1. To constitute a case arising under the Constitution or laws
of the United States within the meaning of the removal statute,
Jud.Code, § 28, 28 U.S.C. 71, a right or immunity created by the
Constitution or laws of the United States must be an essential
element of the plaintiff's cause of action; the right or immunity
must be such that it will be supported if the Constitution or laws
of the United States are given one construction or effect, and
defeated if they receive another; a genuine and present
controversy, not merely a possible or conjectural one, must exist
with
Page 299 U. S. 110
reference thereto, and the controversy must be disclosed upon
the face of the complaint, unaided by the answer, by the petition
for removal, or by allegations in the complaint itself which go
beyond a statement of the plaintiff's cause of action and
anticipate or reply to a probable defense. P.
299 U. S.
112.
2. A suit brought upon a state statute does not arise under an
Act of Congress or the Constitution of the United States because
prohibited thereby or because permitted thereby. P.
299 U. S.
116.
3. In a suit in a state court brought by a state tax collector
against a national bank which, in acquiring assets of another
national bank, had assumed and covenanted to pay the debts and
liabilities of the latter, the complaint alleged that among the
debts so assumed were moneys owing by the insolvent bank for taxes
assessed upon its shares or capital stock, its surplus and
undivided profits, exclusive of the value of its real estate; that,
in law, all taxes thus assessed were debts owing by the
shareholders of the insolvent bank which that bank was under a duty
to pay as their agent out of moneys then in its possession, and
that the defendant bank, in violation of its covenant, failed to
pay the taxes of the insolvent one, which it had thus assumed and
made its own liability.
Held not removable as a case
arising under the Constitution or laws of the United States,
because
(1) The suit is upon a contract having its genesis in the law of
the State, enforcement of which has no necessary connection with
the existence of a controversy arising under federal law. P.
299 U. S.
114.
(2) While the tax sought to be recovered, to be valid and
therefore within the contract sued upon, must be consistent with
the federal statute permitting state taxation of national bank
shareholders (R.S. § 5219; 12 U.S.C. 548), just as it must be
consistent with the Federal Constitution, its basis is a statute of
the State. Furthermore, the state statute in this case (Code,
Miss., § 3138), is in apparent harmony with the permissive federal
Act. If not in accord with the state statute, the tax would be void
for that reason, and if, on evidence, it were shown that that
statute had been obeyed, there might be no room to contend that the
federal law had been infringed. That a federal question may lurk in
the background is not enough to warrant removal. P.
299 U. S.
115.
81 F.2d 502 reversed.
Page 299 U. S. 111
Certiorari,
298 U. S. 60, to
review the affirmance of a judgment dismissing a suit to recover
state taxes. The suit had been removed from a state court.
MR. JUSTICE CARDOZO delivered the opinion of the Court.
Whether a federal court has jurisdiction of this suit as one
arising under the Constitution and laws of the United States is the
single question here.
Petitioner, plaintiff in the court below, sued the respondent in
a state court in Mississippi to recover a money judgment. The
following facts appear on the face of the complaint: in June, 1931,
the assets of the First National Bank of Meridian, a national
banking association, were conveyed to the respondent, the First
National Bank in Meridian, under a contract whereby the debts and
liabilities of the grantor, insolvent at the time and in the hands
of a receiver, were assumed by the grantee, which covenanted to pay
them. Among the debts and liabilities so assumed were moneys owing
to the petitioner, the state collector of taxes, or now claimed to
be owing to him, for state, county, city, and school district
taxes. In form, the assessment was imposed upon the shares or
capital stock of the bank, its surplus and undivided profits,
exclusive of the value of the real estate. In law, so the pleader
states, all taxes thus assessed were debts owing by the
shareholders, which the bank was under a duty to pay as their agent
out of moneys belonging to them, then in its possession.
Page 299 U. S. 112
The new bank, in violation of its covenant, failed to pay the
taxes of the old bank, which it had thus assumed and made its own.
Judgment is demanded for the moneys due under the contract.
A petition was filed by the respondent for the removal of the
cause to the federal court upon the ground that the suit was one
arising "under the Constitution or laws of the United States."
Judicial Code § 28, 28 U.S.C. § 71.
Cf. Judicial Code §
24(1)(a), 28 U.S.C. § 41(1)(a). The state court made an order
accordingly, and the federal District Court denied a motion to
remand. Later, after a trial upon the merits, the complaint was
dismissed. The Circuit Court of Appeals for the Fifth Circuit
affirmed the judgment of dismissal, overruling the objection that
the cause was one triable in the courts of Mississippi. 81 F.2d
502. The decision was put upon the ground that the power to lay a
tax upon the shares of national banks has its origin and measure in
the provisions of a federal statute (R.S. § 5219, 12 U.S.C. § 548),
and that, by necessary implication, a plaintiff counts upon the
statute in suing for the tax. Because of the importance of the
ruling, this Court granted certiorari "limited to the question of
the jurisdiction of the District Court."
