Scott County, Ark. v. Advance-Rumley Thresher Co.

• Decision Date: 16 March 1923
• Docket Number: 6182.
• Citation: 288 F. 739
• Parties: SCOTT COUNTY, ARK., v. ADVANCE-RUMLEY THRESHER CO.
• Court: U.S. Court of Appeals — Eighth Circuit

288 F. 739

SCOTT COUNTY, ARK., v. ADVANCE-RUMLEY THRESHER CO.

No. 6182.

United States Court of Appeals, Eighth Circuit.

March 16, 1923

[Copyrighted Material Omitted]

Daniel Hon, of Ft. Smith, Ark., for plaintiff in error.

James A. Comer, of Little Rock, Ark. (George F. Youmans, of Ft Smith, Ark., on the brief), for defendant in error.

Before STONE, LEWIS, and KENYON, Circuit Judges.

KENYON Circuit Judge.

Parties will be designated as in the trial court.

Plaintiff brought suit in the United States District Court for the Western District of Arkansas on May 23, 1921, alleging: That it was a corporation organized under the laws of the state of Indiana and authorized to transact business in the state of Arkansas; that defendant on January 1, 1921, issued two warrants to the Joe Lyons Machinery Company for the sums of $1,850 and $2,024.84, respectively, the one for $1,850 payable 'out of any money in the treasury appropriated for other expenses of county government,' and the one for $2,024.84 payable 'out of any money in the treasury appropriated for road building'; that the Joe Lyons Machinery Company on March 30, 1921, transferred these warrants to plaintiff; and that it was entitled to judgment against Scott county, defendant, for the sum of $3,874.84.

Defendant claimed in said suit: That the warrants sued on were illegal and void; that warrant No. 414, for $1,850, was issued in lieu of original warrants on a call of the county court of Scott county of all outstanding warrants of the county for cancellation, reissue, or classification; that the original warrants for which this one was issued were all drawn upon the appropriation for 'other expenses of county government' at a time when only $500 had been appropriated for such purpose, and said original warrants were part of the purchase price of road tractors; that as no appropriation had been made for this purchase the contract was void, and the warrants also were void; that warrant No 413, for $2,024.84, was issued in lieu of other warrants bearing date January 6, 1918, and issued to the Joe Lyons Machinery Company as part of the purchase price of a road tractor and parts thereof purchased from said company; that the original warrants represented by warrant No. 413 were drawn on the appropriations for road building at a time when no appropriation had been made therefor and no part of any appropriation previously made for road building was wholly or in part unexpended, and consequently the purchase of said road machinery was in violation of the statutes of Arkansas; that the contract for purchase was made by the county judge of Scott county in both instances.

By an amended answer defendant pleaded to the jurisdiction of the court, claiming that plaintiff was the assignee of the Joe Lyons Machinery Company, and that the complaint does not show that its assignor could have sued in the United States court, or that the court would have had jurisdiction in a suit by the assignor on said warrants; that as the assignor would not have had the right to bring suit, the plaintiff's assignee was not entitled to do so.

A jury was waived by stipulation and the case tried to the court. April 8, 1922, the court rendered judgment on all matters and held that defendant was a corporation within the meaning of subdivision 1 of section 24 of the federal Judicial Code (Comp. St. Sec. 991), and that plaintiff was entitled to recover on the warrants sued on, and entered judgment against defendant, Scott county, for the sum of $3,874.84 and costs. Defendant brings the case here upon writ of error, and the assignments of error raise the questions of jurisdiction and the liability of the county for the warrants sued on.

We consider first the question of jurisdiction. Defendant claims that plaintiff, as assignor of the Joe Lyons Machinery Company, had no legal right to bring this action in the United States court. This is based on section 991, U.S. Compiled Statutes 1918 (Compact Ed.) subd. 1, providing in part as follows:

'No District Court shall have cognizance of any suit (except upon foreign bills of exchange) to recover upon any promissory note or other chose in action in favor of any assignee, or of any subsequent holder, if such instrument be payable to bearer and be not made by any corporation, unless such suit might have been prosecuted in such court to recover upon said note or other chose in action if no assignment had been made.'

It is the contention that the county of Scott is not a corporation within the purview of this act, and that therefore the court is without jurisdiction. The purpose of the act in question was to limit the jurisdiction, undoubtedly, of the federal courts. As expressed by Justice Miller in Wilson v. Knox County (C.C.) 43 F. 481, 482:

'The general rule enunciated by the statute is that the federal courts shall not have jurisdiction of a suit by an assignee 'of a promissory note or other chose in action,' when the assignor could not maintain such a suit. The clause, 'if such instrument be payable to bearer and be not made by any corporation,' operates as an exception to the general rule, and given the federal courts jurisdiction of those suits by assignees, where the action is founded on an obligation, made by a corporation, that is payable to bearer, and is negotiable by mere delivery.'

