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Vol. IV.)

CLAFLIN v. HOUSEMAN.

[No. 2.

as

between a citizen of the state where the suit is brought and a citizen of another state, where an alien is a party, &c., &c. Here no distinction is made between those branches of jurisdiction in respect to which the Constitution uses the expression

66 all cases

and those in respect to which the term “all” is omitted. Some have supposed that wherever the Constitution declares that the judicial power shall extend to “ all cases, as all cases in law and equity arising under the Constitution, laws, and treaties of the United States; all cases affecting ambassadors, &c., the jurisdiction of the federal courts is necessarily exclusive; but that where the power is simply extended to controversies

" to controversies” of a certain class, “ controversies to which the United States is a party,” &c., — the jurisdiction of the federal courts is not necessarily exclusive.

But no such distinction seems to have been recognized by Congress, as already seen, in the judiciary act. And subsequent acts show the same thing. Thus, the first patent law for securing to inventors their discoveries and inventions, which was passed in 1793, gave treble damages for an infringement, to be recovered in an action on the case founded on the statute in the circuit court of the United States, “ or any other court having competent jurisdiction,” — meaning, of course, the state courts. The subsequent acts on the same subject were couched in such terms, with regard to the jurisdiction of the circuit courts, as to imply that it was exclusive of the state courts ; and now it is expressly made so. See Patent Acts of 1800, 1819, 1836, 1870, and Rev. Stat. U. S. sect. 711 ; Parsons v. Barnard, 7 Johns. 144 ; Dudley v. Mayhew, 3 Comst. 14; Elmer v. Pennel, 40 Maine, 434.

So with regard to naturalization, a subject necessarily within the exclusive regulation of Congress, the first act on the subject passed in 1790, and all the subsequent acts, give plenary jurisdiction to the state courts. The language of the Act of 1790 is, “any common law court of record in any one of the states," &c. 1 Stat. 103.

1 Stat. 103. The Act of 1802 designates “the supreme, superior, district, or circuit court of some one of the states, or of the territorial districts of the United States, or a circuit or district court of the United States.” 2 Stat. 153.

So by acts passed in 1806 and 1808, jurisdiction was given to the county courts along the northern frontier, of suits for fines, penalties, and forfeitures under the revenue laws of the United States. 2 Stat. 354, 489. And by Act of March, 3, 1815, cognizance was given to state and county courts, generally of suits for taxes, duties, fines, penalties, and forfeitures arising under the laws imposing direct taxes and internal duties, 3 Stat. 241.

These instances show the prevalent opinion which existed, that the state courts were competent to have jurisdiction in cases arising wholly under the laws of the United States ; and whether they possessed it or not, in a particular case, was a matter of construction of the acts relating thereto. It is true that the state courts have, in certain instances, declined to exercise the jurisdiction conferred upon them ; but this does not militate against the weight of the general argument. See U. S. v. Lathrop, 17 Johns. 4. See especially the able dissenting opinion of Mr. Justice Platt, Ib. p. 11.

It was indeed intimated by Mr. Justice Story, obiter dictum, in deliver

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Vol IV.]

CLAFLIN v. HOUSEMAN.

[No. 2.

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ing the opinion of the court in Martin v. Hunter's Lessee, 1 Wheat. 334337, that the state courts could not take direct cognizance of cases arising under the Constitution, laws, and treaties of the United States, as no such jurisdiction existed before the Constitution was adopted. This is true as to jurisdiction depending on United States authority; but the same jurisdiction existed (at least to a certain extent) under the authority of the states. Inventors had grants of exclusive right to their inventions before the Constitution was adopted, and the state courts had jurisdiction thereof. The change of authority creating the right did not change the nature of the right itself. The assertion, therefore, that no such jurisdiction previously existed, must be taken with important limitations, and did not have much influence with the court when a proper case arose for its adjudication. Houston v. Moore, decided in 1820, 5 Wheat. 1, was such a case. Congress, in 1795, had passed an act for organizing and calling forth the militia, which prescribed the punishment to be inflicted on delinquents, making them liable to pay a certain fine, to be determined and adjudged by a court-martial, without specifying what court-martial. The legislature of Pennsylvania also passed a militia law providing for the organization, training, and calling out of the militia, and establishing courts-martial for the trial of delinquents. The law in many respects exactly corresponded with that of the United States, and, as far as it covered the same ground, was for that reason held to be inoperative and void.

