author: HARRY E. WATKINS, District Judge.

text:
    ANDERSON v. BANKS-MILLER SUPPLY CO. et al.
    Civ. A. No. 3072.
    District Court, S. D. West Virginia.
    April 19, 1945.
    Philip P. Gibson, of Huntington, W. Va., and' Harry Kasfir, of Cincinnati, Ohio (Nichols, Wood, Marx & Ginter and Robert S. Marx, all of Cincinnati, Ohio, on the brief), for plaintiff.
    George S. Wallace, of Huntington, W. Va., for defendant Meyer Mittenthal.
   HARRY E. WATKINS, District Judge.

This action was instituted in 1936 by A. M. Anderson, receiver of the National Bank of Kentucky, of Louisville, against Banks-Miller Supply Company, Meyer Mittenthal and others, to recover an assessment on shares of such national bank held by Banco Kentucky Company, a bank stock holding company. The bank stock was held by such Banco company and the defendants were stockholders of Banco. This case has been continued, awaiting decision upon appeal of a companion case previously tried in the United States District Court at Louisville. The District Court (Anderson v. Abbott, 32 F.Supp. 328) and the Sixth Circuit Court of Appeals (127 F.2d 696) both held that the stockholders of Banco were not liable, and the Supreme Court reversed, holding that stockholders of Banco were liable for such assessment. Anderson v. Abbott, 321 U.S. 349, 64 S.Ct. 531, 88 L.Ed. 793. Following this decision, all of the defendants in this case, except the defendant Meyer Mittenthal, have settled the claims against them. As to the defendant Meyer Mittenthal, the case has been submitted to the court for decision upon an agreed statement of facts. By court order following a pre-trial conference the issues have been limited to the following special defenses now raised by Mittenthal:

1. Defendant Meyer Mittenthal was not, on February 20, 1931, the date of assessment against stockholders, the actual or beneficial owner of the 500 shares of Banco Kentucky stock mentioned therein because: (a) on the date of assessment the Banco Kentucky stock standing in defendant’s name had been pledged and delivered as collateral to Louisville Trust Company to secure payment of a loan; (b) at the date of such assessment defendant was insolvent and had defaulted in the payment of such loan, and (c) that in March, 1932, such stock was sold by the pledgee bank.

2. There was no valid assessment against Mittenthal because (a) the notice of assessment was sent to him in care of Jefferson Dry Goods Company, Louisville, Kentucky, whereas Mittenthal had left that city, and (b) it is stipulated that Mittenthal did not receive such notice of assessment, and consequently did not list the same as part of his indebtedness in his subsequent bankruptcy proceeding.

3. Mittenthal’s liability, if any, has been discharged in bankruptcy.

4. Mittenthal is, under no circumstances, liable for payment of any interest on such stock assessment.

Looking to the first defense, it appears from the stipulation of facts that defendant never owned or had issued to him any stock in the National Bank of Kentucky, and if he is held to be a stockholder in the National Bank of Kentucky, it must be based on the fact that he owned stock in Banco. The facts are not in dispute. On October 14, 1929, defendant purchased over the counter from Louisville Trust Company 500 shares of stock in Banco Kentucky Company for $12,500, of which $2,500 was paid in cash and the remainder was paid by a loan of $10,000 from Louisville Trust Company, secured by the 500 shares of Banco as collateral. The Banco stock was issued to defendant, endorsed by him and delivered to the Louisville Trust Company as collateral for the $10,000 note. This note was renewed from time to time and later consolidated with other debts owed by defendant to the Louisville Trust Company. The renewal note was for $30,000, payable on January 8, 1931, and was secured by the Banco stock and other collateral. By this time defendant had left Louisville and was insolvent. At maturity defendant defaulted in payment of principal and interest. The National Bank of Kentucky failed on November 17, 1930, and on February 20, 1931, the Comptroller of the Currency of the United States levied an assessment against the shareholders of that bank. The Banco stock held as collateral was not sold until March, 1932, more than a year after the stock assessment. Defendant’s first defense is that under these facts he was not the actual or beneficial owner of the Banco stock, because the stock registered in his name was pledged as collateral, that he was insolvent, and had defaulted in payment of his note at the time the stock assessment was made. This position is so obviously unsound that it deserves little attention. The fact that defendant endorsed his certificates and delivered them to the Louisville Trust Company as collateral does not affect his liability. Even the fact that a person has never received possession of the stock certificate is no defense to a statutory action in favor of creditors. Williams v. Stone, 4 Cir., 1928, 25 F.2d 831. That defendant had defaulted in the payment of his note, had become insolvent and left the city when the assessment was made, does not, as defendant seems to believe, strengthen his position to the slightest degree.

The second and third defenses are related and will be discussed together. Defendant admits that the Comptroller of the Currency levied the assessment, but says that he had left Louisville, did not receive the notice of assessment, and for that reason did not include the liability in his subsequent bankruptcy proceedings. Under these circumstances defendant says that there was no valid assessment .against him, and that his liability, if any, was discharged by his subsequent bankruptcy.

The agreed stipulation of facts shows that on March 20, 1931, the plaintiff as receiver of the National Bank of Kentucky sent out a notice to stockholders of Banco informing them of the assessment against the stockholders of the insolvent bank; that a demand for payment had been made against the receiver of Banco, and that it was the intention of the receiver of the insolvent bank “to proceed against you for the collection of the aforesaid assessment liability represented by the said trustees’ participation certificates held by said Banco Kentucky Company, to the extent that the undersigned, as Receiver of The National Bank of Kentucky, is unable to collect said assessment from Banco Kentucky Company or its Receiver”. This notice went by registered letter addressed to the defendant in care of Jefferson Dry Goods Company, 4th and Jefferson Streets, Louisville, Kentucky, the address shown on the records of the transfer agent of Banco as the address of defendant, which address was furnished to the plaintiff as receiver of the insolvent bank by the transfer agent. The return receipt of the registered letter was signed by some person other than defendant. Defendant never actually received the letter. Under these circumstances plaintiff did all that he was required to do. He mailed the notice to the last-known address of the defendant. It has been held that notice of such assessment is not a prerequisite to the maintenance of suit. Rankin v. Miller, D.C., 207 F. 602. It is the Comptroller’s order of assessment which is the basis of the suit. McClaine v. Rankin, 197 U.S. 154, 162, 25 S.Ct. 410, 49 L.Ed. 702, 3 Ann.Cas. 500. As was said in McDonald v. Thompson, 184 U.S. 71, 22 S.Ct. 297, 299, 46 L.Ed. 437, the claim that no demand was made “is also fully met by the allegation of the bill that * * * the Comptroller of the Currency made an order in which he declared that he had made an assessment and requisition upon the shareholders, ‘and that he did thereby make demand upon each and every share of the capital stock of said association,’ and directed the receiver to take proceedings by suit to enforce the individual liability of the shareholders.” If defendant had made an investigation, he would have discovered his liability and could have included same in his subsequent bankruptcy schedules. He should have made that investigation because it was his duty to list all of his creditors and all his assets.

The fourth defense relates to the matter of interest. A similar question was raised in the Western District of Kentucky after the Supreme Court decided the Abbott case. Some of the defendants who were held liable for such assessment objected to paying interest. The District Court overruled these objections, whereupon the objecting shareholders asked leave of the Supreme Court of the United States to file a mandamus proceeding against the District Judge, which was denied. An appeal was then taken to the ruling of the District Court to the Sixth Circuit Court of Appeals. That court held that such defendants were liable for interest from the date the assessment was due, in an opinion filed April 9, 1945, Abell v. Anderson, 148 F.2d 372.

Here defendant assigns as a further reason for not paying interest that this case has been on the docket of this court since 1936; that he has wanted the case tried but that it has been continued awaiting the final decision of the appellate courts in the Abbott case.

