41 U.S. 1 (1842), Swift v. Tyson

Citation:41 U.S. 1, 10 L.Ed. 865
Case Date:January 25, 1842
Court:United States Supreme Court

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41 U.S. 1 (1842)

10 L.Ed. 865




United States Supreme Court.

January 25, 1842


CERTIFICATE OF DIVISION from the Circuit Court for the Southern District of New York. This action was instituted in the circuit court, upon a bill of exchange, dated at Portland, in the state of Maine, on the first day of May 1836, for $1536.30, payable six months after date, drawn by Nathaniel Narton and Jairus S. Keith, upon and accepted by the defendant; the bill having been drawn to the order of Nathaniel Norton, and by him indorsed to the plaintiff. The principal and interest on the bill, up to the time of trial, amounted to $1862.06.

The defense to the action rested on the answers to a bill of discovery filed by the defendant against the plaintiff; by which it appeared, that the bill had been received by him from Nathaniel Norton, with another draft of the same amount, in payment of a protested note made by Norton & Keith, and which had been paid by him to the Maine Bank. When the draft was received by the plaintiff, it had been accepted by the defendant who resided in New York. The plaintiff had no knowledge of the consideration which had been received for the acceptance, and had no other transaction with the defendant. He had received the drafts and acceptances in payment of the protested note, with a full belief that the same were justly due, according to their tenor; and he had no other security for the payment of the protested note, except the drafts, nor had he any knowledge of any contract or dealing between the defendant and Norton, out of which the said draft arose. The defendant then offered to prove that the bill of exchange was accepted by him as part consideration for the purchase of certain lands in the state of Maine, of which Keith & Norton, the drawers of the bill, represented themselves to be the owners, and represented them to be of great value, made certain estimates

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of them which were warranted by them to be correct, and also contracted to convey a good title to the land; all of which representations were in every respect fraudulent and false; and that said Keith & Norton had never been able to make a title to the land; whereupon, the plaintiff, by his counsel, objected to the admission of said testimony, or any testimony, as against the plaintiff, impeaching or showing the failure of the consideration on which said bill was accepted, under the facts aforesaid admitted by the defendant, and those proved by him, by reading said answers in equity of the plaintiff in evidence. And the judges of the court divided in opinion on the point or question of law, whether, under the facts last mentioned, the defendant was entitled to the same defence to the action, as if the suit was between the original parties to the bill, that is to say, the said Norton, or the said Norton & Keith, and the defendant? And whether the evidence so offered in defence, and objected to, was admissible as against the plaintiffs in this action? And thereupon, the said point or question of law was, at the request of the counsel for the said plaintiff, stated as above, under the direction of the judges of the court, to be certified under the seal of the court to the supreme court of the United States, at the next session thereof to be held thereafter; to be finally decided by the said last-mentioned court.


The case was submitted to the court, on printed arguments, by Fessenden, for the plaintiff; and by Dana, for the defendant.

Fessenden argued, that the evidence offered and objected to was no defence as against the plaintiff in this action. The right of the plaintiff to recover, resting, in the first place, on admissions and proof, is establishedprimæ facie. The defendant, by his course of proceeding, has admitted: 1. That the bill in suit was indorsed to the plaintiff, during its course, as negotiable paper, about five months before it became due, according to its tenor. 2. That when it was received by the plaintiff, he had no notice, or knowledge, or intimation, of any fact to the dishonor of the bill; on the contrary, he was assured by his debtor, it would

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be paid promptly at maturity, and that previous acceptances given in payment of the sale of land had been paid at maturity. 3. That the acceptance was taken in payment of a pre-existent debt, and that the plaintiff had no other security for the debt due to him by Norton & Keith but this acceptance, and an acceptance of the same character for the residue of his claim on Norton & Keith; and that on receiving the acceptance, he had given up the note of Norton & Keith, which had been indorsed by one Child.

