Court Opinion

ID: 9419217
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:47:41.678664+00
Date Added: 2024-06-11T17:22:16.304252
License: Public Domain

Mr. Justice Jackson,
concurring:
I think we should attempt a more explicit answer to the question whether federal or state law governs our decision in this sort of case than is found either in the opinion of the Court or in the concurring opinion of Mr. Justice Frankfurter. That question, as old as the federal judiciary, is met inescapably at the threshold of this case. It is the one which moved us to grant certiorari, and we could not resort to the rule announced without at least a tacit answer to it. The petitioner asserts that the decisions in Erie R. Co. v. Tompkins, 304 U. S. 64, and Klaxon Co. v. Stentor Electric Mfg. Co., 313 U. S. 487, govern this case. If they do, we would not be free to disregard the law of Missouri and Illinois and to apply a doctrine of estoppel actually — but not avowedly — drawn from common-law sources to effectuate the policy we think implicit in federal statutes.
. The Rules of Decision Act1 provides that “the laws of the several States, except where the Constitution, treaties *466or statutes of the United States shall otherwise require or provide, shall be regarded as rules of decision in trials at common law, in the courts of the United States, in cases where they apply.” Whether “laws of the several States” as so used included non-statutory law embodied in judicial decisions of state courts was long a subject of controversy. After acting for half a century on the belief that it did, the Court in Swift v. Tyson, 16 Pet. 1, decided that it did not. Almost a century later that decision with its numerous and sorry progeny was overruled, and the Court answered that it did. Erie R. Co. v. Tompkins, supra. It later held that state decisions on conflicts of laws were also binding on the federal courts. Klaxon Co. v. Stentor Mfg. Co., supra. Thus, the Rules of Decision Act as now interpreted requires federal courts to use state law whether declared by the legislature or by the courts as rules of decision “in cases where they apply,” except where federal law “shall otherwise require or provide.” These recent cases, like Swift v. Tyson which evoked them, dealt only with the very special problems arising in diversity cases, where federal jurisdiction exists to provide nonresident parties an optional forum of assured impartiality.2 *467The Court has not extended the doctrine of Erie R. Co. v. Tompkins beyond diversity cases.3
This case is not entertained by the federal courts because of diversity of citizenship. It is here because a federal agency brings the action, and the law of its being provides, with exceptions not important here, that: “All suits of a civil nature at common law or in equity to which the Corporation shall be a party shall be deemed to arise under the laws of the United States: . . .” 4 That this *468provision is not merely jurisdictional is suggested by the presence in the same section of the Act of the separate provision that the Corporation may sue and be sued “in any court of law or equity, State or Federal.”5
Although by Congressional command this case is to be deemed one arising under the laws of the United States, no federal statute purports to define the Corporation’s rights as a holder of the note in suit or the liability of the maker thereof. There arises, therefore, the question whether in deciding the case we are bound to apply the law of some particular state or whether, to put it bluntly, we may make our own law from materials found in common-law sources.
This issue has a long historical background of legal and political controversy as to the place of the common law in federal jurisprudence.6 As the matter now stands, it *469seems settled that the federal courts may not resort to the common law to punish crimes not made punishable by Act of Congress ;* *****7 and that, apart from special statutory or constitutional provision, they are not bound in other .fields by English precedents existing at any particular date. The federal courts have no general common law, as in a sense they have no general or comprehensive jurisprudence of any kind, because many subjects of private law which bulk large in the traditional common law are ordinarily within the province of the states and not of the federal government. But this is not to say that wherever we have occasion to decide a federal question which cannot be answered from federal statutes alone we may not resort to all of the source materials of the common law, or that when we have fashioned an answer it does not become a part of the federal non-statutory or common law.
I do not understand Justice Brandeis’s statement in Erie R. Co. v. Tompkins, 304 U. S. 64 at 78, that “There is no federal general common law,” to deny that the common law may in proper cases be an aid to, or the basis of, de*470cisión of federal questions. In its context it means to me only that federal courts may not apply their own notions of the common law at variance with applicable state decisions except “where the constitution, treaties, or statutes of the United States [so] require or provide.” 8 Indeed, in a case decided on the same day as Erie R. Co. v. Tompkins, Justice Brandeis said that “whether the water of an interstate stream must be apportioned between the two States is a question of ‘federal common law’ upon which neither the statutes nor the decisions of either State can be conclusive.” Hinderlider v. La Plata Co., 304 U. S. 92, 110.
Were we bereft of the common law, our federal system would be impotent. This follows from the recognized futility of attempting all-complete statutory codes, and is apparent from the terms of the Constitution itself.
