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of the vendor's fraud, and it appeared that part of the consideration was an agree*
ment by the vendee to assume the pa3rment of a debt of the vendor to a third person,
whicfa agreement would, under the rulings of the Minnesota courts, render the
vendee liable to such third person therefor. Held, that the federal court wocUd
treat the assumption of such debt as a valid consideration.

Whether, in an action at law involving the validity of a saTb, the court can
apply the equitable principle that an innocent vendee who, subsequent to the sale,
has received notice of the vendor*s fraud will be protected only to the extent of the
portion of the consideration paid prior to the receipt of such notice : Quare.

Motion for a new trial.

This was an action at law arising out of a sale of certain pro*
perty by one Forbes to the plaintiff, and its subsequent seizure as
the property of Forbes under attachment proceedings. It ap-
peared that, prior to September 1878, Forbes was the owner of a
stock of dry goods in a store at Waseca, Minnesota. On the 17th
of that month he executed a bill of sale of said stock of goods to
the plaintiff, and delivered to him possession. This was done by
virtue of an agreement of sale, made without any fraudulent intent
on the part of plaintiff, and without any knowledge by him of any
such intent on the part of Forbes, by which agreement plaintiff
paid Forbes for the goods ?3000 in cash, and assumed the pay^
ment of certain debts held by a bank in Waseca against Forbes,
amounting to about 98800. This agreement was made, or at least



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286 SONSTIBY ». KEELEY.

repeated, in the presence of the cashier of the hank, to whom a
list of the debts was exhibited, with the statement that plaintiff
had agreed to pay them. There was no proof of any agreement
of the bank to look to plaintiff or to release Forbes, except the
proof that the cashier was advised of and assented to the arrange-
ment. Subsequently to the delivery of possession to plaintiff, the
sheriff, by virtue of certain writs of attachment against Forbes,
levied upon and took possession of the goods as the property of
Forbes, under the claim that the sale to plaintiff was void because
made to hinder, delay and defraud creditors. One of the ques-
tions raised in the present case was, whether if there was fraud on
the part of Forbes, the assumption of the bank debts by plaintiff
was binding upon him, and therefore equivalent to a cash payment,
or whether it did not bind him, and therefore he was to be pro-
tected only to the extent of the actual cash paid? The court
charged that the agreement to assume the debts rendered plaintiff
liable to the bank, and therefore was equivalent to the payment
of so much money. This ruling was the ground for the motion
for a new trial.

Wihon ^ Gale and Rogers ^ Rogers^ for the motion.

(7. K, JDaviSy contra.

The opinion of the court was delivered by

McCrary, C. J. — I have grave doubts as to the propriety of
attempting to apply to a case at law the principle invoked by
counsel for defendant in this case. That principle .is, that where
a vendee buys in good faith, and without notice of fraud on the
part of the vendor, and pays a part only of the consideration,
agreeing to pay the remainder at a future day, if, before such
remainder is paid, he receives notice of the vendor's fraud, he will
be protected only to the amount actually paid before notice. No
doubt this is sound principle in equity ; but can it be applied by a
court of law ? Can such a court rescind the contract pro tanto^
and place the parties in statu quo? If so, can it be done in a
case like the present, in which no issue is made except upon the
validity of the sale? If the sale was held void, so as to leave the
title in Forbes, against whom the attachments were issued, judg-
ment at law could be rendered for defendant ; but where the sale



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SONSTIBY r. KEELEr. 28T

is found to be valid and bona fide^ bo far i& the vendee is con-
cerned, and the title is vested in him, and where he has sold or
disposed of a portion of the stock, and probably expended money
and given time and lubor in its care and preservation, it seems
probable that only a court of equity would be competent to grant
any relief to the creditors of the vendor.

But it is not necessary to pass finally upon this question, as I
am clearly of the opinion that the proof shows a payment by
plaintiff of the whole of the purchase price. It is contended that
the promise by plaintiff to assume and pay the indebtedness of
Forbes at the bank, though made as a part of the consideration
for the purchase, was not payment^ and this for the reason that
plaintiff is not legally bound to pay those debts. It is said that
the holders of those claims cannot sue plaintiff and recover upon
them; Upon this question there is a conflict of authority in this
country. In many of the states the right of action by the payee
of such debts against the party assuming to pay them is main-
tained, even where such payee is not party to the contract.

