In re Simeon Leland and others, Bankrupts. ciple is very familiar, and I refer to the case of White v. Coatsworth, (6 N. Y., 137,) only as a striking illustration of its universality. There, a verdict in summary proceedings, to recover the possession of demised premises, finding no rent due, was held conclusive against the landlord, in a subsequent action. The principle was thus stated by the Court: "The judgment of a Court of competent jurisdiction, upon a point litigated between the parties, is conclusive in all subsequent controversies, where the same matter comes again directly in question." The question then is-was there such an adjudication applicable to the case now on trial? I think it undeniable that such an adjudication did take place. The parties might probably have insisted that the matters in question could only be judicially determined in a plenary suit; but they did not take this ground, and, on the contrary, submitted the whole matter to the decision of the District Court, which, by its decree, entered November 1st, 1873, adjudged the claims of the now plaintiffs to be affected by the preferential securities therein referred to, and, upon that ground, debarred them from any participation in the distribution of the fund then being administered. At the hearing of that application the parties now concerned appeared by their counsel, and, in open Court, waived all objections to the form of the proceeding, and submitted all the questions involved therein to the decision and decree of the Court. The general question which the Court was then dealing with, was the distribution of a fund derived from the sale of property which had belonged to the bankrupts, and, as a necessary part of the inquiry, the Court was compelled to consider whether the securities charged upon that property, and which those creditors had received, were preferential, and, so, void. The Court adjudged the securities preferential, and declared that the creditors who had taken them, including the plaintiffs in these suits, were parties to the preferential purpose, and decreed them to be debarred from any lien upon the fund in question. This adjudication stands in force at this day, and cannot be deprived of its effect upon the rights of these parties. It cannot come in VOL. XIV.-16 The National Bank of the Republic v. The Brooklyn City and Newtown R. R. Co. question in the pending suits. They do not bring up the merits of that decision for re-examination in any way. The facts established in that litigation bring the cases of these plaintiffs within the scope of the provision of the bankrupt law which debars the proof of a debt in respect to which a preference has been received, when the assignee has recovered back the property. Upon this part of the case I refer to and adopt the opinions of Judge Blatchford, in respect to the claims of these creditors, as pronounced and reported in In re Leland, (7 Benedict, 156 and 436.) The questions involved are there amply discussed, and I see no advantage to the parties or to the law in going over the same ground and reiterating the same views. Upon all these points the evidence produced by the defendant is not only admissible, but, as it seems to me, also conclusive against the plaintiffs. Under the arrangement at the trial, I do not now proceed to give judgment in the cases. Henry E. Davies, for the creditors. Thomas M. North, for the assignee in bankruptcy. H., having a promissory note made by B., wrongfully diverted it and transferred it to N., as collateral security for a precedent debt due by H. to N., who took it in good faith: Held, that N. could not be affected by any equities between B. and H. N. sued an endorser of the note in a State Court, and was defeated, on the ground that the law, as held by the State Court, was, that N., having taken the note as security for a precedent debt, took it subject to the equities be tween the prior parties. Afterwards N. sued the maker on the same note: The National Bank of the Republic v. The Brooklyn City and Newtown R. R. Co. Held, that the judgment in the suit against the endorser was not a bar in favor of the maker. (Before WALLACE, J., Southern District of New York, May 26th 1877.) WALLACE, J. The diversion of the note in suit by Hutchinson & Ingersoll cannot avail the defendants, the makers, because, within the authority of Swift v. Tyson, (16 Peters, 1,) the plaintiff, having taken the note in good faith from Hutchinson & Ingersoll, though only as collateral to a preexisting debt of the latter, cannot be affected by the equities between the antecedent parties. It is useless to review or discuss the numerous cases which hold that, where a note is thus taken as security, and there is no agreement, express or implied from the circumstances, that the creditor is to forbear or extend the loan, he is not a holder for a valuable consideration, and cannot recover against the maker, when the note has been fraudulently put in circulation or diverted. It suffices to say, that this is the conclusion reached in nearly all the cases in England and in this country where the question has arisen, and is in accord with the doctrine of Courts