The contract clause, which prohibits a state from passing any “Law impairing the Obligation of Contracts,” is an example of the part the common law must play in our system. This provision is meaningless unless we know what a contract is. The Constitution wisely refrains from saying. We have very recently held, upon a long line of authority, that in applying this clause we are not bound by the state’s views as to whether there is a contract. Irving Trust Co. v. Day, 314 U. S. 556. Take the case where the question is whether a promise made without consideration comes within the protection of the contract clause. Is there any doubt as to where we must go for the answer that we do not find in the Constitution itself? This Court has not hesitated to read the eom*471mon-law doctrine of consideration into the contract clause, and to restrict the protection of that clause to promises supported by consideration. Durkee v. Board of Liquidation, 103 U. S. 646, 648; Pearsall v. Great Northern Ry. Co., 161 U. S. 646, 667; Grand Lodge v. New Orleans, 166 U. S. 143, 146. Compare Allegheny College v. National Chautauqua County Bank, 246 N. Y. 369, 159 N. E. 173.
Other recognitions of our common-law powers abound in the Constitution.9
A federal court sitting in a non-diversity case such as this does not sit as a local tribunal. In some cases it may see fit for special reasons to give the law of a particular state highly persuasive or even controlling effect, but in the last analysis its decision turns upon the law of the United States, not that of any state. Federal law *472is no juridical chameleon, changing complexion to match that of each state wherein lawsuits happen to be commenced because of the accidents of service of process and of the application of the venue statutes. It is found in the federal Constitution, statutes, or common law. Federal common law implements the federal Constitution and statutes, and is conditioned by them.10 Within these limits, federal courts are free to apply the traditional common-law technique of decision and to draw upon all the sources of the common law in cases such as the present. Board of Commissioners v. United States, 308 U. S. 343, 350.
The law which we apply to this case consists of principles of established credit in jurisprudence, selected by us because they are appropriate to effectuate the policy of the governing Act. The Corporation was created and financed in part by the United States11 to bolster the entire banking and credit structure. The Corporation did not simply step into the private shoes of local banks. The purposes sought to be accomplished by it can be accomplished only if it may rely on the integrity of banking statements and banking assets. In this case the Corporation attempted to realize on a note that was a part of the assets at the time it insured the bank. It is met by the plea that the note was a sham knowingly given to enable the bank to conceal the worthlessness of certain bonds which it had bought from the maker, a broker. This deception was not for the single day on which the note was delivered; its purpose and its effect were to *473operate as a continuing inducement to existing creditors, and to those who might become creditors, to rely on this note as a $5,000 item counting towards its solvency. It may not have contemplated the then unborn Federal Deposit Insurance Corporation as the particular object of its deception, but its purpose was to conceal a loss from then unknown and unidentified persons who might be or become creditors or banking supervisors on behalf of the public. Under the Act, the Corporation has a dual relation of creditor or potential creditor and of supervising authority toward insured banks.12 The immunity of such a corporation from schemes concocted by the cooperative deceit of bank officers and customers is not a question to be answered from considerations of geography. That a particular state happened to have the greatest connection, in the conflict of laws sense, with the making of the note involved, or that the subsequent conduct happened to be chiefly centered there, is not enough to make us subservient to the legislative policy or the judicial views of that state.13
I concur in the Court’s holding because I think that the defense asserted is nowhere admissible against the Corporation and that we need not go to the law of any particular state as our authority for so holding.
I hardly suppose that Congress intended to set us com*474pletely adrift from state law with regard to all questions as to which it has not provided a statutory answer. An intention to give persuasive or binding effect to state law has been found to exist in a number of cases similar in that they arose under a law of the United States but were not governed by any specific statutory provision.14 No doubt many questions as to the liability of parties to commercial paper which comes into the hands of the Corporation will best be solved by applying the local law with reference to which the makers and the insured bank presumably contracted. The Corporation would succeed only to the rights which the bank itself acquired where ordinary and good-faith commercial transactions are involved. But petitioners’ conduct here was not intended to confer any right on the bank itself, for as to it the note was agreed to be a nullity. Petitioners’ conduct was intended to and did have a direct and independent effect on unknown third parties, among whom the Corporation now appears.15 The policy of the federal Act does not seem *475tome to leave dependent on local law the question whether one may plead his own scheme to deceive a bank’s creditors and supervising authorities as against the Corporation. Even though federal criminal sanctions might not be applicable to- these facts, and even though the doctrine of Deitrick v. Greaney, 309 U. S. 190, may not fully comprehend the present case, I think we now may borrow a doctrine of estoppel from the same source from which the Court borrowed it in that case, and to reach the same result.

