debt previously created. One of the grounds upon which some courts of high authority refuse, in such cases, to apply the rule announced in Swift v. Tyson is, that transactions of that kind are not in the usual and ordinary course of commercial dealings. But this objection is not sustained by the recognized usages of the commercial world, nor, as we think, by sound reason. The transfer of negotiable paper as security for antecedent debts, nothing more, constitutes a material and an increasing portion of the commerce of the country. Such transactions have become very common in financial circles. They have grown out of the necessities of business, and, in these days of great commercial activity, they contribute largely to the benefit and convenience both of debtors and creditors. Mr. Parsons, in his Treatise on the Law of Promissory Notes and Bills of Exchange, discusses the general question of the transfer of negotiable paper under three aspectsone, where the paper is received as collateral security for antecedent debts. We concur with the author, "that when the principles of the lawmerchant have established more firmly and unreservedly their control and their protection over the instruments of the merchant, all of these transfers (not affected by peculiar circumstances) will be held to be regular, and to rest upon a valid consideration." 1 Parsons on Notes and Bills, 218, 2d edition.

Another ground upon which some courts have declined to sanction the rule announced in Swift v. Tyson is, that upon the transfer of negotiable paper merely as collateral security for an antecedent debt, nothing is surrendered by the indorsee -that to permit the equities between prior parties to prevail deprives him of no right or advantage enjoyed at the time of transfer, imposes upon him no additional burdens, and subjects him to no additional inconveniences.

This may be true in some, but it is not true in most cases, nor, in our opinion, is it ever true when the note, upon its delivery to the transferee, is in such form as to make him a party to the instrument, and imposes upon him the duties which, according to the commercial law, must be discharged by the holder of the negotiable paper in order to fix liability upon the indorser.

The bank did not take the note in suit as a mere agent to receive the amount due when it suited the convenience of the debtor to make payment. It received the note under an obligation imposed by the commercial law, to present it for payment, and give notice of non-payment, in the mode prescribed by the settled rules of that law. We are of opinion that the undertaking of the bank to fix the liability of prior parties, by due presentation for payment and due notice in case of non-payment—an undertaking necessarily implied by becoming a party to the instrumentwas a sufficient consideration to protect it against equities existing between the other parties, of which it had no notice. It assumed the duties and responsibilities of a holder for value, and should have the rights and privileges pertaining to that position. The correctness of this rule is apparent

in cases like the one now before us. The note in suit was negotiable in form, and was delivered by the maker for the purpose of being negotiated. Had it been regularly discounted by the bank, at any time before maturity, and the proceeds either placed to the credit of Hutchinson & Ingersoll, or applied directly to the discharge, pro tanto, of any one of the call loans previously made to them, it would not be doubted that the bank would be protected against the equities of prior parties. Instead of procuring its formal discount, Hutchinson & Ingersoll used it to secure the ultimate payment of their own debt to the bank. At the time the written agreement of July 22d, 1873, was executed, by which this note, with others, was pledged as security for any debt then or thereafter held against them, the bank had the right to call in the $10,000 loan, that is, to require immediate payment. The securities npon which that loan rested had become, in part, worthless, and it is evident that but for the deposit of additional collateral securities the bank would have called in the loan, or resorted to its rightful legal remedies for the enforcement of payment. It was, under the circumstances, the duty of the debtors to make such payment, or to secure the debt. It was important to them, and was in the usual course of commercial transactions, to furnish such security. If the bank was deceived as to the real ownership of the paper, or as to the purposes of its execution and delivery to Hutchinson & Ingersoll, it was because the railroad company intrusted it to those parties in a form which indicated that the latter were its rightful holders and owners, with absolute power to dispose of it for any purpose they saw proper.

Our conclusion, therefore, is that the transfer, before maturity, of negotiable paper, as security for an antecedent debt merely, without other circumstances, if the paper be so indorsed that the holder becomes a party to the instrument, although the transfer is without express agreement by the creditor for indulgence, is not an improper use of such paper, and is as much in the usual course of commercial business as its transfer in payment of such debt. In either case, the bona fide holder is unaffected by equities or defenses between prior parties, of which he had no notice. This conclusion is abundantly sustained by authority.