How and when a case arises "under the Constitution or laws of
the United States" has been much considered in the books. Some
tests are well established. To bring a case within the statute, a
right or immunity created by the Constitution or laws of the United
States must be an element, and an essential one, of the plaintiff's
cause of action.
Starin v. New York, 115 U.
S. 248,
115 U. S. 257;
First National Bank v. Williams, 252 U.
S. 504,
252 U. S. 512. The
right or immunity must be such that it will be supported if the
Constitution or laws of the United States are given one
construction or effect, and defeated if they receive another.
Id.; 263 U. S. Seattle
School District, 263
Page 299 U. S. 113
U.S. 361,
263 U. S.
363-364. A genuine and present controversy, not merely a
possible or conjectural one, must exist with reference thereto
(
New Orleans v. Benjamin, 153 U.
S. 411,
153 U. S. 424;
Defiance Water Co. v. Defiance, 191 U.
S. 184,
191 U. S. 191;
Joy v. St. Louis, 201 U. S. 332;
Denver v. New York Trust Co., 229 U.
S. 123,
229 U. S.
133), and the controversy must be disclosed upon the
face of the complaint, unaided by the answer or by the petition for
removal. (
Tennessee v. Union & Planters' Bank,
152 U. S. 454;
Louisville & Nashville R. Co. v. Mottley, 211 U.
S. 149;
The Fair v. Kohler Die & Specialty
Co., 228 U. S. 22,
228 U. S. 25;
Taylor v. Anderson, 234 U. S. 74).
Indeed, the complaint itself will not avail as a basis of
jurisdiction insofar as it goes beyond a statement of the
plaintiff's cause of action and anticipates or replies to a
probable defense.
Devine v. Los Angeles, 202 U.
S. 313,
202 U. S. 334;
The Fair v. Kohler Die & Specialty Co., supra.
Looking backward, we can see that the early cases were less
exacting than the recent ones in respect of some of these
conditions. If a federal right was pleaded, the question was not
always asked whether it was likely to be disputed. This is seen
particularly in suits by or against a corporation deriving its
charter from an act of Congress.
Osborn v.
Bank of the United States, 9 Wheat. 738,
22 U. S.
817-828;
Pacific Railroad Removal cases,
115 U. S. 1,
115 U. S. 11.
Modern statutes have greatly diminished the importance of those
decisions by narrowing their scope.
Gay v. Ruff,
292 U. S. 25,
292 U. S. 35;
Puerto Rico v. Russell & Co., 288 U.
S. 476,
288 U. S. 483.
Federal incorporation is now abolished as a ground of federal
jurisdiction except where the United States holds more than
one-half the stock. Act of February 13, 1925, c. 229, § 12, 43
Stat. 936, 941. Partly under the influence of statutes disclosing a
new legislative policy, partly under the influence of more liberal
decisions, the probable course
Page 299 U. S. 114
of the trial, the real substance of the controversy, has taken
on a new significance.
"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,
225 U. S. 569.
Cf. First National Bank v. Williams, supra; Hopkins v.
Walker, 244 U. S. 486,
244 U. S. 489;
Shoshone Mining Co. v. Rutter, 177 U.
S. 505,
177 U. S. 507.
Only recently we said, after full consideration, that the doctrine
of the charter cases was to be treated as exceptional, though,
within their special field, there was no thought to disturb them.
Puerto Rico v. Russell & Co., supra. "We should fly in
the face of this legislative policy and disregard precedents which
we think controlling were we to extend the doctrine now."
Id. Today, even more clearly than in the past, "the
federal nature of the right to be established is decisive-not the
source of the authority to establish it."
Id.
Viewing the case at hand against this background of established
principle, we do not find in it the elements of federal
jurisdiction.
1. The suit is built upon a contract which, in point of
obligation, has its genesis in the law of Mississippi. A covenant
for a valuable consideration to pay another's debts is valid and
enforceable without reference to a federal law. For all that the
complaint informs us, the failure to make payment was owing to lack
of funds, or to a belief that a stranger to the contract had no
standing as a suitor or to other objections nonfederal in their
nature. There is no necessary connection between the enforcement of
such a contract according to its terms and the existence of a
controversy arising under federal law.
Page 299 U. S. 115
2. The obligation of the contract being a creation of the state,
the question remains whether the plaintiff counts upon a federal
right in support of his claim that the contract has been broken.
The performance owing by the defendant was payment of the valid
debts, and taxes are not valid debts unless lawfully imposed. From
this, defendant argues that a federal controversy exists, the tax
being laid upon a national bank or upon the shareholders therein,
and for that reason being void unless permitted by the federal
law.
