tution to facilitate the borrowing, lending,, the tax exemption so as to restrain the and caring for money. But whether power of the state. Of a similar conten[211] technically banks, or not, these tion made in M'Culloch v. Maryland, organizations may serve the governmental Chief Justice Marshall uttered his often purposes declared by Congress in their creation. Furthermore, these institutions are organized to serve as a market for United States bonds. Not less than 5 per cent of the capital of the Federal land banks, for which stock is outstanding to farm loan associations, is required to be invested in United States bonds. Both kinds of banks are empowered to buy and sell United States bonds.

In First Nat. Bank v. Fellows, supra, this court sustained the power of Congress to enable a national bank to transact business, which, by itself considered, might be beyond the power of Congress to authorize. In that case it was held to be within the authority of Congress to permit national banks to exercise, by permission of the Federal Reserve Board, when not in contravention of local law, the office of trustee, executor, administrator, or registrar of stocks or bonds.

quoted statement: "That the power to tax involves the power to destroy; that the power to destroy may defeat and render useless the power to create; that there is a plain repugnance, in conferring on one government a power to control the constitutional measures of another, which other, with respect to those very measures, is declared to be supreme over that which exerts the control,-are propositions not to be denied." 4 Wheat. 431.

The same principle has been recognized in the National Bank Cases, declaring the power of the states to tax the property and franchises of national banks only to the extent authorized by the laws of Congress. Owensboro Nat. Bank v. Owensboro, 173 U. S. 664, 43 L. ed. 850, 19 Sup. Ct. Rep. 537, involved the validity of a franchise tax in Kentucky on national banks. In that case this court declared (pp. 668, 669) that the states We therefore conclude that the creation were wholly without power to levy any of these banks, and the grant of authority tax directly or indirectly upon national to them to act for the government as banks, their property, assets, or frandepositaries of public moneys and pur-chises, except so far as the permissive chasers of government bonds, brings them within the creative power of Congress, although they may be intended, in connection with other privileges and duties, to facilitate the making of loans upon farm security at low rates of interest. This does not destroy the validity of these enactments any more than the general banking powers destroyed the authority of Congress to create the United States bank, or the authority given to national banks | to carry on additional activities destroyed the authority of Congress to create those institutions.

In the brief filed upon reargument, counsel for the appellant seem to admit the power of Congress to appropriate money for the direct purposes named, and in that brief they say: "Tax exemption is the real issue sought to be settled here." Deciding, as we do, that these institutions [212] have been created by Congress within the exercise of its legitimate authority, we think the power to make the securities here involved tax exempt necessarily follows. This principle was settled in 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. That the Federal government can, if it sees fit to do so, exempt such securities from taxation, seems obvious upon the clearest principles. But it is said to be an invasion of state authority to extend

legislation of Congress allowed such taxation; and the court declared that the right granted to tax the real estate of such banks, and the shares in the names of the shareholders, constituted the extent of the permission given by Congress, and any tax beyond these was declared to be void.

[213] In Farmers' & M. Sav. Bank v. Minnesota, 232 U. S. 516, 58 L. ed. 706, 34 Sup. Ct. Rep. 354, this court held that a state may not tax bonds issued by the municipality of a territory; that to tax such bonds as property in the hands of the holder is, in the last analysis, an imposition upon the right of a municipality to issue them.

The exercise of such taxing power by the states might be so used as to hamper and destroy the exercise of authority conferred by Congress, and this justifies the exemption. If the states can tax these bonds, they may destroy the means provided for obtaining the necessary funds for the future operation of the banks. With the wisdom and policy of this legislation we have nothing to do. Ours is only the function of ascertaining whether Congress, in the creation of the banks, and in exempting these securities from taxation, Federal and state, has acted within the limits of its constitutional authority. For the reasons stated, we think the contention of the government, and of the ap

pellees, that these banks are constitutionally organized and the securities here involved legally exempted from taxation, must be sustained.

It follows that the decree of the District Court is affirmed.

Mr. Justice Brandeis took no part in the consideration or decision of this case. Mr. Justice Holmes, dissenting:

No doubt it is desirable that the question raised in this case should be set at rest, but that can be done by the courts of the United States only within the limits of the jurisdiction conferred upon them by the Constitution and the laws of the United States. As this suit was brought by a citizen of Missouri against a Missouri corporation, the [214] single ground upon which the jurisdiction of the district court can be maintained is that the suit "arises under the Constitution or laws of the United States," within the meaning of § 24 of the Judicial Code. I am of opinion that this case does not arise in that way, and therefore that the bill should have been dismissed.

