Smith v. Kansas City Title & Trust Co., 255 U.S. 180 (1921)

Please note: this case begins in mid-page. It therefore shares a citation with the last page of the previous case. If you are attempting to follow a link to the last page of 255 U.S. 171, click here.

Smith v. Kansas City Title & Trust Company

No.19
Argued January 6, 7, 8, 1920
Restored to docket for reargument April 26, 1920
Reargued October 14, 15, 1920
Decided February 28, 1921
255 U.S. 180

APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES

FOR THE WESTERN DISTRICT OF MISSOURI

Syllabus

1. A bill by a shareholder of a trust company to enjoin the directors from investing its funds in bonds of Federal Land Banks and Joint Stock Land Banks upon the ground that the act of Congress authorizing the creation of such banks and the issue of such bonds is unconstitutional, and that the bonds therefore are not legal securities in which the company’s fund may be lawfully invested states a cause of action arising under the laws of the United States. P. 199. Jud.Code, § 24.

2. The provision of the Federal Farm Loan Act of July 17, 1916, c. 246, 39 Stat. 360, amended January 18, 1918, c. 9, 40 Stat. 431, making the Federal Land Banks and Joint Stock Land Banks established thereunder depositaries of public money when designated by the Secretary of the Treasury, authorizing their employment as financial agents of the government, requiring them to perform, as such depositaries and agents, such reasonable duties as may be laid upon them, and authorizing them to purchase government bonds justify their creation as an exercise of the constitutional power of Congress. P. 208.

3. The necessity for such federal agencies is for Congress to determine, and the motives actuating Congress in exercising its power to create them are not a subject for judicial scrutiny. Pp. 209-210.

4. The extent to which these institutions have so far been employed as government depositaries or fiscal agencies is irrelevant to the power to create them. P. 210.

5. Nor does their legitimacy depend on their being, technically, banks, or on the extent of their banking powers. Id.

6. The fact that these banks were intended to facilitate the making of loans upon farm security at low rates of interest does not invalidate the enactment. P. 211.

7. These banks being federal agencies, Congress had power to exempt their bonds from state, as well a federal, taxation. P. 212.

Affirmed.

This was a direct appeal to review a decree of the district court dismissing a bill brought by a shareholder to enjoin a trust company from investing its money in bonds of Federal and Joint Stock Land Banks. The case is stated in the opinion, infra, p. 195.