upon hearing, the district court entered a decree dismissing the bill; from this decree appeal was taken to this court. [199] No objection is made to the Federal jurisdiction, either original or appellate, by the parties to this suit, but that question will be first examined. The company is authorized to invest its funds in legal securities only. The attack upon the proposed investment in the bonds described is because of the alleged unconstitutionality of the acts of Congress undertaking to organize the banks and authorize the issue of the bonds. No other reason is set forth in the bill as a ground of objection to the proposed investment by the board of directors, acting in the company's behalf. As diversity of citizenship is lacking, the jurisdiction of the district court depends upon whether the cause of action set forth arises under the Constitution or laws of the United States. Judicial Code, § 24.

The general rule is that, where it appears from the bill or statement of the plaintiff that the right to relief depends upon the construction or application of the Constitution or laws of the United States, and that such Federal claim is not merely colorable, and rests upon a reasonable foundation, the district court has jurisdiction under this provision.

At an early date, considering the grant of constitutional power to confer jurisdiction upon the Federal courts, Chief Justice Marshall said:

"a case in law or equity consists of the right of the one party, as well as of the other, and may truly be said to arise under the Constitution or a law of the United States whenever its correct decision depends upon the construction of either," Cohen v. Virginia, 6 Wheat. 264, 379, 5 L. ed. 257, 285; and again, when "the right or title set up by the party may be defeated by one construction of the Constitution or law of the United States, and sustained by the opposite construction." Osborn v. Bank of United States, 9 Wheat. 738, 822, 6 L. ed. 204, 224. These definitions were quoted and approved in Patton v. Brady, 184 U S. 608, 611, 46 L. ed. 713, 715, 22 Sup. Ct. Rep. 493, citing Little York Gold-Washing & Water Co. v. Keyes, 96 U. S. 199, 201, 24 L. ed. 656, 658; Tennessee v. Davis, 100 U. S. 257, 25 L. ed. 648; White v. Greenhow, 114 U. S. 307, 29 L. ed. 199, 5 Sup. Ct. Rep. 923, 962; New Orleans, M. & T. R. Co. v. Mississippi, 102 U. S. 135, 139, 26 L. ed. 96, 97.

[200] This characterization of a suit arising under the Constitution or laws of the United States has been followed in many decisions of this and other Federal courts. See Macon Grocery Co. v. Atlantic Coast Line R. Co. 215 U. S. 501, 506, 507, 54 L ed. 300, 303, 304, 30 Sup. Ct. Rep. 184; Shulthis v. McDougal, 225 U. S. 569, ¶ 3, 56 L. ed. 1210, 32 Sup. Ct. Rep. 704. The principle was applied in Brushaber v. Union P. R. Co. 240 U. S. 1, 60 L. ed. 493, LR.A.1917D, 414, 36 Sup. Ct. Rep. 236, Ann. Cas. 1917B, 713, in which a shareholder filed a bill to enjoin the defendant corporation from complying with the income tax provisions of the Tariff Act of October 3, 1913. In that case, while there was diversity of citizenship, a direct appeal to this court was sustained because of the constitutional questions raised in the bill, which had been dismissed by the court below. The repugnancy of the statute to the Constitution of the United States, as well as grounds of equitable jurisdiction, were set forth in the bill, and the right to come here on direct appeal was sustained because of the averments based upon constitutional objections to the act. Reference was made to Pollock v. Farmers' Loan & T. Co. 157 U. S. 429, 39 L ed. 759, 15 Sup. Ct. Rep. 673, where a similar shareholder's right to sue was maintained, and a direct appeal to this court from a decree of the circuit court was held to be authorized.