 § 34 of the Judiciary Act of 1789, 28 U. S. C. § 725.

 “However true the fact may be, that the tribunals of the states will administer justice as impartially as those of the nation, to parties of every description, it is not less true, that the constitution itself either entertains apprehensions on this subject, or views with such indulgence the possible fears and apprehensions of suitors, that it has established national tribunals for the decision of controversies between aliens and a citizen, or between citizens of different states.” Chief Justice Marshall in Bank of the United States v. Deveaux, 5 Cranch 61, 87. See also, Dodge v. Woolsey, 18 How. 331, 354; Burgess v. Seligman, 107 U. S. 20, 34; Lankford v. Platte Iron Works, 235 U. S. 461, 478. But compare Friendly, The Historic Basis of Diversity Jurisdiction, 41 Harvard Law Review 483.

 Its effect even in such cases seems not to have been definitely settled. In an equity case it was said that “the doctrine applies though the question of construction arises not in an action at law, but in a suit in equity.” Ruhlin v. New York Life Ins. Co., 304 U. S. 202, 205. That case was in the federal courts by reason of diversity jurisdiction. In a later case in which a suit in equity was brought in federal court to enforce liability under a federal statute the Court said: “The Rules of Decision Act does not apply to suits in equity. Section 34 of the Judiciary Act of 1789, 28 U. S. C. 725, directing that the ‘laws of the several states’ ‘shall be regarded as rules of decision’ in the courts of the United States, applies only to the rules of decision in ‘trials at common law’ in such courts, but applies as well to rules established by judicial decision in the states as those established by statute. ... In the circumstances we have no occasion to consider the extent to which federal courts, in the exercise of the authority conferred upon them by Congress to administer equitable remedies, are bound to follow state statutes and decisions affecting those remedies.” Russell v. Todd, 309 U. S. 280, 287, 294. In any event, the estoppel here involved seems no more an equity matter than the issue of good-faith purchase involved in Cities Service Oil Co. v. Dunlap, 308 U. S. 208, where state law was held to govern.

Paragraph Fourth of 12 U. S. C. § 264 (j) empowers the Corporation “To sue and be sued, complain and defend, in any court of law or equity, State or Federal. All suits of a civil nature at common law or in equity to which the Corporation shall be a party shall be deemed to arise under the laws of the United States: Provided, That any such suit to which the Corporation is a party in its capacity as receiver *468of a State bank and which involves only the rights or obligations of depositors, creditors, stockholders and such State bank under State law shall not be deemed to arise under the laws of the United States.”
In a number of respects and with varying degrees of explicitness the Act elsewhere makes reference to state law. Specific federal criminal sanctions are provided.

 A similar provision without more is found in many federal statutes. E. g., 15 U. S. C. § 604 (Reconstruction Finance Corporation); 12 U. S. C. § 24 (National Banks); 12 U. S. C. § 341 (Federal Reserve Banks) ; 12 U. S. C. § 1432 (Federal Home Loan Banks); 12 U. S. C. § 1716 (c) (3) (National Mortgage Associations). This is not to suggest, however, that questions not specifically dealt with in these statutes cannot be federal questions simply because of the absence of an express provision that suits “shall be deemed to arise under the laws of the United States.”

 Judicial opinions discussing various aspects of the question include: Wheaton v. Peters, 8 Pet. 591, 658 (1834); Kendall v. United States, 12 Pet. 524, 621 (1838); Smith v. Alabama, 124 U. S. 465, 478 (1888); Bucher v. Cheshire R. Co., 125 U. S. 555, 583-584 (1888); Justice Field, dissenting in Baltimore & Ohio R. Co. v. Baugh, 149 U. S. 368, 394-395; Justices Holmes and Pitney, dissenting in Southern Pacific Co. v. Jensen, *469244 U. S. 205, 221-222, 230. See also, George Wharton Pepper, The Border Land of Federal and State Decisions (1889); Frankfurter, Distribution of Judicial Power between United States and State Courts, 13 Cornell Law Quarterly 499; Warren, New Light on the History of the Federal Judiciary Act of 1789, 37 Harvard Law Review 49; von Moschzisker, The Common Law and our Federal Jurisprudence, 74 University of Pennsylvania Law Review 109, 270, 367.

 The research of Charles Warren, leaned on heavily in Erie R. Co. v. Tompkins to discredit Swift v. Tyson, led that scholar to conclude that United States v. Hudson, 7 Cranch 32, and United States v. Coolidge, 1 Wheat. 415, establishing the above proposition, were probably wrongly decided. Warren, History of the Federal Judiciary Act of 1789, 37 Harvard Law Review 49, 73. The error, if it be one, comports, however, with the present tendency to constrict the jurisdiction of federal courts, and I think is likely to survive.

