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Section 4282 in terms applies only in case of fire hap- should prosecute him, to their proportionate share of pening “to or on board the vessel.” Therefore the the value of the vessel and freight ($ 4284), and at ship-owner is not protected by that section if goods be the same time retain tho balance without paying the destroyed by fire on a lighter conveying them from other injured parties. Besides, it is necessary that the shore to the ship. Morewood v. Pollock, 1 Ell. & the total amount of losses should be ascertained in Bl. 743. Nor if they be destroyed by fire on the dock order that the proportion to be paid to each claimant after landing. Per Curtis, J., Salmon Falls Mfg. Co. v. may bo determined. Norwich Co. v. Wright, 13 Wall. The Tangier, 11 Law Rep. (N. S.) 6.

104, 124; Dyer v, National S. S. Co., 14 Blatchf. 483; Section 4283 is not so precise on this point. We are The Niagara v. Cordes, 21 How. 7, 26. not aware of any reported case in which it has been In a case where only one person sustained loss it was decided whether, under that section, the loss or dam- said that the ship-owner must take the same proceedage must have occurred on the vessel itself.

ings in order to have the benefit of the act. Per Under section 4283, the destruction, injury, etc., Dwight, Com., Baird v. Daly, 57 N. Y. 236, 252. But to must have occurred “without the privity or knowl- the contrary is the opinion of Grover, J., in Dougan v. edge" of the owners.

Champlain Trans. Co., 56 N. Y. 1, 6, and the reasoning The English courts have shown a disposition to con- in Norwich Co. v. Wright would seem not to apply. strue the words "privity and knowledge" strictly in The rules prescribed by the Supreme Court allow the favor of ship-owners.

owner to take these proceedings and at the same time Thus, if the loss is occasioned by the actual fault of to contest his liability to any extent whatever by inone of several part owners, his co-owners are not serting proper allegations in his libel or petition. thereby precluded from the benefits of section 4283. Adm. Rule 56. But literal compliance with section See The Spirit of ihe Ocean, Br. & Lush. 336. This case 4285, and a transfer in trust for the benefit of the was perhaps anticipated, as would appear from the claimants, would seem hardly consistent with reservprovision that the liability shall not exceed “the ing the question of liability. Of course, whero a stipamount or value of the interest of such owner in such ulation is given on appraisement or money deposited vessel and her freight then pending."

under Admiralty Rule 54, there would be no difficulty. If a collision occur while the master, who is also The Annie Childs, Lush. 509. part owner, is ou board, but not on deck, his duty not It is held that great delay in taking the necessary calling him there, he can have the benefit of the act. proceedings will deprive the owner of the benefit of the The loss occasioned by the collision is not, under the act. Dyer v.Nat.S.S. Co.,14 Blatch.483, 487. Our practice circumstances, with his “ fault or privity." The Obey, in this respect differs from the English courts, where L. R., 1 Adm. & Ecc. 102.

proceedings to limit liability may be taken after an When the owner is a corporation, the privity or adverse decree in admiralty. Leycester v. Logan, 3 K. knowledge of the managing officers of the corporation & J. 446. must be regarded as the privity and knowledge of the The value of the interest of the owner of the vessel corporation itself. Lord v. Goodall, etc., S. S. Co., 4 was in some cases of collision computed on the value Sawy. 292; Hill Mfg. Co. v. Prov. & N. Y. S. S. Co., of the vessel immediately before the disaster. Walker 113 Mass. 495, 500.

v. Boston & Hope Ins. Co., 14 Gray, 288, 303; Barnes If such managing officers, or an individual owner v. Steamship Co., 6 Phila. 479 (per Grier, J.) But the fails to select a competent master and crew, and to Supreme Court, in view of section 4285, allowing a have the ship seaworthy when she sails, and loss ensues transfer to trustees in full exoneration of the shipin consequence of such neglect, such loss is chargeable owner, which must necessarily be made after the disto the owners as occurring with their privity and aster, held the value of the interest at that time to be knowledge. Lord v. Goodall, etc., S. S. Co., supra. the limit of liability, even if the vessel were entirely