. By rule of this court which has been in effect for more than thirty years, counsel for any party desiring trial of any civil action upon the docket shall give notice to opposing parties or their counsel at least twenty days before each regular term of court. Defendant admits that he has never given such notice. He says that he has appeared at each term of court and announced that he was ready for trial. On each occasion counsel for plaintiff informed the court that the Abbott case involving the same question of liability was still pending and undecided upon appeal, and suggested that it would be to the interest of all parties concerned for the case to be continued until a decision was reached in the Kentucky case. That case had taken many weeks to try and the principal point in our case had been squarely raised in the Kentucky case. On each occasion the case was passed until the next term of court, upon motion of counsel for plaintiff, and at no time did defendant or his counsel ever make any objection to such continuance, or otherwise let the court know that he disapproved of such continuance. Counsel for defendant was quite diligent in answering the call of the docket at each term of court and frequently stated that he would like to get the case disposed of as soon as possible, or words to that effect. In that respect, he expressed the sentiment of all parties. At times the court made specific inquiry as to whether any party objected to such continuance and there being no objection expressed at any time, the case was continued. Generally the court made no such specific inquiry, but acted on the motion of the plaintiff, counsel for defendant being present and never opposing or objecting to such continuance. The first intimation the court ever had that such continuances did not meet with the approval of all parties was a short time ago after the decision of the Supreme Court holding shareholders of Banco liable for the assessment. When the court called counsel in for a pretrial conference, insisting that the case be heard, counsel for defendant let the court know for the first time that he disapproved of the continuances. The defendant is liable for such stock assessment together with interest thereon from the date such assessment was due.


source: Caselaw Access Project

author: ADAIR, District Judge.

license: Public Domain

text:
    UNITED STATES v. BROKAW et al.
    No. 2730.
    District Court, S. D. Illinois, N. D.
    March 23, 1945.

      Howard L. Doyle, U. S. Atty., and Marks Alexander, Asst. U. S. Atty., both of Springfield, 111., for the Government.
    James C. Leaton, of Chicago, 111., and Clarence W. Heyl, of Peoria, 111., for petitioner George P. McNear, Jr.
   ADAIR, District Judge.

This cause arises upon a motion filed by George P. McNear, Jr., for leave to file petition as amicus curise asking the court to enter an order directing the United States Attorney to show cause why the order of nolle prosequi should not be vacated and cause reinstated and cause set for trial.

The facts are as follows: An indictment was returned by the Federal Grand Jury for the Northern Division of the Southern District of Illinois charging Paul Brokaw, Harold Dilley and Delmar G. Newdigate with violations of 50 U.S.C.A. §§ 121,. 126, 140 and 18 U.S.C.A. §§ 88, 412a, which said indictment is now pending against defendants Brokaw, Dilley and Newdigate. The defendants Brokaw and Dilley have plead not guilty and the defendant Newdigate entered a plea of guilty; that defendant Newdigate is now a member of the armed forces of the United States, and was prior to said plea, and no sentence has been imposed on said defendant; that on the 14th day of December, 1944, the United States District Attorney, Howard L. Doyle, moved the court for leave to enter a nolle prosequi against all of said defendants at which time the United States District Attorney stated to the court that he had made a thorough and careful investigation of all the facts, and did not believe there was sufficient evidence to convict the defendants under their pleas of not guilty, and that the defendant who had entered a plea of guilty was no more guilty than the remaining defendants; that he had carefully discussed and corresponded with the Attorney General of the United States, and thereupon stated he had full authority from the Attorney General to dismiss the defendants under such indictment. Whereupon, the court entered an order upon said motion to dismiss granting and allowing the said nolle prosequi to be entered.

That the United States District Attorney in his capacity as the public prosecutor in his district is clothed with the power and charged with the duties of the Attorney General in England under the common law is generally recognized and supported by the Federal courts. United States v. Thompson, 251 U.S. 407, 40 S.Ct. 289, 64 L.Ed. 333; In re Confiscation Cases, 1868, 7 Wall. 454, 457, 19 L.Ed. 196; Millikin v. Stone, D.C.S.D.N.Y.1925, 7 F.2d 397; United States v. Stowell, C.C.Mass. 1854, Fed.Cas. No. 16,409; 2 Lord Campbell’s, The Lives of the Chief Justices of England, 173. In this connection the federal prosecutor acts in an administrative capacity. He is the representative of the public in whom is lodged a discretion to be exercised for the general public welfare, a discretion which is not to be controlled by the-courts, or by an interested individual, or by a group of interested individuals who seek redress for wrongs committed against them by use of the criminal process. In United States v. Thompson, supra, the Supreme Court held that the Federal courts have no power to control the initiation of criminal' proceedings, that being the prerogative and duty of the United States District Attorney. The control of criminal litigation during many stages of a prosecution is a prerogative and power closely akin to the power of initiating a prosecution. With reference to such control the United States. District Attorney again derives his power and duty from the common law, and at different stages of a prosecution he exercises that control administratively and may not be required to submit his authority in this respect to the control of a judicial discretion or to the desires of interested individuals or groups of individuals. The practical exercise of this control of criminal proceedings after their initiation lies in the use of the order of nolle prosequi.

The nature of an order of nolle prosequi remains the same at whatever the stage of the criminal proceedings may be at the time of its entry. Whenever it is properly entered, with due regard to such limitations as may surround its entry, it remains the act of the prosecuting officer terminating the criminal proceeding. The literal meaning of the term itself shows this beyond question. Nolle prosequi means r “I am unwilling to prosecute”. So far is this true that the court, unless authorized by special statute, has no power to enter such an order or to direct the prosecuting officer to enter such an order. Commonwealth v. Shields, 89 Pa.Super. 266; State v. Charles, 183 S.C. 188, 190 S.E. 466, 468; In re Confiscation Cases, 1868, 7 Wall. 454, 457, 19 L.Ed. 196; United States v. Stowell, C.C.Mass. 1854, Fed.Cas. No. 16,409. This is particularly true with reference to the Federal courts, and also to all of those states in which the prosecuting authorities of the state have been clothed by the Constitution of the state, or by statute, with the powers of the Attorney General at the common law. In Orabona v. Linscott, 49 R.I. 443, 144 A. 52, 53, the Supreme Court of Rhode Island, in discussing the legality of an agreement between the Attorney General of the state and a defendant for the deferment of sentence, said: “Under the Constitution and by long-established practice great power and responsibility for the enforcement of the criminal laws are lodged in the Attorney General. He has control of his docket for. the trial of criminal cases. * * * the Attorney General may enter a nolle prosequi without the advice or permission of the court.” Again, in Commonwealth v. Wheeler, 2 Mass. 172, 173, the court said: “The practice of entering a nolle prosequi to informations is very ancient; but to indictments it began in the latter end of the reign of Charles 2. * * * I observe in the bar, the nolle prosequi is alleged to have been entered by the advice of the Court of Common Pleas. Certainly, the courts are not legally competent to give any advice on this subject. The power of entering a nolle prosequi is to be exercised in the discretion of the attorney who prosecutes for the government, and for its exercise he alone is responsible.”

Wherever the nolle prosequi is used it is recognized as the act of the prosecutor and not that of the court. This is true even where limitations have been placed by statute or otherwise on the power and authority of the prosecutor. 11 Stat. 51; Levy Court v. Ringgold, 5 Pet. 451, 454, 8 L.Ed. 188; United States v. Corrie, Fed.Cas. No. 14,869, 23 Law Rep. 145; United States v. Stowell, Fed.Cas. No. 16,409, 2 Curt. 153; United States v. McAvoy, Fed.Cas. No. 15, 654, 4 Blatch. 418; The Peterhoff, Fed.Cas. No. 11,024, Blatch. Prize Cas. 463; and The Anna, Fed.Cas. No. 402, Batch. Prize Cas. 337.

At the common law, so much was the entry of the order of nolle prosequi the act of the prosecutor that the accepted practice was for the prosecutor to write on the indictment above his signature the words “nolle pros.”, or to state in open court for entry by the clerk that “he entered a nolle pros.” Ex parte McGrane, 1925, 47 R.I. 106, 130 A. 804.

