Southern Railway Company v. Allison/Opinion of the Court

The state court refused to recognize the validity of the order of removal of this case to the Federal court solely because of the state statute, and because of the admitted compliance of defendant with its provisions. It held that by complying with the statute the defendant became a citizen of North Carolina, so far, at least, as to prevent it applying for removal as a citizen of another state. We, therefore, assume the sufficiency of the facts to warrant the decision of the circuit court of the United States removing the case to that court, provided the defendant company was a citizen of Virginia and did not become a citizen of North Carolina by virtue of its compliance with the state statute.

The ruling of the state court, by which it proceeded to judgment in the case notwithstanding the order of removal to the Federal court, is reviewable here under § 709, Revised Statutes (U.S.C.omp. Stat. 1901, p. 575). Stone v. South Carolina, 117 U.S. 430, 29 L. ed. 962, 6 Sup. Ct. Rep. 799; Missouri P. R. Co. v. Fitzgerald, 160 U.S. 556, 40 L. ed. 536, 16 Sup. Ct. Rep. 389.

Two propositions were argued at the bar: (1) Whether the state court had the right to pass upon the question of the validity of the order of the circuit court of the United States removing the case to that court. (2) Did the defendant company, which was originally incorporated in the state of Virginia, have the right, as a citizen of Virginia, to remove the case into the Federal court, notwithstanding the defendant company had complied with the statute of North Carolina, which declared that upon doing the things therein mentioned the defendant became a domestic corporation of North Carolina?

In the view we take of this case, it is unnecessary to dwell upon the first of these questions. We therefore address ourselves to the second.

The statute of North Carolina provides, in substance, that a railroad company incorporated under the laws of any state or government, other than North Carolina, which desires to own property or carry on business, or to exercise any corporate franchises within that state, shall become a domestic corporation of the state of North Carolina 'by filing in the office of the secretary of state a copy of its charter, duly authenticated in the manner directed by law for the authentication of statutes of the state or country under the laws of which such company or corporation is chartered or organized, and a copy of its by-laws duly authenticated by the oath of its secretary.' Section 3 of the act provides:

'That when any such corporation shall have complied with the provisions of this act (above set our) it shall thereupon immediately become a corporation of this state and shall enjoy the rights and privileges, and be subject to the liability, of corporations of this state the same as if such corporation had been originally created by the laws of this state. It may sue and be sued in all courts of this state, and shall be subject to the jurisdiction of the courts of this state as fully as if such corporation were originally created under the laws of the state of North Carolina.' It is further provided by § 4 that it shall be unlawful for such foreign corporation to do business, or attempt to do business, in North Carolina after the 1st day of June, 1899, without having fully complied with the requirements of the act. It is admitted that the company did comply with the provisions of the act in relation to filing its charter, by-laws, etc., with the secretary of state.

It early became material to inquire into the nature of the status of corporations with regard to the jurisdiction of the Federal courts under the Constitution and laws of the United States. A recent statement of the law on that subject is contained in the case of St. Louis & S. F. R. Co. v. James, 161 U.S. 545, 40 L. ed. 802, 16 Sup. Ct. Rep. 621. It was said by Mr. Justice Shiras, in delivering the opinion of the court in that case, that, after considerable contention in the courts, it was finally determined by this court that the citizenship of a corporation was that of the state originally creating it, and that it was a presumption of law that the members of the corporation were citizens of the same state.

