## Facts

- Thomas C. Sheldon and Eleanor Sheldon, citizens of Michigan, executed a bond and mortgage on Michigan land to Eurotas P. Hastings, as president and trustee for the Bank of Michigan (Michigan citizens).
- Hastings, acting with the bank’s authority, assigned the bond and mortgage to William E. Sill, a citizen of New York.
- Sill filed a bill in equity in the U.S. Circuit Court for the District of Michigan to foreclose the mortgage and obtain satisfaction of the debt.
- Sill asserted federal jurisdiction based on diversity of citizenship between himself (New York) and the Sheldons (Michigan).
- The Sheldons challenged jurisdiction under the Judiciary Act of 1789, which limits federal suits by assignees seeking to recover the contents of a “chose in action” when the assignor could not have sued in federal court.
- The circuit court overruled the jurisdictional objection and entered a foreclosure decree ordering sale of the mortgaged property.
- The Sheldons appealed to the U.S. Supreme Court.

## Issues

1. Whether Congress may constitutionally limit the jurisdiction of inferior federal courts by excluding certain diversity suits, even though Article III extends the judicial power to controversies between citizens of different states.
2. Whether the Judiciary Act’s restriction on assignee suits to recover the contents of a chose in action barred jurisdiction over an assignee’s foreclosure action on a bond and mortgage when the assignor lacked diversity jurisdiction.

## Decision

- The Supreme Court held that Congress may restrict the jurisdiction of lower federal courts within the bounds of Article III.
- The Court held that the bond and mortgage debt constituted a “chose in action” covered by the Judiciary Act’s assignee limitation.
- Because the assignor and the Sheldons were all Michigan citizens, the assignor could not have brought the action in federal court on diversity grounds.
- The Court concluded the circuit court lacked jurisdiction and that its decree in Sill’s favor was not validly rendered.

## Legal Principles

- Article III sets the outer limits of federal judicial power but does not require Congress to vest all constitutionally permissible jurisdiction in inferior federal courts.
- Inferior federal courts are statutory courts and possess only the jurisdiction Congress confers.
- Congress may withhold from inferior federal courts jurisdiction over any category of Article III controversies, so long as it does not confer jurisdiction beyond Article III’s enumerated heads.
- Under the Judiciary Act of 1789, federal courts lack jurisdiction over suits by an assignee to recover the contents of a chose in action unless the assignor could have sued in federal court (with an exception not applicable here).
- A “chose in action” includes contractual rights to recover money by action, including debts secured by instruments such as bonds and mortgages.

## Conclusion

The Court ruled that Congress may narrow lower federal court diversity jurisdiction and that the Judiciary Act validly barred this assignee’s diversity foreclosure suit because the original parties lacked diversity; therefore, the circuit court had no jurisdiction to enter the foreclosure decree.


Sheldon v. Sill, 49 U.S. (8 How.) 441 (1850)