Oates v. First National Bank of Montgomery. to cut off equities which the maker may have against the payee. Such was declared to be the settled doctrine of that court in Fenouille v. Hamilton, 35 Ala. 322. But the opinion in that case contains some passages which apply, with peculiar force, to a suit like this. The court said: "In this case there was no other consideration for the transfer of the note to the defendant than the security of the pre-existing indebtedness of the defendant's indorsee. The fact that the defendant may have been led to grant indulgence, or forbear to enforce his remedies for the collection of the debts, does not prove that such indulgence or forbearance was an element of the contract, or the consideration upon which it was made. If there was any forbearance by the defendant it was a voluntary act, to which he may have been persuaded by the collateral security, and may have resulted from a consciousness of security; but such forbearance was not the result of contract, and is not shown to have been the consideration of it." Had there been, in that case, a present consideration for the transfer of the note beyond giving security for a pre-existing debt, or had the forbearance of the creditor to enforce his remedies been an element in a binding contract, under which the collateral security was furnished, we are persuaded that the Alabama court would have ruled that the creditor in receiving the collateral became a holder for value, in the course of business. But if we are mistaken in our interpretation of the decision of the Supreme Court of Alabama, the result will not follow for which plaintiff in error so earnestly contends. While the Federal courts must regard the laws of the several States, and their construction by the State courts (except when the Constitution, treaties, or statutes of the United States otherwise provide), as rules of decision in trials at common law in the courts of the United States, in cases where applicable, they are not bound by the decisions of those courts upon questions of general commercial law. Such is the established doctrine of this court, so frequently announced that we need only refer to a few of the leading cases bearing upon the subject. Swift v. Tyson, 16 Pet. 1; Watson v. Tarpley, 18 How. 520; Carpenter v. Prov. Ins. Co., 16 Pet. 511. We have already seen that the statutes of Oates v. First National Bank of Montgomery, 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. Upon principle and authority we do not doubt that the defendant in error was, in the sense of the commercial law, a bona fide holder for value of the note in suit. In Swift v. Tyson, 16 Pet. 22, cited by counsel, this court, speaking by Mr. Justice STORY, said that it entertained no doubt "that a bona fide holder, for a pre-existing debt, of a negotiable instrument is not affected by any equities between antecedent parties, when he has received the same before it became due, without notice of any such equities." In some of the State courts the authority of that case has been disputed, so far as the language of the court referred to collateral security received for a pre-existing debt, upon the ground that the note, there in suit, was transferred in payment of, and not as security for, a pre-existing debt, and that consequently the opinion expressed in the language just quoted was unnecessary to the decision of the point in issue. In the more recent case of Goodman v. Simonds, 20 How. 253, it was contended that a party who took negotiable paper merely as collateral security for a preexisting debt, did not acquire it in the usual course of business, but took it subject to prior equities. The court being of opinion that no such question was prese ited by the record, waived its consideration. But after an extended review of the authorities, American and English, the court, speaking through Mr. Justice CLIFFORD, said: "It seems now to be agreed that, if there was a present consideration at the time of the transfer, independent of the previous indebtedness, a party acquiring a negotiable instrument before its maturity, as a collateral security to a pre-existing debt, without knowledge of the facts which impeach the title as between the antecedent parties, thereby becomes a holder in the usual course of business, and that his title is complete, so that it will be unaffected by any prior equities between other parties, at least to the extent of the previous debt for which it is used as collateral." Oates v. First National Bank of Montgomery. That language would seem to be conclusive of the question under consideration. There was here a present consideration, at the time of the transfer, independent of the indebtedness of the manufacturing company to the bank. That consideration, as to the bank, was the unconditional extension of time upon all the company's indebtedness, for different periods reaching beyond the maturity of the note transferred as collateral security. Such extension for fixed periods was a cardinal element of the contract. The creditor forbore pursuit of the remedies which the law supplied for the enforcement of his demands, then soon to mature, in consideration of collateral security being furnished and in consideration also of the payment by the debtor of usurious interest in advance. Besides, having received the note, indorsed so that it became a party thereto, the bank was bound to observe all the rules of the law-merchant as to the presentation, protest, and notice of non-payment. It did not receive the note as the agent of the debtor and merely for collection. It took it under all the responsibility, as to presentation, protest, and notice of dishonor which attached to absolute ownership, and became liable to have the note treated as payment pro tanto if there