298 U.S. 178 (1936), 709, McNutt v. General Motors Acceptance Corp.

Docket Nº:No. 709
Citation:298 U.S. 178, 56 S.Ct. 780, 80 L.Ed. 1135
Party Name:McNutt v. General Motors Acceptance Corp.
Case Date:May 18, 1936
Court:United States Supreme Court

Page 178

298 U.S. 178 (1936)

56 S.Ct. 780, 80 L.Ed. 1135



General Motors Acceptance Corp.

No. 709

United States Supreme Court

May 18, 1936

Argued April 1, 1936




1. In a suit in the District Court to enjoin, as unconstitutional, the enforcement of a state statute requiring the plaintiff to obtain a license for his business and otherwise subjecting the business to regulation, the value in controversy, in the absence of a showing that the plaintiff cannot obtain the license or is prevented by the statute from prosecuting the business, is not the value or net worth of the business, but the value of the right to be free from the regulation, and this may be measured by the loss, if any, that would follow the enforcement of the rules prescribed. P. 181.

2. Under § 5 of the Act of March 3, 1875, Jud.Code, § 37, 28 U.S.C. 80, a plaintiff in the District Court must plead the essential jurisdictional facts and must carry throughout the litigation the burden of showing that he is properly in court; if his allegations of jurisdictional facts are challenged by his adversary in any appropriate manner, he must support them by competent proof, and, even where they are not so challenged, the court may insist that the jurisdictional facts be established by a preponderance of evidence, or the case be dismissed. Pp. 182, 189.

3. In a suit for an injunction in the District Court, the allegation of the jurisdictional amount may be traversed by answer. P. 189.

4. In a case in the District Court, the allegation of jurisdictional amount had been traversed, yet no adequate finding on the issue of fact was made by the court, and no evidence to support the allegation was introduced. Held that the bill should be dismissed for want of jurisdiction. P. 190.


Appeal from a decree of the District Court of three judges which enjoined the enforcement of a statute regulating the business of purchasing contracts arising out of retail installment sales.

Page 179

HUGHES, J., lead opinion

MR. CHIEF JUSTICE HUGHES delivered the opinion of the Court.

Respondent, General Motors Acceptance Corporation of Indiana, brought this suit to restrain the enforcement of chapter 231 of the Acts of 1935 of the General Assembly of Indiana. That act provides for the regulation of the business of purchasing contracts arising out of retail installment sales, including provisions for licenses, for classifications of contracts, and for fixing maximum "finance charges." The validity of the act was [56 S.Ct. 781] challenged as depriving respondent of its property without due process of law and denying it the equal protection of the laws in violation of the Fourteenth Amendment of the Federal Constitution. An interlocutory injunction was sought, and, upon hearing by three judges (28 U.S.C. § 380), a final decree was entered, upon findings of facts and conclusions of law, granting a permanent injunction. No opinion was rendered. The case comes here by direct appeal.

The question arises whether the matter in controversy exceeds the sum or value of $3,000, exclusive of interest and costs, so as to give the District Court jurisdiction. Jud.Code, § 24(1), 28 U.S.C. § 41(1). The complaint alleged that the requisite amount was involved and this

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allegation was denied by the answer. On the argument in this Court, leave was given to file an additional brief upon the question of jurisdiction, and respondent has submitted its brief accordingly.

Respondent points to the allegations of its bill that the "net worth" of its business exceeds $50,000; that, in 1934, it purchased retail installment contracts in Indiana aggregating in excess of $7,000,000; that the value of such purchases for the first six months of 1935 was in excess of $4,000,000, and that, during 1934, respondent purchased in Indiana approximately 23,000 installment sales contracts from more than 500 retail dealers. These allegations were sustained by the findings of the District Court. The bill also alleged that respondent maintained offices in Indiana for which it paid yearly an aggregate rental of $13,147; that it employed on the average 85 employees whose aggregate annual salaries amounted to about $150,000. Respondent also refers to its allegations that the act limits the amount which respondent

may receive as its gross profit for the purchase of an installment contract to a sum not exceeding the maximum "finance charge" which may be fixed by the Department of Financial Institutions,

by prohibiting respondent "from purchasing any retail installment contracts at a less price than the unpaid balance thereon;" that the act limits the amount which may be given by respondent "to retail sellers out of the gross `finance charge' received from retail buyers under installment sale contracts" sold to respondent, by requiring the Department

to fix this maximum amount without regard to any differentiation as between contracts sold to licensees by retail sellers with recourse against such sellers and contracts sold by retail sellers without recourse against them;

and that, in other respects, the statute imposes burdensome requirements which impair the "efficiency of the operations and earnings" of respondent.

