
    William W. Frazier vs. Thomas B. Warfield et al.
    The liability of the acceptors of a bill of exchange is regulated by the law of the place where the contract of acceptance is to be performed.
    Where no particular place of payment is expressed in the face of a bill of exchange, the place of the address on the bill is made the place of payment if it is accepted ; therefore, where a bill of exchange was addressed to “T.B.W. & W.P.W., Lexington, Kentucky,” and they accepted the bill generally, it was held, although they were citizens of Mississippi, the place of payment of the bill of exchange was, by the address and acceptance, fixed at Lexington, Kentucky ; and the contract of acceptance was regulated by the law of-Kentucky.
    Bills of exchange being regulated in Kentucky exclusively by the rules of the common law merchant, it was held to be erroneous in an action in this state, by the indorsee of a bill of exchange, payable in Kentucky, against the acceptors resident here, to allow the introduction of proof to show that the drawers of the bill had settled it with the payees since the execution and delivery of the bill. Such a defence, however, in accordance with the laws of this state, is not good under the rules of the law merchant at common law.
    In error from the circuit court of Washington county, Hon. George Coalter, judge.
    William W. Frazier, for the use of the assignees of the United States Bank of Pennsylvania, sued Thomas B. Warfield and William P. Warfield upon the following bill of exchange, viz.:
    “Exch. $ 10,000. New Orleans, MarchWth, 1837.
    “ Six months after date of this first of exchange (second unpaid) pay to Riddle, Forsyth & Atterbury, or order, ten thousand dollars, value received, and charge the same to account.
    “ N. & E. FoRD & Co.
    “ To T. B. & W. P. Warfield, Lexington, Ky.”
    On the face of the bill were written the words, “ Accepted, T. B. & W. P. Warfield.” It was indorsed “Pay J. Anderson, A. Cash., or order, Riddle, Forsyth & Atterbury.”
    