Can there be a loss by fire caused by the neglect of destroyed. Norwich Co. v. Wright, 13 Wall. 104, 120; the owner, and so not within the total exemption al- Waltson v. Marks, 2 Am. Law Reg. 157, 165. lowed by section 4282, and yet within the limited lia- Nor can insurance be included in this value. It is a bility of section 4283, because occasioned without the distinct, independent subject of property. The assign“privity or knowledge of the owner?”

inent of the ship passes no interest in it. Waltson v. On the one hand it is argued that special provision Marks, 2 Am. Law Reg. 157, 167. (Per Kane, U. S. is made in section 4282 for this peculiar single loss, and D. J.) even though the general language of subsequent sec- The owner must answer not only to the amount of tions might include the loss in that section provided his interest in the vessel but also in the freight pendfor, yet where they may be fully applied to other cases ing. Aud for this purpose a reasonable freight upon of loss, they should be so applied and be satisfied with his own goods is to be included. Allen v. Mackay, 1 such application, thus leaving each and all provisions | Sprague, 219; The Glaucus, 1 Low. 366. But a whaling in force - a cardinal rule in the construction of stat- voyage is special in its character, and on such a voyage utes. Again, by no code of law was an owner of a ship as ordinarily prosecuted there is no "freight pending" limited in his liability where the loss occurred by bis within the meaning of the act. The Ontario, 2 Lowell, own “design or neglect;" the provisions would have 40, 52; affirmed as Swift v. Brownell, 1 Holmes, 467. to be very plain and clear that would justify such an If there be a decree against two vessels, A and B, as interpretation. Knowlton v. Prov. & N. Y. S. S. Co., in a case of collision where both are found in fault, 53 N. Y. 76.

that the owners of A pay 2,0001. to the owners of B, On the other hand it is said that the solution of the and that the owners of B pay 14,0001. to the owners of question must depend on the facts of the case as de- A, and the owners of B take proceedings to limit their veloped by judicial process. In re Prov. & N. Y. S. S. liability under the act, which result in the payment of Co., 6 Ben. 124. To the same effect is Chisholm v. a fund into court for distribution, the owners of A Northern Transportation Co., 61 Barb. 363, 390, which cannot retain the 2,0001, by way of set-off against the as au authority must be considered overruled by the amount due to them by the owners of B, proving case in 53 N. Y, 76.

against the fund in court for the balance only, but In a case within section 4283, if the owner claims the they must pay the 2,0001. in full to the owners of B, benefit of that section he must take proceedings him- and prove against the fund in court for the 14,0001. self (unless some claimant does so), under sections Otherwise the owners of B, instead of having their 4284 or 4285, at least where there is more than one liability limited pursuant to the statute, would suffer claimant. Otherwise the owner might reduce the an additional loss of 2,0001., and would be in exactly the compensation to be made to those claimants who same position as if they had been condemned in Admiralty to bear all their own loss. Chapman v. Royal raising money thereon for the company. Neither Netherlands S. N. Co., L. R., 4 Prob. Div. 157.

LeCount nor Palmer & Co. received any consideration Finally it is always competent for the ship-owner by for tbeir respective indorsements. The note thus incontract to waive the benefit of any or all the provis- dorsed was, with others, placed by the company in the ions of the statute. The original act of 1851 contained hands of Hutchinson & Ingersoll, a firm of note-brokers an express proviso to this effect, at the end of the first in Wall street, for negotiation and sale. section. This is omittel in the Revised Statutes; but Prior to the execution of the note Hutchinson & Init is believed that on general principles, as no rule of gersoll had frequently borrowed money from the demorality or public policy forbids, such a contract fendant in error, the National Bank of the Republic would be binding without the aid of the proviso. of New York. They however kept no account with

But the contract must be express, and no mere im- that institution, and had no transactions with it other plied contract can be alleged against the express ex- than those to which reference will now be made. emption or limitation of the statute. Walker y. The In the month of October, 1872, the bank first made Trans. Co., 3 Wall. 150.

them a call loan, at seven per cent interest, of $25,000, J. F. MOSHER. on collaterals. Subsequently, in 1873, it made to them

other call loans on collaterals, at the same rate of NEGOTIABLE INSTRUMENT-HOLDER FOR interest, as follows: March 11th, $15,000; March 15th, V’ALUE- BAR TO ACTION-ESTOPPEL $10,000; April 1lth, $10,000; May 16th, $10,000; May - CONFLICT OF LAW.