The facts upon which the decision of the court in that case was based, so far as important to be here observed, were these: The St. Louis & San Francisco Railway Company was a corporation originally dreated under the laws of the state of Missouri, and it operated a railroad from Monett in the state of Missouri to the southern border of that state. Subsequently, and under provisions of the laws of Arkansas, it entered that state for the purpose of operating its road therein from the southern boundary of the state of Missouri to Fort Smith in the state of Arkansas; the portion of the railroad in Arkansas was operated by the leasing of a railroad already or partly built in that state. The state of Arkansas had provided by its legislation that before any railroad corporation of any other state or territory should be permitted to avail itself of the benefits of the act allowing the purchasing or leasing of any road within that state, the foreign corporation should 'file with the secretary of state of this state a certified copy of its articles of incorporation, if incorporated under a general law of such state or territory, or a certified copy of the statute laws of such state or territory incorporating such company, where the charter of such railroad corporation was granted by special statute of such state; and upon the filing of such articles of incorporation or such charter, with a map and profile of the proposed line, and paying the fees prescribed by law for railroad charters, such railroad company shall, to all intents and purposes, become a railroad corporation of this state, subject to all of the laws of the state now in force or hereafter enacted, the same as if formally incorporated in this state, anything in its articles of incorporation or charter to the contrary notwithstanding, and such acts on the part of such corporation shall be conclusive evidence of the intent of such corporation to create and become a domestic corporation: And provided further, That every railroad corporation of any other state, which has heretofore leased or purchased any railroad in this state, shall, within sixty days from the passage of this act, file a duly certified copy of its articles of incorporation or charter with the secretary of state of this state, and shall, thereupon, become a corporation of this state, anything in its articles of incorporation or charter to the contrary notwithstanding; and in all suits or proceedings instituted against any such corporation process may be served upon the agent or agents of such corporation or corporations in this state, in the same manner that process is authorized by law to be served upon the agents of railroad corporations in this state organized and existing under the laws of this state.'

The railroad company, pursuant to that act, filed with the secretary of state of the state of Arkansas a duly certified copy of its articles of incorporation under the laws of Missouri. After this had been done and while the company was operating its railroad from Monett, Missouri, to Fort Smith, Arkansas, one Etta James brought an action in the circuit court of the United States for the western district of Arkansas against the company for negligence in maintaining a switch track at Monett, in Barry county, Missouri, so near its tracks that the husband of plaintiff was struck and killed by it on July 3, 1889, while employed as a fireman on one of the company's engines. The plaintiff was the widow and sole heir at law of her husband, and resided at Monett, and was a citizen of the state of Missouri. She recovered a verdict in the United States circuit court in Arkansas, and the cause was taken to the circuit court of appeals for the eighth circuit by the railroad company, which claimed that the circuit court of Arkansas had no jurisdiction, because the railroad company was a citizen of Missouri and the plaintiff was a citizen of the same state. That court, desiring instructions from the Supreme Court of the United States before deciding the case, propounded the following questions:

'1. In view of the provisions of the act of the general assembly of Arkansas, approved March 13, 1889, did the St. Louis & San Francisco Railway Company, by filing a certified copy of its articles of incorporation under the laws of Missouri with the secretary of state of Arkansas, and continuing to operate its railroad through that state, become a corporation and citizen of the state of Arkansas?

'2d. In view of the provisions of the act of the general assembly of Arkansas, approved March 13, 1889, did the St. Louis & San Francisco Railway Company, by filing a certified copy of its articles of incorporation under the laws of Missouri with the secretary of state of Arkansas, and continuing to operate its railroad through that state, become a citizen of the state of Arkansas, so as to give the circuit court of the United States for the western district of Arkansas jurisdiction of this action, in which the defendant in error was and is a citizen of the state of Missouri?

'3d. In view of the provisions of the act of the general assembly of Arkansas, approved March 13, 1889, did the St. Louis & San Francisco Railway Company, by filing a certified copy of its articles of incorporation under the laws of Missouri with the secretary of state of Arkansas, and continuing to operate its railroad through that state, become a citizen of the state of Arkansas, so as to give the circuit court of the United States for the western district of Arkansas jurisdiction of this action, in which defendant in error was and is a resident and citizen of the state of Missouri, and the cause of action accrued in the state of Missouri, and arose from an accident that resulted from the operation of the railroad of the company in that state?

'4th. In view of the facts hereinbefore set forth, did the circuit court of the United States for the western district of Arkansas have jurisdiction of this action?'

After a full examination of the prior cases Mr. Justice Shiras, speaking for the court, answered the second question in the negative, observing that such answer rendered it unnecessary to answer the other questions.

Here was a corporation originally incorporated in the state of Missouri going into the state of Arkansas and operating a railroad in that state by leasing a portion of it therein and complying with a statute which provided that, upon filing a certified copy of its articles of incorporation with the secretary of state of Arkansas, it should be regarded as formally incorporated in that state, and it should thereby become a domestic corporation, and yet it was held that defendant could not be sued by a citizen of Missouri in the Federal court in the state of Arkansas; that, although to some extent and for some purposes it might be regarded as a corporation of Arkansas, it was for purposes of jurisdiction in the Federal courts to be regarded as a corporation of the state of Missouri.