It is apparent that Congress did not intend by this act to prohibit suits in federal courts on instruments made payable to bearer and executed by a corporation. If the instrument is payable to bearer and made by a corporation, action may be brought by the assignee thereof in the federal court, whether or not the assignor could have done so. Independent School Dist. of Sioux City, Iowa, v. Rew, 111 F. 1, 49 C.C.A. 198, 55 L.R.A. 364; Lyon County, Iowa, v. Keene Five-Cent Sav. Bank of Keene, N.H., et al., 100 F. 337, 40 C.C.A. 391; Citizens' Savings Bank v. City of Newburyport, 169 F. 766, 95 C.C.A. 232; New Orleans v. Quinlan, 173 U.S. 191, 19 Sup.Ct. 329, 43 L.Ed. 664. The warrants sued on here were payable to the Joe Lyons Machinery Company, or bearer. This was the same as warrants payable to bearer, and they were payable to plaintiff, not by virtue of any assignment, but by an original and direct promise moving from the maker to the bearer. Thompson v. Perrine, 106 U.S. 589, 1 Sup.Ct. 564, 568, 21 L.Ed. 298. If, therefore, the warrants were issued by a corporation, they were not subject to the restriction of section 991, U.S. Compiled Statutes 1918, hereinbefore referred to.

Jurisdiction depends therefore upon the answer to the question. Was the county of Scott a corporation within the purview of said act? Section 1 of an act passed by the Arkansas Legislature approved February 27, 1879 (Acts 1879, p. 13) provides as follows:

'That sections 937, 938, 939, 944, 945, 946, 947, 948, 949, and 4,516 of Gantt's Digest of the Statutes of Arkansas, and all laws and parts of laws making counties corporations, and authorizing them to sue and be sued as such, be, and they and each and every of them are hereby repealed.'

This act sought to repeal any laws making counties corporations and authorizing them to sue and be sued, although there was a method provided under section 2 of the act as to how judgments might be obtained against the county. Outside of the question raised by this statute, there would be no question as to a county being a corporation within the terms of the federal act. Counties are variously designated as (a) public corporations, Elliott on Roads & Streets, Sec. 531; Commissioners v. Sellew, 99 U.S. 624, 25 L.Ed. 333; Nash v. El Dorado Co. (C.C.) 24 F. 252; Patterson v. Temple, 27 Ark. 202; or as (b) quasi corporations, Dillon on Municipal Corporations, Sec. 35 (5th Ed.); Hamilton County v. Mighels, 7 Ohio St. 109; Finch v. Board, etc., 30 Ohio St. 37, 27 Am.Rep. 414; Hamilton County v. Garrett, 62 Tex. 602. They are different and distinguishable from municipal corporations, and have generally a less measure of corporate life.

In the case of Loeb v. Columbia Township Trustees, 179 U.S. 472, 486, 21 Sup.Ct. 174, 180 (45 L.Ed. 280) the Supreme Court held that the words 'any corporation' in the act of 1888 include municipal as well as private corporations. If a township is a corporation under that act, certainly a county is one. In Cowles v. Mercer County, 74 U.S. (7 Wall.) 118, 122 (19 L.Ed. 86), it is held that the board of supervisors created by acts of the Legislature of Illinois is a corporation, and the court uses this significant language:

'It is enough for this case that we find the board of supervisors to be a corporation authorized to contract for the county. The power to contract with citizens of other states implies liability to suit by citizens of other states, and no statute limitation of suability can defeat a jurisdiction given by the Constitution.'

It has many times been held in the federal courts that warrants such as are here sued upon are choses in action made by a corporation. Jerome v. Commissioners Rio Grande Co. (C.C.) 18 F. 873; McLean v. Valley County, Neb. (C.C.) 74 F. 389; Board of Commissioners of Kearny County, Kan., v. Irvine, 126 F. 689, 61 C.C.A. 607; Lyon County v. Keene Five-Cent Sav. Bank, 100 F. 337, 40 C.C.A. 391; Rollins v. Chaffee County (C.C.) 34 F. 91; Newgass v. City of New Orleans (C.C.) 33 F. 196.

The Supreme Court of Arkansas has in a number of cases given a definition of counties. In Eagle et al. v. Beard et al., 33 Ark. 497, counties were designated as of a purely political character, constituting the machinery and agencies by which governmental power was exercised. The court said there that counties were not business corporations for private purposes. In Pulaski County v. Reeve, 42 Ark. 54, it...