A different determination by this court would, we apprehend, greatly surprise both the legal profession and the commercial world. Bigelow's Bills and Notes, 502, et seq.; 1 Daniel on Neg. Instr., 2d ed., chap. 25, § 820 to 833; Story on Promissory Notes, §§ 186 and 195, 7th ed., by Thorndike; 1 Parson on Notes and Bills. 218, 2d edition, § 4, chap. 6; and Redfield & Bigelow's Leading Cases upon Bills of Ex. and Prom. Notes, where the authorities are cited by the authors.

It is, however, insisted that, by the course of judicial decision in New York, negotiable paper transferred merely as collateral security for an antecedent debt, is subject to the equities of prior parties existing at the time of transfer; that the bank being located in New York, and the other parties being citizens of the same State, and the

contract having been there made, this court is bound to accept and follow the decision of the State court whether it meets our approval or not.

This contention rests upon the provision of the statute which declares that "the laws of the several States, except where the Constitution, treaties or statutes of the United Statea otherwise require 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."

It is undoubtedly true that if we should apply to this case the principles announced in the highest court of the State of New York, a different conclusion would have been reached from that already announced. That learned court have held that the holder of negotiable paper transferred merely as collateral security for an antecedent debt, nothing more, is not a holder for value, within those rules of commercial law which protect such paper against the equities of prior parties.

The question here presented is concluded by our former decisions.

We remark, at the outset, that the section of the statute of the United States already quoted is the same as the 34th section of the original judiciary act.

In Swift v. Tyson, supra, the contention was that this court was obliged to follow the decisions of the State courts in all cases where they apply. But this court said: "In order to maintain the argument, it is essential, therefore, to hold, that the word 'laws' in this section, includes within the scope of its meaning the decisions of the local tribunals. In the ordinary use of language it will hardly be contended that the decisions of courts constitute laws. They are, at most, only evidence of what the laws are, and are not of themselves laws. They are often re-examined, reversed, and qualified by the courts themselves, whenever they are found to be either defective, or ill-founded, or otherwise incorrect. The laws of a State are more usually understood to mean the rules and enactments promulgated by the legislative authority thereof, or long-established local customs having the force of laws. In all the various cases which have hitherto come before us for decision, this court have uniformly supposed that the true interpretation of the 34th section limited 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 things having a permanent locality, such as the rights and titles to real estate, and other matters immovable and intraterritorial in their nature and character. It has never been supposed by us that the section did apply, or was designed to apply, to questions of a more general nature, not at all dependent upon local statutes or local usages of a fixed and permanent operation; as, for example, to the construction of ordinary contracts or other written instruments, and especially to questions of general commercial law, where the State tribunals are called upon to perform the like functions as ourselves; that is, to ascertain upon general reasoning and legal analo

case.

gies, what is the true exposition of the contract or instrument, or what is the just rule furnished by the principles of commercial law to govern the And we have not now the slightest difficulty in holding that this section, upon its true intendment and construction, is strictly limited to local statutes and local usages of the character before stated, and 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. Undoubtedly the decisions of the local tribunals upon such subjects are entitled to and will receive the most deliberate attention and respect of this court; but they can not furnish positive rules, or conclusive authority, by which our own judgments are to be bound up and governed."

In Carpenter v. Providence Washington Ins. Co., 16 Pet. 495, decided at the same term with Swift v. Tyson, it was necessary to determine certain questions in the law of insurance. The court said: "The questions under our consideration are questions of general commercial law, and depend upon the construction of a contract of insurance, which is by no means local in its character, or regulated by any local policy or customs. Whatever respect, therefore, the decisions of State tribunals may have on such a subject, and they certainly are entitled to great respect, they can not conclude the judgment of this court. On the contrary, we are bound to interpret this instrument according to our own opinion of its true intent and objects, aided by all the lights which can be obtained from all external sources whatsoever; and if the result at which we have arrived differs from these learned State courts, we may regret it, but it can not be permitted to alter our judgment."

