Equity Credit Company has in its possession an instrument dated May 1, 2014. The

Question

Equity Credit Company has in its possession an instrument dated May 1, 2014. The instrument is payable to the order of First Choice Moving & Storage Company "on June 1, 2015," for $5,000. In the upper left corner is an address for Greater Metro Development Corporation—10 Corporate Park Avenue, Chicago, Illinois—and in the lower right corner is the signature of "Hilltop Investments, Inc., By Ida, President." In the lower left corner is stamped "ACCEPTED: Greater Metro Development Corporation by John, President, May 5, 2014." On the back is the signature of "First Choice Moving & Storage Company by Kathleen, President." Who, if anyone, is primarily liable on this instrument on May 1? On May 5? Who, if anyone, is secondarily liable on this instrument?

Explanation / Answer

Greater Metro Development Corporation is primarily liable on the instrument as they are the acceptor. An acceptor on a bill of exchange is the principal debtor on the instrument. If the bill is dishonored by non-payment on maturity, the liability will shift to the drawers of the bill, i.e Hilltop Investments Inc. Therefore, First Choice Moving & Storage Company ( the original payee) can file a suit against Hilltop Investments Inc., as the latter are secondarily liable. Equity Credit Company, an endorsee and assumed to be a holder in due course, may recover from any of the prior parties.

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