20th, $20,000; May 23d, $10,000; Jupe 4th, $15,000; June

Oth, $12,000; June 12th, $10,000; June 19th, $36,000; SUPREME COURT OF THE UNITED STATES-OCTOBER

and July 11th, $10,000. Each of these loans was a sepaTERM, 1879.

rate one, upon a particular and distinct lot of collaterals. Hutchinson & Ingersoll were in the habit of

borrowing money from various banks and from indiBROOKLYN CITY & NEWTOwn RAILROAD Co., Plaintiff

viduals or firms upon specific lots of collaterals. in Error, v. NATIONAL BANK OF THE REPUBLIC. The loan of $36,000 on 19th June, 1873, was upon 1. The judgment in an action instituted by the holder of

several notes as collateral security, among them the negotiable paper against the indorsers is not a bar to a above-described note for $5,000, executed May 9th, 1873. subsequent action by the holder against the maker, the All the loans by the bank, prior to the one of $36,000, latter not having been made a party to the first action, had been paid off before that loan was made. nor notified of its pendency.

The loan of $10,000 on the 11th July, 1873, was upon 2. An estoppel arising out of the judgment of a court of

the following notes as collateral security: Two notes competent jurisdiction is equally conclusive upon all

of Howes, Hyatt & Co. for $2,603.98 and $3,540.15, and the parties to the action and their privies. It may not

two of II. L. Ritch & Co. for $3,520.17 and $2,146.92. be invoked or repudiated at the pleasure of one of the parties as his interest may happen to require.

On the 22d July, 1873, Howes, Ilyatt & Co. having 3. The transfer, before maturity, of negotiable paper, as

become insolvent, Hutchinson & Ingersoll executed security for an antecedent debt merely, without other and delivered to the bauk, at its request, antedated to circumstances - if the paper be so indorsed that the June 19th, 1873 (which was the date of the $36,000 holder becomes a party to the instrument - although loan), a written instrument whereby they agreed with the transfer is without express agreement by the cred the bank “that all securities, bonds, stocks, things in itor for indulgence, is not an improper use of such

action, or other property or evidences of property whatpaper, and is as much in the usual course of commercial business as its transfer in payment of such debt. In

soever, which have been or may at any time hereafter either case the bona fide holder is unaffected by equities

be deposited or left by us or on our account, with said or defenses between prior parties of which he had no bank, whether specifically pledged or not, may be held notice.

by said bank, and shall be deemed to be and are hereby 4. The courts of the United States, in determining ques- pledged as security for the payment of any and every

tions of general commercial law, are not controlled by indebtedness, liability or engagement on our part, held the decisions of a State court, even in an action insti

by said bank, and that on the non-payment, when due tuted by a National bank, located in the Stato rendering

and payable, of any sum or sums of money which have such decision, against one of its own citizens, upon a negotiable note there executed and payable. Such de

been or may hereafter be by said bank lent, paid or cisions, not based upon local legislative enactments, are

advanced to or for the account or use of us, or for not "laws" within the meaning of the Federal statute,

which we are or may become in any way liable or inwhich provides that "the laws of the several States, debted to said bank, the said bauk, or its president or except where the Constitution, treaties or statutes of cashier, may immediately thereupon, or at any time the United States otherwise require or provide, shall be thereafter, sell, etc., * and apply the net proregarded as rules of decision in trials at common law

ceeds of sale to the payment of any sum or sums duo in the court of the United States, in cases where they

and payable from us to said bank, and hold any surapply." Swift v. Tyson, 16 Pet. 1, reaffirmed.

