executed and delivered it is governed by the laws of the State in which it is made payable. There are a large number of cases maintaining this doctrine, in the most of which the question to be determined was the rate of interest to be paid or whether the instrument was usurious.71 b. Determination of validity.— The validity of a negotiable instrument is to be determined by the laws of the place where it is executed and made payable." It has been held that a note executed and delivered on Sunday contrary to the statute of a State would be void and not enforceable, although the note was the possession of the maker in New York, is, in contemplation of the law, made in the latter jurisdiction. Massachusetts.- Shoe & Leather Nat. Bank v. Wood, 142 Mass. 563, 8 N. E. 753. Michigan.-Snow v. Perkins, 2 Mich. 238. Missouri.- Kentucky Com. Bank v. Barksdale, 36 Mo. 563. New Hampshire.- Little v. Riley, 43 N. H. 109. In the case of Orr v. Lacy, Fed. Cas. No. 10,589, 4 McLean (U. S.), 243, it was held that the place where bills for discount are negotiated is the place of contract irrespective of the place where they were signed and indorsed. See also to the same effect, In re Con- New Jersey. Friese v. Brownell, rad, Fed. Cas. No. 3,126; Prov. County 35 N. J. L. 285, 10 Am. Rep. 239; Sav. Bank v. Frost, Fed. Cas. No. Ball v. Con. Franklinite Co., 32 N. 11,453, 8 Ben. (U. S.) 293; Bowen J. L. 102; Healy v. Gorman, 15 N. J. v. Bradley, 9 Abb. Pr. (N. S.) (N. L. 328. Y.) 395; Wayne County Sav. Bank v. Low, 81 N. Y. 566, 37 Am. Rep. 533. 71. Law of place where payable governs validity and interpretation. See the following cases: United States.- Wiseman v. Chiappella, 23 How. 368, 16 L. Ed. 466; Phipps v. Harding, 70 Fed. 468, 17 C. C. A. 203; Illinois Bank v. Brady, Fed. Cas. No. 888, 3 McLean, 268; Drake v. Found Treasure Min. Co., 53 Fed. 474. Alabama.- Todd v. Neal, 49 Ala. 266; Hunt v. Hall, 37 Ala. 702. Connecticut.- Webster V. Howe Machine Co., 54 Conn. 394, 8 Atl. 482. Illinois. Wooley v. Lyon, 117 Ill. 244, 6 N. E. 885, 57 Am. Rep. 867; Abt v. American Trust & Sav. Bank, 159 Ill. 467, 42 N. E. 856. Indiana.- Brown v. Jones, 125 Ind. 375, 25 N. E. 452, 21 Am. St. Rep. 227; Fordyce v. Nelson, 91 Ind. 447; Rose v. Park Bank, 20 Ind. 94, 83 Am. Dec. 306. Iowa.- Allen v. Harrah, 30 Iowa, 363; Chatham Bank v. Allison, 15 Iowa, 357. New York.-Hibernia Bank v. Lacombe, 84 N. Y. 367, 38 Am. Rep. 518; Dickinson v. Edwards, 77 N. Y. 573, 33 Am. Rep. 671; Bowen v. Newell, 13 N. Y. 290, 64 Am. Dec. 550. Pennsylvania.-Tenant v. Tenant, 110 Pa. St. 478, 1 Atl. 532. Tennessee. Pioneer Sav. & Loan Co. v. Cannon, 96 Tenn. 599, 36 S. W. 386; Thompson v. Commercial Bank, 43 Tenn. 46; Carter v. Union Bank, 7 Humph. 548, 46 Am. Dec. 89; Cooper v. Santford, 4 Yerg. 452. 72. Sondheim v. Gilbert, 117 Ind. 71, 18 N. E. 687, 10 Am. St. Rep. 23, 5 L. R. A. 32. In the case of Banchor V. Manser, 47 Me. 58, it was held that the indorsee of a note given by an inhabitant of the State of Maine for spirituous liquors sold and delivered in another State, where the sale was not illegal, who had knowledge of the purchaser's intent to sell the same here in violation of law, and did acts beyond the mere sale which aided the purchaser in his unlawful business, cannot legally enforce the payment of such note in the State of Maine. See also Fuller v. Bean, 30 N. H. 181. 74 73 made payable in another State. But the general rule that negotiable instruments executed in one State and made payable in another are governed by the laws of the State in which they are payable, applies in determining the validity of the instrument, and it would seem to follow that if an instrument is not void in the place where payable, because of its execution on Sunday, it will be enforceable. It has been held in an action brought in New York on a promissory note payable in Jamaica, where the defendant set up infancy as a defense, that he must show that such plea would be good defense in Jamaica.75 The place of payment is not always conclusive in determining the law which is to govern the validity of a negotiable instrument. There may be