The case, it will be seen, was not decided upon the ground that the cause of action had arisen in the state of Missouri. It was admitted that the cause of action was transitory, but the broad question was decided that the company was a corporation of Missouri and a citizen of that state, and could not be sued by another citizen of that state in the Federal courts of Arkansas.

'The presumption that a corporation is composed of citizens of the state which created it accompanies such corporation when it does business in another state, and it may sue or be sued in the Federal courts in such other state as a citizen of the state of its original creation.

'We are now asked to extend the doctrine of indisputable citizenship, so that if a corporation of one state, indisputably taken, for the purpose of Federal jurisdiction, to be composed of citizens of such state, is authorized by the law of another state to do business therein, and to be endowed, for local purposes, with all the powers and privileges of a domestic corporation, such adopted corporation shall be deemed to be composed of citizens of the second state, in such a sense as to confer jurisdiction on the Federal courts at the suit of a citizen of the state of its original creation.

'We are unwilling to sanction such an extension of a doctrine which, as heretofore established, went to the very verge of judicial power. That doctrine began, as we have seen, in the assumption that state corporations were composed of citizens of the state which created them; but such assumption was one of fact, and was the subject of allegation and traverse, and thus the jurisdiction of the Federal courts might be defeated. Then, after a long contest in this court, it was settled that the presumption of citizenship is one of law, not to be defeated by allegation or evidence to the contrary. There we are content to leave it.'

In Louisville, N. A. & C. R. Co. v. Louisville Trust Co. 174 U.S. 552, 43 L. ed. 1081, 19 Sup. Ct. Rep. 817, a question arose as to whether the railway company was a corporation of Kentucky as well as of the state where it was originally created. The exigencies of the case did not require a solution of that question, but the James Case, 161 U.S. 545, 40 L. ed. 802, 16 Sup. Ct. Rep. 821, was referred to with approval in the opinion of the court, which was delivered by Mr. Justice Gray. In the course of that opinion, he said (p. 563, L. ed. p. 1087, Sup. Ct. Rep. p. 821):

'But a decision of the question whether the plaintiff was or was not a corporation of Kentucky does not appear to this court to be required for the disposition of this case, either as to the jurisdiction, or as to the merits. As to the jurisdiction, it being clear that the plaintiff was first created a corporation of the state of Indiana, even if it was afterwards created a corporation of the state of Kentucky also, it was and remained, for the purposes of the jurisdiction of the courts of the United States, a citizen of Indiana, the state by which it was originally created. It could neither have brought suit as a corporation of both states against a corporation or other citizen of either * state, nor could it have sued or been sued as a corporation of Kentucky, in any court of the United States.'

So it seems that a corporation may be made what is termed a domestic corporation, or in form a domestic corporation, of a state in compliance with the legislation thereof, by filing a copy of its charter and by-laws with the secretary of state; yet such fact does not affect the character of the original corporation. It does not thereby become a citizen of the state in which a copy of its charter is filed, so far as to affect the jurisdiction of the Federal courts upon a question of diverse citizenship.

Considerable stress has been laid, by those holding opposite views, upon the case of Memphis & C. R. Co. v. Alabama, 107 U.S. 581, 27 L. ed. 518, 2 Sup. Ct. Rep. 432. It was these held that a railroad company, having been made by the statutes of Alabama an Alabama corporation, although having previously been incorporated in Tennessee, could not remove into the circuit court of the United States a suit brought against it in Alabama by a citizen of that state. But in that case the company was required by the legislation of Alabama to open books in that state for the subscription of stock in the capital of the corporation, so as to afford the citizens thereof an opportunity to take stock to the amount of a million and a half of dollars of the capital of the company. The Alabama act also provided that the company should, at the first meeting of the stockholders, designate a time when and a place or places in northern Alabama where, for the convenience of the citizens of the state who may be stockholders, an election for directors should be held, notice whereof was to be given in the newspapers, and elections for directors should be held at the same time both in Alabama and in Tennessee.