In the Brushaber Case the Chief Justice, speaking for the court, said:

"The right to prevent the corporation from returning and paying the tax was based upon many averments as to the repugnancy of the statute to the Constitution of the United States, of the peculiar relation of the corporation to the stockholders, and their particular interests resulting from many of the administrative provisions of the assailed act, of the confusion, wrong, and multiplicity of suits, and the absence of all means of redress which would result if the corporation paid the tax and complied with the act in other respects without protest, as it was alleged it was its intention to do. To put out of the way a question of jurisdiction, we at once say that, in view of these averments and [201] the ruling in Pollock v. Farmers' Loan & T. Co. supra, sustaining the right of a stockholder to sue to restrain a corporation, under proper averments, from voluntarily paying a tax charged to be unconstitutional, on the ground that to permit such a suit did not violate the prohibitions of § 3224, Rev. Stat.,

Comp. Stat. § 5947, 3 Fed. Stat. Anno. 2d ed. p. 1032, against enjoining the enforcement of taxes, we are of opinion that the contention here made, that there was no jurisdiction of the cause, since to entertain it would violate the provisions of the Revised Statutes referred to, is without merit.

"Aside from averments as to citizenship and residence, recitals as to the provisions of the statute, and statements as to the business of the corporation, contained in the first ten paragraphs of the bill, advanced to sustain jurisdiction, the bill alleged twenty-one constitutional objections specified in that number of paragraphs or subdivisions. As all the grounds assert a violation of the Constitution, it follows that, in a wide sense, they all charge a repugnancy of the statute to the 16th Amendment, under the more immediate sanction of which the statute was adopted."

The jurisdiction of this court is to be determined upon the principles laid down in the cases referred to. In the instant case the averments of the bill show that the directors were proceeding to make the investments in view of the act authorizing the bonds about to be purchased, maintaining that the act authorizing them was constitutional, and the bonds valid and desirable investments. The objecting shareholder avers in the bill that the securities were issued under an unconstitutional law, and hence of no validity. It is, therefore, apparent that the controversy concerns the constitutional validity of an act of Congress which is directly drawn in question. The decision depends upon the determination of this issue.

Mortgage, to Equalize Rates of Interest upon Farm Loans, to Furnish a Market for United States Bonds, to Create Government Depositaries and Financial Agents for the United States, and for Other Purposes."

The administration of the act is placed under the direction and control of a Federal Farm Loan Bureau established at the seat of government in the Treasury Department, under the general supervision of the Federal Loan Board, consisting of the Secretary of the Treasury and four members appointed by the President, by and with the advice and consent of the Senate. The United States is divided into twelve districts for the purpose of establishing Federal land banks. Each of the banks must have a subscribed capital of not less than $750,000, divided into shares of $5 each, which may be subscribed for by any individual, firm, or corporation, or by the government of any state, or of the United States. No dividends shall be paid on the stock owned by the United States, but all other stock shall share in dividend distributions without preference. The Federal Farm Loan Board is to designate five directors, who shall temporarily manage the affairs of each Federal land bank, and who shall prepare an organization certificate which, when approved by the Federal Farm Loan Board, and filed with the Farm Loan Commissioner, [203] shall operate to create the bank a body corporate. The Federal Farm Loan Board is required to open books of subscription for the capital stock of each Federal land bank, and if, within thirty days thereafter, any part of the minimum capitalization of $750,000 of any such bank shall remain unsubscribed, it is made the duty of the Secretary of the Treasury to subscribe the balance on behalf of the United States.

The general allegations as to the interest of the shareholder, and his right to have an injunction to prevent the purchase of the alleged unconstitutional securities by misapplication [202] of the funds of the corporation, give jurisdic- The amendment of January 18, 1918, tion under the principles settled in Pol- authorizes the Secretary of the Treasury lock v. Farmers' Loan & T. Co. and to purchase bonds issued by Federal Brushaber v. Union P. R. Co. supra. We land banks, and provides that the temare, therefore, of the opinion that the dis-porary organization of any such bank trict court had jurisdiction under the averments of the bill, and that a direct appeal to this court upon constitutional grounds is authorized.

