Sowell v. Federal Reserve Bank of Dallas, Tex.

• Decision Date: 06 December 1923
• Docket Number: 4169.
• Citation: 294 F. 798
• Parties: SOWELL v. FEDERAL RESERVE BANK OF DALLAS, TEX. [1]
• Court: U.S. Court of Appeals — Fifth Circuit

294 F. 798

SOWELL v. FEDERAL RESERVE BANK OF DALLAS, TEX. ^[1]

No. 4169.

United States Court of Appeals, Fifth Circuit.

December 6, 1923

J. D Williamson, of Waco, Tex., for plaintiff in error.

E. B Stroud, Jr., Tom Scurry, and Joseph Manson McCormick, all of Dallas, Tex. (Etheridge, McCormick & Bromberg, and Charles C Huff, all of Dallas, Tex., on the brief), for defendant in error.

Before WALKER and BRYAN, Circuit Judges, and GRUBB, District Judge.

GRUBB District Judge.

This is a writ of error from a judgment for the defendant in error (plaintiff in the District Court) against the plaintiff in error (defendant in that court) for the amount of a promissory note and interest, executed by the defendant, made payable to the National Bank of Cleburne, and by it indorsed to the plaintiff, and pledged as collateral security for an indebtedness in excess of the amount of the note. The National Bank of Cleburne became insolvent, and failed to pay its indebtedness to the plaintiff, which proceeded to collect the note.

Three objections to the recovery were offered in the District Court, and are here insisted upon:

(1) The defendant questioned the jurisdiction of the District Court upon the ground that the plaintiff was an assignee of the note sued on, and his assignee could not have sued the maker upon it in a federal court.

(2) Because the plaintiff, as holder of the note, negligently failed to present it at the place of payment named in it, and negligently failed to notify the maker of its dishonor.

(3) Because the District Court refused to stay the suit until it could be determined whether the other collateral, which the plaintiff held to secure the indebtedness of the National Bank of Cleburne, was sufficient to pay the indebtedness.

1. Jurisdiction of the District Court was conceded, unless prevented by reason of the operation of the 'assignee clause' of section 24 of the Judicial Code (Comp. St Sec. 991). It was also conceded that the case was one arising under a law of the United States (American Bank & Trust Co. v. Federal Reserve Bank of Atlanta, 256 U.S. 350, 41 Sup.Ct. 499, 65 L.Ed. 983), and that the federal courts would have been without jurisdiction in a suit between the original parties to the note. Jurisdiction depended upon whether the assignee clause applied to a case in which the ground of federal jurisdiction was that the case was one arising under a law of the United States. The plaintiff contends, and the District Court held, that the assignee clause only applied to cases in which federal jurisdiction was acquired by the character of the parties, and not to cases in which it depended upon the character of the subject-matter. The assignee clause appeared in the Judiciary Act of 1789 (1 Stat. 73), and has remained in substantially like form in all subsequent acts. In the act of 1789, federal jurisdiction was conferred only as a result of the character of the parties. The United States, aliens, and citizens of different states alone could sue in the federal courts by its terms. Jurisdiction was not given in cases arising under a law of the United States, except for a brief period, under the Act of February 13, 1801, until the passage of the Act of March 3, 1875. Until that date the assignee clause could not, therefore, have applied to suits arising under the laws of the United States. The courts further limited its application to cases in which aliens and citizens of different states were parties, by eliminating from its scope suits in which the United States were a party. U.S. v. Greene, 26 Fed.Cas. 33, No. 15,258.

Before the Act of March 3, 1875, jurisdiction was denied federal corporations, unless their charters expressly authorized them to sue in the federal courts. When such power was expressly conferred, the courts held the assignee clause inapplicable; the suit being one arising under the laws of the United States. Commercial National Bank v. Simmons, 6 Fed.Cas. 226, No. 3,062; Bank of U.S. v. Planters' Bank of Georgia, 9 Wheat. 904, 6 L.Ed. 244. When general jurisdiction was given the federal courts by the Act of March 3, 1875, over suits arising under laws of the United States, the necessity for express charter authorization to sue in the federal courts was removed, and the assignee clause became inapplicable to the general ground of jurisdiction, as it had been held to be in cases in which jurisdiction was conferred by special charter. In the Act of 1887, as corrected by the Act of 1888, the position of the assignee clause shows the intention of Congress to have been to limit its application to cases in which jurisdiction was acquired because of the character of the parties. It came immediately after them, and before the grant of jurisdiction because the case arose under a law of the United States. The change of the position of this clause in the Judicial Code is not significant of a change in meaning, in view of section 295 of the Judicial Code (Comp. St. Sec. 1272).

The case of Wyman v. Wallace, 201 U.S. 230, 26 Sup.Ct 495, 50 L.Ed. 738, is at least persuasive. In that case the assignee clause would have prevented jurisdiction from attaching because of diverse citizenship. It was sustained by the Supreme Court upon the idea that the case was one arising under a law of the United States; the Act of June 30, 1876, conferring jurisdiction...