By the cases of Bank of Salina v. Babcock, 21 Wend. 499, and Bank of Sandusky v. Scoville, 24 Ibid. 115, it distinctly appears, that the latest opinion of the supreme court in New York is (and seemingly as if that court had never decided otherwise), that receiving negotiable paper in payment of an antecedent debt, is the same thing, in all respects, as regards the rights of the recipient indorsee of such paper, as if he had paid money, or any other valuable consideration for it, at the time, on the credit of the paper. But if these cases cannot be reconciled with the plaintiff Swift' side of the present question, are they, unsustained as they are by like decisions in any other of the states in this Union; resting, as they do, on an obvious misinterpretation of the case of Coddington v. Bay; and contradicting, as they do, the earlier decision of the same court, on the very point in the case of Warren v. Lynch, which has been referred to; and tending, as they do, to drive commercial negotiable paper out of one of the paths of its greatest utility--are they still to overthrow the decisions of this court in the cases of Coolidge v. Payson, and Townsley v. Sumrall? It is contended, on the part of the defendant, that they are, and that this high court is bound to follow them with unreasoning submission, because the bill in question was drawn on the city of New York, in the state of New York; and on account of the 34th section of the judiciary act of 1789, which provides, that 'the laws of the several states, except where the constitution, treaties or statutes of the United States shall otherwise require or provide, shall be regarded as rules of decision, in trials at common law, in cases where they apply.'

In answer to this, it is urged, that, in the first place, after observing,

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that it is not pretended, that the decisions of the supreme court of New York referred to, are founded on, or are in exposition of, the constitution or any statute of that state, that the phrase 'laws of the several states,' in the 34th section of the judiciary act, means nothing else than the written constitutional system and statutes of such states; and that, if the framers of the act of congress had not known that all the states had such written constitutions of government, laws of paramount authority in those states; and had not wished to frame their enactments in language popular and comprehensive, as well as accurate, they would have used the word 'statutes,' the appropriate technical word for laws framed by the word instead of the word 'laws.' If they had intended to embrace in the section, the traditionary, or otherwise derived, common law of such states, as expounded by the decisions of the state courts; being, as they were, scholars as well as lawyers, they would have incorporated in the section, by way of substitute or addition, some such general phrase as 'systems of law.' In common parlance, the word 'laws,' in the plural, means, and did mean in 1789, legislative enactments. The same word also embraces, popularly and technically, when speaking of the regulations of the respective United States, their constitutions of government, as well as their legislative enactments; and the former, as well the latter, were doubtless included in the 34th section. For these reasons, the word 'laws,' instead of the word 'statutes,' makes part of the section.

It is admitted, that if the bill had been delivered to the plaintiff by Norton, for value delivered to him, Norton, at the time, on the strength or credit of the bill, the defence should be rejected. But it is contended on the part of the defendant, that inasmuch as the bill was received by the plaintiff in payment, though it were absolute payment, of a pre-existing debt; and though he has no evidence of, or security for, such debt, except the new security in his hands, received in payment of the old; the bill in question was not indorsed to him in the usual course of trade, so as to give him any rights, as the holder of it, different from those of the person who transferred it to him; however he may have received it fairly and in good faith, and without notice of anything which would disenable the party transferring it to him, to

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recover it of the acceptor; and however the fact may be, as to its original lawfulness. This is the question for the court to decide: and it is contended, that the bill being so transferred and received in payment of a pre-existing debt, gives the indorsee all the rights, as against the acceptor, which he would have had, if, at the time he received it, he had paid the amount of it, in money, to the indorser. It certainly should be so. The use of negotiable paper has hardly been of greater service to civilized man, in facilitating the transmission of the equivalent of money, and thus, in answering, in some respects, the purposes of money itself, than in preventing hostile proceedings in courts of law for the collection of money due. Indeed, one of the principal good effects of the former is, that it tends to prevent suits at law. In point of fact, thousands of suits have been prevented, by receiving a bill of exchange or promissory note, with an additional name upon it, payable at a future day, in...

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