Not every question of federal law emerging in a suit is proof
that a federal law is the basis of the suit. The tax here in
controversy, if valid as a tax at all, was imposed under the
authority of a statute of Mississippi. The federal law did not
attempt to impose it, or to confer upon the tax collector authority
to sue for it. True, the tax, though assessed through the action of
the state, must be consistent with the federal statute consenting,
subject to restrictions, that such assessments may be made. R.S. §
5219, as amended, 12 U.S.C. § 548. It must also be consistent with
the Constitution of the United States.
McCulloch
v. Maryland, 4 Wheat. 316;
Owensboro National
Bank v. Owensboro, 173 U. S. 664;
Baltimore National Bank v. Tax Commission, 297 U.
S. 209. If there were no federal law permitting the
taxation of shares in national banks, a suit to recover such a tax
would not be one arising under the Constitution of the United
States, though the bank would have the aid of the Constitution when
it came to its defense.
Tennessee v. Union & Planters'
Bank, supra; Sawyer v. Kochersperger, 170
U. S. 303;
Arkansas v. Kansas & Texas Coal
Co., 183 U. S. 185;
Louisville & Nashville R. Co. v. Mottley, supra. That
there is a federal law permitting such taxation does not change the
basis of the suit, which is still the statute of the state, though
the federal law is evidence to prove the statute valid.
Page 299 U. S. 116
The argument for the respondent proceeds on the assumption that,
because permission at times is preliminary to action, the two are
to be classed as one. But the assumption will not stand. A suit
does not arise under a law renouncing a defense, though the result
of the renunciation is an extension of the area of legislative
power which will cause the suitor to prevail. Let us suppose an
amendment of the Constitution by which the states are left at
liberty to levy taxes on the income derived from federal
securities, or to lay imposts and duties at their pleasure upon
imports and exports. If such an amendment were adopted, a suit to
recover taxes or duties imposed by the state law would not be one
arising under the Constitution of the United States, though, in the
absence of the amendment, the duty or the tax would fail. We recur
to the test announced in
Puerto Rico v. Russell & Co.,
supra: "The federal nature of the right to be established is
decisive, not the source of the authority to establish it." Here,
the right to be established is one created by the state. If that is
so, it is unimportant that federal consent is the source of state
authority. To reach the underlying law, we do not travel back so
far. By unimpeachable authority, a suit brought upon a state
statute does not arise under an act of Congress or the Constitution
of the United States because prohibited thereby.
Louisville
& Nashville R. Co. v. Mottley, supra. With no greater
reason can it be said to arise thereunder because permitted
thereby.
Another line of reasoning will lead us to the same conclusion.
The Mississippi law provides, in harmony with the act of Congress
(R.S. § 5219), that a tax upon the shares of national banks shall
be assessed upon the shareholders, though the bank may be liable to
pay it as their agent, charging their account with moneys thus
expended.
Page 299 U. S. 117
Code of Mississippi, § 3138.
Cf. Home Savings Bank v. Des
Moines, 205 U. S. 503,
205 U. S. 518;
Aberdeen Bank v. Chehalis County, 166 U.
S. 440;
First National Bank v.
Kentucky, 9 Wall. 353. Petitioner will have to
prove that the state law has been obeyed before the question will
be reached whether anything in its provisions or in administrative
conduct under it is inconsistent with the federal rule. If what was
done by the taxing officers in levying the tax in suit did not
amount in substance under the law of Mississippi to an assessment
of the shareholders, but in substance, as well as in form, was an
assessment of the bank alone, the conclusion will be inescapable
that there was neither tax nor debt apart from any barriers that
Congress may have built. On the other hand, a finding upon evidence
that the Mississippi law has been obeyed may compose the
controversy altogether, leaving no room for a contention that the
federal law has been infringed. The most one can say is that a
question of federal law is lurking in the background, just as,
farther in the background, there lurks a question of constitutional
law, the question of state power in our federal form of government.
A dispute so doubtful and conjectural, so far removed from plain
necessity, is unavailable to extinguish the jurisdiction of the
states.
This Court has had occasion to point out how futile is the
attempt to define a "cause of action" without reference to the
context.
United States v. Memphis Cotton Oil Co.,
288 U. S. 62,
288 U. S. 67-68.
To define broadly and 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 common sense
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.
Bird v. St. Paul, F. & M. Insurance
Page 299 U. S. 118
Co., 224 N.Y. 47, 51, 120 N.E. 86;
Leyland Shipping
Co. v. Norwich Fire Insurance Society, (1918) A.C. 350, 369;
Aetna Insurance Co. v. Boon, 95 U. S.
117,
95 U. S. 130;
Milwaukee & St. Paul R. Co. v. Kellogg, 94 U. S.
469,
94 U. S. 474.
Instead, there has been a selective process which picks the
substantial causes out of the web and lays the other ones aside. As
in problems 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.
The judgment should be reversed, and the cause remitted to the
District Court with instructions to remand it to the court in
Mississippi from which it was removed.
Reversed.
MR. JUSTICE STONE took no part in the consideration or decision
of this case.