This is upon the ground that such a promise is an original
promise, based upon a valuable consideration, namely, the sale and
delivery of the goods : 1 Pars. Cont. (6th ed.) 466-468 ; Fanley
V. Cleveland^ 4 Cow. 482 ; Same v. Same^ Id. 639 ; Ctinal Co. v.
Bank, 4 Duer 97 ; Lawrence v. Fox, 20 N. Y. 268 ; Arnold v.
Lyman, 17 Mass. 400; Carnigie v. MotrtBon, 2 Met. 404;
Crocker v. Stone, 7 Cush. 838 ; ITynd v. Holdship, 2 Watts 104 ;
Bur% V. Robinson, 9 Barr 229 ; Eddy v. RoberU, 17 111. 608 ;
Todd V. Tobey, 29 Me. 219 ; Motley v. Manufacturing Ins. Co.,
Id. 887 ; Metcalf on Cont. 205-11, and cases cited in notes.

And such is the law in Minnesota, as repeatedly decided by the
Supreme Court of that state: Sanders v. Clason, 18 Minn. 879;
Goetz V. Foos, 14 Id. 266 ; Merriam v. Lumber Co., 28 Id. 314.
But the opposite doctrine is maintained by numerous cases, and
among them, by the Supreme Court of the United States, in Nat.
Bank v. Grand Lodge, 98 U. S. 128; 2 Chitty Cont. (11th ed.)
74, and cases cited in notes ; Mellon v. Whipple, 1 Gray 817.

Ordinarily, this court would feel bound to adopt and follow the
rule laid down by the Supreme Court in National Bank v. Grand
Lodge, supra ; but, under the peculiar circumstances of the pre-
sent case, I am clearly of the opinion that I ought to apply the
rule established by the Supreme Court of the state of Minnesota.



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888 SONSTIBY V. KEELEY.

It will be observed that the plaintiff aBsumed and Agreed, in con*
sideration of the sale to him of the stock of goods, &c., to pay
certain debts held by the bank against Forbes. In so far as the
debts are the property of the bank, it is certain that they can be
sued upon only in the state courts ; for it appears that the bank is
a corporation of the state, of Minnesota, and the plaintiff a citizen
of that state. How many of thesa debts belong to the bank, and
how many to other parties represented by the bank, and how many
of such other parties are citizens of Minnesota, does not appear,
nor is it material ; it is enough to say that certainly a part, and
probably the whole, of said debts could only be collected by suit in
the state courts. It may be that some of the claims are less than
$600, and for that reason not within the jurisdiction of this court.
I must assume, therefore, that, in case plaintiff refuses to pay said
claims, suits must be brought certainly upon some of them, and
probably upon all of them, in the courts of Minnesota.

So far as those courts are concerned, as already seen, the law is
settled by repeated decisions of the Supreme Court, and, in accord-
ance therewith^ the plaintiff would be held liable in a suit by the
payee of any of said debts. The question, therefore, is, shall this
court hold that the creditors of Forbes are entitled to recover from
plaintiff the sum of those debts, in this case, and thus subject him
to a second payment of the same amount to the holders of the
claims?

A decision which would establish such injustice as this is not, I
am sure, required at my hands. It is true that this case does not
belong to the class in which, as a rule, the federal courts are
required to follow the decisions of the highest judicial tribunal of
the state. But, although the question is a new one, I am clearly
of the opinion that, even on questions purely of commercial law^
the federal courts should follow those decisions if it appears that,
by reason of the situation of the parties and of the subject-matter,
to hold otherwise would subject a party to double payment of the
same debt, without the possibility of relief from the federal courts.
The motion for a new trial is overruled.

It is proposed to indicate the extent or provide, shall be regarded as riiles of

and limitations of the mle, that ''The decision in trials at common law iri the

laws of the several states, except where courts of the United States in cases

the Constitution, treaties or statutes of where they apply:" Jud. Act 17S4,

the United States shall otherwise roqiure sect. 84 (Rev. Stat. U. S., sect 721).



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SONSTIBT V. KBELBT.



289



X. Xxo0ptloiia>
TJiriTED States Constitutioh,
Statutes and Trbatibs. — The laws of
the several states are not rales of decision
for the federal courts in cases where the
Constitution, treaties or statutes of the
United States otherwise require or pro-
Tide. See Denn v. ffamden, 1 Paine
55.

Spbcial Casb. — A case gotten up in
a state court for the purpose of antici-
pating a decision bj the Supreme Court
of the United States, on a question
known to be pending before it, would
not necessarily be followed. This is
intimated obiter in Pecue v. Pack^ 18
How. 595. But East Oakland t. Sku^-
ner, 94 U. S. 255, holds that the
Supreme Court of the United States,
when shown a decision of a state
Supreme Court construing a state statute,
will not entertain the objection that the
cause in which it was rendered was a
fictitious one, and decline to follow the
decision as not genuinely contested.