plus of such net proceeds, together with any and all error to the Circuit Court of the United States

remaining securities, property, or evidences of propfor the Southern District of New York. The

erty, then held by said bank and not sold, as security opinion states the case.

for the payment of any and all other of our tbeu ex

isting and remaining liabilities and engagements to HARLAX, J. The case, as made by an agreed state- said bank." ment of facts, is this: The plaintiff in error, the When that writing was executed no agreement was Brooklyn City & Newtown Railroad Company, a corpo- made to extend the loan or to refrain from calling it in. ration organized under the laws of New York, exe- The bank knew that Hutchinson & Ingersoll were cuted, at Brooklyn, in that State, on 9th May, 1873, its note-brokers, but until August 8, 1873, had no kuowlpromissory note for the sum of $5,000, payable four edgo or information of the connection of the Palmers months after date to the order of Wm. V. LeCount, with the railroad company, or of the circumstances [its) treasurer, at the Atlantic State Bank of Brooklyn. atteuding the making or indorsement of the note in It was indorsed in blank, first by LeCount, treasurer, suit, or of the purpose thereof, or of any relations, and then by Palmer & Co., a firm composed of Thomas dealings or communication between Hutchinson & InPalmer, Jr., and Anson S. Palmer, the former being gersoll, and the parties to the note (except that they the president and the latter the financial agent of the knew Hutchinson & Ingersoll to be note-brokers), or company, and together owing the larger portion of its that the note was any thing else than ordinary busistock. The note was made for the purpose only of ness paper, or that there was any question as to tho

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right of said Hutchinson & Ingersoll to pledge or nego- is equally conclusive upon all the parties to the action tiate it. Nor did the railroad company know or sus- and their privies. It may not be invoked or repudiated pect that the firm had parted with or hypothecated at the pleasure of one of the parties as his interest said note until August 15, 1873.

may happen to require. The company, by reason of certain advances made The liability of the maker and indorsers was not to its use by Hutchinson & Ingersoll, became indebted joint, but several, and therefore a judgment in an acto the latter, on the 8th of August, 1873, in the sum of tion against the indorsers, upon the contract of in$600. On the 15th day of August, 1873, it tendered dorsement, could not bar a separate action by the that sum to the firm, and demanded a return of the bank against the maker- certainly not, where the $5,000 note. During the same month it made a like maker was without notice from the indorsers of the tender to the bank, and demanded the note.

pendency of the action against them. The $36,000 loan was paid in full out of the collate- Second. The next proposition involves the right of rals given to secure its payment, as they respectively the railroad company to show, as against the bank, matured, without resorting to the note in suit, the first that the note was executed and delivered to Hutchinpayment of $4,580 being July 22, 1873, and the last pay

son & Ingersoll for the purpose only of raising money ment being April 4th, 1874, leaving the $5,000 note in upon it for the company, and that consequently they the bank's possession.

had no authority to pledge it as collateral security for Hutchinson & Ingersoll are insolvent. The collate- their own indebtedness to the bank. It will have been rals collected exceeded the $36,000 loan by $4,503.61. observed, from the statement of facts, that the note in

On the $10,000 loan of July 11, 1873, there was a bal- suit was among those pledged to the bank as security ance due the bank, November 21, 1876, of $5,136.68 after for the call loan of $36,000, made on June 19, 1873; exhausting all collaterals in its possession which had that Howes, Hyatt & Co., whose notes had been been specially pledged to secure that loan, and cred- pledged as security for the call loan of $10,000, made iting the amount, with interest collected, of a certain on June 19, 1873, having become insolvent, Hutchinjudgment to be now referred to.

son & Ingersoll, July 22, 1873, at the request of the In 1874 the bank sued Palmer & Co., as indorsers bank, executed the writing dated June 19, 1873, whereby upon the note in suit, in the Supreme Court of New they pledged all securities, bonds, stocks, things in acYork. The case was sent to a referee, who rendered tion, or other property theretofore deposited with the judgment in favor of the bank for $601, which seems bank, whether specifically or not, as security for the to be the amount due from the railroad company to payment of any and every indebtedness, liability, or Hutchinson & Ingersoll. That judgment, with the engagement held by the bank for which they were, or costs, was satisfied.

