Bond vs. The Central Bank of Georgia.

"Every person" says Judge Story, "is treated as a bona fide [6.] holder for value, (of a note,) not only when he has advanced money or other value for it, but when he has received it in payment of a precedent debt." Story on Prom. Notes, 215. See also Chitty on Bills ch. 3, p. 85, 8 ed. 1833; 3 Kent Comm. 81, 4 ed.; 4 Bingh. R. 496; 8 Ves. 531; 12 Pick. 399; 16 Maine R. 117.

In England this doctrine has been uniformly recognized from Pillans & Rose vs. Van Mierop & Hopkins, 3 Burr. R. 1664, down to the present time.

The same rule seems generally to have prevailed in the American Courts.

In the Bank of Salina vs. Babcock and others, 21 Wend. R. [7.] 499, the Supreme Court of New York, held, that when a Bank receives and discounts negotiable paper, places the proceeds to the credit of the holder and charges over against him, and cancels other notes upon which are responsible parties but which are over due and lie under protest, such cancellation is equivalent to paying value at the time and precludes all defence as existing between the original parties.

Chief Justice Nelson, who delivered the opinion of the Court in this case, remarks, "there is no question but that the plaintiff received and discounted the note in good faith, and the only pretence of objection to the recovery is, that no value has been given. The answer is, the plaintiff had a right to give up the old securities upon the faith of the new paper. This is parting with value in the strictest sense of the term."

In the Bank of Sandusky vs. Scoville, Barton, and Mooney, 24 Wend. R. 115, the same Court held that where a bank discounts a note to extinguish a debt due it from the holder, or the proceeds are applied towards the discharge of his liability, such acts are equivalent to paying value at the time, and constitute the Bank a holder for a valuable consideration. And Mr. Justice Bronson says, "the plaintiff received the note in good faith, and without notice, and the only question is whether they paid a valuable consideration; I think they did. The note was discounted by the Bank for the benefit of Ward, the holder, to extinguish his debt, and the avails went to discharge his liability to the Bank. It is the same thing, substantially, as though Ward had first received the money and then paid it over to the plaintiff, or indeed to any other creditor. If Ward's liability was discharged, his debt extinguished, it

Bond vs. The Central Bank of Georgia.

is impossible to deny that the plaintiff in effect parted with their money, and that Ward received it."

The same doctrine was affirmed so late as 1842, in the case of Williams, ex'r &c. vs. Smith and others, 2 Hill N. Y. R. 301. I am aware that in some of the earlier cases the Supreme Court seem to have departed from this rule. They have returned, however, to the old ground of the text books, and the leading English and American decisions.

In the case of Thomas F. Townsley vs. Joseph K. Sumrall, this point came under the consideration of the Supreme Court of the United States. And the Court there held that damage to the promissee constitutes as good a consideration as benefit to the promissor; and that it could make no difference in law whether the debt, for which a bill of exchange is taken, is a pre-existing debt or money then paid for the bill. 2 Peter R. 182.

But, in Swift vs. Tyson, 16 Peter R. 1, this question underwent a most thorough investigation before that high tribunal. The acceptance of the bill of exchange by the defendant having been in New York, it was contended that the injunction of the 34th section of the Judiciary Act of 1789, that "the laws of the several States, except where the Constitution, treaties, or statute, otherwise provide or require, shall be regarded as rules of decision in trials at Common Law in the courts of the United States where they apply," imposed on the Supreme Court an obligation as well to apply the decisions of the courts of that State, as the statutes, to cases which came before the Federal Judiciary.

Judge Story, who was the organ of the Court, held that the section referred to was 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 things having a permanent locality, such as the rights and titles to real estate, and other matters immovable, and intrateritorial in their nature and character. And that it never was supposed that the 34th 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 the national courts; that is to ascertain, upon general reasoning and legal analogies, what is the true exposition

Band vs. The Central Bank of Georgia.

of the contract or instrument, or what is the just rule furnished by the principles of commercial law to govern the case. And that, while the decisions of the local tribunals are entitled to and would receive the most deliberate attention and respect of that court, still they could not furnish positive rules or conclusive authority by which its own judgments are to be bound up and governed. That the law of negotiable instruments may be truly declared, in the language of Cicero adopted by Lord Mansfield, in Luke and others vs. Lyde, 2 Burr. R. 883, 887, to be in a great measure not the law of a single country only, but of the commercial world. Non erit alia lex Roma, alia Athenis, alia nunc, alia posthac, sed et apud omnes gentes, et omni tempore, una eadem que lex obtenebit.

Justice Story reviews the adjudications of the State of New York, which have been mainly, if not exclusively, relied on by counsel for the defendant in the case now at bar, and shows, that it was only for a short period that the Supreme Court maintained, that a pre-existing debt was not a sufficient consideration to shut out the equities of the original parties in favour of the holders. And that no case to that effect ever was so decided by the Court of Errors. And that the more modern cases, even there, have greatly shaken, if they have not entirely overthrown, those decisions, and have brought back the doctrine to that promulgated in Warren vs. Lynch, 5 John. R. 239, and Bay vs. Coddington, 5 John. Ch. R. 54, and the earliest cases.

