Bankers Trust Company v. Texas Pacific Railway Company

• Decision Date: 22 May 1916
• Docket Number: No. 889,889
• Parties: BANKERS TRUST COMPANY, as Trustee, Appt., v. TEXAS & PACIFIC RAILWAY COMPANY and New Orleans Pacific Railway Company
• Court: U.S. Supreme Court

241 U.S. 295

36 S.Ct. 569

60 L.Ed. 1010

BANKERS TRUST COMPANY, as Trustee, Appt.,

v TEXAS & PACIFIC RAILWAY COMPANY and New Orleans Pacific Railway Company.

No. 889.

Argued April 12 and 13, 1916.

Decided May 22, 1916.

[Syllabus from pages 295-297 intentionally omitted] Messrs. Maurice E. Locke and William W. Green for appellant.

[Argument of Counsel from pages 298-300 intentionally omitted] Messrs. George Thompson, Henry C. Coke, Thomas J. Freeman, Arthur J. Shores, Alexander S. Coke, Winslow S. Pierce, and Lawrence Greer for appellees.

Mr. Justice Van Devanter delivered the opinion of the court:

This is a suit to foreclose a railroad mortgage and for other incidental relief. It was brought in the district court for the northern district of Texas December 27, 1915, was dismissed by that court for want of jurisdiction, and is here upon a direct appeal under § 238 of the Judical Code [36 Stat. at L. 1157, chap. 231, Comp. Stat. 1913, § 1215].

The bill alleges that the plaintiff, the trustee under the mortgage, is a New York corporation and 'a citizen of said state;' that the Texas & Pacific Railway Company, one of the defendants, is a corporation created and existing under the laws of the United States, has its principal place of business and its principal operating and general offices in the northern district of Texas, and 'is a resident and inhabitant' of that district; that the New Orleans Pacific Railway Company, the other de- fendant, is a Louisiana corporation and 'a citizen of said state;' that one of the acts of Congress under which the Texas & Pacific Railway Company was created and now exists (act March 3, 1871, chap. 122, § 1, 16 Stat. at L. 573) provides that such company 'by that name . . . shall be able to sue and be sued, plead and be impleaded, defend and be defended, in all courts of law and equity within the United States;' that under that act and designated amendatory and supplemental acts of Congress (May 2, 1872, chap. 132, 17 Stat. at L. 59; March 3, 1873, chap. 257, 17 Stat. at L. 598; June 22, 1874, chap. 406, 18 Stat. at L. 197) said company came to own and hold on February 1, 1888, certain railroad properties and interests in Texas and Louisiana; that on that date said company, 'acting in pursuance of due authority conferred upon it by said acts of Congress,' the relevant portions of which are copied into the bill, and the New Orleans Pacific Railway Company, acting in pursuance of authority conferred upon it by the laws of Louisiana, executed and delivered the mortgage in suit covering these railroad properties and interests, a substantial part of which is situate in the northern district of Texas; that the mortgage was duly filed and recorded in the Department of the Interior pursuant to such acts of Congress; that the mortgagors have defaulted in the performance of the terms and conditions of the mortgage, and that the suit involves the requisite jurisdictional amount and 'arises under the Constitution and laws of the United States.'

By a motion to dismiss, the Texas & Pacific Railway Company challenged the jurisdiction of the district court upon the grounds that the act of January 28, 1915, chap. 22, § 5, 38 Stat. at L. 803, provides: 'No court of the United States shall have jurisdiction of any action or suit by or against any railroad company upon the ground that said railroad company was incorporated under an act of Congress;' and that, apart from the Texas & Pacific Rail- way Company's incorporation under congressional enactments, the suit is not one arising under the Constitution or any law of the United States, and is not one between citizens of different states. The motion was sustained and the bill was dismissed as to both defendants.

The plaintiff insists that, in refusing to entertain the suit, the district court erred because (1) the provision before quoted from § 1 of the act of March 3, 1871, enables the Texas & Pacific Railway Company to sue and be sued in any court of law or equity within the United States; (2) the bill shows that the suit is one arising under the laws of the United States apart from the incorporation of the Texas & Pacific Railway Company under acts of Congress, and therefore the act of January 28, 1915, is not controlling, and (3) the bill shows that the suit is between citizens of different states.