circumstances connected with the transaction which will show that it was the understanding of the parties that the law of the place of payment was not to control.76 c. As to negotiability. The determination of the question of the negotiability of a bill or note is to be determined by the law of the State where it was made payable." A note payable generally, made in North Carolina and negotiable there, and afterward indorsed in Virginia, where it is not negotiable, will, in a suit brought thereon in North Carolina, be governed as to the question of negotiability by the laws of that State.78 But it has been held, where a note made in Massachusetts is payable in Vir 73. Arbuckle v. Reaume, 96 Mich. 243, 55 N. W. 808. 74. Validity, what law governs.Murphy v. Collins, 121 Mass. 6. See also as to the general proposition that the validity of a note is to be determined by the laws of the State where it is payable, Coffman v. Kentucky Bank, 41 Miss. 212, 90 Am. Dec. 371; Backman v. Jenks, 55 Barb. (N. Y.) 468. But in Georgia the rule seems to be that the validity of promissory notes is controlled by the law of the place where the notes are executed, and not where they are made payable. Jackson v. American Mortgage Co., 88 Ga. 756, 15 S. E. 812; Stansell v. Georgia Loan & Trust Co., 96 Ga. 227, 22 S. E. 898. And in the case of Joslin v. Miller, 14 Neb. 91, 15 N. W. 214, it was held that the validity of a promissory note made in Nebraska, and payable in New York, is to be determined by the laws of Nebraska. 75. Thompson v. Ketcham, 8 Johns. (N. Y.) 189, 5 Am. Dec. 332. 76. In the case of Sheldon v. Hextum, 91 N. Y. 124, the defendant who resided in Illinois, having collected certain moneys belonging to S., a resident of the State of New York, by an agreement with the latter, sent to him by mail, in place of the money, his (the defendant's) notes for the amounts, dated at his place of residence in Illinois, payable with 10 per cent. interest, which rate of interest was lawful in that State. The defense of usury was pleaded in the action. It was held that the validity of the notes was to be determined by the law of Illinois, and as they were valid there they were also valid in New York; and this although one of the notes was made payable in New York. 77. Stevens v. Gregg, 89 Ky. 461, 12 S. W. 775; Cope v. Daniel, 9 Dana (Ky.), 415; Warren v. Coplin, 4 Metc. (Mass.) 594. 78. Keddick v. Jones, 6 Ired. (N. C.) 107, 44 Am. Dec. 68; Woods v. Ridley, 11 Humph. (Tenn.) 194. ginia, that it will be governed, for the purpose of determining its negotiability, by the law of Virginia.79 § 172. Liabilities of parties. a. The drawer and indorser. The contract of the drawer of a bill of exchange is governed by the law of the place where the bill is drawn, in regard to the rights of the payee and any subsequent holder, and not by the law of the place of payment by the acceptor.80 This is so since the contract of the drawer is to pay the bill in the place where it is drawn, in case of the failure of the drawee to accept it, and not to pay it at the place where the drawee resides.81 An indorsement is to be considered as a separate contract and the obligations to it are to be determined according to the law of the State or country where it was made. 79. Freeman's Bank v. Rucklan, 16 Gratt. (Va.) 126. 80. Story on Bills of Exchange, 131; Crawford v. Branch Bank, 6 Ala. 12, 41 Am. Dec. 33; Hunt v. Standart, 15 Ind. 33, 77 Am. Dec. 79; Wood v. Gibbs, 35 Miss. 559. 82 of the place where made. Such is the character of the contract of the drawer of the bill or the indorser of the note. The indorser of a bill here, payable in New York, promises that upon the dishonor of the bill and notice to him, he will pay it, not at New York, but here or generally. His contract is to be performed here." 81. Wood v. Gibbs, 35 Miss. 559. As to liability of drawer.-In the case of Aymar v. Sheldon, 12 Wend. 82. As to contract of indorsement.