It is evident that the cause of action arises not under any law of the United States, but wholly under Missouri law. The defendant is a Missouri corporation, and the right claimed is that of a stock holder to prevent the directors from doing an act, that is, making an investment, alleged to be contrary to their duty. But the scope of their duty depends upon the charter of their corporation and other laws of Missouri. If those laws had authorized the investment in terms, the plaintiff would have had no case, and this seems to me to make manifest what I am unable to deem even de batable,-that, as I have said, the cause of action arises wholly under Missouri law. If the Missouri law authorizes or forbids the investment according to the determination of this court upon a point under the Constitution or acts of Congress, still that point is material only because the Missouri law saw fit to make it so. The whole foundation of the duty is Missouri law, which, at its sole will, incorporated the other law as it might incorporate a document. The other law or document depends for its relevance and effect not on its own force, but upon the law that took it up; so I repeat once more, the cause of action arises wholly from the law of the state.

65 L. ed.

But it seems to me that a suit cannot be said to arise under any other law than that which creates the cause of action. It may be enough that the law relied upon creates a part of the cause of action, although not the whole, as held in Osborn v. Bank of United States, 9 Wheat. 738, 819-823, 6 L. ed. 204, 223, 224, which, perhaps, is all that is meant by the less guarded expressions in Cohen v. Virginia, 6 Wheat. 264, 379, 5 L. ed. 257, 285. I am content to assume this to be so, although the Osborn Case [215] has been criticized and regretted. But the law must create at least a part of the cause of action by its own force, for it is the suit, not a question in the suit, that must arise under the law of the United States. The mere adoption by a state law of a United States law as a criterion or test, when the law of the United States has no force proprio vigore, does not cause a case under the state law to be also a case under the law of the United States, and so it has been decided by this court again and again. Miller v. Swann (Miller v. Anderson) 150 U. S. 132, 136, 137, 37 L. ed. 1028, 1030, 14 Sup. Ct. Rep. 52; Louisville & N. R. Co. v. Western U. Teleg. Co. 237 U. S. 300, 303, 59 L. ed. 965, 966, 35 Sup. Ct. Rep. 598. See also Shoshone Min. Co. v. Rutter, 177 U. S. 505, 508, 509, 44 L. ed. 864, 865, 866, 20 Sup. Ct. Rep. 726.

I find nothing contrary to my views in Brushaber v. Union P. R. Co. 240 U. S. 1, 10, 60 L. ed. 493, 498, L.R.A.1917D, 414, 36 Sup. Ct. Rep. 236, Ann. Cas. 1917B, 713. It seems to me plain that the objection that I am considering was not before the mind of the court, or the subject of any of its observations, if open. I am confirmed in my view of that case by the fact that in the next volume of reports is a decision, reached not without discussion, and with but a single dissent, that "a suit arises under the law that creates the cause of action." That was the ratio decidendi of American Well Works Co. v. Layne & B. Co. 241 U. S. 257, 260, 60 L. ed. 987, 989, 36 Sup. Ct. Rep. 585. I know of no decisions to the contrary, and see no reason for overruling it now.

Mr. Justice McReynolds concurs in this dissent. In view of our opinion that this court has no jurisdiction, we express no judgment on the merits.


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2. Whether or not a ship owned by a foreign government, and, at the time of arrest, in the possession of such government, is subject to the process of a Federal district court, sitting as a court of admiralty, is a jurisdictional question in the sense of the provision of the Judicial Code, § 238, for an appeal or writ of error from a district court directly to the Federal Supreme Court in any case in which the jurisdiction of the lower court may be in



foreign government.

objection by

APPEAL from the District Court of

the United States for the Southern District of New York to review a decree which released a vessel from arrest upon suggestion by a foreign Ambassador that the ship was owned by his government, and at the time of arrest was in the possession of such government. Reversed.

The facts are stated in the opinion.

Messrs. Oscar R. Houston and Harold V. Amberg argued the cause, and, with Mr. D. Roger Englar, filed a brief for petitioner:

The doctrine of admissibility and conclusiveness of direct ambassadorial suggestions arises out of a failure to distinguish between the several functions of an ambassador.