We come to examine the questions presented by the attack upon the constitutionality of the legislation in question. The Federal Farm Loan Act is too lengthy to set out in full. It is entitled: "An Act to Provide Capital for Agricultural Development, to Create Standard Forms of Investment Based upon Farm

shall be continued so long as any farm loan bonds shall be held by the Treasury, and until the subscription to stock in such bank by national farm loan associations shall equal the amount of the stock held by the United States government. When these conditions are complied with, a permanent organization is to take over the management of the bank, consisting of a board of directors composed of nine members, three of whom shall be known as district direc

tors, and shall be appointed by the Farm Loan Board, who shall represent the public interest, six of whom, to be known as local directors, shall be chosen by, and be representative of, national farm loan associations.

upon the full payment of the mortgage loan. In such event, the national farm loan association must pay off at par and retire the corresponding shares of its stock which were issued when the land bank stock so retired was issued; but it is further provided that the capital stock of the land bank shall not be reduced to less than 5 per cent of the principal of the outstanding farm [205] loan bonds issued by it. The shares in national farm loan associations shall be of the par value of $5 each.

Federal land banks are empowered to invest their funds in the purchase of qualified first mortgages on farm lands situated within the Federal land bank district within which they are organized or acting. Loans on farm mortgages are to be made to co-operative borrowers through the organization of corporations At least 25 per cent of that part of known as national farm loan associa- the capital of any Federal land bank for tions, by persons desiring to borrow which stock is outstanding in the name money on farm mortgage security under of national farm loan associations must the terms of the act. Ten or more nat- be held in quick assets. Not less than ural persons who are the owners of or 5 per cent of such capital must be investare about to become the owners of farmed in United States government bonds. land qualified as security for mortgage The loans which Federal land banks loans, and who desire to borrow money may make upon first mortgages on farm on farm mortgage security, may unite to lands are provided for in § 12 of the act. form a national farm [204] loan associa- By § 13, these banks are empowered, subtion. The manner of forming these as-ject to the provisions of the act, to issue sociations, and the qualifications for membership, are set out in the act.

A loan desired by each such person must be for not more than $10,000 nor less than $100, and the aggregate of the desired loans not less than $20,000. The application for loan must be accompanied by subscriptions to stock of a Federal land bank equal to 5 per cent of the aggregate sum desired on the mortgage loan. Provision is made for appraisal of the land, and report to the Federal Farm Loan Board. No persons but borrowers on farm loan mortgages shall be members or shareholders of national farm loan associations.

Shareholders in farm loan associations are made individually responsible for the debts of the association to the extent of the amount of the stock owned by them respectively, in addition to the amount paid in and represented by their shares.

When any national farm loan association shall desire to secure for any member a loan on first mortgage from the Federal land bank in its district, it must subscribe to the capital stock of the Federal land bank to an amount of 5 per cent of such loan, which capital stock shall be held by the Federal land bank as collateral security for the payment of the loan, the association shall be paid any dividends accruing and payable on the capital stock while it is outstanding. Such stock may, in the discretion of the directors, and with the approval of the Federal Farm Loan Board, be paid off at par and retired, and shall be so retired

and sell farm loan bonds of the kind described in the act, and to invest funds in their possession in qualified first mortgages on farm lands, to receive and to deposit in trust with the Farm Loan Registrar, to be held by him as collateral security for farm loan bonds, first mortgages upon farm lands, and, with the approval of the Farm Loan Board, to issue and to sell their bonds secured by the deposit of first mortgages on qualified farm lands as collateral, in conformity with the provisions of § 18 of the act. By the amendment of January 18, 1918, the Secretary of the Treasury was empowered, during the years 1918 and 1919, to purchase farm loan bonds issued by Federal land banks to an amount not exceeding $100,000,000 each year, and any Federal land bank was authorized at any time to repurchase at par and accrued interest, for the purpose of redemption or resale, any of the bonds so purchased from it and held in the United States Treasury.

