U.S. Supreme Court
Oates v. National Bank, 100 U.S. 239 (1879)
Oates v. National Bank
100 U.S. 239
1. The courts of the United States are not bound by the decisions of state courts upon questions of general commercial law.
2. A creditor who before its maturity accepts a negotiable note, so endorsed that he becomes a party thereto, as collateral security for a preexisting debt in consideration of an extension of time granted to the debtor is, according to the law merchant, a holder for value, and his rights as such are not affected by equities between antecedent parties of which he had no notice.
3. "Bills of exchange and promissory notes, payable in money at a certain place of payment therein designated," are, by an act of the Legislature of Alabama, put upon the same basis as to immunity from setoff, discount, or equities as bills and notes payable at a bank or private banking house. Such declared to be the intention and effect of the Act of April 8, 1873, amending sec. 1833 of the Revised Code of that state.
4. The legislative intent, clearly expressed, should not be defeated by too rigid an adherence to the mere letter of the statute nor an interpretation adopted which leads to absurd consequences.
5. At the request of its debtor, a national bank in Alabama gave him further time, in consideration of his transferring, before maturity, a negotiable note, as collateral security and paying in advance usurious interest, for the period of extension. The note was so endorsed as to make the bank a party to the instrument, responsible for its due presentation and for due notice of nonpayment. The consideration being in part legal and in part vicious, it was held 1st, that the former was itself sufficient to sustain the contract of extension and transfer, and to constitute the bank a holder for value; 2d, that the National Banking Act subjects the bank to liability for taking usurious interest, but does not declare the contract of endorsement void, and that no such penalty being prescribed, the courts cannot superadd it.
The facts are stated in the opinion of the Court.