Bank of United States v. Planters' Bank of Ga. - 22 U.S. (9 Wheat.) 904 (1824)

Rule:

When a government becomes a partner in any trading company, it divests itself, so far as concerns the transactions of that company, of its sovereign character, and takes that of a private citizen. Instead of communicating to the company its privileges and its prerogatives, it descends to a level with those with whom it associates itself, and takes the character which belongs to its associates, and to the business which is to be transacted. Thus, many States of this Union who have an interest in banks, are not suable even in their own courts; yet they never exempt the corporation from being sued. The state, by giving to the bank the capacity to sue and be sued, voluntarily strips itself of its sovereign character, so far as respects the transactions of the bank, and waives all the privileges of that character. As a member of a corporation, a government never exercises its sovereignty. It acts merely as a corporator, and exercises no other power in the management of the affairs of the corporation, than are expressly given by the incorporating act.

Facts:

The note holders filed a petition against the Planters’ Bank claiming a right to payment on promissory notes that had been assigned to them. The Bank pleaded to the jurisdiction of the court, and alleged, that it was a corporation, of which the State of Georgia, and certain individuals, who were citizens of the same State with some of the plaintiffs, were members. The plea also alleged, that the persons to whom the notes mentioned in the petition were made payable, were citizens of the State of Georgia, and, therefore, incapable of suing the said Bank in a Circuit Court of the United States; and being so incapable, could not, by transferring the notes to the plaintiffs, enable them to sue in that Court. To this plea, the plaintiffs demurred, and the defendants joined in demurrer. 

Issue:

Were the averments in the declaration sufficient to give the court jurisdiction over the complaint’s cause?

Answer:

Yes.

Conclusion:

The court held that the averments in the declaration were sufficient to give the court jurisdiction of the cause. The state bank was not exempted from being sued in the federal courts by the circumstance that the State was a corporator. The State government, by becoming a corporator, laid down its sovereignty so far as respected the transactions of the corporation, and exercised no power or privilege that was not derived from the charter. The charter gave the state bank a right to sue in the circuit courts of the United States without regard to citizenship. The court held that the note holders were entitled to judgment.