should become, in any way liable. Although, thereThe present action is by the bank against the railroad fore, the call loan of $36,000 was extinguished, without company to recover the amount of the $5,000 note exe- resorting to the note in suit, that note, under the cuted by the latter on the 9th of May, 1873, and placed agreement made on the 22d of July, 1873, stood pledged in the hands of Hutchinson & Ingersoll for sale for the as collateral security also for the $10,000 call loan of benefit of the company.

July 11, 1873. The court below gare judgment for the bank, to re- The bank, we have seen, received the note before its verse which the company has prosecuted this writ. maturity, indorsed in blank, without any express

First. The first proposition of the plaintiff in error agreement to give time, but without notice that it was is that there has been a final determination by a court other than ordinary business paper, or that there was of competent jurisdiction, between the same parties any defenso thereto, and in ignorance of the purposes or their privies, upon the same subject-matter as that for which it had been executed and delivered to here in controversy. This contention rests upon the Hutchinson & Ingersoll. Did the bauk, under these judgment of the Supreme Court of New York in the circumstances, become a holder for value, and as such action instituted by the bank against Palmer & Co., as entitled, according to the recognized principles of the indorsers of the note in suit.

commercial law, to be protected against the equities or The judgment in the State court clearly constitutes defenses which the railroad company may have against no bar to the present action. Personal judgments bind the other parties to the note? only parties and their privies. The railroad company This question was carefully considered, though perwas in no sense a party to the separate action against haps it was not absolutely necessary to be determined, Palmer & Co. Nor did it receive notice from the lat- in Swift v. Tyson, 16 Pet. 1. After stating that the ler of the pendency of that suit. It was therefore in law respecting negotiable instruments was not the law no manner affected by the judgment. IIad the com- of a single country only, but of the commercial world, pany received such notice in due time, it would, per- the court, speaking by Mr. Justice Story, said: “And haps, although not technically a party to the record, we have no hesitation in saying that a pre-existing have been estopped, at least as between it and its debt does constitute a valuable consideration in the accommodation indorsers, from saying that the latter sense of the general rule already stated as applicawere not bound to pay the judgment, if obtained with- ble to negotiable instruments. Assuming it to be out fraud or collusion. Being however an entire true (which, however, may well admit of some doubt stranger to the record, it had no opportunity or right, from the generality of the language) that the holder of in that proceeding, to controvert the claim of the bank, a negotiable instrument is unaffected with the equities to control the defense, to introduce or cross-examine between antecedent parties, of which he has no notice. witnesses, or to prosecute a writ of error from the only where he receives it in the usual course of trade judgment.

