Swift v. Tyson
Encyclopedia
Swift v. Tyson, , was a case brought in diversity in the Circuit Court for the Southern District of New York on a bill of Exchange accepted in New York
in which the Supreme Court of the United States
determined that United States federal courts
hearing cases brought under their diversity jurisdiction
pursuant to the Judiciary Act of 1789 must apply the statutory law of the states
when the state legislature of the state in question had spoken on the issue but did not have to apply the state's common law
in those cases in which that state's legislature had not spoken on the issue. The Court's ruling meant that the federal courts, when deciding matters not specifically addressed by the state legislature, had the authority to develop a federal common law
.
, §34: "the laws of the several states, except where the constitution, treaties or statutes of the United States
shall otherwise recognise or provide, shall be regarded as rules of decision in trials at common law, in the courts of the United States, in cases where they apply."
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
in which the Supreme Court of the United States
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
determined that United States federal courts
United States federal courts
The United States federal courts make up the judiciary branch of federal government of the United States organized under the United States Constitution and laws of the federal government.-Categories:...
hearing cases brought under their diversity jurisdiction
Diversity jurisdiction
In the law of the United States, diversity jurisdiction is a form of subject-matter jurisdiction in civil procedure in which a United States district court has the power to hear a civil case where the persons that are parties are "diverse" in citizenship, which generally indicates that they are...
pursuant to the Judiciary Act of 1789 must apply the statutory law of the states
State law
In the United States, state law is the law of each separate U.S. state, as passed by the state legislature and adjudicated by state courts. It exists in parallel, and sometimes in conflict with, United States federal law. These disputes are often resolved by the federal courts.-See also:*List of U.S...
when the state legislature of the state in question had spoken on the issue but did not have to apply the state's common law
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
in those cases in which that state's legislature had not spoken on the issue. The Court's ruling meant that the federal courts, when deciding matters not specifically addressed by the state legislature, had the authority to develop a federal common law
Federal common law
Federal common law is a term of United States law used to describe common law that is developed by the federal courts, instead of by the courts of the various states...
.
Statute
Judiciary Act of 1789Judiciary Act of 1789
The United States Judiciary Act of 1789 was a landmark statute adopted on September 24, 1789 in the first session of the First United States Congress establishing the U.S. federal judiciary...
, §34: "the laws of the several states, except where the constitution, treaties or statutes of the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
shall otherwise recognise or provide, shall be regarded as rules of decision in trials at common law, in the courts of the United States, in cases where they apply."
Holdings
The Court:- Held that a bona fide holder of a negotiable instrumentNegotiable instrumentA negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time. According to the Section 13 of the Negotiable Instruments Act, 1881 in India, a negotiable instrument means a promissory note, bill of exchange or cheque payable either...
for valuable considerationConsiderationConsideration is the central concept in the common law of contracts and is required, in most cases, for a contract to be enforceable. Consideration is the price one pays for another's promise. It can take a number of forms: money, property, a promise, the doing of an act, or even refraining from...
, without any notice of the facts which implicate its validity as between the antecedent parties, if he takes it under an endorsementEndorsementEndorsement may refer to:*Testimonial in advertising, written or spoken statement endorsing a product*Political endorsement*a form added to an insurance policy, modifying the terms...
made before the same becomes due, holds the titleTitleA title is a prefix or suffix added to someone's name to signify either veneration, an official position or a professional or academic qualification. In some languages, titles may even be inserted between a first and last name...
unaffected by those facts, and may recover thereon although, as between the antecedent parties, the transactionFinancial transactionA financial transaction is an event or condition under the contract between a buyer and a seller to exchange an asset for payment. It involves a change in the status of the finances of two or more businesses or individuals.-History:...
may be without any legal validity. - Held that §34 of the Judiciary Act of 1789Judiciary Act of 1789The United States Judiciary Act of 1789 was a landmark statute adopted on September 24, 1789 in the first session of the First United States Congress establishing the U.S. federal judiciary...
does not restrict federal courts hearing diversity of citizenship cases from deriving their "own" common law. - Sustained the determination of the lower federal court that, under federal common law (with reference to general principles of commercial jurisprudence), a pre-existing debt constitutes a valuable consideration for a negotiable instrument.
Reasoning
- Common law is not strictly local; court decisions aspire towards true interpretations, which are to be sought, not in the decisions themselves, but in general principles and doctrines. Court decisions do not constitute laws, or conclusive authority as to what the law is, but only evidence of what the law is.
- What is strictly local law: the state's positive statutes; constructions thereof adopted by state courts; and rights and titles to things having a permanent locality, e.g. to real estate and other matters immovable and intra-territorial in their nature and character.
- What is not local but "common" law: the rights and titles created in contracts or other instruments of a commercial nature, which are to be sought in general principles of commercial jurisprudence.
- In Judiciary Act 1789 § 34, "the laws of the several states" was intended to refer to state laws strictly local—and thus, by the above reasoning, not to a state's "common" law.
- Thus, the Judiciary Act 1789 § 34 does not bind Federal courts to state commercial jurisprudence. The Federal jurisdiction is free to derive its "own" common law.
- The Court sustained the determination of the lower federal court that, under federal common law,
- A pre-existing debt constitutes a valuable consideration for a negotiable instrument.
External links
- [ Supreme Court of the United States]
- United States District Court for the Southern District of New York