4 Moore, International Law Dig. pp. 445, 584, 631, 635, 642, 680.

If the ambassador, filing the direct suggestion in the instant cases, is presenting a political question, the suggestion is improper and impotent.

Underhill v. Hernandez, 168 U. S. 250, [For other cases, see Appeal and Error, 895-42 L. ed. 456, 18 Sup. Ct. Rep. 83; Jones 914, in Digest Sup. Ct. 1908.] V. United States, 137 U. S. 202, 34 L. ed. 691, 11 Sup. Ct. Rep. 80; Mighell v. Sultan [1894] 1 Q. B. 149, 63 L. J. Q. B. N. S. 593, 9 R. 447, 70 L. T. N. S. 64, 58 J. P. 244; Williams v. Suffolk Ins. Co. 13 Pet. 415, 10 L. ed. 226.

3. The objection that a vessel libeled was owned by a foreign government, and, at the time of arrest, was in the possession of such government, should come through

official channels of the United States, and not by way of a direct suggestion of the Ambassador of such foreign government, and an accompanying certificate of the Secretary of State that such Ambassador is the duly accredited representative of such foreign government gives no sanction to such suggestion.

[No. 317.]

If the foreign ambassador, in filing the suggestion, is presenting a judicial question, the suggestion is inadmissible, in that it does not meet the requirements of the ordinary rules of evidence.

22 C. J. p. 791; Church v. Hubbart, 2 Cranch, 187, 2 L. ed. 249; The Alice, 12 Fed. 923; Edison Electric Light Co. v. Electric Engineering Supply Co. 60 Fed. 401; United States v. Lew Poy Dew, 119

Argued January 26 and 27, 1921. Decided Fed. 786; 22 C. J. § 922, p. 809.

February 28, 1921.

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Mr. John M. Woolsey argued the cause and filed a brief for respondent:

This court has not jurisdiction on this appeal because it was improperly taken to this court direct. The question of the jurisdiction of the district court as a Federal court was not involved, and, hence, the appeal should have been taken to the circuit court of appeals.

Note. As to what judgments are final for purposes of review-see notes to Gibbons v. Ogden, 5 L. ed. U. S. 302; Schlosser v. Hemphill, 49 L. ed. U. S. 1001; and Detroit & M. R. Co. v. Michigan R. Commission, 60 L. ed. U. S. 802. On direct review in the Federal Supreme Court of judgments of district or circuit courts-see notes to Gwin V. Carey v. Houston, & T. C. R. Co. 150 United States, 46 L. ed. U. S. 741; B. U. S. 170, 37 L. ed. 1041, 14 Sup. Ct. Altman & Co. v. United States, 56 L. ed. Rep. 63; Farrugia v. Philadelphia & R. U. S. 894; and Berkman v. United States, R. Co. 233 U. S. 352, 58 L. ed. 996, 34 63 L. ed. U. S. 877. Sup. Ct. Rep. 591; De Rees v. Costaguta, 254 U. S. 166, ante, 202, 41 Sup. Ct. Rep. 69; Bien v. Robinson, 208 U. S. 423, 52 L. ed. 556, 28 Sup. Ct. Rep. 379; Scully v. Bird, 209 U. S. 481, 52 L. ed. 899, 28

1The record title in this case is Giovanni Luzzato and Joseph G. Luzzato, Copartners, Trading under the Firm Name of Giovanni Luzzato & Son v. Steamship Pesaro, etc.

Sup. Ct. Rep. 597; Workman v. New | 48 L. J. Prob. N. S. 13, 40 L. T. N. S. York, 179 U. S. 570, 572, 574, 45 L. ed. 219, 27 Week. Rep. 739; The Ester, 190 324, 325, 21 Sup. Ct. Rep. 212; The At- Fed. 216; The Belgenland, 114 U. S. 355, tualita, 152 C. C. A. 43, 238 Fed. 909; 364, 365, 29 L. ed. 152, 155, 156, 5 Sup. The Resolute, 168 U. S. 438, 442, 42 L. Ct. Rep. 860; Rocca v. Thompson, 223 U. ed. 533, 536, 18 Sup. Ct. Rep. 112. S. 317, 56 L. ed. 453, 32 Sup. Ct. Rep. 207.

