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is paid by the holder, he is not injured by the impeachment of his title. 2. That such a transfer as is supposed in either of the last two cases is not one made in the usual course of business.

Transfers of negotiable securities, for the purpose supposed, are seldom made, except in the execution of some agreement or understanding, by which the transferrer is to be benefited; as by delay or forbearance or further credit, or the giving up of other collaterals, or the substitution of one collateral for another, or the promise to forego the means of obtaining other indemnity or security.

Few cases, it is presumed, arise where the interest of the debtor is not consulted; so that, if the rule should be confined to the cases falling within the abstract theory of such a defence, the question would cease to be of much importance, nor would it often be true that, if the title of the holder should be impeached, he would be left in as good condition as he was before. 1 Parsons, Bills and Notes, 219.

Debtors are often benefited by delay, but creditors are usually sufferers. Transactions of the kind, it is said, are not to be regarded as transfers made in the usual course of business; but the court is unable to adopt that conclusion, as the statement of the learned author is believed to be correct, that a large part of the use that is made of negotiable paper is as a means of borrowing money or of securing debts previously contracted. Bills and instruments of the kind, indorsed in blank or payable to bearer, when transferred to an innocent holder create the same liability as if indorsed at the time of the transfer. Where a party executed such a note to take up a prior note, and his agent delivered it to a third person as collateral security for his own pre-existing debt, Shaw, C. J., held that the holder took a good title as against the maker to the extent of his debt, but that he could not recover any more than the amount of his pre-existing debt. Stoddard v. Kimball, 6 Cush. (Mass.) 469.

Adjudged cases, almost without number, decide that, where the pre-existing debt is discharged, the title of the innocent holder is beyond question; but frequent attempt is made to show that there is a distinction between taking such a note in

payment of a pre-existing debt and taking it as a collateral security for such a payment. One whose debt is due, says Redfield, C. J., must pay it, or become a bankrupt in the commercial sense. If, instead of money, he gives a bill or note, either on time or at sight, whether this is payment in form or is given as collateral to his debt, he gains time, and is saved from the disgrace and ruin consequent upon stopping payment. Viewed as it may be, the debtor in either case derives the benefit of an implied understanding that the creditor will not immediately press for payment, unless the new security proves unproductive, and, if it does, that the creditor may pursue any other proper remedy. Difference in form between payment and collateral security, it was admitted, existed; but the court unanimously held that there was no difference in principle, provided the indorsement was unqualified, so as to impose upon the holder the obligation to conform to the law merchant in enforcing payment. Atkinson v. Brooks, 26 Vt. 569, 576.

Other State decisions, too numerous for citation, hold that a party taking a negotiable note in payment of, or as a collateral security for, a precedent debt, is a bona fide holder for a valuable consideration, and that he is entitled to the same protection as a holder who receives the same in payment for goods delivered at the time of the transfer, or one who pays cash for the instrument when it is delivered. Allaire v. Hartshorne, 21 N. J. L. 665; Hamilton v. Vought, 34 id. 187, 191; Culver v. Benedict, 13 Gray (Mass.), 7, 10; Johnson v. Way, 27 Ohio St. 374, 379; Brush v. Scribner, 11 Conn. 388; Gwynn v. Lee, 9 Gill (Md.), 138.

Even suppose that the title of the plaintiffs is good under the rule of the commercial law, as understood and administered in the Federal courts, still it is insisted by the defendants that the State courts have adopted a different rule in such a case, and that the State rule of decision is the one applicable in the case before the court. Both parties are citizens of the same State; and it must be admitted that if the State rule is applicable in the case, then the ruling of the Circuit Court is erroneous. Various arguments were advanced in support of the proposition, but the one most pressed is that derived from the thirty-fourth section of the Judiciary Act, which provides that the laws of

the several States, except where the Constitution, treaties, or statutes of the United States otherwise require or provide, shall be regarded as rules of decision in trials at common law in the courts of the United States, in cases where they apply. 1 Stat. 92.

State laws furnish rules of decision in trials at common law in the Federal courts, in cases where they apply, which leaves it plainly to be understood that those laws do not apply in all cases, and it was early decided that they do not apply to the process and practice of the Federal courts. Wyman v. Southard, 10 Wheat. 1.

In cases depending on the statutes of a State, and more especially in those representing titles to land, the court adopts the construction of the State, where that construction is settled and can be ascertained. Polk's Lessee v. Wendell, 9 Cranch, 87,98.

