Keifer Keifer v. Reconstruction Finance Corporation

• Decision Date: 27 February 1939
• Docket Number: No. 364,364
• Parties: KEIFER & KEIFER v. RECONSTRUCTION FINANCE CORPORATION et al
• Court: U.S. Supreme Court

306 U.S. 381

59 S.Ct. 516

83 L.Ed. 784

KEIFER & KEIFER

v RECONSTRUCTION FINANCE CORPORATION et al.

No. 364.

Argued Jan. 31 to Feb. 1, 1939.

Decided Feb. 27, 1939.

Messrs. Ernest B. Perry and Robert Van Pelt, both of Lincoln, Neb., for petitioner.

[Argument of Counsel from page 382 intentionally omitted] Mr. Peyton R. Evans, of Washington, D.C., for respondents.

[Argument of Counsel from pages 383-387 intentionally omitted] Mr. Justice FRANKFURTER delivered the opinion of the Court.

The Court took this case for review because an important question of federal law called for settlement, particularly in view of a conflict between the court below and the Supreme Court of Minnesota. Casper v. Regional Agricultural Credit Corporation, 202 Minn. 433, 278 N.W. 896. The question is whether a Regional Agricultural Credit Corporation, in the circumstances presently to be stated, is immune from suit.

On July 21, 1932, Congress enlarged the powers of the Reconstruction Finance Corporation (hereafter called 'Reconstruction') established early that year, Act of January 22, 1932, c. 8, 47 Stat. 5, 15 U.S.C.A. § 601 et seq., by authorizing it, among other things, to create regional agricultural credit corporations 'in any of the twelve Federal land-bank districts.' Emergency Relief and Construction Act of 1932, § 201(e), c. 520, 47 Stat. 709, 713, 12 U.S.C.A. § 1148. Each corporation was to have a paid-up capital of not less than $3,000,000 to be subscribed for by Reconstruction, was to be managed by appointees of Reconstruction, and was empowered to make loans to farmers and stockmen for agricultural purposes or for raising and marketing livestock. Accordingly, on September 10, 1932, Reconstruction chartered the Regional Agricultural Credit Corporation of Sioux City, Iowa (hereafter called 'Regional'). Regional, in due exercise of its powers, entered into so-called cattle-feeding contracts, whereby it undertook to provide sufficient feed and water for livestock with appropriate security for rendering these services. Failure through negligence to provide proper care for cattle delivered under this arrangement, with resulting damage to the livestock, is the basis of this suit brought by petitioner, plaintiff below, against Reconstruction and Regional. Both de- fendants demurred on several grounds, of which challenge to the jurisdiction of the court is alone pertinent here. The District Court sustained the demurrers and dismissed the suit. 22 F.Supp. 918. The Circuit Court of Appeals affirmed, holding for Reconstruction because its control of Regional had been transferred by Executive Order (No. 6084, dated March 27, 1933, effective May 27, 1933, 12 U.S.C.A. c. 7 note) to the Farm Credit Administration prior to the alleged cause of action, and for Regional because it was found immune from suit. 8 Cir., 97 F.2d 812. Certiorari was granted, directed solely to the latter issue. 305 U.S. 588, 59 S.Ct. 106, 83 L.Ed. —-.

The starting point of inquiry is the immunity from unconsented suit of the government itself. As to the states, legal irresponsibility was written into the Eleventh Amendment, Const.U.S.C.A.; as to the United States, it is derived by implication. Principality of Monaco v. Mississippi, 292 U.S. 313, 321, 54 S.Ct. 745, 747, 78 L.Ed. 1282. For present purposes it is academic to consider whether this exceptional freedom from legal responsibility rests on the theory that the United States is deemed the institutional descendant of the Crown, enjoying its immunity but not its historic prerogatives, cf. Langford v. United States, 101 U.S. 341, 343, 25 L.Ed. 1010, or on a metaphysical doctrine 'that there can be no legal right as against the authority that makes the law on which the right depends.' Kawananakoa v. Polyblank, 205 U.S. 349, 353, 27 S.Ct. 526, 527, 51 L.Ed. 834. But because the doctrine gives the government a privileged position, it has been appropriately confined.¹

Therefore, the government does not become the conduit of its immunity in suits against its agents or instrumentalities merely because they do its work. United States v. Lee, 106 U.S. 196, 213, 221, 1 S.Ct. 240, 254, 261, 27 L.Ed. 171; Sloan Shipyards Corp v. U.S. Shipping Board Emergency Fleet Corp., 258 U.S. 549, 567, 42 S.Ct. 386, 388, 66 L.Ed. 762. For more than a hundred years corporations have been used as agencies for doing work of the government. Congress may create them 'as appropriate means of executing the powers of government, as, for instance, * * * a railroad corporation for the purpose of promoting commerce among the states.' Luxton v. North River Bridge Co., 153 U.S. 525, 529, 14 S.Ct. 891, 892, 38 L.Ed. 808. But this would not confer on such corporations legal immunity even if the conventional to-sue-and-be-sued clause were omitted. In the context of modern thought and practice regarding the use of corporate facilities, such a clause is not a ritualistic formula which alone can engender liability like unto indispensable words of early common law, such as 'warrantizo' or 'to A and his heirs', for which there were no substitutes and without which desired legal consequences could not be wrought. Littleton, Tenures (Wambaugh ed.) §§ 1, 733.

