Security-First Nat. Bank v. Republic Pictures Corp.

• Decision Date: 26 April 1951
• Docket Number: No. 12260.,12260.
• Citation: 97 F. Supp. 360
• Parties: SECURITY-FIRST NAT. BANK OF LOS ANGELES v. REPUBLIC PICTURES CORP.
• Court: U.S. District Court — Southern District of California

97 F. Supp. 360

SECURITY-FIRST NAT. BANK OF LOS ANGELES v. REPUBLIC PICTURES CORP.

No. 12260.

United States District Court S. D. California, Central Division.

April 26, 1951.

COPYRIGHT MATERIAL OMITTED

Louis E. Swarts, Beverly Hills, Cal., Joseph S. Dubin, University City, Cal., Wild, Carlson & Reeve and David S. Davis, all of Fresno, Cal., for plaintiff.

Loeb & Loeb and Saul N. Rittenberg, all of Los Angeles, Cal., for defendant.

Hugo A. Steinmeyer, Robert H. Fabian and Robert Van Buskirk, all of Los Angeles, Cal., for Bank of America Nat. Trust & Savings Ass'n, amici curiæ.

YANKWICH, District Judge.

Plaintiff, a national banking association authorized to do business in California, was the mortgagee under a chattel mortgage, dated October 2, 1944, executed by Pre-Em Pictures, Inc., a California corporation, to secure the repayment of a loan of $35,000.00 and advances made to Pre-Em to plaintiff.

The mortgage covered, among other items of personal property, all copyrights on the story, treatment, script, continuity and manuscript composition of the motion picture photoplay, entitled "A Song For Miss Julie", together with the right to copyright and all rights to renew and extend the copyright. The photoplay was produced by Pre-Em and distributed by the defendant, a New York corporation qualified to transact business in the State of California, and engaged in the business of distributing, leasing and licensing motion pictures and photoplays throughout the United States and the World. Pre-Em defaulted in the repayment of the loans and advances secured by the chattel mortgage. On September 20, 1948, the plaintiff instituted a foreclosure proceeding against Pre-Em and others in the United States District Court. On August 13, 1949, the Court rendered a decree of foreclosure in favor of the plaintiff which has become final. Under this decree, the United States Marshal for the Southern District of California sold the property at public auction, on October 5, 1949, to the plaintiff for the sum of $5000.00, and issued to the plaintiff a certificate of sale on foreclosure, which was duly recorded in the Copyright Office of the United States.

Controversy has arisen between the plaintiff and the defendant as to the rights acquired by the plaintiff under the foreclosure. It is the contention of the plaintiff that they acquired all the rights of Pre-Em in the property covered by the chattel mortgage, including the right to the copyright of the story. These contentions are asserted in an action for declaratory relief instituted on September 11, 1950.¹ The defendant, in an Answer filed on October 18, 1950, challenges the jurisdiction of this court to foreclose the chattel mortgage as to the copyright. The evidence before the court shows, without dispute, the foregoing facts, also that the jurisdictional minimum is involved in the controversy. The sole question for determination is whether the district court had jurisdiction to foreclose the copyright itself, under Section 1338(a) of Title 28 U.S.C.A.

I Cases Arising Under Federal Law

Concededly, there is no binding precedent dealing with the problem. So the approach must consider both the nature of the jurisdiction of the federal courts and the nature of copyright. We start with the premise that federal courts are courts of limited jurisdiction.² And jurisdiction to entertain the foreclosure of a mortgage of a copyright, if it exists at all, must derive either from Section 1338(a), which provides, in effect, that the district court has original jurisdiction of actions arising under acts of Congress relating to patents, copyrights and trademarks³, or under what is known as the "federal question" statute, which provides for jurisdiction in cases, which, in addition to satisfying the jurisdictional minimum, also arise under "the Constitution, laws or treaties of the United States."⁴

The conditions which confer jurisdiction under either statute are the same, except that in cases arising "under the Constitution, laws and treaties of the United States", the jurisdictional minimum must also be present, while in those arising under congressional acts relating to patents, copyrights and trademarks, the jurisdictional minimum need not be present. But as to both, the criterion by which it is determined whether they arise under the particular law so as to give the federal courts jurisdiction is the same.