In Oates v. National Bank, 100 U. S. 239, 10 Cent. L. J. 9, we had before us the precise question now under consideration. That was an action by a National bank, located in Alabama, against a citizen of that State, upon a promissory note there executed and negotiated. It was contended that the decision of the Supreme Court of Alabama should be accepted as the law governing the rights of parties. We, however, held-referring to some of our previous decisions-that the Federal courts were not bound by the decisions of the State courts "upon questions of general commercial law. * * We have already seen that the statutes of Alabama placed under the protection of the commercial law, promissory notes payable in money at a certain designated place; but how far the rights of parties here are affected by the rules and doctrines of that law is for the Federal courts to determine upon their own judgment as to what these rules and doctrines are."

To this doctrine, which received the approval of all the members of this court when first announced, we have, as our decisions show, steadily adhered. We perceive no reason for its modification in any degree whatever. We could not infringe upon it, in this case, without disturbing or endangering

that stability which is essential to be maintained in the rules of commercial law. The decisions of the New York court, which we are asked to follow in determining the rights of parties under a contract there made, are not in exposition of any legislative enactment of that State. They express the opinion of that court, not as to the rights of parties under any law local to that State, but as to their rights under the general commercial law existing throughout the Union, except where it may have been modified or changed by some local statute. It is a law not peculiar to one State, or dependent upon local authority, but one arising out of the usages of the commercial world. Suppose a State court, in a case before it, should determine what were the laws of war as applicable to that and similar cases. The Federal courts, sitting in that State, possessing, it must be conceded, equal power with the State court in the determination of such questions, must upon the theory of counsel for the plaintiff in error, accept the conclusions of the State court as the true interpretation, for that locality, of the laws of war, and as the "law" of the State in the sense of the statute which makes the "laws of the States rules of decision in trials at common law." prehend, however, that no one would go that far in asserting the binding force of State decisions upon the courts of the United States when the latter are required, in the discharge of their judicial functions, to consider questions of general law, arising in suits to which their jurisdiction extends. To so hold would be to defeat one of the objects for which those courts were established, and introduce infinite confusion in their decisions of such questions. Further elaboration would seem to be unnecessary. The judgment is affirmed.

Mr. Justice BRADLEY:

We ap

I concur in the judgment rendered in this case and in most of the reasons given in the opinion. But, in reference to the consideration of the transfer of the note as collateral security, I do not regard the obligation assumed by the indorsee (the bank) to present the note for payment and give notice of non-payment, as the only, or the principal, consideration of such transfer. The true consideration was the debt due from the indorsers to the indorsee, and the obligation to pay or secure said debt. Had any other collateral security been given, as a mortgage, or a pledge of property, it would have been equally sustained by the consideration referred to-namely, the debt and the obligation to pay it or to secure its payment. If the indorsers had assigned a mortgage for that purpose, the title of the bank to hold the mortgage would have been indubitable. In that case prior equities of the mortgagor might have prevailed against the title of the bank; because a mortgage is not a commercial security, and its transfer for any consideration whatever does not cut off prior equities. But the bona fide transfer of commercial paper before maturity does cut off such equities; and every collateral is held by the creditor by such title and in such manner as appertain to its nature and qualities. Security for

the payment of a debt actually owing is a good consideration, and sufficient to support a transfer of property. When such transfer is made for such purpose, it has due effect as a complete transfer, according to the nature and incidents of the property transferred. When it is a promissory note or bill of exchange, it has the effect of giving absolute title and of cutting off prior equities, provided the ordinary conditions exist to give it that effect. If not transferred before maturity or in due course of business, then, of course, it can not have such effect. But I think it is well shown in the principal opinion that a transfer for the purpose of securing a debt is a transfer in due course. And that really ends the argument on the subject.

Mr. Justice MILLER dissents.

ABSTRACTS OF RECENT DECISIONS.

ENGLISH, IRISH AND CANADIAN CASES.

MORTGAGE OF SUBSEQUENTLY ACQUIRED PROPERTY. -The grantor of a bill of sale assigned to the grantee the whole of the stock-in-trade, chattels, goods and effects in certain specified premises, and also the stock-in-trade, goods, chattels and effects which might at any time during the continuance of the security be brought into the premises, either in addition to or in substitution for the stock-in-trade, goods, chattels and effects therein at the time of the making of the bill of sale. Held, by LOPES, J. (on further consideration), that the property in the stockin-trade brought upon the premises subsequently to the making of the bill of sale passed by it to the grantee.-Lazarus v. Andrade. Engltsh High Court, C. P. Div., 43 L. T. (N. S.) 30.