Houston, a delinquent under the United States law, was tried by a state court-martial, and it was decided that the court had jurisdiction of the offence, having been constituted, in fact, to enforce the laws of the United States which the state legislature had reënacted. But the decision (which was delivered by Mr. Justice Washington) was based upon the general principle that the state court had jurisdiction of the offence, irrespective of the authority, state or federal, which created it. Not that Congress could confer jurisdiction upon the state courts, but that these courts might exercise jurisdiction on cases authorized by the laws of the state and not prohibited by the exclusive jurisdiction of the federal courts. Justices Story and Johnson dissented ; and, perhaps, the court went further in the case than it would now. The act of Congress having instituted courts-martial, as well as provided a complete code for the organization and calling forth of the militia, the entire law of Pennsylvania on the same subject might well have been regarded as void. Be this as it may, it was only a question of construction, and the court conceded that Congress had the power to make the jurisdiction of its own courts exclusive.

In Cohens v. Virginia, 6 Wheaton, 415, Chief Justice Marshall demonstrates the necessity of an appellate power in the federal judiciary, to revise the decisions of state courts in cases arising under the Constitution and laws of the United States, in order that the constitutional grant of judicial power, extending it to all such cases, may have full effect. He says: “The propriety of intrusting the construction of the Constitution and laws made in pursuance thereof to the judiciary of the Union, has not, we believe, as yet been drawn in question. It seems to be a corollary from this political axiom, that the federal courts should either pos

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Vol. IV.)

Johnson v. WAY.

(No. 2.

sess exclusive jurisdiction in such cases, or a power to revise the judgment rendered in them by the state tribunals.

““ If the federal and state courts have concurrent jurisdiction in all cases arising under the Constitution, laws, and treaties of the United States, and if a case of this description brought in a state court cannot be removed before judgment, nor revised after judgment, then the construction of the Constitution, laws, and treaties of the United States is not confided particularly to their judicial department, but is confided equally to that department and to the state courts, however they may be constituted.”

See subject further discussed in 1 Kent's Com. 395, &c.; Sergeant on the Constitution, 268; 2 Story on the Const. sec. 1748, &c.; 1 Curtis's Commentaries, secs. 119, 134, &c.

The case of Teal v. Felton was a suit brought in the state court of New York against a postmaster, for neglect of duty to deliver a newspaper under the postal laws of the United States. The action was sustained by both the supreme court and court of appeals of New York, and their decision was affirmed by this court. 1 Comstock, 537; 12 How. 292. We do not see why this case is not decisive of the very question under consideration.

Without discussing the subject further, it is sufficient to say, that we hold that the assignee in bankruptcy, under the Bankrupt Act of 1867, as it stood before the revision, had authority to bring a suit in the state courts, wherever those courts were invested with appropriate jurisdiction, suited to the nature of the case.

The judgment is affirmed.

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SUPREME COURT COMMISSION OF OHIO.

(To appear in 27 Ohio St.)

BILLS AND NOTES. — EVIDENCE OF FRAUD IN TAKING PAPER AS

OPENING ANTECEDENT DEFENCES.

JOHNSON v. WAY.

a

A holder of negotiable paper, who takes it before maturity for a valuable consideration,

in the usual course of trade, without knowledge of facts which impeach its validity between antecedent parties, holds it by a good title; but circumstances tending to show bad faith or fraud in taking such paper are admissible in evidence, and the establishment of such bad faith or fraud, whether by direct or circumstantial evidence, subjects the holder of paper so taken to defences existing between antecedent parties.

ERROR to the district court of Portage County,

The plaintiff brought suit in the court of common pleas of Portage County to recover of the defendant the amount of two promissory notes of seventy-five dollars each, of which the following is a copy :

Vol. IV.)

JOHNSON vi WAY.

[No. 2.

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lows:

“Post-OFFICE ADDRESS, SUFFIELD, COUNTY OF PORTAGE,

State of Ohio, July 29, 1869. " Three months after date, I promise to pay to the order of L. A. Wilder seventy-five dollars, for value received, with use.

[Stamp.]

“ SOLOMON WAY." “ Indorsed : I hereby certify that I am worth $8,000, consisting of personal property to the amount of $1,000 and one hundred and seventeen acres of land. I make this statement for the purpose of obtaining credit. .

.

" SOLOMON WAY." 5 Indorsed, without recourse, to L. A. Wilder." The second note is like the first, except due in four months after date.

On the trial, the plaintiff admitted that the notes were given for a worthless patent right metallic roofing cement, and were without considerati on, as between the original parties.