The Court then proceeds to express their opinion upon the point under discussion, and declare that they have "no hesitation in saying that a pre-existing debt does constitute a valuable consideration, as applicable to negotiable instruments. Assuming it to be true, (which, however, may well admit of some doubt from the generality of the language,) that the holder of a negotiable instrument is unaffected with the equities between the antecedent parties, of which he has no notice, only when he receives it in the usual course of trade and business for a valuable consideration before it becomes due, we are prepared to say, that receiving it in payment of, or as security for, a pre-existing debt, is according to the known usual course of trade and business. And why, upon principle, should not a pre-existing debt be deemed such a valuable consideration? It is for the benefit and convenience of the commercial world to give as wide an extent as practicable to the credit and circulation of negotiable paper; that it may pass not only as security for new purchases and advances made upon the trans

Bond vs. The Central Bank of Georgia.

fer thereof, but also in payment of and as security for pre-existing debts.

"The creditor is thereby enabled to realize or to secure his debt, and thus may safely give a prolonged credit, or forbear from taking any legal steps to enforce his rights. The debtor, also, has the advantage of making his negotiable securities of equivalent value to cash. But, establish the opposite conclusion, that negotiable paper cannot be applied in payment of, or as security for, pre-existing debts, without letting in all the equities between the original and antecedent parties, and the value and circulation of such securities must be essentially diminished, and the debtor driven to the embarrassment of making a sale thereof, often at a ruinous discount, to some third person, and then, by circuity, to apply the proceeds to the payment of his debts. What, indeed, upon such a doctrine, would become of that large class of cases where new notes are given by the same or by other parties, by way of renewal or security to Banks, in lieu of old securities discounted by them, which have arrived at maturity? Probably more than half of all Bank transactions in our country, as well as those of other countries, are of this nature. The doctrine would strike a fatal blow at all discounts of negotiable securities for pre-existing debts." We have not the slightest difficulty, either upon principle or authority, in ruling that the Central Bank, receiving the note of Joseph Bond, payable to William F. Bond or bearer, a month before its maturity, from Samuel Beall, in satisfaction of the pre-existing debts of Beall to the Bank, upon which there were solvent securities, took it free from any equities which might have been set up between the maker and payee. Any other view would destroy the value of negotiable paper; no creditor would ever receive notes from his debtor, if in doing so he incurred the peril proposed by this defence. Instead of waiting with his debtor, by receiving collaterals, and thus strengthening the security of his claim, the gruffy demand in every case would be, "pay me what thou owest;" and, in the event of failure, the unfortunate debtor would be hauled instantly to the court-house and the prison. Public policy, no less than humanity, stands opposed to such a conclusion.

And, having settled this question, it necessarily sustains the decision of the Judge of the Circuit, in rejecting the defence set up, and the evidence by which it was sought to be supported. Whether the receipt of William F. Bond to Joseph Bond was executed contemporaneously with the note, and whether the latter was in

Bond vs. The Central Bank of Georgia.

possession of the payee at the time he made the acknowledgement as to the mode of its payment, and whether or not these declarations were admissible as a part of the res gesta, notwithstanding William F. Bond was neither a party to the record, nor identified in interest with the plaintiff—I repeat that all these inquiries become wholly immaterial. The Bank being adjudged, in the commercial sense of the term, a bona fide holder of the note for value, all this matter is excluded.

Moreover, we are of the opinion, that the Court below [8.] committed no error in withdrawing from the jury the proof as to notice. The paper itself should have been produced, as the best evidence of the contents of the advertisement said to have been published in it. In one of the early cases decided by this Court, Rogers vs. Athinson et al. 1 Kelly R. 12, we took occasion to demonstrate the superiority of written over parol testimony. And the reason of the rule certainly applies with equal force when the matter in dispute is in print, instead of in manuscript. Had the evidence gone to the jury, it fell greatly short of conveying notice to the plaintiff. There was no proof that Dr. Fort, while acting as President of the Bank two years before this note was transferred, ever saw the gazette, or the caution in its columns. At that time the Bank had no interest in the paper. Dr. Fort had gone out of office, and been succeeded by Col. Thomas, long prior to the transfer. The cashier, under all of these administrations, states, upon oath, that Bond's paper was traded without notice; no attempt was made to bring home notice to Beall, from whom the Bank received the note, and even if he were an innocent holder, the Bank could be protected in its derivative title under Beall; to defeat the recovery it would be incumbent on the defendant to show, notice to Beall that the note was void in the hands of William F. Bond, from whom he purchased it. Story on Prom. Notes 210, sec. 191; Haly vs. Lane, 2 Atk. R. 182; Lickbarrow vs. Mason, 2 T. R. 71; Chalmers vs. Lanion, 1 Campb. R. 380; Robinson vs. Reynolds, 2 Adol. & Ellis New R. 211.

One other important question remains to be considered. [9.] The Circuit Judge held, that the plaintiff was entitled to recover, although the note sued on was without securities or endorsers, exceeded the sum of two thousand five hundred dollars, and was payable two years after date. And it has become the duty of this Court upon the present writ of error to decide whether this opinion can be maintained in point of law.