RAILROADS OVERCROWDING CAR- TRESPASS.Overcrowding a car is a breach of contract and may amount to a trespass to those passengers who had previously secured compartments. The admitted facts of the case were that on the second day of August, 1880-a bank holiday-the plaintiff, who was a firstclass season-ticket holder on the defendant's line, traveled by the 11:16 A. M. train from Ludgate Hill to Tulse Hill. The compartment in which he traveled was constructed to carry six passengers only; at the Elephant and Castle station the porter put in ten additional passengers, making five in excess of the proper number. The plaintiff remonstrated with the porter and also with the guard, but no notice was taken of his remonstrance. The plaintiff thereupon brings this action for damages for breach of contract by defendant in overcrowding the compartment, which, he contends, was attended with inconvenience and danger, especially in case of collision or other accident on the line. The defendant contended that plaintiff was only entitled to nominal damages, in respect of which one shilling had been paid into court. The court held that the plaintiff was entitled to substantial damages for the breach of the contract by which he was deprived of the accommodation which they had undertaken to provide, and observed that without doubt the inconvenience to which plaintiff had been subjected amounted to a trespass in law. They therefore gave a verdict for £2, the full amount claimed.-Yetts v. London, etc. R. Co. English County Court, Southwark County.

CONFLICT OF LAWS- LEGITIMACY OF CHILDREN BORN ABROAD. A child, illegitimate according to English law, but who has been, according to the laws of its domicil and of its parent's domicil, legitimized by a post-natal marriage, can not take under the statute of distribution as one of the next kin of an intestate dying domiciled in England. The word "children," in the statute of distributions, means children according to the English law--Re Goodman's Trusts. English High Court, Chy. Div., 43 L. T. (N. S.) 14. RAILROAD-NEGLIGENCE-INJURY TO PASSENGER -OVERCROWDED PLATFORM.-A railway company is not bound to provide at a station, even when an unusually large number of passengers is expected by a cheap train, a staff of servants sufficient, not merely for the guidance of passengers and the preservation of order among them, but also to control persons entering the station without permission and overcrowding the platform.-Cannon v. Midland, etc. R. Co. Irish Court of Appeal, L. R. 6 Ir. 199.

SUPREME COURT OF ILLINOIS.
September, 1880.

FRAUDULENT CONVEYANCE-VOLUNTARY SETTLEMENT-PRIOR LIEN.-1. If at the time of making a voluntary settlement by a father upon his children, he still retains sufficient property to pay all his debts, it can not be impeached, unless it is fraudulent in fact. Mere indebtedness at the time is not sufficient to render the settlement fraudulent in law, if the donor retains property sufficient to discharge his debts. 2. To impeach a conveyance of land by a father to his children as fraudulent, it necessarily devolves upon the complainant to aver and prove that he was a creditor at the time it was made, and that the grantor was then insolvent, or show such facts and circumstances as will authorize a court or jury to presume insolvency. 3. Where a father conveys land to his children' subject to liens thereon by mortgage and judgment which are prior liens, and the same is sold under such prior liens and purchased by a third person for the benefit of such children with means derived from their mother's separate estate, and it passes redemption, a judgment creditor whose lien is junior, can not have the conveyance to the children and third person set aside as fraudulent, and subject the land to the payment of his debt. Affirmed. Opinion by CRAIG, J.-Merrill v. Johnson.

INSTRUCTIONS-CONNECTING TWO BY THE WORDS "HENCE IN THIS CASE"-BURDEN OF PROOF.-1. An instruction given on a trial for murder gave the statutory definition of the crime, and stated, in the language of the statute, when and under what circumstances malice would be implied. This was connected with another instruction following, by the words, "hence in this case," which declared "if the jury believe, from the evidence, beyond a reasonable doubt, that the defendant killed A B as charged in the indictment, under circumstances showing no considerable provocation, but showing an abandoned and malignant heart on the part of the defendant, the law pronounces it murder," etc. Held, that the words "hence in this case," were used in the sense of "therefore," and must have been so understood, and did not vitiate the first instruction. 2. Where the killing is proved on a trial for murder, the burden of proving circumstances in mitigation, or that justify or excuse the homicide, is thrown upon the accused, unless the proof on the part of the prosecution suffi

