41 U.S. 1 (1842)
Swift, a citizen of Maine, instituted an action in the circuit court of New York against Tyson on a bill of exchange that Tyson had accepted in New York.1 The acceptance and indorsement of the bill were admitted at trial.2
Swift had taken the bill before it became due in payment of a promissory note due to him from Norton & Keith. He was a bona fide holder without notice who believed the bill was justly due.3
Tyson had accepted the bill as part consideration for lands sold by Norton & Keith, to which those parties had no title and which were of little or no value. The defendant offered to prove that the acceptance had been given under circumstances involving misrepresentation of the quality of the lands and imposition by fraud on the part of the drawer and co-owners.4
The circuit judges divided on the question of whether, under these facts, the defendant had available to him the same defense against Swift as he would have had against the original parties to the bill. This division resulted in certification of the question to the Supreme Court for resolution.5
Whether a defendant may assert against a subsequent bona fide holder of a bill of exchange the same defenses that would have been available against the original parties to the instrument?6
A bona fide holder of a negotiable instrument for a valuable consideration, without any notice of facts which implicate its validity as between the antecedent parties, who takes it under an indorsement made before it becomes due, holds title unaffected by those facts and may recover thereon, although, as between the antecedent parties, the transaction may be without legal validity.7 The holder before maturity is not bound to prove that he is a bona fide holder for a valuable consideration without notice; the law will presume this in the absence of rebutting proof.8
No. Swift was a bona fide holder who took the bill before it became due in payment of a pre-existing debt owed by Norton & Keith.9 Tyson attempted to prove fraud and lack of title in the underlying land sale by Norton & Keith. Because Swift took the instrument in good faith for valuable consideration before maturity without notice, the defenses available against the original parties do not apply to him.10 The rule protects the circulation of negotiable paper by shielding innocent holders from equities between antecedent parties.11
The defendant may not assert against Swift the same defenses that would have been available against the original parties.12
Related opinions on this issue
Justice Catron concurred in the judgment that extinguishment of a debt protects the purchaser of a negotiable note from prior infirmities. He specifically agreed that a post consideration of this nature shields the assignee when the instrument is negotiated before maturity.13 Catron nevertheless limited his concurrence to the precise facts presented by the record.14
He expressly declined to hold that a note taken as collateral security for a previous debt receives the same protection as one taken in extinguishment of the debt. State courts of high authority have reached different conclusions on the collateral security issue. Because that question was not argued and is not necessarily presented here, Catron was unwilling to announce a principle on it.15
Whether the 34th section of the Judiciary Act of 1789 requires federal circuit courts to treat state court decisions on the validity of negotiable instruments as binding rules of decision?16
The 34th section of the Judiciary Act of 1789 has been understood by this Court to apply to state laws strictly local. It covers positive statutes and constructions adopted by local tribunals. It also applies to rights and titles to things having permanent locality such as real estate.17 The section does not extend to contracts or other instruments of a commercial nature.18 The true interpretation and effect of such instruments are to be sought in the general principles and doctrines of commercial jurisprudence, not in state court decisions.19
No. Although New York decisions were cited regarding whether a pre-existing debt is valuable consideration, the question is one of general commercial law, not local law. Therefore, state court decisions are not binding rules of decision for the federal court on the construction of negotiable instruments.20
The 34th section does not require federal circuit courts to treat state court decisions on the validity of negotiable instruments as binding rules of decision.21