U.S. Supreme Court
Swift v. Tyson, 41 U.S. 16 Pet. 1 1 (1842)
Swift v. Tyson
41 U.S. (16 Pet.) 1
Action in the Circuit Court of New York on a bill of Exchange accepted in New York, instituted by the holder, a citizen of the state of Maine. The Acceptance and endorsement of the bill were admitted, and the defence was rested on allegations that the bill had been received in payment of a preexistent debt, and that the acceptance had been given for lands which the acceptor had purchased from the drawer of the bill, to which lands the drawer had no title, and that the quality of the lands had been misrepresented, and the purchaser imposed upon by the fraud of the drawer, and those who were co-owners of the land and cooperators in the sale. The bill accepted had been received bona fide, and before it was due.
There is no doubt that a bona fide holder of a negotiable instrument for valuable consideration, without any notice of the facts which implicate its validity as between the antecedent parties, if he takes it under an endorsement made before the same becomes due, holds the title unaffected by those facts, and may recover thereon although, as between the antecedent parties, the transaction may be without any legal validity.
The holder of negotiable paper, before it is due, is not bound to prove that he is a bona fide holder for valuable consideration, without notice, for the law will presume that in the absence of all rebutting proof, and therefore it is incumbent of a defendant to establish by way of defence satisfactory proofs of the contrary, and thus to overcome the prima facie title of the plaintiff.
The thirty-fourth section of the Judiciary Act of 1789, which declares
"[t]hat the laws of the several states, except where the Constitution, treaties, or statutes of the United States shall otherwise recognise 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,"
has uniformly been supposed by the Supreme Court to be limited in its application to state laws strictly local -- that is to say, to the positive statutes of the state and the construction thereof adopted by the local tribunals, and to rights and titles to chanroblesvirtualawlibrary
things having a permanent locality, such as the rights and titles to real estate and other matter immovable and intraterritorial in their nature and character. The section does not extend to contracts or other instruments of a commercial nature, the true interpretation and effect whereof are to be sought not in the decisions of the local tribunals, but in the general principles and doctrines of commercial jurisprudence.
On a 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 $1,536.30, 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 $1,862.06. 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 chanroblesvirtualawlibrary
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. chanroblesvirtualawlibrary