It is also provided that the bonds of any Federal land bank so purchased and held in the Treasury one year after the termination of the pending war shall, upon thirty days' notice from the Secretary of the Treasury, be redeemed and repurchased by such bank at par and accrued interest. By § 15 it is provided that whenever, after the act shall have been in effect for one year, it shall appear to the Federal Farm Loan Board that national farm loan [206] associations have not been formed and are not likely to be formed, in any locality, be

cause of peculiar local conditions, the board may, in its discretion, authorize Federal land banks to make loans on farm lands through agents approved by the board, on the terms and conditions and subject to the restrictions prescribed in that section.

joint stock land banks; in each case the issue is made subject to the approval of the Federal Farm Loan Board. The farm loan mortgages, or United States bonds, which constitute the collateral security for the bonds, must be deposited with the Farm Loan Registrar.

Section 26 of the act provides as fol

"That every Federal land bank and every national farm loan association, including the capital and reserve or surplus therein and the income derived therefrom, shall be exempt from Federal, state, municipal, and local taxation, except taxes upon real estate held, purchased, or taken by said bank or association under the provisions of section eleven and section thirteen of this act. First mortgages executed to Federal land banks, or to joint stock land banks, and farm loan bonds issued under the provisions of this act, shall be deemed and held to be instrumentalities of the government of the United States, and as such they and the income derived therefrom shall be exempt from Federal, state, municipal, and local taxation.

The act also authorizes the incorporation of joint stock land banks, with cap-lows: ital provided by private subscription. They are organized by not less than ten natural persons, and are subject to the requirements of the provisions of § 4 of the act so far as applicable. The board of directors shall consist of not less than five members. Each shareholder shall have the same voting privileges as the holders of shares in national banking associations, and shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts, and engagements of such bank to the extent of the amount of stock owned by them at the par value thereof, in addition to the amount paid in and represented by their shares. The joint stock land bank is authorized to do business when capital stock to the amount of $250,000 has been subscribed, and one half paid in cash, the balance remaining subject to call by the board of directors, the charter to be issued by the Federal Farm Loan Board. No bonds shall be issued until the capital stock is entirely paid up. Except as otherwise provided, joint stock land banks shall have the powers of and be subject to all the restrictions and conditions imposed on Federal land banks by the act, so far as such conditions or restrictions | are applicable.

Federal land banks may issue farm loan bonds up to twenty times their capital and surplus. Joint stock land banks are limited to the issue of farm loan bonds not in excess of fifteen times the amount of their capital and surplus. Joint stock land banks can only loan on first mortgages upon land in the state where located, or in a state [207] contiguous thereto. No loan on mortgage may be made by any bank at a rate exceeding 6 per cent per annum, exclusive of amortization payments. Joint stock land banks shall in no case charge a rate of interest on farm loans which shall exceed by more than 1 per cent the rate established by the last series of farm loan bonds issued by them, which rate shall not exceed 5 per cent per annum. Provisions for the issue of farm loan bonds secured by first mortgages on farm lands or United States bonds, as collateral, are made for Federal land banks and

"Nothing herein shall prevent the shares in any joint stock land bank from being included in the valuation of the personal property of the owner or holder of such shares, in assessing taxes imposed by authority of the state within which the bank is located; but such assessment and taxation shall be in manner and subject to the conditions and limitations contained in section fifty-two [208] hundred and nineteen of the Revised Statutes (Comp. Stat. § 9784, 6 Fed. Stat. Anno. 2d ed. p. 796), with reference to the shares of national banking associations.

"Nothing herein shall be construed to exempt the real property of Federal and joint stock land banks and national farm loan associations from either state, county, or municipal taxes, to the same extent, according to its value, as other real property is taxed."

Since the decision of the great cases of M'Culloch v. Maryland, 4 Wheat. 316, 4 L. ed. 579, and Osborn v. Bank of United States, 9 Wheat. 738, 6 L. ed. 204, it is no longer an open question that Congress may establish banks for national purposes, only a small part of the capital of which is held by the government, and a majority of the ownership in which is represented by shares of capital stock, privately owned and held; the principal business of such banks being private banking, conducted with the usual methods of such business. While the express power to create a bank or incorporate one