Congress may, of course, endow a governmental corporation with the government's immunity. But always the question is: has it done so? Federal Land Bank v. Priddy, 295 U.S. 229, 231, 55 S.Ct. 705, 706, 79 L.Ed. 1408. Cf. Helvering v. Gerhardt, 304 U.S. 405, 411, 412, notes, 58 S.Ct. 969, 971, 972, 82 L.Ed. 1427. This is our present problem. Has Congress endowed Regional with immunity in the circumstances which enveloped its creation? It is not a textual problem; for Congress has not expressed its will in words. Congress may not even have had any consciousness of intention. The Congressional will must be divined, and by a process of interpretation which, in effect, is the ascertainment of policy immanent not merely in the single statute from which flow the rights and responsibilities of Regional, but in a series of statutes utilizing corporations for governmental purposes and drawing significance from dominant contemporaneous opinion regarding the immunity of governmental agencies from suit.

Because of the advantages enjoyed by the corporate device compared with conventional executive agencies, the exigencies of war and the enlarged scope of government in economic affairs have greatly extended the use of independent corporate facilities for governmental ends.² In spawning these corporations during the past two decades, Congress has uniformly included amenability to law. Congress has provided for not less than forty of such corporations discharging governmental functions, and without exception the authority to-sue-and-be-sued was included.³ Such a firm practice is partly an indication of the present climate of opinion which has brought governmental immunity from suit into disfavor, partly it reveals a definite attitude on the part of Congress which should be given hospitable scope.⁴ It is noteworthy that the oldest surviving government corporation—the Smithsonian Institution—has several times been in the law courts, even in the absence of explicit authority and although the general feeling regard- ing governmental immunity was very different in 1846 from what it has become in our own day. 9 Stat. 102, 20 U.S.C.A. § 41 et seq. Smithsonian Institution v. Meech, 169 U.S. 398, 18 S.Ct. 396, 42 L.Ed. 793; Smithsonian Institution v. St. John, 214 U.S. 19, 29 S.Ct. 601, 53 L.Ed. 892.

Only two instances have been brought to the Court's attention in which Congress has not explicitly rendered its recent corporate creations amenable to suit. These are the Regionals and the Federal Savings and Loan Associations. 48 Stat. 128, 132-134, 12 U.S.C.A. § 1464. It is significant that neither of these classes of corporations was the direct emanation of Congress or the offspring of a general incorporation law under Congressional authority. Sloan Shipyards Corp. v. U.S. Shipping Board Emergency Fleet Corp., supra. Each was to come into being through an organ that had theretofore been created by Congress. We put the Federal Savings and Loan Associations to one side, because they are not now before the Court.⁵ But the circumstances attending the origination of Regional make it manifest that it was within the considerations that have uniformly led Congress to make its immediate corporate creatures subject to suit. The genesis, functions, and affiliations of Regional all negative the assumption that in its operations it was to be without the law.

Reconstruction is the parent of Regional. When creating it, Congress gave Reconstruction various general corporate powers including authority 'to sue and be sued, to complain and to defend, in any court of competent jurisdiction, State or Federal.' 47 Stat. 5, 6, 15 U.S.C.A. § 604. When later Congress authorized Reconstruction to create these Regional Agricultural Credit Corporations, it did so by outlining in a single section of a comprehensive statute the broad scope of this added power for Reconstruction. 47 Stat. 709, 713.⁶ Congress naturally assumed that the general corporate powers to which it had given particularity in the original statute establishing Reconstruction would flow automatically to the Regionals from the source of their being. Such, certainly, has been the practical construction of the Regional Agricultural Credit Corporations in the instinctive pursuit of their enterprise. See, e.g., Hallenbeck v. Regional Agricultural Credit Corporation, 47 Ariz. 477, 56 P.2d 1041; Regional Agricultural Credit Corporation v. Elston, Prince & McDade, La.App., 183 So. 91. Cf. Lewis v. Regional Agricultural Credit Corporation, 10 Cir., 92 F.2d 1008. To imply for Regionals a unique legal position compared with those corporations to whose purposes Regional is so closely allied,⁷ is to inter Congressional idiosyncrasy. There is a much more sensible explanation for the...