all previous parties. And although the question of reasonable time is generally rne only of law, yet, in this connection, it is treated as so far a question of fact, that it is submitted to the jury. There is no certain rule determining what is reasonable time in this respect. If a bill of exchange be payable on demand, it is not like a promissory note, but must be presented within a reasonable time, or the drawer will be discharged. A holder may put a bill payable after sight into circulation, without presenting it himself; and in that case, if a subsequent holder presents it, a longer delay in presentment would be allowed than if the first holder had kept it in his own possession.
The presentment should be made during business hours; out in this country they extend through the day and until evening, except in the case of banks. Any distinct usage established where the presentment is made would probably be received in evidence, and permitted to affect the question.
Ill health, or other actual impediment without fault, may excuse delay on the part of the holder; but the request of the drawer to the drawee not to accept does not excuse non-presentment for acceptance.
Presentment for acceptance should be made to the drawee himself, or to his agent authorized to accept. And when it is presented, the drawee may have a reasonable time to consider whether he will accept, during which time the holder is justificci n leaving the bill with him. And this time would be as much
as twenty-four hours, unless the mail goes out before. And if the holder gives more than twenty-four hours for this purpose, or the mail goes out before, he should inform the previous parties of it. If the drawee has changed his residence, the holder should use due diligence to find him; and what constitutes due or reasonable diligence is a question of fact for a jury. And if he be dead, the holder should ascertain who is his personal representative, if he has one, and present the bill to him. If the bill be drawn upon the drawee at a particular place, it is regarded as dishonored if the drawee has absconded, so that the bill cannot be presented for acceptance at that place.
4 OF PRESENTMENT FOR DEMAND OF PAYMENT.-The next question relates to the duty of demanding payment; and here the law is much the same in respect both to notes and to bills.
The universal rule of the law-merchant is, that the indorsers of negotiable paper are supposed to agree to pay it only if the maker or previous indorsers do not, and provided due measures are taken by the holder to get it paid by those who ought, in the first place, to pay it. Every holder of negotiable paper can hold it as long as he likes, and not lose his claim against the maker of a note, or the acceptor of a bill, unless he holds it more than six years, and the Statute of Limitations bars his claim. The reason is, that the maker or acceptor promises directly, and not merely to pay if another does not. But every indorser of a note or bill, and every drawer of a bill, only promises to pay if a maker or acceptor or some previous indorser does not. IS there is a bill of exchange with six indorsers, the last promises in law to pay it only if the acceptor, the drawer, and the five previous indorsers do not pay. He has therefore a right that a demand according to law should be made against every one of these persons, and that their refusal to pay should be notified to him, forthwith, so that he may secure himself if he can. And the law-merchant is very rigorous and precise in defining what demand should be made by the holder, and when and how demand should be made on every prior party, in order to hold any subsequent party; and also as to what notice of the demand and refusal of the prior party should be given to any subsequent party to whom the holder looks for payment.
A demand is sufficient if made at the usual residence or place of business of the payer, either of himself, or of an agent authorized to pay; and this authority may be inferred from the habit of paying, especially if the agent be a child, a wife, or a servant. The demand should not be made in the street, although a demand then would probably be held good, unless objected to at the time because made there. When a demand is made, the bill or note should be exhibited; and if lost, a copy should be exhibited, although this is not absolutely necessary. And when a payer calls on the holder, and declares to him that he shall not pay, and desires him to give notice to the indorsers, this constitutes a demand and refusal, provided this declaration be made at the maturity of the paper; but not if it was made before maturity, because the payer may change his intention.
Bankruptcy or insolvency of the payer is no excuse for nondemand; although the shutting up of a bank may be regarded as a refusal to all their creditors to pay their notes. Absconding of the payer is generally a sufficient excuse; but if the payer has shut up his house, the holder must nevertheless inquire after him, and find him, if he can by proper efforts. Even in case of absconding, it is always better to go through the formality of making a demand at the payer's last residence or place of business; and this is held necessary in Massachusetts. If the payer be dead, demand should be made at his house, unless he have personal representatives, and in that case, of them. And if the holder die, presentment should be made by his personal representatives; that is, by his executor or administrator.
If the drawer has no effects in the hands of the drawee, and has no arrangement or understanding which gives him a right to draw, non-presentation for payment is not a defence which he can make if sued on the bill.
Impossibility of presenting a bill for payment, without the fault of the holder, as the actual loss of a bill, or the like, will excuse some delay in making a demand for payment; but not more than the circumstances require. And the mere mistake of the holder as to the time, place, person, and manner, is no excuse, because he has no right to make mistakes to the injury of other people.