John Herrmann v. Benjamin Edwards

• Decision Date: 14 June 1915
• Docket Number: No. 222,222
• Citation: 59 L.Ed. 1224,35 S.Ct. 839,238 U.S. 107
• Parties: JOHN P. HERRMANN, Appt., v. BENJAMIN F. EDWARDS et al
• Court: U.S. Supreme Court

238 U.S. 107

35 S.Ct. 839

59 L.Ed. 1224

JOHN P. HERRMANN, Appt.,

v BENJAMIN F. EDWARDS et al.

No. 222.

Argued and submitted April 14, 1915.

Decided June 14, 1915.

Messrs. Shepard Barclay, William R. Orthwein, and S. Mayner Wallace for appellant.

[Argument of Counsel from page 108 intentionally omitted] Messrs. C. D. Corum, Sam B. Jeffries, Daniel N. Kirby, Eugene S. Wilson, Joseph W. Lewis, Charles M. Rice, John F. Lee, and Charles M. Polk for appellees.

[Argument of Counsel from pages 109-110 intentionally omitted] Mr. Chief Justice White delivered the opinion of the court:

If the statutes which control the question for decision in this case and their significance as settled by the decisions of this court long prior to the commencement of this suit be at once stated, it will serve to clarify and facilitate the analysis of the issue to be decided. Section 4 of the act of Congress of August 13, 1888, chap. 866, 25 Stat. at L. 433, provided as follows:

'That all national banking associations established under the laws of the United States shall, for the purposes of all actions by or against them, real, personal or mixed, and all suits in equity, be deemed citizens of the states in which they are respectively located; The provisions of this section shall not be hold to affect the jurisdiction of the Courts of the United States in cases commenced by the United States or by direction of any officer thereof, or cases for winding up the affairs of any such bank.' (A line is drawn through certain words for reasons hereafter referred to.)

This section was but a re-enactment of an identical provision contained in the 4th section of the act of Congress of March 3, 1887 (chap. 373, 24 Stat. at L. 552, Comp. Stat. 1913, § 1033), and again this was but the re-enactment of an identical provision contained in the 4th section of the act of July 12, 1882 (chap. 290, 22 Stat. at L. 162, Comp. Stat. 1913, § 9665).

Under the provisions of the act of 1882, long prior to their re-enactment in 1888, it had been conclusively established that because a corporation was a national bank, created under an act Congress, gave it no greater right to remove a case than if it had been organized under a state law. Leather Mfrs.' Nat. Bank v. Cooper, 120 U. S. 778, 30 L. ed. 816, 7 Sup. Ct. Rep. 777. And after the re-enactment in 1888 a case (Whittemore v. Amoskeag Nat. Bank, 134 U. S. 527, 33 L. ed. 1002, 10 Sup. Ct. Rep. 592) was decided involving a controversy controlled by the act of 1882, but the decision of which was necessarily also an interpretation of the act of 1888, as the two were identical. The case was this: A stockholder of a national bank, on his own behalf and of all others who might join, sued in a circuit court of the United States the directors of the bank, making the bank also a party defendant, to hold the directors liable for an act of alleged maladministration committed by them. The prayer was that the directors be decreed to pay back to the bank for the benefit of its stockholders the amount of money lost by the bank as the result of their misconduct. There was no diversity of citizenship upon which the jurisdiction of the circuit court could rest, and therefore its power to entertain the case rested alone upon the fact that the defendant bank was a national banking association, that the other defendants were directors of such an association, and that the liability sought to be enforced arose from misconduct on their part in relation to their duties to the bank. The circuit court, not passing upon these questions, dismissed the bill because there had not been a compliance with equity rule 94.¹ But this court concluding that the act of 1882 excluded jurisdiction as a Federal court, the action of the court below in dismissing for want of compliance with the equity rule was reversed and the case remanded with directions to dismiss for want of jurisdiction as a Federal court. Of course this conclusion involved deciding that, in the absence of a Federal controversy concerning the interpretation of some provision of the national bank act raising what might be considered by analogy a Federal question in the sense of § 709, Rev. Stat., a mere assertion of liability on the part of directors for wrongs for which they might be responsible at common law afforded no basis for jurisdiction. Indeed, that this conception was the one upon which the decision was rested is shown by the fact that in the course of the opinion it was pointed out that neither the provisions of § 5209, Rev. Stat. (Comp. Stat. 1913, § 9772), providing for criminal punishment of directors of national banks in certain cases, nor § 5239, Rev. Stat. (Comp. Stat. 1913, § 9831), giving certain powers to the Comptroller of the Currency in certain instances, were involved in the cause of action so as to give rise to a Federal question upon which the jurisdiction could be based.

This ruling during the many years which have elapsed has never been questioned and the fundamental principle upon which it rested has been applied in various aspects. Petri v. Commercial Nat. Bank, 142 U. S. 644, 35 L. ed. 1144, 12 Sup. Ct. Rep. 325; Ex parte Jones, 164 U. S. 693, 41 L. ed. 601, 17 Sup. Ct. Rep. 222; Continental Nat. Bank v. Buford, 191 U. S. 119, 48 L. ed. 119, 24 Sup. Ct. Rep. 54; Yates v. Jones Nat. Bank, 206 U. S. 158, 51 L. ed. 1002, 27 Sup. Ct. Rep. 638; Thomas v. Taylor, 224 U. S. 73, 56 L. ed. 673, 32 Sup. Ct. Rep. 403.

By § 24 of the Judicial Code of 1911 [36 Stat. at L. 1092, chap. 231, Comp. Stat. 1913, § 991 (16)] the jurisdiction of the district courts is provided for. The 16th paragraph of that section gives those courts original jurisdiction as follows:

'Sixteenth. Of all cases commenced by the United States, or by direction of any officer thereof, against any national banking association, and cases for winding up the affairs of any such bank; and of all suits brought by any banking association established in the district for which the court is held, under the provisions of title 'National Banks,' Revised Statutes, to enjoin the Comptroller of the Currency, or any receiver acting under his direction, as provided by said title. And all national banking associations established under the laws of the United States shall, for the purposes of all other actions by or against them, real, personal, or mixed, and all suits in equity, be deemed citizens of the states in which they are respectively located.'

The statutory law with the concluded interpretation affixed to it to which we have referred being in force, this suit was commenced in the court below in March, 1913. The complainant, as a stockholder in the National Bank of Commerce, a national banking association established and carrying on business in St. Louis, Missouri, on his own and on behalf of all other stockholders who might elect to join in the suit, sought recovery from the defendants, George Lane Edwards and Benjamin F. Edwards, of an amount exceeding $1,300,000 for the benefit of the complainant and the other stockholders of the National Bank of Commerce upon substantially the following grounds: That the defendants, as directors and officers of the National Bank of Commerce, having also a large interest, direct or indirect, in another national bank known as the Fourth National Bank, had devised a scheme by which the National Bank of Commerce would buy out the Fourth National...