When a character's DEF file has the line "stcommon = common1.cns", and there's no file with that name in his respective directory, then Mugen assumes it's the file in Mugen's "data" folder, right?...

And when a character's DEF file has a file with some other name mentioned in the "stcommon" field, then it checks the character's directory for it, right?...

If that's the case, then if there's a file called "common1.cns" both in the character's folder and the "data" folder, which of them gets read?...

I hope I was clear enough in stating my doubt - I'm trying to make sure of how Mugen handles a character's "common" states file for a little project I'm working on with a friend...

The one in the character's folder is the one used, as it has priority.

What I found the other day, is that it first checks the common1.cns (if it exists) in the character's folder, but if it discovers that the file is not valid, it then silently reverts to the one in your data directory. I found that when I tried putting the 2002.04.14 version of common1.cns in KFM's folder while using Mugen 2001.04.14, and it ignored the file due to the unrecognized new triggers.

I remember changing some of the jump properties for a character inside the common1.cns in the character's folder and the changes didn't show. I had to change part of state 45 for a wall jump to work. I placed the code inside another cns that the character used and the move worked. Might just be my poor memory. Go figure.

I had the same problem that Messatu had when I was codding Mr. Karate Ai jump code.
Then I renamed thir common1.cns file that was at their directory to Common.cns and it worked like heaven.
So, up to now, it is known that naming the file that will hold common code as common1.cns and putting it at the character directory might not work well in some situations.
Further studing and testing will be required before making an statement.