Page 181

Respondent invokes the principle that jurisdiction is to be tested by the value of the object or right to be protected against interference. Hunt v. New York Cotton Exchange, 205 U.S. 322; Bitterman v. Louisville & Nashville R. Co., 207 U.S. 205; Berryman v. Whitman College, 222 U.S. 334; Glenwood Light Co. v. Mutual Light Co., 239 U.S. 121; Healy v. Ratta, 292 U.S. 263. But, in the instant case, the statute does not attempt to prevent respondent from conducting its business. There is no showing that it cannot obtain a license and proceed with its operations. The value or net worth of the business which respondent transacts in Indiana is not involved save to the extent that it may be affected by the incidence of the statutory regulation. The object or right to be protected against unconstitutional interference is the right to be free of that regulation. The value of that right may be measured by the loss, if any, which would follow the enforcement of the rules prescribed. The particular allegations of respondent's bill as to the extent or value of its business throw no light upon that subject. They fail to set forth any facts showing what, if any, curtailment of business and consequent loss the enforcement of the statute would involve. The bill is thus destitute of any appropriate allegation as to jurisdictional amount save the general allegation that the matter in controversy exceeds $3,000. That allegation was put in issue, and the record discloses neither finding nor evidence to sustain it.

In the absence of any showing in the record to support that general allegation, the question is upon which party lay the [56 S.Ct. 782] burden of proof. Respondent contends that the burden of proving the lack of jurisdiction rests upon the party challenging the jurisdiction, and cites decisions of this Court to that effect. The question is thus sharply presented.

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The jurisdiction of the District Court in a civil suit of this nature is definitely limited by statute to one

where the matter in controversy exceeds, exclusive of interest and costs, the sum or value of $3,000, and (a) arises under the Constitution or laws of the United States, or treaties made, or which shall be made, under their authority, or (b) is between citizens of different States, or (c) is between citizens of a State and foreign States, citizens, or subjects.

Jud.Code, § 24(1), 28 U.S.C. § 41(1).

Further, the Act of March 3, 1875, c. 137, § 5 (18 Stat. 472), as now applied to the District Courts (Jud.Code, § 37, 28 U.S.C. § 80), explicitly charges those courts with the duty of enforcing these jurisdictional limitations. The provision in its present form is as follows:

If, in any suit commenced in a district court or removed from a State court to a district court of the United States, it shall appear to the satisfaction of the said district court at any time after such suit has been brought or removed thereto, that such suit does not really and substantially involve a dispute or controversy properly within the jurisdiction of said district court, or that the parties to said suit have been improperly or collusively made or joined, either as plaintiffs or defendants, for the purpose of creating a case cognizable or removable under this chapter, the said district court shall proceed no further therein, but shall dismiss the suit or remand it to the court from which it was removed, as justice may require, and shall make such order as to costs as shall be just.

It is incumbent upon the plaintiff properly to allege the jurisdictional facts, according to the nature of the case.

Where the law gives no rule, the demand of the plaintiff must furnish one; but where the law gives the rule, the legal cause of action, and not the plaintiff's demand, must be regarded.

Wilson v. Daniel, 3 Dall.

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401, 407-408; Barry v. Edmunds, 116 U.S. 550, 560; Vance v. Vandercook Co. (No. 2), 170 U.S. 468, 481; Lion Bonding Co. v. Karatz, 262 U.S. 77, 85-86. Where the pleadings properly alleged the jurisdictional facts -- as, for example, with respect to...

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