In determining the jurisdictional amount in an action in a
circuit court of the United States to recover on a municipal bond,
the matured coupons are to be treated as separable independent
promises, and not as interest due upon the bond.
Action by James C. Edwards against Bates county, impleaded in
behalf of Mt. Pleasant township. A judgment sustaining a plea to
the jurisdiction was affirmed, and plaintiff brings error.
Reversed.
On October 5, 1891, plaintiff in error filed his petition to
recover from the defendant an aggregate alleged indebtedness,
consisting of the following items:
1. The principal of two bonds for $1,000 each, issued by the
defendant on January 18, 1871, with interest from the date of
maturity of the bonds (January 18, 1886).
2. The amount of interest coupons on said bonds, due and payable
on the 18th day of January, in the years 1873 to 1886, both
inclusive, with interest from the maturity of each coupon; and,
3. The principal of seven funded bonds of said county, each for
the sum of one hundred dollars, dated October 1, 1885, and payable
October 1, 1905.
The petition alleged that due notice had been given by the
county, pursuant to an option reserved by it, that it would redeem
said last-named bonds at a place named on the 1st of July, 1891,
and that on that date, and at the place designated, said bonds had
been duly presented, and payment thereof demanded and refused.
A plea to the jurisdiction was filed on behalf of the defendant,
based upon the claim that the matter in controversy, exclusive of
interest and costs, did not exceed the sum or value of $2,000. It
was alleged, among other things, that each of the funded bonds
provided on its face that the said County of Bates, for and on
behalf of the Township of Mt. Pleasant, reserved the right at its
option to redeem the bonds at any time after five years from the
1st day of October, 1885, in accordance
Page 163 U. S. 270
with the conditions printed on the back, which conditions, among
other things, provided for the giving of notice, by advertisement,
of the intention to redeem, and further provided that
"if any bond be not presented as required in such notice or
within thirty days after the date therein fixed, interest thereon
shall cease from said date, but said bond, with interest accrued to
said date, shall be payable upon presentment at the office of the
Treasurer of Bates County at any time thereafter."
It was further alleged that the funding bonds in question had
not been presented for payment, and that the purpose of including
them in the suit at bar was merely in aid of an attempt to confer
jurisdiction upon the court over the claim of plaintiff upon the
two one thousand dollar bonds. The plaintiff filed a reply to the
plea to the jurisdiction, and the issue thereby raised was heard
upon an agreed statement of facts and certain documentary evidence
unnecessary to be specifically stated.
In the agreed statement of facts, it was admitted that the
funding bonds in question had never been presented for payment at
the place designated by the contract for the redemption of the
same, though said county had on deposit at the depository named in
the advertised notice of intention to redeem, on said 1st day of
July, 1891, and for more than thirty days thereafter, sufficient
funds to pay said bonds, which funds had been deposited for such
special purpose, and that the County of Bates had in the hands of
its county treasurer money sufficient belonging to said township to
pay said bonds at any and all times after said thirty days from
said 1st day of July, 1891, if they had been presented for payment
by the holder thereof.
The trial court sustained the plea, and dismissed the case for
want of jurisdiction. 55 F. 436. The case was then brought to this
Court by writ of error.
Page 163 U. S. 271
MR. JUSTICE WHITE, after stating the facts in the foregoing
language, delivered the opinion of the Court.
We are solely concerned in this case in determining whether or
not the circuit court possessed jurisdiction over the claim
asserted in the petition. Act March 3, 1891, c. 517, § 5.
From the facts heretofore detailed the following questions
arise:
First. Should the circuit court have taken into consideration,
for the purpose of ascertaining the adequacy of the jurisdictional
amount, the claim of plaintiff upon the interest coupons attached
to the two one thousand dollar bonds?
Second. Did the court rightly hold that the amount of the claim
upon the funding bonds was not an item "in dispute" between the
parties, and therefore not proper to be taken into account in
determining whether the court possessed jurisdiction?
As to the first point. By the Act of Congress of March 3, 1887,
c. 373, as amended August 13, 1888, c. 866, 25 Stat. 434, original
jurisdiction was conferred upon circuit courts of the United
States,
"concurrent with the courts of the several states, of all suits
of a civil nature at common law or in equity, . . . in which there
shall be a controversy between citizens of different states in
which the matter in dispute exceeds, exclusive of interest and
costs, the sum or value of two thousand dollars."
It is contended that an indebtedness for the face amount of
coupons is an indebtedness for "interest" within the meaning of the
statute.
The nature of a coupon was thus defined in
Aurora v.
West, 7 Wall. 82, where this Court said (p.
74 U. S.
105):
"Coupons are written contracts for the payment of a definite sum
of money on a given day, and, being drawn and executed in a form
and mode for the very purpose that they may be separated from the
bonds, it is held that they are negotiable, and that a suit may be
maintained on them without the necessity of producing the bonds to
which they were attached. "
Page 163 U. S. 272
Each matured coupon upon a negotiable bond is a separable
promise, distinct from the promises to pay the bond or other
coupons, and gives rise to a separate cause of action.
Nesbit
v. Riverside Independent District, 144 U.
S. 610. In that case, this Court said (p.
144 U. S.
619):
"Each matured coupon is a separable promise, and gives rise to a
separate cause of action. It may be detached from the bond and sold
by itself. Indeed, the title to several matured coupons of the same
bond may be in as many different persons, and upon each a distinct
and separate action be maintained. So while the promises of the
bond and of the coupons in the first instance are upon the same
paper, and the coupons are for interest due upon the bond, yet the
promise to pay the coupon is as distinct from that to pay the bond
as though the two promises were placed in different instruments
upon different paper."
Not only may a suit be maintained upon an unpaid coupon in
advance of the maturity of the principal debt, but the holder of a
coupon is entitled to recover interest thereon from its maturity.
Amy v. Dubuque, 98 U. S. 470,
98 U. S. 473.
The logical effect of these rulings is that when the interest
evidenced by a coupon has become due and payable, the demand based
upon the promise contained in such coupon is no longer a mere
incident of the principal indebtedness represented by the bond, but
becomes really a principal obligation. Clearly such would be the
nature of the claim of one who, as owner of the coupons, and not of
the bonds, brought his action to enforce payment of the
indebtedness evidenced by the coupons. So also, before maturity of
the bonds, their holder could still have sued upon the matured
coupons as an independent indebtedness, and not as a mere accessory
to a demand for a recovery of the face of the bonds. No good reason
therefore exists for creating a distinction between such cases and
the case at bar, in which there is coupled with the demand to
recover upon the coupons a demand for judgment upon the bonds. The
confusion of thought to which we alluded in the case of
Brown
v. Webster, 156 U. S. 328, is
also involved in the decision below -- that is, the failure to
Page 163 U. S. 273
distinguish between a principal and accessory demand. The claim
made by the plaintiff on the coupons was in no just sense accessory
to any other demand, but was in itself principal and primary. In
ascertaining, therefore, the jurisdictional sum in dispute, the sum
of the coupons should have been treated as an independent principal
demand, and not as interest, and in holding otherwise the lower
court erred to the prejudice of the plaintiff in error.
As the face of the bonds amounted to the sum of $2,000, the
addition of the demand based upon the coupons brought the sum in
dispute within the jurisdiction of the circuit court. It is
therefore unnecessary to consider whether the controversy as to the
funding bonds did not involve a real matter "in dispute" between
the parties.
The judgment is reversed and the cause is remanded with
directions to set aside the order dismissing the action for want of
jurisdiction and for further proceedings in conformity to
law.
