Source: https://supreme.justia.com/cases/federal/us/268/449/
Timestamp: 2019-04-19 18:33:35+00:00

Document:
1. An action brought on a promissory note by a federal reserve bank, a federal corporation, is an action "arising under the laws of the United States" within the meaning of Jud.Code § 24, "First" (a). P. 268 U. S. 453.
2. A federal reserve bank is not a national bank, subject to the provisions of Jud.Code § 24, "Sixteenth." Id.
3. The Assignee Clause, Jud.Code § 24, "First" (a), which forbids the district court to take cognizance of an action on a chose in action by an assignee which could not have been prosecuted in that court if no assignment had been made, applies where the sole ground of jurisdiction is diversity of citizenship, but not where the ground is that the action arises under the laws of the United States. Id.
4. Failure to present a promissory note for payment at the payee bank, where it was payable and where the maker had sufficient funds, or to give notice of dishonor, held not a defense to an action against the maker by the endorsee holder, in view of provision in the note waiving "protest, notice thereof, and diligence in collecting," and the Negotiable Instruments Law in Texas, giving effect to such provisions. P. 268 U. S. 456.
5. A note made to the order of a bank in which the maker had a deposit was endorsed by the payee to another bank as partial security for a larger indebtedness owed by the first bank to the second. The payee bank became insolvent, and the endorsee sued the maker on the note. Held that the maker was not entitled, merely in virtue of his equitable right of set-off as against the payee, to have the action stayed until the endorsee had exhausted other collateral held by it as security for the debt owed it by the payee -- at all events, not in the absence of the payee as a party. Id., .
the bank in an action against Sowell on his promissory note.
Writ of error to the United States Circuit Court of Appeals for the Fifth Circuit to review its judgment, affirming a judgment for the plaintiff below of the district court of the United States for the Northern District of Texas, in an action upon a promissory note.
other collateral held by it as security for the indebtedness of the indorser.
"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 unquestioned that, where the sole ground of jurisdiction is diversity of citizenship, such jurisdiction is excluded by the operation of this clause, and the question now presented is whether the clause has a like effect where the sole ground of jurisdiction is that the suit arises under the laws of the United States.
No inference as to the meaning of the assignee clause can be drawn from its relative position in § 24, and that of the clause giving jurisdiction of suits arising under the laws of the United States. Judicial Code, § 295.
not to deprive the federal courts of jurisdiction where it was conferred on grounds other than diversity of citizenship.
brought by an assignee to cases where the suit might have been sustained, had no assignment been made. But the bank does not sue in virtue of any right conferred by the Judiciary Act, but in virtue of the right conferred by its charter. It does not sue because the defendant is a citizen of a different state from any of its members, but because its charter confers upon it the right of suing its debtors in a circuit court of the United States."
Mr. Justice Story applied the same rule in the case of a claim assigned to the United States, holding that the assignee clause was not applicable (United States v. Greene, 4 Mason 427), resting his decision both on the meaning and effect of the assignee clause and on the effect of the Act of 1815, Chap. 253, conferring general jurisdiction on the federal courts over suits brought by the United States.
By the Act of 1875, 18 Stat. 336, jurisdiction of the federal courts was extended generally to all suits arising under the laws of the United States. Where such is the ground of jurisdiction, the assignee clause appears to us to be inapplicable, just as it had been held to be in cases in which the like jurisdiction was conferred by special corporate charter provisions or where jurisdiction was given generally over suits brought by the United States.
The precise question seems not to have been expressly passed upon by this Court since the Act of 1875. It, however, was necessarily involved in Wyman v. Wallace, 201 U. S. 230, in which the assignee clause would have defeated the jurisdiction attaching because of diversity of citizenship, but in which the jurisdiction was, nevertheless, upheld because the case was one arising under a law of the United States.
the laws of the United States was enacted later, and without any exceptions, lead to the conclusion that it should be so applied as not to limit jurisdiction arising from the nature of the subject matter of the suit, as is the case in suits brought by or against corporations organized under the laws of the United States. American Bank & Trust Co. v. Federal Reserve Bank, supra, p. 256 U. S. 356. We hold that the district court had jurisdiction over the cause.
The note sued on contained a provision that the maker waived "protest, notice thereof and diligence in collecting." The Negotiable Instruments Law in force in Texas gives effect to stipulations waiving presentment, protest, or notice of dishonor, contained in the body of the instrument, and provides that they are binding on all parties to it. (Revised Statutes, Texas, § 82, Art. 6001-a(3), 109, 110, 111.) Plaintiff in error was therefore bound by his waiver, and the circumstance that defendant in error had knowledge of a deposit of the plaintiff in error with the payee bank sufficient to meet the note at maturity did not, contrary to the express terms of the waiver, impose a duty on defendant in error to present the note for payment. Defendant's rights were unimpaired by its failure to make due presentation of the note or to give notice of its dishonor.
rests upon the principle that a creditor having two funds to satisfy his debt may not, by his application of them to his demand, defeat another creditor, who may resort to only one of the funds. The debtor may not ordinarily invoke the doctrine, for, by doing so he, would disregard the express provisions of his contract on which the creditor is entitled to rely. The plaintiff in error is bound to pay his obligation according to its tenor. He cannot deny his own contract merely because his creditor has acquired other rights with which he may satisfy his debt and because he wishes to avail himself of an equitable set-off against the payee of the note. Had plaintiff in error set up any defense to the note, good as to the payee, such as fraud, or failure of consideration, he might, under the law of some jurisdictions, have urged such cases as McBride v. Potter, 169 Mass. 7, or Second National Bank v. McGehee, 241 S.W. 287, or Van Winkle, etc., Co. v. Citizens' Bank, 89 Tex. 147, as a basis for the claim that, because of his special equities affecting the inception of the note, the defendant in error should exonerate him by resorting to the other collateral, if shown to be sufficient to pay the note.
But plaintiff in error shows only the obligation of his note, presumptively valid both in the hands of the payee and the defendant in error, and claims that, since he has an equitable set-off good against the payee of the note, he should be relieved of his own obligation until the collateral of the payee bank has first been applied to its satisfaction. But these circumstances, which do not in any way affect the validity of negotiable paper as such, can afford no foundation for equitable relief to the maker, or for depriving the creditor of the full benefit of his security in accordance with his contract. To engraft upon the note the equity here asserted against an innocent holder would be to disregard its terms and impair its negotiability. Such authority as there is rejects it. Hanesley v.
National Park Bank, 147 Ga. 96; Haas v. Bank of Commerce, 41 Neb. 754; Citizens' Bank v. Giddings, 60 Neb. 709; Third National Bank v. Harrison, 10 F. 243. And see 15 U. S. Laird, 2 Wheat. 390; Myer v. Kendall, 142 La. 361. In any event, the other debtor of defendant in error was not before the court, and for that reason plaintiff was not entitled to the relief sought. Dorr v. Shaw, 4 Johns, Ch. 17-18.

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