Keary v. the Farmers and Merchants Bank of Memphis
Court: Supreme Court of the United States; February 18, 1842; Federal Supreme Court; Federal Appellate Court
In the case of Hugh M. Keary, Patrick F. Keary, and Charles A. Lacoste versus The Farmers' and Merchants' Bank of Memphis, the plaintiffs in error challenged a judgment from the Circuit Court for the District of Mississippi regarding a promissory note. The bank, a Tennessee corporation, initiated the action against the Mississippi defendants, asserting that the action violated Mississippi law, which mandates that all parties to a promissory note must be joined in a joint action.
The defendants contended that the court lacked jurisdiction because the cause of action arose from a note payable to Lacoste, who endorsed it to the bank. They argued that both they and Lacoste were residents of Mississippi, thus creating a jurisdictional issue under the relevant statutes. The plaintiffs demurred to this jurisdictional plea, which the circuit court sustained, leading to a joint judgment against all defendants.
On appeal, the defendants raised several points: the combined action against separate contracts was improper, the judgment was erroneous due to lack of jurisdiction, and the rules adopted by the circuit court to align with Mississippi practice were not authorized by the judiciary act. They claimed that the proper jurisdictional parameters had not been met, as the obligations were only to the indorser, Lacoste, and not to the bank, a Tennessee entity. The argument emphasized that jurisdiction cannot be established through court rules but must comply with statutory authority.
A defective cause of action exists, as outlined in the declaration, which cannot support a judgment. The action involves joint liability for breach and damages, but the obligations of the makers and indorser are distinct and independent. Jones, representing the defendants, argued that the plea was correctly overruled by the circuit court. He claimed that the indorsement of the note represented a joint promise from both the makers and the indorser to the indorsees, rather than merely an assignment of the original chose in action. This interpretation of the indorsement creates a new obligation, making the action valid under Mississippi law. Failure to recognize this could undermine the jurisdiction of U.S. courts in commercial matters, which the Judiciary Act of 1789 aimed to preserve. The court has the authority to adapt commercial instruments to fulfill their intended purposes, allowing for unique circumstances like liability from a new bill or note arising from an indorsement. Specific cases illustrate that various forms of irregularities, such as forged endorsements, can still bind subsequent endorsers. The case at hand involves a promissory note issued by Hugh M. Keary and Patrick F. Keary, payable to Charles A. Lacoste, and subsequently indorsed to the Farmers' and Merchants' Bank of Memphis.
Plaintiffs, citizens of Tennessee, initiated a joint lawsuit against defendants, citizens of Mississippi, including both makers and an indorser of a promissory note. This joint action is based on a Mississippi statute requiring that actions on bills of exchange and promissory notes involve both drawers and indorsers residing in Mississippi. The statute mandates that suits be filed in the county of the drawer's residence or, if the drawer is deceased or resides outside Mississippi, in the county of the first indorser's residence.
The makers of the note contested the court's jurisdiction, asserting that they were residents of Mississippi when the note was executed and when the suit commenced. Their plea was met with a demurrer, which was overruled, leading to a judgment against all defendants after they failed to continue their defense.
The central question for consideration is the sustainability of the joint action in the circuit court. The court concluded that the Mississippi statute does not have effect in U.S. courts, as state legislatures lack the authority to regulate proceedings in federal courts. Only Congress can dictate jurisdiction and procedural rules. The court found that the statute's provisions concerning venue and mandatory joinder of parties are incompatible with federal laws, specifically the Judiciary Act of 1789, which requires that suits be filed where the defendant resides or is found. Thus, the circuit court could not adopt the state law regarding joint actions for this case.
The Judiciary Act of 1789 grants the circuit court jurisdiction over suits between citizens of different states, with specific exceptions, including cases involving promissory notes assigned to another party. In this case, since all parties involved in the promissory note (makers and payee) are citizens of Mississippi, a suit could not be maintained between them in the circuit court. However, the plaintiffs, as indorsees, can sue their immediate indorser, Lacoste, because they are citizens of different states and have a direct contractual relationship.
The court emphasizes that allowing the Mississippi statute to contradict the Judiciary Act would undermine federal jurisdiction by permitting state legislatures to alter the jurisdictional landscape through changes in procedural law. Consequently, the suit against the makers is deemed not maintainable, while the suit against the indorser is valid. The court finds the plea regarding jurisdiction by the makers to be legally sound, concluding that the joint action cannot proceed in federal court against any defendants due to the distinct contracts involved. As a result, the circuit court's judgment is reversed, and the case is remanded with directions for the plaintiffs to take nothing by their writ.