The special appearance of the Italian Ambassador, through proctors, for the purpose of claiming immunity, and for no other purpose, was a proper procedure for him to follow in the vindication of his Sovereign's prerogatives when a vessel owned by that Sovereign was arrested by process of our courts.

The Anne, 3 Wheat. 435, 445, 4 L. ed. 428, 430.

The assent of the State Department has been secured, because the Ambassador presented to the State Department his special appearance, which contained the reasons for his intervention and a statement of the relief sought, and the State Department annexed to his special appearance a certificate of his standing as

accredited Ambassador.

United States v. Benner, Baldw. 234, Fed. Cas. No. 14,568; United States v. Liddle, 2 Wash. C. C. 205, Fed. Cas. No. 15, 598; United States v. Ortega, 4 Wash. C. C. 531, Fed. Cas. No. 15,971.

If the Ambassador's appearance be considered an appearance as amicus curiæ, it was in all respects proper for the court to allow it, for each court has an inherent right, in the exercise of its judicial discretion, to allow appearances before it of amici curiæ.

Employers' Liability Cases (Howard v. Illinois C. R. Co.) 207 U. S. 463, 490, 52 L. ed. 297, 305, 28 Sup. Ct. Rep. 141; Dillon v. Strathearn S. S. Co. 248 U. S. 182, 63 L. ed. 199, 39 Sup. Ct. Rep. 83; Strathearn S. S. Co. v. Dillon, 252 U. S. 348, 64 L. ed. 607, 40 Sup. Ct. Rep. 350; The Claveresk, 264 Fed. 276; The Carlo Poma, 170 C. C. A. 345, 259 Fed. 369; Muir v. Chatfield, 166 C. C. A. 352, 255 Fed. 24; Northern Securities Co. v. United States, 191 U. S. 555, 556, 48 L. ed. 299, 24 Sup. Ct. Rep. 119; The Adriatic, 169 C. C. A. 622, 258 Fed. 902; The Strathearn, 168 C. C. A. 25, 256 Fed. 631; The Athanasios, 228 Fed. 558; The Strathearn, 239 Fed. 583; The Maipo, 252 Fed. 627; The Adriatic, 253 Fed. 489; The Roseric, 254 Fed. 154; Earn Line S. S. Co. v. Sutherland S. S. Co. 254 Fed. 127; The Santa Cruz (E. D. Va. June 28, 1919); Nanklivel v. Omsk All Russian Government (N. Y. L. J. Oct. 28, 1920); Marine Transport Service Co. v. Romanoff (N. Y. L. J. Feb. 1, 1918); The Constitution, L. R. 4, Prob. Div. 39,

Mr. Justice Van Devanter delivered

the opinion of the court:

The Pesaro, an Italian steamship which carried a shipment of olive oil from Genoa to New York, was sued in rem [217] in admiralty in the district court to enforce a claim for damage to that part of her cargo, the libel alleging that she was "a general ship engaged in the common carriage of merchandise by water, for hire." The usual process issued and the ship was arrested. Afterwards, Ambassador that the ship was owned by upon a direct suggestion by the Italian the Italian government, and at the time of the arrest was in its possession, and therefore was not subject to the court's process, the court vacated the arrest. The libellants objected that a direct suggestion by the Ambassador was not admissible, and that, to be entertained, the suggestion should come through official channels of the United States; but the objection was overruled. The libellants then requested permission to traverse the suggestion and to make a showing in opposition; but the request was denied, the court holding that to controvert or question the suggestion was not allowable. The libellants appealed directly to this court, and in that connection the district court certified the ground of its decision as follows:

"I do certify that the vessel was released from arrest by me by a final decree herein, solely because I deemed that the United States district court, sitting as a court of admiralty, has no jurisdiction to subject to its process a steamship which is, by the suggestion of the said Italian Ambassador, filed in this court, represented to be the public property and in the possession of the Kingdom of Italy."