— (N. Y.) 439, 27 Am. Dec. 137, the The following passage is quoted from court said: "That the nature and Story on Conflict of Laws. " Negotiable extent of the liabilities of the drawer instruments often present questions of or indorser are to be determined ac- a like mixed nature. Thus suppose the cording to the law of the place where negotiable bill of exchange was drawn the bill is drawn or indorsement made, in Massachusetts on England, is inhas been adjudged both here and in dorsed in New York, and again by the England." first indorsee in Pennsylvania, and by And in the case of Hunt v. Standart, the second in Maryland, and the bill 15 Ind. 33, 77 Am. Dec. 79, the court is dishonored. What damages will after citing the authorities upon the the holder be entitled to? The law subject said: "These and numerous as to damages in these States is difother authorities that might be cited, ferent. In Massachusetts it is 10 per were it necessary, clearly establish the cent., in New York and Pennsylvania proposition that the contract of the 20 per cent., and in Maryland 15 per drawer of a bill is, as to its construc- cent. What rule then is to govern? tion and legal effect, to be governed The answer is that in each case, the by the law of the place where the bill lex loci contractus. The drawer is liais drawn, and not that of the place ble on the bill according to the law of where it is payable. Indeed, it cannot the place where the bill was drawn; be held otherwise consistently with and the successive indorsers are liable legal principles which are thoroughly on the bill according to the law of the established. A contract to be per- place of their indorsement, their informed at the place where it is exe- dorsement being treated as a new and cuted or generally, without naming an- substantive contract." other place for performance, is undoubtedly to be governed by the law In the case of Hunt v. Standart, 15 Ind. 33, 77 Am. Dec. 79, the court b. The acceptor.— The liability of an acceptor of a bill is to be governed by the law of the place of his acceptance, as to the drawer, payee, and each subsequent holder, unless he accepts in one place for payment in another, in which case the law of the place where the bill is payable will govern his liability.83 The question of the validity of a verbal promise to accept a bill of exchange has frequently arisen, because of the fact that by the statutes of some of the States it is required that a promise to accept should be in writing, while the common-law rule recognizes the validity of a verbal promise. As a general rule the validity of a verbal promise to accept a bill of exchange made in one State and payable in another will be governed by the law of the State where the promise was made. But where it appears by the circumstances of a case that an acceptance and payment of a bill was to be governed by the law of the place of performance of the contract, the law of such place must govern the validity of the acceptance. So where a verbal agreement was made in the State of Missouri to accept and pay a bill upon its presentation to the said: Bank, 91 U. S. 406, 413, 23 L. Ed. 245, a bill of exchange was drawn by a party in Chicago upon a firm in St. Louis, and verbally accepted by the member of the firm then present in Chicago. It was held that the validity of such acceptance was to be deterIn the case of Aymar v. Sheldon, 12 mined by the law of Illinois. The Wend. (N. Y.) 439, 27 Am. Dec. 137, court in this case said: "There is the bill of exchange was drawn at St. no statute in the State of Illinois that Pierre, Martinique, on a person at requires an acceptance of a bill of exBordeaux, in France, by the payees at change to be in writing, or that prothe city of New York. It was held hibits a parol promise to accept a bill that the contract of indorsement was of exchange; on the contrary, a parol governed by the law of New York, acceptance and a parol promise to acwhere the indorsement was made, cept are valid in that State, and the the bill was payable. See also decisions of its highest court held that and not by that of France, where a parol promise to accept a bill is an Allen v. Merchants' Bank, 22 Wend. acceptance thereof. If this be so, no (N. Y.) 215, 239, 34 Am. Dec. 289; Everett v. Vandryes, 19 N. Y. 436. 