Feitatb Acts.— In Smith v. Kemo-
ckeny 7 How. 198, a case in which the
Supreme Court of Alabama had con-
strued the charter of an insurance com-
pany, holding it violated by a transac-
tion leading to a mortgage, it was held
that such 'construction of the charter by
the state court would bo followed ; but,
subsequently, in WiUianum t. iB«rry,
8 How. 495, it was held that the
Supreme Court of the United States
would not be bound by a state court's
construction of a private act, the act in
this case being one for the discharge and
appointment of a trustee in a certain
case.

Cbiminal Laws. — Nor are the crimi-
nal biws of a state to be followed by the
federal courts: United States v. Reid,
IS Uow. 361.

Admiralty. — State laws are not of
binding force in cases in admiralty:
Neves ▼. Scott, 13 How. 268. But in
The Princess Alexandra^ 8 Ben. 209, it
was held that the construction put by the



highest court of a state npon a pilot law
is binding upon the federal courts — and
this, notwithstanding a different con-
struction had been previously put upon
the law by the United States Supreme
Court.

Equity. — Nor in equity: Russell v.
Southard, 12 How. 139 ; Neves v. Scott,
1 3 Id. 268. But see Ewing v. .Sf. Louis,
5 Wall. 413, where it was held that a
non-resident complainant can ask no
greater relief in the courts of the United
States than he could obtain were he to
resort to the state courts, and that, if in
the latter courts equity w^uld afford no
reHef, neither will it in the former.

Pleadiwos and Practice. — State
rules relating to pleadings and procedure
are not within the meaning of the 34th
section, although by another enactment :
Sect. 914, Rev. Stat. U. S. (Act June
1st 1872, sect. 5), they are made rules
fbr the guidance of the Circuit and Dis-
trict courts of the United States within
the several states. See Robinson v.
CamfbeU, 3 Wheat. 21 2 ; Fenn v. Holme,
21 How. 481 ; Sheirburn v. Cordova, 24
Id. 423; Wayman v. Southard, lO
Wheat. 1 ; Brown v. Van Braam, 3
Dall. 351 ; Atlantic, ^-c., Railroad Co,
V. Hopkins, 94 U. S. 1 1 ; Chemung, f^,,
Co, V. Lowery, 93 Id. 72.

General Jurisprudence. — (a.)
Commercial law, — The federal courts re-
fuse to bo bound by decisions of the
state tribunals in cases involving ques-
tions of general jurisprudence, and es-
pecially in cases involving questions of
commercial law. Thus, in Williams v.
Suffolk Ins, Co,y 3 Sumn. 270, 277, con-
cerning the rule causa proxima non
retnota spectaiur,. Story, J., held that
"this doctrine being founded not upon
local law, but upon the gcneml principles
of commercial law, would be obligatory
upon this court, even if the decisions of
the state court of Massachusetts were to
the contrary ; for upon commercial ques-
tions of a general nature the courts of
the United States possess the same



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240



SONSTIBY ». KEELEr.



general authority which belongs to the
state tribunals, and arc not bound by
the local decisions. They are at liberty
to consnlt their own opinions, guided
indeed by the greatest deference for the
acknowledged learning and ability of
the state tribunals, but still exercising
their own judgment as to tlie reasons on
which those judgments are founded."
And see Foxcroft v. MaUete, 4 How.
353, 379.

In Swijl V. Tysoti^ 16 Pet. 1, it was
decided that, admitting that by the law
of New York a pre-existing debt was not
a valuable consideration for the transfer
of an accepted bill, this rule was not
obligatory upon the federal court, which
therefore held that a pre-existing debt
did constitute a valuable consideration
in the sense of the rule protecting bona
fidt holders for value • and without
notice.

The same principle was recognised in
Carpenter v. The Providence j ^., Ins,
Co,, 16 Pet. 495, 511, Mr. Justice
Stort holding that "we have not
thought it necessary upon this occasion
to go into an examination of the cases
cited from the New York and Massa-
chusetts reports, either upon this last
point or upon the former point. The
decisions in those cases are certainly
open to some of the grave ddubts and
difficulties suggested at the bar as to
their true bearing and results. The cir-
ctmistances, however, attending them are
distinguishable from those of tlie case
now before us, and they certainly can-
not be admitted to govern it. The
questions under our consideration are
questions of general commercial law,
and depend upon thQ construction of a
contract of insurance whidi is by no
means local in its character, or regulated
by any local policy or customs. What-
ever respect, therefore, the decisions of
state tribunals may have on such a sub-
ject, and they certainly are entitled to
great respect, they cannot conclude the
judgment of this court. On the con-



trary, we are bound to interpret .this
instrument according to our own opin-
ions of its true intents and objects, aided
by all the lights which can be obtained
from all external sources wLatsoevcTy
and if the result to which we have
arrived differs from that of these learned
state courts, we may regret it, bnt it
cannot be permitted to alter our judg-
ment.'*