The rule at the common law seems to have been, and in the present-day common law courts to remain, that prior to trial the prosecutor has the absolute uncontrolled power to enter a nolle prosequi; that after the empaneling of the jury until the return of a verdict the power is subject to the control of the court since it may not be used at that time to the prejudice of the defendant; and that following the return of the verdict the uncontrolled power of the prosecutor to enter a nolle revives and continues until such time as judgment is entered and sentence imposed. Commonwealth v. Tuck, 20 Pick. 356; State v. Valent, 3 W.W.Harr. 399, 138 A. 640; State v. Smith, 49 N.H. 155, 6 Am.Rep. 480; Anonymous, 31 Me. 590, 592; State v. Whittier, 21 Me. 341, 38 Am.Dec. 272; Baker v. State, 12 Ohio St. 214, 215; Commonwealth v. Gillespie, 7 Serg. & R., Pa., 469, 10 Am.Dec. 475; State v. Smith, 67 Me. 328; Regina v. Leatham, 8 Cox Cr. Cas. 498; Rex v. Moss et al., 1 Russell & Ryan 620; Orabona v. Linscott, 49 R.I. 443, 144 A. 52; Rogers v. Hill, 22 R.I. 496, 48 A. 670; Ex parte McGrane, 47 R.I. 106, 130 A. 804; Commonwealth v. McMonagle, 1 Mass. 517; Commonwealth v. Briggs, 7 Pick. 177; Commonwealth v. Jenks, 1 Gray 490; Jennings v. Commonwealth, 105 Mass. 586; Commonwealth v. Scott, 121 Mass. 33; State v. Pillsbury, 47 Me. 449; State ex rel. Bier v. Klock, 48 La.Ann. 140, 18 So. 942.

The foregoing array of authorities and the lack of holdings to the contrary seem to establish the doctrine as presented by the recognized texts, including Corpus Juris Secundum, beyond question.

This court therefore concludes that the power, rights and authority of the United States District Attorney arises under the common law, and that no legislative or judicial acts have limited such powers, and therefore the District Attorney in this proceeding was not required to move for an order to nolle the prosecution against any of the defendants, but that said motion was based upon a practice long existing in this court, concurred in by the Attorney General of the United States, that when such a motion was made before the court the only power to deny said motion would be based upon the failure of the District Attorney to exercise discretion. In other words, was he guilty of corruption or malfeasance in office? If so, such motion would be denied because the District Attorney had not exercised his own discretion. This court is powerless to exercise his discretion but must determine the issues solely upon the discretion of the District Attorney, regardless of whether or not he may believe such discretion proper. There is no charge set forth in the petition filed herein to set aside such order because of any corruption or malfeasance in office. It appears that the petitioner does not agree with the action of the United States District Attorney. He believes that the entering of such nolle prosequi was unjustified and that the defendants should be brought to trial. He disagrees on the statement of the District Attorney that evidence was not sufficient and disagrees on the grounds of public policy in the trial of such cause. This court might well disagree and would still be powerless to act in refusing the District Attorney’s motion. The prosecution or the dismissal of all criminal actions rests in the honest discretion of the United States District Attorney. If he from a corrupt motive prosecutes or refuses to prosecute, he is subject to removal from office and criminal prosecution, and that is the only remedy given to this court. There is no such charge in the petition filed herein, and unless such facts do exist the granting of the right of petitioner to intervene would serve no good purpose. The District Attorney could then in his own right nolle before the clerk and would only result in a precedent inviting any person dissatisfied with the action of the District Attorney in any future case to file a similar motion requesting this court to exercise its discretion over that of the United States District Attorney.

The entry of the order allowing the motion to nolle the indictment in the above-entitled cause can scarcely be labeled a judicial act, at most it was a ministerial act prompted by the custom of making such motions in the district court. No law requires such motions to be made or the court to allow or disallow the same, and such order has no more effect than the entry of a nolle by the District Attorney before the clerk without any action by the court, and if the District Attorney had so nolled by what authority could this court require the District Attorney to proceed with the prosecution.

For the above reasons, the motion to intervene is hereby denied.


author: RIFKIND, District Judge.

text:
    UNITED STATES v. GUARANTY TRUST CO. OF NEW YORK (two cases). Petition of RECHT.
    District Court, S. D. New York.
    Feb. 19, 1945.

      Mathias F. Correa, U. S. Atty., of New York City, Francis M. Shea, Asst. Atty. Gen., and Daniel M. Sandomire, Louis W. Bookheim, Lester S. Jayson, and Joseph K. Reichbart, Sp. Assts. to Atty. Gen., for the United States.
    Davis, Polk, Wardwell, Sunderland & Kiendl, of New York City (Ralph M. Carson, William C. Cannon, Francis W. Phillips, and William R. Meagher, all of New York City, of counsel), for Guaranty Trust Co. of New York.
    Paul J. Kern, of New York City, for Charles Recht.
   RIFKIND, District Judge.

This is an application by an attorney to have the court determine the value of services rendered by him and to have the amount so determined declared to be a lien on the judgments to be entered in the above-entitled actions.

Petitioner is a lawyer who, since 1920, has represented various Russian interests in the United States. Sometime in 1921, he learned that an action had been commenced, in the New York Supreme Court, by P. V. Baranowsky Co., Ltd. v. Guaranty Trust Company, 156 Misc. 74, 280 N.Y.S. 427. He believed that the Soviet Government, then unrecognized by .the United States, had an interest in the litigation. He advised the Soviet authorities and was instructed to cooperate with the defendant in an effort to defeat Baranowsky’s claim. To that end he rendered important services for his client, the Soviet Government. Discussions were had between him and his client concerning his compensation but they reached no agreement and the subject was deferred for later consideration.

In April, 1933, the petitioner served upon the parties to that litigation a motion for leave .to intervene on behalf of the Union of Soviet Socialist Republics as party plaintiff. The motion was denied and no appeal from the order entered thereon was ever taken. The trial of the Baranowsky case resulted in a disagreement of the jury. While preparations were under way for a retrial, petitioner, on behalf of his client, negotiated with the defendant concerning a settlement of the interest of Soviet Russia in the litigation in the event Baranowsky was defeated. The terms of ruch a settlement, apparently, were fairly well worked out but were not formally accepted. By the Litvinov Assignment of November 16, 1933, the Soviet Government transferred its claims to the United States and the negotiations came to an end.

The petitioner alleges that “prior to said Litvinoff Assignment, it was the intent of the parties that, upon consummation of the settlement between Guaranty Trust Company and the Government of the U. S-. S. R. above referred to, that petitioner was to be compensated for his services on the basis of quantum meruit from the fund paid in settlement, by consent of both parties”. Subsequently, the United States, as assignee under the Litvinov Assignment, commenced the above-entitled actions to recover inter alia the same bank balance that Baranowsky unsuccessfully sought to reach. (Judgment in the Baranowsky case was ultimately entered for the defendant.) The actions prosecuted by the United States were consolidated for trial with another action brought by the receivers, appointed by the New York Supreme Court, of the assets in New York of Russo-Asiatic Bank. In all the actions Guaranty did not appear as stake-holder; it denied liability.

The petitioner first founded his claim on Section 475 of the Judiciary Law of New York, Consol.Laws, c. 30. In a later brief he suggested that, in part, his claim rested upon non-statutory, equitable grounds. For several independent reasons petitioner cannot prevail.

1. Since his claim is and must be founded on Section 475 of the New York Judiciary Law, Gregory v. Pike, 1 Cir., 1895, 67 F. 837, 843, he must bring himself within the terms of that statute. Petition of Nathan, 1942, 178 Misc. 226, 33 N.Y.S.2d 612. That, he has failed to do. Even if it be assumed that the application for leave to intervene in the Baranowsky case, which was denied, constitutes the commencement of an action (which I doubt, cf. N.Y., Civil Practice Act, §§ 114, 218) that action resulted in a dismissal; and thereby any lien which petitioner may have had necessarily died. In re Cooper, 1943, 291 N.Y. 255, 261, 52 N.E.2d 421.

2. Whether the assertion of the lien be deemed a claim against the United States or against Soviet Russia, in either event, enforcement is precluded by the sovereign immunity of the parties. Hewitt v. Speyer, 2 Cir., 1918, 250 F. 367; United States v. Alabama, 1941, 313 U.S. 274, 61 S.Ct. 1011, 85 L.Ed. 1327; Maricopa County, Ariz v. Valley Nat. Bank, 1943, 318 U.S. 357, 63 S.Ct. 587, 87 L.Ed. 834. See also Recht v. United States, 1942, 95 Ct.Cl. 741.

It follows that the petition must be denied.

Supplemental Opinion.