The proof shows that one Lewis D. Joy bought the notes before ma-
turity; that Joy paid $100 cash for each $150 of notes, and received them
indorsed without recourse;" that the plaintiff bought the notes of Joy
before maturity, and paid the face thereof in coal stock of the Trumbull
Coal Company (an incorporated mining company), at fifty cents on the
dollar of its par value; that the coal stock was delivered to Joy, and the
notes to Johnson before they matured, and without any actual notice of
any defence.
On the trial the plaintiff asked the court to charge the jury as fol-

“1. Suspicion of defect of title, or fraudulent inception, or the knowledge of circumstances which would excite such suspicion in the mind of a prudent man, or gross negligence on the part of the taker at the time of the transfer, will not defeat his title ; that result can be produced only by bad faith on his part; mere want of caution and care is not enough.

“2. In brief, did the plaintiff or Joy buy the notes in good faith and without fraud, for value, before due ? If so, and without notice of any defect, plaintiff is entitled to recover. It is a question of good faith and fraud, and not of carelessness or negligence on the part of plaintiff or Joy, unless it amounts to fraud or want of good faith.

"3. That the law presumes primă facie in favor of every holder of negotiable paper, that, ist. He is the owner of it; 2d. That he took it for value ; 3d. Before due; 4th. In the regular course of trade; and plaintiff is entitled to recover, unless these presumptions of law are overcome by proof in the case.”

The court refused to charge as requested, but charged the jury upon the point in question as follows:

* If the proof shows that both Johnson and Joy took these notes with notice of their infirmities, then plaintiff ought not to recover, and upon this proposition the burden of proof rests upon the defendant.

" To constitute a sufficient notice, it is not essential that the party should have had actual positive notice of the defects of the notes, but if the circumstances and facts connected with, and surrounding the transfer, whether they appeared upon the notes themselves, or outside of them, were of such strong and pointed character as to put the purchaser on in

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quiry, then the law presumes that he did make those inquiries, or that if he did not he should bear the responsibility in the same manner as if he had made them, and they had led him to a full knowledge of the whole truth connected with giving the notes. The purchaser was not bound to make inquiries, unless there was something in the circumstances of the case that would have put an ordinarily careful and prudent man upon investigation. But while the purchaser was not bound to make inquiries from motives of mere curiosity and suspicion, yet he was not at liberty to shut his eyes to facts and circumstances that presented themselves to him, if those facts and circumstances would have attracted the attention of a man of common prudence. It was not enough if the facts and circumstances were merely sufficient to suggest inquiry by the most cautious; nor does the law require circumstances so startling as to awaken investigation on the part of the most dull and stolid. But if the defendant has shown you by testimony, to your satisfaction, that Joy and Johnson had actual notice at the time of the purchase of the notes of their defects and infirmities, or if they had such knowledge of facts and circumstances as to put a reasonable and prudent man upon inquiry, then the plaintiff cannot recover."

To the refusal of the court to charge as requested, and to the charge as given, the plaintiff excepted. Judgment was rendered for the defendant, and on petition in error the judgment of the common pleas was affirmed by the district court. It is now sought to reverse the judgments of the courts below, for error in the charge given to the jury on the trial in the court of common pleas.

M. Stewart, for plaintiff in error. The court erred in its charge, which was, in substance, that “the plaintiff, having admitted that the notes were without consideration between the original parties, he is not entitled to recover, unless he proves (independent of any presumption of law) that he bought them before due, and paid value in the regular course of trade.” 1 Parsons on Notes & Bills, 185; Swift v. Tyson, 16 Pet. 16; Nixon v. De Wolf, 10 Gray, 318; Dumont v. Williamson, 18 Ohio St. 115; Davis v. Bartlett, 12 Ib. 544. And as to notice, Goodman v. Si.

v mons, 20 How. 365; Andrews v. Pond, 13 Pet. 65; Fowler v. Brantly, 14 Ib. 318; Bank of Pittsburg v. Neal, 22 How. 108; 2 Parsons on Con. 3, 4.

The indorsement furnished no evidence or ground of suspicion to put plaintiff on inquiry. Russell v. Ball, 2 Johns. 50; Goddard v. Lyman, 14 Pick. 268 ; Bisbing v. Graham, 14 P. S. 14; Epler v. Funk, 8 Barr, 468.

The purchaser 'of commercial paper before due, in good faith, for value, in the regular course of trade, holds it discharged of all prior equities. Circumstances of suspicion that would attract the attention of a man of common prudence, or even carelessness or gross negligence on his part, at the time of the purchase, will not defeat his title. That can only be effected by actual notice, or fraud on his part. Murray v. Lardner, 2 Wall. 121; Goodman v. Harvey, 4 Adol. & Ellis, 470.

The rule in England originally, for a long period, protected the holder against the fraud of antecedent parties, unless he was shown to have had actual notice, or was guilty of bad faith. It was first announced by Lord

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