1. Upon reading § 1 of the act of 1871 it is plain that the words 'by that name . . . shall be able to sue and be sued, plead and be impleaded, defend and be defended, in all courts of law and equity within the United States' were not intended in themselves to confer jurisdiction upon any court. As the context shows, Congress was not then concerned with the jurisdiction of courts, but with the faculties and powers of the corporation which it was creating; and evidently all that was intended was to render this corporation capable of suing and being sued by its corporate name in any court of law or equity—Federal, state, or territorial—whose jurisdiction as otherwise competently defined was adequate to the occasion. Had there been a purpose to take suits by and against the corporation out of the usual jurisdictional restrictions relating to the nature of the suit, the amount in controversy, and the venue, it seems reasonable to believe that Congress would have expressed that purpose in altogether different words. The case of Bank of United States v. Deveaux, 5 Cranch, 61, 85, 3 L. ed. 38, 44, is well in point. A provision in the act incorporating the bank (chap. 10, § 3, 1 Stat. at L. 191), much like that here relied upon, was invoked as in itself entitling the bank to sue in a circuit court of the United States, but that view was rejected in an opinion by Chief Justice Marshall, wherein it was said:

'That act creates the corporation, gives it a capacity to make contracts and to acquire property, and enables it 'to sue and be sued, plead and be impleaded, answer and be answered, defend and be defended, in courts of record, or any other place whatsoever.' This power, if not incident to a corporation, is conferred by every incorporating act, and is not understood to enlarge the jurisdiction of any particular court, but to give a capacity to the corporation to appear, as a corporation, in any court which would, by law, have cognizance of the cause, if brought by individuals. If jurisdiction is given by this clause to the Federal courts, it is equally given to all courts having original jurisdiction, and for all sums, however small they may be.'

Afterwards, when the second bank of the United States was established, a provision was inserted in the incorporating act (chap. 44, § 7, 3 Stat. at L. 266), enabling the bank to sue and be sued 'in all state courts having competent jurisdiction, and in any circuit court of the United States;' and in Osborn v. Bank of United States, 9 Wheat. 738, 6 L. ed. 204, it was held (pp. 816-818) that this provision, unlike that in the prior act, amounted to an express grant of jurisdiction to the circuit courts, and (pp. 823 et seq.) was within the power of Congress under the Constitution. It was in the light of these differing precedents in legislation and of the resulting difference in their interpretation that Congress framed the act of 1871. While that act does not literally follow either precedent, its words have the same generality and natural import as did those in the earlier bank act, and this strengthens the conclusion that Congress intended thereby to give to the Texas &amp Pacific Railway Company only a general capacity to sue and be sued in courts of law and equity whose jurisdiction as otherwise defined was appropriate to the occasion, and not to establish an exceptional or privileged jurisdiction.

2. Under the Constitution Congress undoubtedly possesses power to invest the subordinate Federal courts with original jurisdiction of all suits at law or in equity arising under the Constitution, laws, or treaties of the United States, and, if the act of February 13, 1801, chap. 4, § 11, 2 Stat. at L. 89, be not noticed because of its early repeal (chap. 8, § 1, 2 Stat. at L. 132), it is true, as sometimes has been said,¹ that this power was broadly exercised for the first time by the act of March 3, 1875, chap. 137, § 1, 18 Stat. at L. 470. By that act Congress in express terms gave the circuit courts original jurisdiction, concurrent with the courts of the several states, of all suits of that nature, where the value of the matter in dispute, exclusive of costs, was in excess of $500, and this jurisdiction remained with the circuit courts until January 1, 1912, when they were abolished, save as the act of March 3, 1887, chap. 373, § 1, 24 Stat. at L. 552, required that the value of the matter in dispute, exclusive of interest and costs, be in excess of $2,000. Upon the discontinuance of the circuit courts this jurisdiction was transferred to the district courts by § 24 of the Judicial Code [36 Stat. at L. 1091, chap. 231, Comp. Stat. 1913, § 991], subject to a restriction that thereafter the value of the matter in controversy should exceed $3,000, exclusive of interest and costs.

As long ago as Osborn v. Bank of United States, supra, it was settled that a suit by or against a corporation chartered by an act of Congress is one arising under a law of the United States, and this because, as was said in that case, pp. 823, 825: 'The charter of incorporation not only creates it [the corporation], but gives it every faculty which it possesses. The power to acquire rights of any description, to transact business of any description, to make contracts of any description, to sue on those contracts, is given and measured by its charter, and that charter is a law of the...