of equity, that he who does not part with some new consideration, or assume some new obligation, is not a purchaser for a valuable consideration, and has no better rights than the party from whom he purchases. Text writers and commentators of very respectable authority have expressed the opinion that no new agreement between the creditor and the party transferring the paper is essential, for the reason that, if such an agreement is not implied, at least there follows a remission of that vigilance which might otherwise have secured satisfaction of the debt, and because the acceptance of the security imposes new obligations on the part of the creditor toward the debtor. (Daniel on Neg. Ins'ts, § 829; Byles on Bills, 125, note by Judge Sharswood.) Whether this reasoning is satisfactory or not I shall not now stop to inquire. The case of Swift v. Tyson was one where the bill was taken in payment of a note held by the plaintiff against the person who transferred the bill, but no weight was placed upon the fact that plaintiff accepted the note in payment and thus satisfied the original debt; and it The National Bank of the Republic v. The Brooklyn City and Newtown R. K. Co. has been generally accepted as committing the Supreme Court to the broad proposition, that the mere acceptance of negotiable paper as security entitled the holder to all the rights of a purchaser for a valuable consideration. (McBride v. Farmers' Bank, 26 N. Y., 450; Atkinson v. Brooks, 26 Verm., 569; Allaire v. Hartshorne, 1 Zabriskie, 665; Gibson v. Conner, 3 Georgia, 47; Fellows v. Harris, 12 Sm. & M., 462; Blanchard v. Stevens, 3 Cush., 162.) Until a more decisive expression from that tribunal, I must yield to the accepted import of that decision, and hold adversely to the position of the defendant. It is insisted for the defendant, that the judgment recov ered in the suit brought by the plaintiff against the endorsers of the note in suit is a bar to this action against the maker. That suit was brought in the State Court, and decided, not upon any defence peculiar to the endorsers, but in accordance with the rule as held in this State, by which the holder of a note, who has taken it as security for a precedent debt, takes it subject to the equities existing between the prior parties. The simple question, then, is whether a judgment in favor of an endorser, in an action by the holder of the note, is an estoppel in an action brought against the maker, where the defence is upon ground common to both the maker and endorser. It would hardly be contended that a judgment in favor of the creditor against the principal would estop a surety from contesting the same issue when sued by the creditor; and it has been decided, in several cases, that a judgment in favor of the principal, when sued by the creditor, will not preclude a subsequent recovery by the creditor against the surety. (Townsend v. Riddle, 2 New Ilamp., 448; Bank of the State v. Robinson, 8 English, 214; Barker v. Cassidy, 16 Barb., 177.) Where there is no agreement, express or implied from the nature of the contract, that a surety shall be bound by a suit against the principal, the surety is not affected by the result. He is in the position of a stranger to the controversy. If the surety is not precluded by a judgment against the principal, the creditor is not, because estoppel must equally affect both In re A. Orlando Jackson, on Habeas Corpus. parties. I entertain no doubt that the former suit is not a bar. To the extent its payment operated as a satisfaction of the plaintiff's debt, the defendant is entitled to be relieved. It has no other effect. The plaintiff is entitled to judgment for the amount of the debt unpaid, for which the note in suit was taken as collateral. Rodman & Adams, for the plaintiff. Field & Deyo, for the defendant. IN THE MATTER OF A. ORLANDO JACKSON, ON HABEAS COR PUS. The provisions of § 3894 of the Revised Statutes, as amended by § 2 of the Act of July 12th, 1876, (19 U. S. Stat. at Large, 90,) prohibit the carrying in the mail of letters or circulars concerning lotteries, and punish as a crime the offence of knowingly depositing or sending anything to be conveyed by mail, in violation of said § 3894, and apply to sealed letters, and are not unconstitutional or invalid.* A grant of power in the Constitution is to be construed according to the fair and reasonable import of its terms, and its construction is not necessarily to be controlled by a reference to what existed when the Constitution was adopted. Although the only punishment prescribed by § 3894 is a fine, a person who violates the statute may be arrested for trial and imprisoned or bailed. (Before BLATCHFORD, J., Southern District of New York, June 9th, 1877.) BLATCHFORD, J. On the 8th of March, 1877, a United States Commissioner for this District issued a warrant to the marshal, which recited, that complaint on oath had been made to him, charging that A. Orlando Jackson did, on or about the 23d of February, 1877, "at the Southern District of New York, unlawfully, wilfully and knowingly deposit, and • The Supreme Court held to the same effect, in Ex parte Jackson, (6 Otto, 727.) |