Smith v. Kansas City Title & Trust Co. (US 1921) – Smith sues Kansas City Title & Trust Co. for investing in bonds issued by the federal government. Plaintiff claims that investing in the bonds would exceed the company’s corporate powers since it was only authorized to invest in valid securities, and the bonds at issue in this case were invalid because the federal statute authorizing them was unconstitutional.
a. Holding: Federal question jurisdiction applies.
b. Ruling: “where it appears from the complaint that the right to relief depends upon the construction or application of the constitution or laws of the United States, the district court has federal question jurisdiction.” Federal law embedded in state law so yes (fails under Holmes test).