This court held that, by reason of the particular language used in the act, there was a separate original Alabama corporation formed; that the sections, taken altogether, made it a corporation created as well as controlled by the state of Alabama. It is stated in the opinion, page 584, L. ed. p. 519, Sup. Ct. Rep. p. 435:

'The whole act, taken together, manifests the understanding and intention of the legislature of Alabama that the corporation, which was thereby granted a right of way to construct through this state a railroad, with which any railroad company, chartered or to be chartered in this state, should have the right to connect its road, and which was required to construct a branch railroad in this state, to open books for subscriptions of stock to a certain amount in this state, to apply the moneys here subscribed to the construction of the road within this state, and to hold elections in this state, was and should be in law a corporation of the state of Alabama, although having one and the same organization with the corporation of the same name previously established by the legislature of Tennessee.'

The difference between the above case and the cases we have already referred to is plain and fundamental, but in any event we regard the James Case, reaffirmed and approved as it is by that of Louisville, N. A. & C. R. Co. v. Louisville Trust Co. 174 U.S. 552, 43 L. ed. 1081, 19 Sup. Ct. Rep. 817, as decisive of the case before us.

We do not subscribe to the doctrine that, if a corporation files its charter in one state, after having been first chartered in another state, and is sued by a citizen of the state in which it filed its charter, in the state courts of that state, the right of removal to the Federal courts will be denied, while, at the same time, if such a corporation is sued by a citizen of the state in which it filed its charter, in the United States courts, the jurisdiction of the United States courts will be sustained upon the ground that in the Federal courts the corporation is domestic in the state where it was originally created and where its original incorporators are citizens, and it will be conclusively presumed, as a matter of law, that they are citizens of the state originally chartering it. If there be jurisdiction in the United States courts in the latter case, on the ground that it is a corporation and citizen of the state in which it was created, that fact gives jurisdiction to the Federal court to remove the case from the state court when the corporation is sued by a citizen of the state in which it filed its charter, because such corporation is a citizen of another state, namely, the state in which it was originally created. The citizenship of the corporation is not changed because of the particular court in which the action is commenced. If it be a citizen of another state in the one case, it is such citizen also in the other, and, if the other party to the action be a citizen of a state other than the one which created the corporation, the jurisdiction of the Federal courts exists, and the right of the corporation (upon complying with the statute) to remove the case from the state court when it is sued by a citizen of the state where its charter may have been subsequently filed, is granted by the laws of the United States.

We have read with respectful consideration the cases of Debnam v. ''Southern Bell Teleph. & Teleg. Co. 126 N. C. 831, 36 S. E. 269, and Layden v. Endowment Rank, K. of P.'' 128 N. C. 546, 39 S. E. 47, in which the supreme court of North Carolina comes to a different conclusion from that which we have reached in regard to the jurisdiction of the Federal courts in such a case as this; but we cannot concur in the doctrine of the supreme court of the state as announced in those cases. We feel bound by the decisions of this court upon that subject.

The supreme court of South Carolina has come to the same conclusion that we reach in this case, having altered its holding in Mathis v. Southern R. Co. 53 S.C.. 257, 31 S. E. 240, after the decision of the James Case, 161 U.S. 545, 40 L. ed. 802, 16 Sup. Ct. Rep. 821. See, to that effect, Wilson v. Southern R. Co. 64 S.C.. 162, 36 S. E. 701, 41 S. E. 971.

In Walters v. Chicago, B. & Q. R. Co. 104 Fed. 377, the United States circuit in Nebraska held, in accordance with the principles maintained in the James Case, that the defendant, although made a domestic corporation of Nebraska, yet, having in fact been originally created by the state of Illinois, was a citizen of that state. The motion to remand to the state court was therefore denied.

We are of opinion that the plaintiff in error was not a citizen of the state of North Carolina at the time it was sued by the defendant in error, so far as regards the jurisdiction of the Federal courts, and that the order of removal made by the circuit court of the United States operated to withdraw from the state court the right to hear and determine the case. The judgment of the Supreme Court of North Carolina is therefore reversed, and the case remanded to that court for further proceedings not inconsistent with the opinion of this court.

So ordered.