Our authority to entertain the appeal is challenged upon two grounds. One is that the decree is not final, because it does not dismiss the libel. That it does not formally do so is true, but this is not decisive. The suit is in rem,-is against the ship. The decree holds for naught the process under which the ship was arrested, declares she is not subject to any such process, and directs her release,-in other words, dismisses her without day. Thus the decree ends the

suit as effectually as if it formally dis-
missed the libel. [218] Obviously, there-
fore, it is final. That it was intended to
be so is shown by the court's certificate.
The other ground is that the question
raised and decided was not a jurisdic-
tional one in the sense of the statute,
Judicial Code, § 238, providing for an
appeal or writ of error from a district
court directly to this court "in any case
in which the jurisdiction of the court
may be in issue." But we think it was
such a question, because it directly con-
cerned the power of the district court, as
defined by the laws of the United States,
to entertain and determine the suit.
The Jefferson, 215 U. S. 130, 137, 138, 54
L. ed. 125, 128, 129, 30 Sup. Ct. Rep. 54,
17 Ann. Cas. 907; The Ira M. Hedges
(Lehigh Valley R. Co. v. Cornell S. B.
Co.) 218 U. S. 264, 270, 54 L. ed. 1039,
1040, 31 Sup. Ct. Rep. 17, 20 Ann. Cas.
1235; United States v. Congress Constr.
Co. 222 U. S. 199, 56 L. ed. 163, 32 Sup.
Ct. Rep. 44. By the Judicial Code, § 24,
cl. 3, the district courts are invested
with original jurisdiction of "all civil
causes of admiralty and maritime juris-
diction; " and this is a suit of that char-
acter. Whether Congress intended this
statute should include suits against
ships such as the Pesaro is represented
to be in the Ambassador's suggestion,
when they are within the waters of the
United States, is as yet an open question.
The statute contains no express excep-
tion of them; but it may be that they
are impliedly excepted. The Exchange.
v. M'Faddon, 7 Cranch, 116, 136, 146, 3
L. ed. 287, 293, 296. If so, the implica-
tion is a part of the statute.
States v. Babbit, 1 Black, 55, 61, 17 L.
ed. 94, 96; South Carolina v. United
States, 199 U. S. 437, 451, 50 L. ed. 261,
265, 26 Sup. Ct. Rep. 110, 4 Ann. Cas.
737. Thus, the answer to the question
propounded to the district court involved
a construction of the statute, defining its
jurisdiction in admiralty.

that established his diplomatic status, it gave no sanction to the suggestion. The terms and form of the suggestion show that the Ambassador did not intend thereby to put himself or the Italian government in the attitude of a suitor, but only to present a respectful suggestion and invite the court to give effect to it. He called it a "suggestion," and we think it was nothing more. In these circumstances the libellants' objection that, to be entertained, the suggestion should come through official channels of the United States, was well taken. Re Muir, 254 U. S. 522, ante, 383. 41 Sup. Ct. Rep. 185. And see United States v. Lee, 106 U. S. 196, 209, 27 L. ed. 171, 177, 1 Sup. Ct. Rep. 240. With the suggestion eliminated, as it should have been, there obviously was no basis for holding that the ship was not subject to the court's process. What the decree should have been if the matters affirmed in the suggestion had been brought to the court's attention and established in an appropriate way we have no occasion to consider now. An opportunity so to present and establish them should be accorded when the case goes back, as it must.

Decree reversed.


(See S. C. Reporter's ed. 219–221.)


from district court diction below.



a court of ad

[For other cases, see Appeal and Error, 895914, in Digest Sup. Ct. 1908.]

1. Whether or not a ship owned by a foreign government, and, at the time of arrest, in the possession of such government, is subject to the process of a Federal district court sitting as miralty, is a jurisdictional question in the sense of the provision of the Judicial Code, $ 238, for an appeal or writ of error from a district court directly to the Federal We come, then, to consider whether Supreme Court in any case in which the the court erred in sustaining the Am-jurisdiction of the lower court may be in bassador's suggestion that the ship was not subject to its process. Apart from that suggestion, there was nothing pointing to an absence of jurisdiction. On the contrary, what was said in the libel pointed plainly to its presence. The suggestion was made directly to the court, and not through any official channel of the United States. True, it was accompanied by a certificate of the [219] Secretary of State, stating that the Ambassador was the duly accredited diplomatic representative of Italy, but while

Note.-On direct review in Federal

Supreme Court of judgments of district

or circuit courts-see notes to Gwin v. United States, 46 L. ed. U. S. 741; B. Altman & Co. v. United States, 56 L. ed. U. S. 894; and Berkman v. United States, 63 L. ed. U. S. 877.

1The record title in this case is Cavallaro v. Steamship Carlo Poma, Her Engines, etc.; Kingdom of Italy, Claimant.

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