ciently manifests the same facts; and an instruction which imposes the burden of proving such facts upon the defense without reference to whether they do not appear from the proof by the prosecution, is erroneous, as casting upon the defendant a greater burden than the law requires. 3. When the killing is proved, on a charge of murder, and the defendant seeks to show he was justified or excused, it is erroneous to instruct the jury that it is incumbent on him to establish satisfactorily such defense. The statute does not require such a high degree of proof. The defendant is only bound to prove the circumstances of mitigation, or that justify or excuse, as any fact is to be proved. If the proof creates a reasonable doubt of the defendant's guilt he is entitled to an acquittal. Reversed. Opinion by SCOTT, J.-Alexander v. People.

NEGLIGENCE-CONTRIBUTORY AND COMPARATIVE -MASTER AND SERVANT · RIGHT TO ACT ON INVITATION OF CONDUCTOR INSTRUCTIONS. — 1. Where a railroad company is guilty of negligence in leaving a freight car across a sidewalk leading to a passenger depot about the time for the arrival of a passenger train, without opening the freight train so as to permit passengers to pass, and a person seeking to make the passenger train is also guilty of negligence in attempting to pass under the end of a freight car, though invited or directed by the conductor of that train to do so, if snch act was dangerous, and would be so considered by prudent persons generally, and the person in passing under the car is injured by the freight train suddenly starting, it should be left to the jury by the instructions to say whether such person's negligence was slight, and that of the agents of the company gross, in obstructing the passage to the depot and in inviting the passenger to pass under the freight ear. 2. Where a person in going to a railroad depot to take passage on a passenger train finds a freight train across the sidewalk, and is told by the freight conductor to pass under the end of a freight car-that he has plenty of time-and while passing under is injured, sec. 54 of the Railroad and Warehouse law will have no application to the case or bearing upon such person's negligence. That section applies only to climbing, stepping, standing upon, clinging to, or in any way attaching one's self to a locomotive engine or car, either stationary or in motion on the track. 3. Where a conductor has control over his train as to its starting or stopping, a person will have the right to act on his invitation to pass under a freight car when the train is obstructing the passageway, unless he has reason to suppose it hazardous. The person in such case has the right to suppose the train will not be started until he can pass through, and that the conductor has the power to control the train, and will do so, knowing the dangerous position in which the person is placed by his direction. 3. When a railroad conductor is engaged in the performance of his duty to the company and about its business, the company will be held responsible for his acts, although he may not have been free from fault on his part, and may have acted beyond his duty. 5. An instruction as to the right of a party to act upon the direction of a railroad conductor to pass under a freight car in a train which was obstructing the sidewalk leading to a depot, which refers to many of the circumstances bearing upon the question of negligence, but not to all of them, and which is augmentative, and not explicit in announcing the rule of law sought to be presented, should not be given. 6. In a suit against a railroad company to recover damages for a personal injury resulting in death, through negligence, it is error to instruct the jury that if they find the defendant guilty, they may assess the plaintiff's damages at any sum not exceeding $5,000,