and business for a valuable consideration, before it If, in the action against Palmer & Co., the bank becomes due; we are prepared to say that receiving it had obtained judgment for the full amount of the in payment of, or as security for a pre-existing debt, is note, and being unable to collect it, had sued the rail- according to the known usual course of trade and busiroad company, the latter would not have been pre- ness. And why, upon principle," continued the court, cluded by the judgment in that action, to which it “should not a pre-existing debt be deemed such a was not a party, and of the pendency of which it had valuable consideration? It is for the benefit and connot been notified, from asserting any defense it might venience of the commercial world to give as wide an have against the note. This being so, it results that extent as practicable to the credit and circulation of the company cannot plead the judgment in the State negotiable paper, that it may pass not only as security court as a bar to this action. An estoppel arising out for new purchases and advances, made upon the transof the judgment of a court of competent jurisdiction fer thereof, but also in payment of and as security for pre-existing debts. The creditor is thereby enabled to to recover on the note, when it might not, as between realize or to secure his debt, and thus may safely give the original parties, be valid. But Chancellor Kent a prolonged credit, or forbear from taking any legal adds: “Mr. Justice Story, on Promissory Notes, p. steps to enforce his rights. The debtor also has the 215, note 1, repeats and sustains the decision in Swift v. advantage of making his negotiable securities of Tyson, and I am inclined to concur in that decision as equivalent value to cash. But establish the oppo- the plainer and better doctrine. Of course it did not site conclusion, that negotiable paper cannot be ap- escape his attention that the court in Swift v. Tyson plied in the payment of, or as security for pre-existing declared the equities of prior parties to be shut out as debts, without letting in all the equities between the well when the note was merely pledged as collateral original and antecedent parties, and the value and security for a pre-existing debt, as when transferred circulation of such securities must be essentially in payment or extinguishment of such debt. diminished, and the debtor driven to the embarrass- According to the very general concurrence of judiment of making a sale thereof, often at a ruinous dis- cial authority in this country as well as elsewhere, it count, to some third person, and then by circuity to may be regarded as settled in commercial juris;ruapply the proceeds to the payment of his debts. dence -- there being no statutory regulations to the What, indeed, upon such a doctrine would become of contrary - that where negotiable paper is received in that large class of cases, where new notes are given by payment of an antecedent debt; or where it is transthe same or by other parties, by way of renewal or ferred, by indorsement, as collateral security for a security to banks, in lieu of old securities discounted debt created, or a purchase made at the time of transby them, which have arrived at maturity? Probably fer; or the transfer is to secure a debt, not due, under more than one-half of all the bank transactions in our an agreement express or to be clearly implied from the country as well as those of other countries are of this circumstances, that the collection of the principal debt nature. The doctrine would strike a fatal blow at all is to be postponed or delayed until the collateral madiscounts of negotiable securities for pre-existing tured; or where time is agreed to be given and is acdebts."

tually given upon a debt overdue in consideration of After a review of the English cases, the court pro- tho transfer of negotiable paper as collateral security ceeded. “They directly establish that a bona fide therefor; or where the transferred note takes the holder, taking a negotiable vote in payment of, or as place of other paper previously pledged as collateral security for a pre-existing debt, is a holder for a valu- security for a debt, either at the time such debt was able consideration, entitled to protection against all contracted or before it became due; in each of these the equities between the antecedent parties."

cases the holder who takes the transferred paper beThe opinion in that case has been the subject of fore its maturity, and without notice, actual or othercriticism in some courts, because it seemed to go be- wise, of any defense thereto, is held to have received yond the precise point necessary to be decided, when it in due course of business, and in the sense of the declaring that the bona fide holder of a negotiable commercial law, becomes a holder for value, entitled note, taken as collateral security for an antecedent to enforce payment without regard to any equity or debt, was protected against equities existing between defense which exists between prior parties to such the original or antecedent parties. The brief dissent paper. of Mr. Justice Catron was solely upon that ground, Upon these propositions there seems at this day to which renders it quite certain that the whole court be no substantial conflict of authority. But there is was aware of the extent to which the opinion carried such conflict where the note is transferred as collateral the doctrines of the commercial law upon the subject security merely, without other circumstances, for a of negotiable instruments transferred or delivered as debt previously created. One of the grounds upon security for antecedent indebtedness. In the judg- which some courts of high authority refuse in such ment of this court, as then constituted (Mr. Justice cases to apply the rule announced in Suist v. Tyson is, Catron alone excepted), the holder of a negotiable in- that transactions of that kind are not in the usual and strument, received before maturity, and without no- ordinary course of commercial dealings. But this tice of any defense thereto, is unaffected by the objection is not sustained by the recognized usages of equities or defenses of antecedent parties, equally the commercial world, nor, as we think, by sound whether the note is taken as collateral security for, or