This memorandum is supplementary to the opinion heretofore filed in these causes and is limited to the question of interest to which the plaintiff is entitled.

1. In calculating interest on Russo-Asiatic dollar deposits for the period prior to the date of breach I have given effect to the provisions of the Banking Act of 1933, § 11(b), 12 U.S.C.A. § 371a, prohibiting the payment of interest by member banks of the Federal Reserve System on demand deposits. The proviso in this section which excepts contractually established interest rates does not, in my opinion, apply to the Russo-Asiatic deposits, which were open as to time, under the circumstances detailed in the previous opinion.

2. I have calculated interest after the breach from the date the actions were commenced, no prior demand having been proved. The plaintiff advances two earlier alternative dates: (1) the date of the defendant’s refusal to pay on demand of the refugee directors; (2) the date of the acquisition of the claims by the United States through the Litvinov Assignment. Neither of these positions is, in my judgment, valid. The demand of the refugee directors does not rise to the dignity of a transaction “valid when entered into”, Guaranty Trust Company v. U. S., 1938, 304 U.S. 126, 140, so as to be given effect after recognition of Soviet Russia, for the purpose of starting an interest liability in favor of the United States, especially when the claim of the United States is incompatible with the claim asserted by the refugee directors. Nor can the refusal to pay on demand of the refugee directors justify the contention of the United States that, when it acquired the claims, a demand was futile, Tillman v. Guaranty Trust Company of New York, 1930, 253 N.Y. 295, 171 N.E. 61. Recognition of Russia and the execution and delivery of the Litvinov Assignment were major events full of significance. From the fact that the directors’ demand was refused prior to them the inference may not be drawn that it would again be refused if made by the United States after their occurrence.

3. The final question is concerned with the rate of interest after the commencement of the actions. Royal Indemnity Co. v. United States, 1941, 313 U.S. 289, 296, 61 S.Ct. 995, 997, 85 L.Ed. 1361, established that “the rule governing the interest to'be recovered as damages for delayed payment of a contractual obligation to the United States is not controlled by state statute or local common law.” Consequently, this court is not bound by New York Civil Practice Act, Section 480, or New York General Business Law, Consol. Laws, c. 20, § 370. “And in the absence of any controlling statutory regulation the trial court is as competent to determine the .amount of interest for delay as any other item of damage.” Ibid.

The 'rate established by the New York statute is one of the criteria the court may apply, but it is not conclusive. Greenberg v. Arsenal Building Corporation, 2 Cir., 1944, 144 F.2d 292, 294, which allowed 6% interest in an action arising under the Fair Labor Standards Act, 29 U.S.C.A. § 201 et seq., and where jurisdiction was not founded on diversity, did not say that the court was bound by the New York statute.

In considering the rate of interest to be recovered for damages for the delay in payment in this case, which is an action at law for the recovery of a bank deposit, “equitable rules” are inapplicable. Royal Indemnity Co. v. United States, supra, 313 U.S. at page 296, 61 S.Ct. 995, 85 L.Ed. 1361; Board of Commissioners v. United States, 1939, 308 U.S. 343, 352, 60 S.Ct. 285, 84 L.Ed. 313. The application of “legal rules” suggests that the rate of interest employed should be compensatory and not punitive. Judicial notice may well be taken of the fact that during the entire period of time herein involved, from 1934 to the present, interest rates prevailing in the market were below 6%. How much below that rate, is a question which cannot be answered with precision. It is my conclusion that in this case a 4% rate is fairly compensatory. This conclusion I reach not on the theory of exercising discretion, nor by giving effect to equities, but on a finding that the 4% rate will compensate the plaintiff for the damages which it has suffered by reason of the delay in payment.


author: MANDELBAUM, District Judge.

text:
    DESPATCH SHOPS, Inc., et al. v. RAILROAD RETIREMENT BOARD et al.
    District Court, S. D. New York.
    March 16, 1945.

      Frederick L. Wheeler, of New York City (Paul Folger, of Rochester, N. Y., and Crosby J. Beakes and Leo Manville, both of New York City, of counsel), for plaintiffs.
    Myles F. Gibbons, of Chicago, 111. (David B. Schreiber, Paul M. Johnson, and Louis Turner, all of Chicago, 111., of counsel), for defendant.
    Samuel J. Cohen, of New York City (Willard H. McEwen, of Toledo, Ohio, of counsel), for intervening defendants.
   MANDELBAUM, District Judge.

This action is brought pursuant to Sec. 11 of the Railroad Retirement Act of 1937, 45 U.S.C.A. § 228k, to compel the Railroad Retirement Board to set aside its decision of March 7th, 1944, in Jurisdictional Docket No. 13, holding that Despatch Shops, Inc., is or has been an employer within the meaning of Sec. 1(a) of the Railroad Retirement Act of 1937, 45 U.S.C.A. § 228a(a), and to the extent applicable a carrier within the meaning of Sec. 1(a) of the Railroad Retirement Act of 1935, 45 U.S.C.A. §§ 215-228 note, and that individuals engaged in the operation of Despatch Shops, Inc., subject to its continuing authority to supervise and direct the manner of rendition of their compensated service, have been employees within the meaning of Sec. 1(c) of said Acts, and that compensated service thus rendered to Despatch Shops, Inc., is creditable towards annuities under said Acts.

A fundamental problem — the resolution of which must determine the approach of this court to the decision under review, is the extent to which the court must be here guided by the doctrine of administrative finality. The plaintiff concedes the general rule that the findings of an administrative board if supported by substantial evidence may not be set aside by a reviewing court.

Plaintiff maintains, however, that an exception to that doctrine presents itself here arguing — that the determination of whether or not Despatch Shops, Inc., is an employer within the meaning of the Act is a necessary condition to establish the Board’s jurisdiction — that power to determine the fact of such jurisdiction has not been given to the Board in the statute — and in the absence of such specific statutory authority — the court’s review should consist of a trial de novo on the record.

An examination of the Acts in question and a careful review of the decisions leads this court to the conclusion that the instant case presents no exception to the doctrine of administrative finality.

The power to determine who is an employer within the meaning of the Act is a necessary concomitant of the conceded power to determine who is an employee. Further, the Act itself confides the power to determine the jurisdictional question in the Board. Sec. 10(b), U.S.C.A., Title 45, § 228j(b), which sets forth both the duties and powers of the Board, provides that :

“1. The Board shall have and exercise all the duties and powers necessary to administer’’ the Railroad Retirement Acts of 1935 and 1937. “The Board shall take such steps as may be necessary to enforce such sections and make awards and certify payments * *

“4. The Board shall establish and promulgate rules and regulations to provide for the adjustment of all controversial matter arising in the administration of * * * ” the Railroad Retirement Acts of 1935 and 1937. (Italics supplied.)

The Board’s decision if supported by substantial evidence in the record, and if it is not arbitrary or capricious and has a reasonable basis in law, must be sustained by this court. Ellers v. Railroad Retirement Board, 2 Cir., 132 F.2d 636.

I have examined carefully the record before the Board and I am constrained to find that the decision of the Board is based on substantial evidence and has a reasonable basis in law.

The holding in Duquesne Warehouse Company v. Railroad Retirement Board, 2 Cir., 148 F.2d 473, that the Board erred in holding that a public warehouse was an ■employer under the Railroad Retirement Act does not apply in the instant case.

The facts in the record before me indicate that the services of Despatch Shops, Inc., are so intimately and inseparably connected with railroad transportation that the Board could not have reasonably arrived at any other conclusion than that Despatch Shops, Inc., is an employer within the meaning of the Act.

Where the question before this court is whether or not the findings of an administrative board are based on substantial evidence, the court lacks the power to make findings of fact contemplated by Federal Rules of Civil Procedure, rule 52 (a), 28 U.S.C.A. following section 723c. In re Chicago, M., St. P. & P. R. Co., 7 Cir., 138 F.2d 433, 435. I therefore think I am relieved from making any findings.

Accordingly, this action is dismissed with costs in favor of the defendant.


author: REEVES, District Judge.

text:
    AGRICULTURAL LANDS, Inc., v. PANHANDLE & S. F. RY. CO.
    No. 3047.
    District Court, W. D. Missouri, W. D.
    April 17, 1945.