EVI

DENCE.-By contract with the City of Lawrence the defendant agreed to build an armory, and by sub-contract agreed with the plaintiff to do the stone, brick, iron and slate work, and furnish the materials thereor by a written contract, which provided that the work should be done in all respects according to the plan and specifications which had been furnished by the architects. One of the clauses of the specifications required "all walls to be vaulted and to be bound across by turning headers," and another required the builder in every respect to complete and finish all mason work in a good and workmanlike manner. By said plan the brick walls appeared to be sixteen inches in width, without the appearance of any vault or space intended to be left in them. The city abandoned the contract before the work was commenced, and this action was brought to recover the damages sustained by the plaintiff by reason of such abondonment. The defendant asked the court to rule that the contract plan and specifications called for a wall containing sixteen inches of masonry, exclusive of the vault. Held, that such ruling was properly refused. As between the positive requirement of a written clause in the contract and a plan referred to which, though perfect in other respects, shows an omission to indicate thereon this single matter of detail, there can be no doubt that the written clause must control the mere implication derived from the omission in the plan. See Robertson v. French, 4 East, 136. Held, further, that there was no such ambiguity as to render parol evidence of an expert competent to explain the contract; that the liability of the plaintiff arising under a contract made by him with a third person for iron required to be furnished by his contract with the defendant, was a proper element of damage in this action (Fox v. Harding, 7 Cush. 516); and that as, after this action was commenced, the present defendant was summoned in several actions as trustee of the present plaintiff, which might, for aught that appeared, be still pending, it was error to allow interest by way of damages from the date of the writ in this action. Huntress v. Burbank, 111 Mass. 216; Rennell v. Kimball, 5 Allen, 356; Adams v. Cordis, 8 Pick. 260. But, as defendant's exceptions were sustained upon the last point only, if the plaintiff would remit said interest, the exceptions might be overruled. Opinion by COLT, J. -Smith v. Flanders.

MONEY HAD AND RECEIVED-INSURANCE.-In an action to recover a portion of certain insurance money, received by the defendants, it appeared that the defendants effected insurance in various companies in their own name upon merchandise contained in their ware-house, the same being described in the policies as merchandise, principally hides and leather, their own or held by them in trust, or on commission, or

sold, but not removed from the building. "At the time of loss, said warehouse contained, among the goods sold but not removed, certain goods of the plaintiffs purchased by them of the defendants. The statement of loss rendered by the defendants to the insurers included goods sold but not delivered." Some of the insurance companies were rendered insolvent by the fire which consumed the defendants' warehouse, and they received but a percentage of the whole loss. The defendants were bound by contract with their consignors to insure goods consigned, but not with purchasers to insure goods sold but not removed. The goods owned and consigned being of greater value than the total amount of insurance, the adjusters testified that the same amount would have been allowed, if the goods sold but not removed had not been included in the proof of loss. Held, that there was no equity as between the parties which required the defendants to pay over to the plaintiffs any portion of the money so received. The fact that goods sold but not removed were included in the statement of loss, can not, of itself, give any right to the plaintiffs which they did not otherwise possess. Martineau v. Kitching, L. R. 7 Q. B. 436; Stilwell v. Staples, 19 N. Y. 401. Opinion by ENDICOTT, J.-Reitenbach v. Johnson.

NEGLIGENCE-DUE CARE-EVIDENCE.-In an action by a child of tender years, per pro. ami., against the defendant for injury caused by the escape of gas from the defendant's pipe, it appeared that the child and its mother occupied the same room and bed; that, one morning, the door of the room in which they slept was broken open and the plaintiff was found insensible by the dead body of his mother; that there was an intense smell of gas, which was escaping from a crack in the pipe laid by the defendant through the court upon which the house occupied by the plaintiff's parents was situated; that there were no gas fixtures in said room; that on the day previous there was no smell of gas in the court; that the mother was a sober and prudent woman. There was some evidence that the pipe was laid above the first line, and that sometimes the breakage of pipes, from the expansion or shrinkage from heat or frost, was a very great dan ger. The plaintiff was too young to testify, and it did not appear that there was any other person living who could be called to give an account of the occurrence. After a verdict for the plaintiff, the case was reported to this court upon the questions of law raised by the evidence. Held, that the jury may well have found that the crack in the pipe and the escape of gas first occurred some time during the night, and would be justified in finding that neither the plaintiff nor his mother were chargeable with want of ordinary care in preventing or escaping the result; that the plaintiff was bound to show himself and his mother to have been in the exercise of due care in respect to the occurrence from which the injury arose, and that this might be shown by evidence which excludes fault, and that the evidence reported was sufficient for that purpose. Craig v. New York, New Haven & Hartford R. Co., 118 Mass. 437; Com. v. Boston & Lowell R. Co., 126 Mass. 61, 68; Huickly v. Cape Cod R. Co., 120 Mass. 257; and that there was evidence enough of want of proper care on the part of the defendants, to make them responsible, on the ground that they were bound to conduct their gas in a proper manner, and had neglected so to do. Opinion by COLT, J.-Smith v. Boston Gas Light Co.