John Brown v. Austin Fletcher No 454 Provident Life Trust Company v. Austin Fletcher No 455

• Citation: 59 L.Ed. 374,235 U.S. 589,35 S.Ct. 154
• Decision Date: 05 January 1915
• Docket Number: Nos. 454 and 455,s. 454 and 455
• Parties: JOHN A. S. BROWN and Frank E. Schermerhorn, as Trustees for Clara Schermerhorn under the Last Will and Testament of Thomas Cunningham, Deceased, Appts., v. AUSTIN B. FLETCHER, as Testamentary Trustee of Conrad Morris Braker, under the Last Will and Testament of Conrad Braker, Jr., Deceased, and Conrad Morris Braker. NO 454. PROVIDENT LIFE & TRUST COMPANY and Catharine Stewart Wood, as Executors under the Last Will and Testament of William Brewster Wood, Deceased, Appts., v. AUSTIN B. FLETCHER, as Testamentary Trustee of Conrad Morris Braker under the Last Will and Testament of Conrad Braker, Jr., Deceased, and Conrad Morris Braker. NO 455
• Court: United States Supreme Court

235 U.S. 589

35 S.Ct. 154

59 L.Ed. 374

JOHN A. S. BROWN and Frank E. Schermerhorn, as Trustees for Clara Schermerhorn under the Last Will and Testament of Thomas Cunningham, Deceased, Appts.,

v AUSTIN B. FLETCHER, as Testamentary Trustee of Conrad

Morris Braker, under the Last Will and Testament of

Conrad Braker, Jr., Deceased, and Conrad Morris Braker.

NO 454.

PROVIDENT LIFE & TRUST COMPANY and Catharine Stewart

Wood, as Executors under the Last Will and Testament of

William Brewster Wood, Deceased, Appts.,

v. AUSTIN B. FLETCHER, as Testamentary Trustee of Conrad

Morris Braker under the Last Will and Testament of

Conrad Braker, Jr., Deceased, and Conrad Morris Braker.

NO 455.

Nos. 454 and 455.

Argued December 1, 1914.

Decided January 5, 1915.

Conrad Braker, Jr., of New York, died testate July 21, 1890. The 15th item of his will provided that the sum of $50,000 should be held in trust and securely invested for the use of his son, Conrad Morris Braker, who was to receive the income until he attained the age of fifty-five, when the 'principal should be paid to him and belong to him absolutely.' If he failed to reach that age the property was to be held for the benefit of his wife for life with remainder to Henry Braker.

The 16th item directed that 'one half of all the rest, residue and remainder, both real and personal,' of his estate should be held in trust for the use and benefit of Conrad Morris Braker, who was to receive the interest derived from said trust, until he attained the age of fifty-five, when 'the whole amount, less $25,000, shall be paid and belong to him absolutely.' If he failed to reach that age, then the property was to pass to another son.

The amount realized from the residuum, described in the 16th item, aggregated $120,000, and with the $50,000 described in the 15th item of the will, was invested in property (not described) which is now held by Austin B. Fletcher, the duly appointed testamentary trustee.

On April 18, 1901, Conrad Morris Braker assigned to Frank L. Rabe 'seven tenths of all the estate, right, title and interest which he had in and to the principal sum of $50,000 described in the 15th item of the will.' Thereafter Rabe transferred and assigned this interest to the New York Finance Company.

On February 25, 1902, Conrad Morris Braker executed an instrument in which, subject to the assignment of $35,000 above referred to, he 'granted, bargained, sold, assigned, transferred and set over to the New York Finance Company all of his estate, right, title and interest of any kind, form or description whatsoever to the amount or extent of $35,000 in and to the legacy of $50,000, and also in and to a legacy of the part or share of the residuary estate to which he was entitled under and by virtue of the 15th and 16th paragraphs of the will of Conrad Braker, Jr., deceased.'

By virtue of these two transfers the New York Finance Company claimed to be the owner of such interest in the fund or estates created under the 15th and 16th items of the will.

The Finance Company thereafter made a note for $15,000, payable to William Brewster Wood, and secured the same by a transfer of its interests under the 16th item. It also made another note for $10,000 to Brown and Schermerhorn, trustees for Clara Schermerhorn, and secured the same by a transfer of its interest under the 15th item.

These notes were not paid when they fell due, and the New York Finance Company's equity of redemption was acquired by the respective holders of the two notes. In February, 1913, when Conrad Morris Braker attained the age of fifty-five, the respective holders of the notes and assignments demanded that the trustee should pay over to them that to which they were entitled by virtue of the instruments aforesaid. The trustee refused to comply, and thereupon the executors of Wood and the trustees of Clara Schermerhorn (all of whom were citizens and residents of Pennsylvania) brought suit in the United States district court for the southern district of New York against Fletcher, trustee, and Conrad Morris Braker, beneficiary, both being citizens and residents of New York.