were a failure to make due presentation, and in the event of non-payment, to give proper notice to the creditor. The debtor could not withdraw his indorsement after delivering the note under the contract for extension, nor could the bank, after receiving the note under that contract, disregard its agreement for forbearance. Nor was the bank any the less bound by the contract for extension because of the payment in advance of usurious interest by its debtor. Although the taking of usurious interest subjected the bank to certain forfeitures prescribed by law, and to an action by the debtor, if he so elected, to recover twice the amount so paid by him, it could not, of its own volition or by its own act, avoid the contract for indulgence because of such payment of usury. The payment in advance was itself a sufficient consideration for the extension, in the sense, that the bank would not be allowed to repudiate its agreement upon the ground that it had taken usurious interest, in violation of law. 2 Dan. on Neg. Inst., § 1317. But independent of that aspect of the case, and throwing out of view Oates v. First National Bank of Montgomery. altogether the usurious feature of the contract, we are of opinion that a creditor who takes a negotiable note, before maturity, so indorsed that he becomes a party to the instrument, as collateral security for a pre-existing debt, and in consideration of an extension of time to the debtor, actually granted, is, according to the law-merchant, a holder for value, and that his rights as such holder cannot be affected by equities between antecedent parties, of which he had no notice. Goodman v. Simonds, 20 How. 253; 1 Pars. on Notes and Bills, 221-228; Story on Prom. Notes, § 195, notes, 7th ed., by Thorndike; 1 Dan. on Neg. Inst. (2d ed.), §§ 820 and 832, and notes; Lead. Cas. upon Bills of Ex. and Prom. Notes by Redfield and Bigelow, 186-217, and notes. Whether the tak ing of such note merely as collateral security for antecedent debts, without any binding contract for indulgence, would constitute a valuable consideration within the established rules of commercial law, protecting the creditor against defenses or equities between antecedent parties, of which he had no notice, it is not necessary now to decide. That precise question is not presented in this case, and we forbear to express any opinion upon it. suit, since 3. One other question remains to be considered. Counsel for plaintiff in error have pressed, with much vigor, the suggestion that the bank, consistently with public policy, should not be regarded as a bona fide holder for value of the note in the contract under which it received the note involved in its execution a direct violation of the statutes against usury. We are referred in support of that position to several decisions of the Supreme Court of Alabama which, it must be conceded, announce the broad doctrine that one 66 I who has become the indorsee of a bill, by violating the provisions of a statute, cannot with any degree of propriety be said to be a bona fide holder in the usual course of trade." 13 Ala. 410; 14 id. 688; 16 id. 406. Without extending this opinion by a critical examination of those cases, we repeat that in the determination of such a question we are not bound by the decisions of the State court. The question is one of general law, and depends in nowise for its solution upon local laws and usages. We are referred, in this connection, to two cases in this court Oates v. First National Bank of Montgomery. Levy v. Gadsby, 3 Cr. 180, and Gaither v. Farmers and Mechanics' Bank, 1 Pet. 41. The case in 3 Cr. is so meagerly reported that it is difficult to see the precise ground upon which the conclusion of the court was rested. That in 1 Pet. is clearly distinguishable from this case. There a note was indorsed and delivered as collateral security for a pre-existing debt, evidenced by a note given on an usurious contract. The case was held to be governed by the statute of Maryland, which declared "all bonds, contracts and assurances whatever, taken on an usurious contract," to be utterly void. Under that statute the contract of indorsement was held to be void. In the eye of the law it was as though it had never existed, and consequently, no cause of action, it was adjudged, passed to the indorsee. The case in hand is altogether different. The statute under which the bank was organized, known as the National Banking Act, does not declare the contract, under which the usurious interest is paid, to be void. It denounces no penalty other than a forfeiture of the interest which the note or bill carries, giving to the debtor the right to sue for and recover twice the amount of interest so paid. If we should declare the contract of indorsement void, and consequently, that no right of action passed to the bank on the note transferred as collateral security, an additional penalty would thus be added beyond those imposed by the law itself. "On what principle could this court add another to the penalties declared by the law itself?" De Wolf v. Johnson, 10 Wheat. 367; Barnett v. National Bank, 98 U. S. 558; 91 id. 29. Besides, in this case, the forbearance extended to the debtor was not upon the sole consideration of usurious interest paid in advance. It was upon the additional and substantial consideration that the debtor corporation gave collateral security for the payment of indebtedness about to mature, and which it confessed its inability to meet. We have already seen that the transfer of the note, before maturity, as collateral security, and so indorsed that the bank became a party to the instrument, under obligation to make due presentment and give due notice of non-payment, was, itself, a sufficient consideration to constitute the bank a bona fide |