 Similarly, Mr. Justice Holmes's statement that there is no “transcendental body of law outside of any particular State but obligatory within it unless and until changed by statute” was made with reference to “matters that are not governed by any law of the United States or by any statute of the State.” See Black & White Taxicab Co. v. Brown & Yellow Taxicab Co., 276 U. S. 518, 533.

 Thus, the Judiciary Article provides that “the Judicial Power shall extend to all Cases, in Law and Equity, arising under this Constitution, the Laws of the United States, and Treaties” made under their authority. It does not give any definition of what are cases in law and equity; it simply assumes the existence of a jurisprudence from Which the courts can ascertain the meaning of those terms.
Particularly in the clauses dealing with the rights of the individual, the Constitution uses words and phrases borrowed from the common law, meaningless without that background, and obviously meant to carry their common-law implications. Thus, we find, in it the following: “convicted”; “Indictment”; “Treason, Felony, and Breach of the Peace”; “Piracies and Felonies”; “Privilege of the Writ of habeas Corpus”; “Bill of Attainder or ex post facto Law”; “Bribery”; “original Jurisdiction”; and “appellate Jurisdiction both as to Law and Fact.” In the Bill of Rights Amendments, the necessity for resort to the common law for constitutional interpretation is even more obvious. Here we find: “unreasonable searches and seizures”; “Warrants”; “presentment or indictment of a Grand Jury”; “due process of law”; “right to a speedy and public trial by an impartial jury”; “in Suits at common law”; and “no fact tried by a jury shall be otherwise reexamined in any Court of the United States, than according to the rules of the common law.”

 For example, the common-law doctrines of conflict of laws worked out in a unitary system to deal with conflicts between domestic and truly foreign law may not apply unmodified in conflicts between the laws of states within our federal system which are affected by the full faith and credit or other relevant clause of the Constitution.

 12 U. S. C. § 264 (d).

 12 U. S. C. § 264 (i), (k), (l).

 Compare Central Vermont Ry. Co. v. White, 238 U. S. 507; Southern Express Co. v. Byers, 240 U. S. 612; Chesapeake & Ohio Ry. Co. v. Kelley, 241 U. S. 485; Western Union Telegraph Co. v. Boegli, 251 U. S. 315; Western Union Telegraph Co. v. Esteve Bros. & Co., 256 U. S. 566; Western Union Telegraph Co. v. Priester, 276 U. S. 252; Chesapeake & Ohio Ry. Co. v. Kuhn, 284 U. S. 44; Local Loan Co. v. Hunt, 292 U. S. 234; Jenkins v. Kurn, 313 U. S. 256; Royal Indemnity Co. v. United States, 313 U. S. 289; O’Brien v. Western Union Telegraph Co., 113 F. 2d 539.

 Campbell v. Haverhill, 155 U. S. 610; McClame v. Rankin, 197 U. S. 154; Chattanooga Foundry v. Atlanta, 203 U. S. 390; O’Sullivan v. Felix, 233 U. S. 318; Seaboard Air Line Ry. Co. v. United States, 261 U. S. 299; Brown v. United States, 263 U. S. 78; United States v. Guaranty Trust Co., 293 U. S. 340; Board of Commissioners v. United States, 308 U. S. 343; Rawlings v. Ray, 312 U. S. 96; Just v. Chambers, 312 U. S. 383.

 The reasons given by the opinion of Mr. Justice Frankfurter for declining to apply the doctrine of equitable estoppel seem inadequate. To insist that the 15,000 note in question does not appear from the record to have had “any relation to the bank’s insolvency or the Corporation’s undertaking as insurer” is to part company with the realities of the period in question, when small banks — and large ones as well— were operating on perilously narrow margins of solvency, if any. To hold that the Corporation is to be judged as a mere private pledgee of a particular piece of paper is to ignore the comprehensive public character of its function. And the wrong to it was sustained when it be*475came committed to insure the bank — not later when, as a step to working its way out of loss, it took assets already equitably its own as a pledge and put up money for a plan to continue banking facilities to the community. To say that the note had been charged off is to stress the irrelevant. This was, admittedly, long after the Corporation had become bound as the bank’s insurer. It also attributes to the “charge-off” an unwarranted significance. The classification of this paper as inadmissible for a commercial bank would have been justified by its obvious “slow” character, or may have been due to mere lack of information as to the ability of a nonresident debtor to meet it. It is no acknowledgment or notice of a legal defect in the paper.