Respondent instituted this suit in the United States District Court for the Eastern Division of the Eastern District of Missouri on a demand note for $5000 executed by petitioner in 1933 and payable to the Belleville Bank & Trust Co., Belleville, Illinois. Respondent insured that bank January 1, 1934; and it acquired the note in 1938 as part of the collateral securing a loan of over $1,000,000 to the bank, made in connection with the assumption of the latter's deposit liabilities by another bank. Since 1935 the note had been among the charged off assets of the bank. The note was executed by petitioner in renewal of notes which it had executed in 1926. Petitioner who was engaged in the securities business at St. Louis, Missouri, had sold the bank certain bonds which later defaulted. The original notes were executed to enable the bank to carry the notes and not show any past due bonds. Proceeds of the bonds were to be credited on the notes. The receipts for the notes contained the statement, 'This note is given with the understanding it will not be called for payment. All interest payments to be repaid.' Respondent had no knowledge of the existence of the receipts until after demand for payment on the renewal note was made in 1938. Certain interest payments on the notes were made prior to renewal for the purpose of keeping them 'as live paper'. Petitioner's president who signed the original notes knew that they were executed so that the past due bonds would not appear among the assets of the bank, and that the purpose of the interest payments was 'to keep the notes alive'. The original notes were signed in St. Louis, Missouri, were payable at petitioner's office there, and were delivered to the payee in Illinois. The evidence does not disclose where the note sued upon was signed, though it was dated at Belleville, Illinois, and payable to the bank there.
The main point of controversy here revolves around the question as to what law is applicable. The District Court held that Illinois law was applicable and that petitioner was liable. The Circuit Court of Appeals applied 'general law' to determine that the note was an Illinois rather than a Missouri contract; and it decided that under Illinois law respondent was the equivalent of a holder in due course and entitled to recover. 8 Cir., 117 F.2d 491. Petitioner contends that under the rule of Klaxon Company v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477, a federal court sitting in Missouri must apply Missouri's conflict of law rules; that if, as was the case here, Illinois law was not pleaded or proved, a Missouri court would have ascertained Illinois law from Missouri decisions since in such a case Illinois law would be presumed to be the same as the Missouri law; and that the District Court was bound to follow that same course. We granted the petition for certiorari, 314 U.S. 592, 62 S.Ct. 80, 86 L.Ed. --, because of the asserted conflict between the decision below and Klaxon Company v. Stentor Electric Mfg. Co., supra.
We held in the latter decision that a failure of a federal court in a diversity of citizenship case to follow the forum's conflict of laws rules 'would do violence to the principle of uniformity within a state' upon which Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487, was based. 313 U.S. at page 496, 61 S.Ct. at page 1021, 85 L.Ed. 1477. The jurisdiction of the District Court in this case, however, is not based on diversity of citizenship. Respondent, a federal corporation, brings this suit under an Act of Congress authorizing it to sue or be sued 'in any court of law or equity, State or Federal.' Sec. 12B, Federal Reserve Act, 12 U.S.C. § 264(j), 12 U.S.C.A. § 264(j), 48 Stat. 162, 168, 172, 49 Stat. 684, 692. And see 28 U.S.C. § 42, 28 U.S.C.A. § 42, 43 Stat. 941. Whether the rule of the Klaxon case applies where federal jurisdiction is not based on diversity of citizenship, we need not decide. For we are of the view that the liability of petitioner on the note involves decision of a federal not a state question under the rule of Deitrick v. Greaney, 309 U.S. 190, 60 S.Ct. 481, 84 L.Ed. 694.