is not found in the Constitution, the | Secretary of the Treasury, and has aucourt, speaking by Chief Justice Marshall, thorized their employment as financial in M'Culloch v. Maryland, found author- agents of the government, and the banks ity so to do in the broad general powers are required to perform such reasonable conferred by the Constitution upon the duties, as depositaries of public moneys Congress to levy and collect taxes, to bor- and financial agents, as may be required row money, to regulate commerce, to pay of them. The Secretary of the Treasury the public debts, to declare and conduct shall require of the Federal land banks war, to raise and support armies, and to and the joint stock land banks, thus provide and maintain a navy, etc. Con- designated, satisfactory security, by the gress, it was held, had authority to use deposit of United States bonds or othersuch means as were deemed appropriate wise, for the safe-keeping and prompt to exercise the great powers of the gov- payment of the public money deposited ernment by virtue of article 1, § 8, clause with them, and [210] for the faithful 18 of the Constitution, granting to Con- performance of their duties as the finangress the right to make all laws necessary cial agents of the government. and proper to make the grant effectual. In First Nat. Bank v. Fellows, 244 U. S. 416, 419, 61 L. ed. 1233, 1237, L.R.A. 1918C, 283, 37 Sup. Ct. Rep. 734, Ann. Cas. 1918D, 1169, the Chief Justice, speaking for the court, after reviewing M'Culloch v. Maryland and Osborn v. Bank of United States, and considering the power given to Congress to pass laws to make the specific powers granted effectual, said:

"In terms it was pointed out that this broad authority [209] was not stereotyped as of any particular time, but endured, thus furnishing a perpetual and living sanction to the legislative authority within the limits of a just discretion enabling it to take into consideration the changing wants and demands of society, and to adopt provisions appropriate to meet every situation which it was deemed required to be provided for."

That the formation of the bank was required, in the judgment of the Congress, for the fiscal operations of the government, was a principal consideration upon which Chief Justice Marshall rested the authority to create the bank; and for that purpose, being an appropriate measure in the judgment of the Congress, it was held not to be within the authority of the court to question the conclusion reached by the legislative branch of the govern


Upon the authority of M'Culloch v. Maryland and Osborn v. Bank of United States, the national banking system was established, and upon them this court has rested the constitutionality of the legislation establishing such banks. Farmers & M. Nat. Bank v. Dearing, 91 U. S. 29, 33, 34, 23 L. ed. 196, 198, 199.

Congress has seen fit in § 6 of the act to make both classes of banks, when designated for that purpose by the Secretary of the Treasury, depositaries of public money, except receipts from customs, under regulations to be prescribed by the

Section 6 also provides that no government funds deposited under the provisions of the section shall be invested in mortgage loans or farm loan bonds.

It is said that the power to designate these banks as such depositaries has not been exercised by the government, and that the Federal land banks have acted as Federal agents only in the case of loans of money for seed purposes, made in the summer of 1918, to which we have already referred. But the existence of the power under the Constitution is not determined by the extent of the exercise of the authority conferred under it. Congress declared it necessary to create these fiscal agencies, and to make them authorized depositaries of public money. Its power to do so is no longer open to question.

But, it is urged, the attempt to create these Federal agencies, and to make these banks fiscal agents and public depositaries of the government, is but a pretext. But nothing is better settled by the decisions of this court than that, when Congress acts within the limits of its constitutional authority, it is not the province of the judicial branch of the government to question its motives. Veazie Bank v. Fenno, 8 Wall. 533, 541, 19 L. ed. 482, 485; McCray v. United States, 195 U. S. 27, 49 L. ed. 78, 24 Sup. Ct. Rep. 769, 1 Ann. Cas. 561; Flint v. Stone Tracy Co. 220 U. S. 107, 147, 153, 156, 55 L. ed. 389, 411, 414, 415, 31 Sup. Ct. Rep. 342, Ann. Cas. 1912B, 1312, and cases cited.

That Congress has seen fit, in making these banks fiscal agencies and depositaries of public moneys, to grant to them banking powers of a limited character, in nowise detracts from the authority of Congress to use them for the governmental purposes named, if it sees fit to do so. A bank may be organized with or without the authority to issue currency. It may be authorized to receive deposits in only a limited way. Speaking generally, a bank is a moneyed insti

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