In Boyce v. Tabb, 18 Wall. 546,
slaves were held snfficient consideration
for a note, notwithstanding the Supremo
Court of Louisiana had held otherwise.
And see Brown v. Van Braam, 3 Dall.
354 ; Robinson v. Ins, Co,, 8 Sumn.
220; Gloucester Ins, Co, v. Younger^
2 Curtis 322.

The opinion of Judge McCbabt in
the principal case admits the rule to be
that the federal will not necessarily
follow the state courts in deciding ques-
tions of commercial law, bnt excepts the
principal case from the operation of the
rule on the ground that to do otherwise
might subject- the plaintiff to a double
liability. This certainly appears equit*
able ; for were the plaintiff' sued by the
bank in the state court, a plea of former
recovery could not protect him, since the
bank was not a patty to the suit in the
federal court, and therefore could not be
concluded by its action. Had the bank
been a party and then sought to subject
the plaintiff to a second liability, it
would seem that a plea of former recov-
ery would avail the latter, or that he
might have procured an injunction from
the federal conrt restraining the bank
from proceeding at the state court. 8eo
French v. Hay, 22 Wall. 250 ; Fisk r.
U, P, Railroad Co., 10 Blacchf. 518.

Federal courts will not follow deci-
sions of state courts where so to do
would impair the obligation of con*
tracts: Gilpehe v. Dubugue, 1 Wall.
175. In this case, by a series of ded-
sions of the Supreme Court of Iowa
prior to that of lotca v. Wapello, 18
Iowa 388, the right of the legislature



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SONSTIBY r. KEELEY.



241



of tliat state to aathoriie municipal cor-
pcmdoDs to sabflcribe to railroads ex-
tending beyond the limits of the city or
coonty, and to issue bonds accordingly,
was settled in favor of the right ; and it
was held that those decisions meeting
with the approbation of this (the federal
supreme) court, and being in harmony
with the adjudications of sixteen states
of the Union, will be regarded as a true
interpretation of the Constitution and
laws of the state so far as relate to bonds
issued and put upon the market during
the time that those decisions were in
foree. **The fact," said the court,
<* that the Supreme Court of Iowa now
hold that those decisions were erroneous,
and oaght not to hare been made, and
that the legislature of the state had no
such power as former courts decided that
they had, can have no effect upon trans-
actions in the past, howerer it may affioct
those in the future.*' And to the same
effect, see Havemeytr y. Towa Cotmty, 3
WalL 294 ; Kenosha v. Lamion, 9 Id.
477'; Aleott t. Supermson, 16 Id. 678 ;
ifttekell V. Bmrlinfjton, 4 Id. 870;
Jjamed v. Burlmgtan^ Id. 275 ; Ddmoi
T. Ins. Co., 14 Id. 661. But see Sione
T. Wisconsin, 94 U. S. Itl.

And the U. S. Supreme Court affirms
its right to construe a state statute inde-
pendently of the state courts when
such statute in fact amounts to a con-
tract : Jefferson Branch Bank v. SkeUy,
I Blk. 436; Bridge IVoprietors v.
Hoboken Co., I Wall. 145,

And where a question inrolyed in the
construction of state statutes practically
affects the remedies of creditors which
are protected by the Constitution, this
court will exercise its own judgment
on the meaning of the statutes, irre-
spectirely of the decisions of the state
courts, and if it deems those decisions
wrong, will not follow them. A remedy
which the statutes of a state on what
this court considers a plainly right con-
struction of them, give for the enforce-
ment of contracts, cannot be taken away,
Vol. XXX.— 31



as respects previously existing contracts,
by judicial decisions of the state courts
construing the statutes wrongly : Butz r.
Afuscatine, 8 Wall. 575.

(6.) Other Cases. — And in cases of
general jurisprudence other than those
involving questions of commercial law,
the decisions of the state courts will not
necessarily be followed.