Where any rule of real property has been settled in the State courts, the same rule will be applied by this court that would be applied by them. Jackson v. Chew, 12 Wheat. 153, 162.

Controversies often arise where this court will refuse to adopt a decision of the State court, as in the construction of a will, unless it appears that the decision has become, by acquiescence, a rule of property in the State. Lane v. Vick, 3 How. 464, 476.

Three decisions from the State courts show that the rule of decision adopted by the courts of the State at that period support the views of the defendants, and we regret to say that the tendency of some of the later decisions in the same tribunals are in the same direction. Atlantic National Bank of New York v. Franklin, 55 N. Y. 235.

Such being the fact, it becomes necessary to decide the question whether the decisions of a State court compel this court to apply to the facts of the case a rule of decision, believed to be in direct conflict with the rule of commercial law. Nearly forty years have elapsed since this question was first presented to this court for decision. Doubts were then entertained whether the State rule was absolutely settled; but, for the purposes of the decision, that point was unconditionally ad

mitted Then as now the chief argument in support of the proposition was that the question was controlled by the thirtyfourth section of the Judiciary Act, to which the court responded, in the first place, by denying that the word “laws,” used in the section, included the decisions of the local tribunals within the scope of its meaning. In the ordinary meaning of language, said Mr. Justice Story, it will hardly be contended that the decisions of the courts constitute laws, adding that, at most, they are only evidence of what the law is, and are not of themselves laws. They are often re-examined, reversed, and qualified by the courts themselves, whenever they are found to be either defective or ill-founded or otherwise incorrect.

His views were that the laws of a State are more usually understood to be the rules and enactments of the legislature, or long established local customs having the force of laws. None, it is believed, can dissent from that view, and we have the authority of that opinion for saying that, in all cases prior to that time, the court had uniformly supposed that the section, when properly interpreted, was limited in its application to State laws strictly local, and the construction thereof by the local tribunals, and to rights and titles to things having a permanent locality, such as the rights and titles to real estate, and other matters immovable and intra-territorial in their nature and character; that the court had never supposed that the section applied, or was designed to apply, to the construction of ordinary contracts or other written instruments, nor to questions of general commercial law.

These views were enforced by many other illustrations, and the court decided — every member of the court but one concurring that the section, upon its true intendment and construction, is strictly limited to local statutes and local usages, and that it does not extend to contracts and other instruments of a commercial nature, the true interpretation and effect of which are to be sought, not in the decisions of the local tribunals, but in the general principles and doctrines of commercial jurisprudence. Swift v. Tyson, 16 Pet. 1, 18.

Judicial views of a corresponding character were expressed by Lord Mansfield, as Chief Justice of the King's Bench, nearly a century earlier, when he said that the maritime law is not the

law of a particular country, but the general law of nations. Luke v. Lyde, 2 Burr. 882.

Mr. Justice Story referred to that case, in support of the decision of the court, and quoted the celebrated maxim of Cicero, which, liberally interpreted, is to the effect that maritime law is not one thing in one country and another thing in a different country, nor one thing to-day and another to-morrow, but that, in all times and nations, it is immutable and imperishable. Translation by Yonge (London, 1853), 360.

Commercial law, says Bouvier, is a phrase employed to denote the branch of the law which relates to the rights of property and the relations of persons engaged in commerce. Persons engaged in commercial adventures, wherever they may have their domicile, have business relations throughout the civilized world, from which it results that commercial law is less local and more international than any other system of law, except the law of nations.

Codes, laws, and ordinances of other States, says a learned writer, whether ancient or modern, are received by the courts with great respect, not as containing any authority in themselves, but as evidence of the general law merchant. Where these are contradicted by judicial decisions, they cease to have any value in the jurisdiction where the law is decided to be the other way. Levi (2d ed.), 2.

Authoritative support to the proposition, that the decisions of the State courts do not control in such a case, is also derived from other decisions of this court, in which every member of the court concurred. Carpenter v. The Providence Washington Insurance Co., 16 Pet. 495, 511.

Insurance against fire in that case was effected by a mortgagor, and one of the questions was as to the amount the insured was entitled to recover. Reported cases from the State reports were referred to as furnishing the rule of decision. Responsive to that argument, Mr. Justice Story remarked, among other things, that the question presented was a question of general commercial law, involving the construction of an insurance contract, which is by no means local in its character, or regulated by any local policy or customs; that the decisions of the State tribunals are entitled to great respect, but that

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