The transfer of negotiable paper as security in payment of, prerious indebtedness. And we under- for antecedent debts, nothing more, constitutes a mastand the case of McCarty v. Roots, 21 How. 439, to terial and an increasing portion of the commerce of affirm Swift v. Tyson, upon the point now under con- the country. Such transactions have become very sideration. It was there said: “Nor does the fact that common in financial circles. They have grown out of the bills were assigned to the plaintiff as collateral the necessities of business, and in these days of great security for a pre-existing debt, impair the plaintiff's commercial activity they contribute largely to the benright to recover. * * * The delivery of the bills to efit and convenience both of debtors and creditors. the plaintiff as collateral security for a pre-existing Mr. Parsons, in his Treatise on the Law of Promisdebt, under the decision of Swift v. Tyson, was sory Notes and Bills of Exchange, discusses the genlegal."

eral question of the transfer of negotiable paper under It may be remarked in this connection that the three aspects - one, where the paper is received as courts holding a different rule have uniformly referred collateral security for antecedent debts. We concur to an opinion of Chancellor Kent in Bay v. Codding- with the author, "that when the principles of the law ton, 5 Johns. (N. Y) 56, reaffirmed in Coddington v. merchant have established more firmly and unreservBay, 20 id. 637. There is, however, some reason to be- edly their control and their protection over the instrulieve that the views of that eminent jurist were sub- ments of the merchant, all of these transfers (not sequently modified. In the 6th edition of his Com- | affected by peculiar circumstances) will be held to be mentaries, side page 81, note b, prepared by himself, regular, and to rest upon a valid consideration." 1 reference is made to Stalker v. McDonald, 6 Hill, 93, in Pars. on Notes and Bills, 218, 2d ed. which the principles asserted in Bay v. Coddington Another ground upon which some courts have dewere re-examined and maintained in an elaborate clined to sanction the rule announced in Swiftv. Tyson opinion by Chancellor Walworth, who took occasion is, that upon the transfer of negotiable paper merely to say that the opinion in Swift v. Tyson was not cor- as collateral security for an antecedent debt, nothing rect in declaring that a pre-existing debt was, of itself, is surrendered by the indorsee -- that to permit the and without other circumstances, a sufficient cousid- equities between prior parties to prevail neprives him eration to entitle the bona fide holder, without notice, of no right or advantage enjoyed at the time of trans

reason.

fer; imposes upon him no additional burdens, and sub- $ 4, ch. 6; and Redfield & Bigelow's Lead. Cas, on Bills jects him to no additional inconveniences.

of Ex, and Prom. Notes, where the authorities are This may be true in some, but it is not true in most cited by the authors. cases, nor, in our opinion, is it ever true when the note, Third. It is, however, insisted that by the course of upon its delivery to the transferee, is in such form as judicial decision in New York, negotiable paper transto m ko him a party to the instrument, and impose ferred merely as collateral security for an antecedent upon him the duties which, according to the commer- debt, is subject to the equities of prior parties existcial law, must be discharged by the holder of negoti- | ing at the time of transfer; that the bank being loable paper in order to fix liability upon the indorser. cated in New York, and the other parties being citizens