83. Story on Bills of Exchange, § 131; Hunt v. Standart, 50 Ind. 33, 77 Am. Dec. 79; Kelly v. Smith, 1 Metc. (Ky.) 313; Lizardi v. Cohen, 3 Gill (Md.), 430; Frazier v. Warfield, 17 Miss. 220; Bright v. Judson, 47 Barb. (N. Y.) 29. 84. Validity of verbal acceptance.Hubbard v. Exchange Bank, 72 Fed. 234, 18 C. C. A. 525; Scott v. Pilkington, 15 Abb. Pr. (N. Y.) 280. In the case of Scudder v. Union Nat. question of jurisdiction or of conflict of laws arise. The contract to accept was not only made in Illinois, but the bill was then and there actually accepted in Illinois as perfectly as if Mr. Scudder had written an acceptance across its face, and signed thereto the name of his firm. The contract to accept the bill was not to be performed in Missouri. It had already, by the promise, been performed in Illinois. The contract to pay was indeed to be performed in Missouri; but that was a different contract from that of acceptance." drawee at his place of business in Illinois, it was held that the law of Illinois would control the validity of such agreement. 85 c. Rights and liabilities of bona fide holders.— Where a note is executed in one State and payable in another the extent of the maker's obligation and the character of the defense he may interpose in a suit thereon is governed by the law of the State where the note is payable.86 As an example, under the laws of Mississippi a statute provided that, "The defendant shall be allowed the benefit of all want of lawful consideration, failure of consideration, payment, and set-offs made, had, or possessed against the same, previous to notice of the assignment;" it was held in a case where an indorsee sued in Mississippi the maker of a note executed in Louisiana, but payable in Mississippi, that this statute could be pleaded by the defendant.87 The defenses which exist in the State where a bill or note is made payable are controlling as against the holder of such bill or note in any State where he seeks to enforce his remedies against the persons liable thereon.88 § 173. Transfer by indorsement or assignment. a. By indorsement. The indorsement of a note is a distinct contract, and is governed by the law of the State in which the V. 85. Hall v. Cordell, 142 U. S. 116, 12 Sup. Ct. 154, 35 L. Ed. 956; Cogh. lan v. S. C. R. Co., 142 U. S. 101, 12 Sup. Ct. 150, 35 L. Ed. 951. 86. Sturtevant Memphis Nat. Bank, 60 Fed. 730, 9 C. C. A. 256. 87. Brabston v. Gibson, 9 How. (U. S.) 263, 13 L. Ed. 131; Tilden v. Blair, 21 Wall. (U. S.) 241, 22 L. Ed. 632. and is not subject, in the hands of an innocent holder, to the set-off which existed in favor of the payer against antecedent parties. It was held that this statute controlled the rights of the parties in the suit in Kentucky. The court said: "Where a contract is made with reference to the common or general law, such contract is subject to any remedy by the State In the case of Webster v. Howe Ma- in which it is attempted to enforce chine Co., 54 Conn. 394, 8 Atl. 482, it, though such remedy might be unwhich was an action upon acceptance known to the State in which the conin New York of a bill of exchange tract was made; but, as we have atdrawn in England upon a corporation tempted to show, if the contract is having its place of business in New to be executed in a particular State, York and made payable in New then its statutory law fixing the charYork, it was held that the law of New York governs the question as to whether the plaintiff is a bona fide holder. acter of such contract, and denying the right to make certain defenses to it, becomes a part of the contract, and the comity existing between the 88. Stevens v. Gregg, 89 Ky. 461, States forbids the allowing of such 12 S. W. 775. This was an action defenses in any other State to which brought in the State of Kentucky the party may be compelled to resort upon a promissory note payable in for remedy for a breach of the conOhio. Under the statutes of Ohio, the tract. See also Barrett v. Walker, 14 note sued upon was placed upon the La. 303; Emanuel v. White, 34 Miss. same footing as a bill of exchange, 56, 69 Am. Dec. 385. |