      The defendants plead non assumpsit and payment. On the trial the jury found for them. From the bill of exceptions sealed at the trial, the following facts appear. After the bill of exchange had been read, Oliver Fuller’s deposition for the de-fence was produced. He proved that N. & E. Ford & Co., of New Orleans, deposited with Riddle, Forsyth & Atterbury certain securities, including an acceptance of $10,000 of T. B. & W. P. Warfield, as collateral security against the bills of N. & E. Ford & Co., accepted or to be accepted by Riddle, Forsyth & Atterbury ; that he had understood from the latter, that the drafts were deposited with them as collateral, and not for negotiation, but that they had assigned some to the United States Bank, and some to other persons; that N. & E. Ford & Co. had in their possession certain bills accepted by Riddle, Forsyth & Atterbury, for the accommodation of N. & E. Ford & Co. before and at the maturity of the acceptance of T. B. & W. P. War-field. The witness, as agent for N. & E. Ford & Co. had these bills in his possession for some time; that N. & E. Ford <fc Co. at and before the maturity of the acceptance of T. B. & W. P. Warfield, tendered the acceptances of Riddle, Forsyth & Atter-bury to them, upon condition of their surrendering up the bills, notes, drafts and acceptances held by them as collateral security. That N. & E. Ford & Co., on the 20th of November, published in the United States Gazette, in Philadelphia, an advertisement forewarning all persons from trading for the bills, notes and drafts deposited with Riddle, Forsyth & Atterbury, including the one sued on. Joseph R. Chandler, for the defence, proved the same fact with reference to the publication, and that the United States Bank was a subscriber to the paper.
    John A. Fo syth, for the defence, proved that he was ihe agent of the firm of Riddle, Forsyth & Atterbury. That that firm transacted its business in 1836 and 1837 in Philadelphia, and made an arrangement with N. & E. Ford & Co., of New Orleans, to accept drafts of the latter on them, which the latter were to furnish them means to pay as they matured, and were besides to deposit collateral security for their payment. Among the collateral security deposited was the acceptance sued on, which, on the 3d of May, 1837, before the maturity of any of the drafts against which it was held as collateral, was passed by Riddle, Forsyth & Atterbury to the United States Bank, as collateral for a draft drawn by Riddle, Forsyth & Atterbury on Forsyth, Goodwyn & Co., for $10,561 50, discounted by the United States Bank for Forsyth, Riddle & Atterbury, and which was still unpaid. That N. & E. Ford &.Co. retired all their bills accepted by Forsyth, Riddle & Atterbury, for their accommodation, and for which the collaterals, including the acceptance of the defendants, were pledged, at their maturity. It was further proved, on the part of the defendants, that Thos. B. & W. P. Warfield were residents and citizens of the state of Mississippi during the year 1837, and before and afterwards having a plantation and residence in the county of Washington ; that Thos. B. Warfield was and remained in the state of Mississippi during the year 1837, from May to October 1st; and there was no evidence that he was out of the state of Mississippi during the year 1837, but that W. P. Warfield, the other defendant, was on a visit to the state of Kentucky during that period. The acceptance was proved to be in the hand-writing of Thos. B. Warfield; that N. & E. Ford were citizens of New Orleans, but William F. Markham, of the firm of N. & E.' Ford ¿6 Co., was a citizen of Mississippi.
    It was proved and admitted by the defendants, that the law merchant prevails both in New Orleans, Louisiana, and Lexington, Kentucky, and that there was no statute in either of those states giving to makers of notes and bills equitable defences; but that in those states they are negotiable by the common law merchant.
    Upon this proof the plaintiff moved the court to exclude all the evidence of the defendants, as contradicting the bills of exchange, and illegal. The motion was overruled, and exceptions taken.
    The plaintiff then asked the court to instruct the jury,
    1. That if the jury believe from the evidence, the contract of acceptance by the defendants was made at New Orleans, Louisiana, or at Lexington, Kentucky, it is regulated by the laws of one or the other of those states; and it being admitted by the defendants, that contracts of this kind are regulated by the law merchant in those states, the defendants are not entitled to set up in their defence a failure of consideration in an action by a bona fide holder for value.
    2. That the plaintiff being the holder of a negotiable instrument for a valuable consideration, made in New Orleans, Louisiana, and directed to defendants at Lexington, Kentucky, without any notice of facts which impeach its validity as between the antecedent parties, and having taken it before due, holds the title unaffected by these facts, and may recover thereon, although as between the antecedent parties the transaction may be without any legal validity.
    3. That a contract is to be governed by the law of the place of contract, or place of payment.
    4. That the defendants having accepted a bill drawn at New Orleans, Louisiana, and directed to them at Lexington, Kentucky, are bound by the laws pf one or the other of those states; unless they clearly prove that the intention was at the time of the making of the contract that it should be governed by the laws of some other state.
    5. That the bill of exchange sued on is a foreign bill.
    The court refused to give these instructions as asked, but in lieu of them instructed the jury as follows:
    1. If the jury believe that the bill was drawn at New Orleans, Louisiana, on parties residing in Mississippi, and accepted in Mississippi, then it is subject to the laws of Mississippi.
    2. If the jury believe that the bill was made in Louisiana, and drawn on parties in Kentucky, and there accepted, it is not subject to any equities between the original parties in the hands of an innocent holder. Otherwise if the bill was of the kind described in the first instruction.
    3. That the bill is to be regulated by the law of the place of acceptance, if no other place of payment is designated.
    4. That if the bill sued on was made at New Orleans, Louisiana, and directed to persons living in Mississippi, and there accepted, it is subject to the laws of Mississippi.
    
      5. That if the jury believe that this bill was accepted in Mississippi, it, admitting it to be a foreign bill of exchange, is payable there and subject to the laws of Mississippi.
    Exceptions were taken to these instructions, and a motion for a new trial being overruled, the plaintiff below prosecutes this writ of error.
    
