Holmes v. Goldsmith

CourtUnited States Supreme Court
Citation13 S.Ct. 288,37 L.Ed. 118,147 U.S. 150
Docket NumberNo. 93,93
PartiesHOLMES et al. v. GOLDSMITH et al
Decision Date09 January 1893

This was an action brought by L. Goldsmith and Max Goldsmith, doing business as partners under the name of L. Goldsmith & Co., citizens of the state of New York, against M. B. Holmes, John Dillard, and R. Phipps, citizens of the state of Oregon, as makers of a promissory note, in the words and figures following:

'$10,000. Portland, Oregon, Aug. 9, 1886. Six months after date, without grace, we, or eithr of us, promise to pay to the order of W. F. Owens ten thousand dollars, for value received, with interest from date at the rate of ten per cent. per annum until paid, principal and interest payable in U. S. gold coin, at the First National Bank of Portland, Oregon; and in case suit is instituted to collect this note, or any portion thereof, we promise to pay such additional sum as the court may adjudge reasonable as attorneys' fees in said suit. M. B. Holmes. John Dillard. R. Phipps.'

On the day of its date, W. F. Owens indorsed the note, waived, in writing, demand, notice, and protest, delivered the note, so indorsed, to the agent of the plaintiffs, and received the sum of $10,000.

The complaint alleged that the transaction was a loan by plaintiffs to W. F. Owens; that the defendants executed the note for the accommodation of Owens, to enable him to procure the loan thereon; and that Owens was in fact a maker of said note to the plaintiffs, and never himself had any cause of action thereon against the defendants.

To this complaint the defendants demurred on the ground that it did not bring the case within the jurisdiction of the circuit court, and did not state facts sufficient to constitute a cause of action.

Upon argument this demurrer was overruled. 36 Fed. Rep. 484.

The defendants answered, denying the execution of the note and knowledge of the other facts alleged in the complaint. At the trial a verdict was given in favor of the plaintiffs for the amount of the note, with interest from date; and on June 19, 1889, judgment was entered on the verdict, in favor of the plaintiffs and against the defendants, for the amount of the note, with interest, and with costs and disbursements.

A writ of error was duly sued out and allowed, and the case brought into this court for review.

J. H. Mitchell, for plaintiffs in error.

[Argument of Counsel from pages 152-156 intentionally omitted] L. B. Cox, for defendants in error.

Mr. Justice SHIRAS delivered the opinion of the court.

The complaint alleges the ownership in the plaintiffs of a chose in action; as to the character, a promissory note; as to amount, ten thousand dollars; as to parties, the plaintiffs, citizens of the state of New York, and the defendants, citizens of the state of Oregon; thus bringing the case within the jurisdiction of a circuit court of the United States, as defined in the constitution.

By the demurrer to the complaint the defendants invoked the provision of the act of August 13, 1888, (25 St. p. 434,) which is as follows:

'Nor shall any circuit or district court have cognizance of any suit, except upon foreign bills of exchange, to recover the contents of any promissory note or other chose in action in favor of any assignee or of any subsequent holder, if such instrument be payable to bearer, * * * unless such suit might have been prosecuted in such court to recover the said contents if no assignment or transfer had been made.'

Upon the face of the complaint, the jurisdiction of the circuit court was duly made to appear, so far as the requisitions of the constitution apply. But it has been held, in a series of cases beginning with Turner v. Bank, 4 Dall. 8, that it is competent for congress, in creating a circuit court and prescribing the extent of its jurisdiction, to withhold jurisdiction in the case of a particular controversy.

In pursuance of this view it has been frequently held by this court that, in an action in a circuit court of the United States by an assignee of a chose in action, the record must affirmatively show, by apt allegations, that the assignor could have maintained the action. Thus, Mr. Justice Strong, in delivering the opinion of the court in the case of Morgan's Ex'r v. Gay, 19 Wall. 81, 83, said:

'In Turner v. Bank, 4 Dall. 8, it was distinctly ruled that, when an action upon a promissory note is brought in a federal court by an indorser against the maker, the citizenship of not only the parties to the suit, but also of the payee and indorser, must be averred in the record to be such as to give the court jurisdiction.'

In Sheldon v. Sill, 8 How. 441, 448, it was contended, in favor of the jurisdiction of the circuit court, that the provision in the judiciary act of 1789, inhibiting a suit by an assignee of a chose in action, in cases where the assignor could not have sued, if no assignment had been made, was invalid, because it attempted to deprive the courts of the United States of the judicial power with which the constitution had invested them; but this court, speaking through Mr. Justice Grier, said:

'The eleventh section of the judiciary act, which defines the jurisdiction of the circuit courts, restrains them from taking 'cognizance of any suit to recover the contents of any promissory note, or other chose in action, in favor of an assignee, unless a suit might have been prosecuted in such court to recover the contents if no assignment had been made, except in cases of foreign bills of exchange.'

'The third article of the constitution declares that 'the judicial power of the United States shall be vested in one supreme court and such inferior courts as the congress may from time to time ordain and establish.' The second section of the same article enumerates the cases and controversies of which the judicial power shall have cognizance, and, among others, it specifies 'controversies between citizens of different states.'

'It has been alleged that this restriction of the judiciary act, with regard to assignees of choses in action, is in conflict with this provision of the constitution, and therefore void.

'It must be admitted that if the constitution had ordained and established the inferior courts, and distributed to them their respective powers, they could not be restricted or divested by congress. But, as it has made no such distribution, one of two consequences must result,—either that each inferior court created by congress must exercise all the judicial powers not given to the supreme court, or that congress, having the power to establish the courts, must define their respective jurisdictions. The first of these inferences has never been asserted, and could not be defended with any show of reason, and, if not, the latter would seem to follow as a necessary consequence; and it would seem to follow, also, that, having a right to prescribe, congress may withhold, from any court of its creation, jurisdiction of any of the enumerated controversies. Courts created by statute can have no jurisdiction but such as the statute confers. No one of them can asser a just claim to jurisdiction exclusively conferred on another, or withheld from all. The constitution has defined the limits of the judicial power of the United States, but has not prescribed how much of it shall be exercised by the circuit court. Consequently, the statute which does prescribe the limits of their jurisdiction cannot be in conflict with the constitution, unless it confers powers not enumerated therein.'

This doctrine has remained unchallenged, and has been assumed for law in numerous cases, which it is unnecessary to cite; and a similar provision has been inserted in the various acts defining the jurisdiction of the circuit courts, including, as we have seen, the act of August 13, 1888, under which the present action was brought.

Nor are we asked by the defendant in error to disregard those cases, but he contends that, consistently with their doctrine and the provision of the judiciary act, he can maintain his action by alleging and proving that the nominal indorser was not really such, but that the note was made by the makers for his accommodation and as his sureties; that he was, in legal effect, a maker of the note; that he received the proceeds of the loan effected through the note, and had no right of action against the nominal makers of the note; and hence that he cannot be regarded as an assignor of a right of action against the makers, within the true meaning of the judiciary act.

The learned judge who tried the case below adopted the view that where it is necessary, to maintain the jurisdiction of the circuit court in an action on a promissory note, to show that the plaintiff, who appears to be an indorsee or assignee, is in point of fact the payee of the note, it may be done, and therefore overruled the demurrer.

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