      Hale & Kincaid, of Columbus, Ohio, and Michaels, Blackmar, Newkirk, Eager & Swanson, of Kansas City, Mo., for plaintiff.
    Cyrus Crane, John H. Lathrop, Winston H. Woodson, and Sam D. Parker, all of Kansas City, Mo., for defendant.
   REEVES, District Judge.

The questions for decision on the above motion are, whether the complaint states a cause of action, and, if so, whether its averments are definite and fully advise the defendant of the nature of the claim.

In the complaint it is charged, after identifying the parties and their several residences, “* * * that on or about the first day of March, 1943, the defendant received from the agent of John Clay Livestock Commission Company, acting in behalf of the plaintiff * * *” certain livestock for shipment in interstate commerce. There is an averment that the cattle, when received by the defendant, “were in a sound and marketable condition, but when the same were delivered at London, Ohio and Columbus, Ohio, 165 head of said cattle were, by reason of the carriers’ negligence, not delivered or not delivered in as good condition as they were in when received by the defendant, but were damaged as follows: * *

Subsequent averments detail the nature of the damage alleged to have accrued, and for which the plaintiff seeks judgment. The initial shipments began at Canadian, Texas, where, it is charged, the cattle were received by the defendant.

The basis for the motion to dismiss is “that the petition fails to show that plaintiff was the lawful holder of the bill of lading or what interest or title, if any, plaintiff had in the livestock at the time of the alleged injuries.”

The motion for a more definite statement, or for a bill of particulars, asserts: “* * * that the above matters are not averred with sufficient definiteness or particularity to enable defendant to properly prepare its answer and defense to said petition for the reason that defendant is not apprized of plaintiff’s claims in respect to the manner in which defendant is claimed to have been negligent.”

° 1. The defendant calls attention to Title 49 U.S.C.A. § 20(11), relating to the general subject of transportation. This paragraph undertakes to unify responsibility in cases of connecting carriers. It provides: “Any common carrier * * * receiving property for transportation from a point in one State * * * to a point in another State, * * * shall issue a receipt or bill of lading therefor, and shall be liable to the lawful holder thereof for any loss, damage, or injury to such property caused by it or by any common carrier, railroad, or transportation company to which such property may be delivered or over whose line or lines such property may pass within the United States * *

The complaint asserts that the cattle mentioned therein were “owned by plaintiff.” It is to be presumed that the plaintiff is “the lawful holder” of the receipt or bill of lading issued, as directed by the law, to the shipper. If, perchance, the bill of lading was issued to the agent acting for the commission company, or issued to the commission company, then, of course, it would be a simple matter for either of the agents to transfer the bill of lading to the plaintiff so as to make it the lawful holder. It is true that, under the express language of the statute and under the authorities, the right of action for damages to a shipment such as this would be in the lawful holder of the bill of lading. Pennsylvania R. Co. v. Olivit Bros., 243 U.S. 574, 37 S.Ct. 468, 61 L.Ed. 908; Adams Express Co. v. Croninger, 226 U.S. 491, 33 S.Ct. 148, 57 L.Ed. 314, 44 L.R.A., N.S., 257. However, a bill of lading, even if not negotiable, may be transferred to a transferee who then becomes the lawful holder thereof. 13 C.J.S. Carriers, § 128, pp. 243, 245. Even in some cases a transfer is made by mere delivery of the bill of lading.

If the plaintiff, as it alleges, was the owner of the cattle shipped by its agents, and, if, by reason of the negligence of the defendant, whether on its line or those of connecting carriers, the cattle were injured, the plaintiff would be entitled to recover, conditioned, of course, that it is able to establish that it was the lawful holder of the bill of lading. Unquestionably, it could show this by proving the agency of those who made the ship'ment and in whose name the bill of lading was drawn.

2. Although the defendant charges that the averments lack definiteness and particularity “to enable defendant to properly prepare its answer and defense,” nevertheless the defendant already has answered. This would obviate the necessity of discussing the motion. However, bills of particular are no longer favorites of the law. The same might be said of motions for more definite statement. The information sought can be obtained under the several rules of discovery, and by such proceeding Rule 8 of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, can be maintained in accordance with the intention of the rule-makers. By paragraph (a) of Rule 8, it is provided that the complaint “shall contain * * *(2) a short and plain statement of the claim showing that the pleader is entitled to relief * * Rule 12, relating to a more definite statement and for bill of particulars, should not be construed to repeal Rule 8. A citation of authorities is unnecessary. It is sufficient to say that they are numerous in support of the above suggestion.

It follows from the above that the motions to dismiss, and for a more definite statement, or for a bill of particulars, should be overruled.


author: DAVIES, District Judge.

text:
    FEDERAL SAVINGS & LOAN INS. CORPORATION v. THIRD NAT. BANK IN NASHVILLE.
    Civil Action No. 337.
    District Court, M. D. Tennessee, Nashville Division.
    April 5, 1945.

      Farmer, Denney & Leftwich, of Nashville, Tenn., for plaintiff.
    E. J. Walsh and Walker & Hooker, all of Nashville, Tenn., for defendant.
   DAVIES, District Judge.

This cause is before the Court on motion of defendant to dismiss for lack of jurisdiction over the subject matter.

The grounds of the court’s jurisdiction of the above cause is stated in the original complaint, as follows:

“1. The plaintiff is a governmental corporation, created by an Act of Congress. Its capital stock is entirely owned by the United States through the Home Owners’ Loan Corporation. The status of the plaintiff corporation is the ground upon which this Count’s jurisdiction depends. * * jjí »

Defendant, in its answer, insists that this court is without jurisdiction for the reason that while plaintiff is a corporation created by an Act of Congress, its capital stock is not owned by the government of the United States, but is, in faot, owned by the Home Owners’ Loan Corporation, a separate corporation, the stock of which is in turn owned by the government of the United States; and that by reason of the provisions of Title 28 U.S.C.A. § 42, this court is without jurisdiction, the government of the United States not in fact being the owner of more than one-half of the capital stock of plaintiff.

Plaintiff was created under an Act of Congress of June 27, 1934, being Chapter 847, Section 402, 48 Stat. 1256, and appearing as Title 12 U.S.C.A. § 1725, providing, in part, as follows :

“(b) The Corporation shall have a capital stock of $100,000,000, which shall be divided into shares of $100 each. The total amount of such capital stock shall be subscribed for by the Home Owners’ Loan Corporation which is hereby authorized and directed to subscribe for such stock and make payment therefor in bonds of the Home Owners’ Loan Corporation. The Corporation shall issue to the Home Owners’ Loan Corporation receipts for payment for or on account of such stock, which shall serve as evidence of the ownership thereof, and the Home Owners’ Loan Corporation shall be entitled to the payment of dividends on such stock out of net earnings at a rate equal to the interest rate on such bonds, which dividends shall be cumulative.

“(c) On June 27, 1934, the Corporation shall become a b'ody corporate, and shall be an instrumentality of the United States,. and as such shall have power—

“(1) To adopt and use a corporate seal.

“(2) To have succession until dissolved by Act of Congress.

“(3) To make contracts.

“(4) To sue and be sued, complain and defend, in any court of law or equity, State or Federal.”

In support of its motion, defendant relies on the terms and provisions of the Act of February 13, 1925, Title 28 U.S.C.A. § 42, providing as follows:

“No district court shall have jurisdiction of any action or suit by or against any corporation upon the ground that it was incorporated by or under an Aot of Congress. This section shall not apply to any suit, action, or proceeding brought by or against a corporation incorporated by or under an Act of Congress wherein the Government of the United States is the owner of more than one-half of its capital stock.”

Defendant insists that ownership of the capital stock of plaintiff by (the Home Owners’ Loan Corporation is not ownership thereof by the Government of the United States as contemplated by the terms and provisions of the statute above quoted, and therefore, plaintiff is not entitled to maintain its suit in this court.

Plaintiff insists that it is an instrumentality of the Government of the United States, was created by an Act of Congress and empowered to sue and be sued, complain and defend, in any court of law or equity, State or Federal, and that, by reason of the fact that the Government of the United States is the owner of the entire capital stock of the Home Owners’ Loan Corporation, that both the Home Owners’ Loan Corporation and plaintiff are parts of the Government of the United States, and this suit is therefore a suit arising under the laws of the United States.