Thus, in Chicago v. Bobbins, 2 Black
418, the city of Chicago sought to re-
cover from Bobbins indemnity for dam-
ages recovered against it because of an
injury to one who had fallen into a hole
negligently left open and unguarded by
Bobbins. The Supreme Court of Illi-
nois had previously decided a case similar
to Chicago v. Bobbins, laying down a
rule as to negligence in omitting to cover
an opening in an area to which the
federal Supreme Court disagreed. It
was urged that the decision in the state
court must be followed, but the court,
by Mr. Justice Davis, held that '* where
private rights are to be determined by
the application of common-law rules
alone, this court, although entertaining
for state tribunals the highest respect,
does not feel bound by their decisions.*'

Thomas V. Hatch, 3 Sumn. 170, holds
that the federal courts are not bound in
the interpretation of deeds by the local
adjudications of a particular state.

And where a question arises under a
compact between two states, the rule of
decision is not to be collected from the
decisions of either state, but is one of a
national character : Marlatt v. Silk, 1 1
Pet. 1.

ZZ. Omm within the Bole.
Cases ikvoltino Statb Constitu-
tional Pkovisions. — Thus, in South
Ottawa V. Perkins, 94 U. S. 260, the Su-
preme Court of the United States fol-
lowed the Supreme Court of Illinois in
deciding that under the Constitution of
1 848 of that state, a statute thereof is not
valid unless the legislative journals show
its passage by a majority of all the mem-



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242



SONSTIBY r. KEELET.



bers-elect in each house of the General
Assembly.

In Nesmith v. Sheldon, 7 How. 812,
the same court followed the Soprcme
Court of Michigan in deciding that
under a constitutional proyision forbid-
ding the legislature from *' passing any
act of incorporation unless with the as-
sent of at least two-thirds of each
house/* the judgment of the legislature
is required to be exercised upon the pro-
priety of creating each particular cor-
poration, and two- thirds of each house
must sanction and approve each indi-
vidual charter. And see County of
LeavenxDorth v. Barnes, 94 U. S. 70.

In Luther v. Borden, 7 How. 1, two
governments having been in existence in
Rhode Island, viz. : the old charter
government and a new one formed by
a convention of the people, and the
courts of that state having recognised
the former as valid, it was held that the
federal court would adopt and follow the
state court's decision ; and see Webeter
V. Cooper, 14 How. 504.

Cases involtiwq State Statutes.
(a.) Miscellaneous Statutes, — It is to be
remarked that where a state adopts a stat-
ute from another coimtry, the decisions
of such other country construing such
statute are entitled to great considera-
tion, but cannot be considered as conclu-
sive upon the construction of the law ;
if the doctrines of the courts of the state
adopting the statute be irreconcilable
with those of the Courts of the former
country, the state court's decisions will
be followed and the others disregarded :
Bell V. Morrison, I Pet. 351. .

In Nichols V. Levy, 5 Wall. 433,
where a state court — interpreting a stat-
ute of its own state, which gave such
court jurisdiction to subject legal and
equitable interests in real estate to the
claims of creditors — decided that the
statute embraced trusts like the one in
question (which judgment-creditors were
seeking to set aside), and that it ex-
eiiif»ted the property embraced by the



trust from the claims of crediton, the
Federal Supreme Court followed that
construction of the statute and sustained
the trust, though it remarked that if the
question had been treated by it on gene-
ral principles of jurisprudence, and inde-
pendently of the state decisions on the
statute, the judgment would necessarily
have been the other way.

In Beauregard v. New Orleans, 18
How. 497, it was held by the Supreme
Court of the United States, that its
habit had been to defer to the decisions
of the judicial tribunals of the states
upon questions arising out of the com-
mon law of the state (compare this with
Chicago v. Bobbins, supra), especially
when applied to the title in land.

Therefore, where the Supreme Court
of Louisiana had decided questions re-
lating to the jurisdiction of the District
Court of the First Judicial District of
tlie state over the succession of a debtor
who was enjo3ring a respite from the
claims of his creditors for a certain time,
and died before the time expired ; to the
mode in which jurisdiction should be
exercised ; to the propriety of collater-
ally attacking a sale made by its author-
ity ; to the point whether or not the
death of the party transferred the pro-
ceedings to the Court of Probate ; and
the mode in which -the Court of Probate
should exercise its jurisdiction; the
Federal Supreme Court held that it
would adopt these decisions— especially
where many of them concurred with its
own judgments upon the same or similar
points.

A state decision that the statute re-
quires the payment of taxes in gold and
silver coin, will be followed : Leme Co.
V. Oregon, 7 Wall. 71 ; and see ^^t^
V. Hunter, 7 How. 738.

Rules of evidence prescribed by the
laws of a state, are to be followed, e, g.
a statute allowing a party to testify in



Online Libraryclergyman of the church of englandThe American law register, Volume 21 → online text (page 30 of 109)