The bank did not take the note in suit as a mere of the same State, and the contract having been there agent to receive the amount due when it suited the made, this court is bound to accept and follow the convenience of the debtor to make payment. It re- decision of the State court whether it meets with our ceived the note under an obligation imposed by the approval or not. This contention rests upon the procommercial law to present it for payment and give vision of the statute which declares that "the laws of notice of non-payment in the mode prescribed by the the sereral States, except where the Constitution, settled rules of that law. We are of opinion that the treaties, or statutes of the United States otherwise undertaking of the bank to fix the liability of prior require or provide, shall be regarded as rules of decisparties by due presentation for payment and due no- ion in trials at common law, in the courts of the tice in case of non-payment- an undertaking neces- United States, in cases where they apply." sarily implied by becoming a party to the instrument It is undoubtedly true that if we should apply to this - was il sufficient consideration to protect it against case the principles announced in the highest court of equities existing between the other parties, of which the State of New York, a different conclusion would it had no notice. It assumed the duties and responsi- have been reached from that already announced. That bilities of a holder for value and should have the rights learned court has held that the holder of negotiable and privileges pertaining to that position. The cor- paper transferred merely as collateral security for an rectness of this rule is apparent in cases like the one antecedent debt, nothing more, is not a holder for now before us. The note in suit was negotiable in form, value within those rules of commercial law, which and was delivered by the maker for the purpose’of being protect such paper against the equities of prior parnegotiated. Had it been regularly discounted by the ties. bank at any time before maturity and the proceeds The question here presented is concluded by our either placed to the credit of Ilutchinson & Ingersoll, or former decisions. applied directly to the discharge, pro tanto, of any one We remark, at the outset, that the section of the of the call loans previously made to them, it would not statute of the United States already quoted is the same be doubted that the bank would be protected against as the 34th section of the original judiciary act. the equities of prior parties. Instead of procuring its In Swist v. Tyson, supra, the contention was that formal discount Hutchinson & Ingersoll used it to this court was obliged to follow the decisions of the secure the ultimate payment of their own debt to the State courts in all cases where they apply. But this bank. At the time the written agreement of July 22, court said: “In order to maintain the argument it is 1873, was executed, by which this note, with others, essential therefore to hold that the word laws'in was pledged as security for any debt then or thereafter this section, includes within the scope of its meaning held against them, the bank had the right to call in the decisions of the local tribunals. In the ordinary the $10,000 loan, that is, to require immediate pay- use of language it will hardly be contended that the ment. The securities upon which that loan rested had decisions of courts constitute laws. They are, at become in part worthless, and it is evident that but most, only evidence of what the laws are, and not of for the deposit of additional collateral securities the themselves laws. They are often re-examined, rebank wo have called in the loan, or resorted to its versed, and qualified by the courts themselves, whenrightful legal remedies for the enforcement of pay- ever they are found to be either defective, or illment. It was, under the circumstances, the duty of founded, or otherwise incorrect. The laws of a State the debtors to make such payment, or to secure the are more easily understood to mean the rules and debt. It was important to them, and was in the usual enactments promulgated by the legislative authority course of commercial transactions, to furnish such thereof, or long-established local customs baving tbe security. If the bank was deceived as to the real own- force of laws. In all the various cases which have ership of the paper, or as to the purposes of its execu- hitherto come before us for decision this court have tion and delivery to Hutchinson & Ingersoll, it was uniformly supposed that the true interpretation of the because the railroad company intrusted it to those 34th section limited its application to State laws parties in a form which indicated that the latter were strictly local; that is to say, to the positive statutes of its rightful holders and owners, with absolute power the State, and the construction thereof adopted by to dispose of it for any purpose they saw proper. the local tribunals, and to rights and titles to things

Our conclusion, therefore, is that the transfer, be- having a permanent locality, such as the rights and fore maturity, of negotiable paper as security for an titles to real estate, and other matters immorable and antecedent debt merely, without other circumstances, intraterritorial in their nature and character. It has if the paper so indorsed that the holder becomes a ever been supposed by us that the section did apply, party to the instrument, although the transfer is with- or was designed to apply, to questions of a more out express agreement by the creditor for indulgence, general nature, not at all dependent upon local statates is not an improper use of such paper, and is as much or local usages of a fixed and permanent operation; in the usual course of commercial business as its trans- as for example, to the construction of ordinary confer in payment of such debt. In either case the bona tracts or other written instruments, and especially to fide holder is unaffected by equities or defenses be- questions of general commercial law, where the State tween prior parties of which he had no notice. This tribunals are called upon to perform the like functions conclusion is abundantly sustained by authority. A as ourselves; that is, to ascertain upon general reasondifferent determination by this court would, we appre- ing and legal analogies, what is the true exposition of hend, greatly surprise both the legal profession and the contract or instrument, or what is the just rule the commercial world. Bigelow's Bills and Notes, 502 et furnished by the principles of commercial law to gosseq.; 1 Daniel on Neg. Instr. (2d ed.) ch. 25, SS 820 to 833; ern the case. And we have not now the slightest Story on Prom. Notes, $s 186 and 195 (7th ed.) by difficulty in holding that this section, upon its true Thorndy ke; 1 Pars. on Notes and Bills, 218 (2d ed.), intendment and construction, is strictly limited to

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