Indeed, the language in which the courts have couched the principle has remained unchanged through the years.⁵ It is substantially this: A cause is said to arise under the Constitution and laws of the United States when its correct determination depends upon the construction of the Constitution or laws of the United States, or when the right of a party may be sustained by one construction or defeated by another.

Cases decided in recent years have given more accurate criteria for determining the nature and source of rights which give jurisdiction. For the purpose of the present controversy, two statements may furnish the distinguishing marks for determining the matter. The first is by Mr. Justice Stone: "Federal jurisdiction may be invoked to vindicate a right or privilege claimed under a federal statute. It may not be invoked where the right asserted is non-federal, merely because the plaintiff's right to sue is derived from federal law, or because the property involved was obtained under federal statute. The federal nature of the right to be established is decisive—not the source of the authority to establish it."⁶ (Emphasis added).

The other is by Mr. Justice Cardozo: "To bring a case within the statute, a right or immunity created by the Constitution or laws of the United States must be an element, and an essential one, of the plaintiff's cause of action. Starin v. New York, 115 U.S. 248, 257, 6 S.Ct. 28, 29 L.Ed. 388; First National Bank of Canton, Pa. v. Williams, 252 U.S. 504, 512, 40 S.Ct. 372, 374, 64 L.Ed. 690. The right or immunity must be such that it will be supported if the Constitution or laws of the United States are given one construction or effect, and defeated if they receive another."⁷

The case just cited is a good illustration of the distinction which the courts have in mind. The question before the court was whether an action brought by a state-taxing authority against a national bank could be removed to the federal court. It was argued that the authority of the state to tax the shares of national banks, being derived from a federal statute, the right to remove existed. But the Court held that the right to tax the shares of the national bank was a state right, and that the permissive nature of the federal law allowing the tax did not change the right. Recurring to the test laid down in Puerto Rico v. Russell & Co.,⁸, the Court said: "Here the right to be established is one created by the state. If that is so, it is unimportant that federal consent is the source of state authority. To reach the underlying law we do not travel back so far. By unimpeachable authority, a suit brought upon a state statute does not arise under an act of Congress or the Constitution of the United States because prohibited thereby. Louisville & Nashville R. Co. v. Mottley, supra, 211 U.S. 149, 29 S.Ct. 42, 53 L.Ed. 126. With no greater reason can it be said to arise thereunder because permitted thereby."⁹

In substance, therefore, these cases lay down these principles:

Federal jurisdiction may not be invoked where the right asserted is non-federal merely because (1) the plaintiff's right to sue is derived from federal law, or (2) the property involved was obtained under a federal statute. But these cases say no more than that, in determining whether jurisdiction exists, the decisive test is the nature of the right sought to be established and not the source of the authority to establish it. The test is,—to use the language of Mr. Justice Stone: "The federal nature of the right to be established".¹⁰ If the object of the action is to "enforce" a right created by a law of the United States, or "to interpret" such law, exclusive jurisdiction is in the federal courts.

II The Nature of Copyright

With this test in mind, the inquiry turns to the question:

What is the nature of the right which the plaintiff sought to be asserted in the foreclosure proceeding?

The answer is: The right to mortgage the copyright.

And that derives from Section 28 of Title 17 U.S.C.A., which reads: "Copyright secured under this title or previous copyright laws of the United States may be assigned, granted, or mortgaged by an instrument in writing signed by the proprietor of the copyright, or may be bequeathed by will."¹¹

The entire law of copyright is of statutory origin. The copyright law, as we understand it, is entirely distinct from what has been denominated "the common law copyright", which extended to the manuscript itself before its publication.¹²

The statutory right is, as stated by Lord Mansfield, in 1769, "incorporeal: it relates to ideas detached from any physical substance."¹³ In the famous case in which he used these expressions,—the first important case in which the question of literary property came before the court of King's Bench in England,—Lord Mansfield stated the deficiencies which attached to the copyright of ideas in a manner which, despite conciseness of statement, has not been equalled for thoroughness:

"I used the word `copy', in the technical sense in which that name or term has been used for ages, to signify an incorporeal right to the sole printing and publishing of somewhat intellectual, communicated by letters.

"It has all along been expressly admitted, that, by the common law, an author is intitled to the copy of his own work until it has been once printed and published by his authority;' and `that the four cases in Chancery, cited for that purpose, are agreeable to the common law; and the relief was properly given, in consequence of the legal right.'

"The...