Until February 13, 1925, it was a well settled rule of law that a suit, for whatever reason, by or again'st a corporation created under an Act of Congress with power to sue or be sued in any count, State or Federal, was a suit arising under the laws of the United States. Under the decisions of the Supreme Court, the essence of those decisions is that such a suit arises under the laws of the United States, not because of the character of the suit, nor the relief demanded, but merely because the plaintiff suing or the defendant sued is a Federal Corporation with power to sue or be sued in any court, State or Federal. Osborn v. Bank of United States, 9 Wheat. 738, 6 L.Ed. 204; Union Pacific R. Co. v. Myers, 115 U.S. 1, 5 S.Ct. 1113, 29 L.Ed. 319.

On February 13, 1925, the statute above quoted, Title 28 U.S.C.A. § 42, was enacted, distinctly changing the rule of law in effect up to that date.

The question now before the Court is whether or not the ownership of plaintiff’s stock by the Home Owners’ Loan Corporation amounts to ownership by the Government of the United States. If so, the rule remains unchanged.

The Home Owners’ Loan Corporation was created by the Act of June 13, 1933, Title 12 U.S.C.A. § 1463, which provides that the stock of the Home Owners’ Loan Corporation “shall be subscribed for by the Secretary of the Treasury on behalf of the United States, * * *. The Corporation shall issue to the Secretary of the Treasury receipts for payments by him for or on account of such stock, and such receipts shall be evidence of the stock ownership of the United States. * * * ”

The creation and legal existence of the Home Owners’ Loan Corporation has been referred to and noticed by the courts on a number of occasions, and it is well settled that while said corporation is an. instrumentality of the Government of the United States, it is, at the same time, a properly organized corporation having complete corporate existence. Fletcher v. Jones, 70 App.D.C. 179, 105 F.2d 58; United States, ex rel. Fletcher v. Fahey, 73 App.D.C. 257, 121 F.2d 28. Congress, in creating instrumentalities of the Government for particular purposes, has resorted to the plan of creating separate corporations for these purposes. In the creation of some of these corporations, such as the Reconstruction Finance Corporation, Federal Deposit Insurance Corporation, Home Owners’ Loan Corporation, and Federal Intermediate Credit Banks, the Congress has provided that the stock in said corporations shall be subscribed for by the Secretary of the Treasury on behalf of the United States and payments made therefor paid from the Treasury, and receipts evidencing payments to be evidence of stock ownership of the United States.

Congress has created other instrumentalities of the Government without such direct ownership of stock by providing that corporations theretofore created by Congress should subscribe for such capital stock. While it is true that the Government of the United States may be deemed to be the ultimate beneficial owner of plaintiff’s stock by reason of the Government’s ownership of the stock of the Home Owners’ Loan Corporation, and while the Government of the United State's might be said to be the owner once removed of plaintiff’s stock, the question is: Does the situation comply with the terms and provisions of the Act of 1925 relating to the jurisdiction of the district courts of the United States so as to give thi's court jurisdiction?

It is well settled that the district courts of the United States are courts of limited jurisdiction, and it is apparent that it was the intention of Congress, by the passage of the Act of February 13, 1925, to further limit this jurisdiction. Up until that time, the district courts had jurisdiction of all suits by or against any corporation organized or created under an Act of Congress on the theory that all such suits arose under the laws of the United States, regardless of the character of the suit, merely because the corporation was a Federal corporation.

The effect of the Act of February 13, 1925, was to remove from the jurisdiction of the Federal courts such cases arising under the laws of the United States as suits by or against Federal corporations in which the Government was not the owner of more than one-half of the capital stock, thereby further limiting the jurisdiction of the courts of the United States. It is also well settled that statutes relating to the jurisdiction of United States Courts are to be strictly construed. Elgin v. Marshall, 106 U.S. 578, 1 S.Ct. 484, 27 L.Ed. 249; Grace v. American Central Ins. Co., 109 U.S. 278, 3 S.Ct. 207, 27 L.Ed. 932; Healy v. Ratta, 292 U.S. 263, 54 S.Ct. 700, 78 L.Ed. 1248.

Should, therefore, the courts, by judicial interpretation, attempt to broaden an Act which apparently was passed for the purpose of limitation of jurisdiction? The Act does not say that it shall not apply to all corporations wherein the Government of the United States is the beneficial owner of more than one-half of its capital stock, or in which it is indirectly the owner of more than one-half of its capital stock. The Home Owners’ Loan Corporation, being a distinct, separate legal entity, is the owner of the capital stock of plaintiff. This stock constitutes a part of the asset's of the Home Owners’ Loan Corporation, and is liable for any debts of the Home Owners' Loan Corporation. It is subject to attachment and execution on the part of creditors; while if the stock were owned by the Government of the United States, it would not be subject to attachment and execution on the part of a general creditor. It has been held that the Reconstruction Finance Corporation, a similar Governmental corporation in which the entire capital stock is owned by ithe Government of the United States, is such an entirely separate and distinct legal corporate entity that it is liable for the payment of court costs, just as any other litigant would be. Reconstruction Finance Corporation v. J. G. Menihan Corporation, 312 U.S. 81, 61 S.Ct. 485, 85 L.Ed 595. It is nc.t at all unusual in the business world for corporations to own stock in other corporations, but it has never yet been determined that a stockholder of a parent corporation, by reason of his ownership of said stock, thereby becomes a stockholder in the subsidiary corporation. The Act itself, under which plaintiff was created, provides that all dividends declared on its capital stock should be paid to the Home Owners’ Loan Corporation.

To accept the theory advanced by counsel for plaintiff would, in the opinion of the Court, serve to defeat the purpose of the statute in more cases than this particular one, as it would necessarily increase instead of limit the jurisdiction of the district courts of the United States. The Court will take judicial knowledge of the fact that there are a considerable number of national banks created under an Act of Congress wherein the Reconstruction Finance Corporation, a Governmental agency, through its ownership of preferred stock, is the owner of more than one-half of the capital stock of said national banking associations, and to construe the statute according to plaintiff’s theory would result in the district courts of the United States having jurisdiction of all suits wherein the required amount was involved brought by or against such bank, even though it is specifically provided in ithe Act creating said banks that for the purpose of jurisdiction, the bank 'should be deemed a citizen of the state where it is located. Federal Intermediate Credit Bank v. Mitchell, 277 U.S. 213, 48 S.Ct. 449, 72 L.Ed. 854, which held that by reason of the Government of the United States owning all the capital stock of the Federal Intermediate Credit Bank, which was a corporation created by an Act of Congress, ithe district courts had jurisdiction of any suits by or again'st said corporation, even though the Act creating said corporation provided that each such bank “for purposes of jurisdiction shall be deemed a citizen of ithe State where it is located.” 12 U.S.C.A. § 1023.

Counsel for plaintiff eanestly insist that plaintiff, being a Governmental agency, is an arm of the Government of the United States, exercising Governmental functions, and carrying on the business of the Government of the United States, and for these reasons should be entitled to prosecute its suits concerning Government business in the courts of the United States; and that for the Court to hold that Title 28 U.S.C.A. § 42 excludes jurisdiction on the part of this court of trying suits concerning plaintiff’s business is, in effect, the same as holding that ithe plaintiff and the Home Owners’ Loan Corporation, the owner of plaintiff’s capital stock, is not a part of the Government of the United States. It is apparent from the reading of the opinions of the Supreme Court on this question that these considerations were in a large part responsible for the adoption of the rule that any suit brought by or against a corporation chartered under the Act's of Congress was deemed to be a suit arising under the Constitution or laws of the United States, and, as pointed out, such has been the law until the passage of the statute in question. The matter of jurisdiction of the district courts of the United States is not to be considered a special privilege conferred upon Governmental agencies or others, and jurisdictional statutes are not to be considered in any protective sense. “Due regard for the rightful independence of state governments, which should actuate federal courts, requires that they scrupulously confine their own jurisdiction to the precise limits which the statute has defined.” Healy v. Ratta, 292 U.S. 263, 54 S.Ct. 700, 703, 78 L.Ed. 1248.