      George IS. Yerger, for plaintiff in error.
    1. By the law merchant or common law, there is no doubt a pledge of a bill, with a blank indorsement before due, to secure money loaned at the time, passed the property in the bill, discharged of all equities or defences of the maker or collateral equities of third persons, unless the party receiving it knew of the equity or rights of others. Story on Bailments, 214; 1 Bos. & Pull. 648 ; 2 Hill, 301; Bayley on Bills, 545 ; 12 Pick. 399; 20 Martin, 370; 22 Pick. 24.
    2. It is also clear, that at common law, an agent taking a bill in his own name, or holding the bill of his principal by blank indorsement, if he pledges or passes it to a bona fide holder for value, the latter will hold it against the true owner. Bay v. Coddington, 20 Johns. R. 637; Story on Bailments, 214.
    3. The mercantile law, except when changed by statute, is in force in Mississippi. By that law the defendants are liable.
    At common law equities against negotiable paper were of two kinds. 1st. Defences or equities of the maker or acceptor. 2d. Cases where the maker was liable, at all events, but third persons claimed the paper as their property, as in the case in 20 Johns. R4. 637, or of pledges. In both cases a bona fide purchaser of the paper without notice of the claim, held the note or bill, discharged of the equity.
    Our statute, supposing it to embrace foreign bills, authorizes suit to be brought in the name of the assignee or indorsee, and in all actions, &c., “the defendant shall be allowed all want of consideration, failure of consideration, payments, discounts, set-offs, had or possessed against the same, previous to notice of the assignment, in the same manner as if the same had been sued or prosecuted by the obligee or payee therein.” Bullock v. Wilcox, 7 Watts, 328.
    It is evident that this statute only applies to cases where the maker or acceptor has a valid defence, which will discharge him. It does not apply to cases where the maker is liable at all events, but third persons are contending for the property in the bill or note. Here the acceptors owe the money, and the contest is between Ford & Co., the pledgors, and the United States Bank. 2 Johns. Ch. R. 441; 1 Pertle’s Digest, 50, p. 96. And the consideration between the drawer and payee cannot be inquired into by acceptor. 4 Maine, N. S. 355.
    4. But if they had such defence, it will not avail them, because this bill on its face is payable in and governed by the law of Kentucky. The bill is drawn upon them at Lexington, Kentucky. It makes no difference where they resided or accepted it, as to third persons, it is on its face a foreign bill, payable in Lexington, Kentucky. Story on Bills, 26, 29, 51, 176, 177; 7 Monroe’s Ken. R. 283; Bayley on Bills, 21; 6 Shepley, 292; 12 Peters R.; 8 Dana’s R. 134.
    Bills drawn in one state, and directed to persons in another state, are foreign bills, because being directed to them in another state, and accepted, the law implies they are payable there. See 2 Peters, 586; 12 Wend. 264; 12 Pick. 483; 15 Wend. 527; 12 Peters, 32; 7 Monroe R. 284; 8 Dana, 134. If a bill is payable in another state, it is a foreign bill, although all parties live in the same state. 6 Shepley, 292. The place of payment is the residence of the drawee, or where it is directed to him on the face of the bill. Story on Bills, 61. And although he may reside at a different place than the direction, as to third persons the direction must prevail. Story on Bills, 29. The fact that a man resides in one state, if the bill is accepted by him in another, and there is no direction on the face of the bill; it is not payable where he resides, but where he accepts. Story’s Conflict, 263, note 3. So a bill, directed to a man in London, is payable there, although acceptor resides in America. See forms of bills, Story on Bills, 31, 32.
    