The two bills were each prepared by the same counsel, and were identical, except that the trustees of Schermerhorn sued for what had been assigned them under the 15th item. The executors of Wood sued for the interest assigned them in the money or property mentioned in the 15th and 16th items of the will. In both suits it was alleged that the complainants had acquired title by virtue of the sale, transfer, and assignment executed by Conrad Morris Braker, and subsequent mesne conveyance. It was alleged that complainants had been informed that he claimed the transfers signed by him to be void because made to secure usurious debts. Both bills prayed that Braker should be enjoined from litigating the question of title in any other court; that the complainants' right under the assignments should be established by final decree, and that Fletcher, the testamentary trustee, should be ordered to pay over to the complainants what was due them by virtue of the respective assignments from Braker.

The court dismissed both bills, and in each ease gave a certificate that the order was based 'solely on the ground that no jurisdiction of the district court existed.'

From that order the complainants appealed to this court.

Messrs. Charles H. Burr, Frederick W. Frost, Perry D. Trafford, and H. Gordon McCouch for appellants.

Messrs. William P. S. Melvin and Safford A. Crummey for appellees.

Statement by Mr. Justice Lamar:

Mr. Justice Lamar, after making the foregoing statement, delivered the opinion of the court:

The appellants brought suit in the United States district court for the southern district of New York for the purpose of recovering from the trustee an interest in a trust estate which had been sold, transferred, and assigned by Conrad Morris Braker, the beneficiary. The complainants were citizens and residents of Pennsylvania. Both defendants were citizens and residents of New York. Notwithstanding the diversity of citizenship, the court dismissed the bill on the ground that, as the assignor Braker, a citizen of New York, could not, in the United States district court, have sued Fletcher, trustee and citizen of the same state, neither could the complainants, his assignees, sue therein, even though they were residents of the state of Pennsylvania.

The appeal from that decision involves a construction of § 24 of the Judicial Code [36 Stat. at L. 1091, chap. 231, Comp. Stat. 1913, § 991(1)], which limits the jurisdiction of the United States district court when suit is brought therein . . . 'to recover upon any promissory note or other chose in action in favor of any assignee. . . .'¹

This section of the Judicial Code is the last expression of a policy intended to prevent certain assignees from proceeding in the United States courts.

The restriction was imposed not only to prevent fraudulent transfers, made for the purpose of conferring jurisdiction, but in apprehension that promissory notes and like papers might be transferred in good faith by the citizens of one state to those of another, and thus render the maker liable to suit in the Federal court. Bank of United States v. Planters' Bank, 9 Wheat. 909, 6 L. ed. 245.

Except for a short time, when the act of 1875 (18 Stat. at L. 470, chap. 137, Comp. Stat. 1913, § 991[1]), restricted suits 'founded on a contract in favor of an assignee,' the several statutes on the subject, in force prior to the adoption of § 24, made this limitation on the jurisdiction of United States courts apply to 'suits to recover the contents of any promissory note or other chose in action in favor of any assignee' (act of 1789, 1 Stat. at L. 78, § 11, chap. 20; Rev. Stat. § 629; act of 1887, 24 Stat. at L. 553, chap. 373, Comp. Stat. 1913, § 991[1]). These were technical terms of variable meaning. They might have been given a literal construction, in which case the act would not have wholly remedied the evil intended to be corrected. They were also susceptible of a construction so broad as to include subjects far beyond the congressional policy. For a 'chose in action embraces in one sense all rights of action.' Dundas v. Bowler, 3 McLean, 208, Fed. Cas. No. 4,140. So that if the words of the statute had been given their most comprehensive meaning, every assignee or vendee would have been prevented from suing in the United States court unless the assignor could have maintained the action. It is evident, however, that there was no intent to prevent assignees and purchasers of property from maintaining an action in the Federal court to recover such property, even though the purchaser was an assignee, and the deed might, in a sense, be called a chose in action.

On the other hand, to construe the statute so as to only prohibit suits in such courts by the assignees of notes, drafts, and written promises to pay, would have left open a wide field and enabled assignees of accounts and of claims arising out of breaches of contracts to proceed in the Federal courts, although the parties to the original agreement could not have there sued.

While, therefore, it was admitted in Sere v. Pitot, 6 Cranch, 332, 3 L. ed. 240, that suits to recover the 'contents of a chose in action' referred to 'assignable paper,' yet, in view of the general policy of the act, these words were given a construction so broad as to include suits on accounts and on claims other than those containing written promises to pay.

That ruling, though criticized in Bushnell v. Kennedy, 9 Wall. 393, 19 L. ed. 739, was constantly followed (Sheldon v. Sill, 8 How. 441, 12 L. ed. 1147; Shoecraft v. Bloxham, 124 U. S. 730, 31 L. ed. 574, 8 Sup. Ct. Rep. 686), and it has been settled that the prohibition applied not only to suits on instruments which might be...