It is well recognized that the district courts of the United States are courts of limited jurisdiction, and, however much the Court might desire to entertain suits relative to the business of the Government brought by Governmental agencies, Congress, in its wisdom, has seen fit to limit the jurisdiction of the district courts, and it is clearly apparent that the limitation imposed by Section 42 of Title 28 U.S.C.A. was a distinct departure from, and limitation of, the rule which had been declared by judicial interpretation of the courts. If Congress sees fit, for reasons best known to it, to limit, alter or modify this rule, it is not ithe province of the courts to question such action.

The Court, for these reasons, is constrained to hold that the ownership of the capital stock of plaintiff by the Home Owners’ Loan Corporation does not come within the exception in the statute exempting from its terms any corporation incorporated by or under an Act of Congress wherein the Government of the United States is the owner of more than one-half of its capital stock, and, therefore, plaintiff is within the statutory prohibition that no district court shall have jurisdiction of any suit brought by a corporation upon the sole ground that it was incorporated by or under an Act of Congress.

Plaintiff now seeks to amend its original and amended complaint on the question of jurisdiction by adding, at the end of the first paragraph thereof, the following:

“1. Plaintiff corporation is an instrumentality of the United States and is empowered ‘to sue and be sued, complain and defend, in any court of law or equity, State or Federal’ (Title 12, Section 1724 [1725] U.S.C.A.). The matter in controversy exceeds, exclusive of interest and cost, the sum of '$3,000.00 and as the plaintiff is a corporation created by an Act of Congress, this suit and the questions involved arise under the ‘laws of the United States’ (Title 28, Section 41 [1] (a) USCA). The Government of the United States is the owner of more than one-half of the capital stock of plaintiff corporation, in that its entire capital stock is owned and held by the Home Owners’ Loan Corporation (Title 12, Section 1725 b), which is a corporation created by an Act of Congress (Title 12, Section 1461-1468, USCA), and is an instrumentality of the United States, the funds therefor being provided by the United States, and the stock thereof being held by the Treasury on behalf of the United States, from funds made available to the Secretary of the Treasury by ithe Reconstruction Finance Corporation, both this plaintiff and the Home Owners’ Loan Corporation being a part of the ‘Government of the United States’ (Title 28, Section 42, USCA).

“2. That as one of the basis of its claim, plaintiff shows a violation by the defendant of Title 12, U.S.C.A. Section 1731 (e) in that the defendant for the purpose of influencing the action of the said plaintiff corporation made, or caused to be made, a statement, knowing the same to be false, Title 12 USCA, Section 1731(e).-

“3. That as one of the basis for its claim plaintiff corporation made a “contribution” under the provisions of Section 1729(f) as hereinafter more fully alleged. That the right to make such contribution under Section 1729(f) is an essential element of plaintiff’s cause of action, and that if the law is given one construction, plaintiff’s cause of action will fail, and if given another construction, it will succeed.”

Inasmuch as the proposed amendment relates solely to ithe question of jurisdiction, the Court will consider the question as if the amendment had been allowed; and if, after such consideration, it appears that there is no jurisdiction irrespective of the proposed amendment, it would be needless to allow same. Paragraph numbered “1” of the amendment is merely a more detailed statement of the proposition which has already been decided in the first part of this opinion.

Paragraph numbered “2” of the amendment states that as one of the basis 6f its claim, plaintiff shows a violation by the defendant of Title 12 U.S.C.A. § 1731(e). in that defendant, for the purpose of influencing the action of .plaintiff, made, or caused to be made, a statement, knowing the same to be false.

Section 1731(e) of Title 12 U.S.C.A., above referred to, provides as follows:

“Whoever, for the purpose of inducing the insurance of the accounts of any institution by the Federal Savings and Loan Insurance Corporation or for the purpose of obtaining any extension or renewal of such insurance by said Corporation or for the purpose of influencing in any way the action of the said Corporation under this chapter, makes, passes, utters, or publishes, or causes to be made, passed, uttered, or published, any statement, knowing the same to be false, or utters, forges, or counterfeits, or caüses or procures to be uttered, forged, or counterfeited, any instrument, paper, or document, or utters, publishes, or passes as true, or causes to be uttered, published, or passed as true, any instrument, paper, or document, knowing it to have been uttered, forged, or counterfeited, or willfully overvalues any security, asset, or income, of any institution insured or applying for- insurance by said Corporation, shall be punished by a fine of not more than $5,000, or by imprisonment for not more than two year's, or both.”

It will be noted in the first place that the statute above referred to applies to Savings and Loan Associations, their agents and employees, insured or applying for insurance or renewals thereof with the Federal Savings and Loan Insurance Corporation. Furthermore, it is well recognized that the violation of a Federal statute does not create a civil right of action cognizable in the Federal courts, unless so provided by the statute. The mere fact that a person might violate a Federal criminal statute does not, of itself, give the United States district courts jurisdiction of a civil suit resulting therefrom. A person who steals an automobile and transports it in interstate commerce has violated a Federal statute, but it does not necessarily follow that the owner of the car may prosecute a civil suit for the value of the car in a district court of the United States for the sole reason that a Federal statute was violated in the theft of the automobile, thereby causing the case to become one arising under the laws of the United States. The purpose of the statute in question is to place a criminal penalty upon the commission of certain acts, and does not purport to confer jurisdiction upon the United States court to try any civil action arising out of the violation of the statute.

Paragraph numbered “3” states that as one of the ba'sis for its claim, plaintiff made a “contribution” under the provisions of Title 12 U.S.C.A. § 1729(f), as hereinafter more fully alleged; that the right to make such “contribution” under said Section is an essential element of plaintiff’s cause of action, and that if the law is given one construction, plaintiff’s cau'se of action will fail, and if given another construction, it will succeed.

It is apparent that this paragraph is nothing more or less than a conclusion of the pleader. To fully discuss the question raised by thi's paragraph, it is necessary to examine the basis of plaintiff’s suit. Whether a suit arising under a law of the United States is within the district court’s jurisdiction must appear from plaintiff’s pleading, not the defenses which may be interposed to, or anticipated by it. Peyton v. Railway Express Agency, 316 U.S. 350, 62 S.Ct. 1171, 86 L.Ed. 1525; Tennessee v. Union & Planters’ Bank, 152 U.S. 454, 14 S.Ct. 654, 38 L.Ed. 511; Louisville & N. R. R. v. Mottley, 211 U.S. 149, 29 S.Ct. 42, 53 L.Ed. 126; Gully v. First National Bank, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 70.

The original complaint, in substance, alleges that, as authorized and directed by law, plaintiff insured the accounts of the Fidelity Federal Savings and Loan Association of Nashville, Tennessee; that one Virgil Hall was secretary and treasurer of Fidelity Federal Savings and Loan Association from its organization until about February 1, 1941; that said Hall wrongfully and without authority abstracted funds of the Association for his own use in the sum of $34,137.03,- and as a result of such abstraction of funds, the capital of the Association was impaired, and plaintiff, in order to protect itself, made a contribution in the manner provided by law in the sum of $32,361.47 to said Association, with the provision that $29,708.50 would be used in restoring the shortage occasioned by ¡the acts of Hall, the balance to be used for the restoration of other lo'sses; and that the Association has assigned all of its right, .title and interest, and choses in action and rights of action against defendant to the plaintiff.

That the Fidelity Federal Savings and Loan Association had its chief bank account with the defendant, Third National Bank, and because of an arrangement between Hall and defendant Bank to mislead and give untrue information to the examiners of plaintiff, said Bank unlawfully and without authority made charges against the account of the Association, applying the proceeds thereof to the payment of personal loans made by defendant Bank to Hall; that at ithe time of said transaction's, Hall was indebted to the Bank in large sums, and plaintiff divides its suit into five claims of relief, alleging five separate transactions which entitle it to recover:

1. An item of $10,000 unlawfully charged against the account of the Association by defendant as of September 20, 1940.

2. An item of $15,945.66 unlawfully charged against the account of ithe Association by defendant as of September 13, 1940.

3. An item of $10,000 unlawfully charged against the account of the Association by defendant as of October 9, 1940.

4. An item of $11,456.83 lost by plaintiff by reason of fraud and deceit of defendant in making false and untrue 'statements to plaintiff’s examiners.