      
      John M. Chilton, for defendants in error.
    1. The first instruction given by the court is correct. The rule of law is, that in the absence of any stipulation to the contrary, the placp of performance shall supply the law to govern the contract. Story on Conflict of Laws, (3d ed.) 233, sect. 280, citing 13 Peters R. 65.
    In the case at bar the acceptors resided in Mississippi. This was their place of business, and here lay their resources. Before this bill eould have been protested for nonpayment, it must have been exhibited and presented at the residence of the acceptors in Mississippi, and payment there demanded. A presentment and demand at any other place would have discharged the drawer of the bill The case is thus clearly brought within the rule as above quoted from Story. See also, same author, page 252, sect. 304, and sect. 315, p. 262. In a late case, Mus-son & Co. v. Lake, decided .in the supreme court of the United States, 4 How. 278, it is said, “The place where the contract is to be performed is to govern the liability of the person who has undertaken to perform it. The acceptors resided at New Orleans. They became parties to the bill by accepting it there. So far as their liabilities are concerned, they were governed by the laws of Louisiana, but the drawer and indorser resided in Mississippi, &c., and their liabilities, if any, accrued there.”
    In the case of Foden v. Thorp, 4 Johns. R. 183, the bill was made payable in London, and accepted there. See Story’s Gonfl. 3d ed.- sect. 320, p. 266. In 2 Kent’s Comm. p. 457, 458, it is laid down, the contract is to be governed by the law of the .place where such contract, in the contemplation of the parties, was to be performed. Froto all the facts of this case we must presume they contemplated the place of the residence of the acceptors.
    2. It may be contended that in this case, the temporary absence of Warfield from Mississippi, and the words “Lexington, Ky.” -make Kentucky the place of performance.
    To this we answer, the rule is, that the residence of the party is presumed to be the place of performance, and not the spot where he may be in transitu, at the moment of acceptance. The whole testimony shows that these words were not intended to constitute an essential ingredient of the bill itself,
    3. Again, the court does not instruct the jury that a bill, if accepted in Kentucky, was subject to the law of Mississippi, but on the contrary, that “a bill drawn on parties in Kentucky and accepted there, would not be subject to any equities as against an innocent holder.” This instruction is all that the appellants could ask or contend for; and even if the first instruction had been erroneous, the second instruction would so modify it, as to meet the appellant’s wishes.
    4. The third instruction only embodies the two former, and if incorrect, is only so in favor of the appellant in this cáse.
    5. The fourth .instruction is also embodied in the first three, and what has been said of them is equally applicable to this. If it be correct, as we contend it is, then it is to be inferred that the jury, who were the only judges of the testimony, believed the bill was accepted in Mississippi.
    6. The fifth instruction is undoubtedly correct. It is not denied that a foreign bill is a bill drawn by parties living in one state, on parties living in another state, and it certainly cannot be a subject of doubt, that such a bill might be subject to the law of the place where the drawees resided. And (conceding that the bill in question is a foreign bill,) we contend that so far as the liability of the acceptors is concerned, the jury had a right to find from the evidence, in favor of the defendants.
    7. In conclusion, I will invite the attention of the court to another point, which undoubtedly had its weight on the jury. It is proved, that one of the firm which drew the bill was a resident of the same state in which the acceptors resided, to wit, the state of Mississippi. This circumstance imparted to the bill in question the complexion of an inland bill. We also contend that this bill having been deposited as a collateral security with the holder, was not assignable to the United States Bank ; and that, moreover, the jury had a right to infer from the proof, that the United States Bank took the bill to secure an antecedent debt due them, and with full notice of its having been deposited as a collateral with the assignor.
   Mr. Justice Thacher

delivered the opinion of the court.

This is an action instituted for the use of the assignees of the United States Bank of Pennsylvania, by Frazier, an indorsee of a bill of exchange, against Thomas B. and William P. Warfield, the acceptors. The bill is drawn by N. & E. Ford & Co. upon Riddle, Forsyth and Atterbury. The evidence shows that it was placed in the hands of the payees by the drawers as collateral security for liabilities incurred for them. The payees indorsed the bill before its maturity, to the United States Bank of Pennsylvania as security for a note which they procured to be discounted. The bill is drawn at New Orleans, and directed to the acceptor's at Lexington, Kentucky, and by them accepted generally. It was permitted to be proved, that the acceptors were citizens and residents of Mississippi at the time of the acceptance, although one of them was on a visit to Kentucky, but not the one in whose handwriting the acceptance wasmade. The firm of the drawers was established in New Orleans, but one of the partners resided in Mississippi. It was likewise proved and admitted by the defendants, that in Louisiana and Kentucky, bills of exchange are governed in their negotiability exclusively by the rules of the common law merchant. After the pledge of the bill to the United States Bank of Pennsylvania, the drawers liquidated all the liabilities, for the payment of which the bill was originally pledged to the payees. The acceptors defended upon the ground that the bill belonged to the drawers and not to the indorsee, the plaintiff. The jury found for the defendants, and, as could only have been, from the evidence permitted to be introduced as to the actual residence of the acceptors in Mississippi, and the charge of the court as to the modification of the common law merchant in this state, by which the defence employed was supposed to have been let in.

The chief inquiry is, as was made on the trial, in regard to the place where the contract of the acceptors was to have been performed, because their liability is controlled by that circumstance. The place of payment for a drawee is his place of residence, or the place to which it is addressed to him, unless a particular place of payment is stated in the bill. Story on Bills, 47. The bill in this case was addressed to the drawees at Lexington, Kentucky, and neither the bill nor the acceptance exhibit that any other place of payment was designed. The place of the address on the bill was, therefore, adopted by the acceptors, and made the place of payment. This was then the written contract of the acceptors, and binding on them. The contract was to pay in Lexington, Kentucky. It was admitted, that the laws of Kentucky do not allow such a defence as was urged in the circumstances of this case, and consequently as the defence prevailed, it follows that the finding of the jury was erroneous, and that a new trial should have been granted. The instructions of the court, as general principles governing the law merchant, might have been correct, but they emanated, from evidence improperly admitted, and therefore had an improper influence upon the jury.

The judgment must therefore be reversed, and a new trial awarded.  