5. An item of $3,000 representing the proceeds of a mortgage belonging to the Association unlawfully held by defendant Bank as collateral to a personal indebtedness of Hall.

In short, the first, second and third claims of relief charge the unlawful conversion of funds by the defendant from the account of the Association, which said items were unlawfully converted by defendant from the account of the Association and credited to the personal indebtedness of Hall. The fourth claim of relief seeks to recover an item of loss occasioned by fraud and deceit on the part of defendant. The fifth claim of relief seeks to recover the value of a mortgage note unlawfully transferred to defendant by reason of an invalid endorsement.

Plaintiff, by amendment to its original complaint, has stated a sixth claim of relief, which apparently consists of a number of different items, all, however, relating to alleged fraudulent and illegal dealings between the Bank and Hall, wherein the Bank is charged with having advanced Hall funds with which to cover shortages in his account with the Association, and thereafter illegally making itself whole by various methods, 'such as accepting the proceeds of checks drawn against funds of the Association on which checks the endorsement of payees were forged; by charging against the account of the Association checks not properly countersigned; by crediting to the account of the Association for the purpose of deceiving the examiners of plaintiff checks drawn against the accounts of other depositors of said Bank who had insufficient funds with which to pay said checks, which fact was well known to the Bank, then later charging the checks against the account of the Association; by permitting Hall .to deposit to hi's own account checks illegally drawn on the account of the Association; by pre-dating deposits in the account of the Association to deceive plaintiff’s examiners; by holding as security and collateral to the personal indebtedness of Hall, checks of the Association illegally drawn by Hall; by holding as collateral security to the personal indebtedness of Hall, notes and mortgages of the Association illegally assigned to the Bank; by giving false statements to the examiners of plaintiff as to the state of the Association’s account, for the purpose of deceiving plaintiff and the Association and to protect Hall; and by accepting checks of the Association payable to third parties bearing forged and restrictive endorsements, all amounting to conversion and fraud and deceit on the part of the defendant Bank.

It is apparent that the alleged acts complained of are purely of a local nature and plaintiff’s rights, if any, are fully governed by the common law and the laws of the State of Tennessee relating to conversion and fraud and deceit. Plaintiff has not pointed out any Federal statute vesting this court with jurisdiction of suits of this nature, except in cases where jurisdiction would be entertained on the grounds of diversity of citizenship; neither has it been shown that plaintiff’s basic rights depend upon the construction of any Federal statute. The gist of the entire action is the alleged fraudulent and deceitful conduct of the defendant and the alleged wrongful conversion of funds belonging to the Association. How plaintiff’s recovery for these matters could involve the interpretation of the Constitution or laws of the United States which, if given one construction, plaintiff’s rights would be supported, and if given another construction, would be defeated, is not apparent. The rights of plaintiff ito recover in this case depend entirely upon the facts, the common law, and the laws of the State of Tennessee relative to conversion and fraud and deceit. These rights, if any, are enforceable without reference ito any Federal statutes. There is no necessary connection between the enforcement of such rights and the existence of a controversy, arising under Federal law.

Counsel for plaintiff, apparently realizing their dilemma, have attempted to bolster the allegations of jurisdiction, first, by paragraph numbered “3” of the amendment 'Stating: “That as one of the basis for its claim plaintiff corporation made a ‘contribution’ under the provisions of Section 1729(f) as hereinafter more fully alleged. That the right to make such contribution under Section 1729(f) is an essential element of plaintiff’s cause of action, and that if the law is given one construction, plaintiff’s cause of action will fail, and if given another construction, it will succeed.” As hereinabove mentioned, it is apparent that this statement on its face is a conclusion of the pleader. “The office of pleading is to state the facts, not conclusion's of law. It is the duty of the court to declare the conclusions, and of the parties to state the premises.” Gold-Washing & Water Co. v. Keyes, 96 U.S. 199, 202, 24 L.Ed. 656. An examination of ¡the complaint shows that the only mention of the matter embodied in paragraph numbered “3” of the amendment is contained in paragraph “2” of the complaint, which state's:

“As a result of such abstraction of funds, the capital of the Fidelity Federal Savings & Loan Association was impaired and plaintiff in order to protect itself made a contribution in the manner provided by law in the sum of $32,361.47 to the Fidelity Federal Savings & Loan Association, with the provision that $29,708.50 of said amount would be used in restoring the°shortage occasioned by the acts of the said Virgil Hall and that the balance would be used for the restoration of other losses.”

It is not alleged that the defendant is denying the right of plaintiff to make said contribution, and it is difficult to see how the act of plaintiff in making the contribution could in any way affect the basic right to recover of the defendant by reason of wrongful acts of conversion and fraud and deceit out of which .this suit arises. It may be said as a matter of conjecture that somewhere or some time during the course of the proceeding, plaintiff’s right to make the contribution may be brought into question, but it is well settled that a genuine and present controversy, not merely a passible or conjectural one, must exist with reference to the question of jurisdiction. New Orleans v. Benjamin, 153 U.S. 411, 14 S.Ct. 905, 38 L.Ed. 764; Defiance Water Co. v. Defiance, 191 U.S. 184, 24 S.Ct. 63, 48 L.Ed. 140; Gully v. First National Bank, 299 U.S. 109, 57 S.Ct. 96, 98, 81 L.Ed. 70. “Indeed, the complaint itself will not avail as a basis of jurisdiction in so far as it goes beyond a statement of the plaintiff’s cause of action and anticipates or replies • to a probable defense.” Gully v. First National Bank, supra. It is not alleged in the complaint or the amendment as to how any construction which might possibly be placed upon plaintiff’s right of a contribution could in any way affect plaintiff’s basic right of recovery. “A suit to enforce a right which takes its origin in the laws of the United States is not necessarily, or for that reason alone, one arising under those laws, for a suit does not 'so arise unless it really and substantially involves a dispute or controversy respecting the validity, construction, or effect of such a law, upon the determination of which the result depends.” Shulthis v. McDougal, 225 U.S. 561, 32 S.Ct. 704, 706, 56 L.Ed. 1205. Not every question of Federal law emerging in a suit is proof that a Federal law is the basis of the suit. Gully v. First National Bank, supra. In the above case, Mr. Justice Cardozo, in delivering the opinion of the Court, has so aptly said:

“This Court has had occasion to point out how futile is the attempt to define a ‘cause of action’ without reference to the-context. * * * To define broadly and1' in the abstract ‘a case arising under the Constitution or laws of the United States^ has hazards of a kindred order. What is needed is something of that commonsense accommodation of judgment to kaleidoscopic situations which characterizes the law in its treatment of problems of causation. One could carry the search for causes backward, almost without end.

“Instead, there has been a selective process which picks the substantial causes out of the web and lays the other ones aside. As in problem's of causation, so here in the search for the underlying law. If we follow the ascent far enough, countless claims-of right can be discovered to have their source or their operative limits in the provisions of a Federal statute or in ¡the Constitution itself with its circumambient restrictions upon legislative power. To set bounds to the pursuit, the courts have formulated the distinction between controversies that are basic and those that are collateral, between disputes that are necessary and those that are merely possible. We 'shall be lost in a maze if we put that compass by.” (299 U.S. 117, 118, 57 S.Ct. 100, 81 L.Ed. 70.)

As to the basic nature of plaintiff’s claim, let us assume that plaintiff had not made a contribution and had not taken an assignment of the claim of Fidelity Federal Savings & Loan Association against the defendant. Would, under the statement of' ¡the claim's of relief made in the complaint,, this court have had jurisdiction of a suit by the Fidelity Federal Savings & Loan Association, a Tennessee corporation, against the defendant Bank to recover on said claims ? It appears that this question would certainly have ¡to be answered in the negative. It is apparent, therefore, that in so-far as the construction of any Federal statute is concerned, the plaintiff herein, standing in the shoes of the Fidelity Federal.’ Savings & Loan Association, would not be-in any better position as far as the question of jurisdiction i's concerned, except for the fact that plaintiff is a corporation organized and chartered under an Act of Congress, which question has already been disposed of.

For all of these reasons, it appears that to allow the amendment would avail nothing. The application to amend is therefore denied. And it appearing that the court is without jurisdiction of the -subject matter of this cause, the motion to dismiss is accordingly granted.