St. Louis Railway Company v. James/Opinion of the Court

Etta James, as a citizen of the state of Missouri, and having a cause of action against the St. Louis & San Francisco Railway Company, a corporation of the state of Missouri, could, of course, sue the latter in the courts of that state, but equally, of course, could not sue such state corporation in the circuit court of the United States for the district of Missouri. Can she, as such citizen of the state of Missouri, lawfully assert her cause of action in the circuit court of the United States for the district of Arkansas against the St. Louis & San Francisco Railway Company, by showing that the latter had availed itself of the rights and privileges conferred by the state of Arkansas on railroad corporations of other states coming within her borders, and complying with the terms and conditions of her statutes?

Before addressing ourselves directly to this question, it must be conceded that the plaintiff's cause of action, though arising in Missouri, is transitory in its nature, and that the St. Louis & San Francisco Railway Company, though denying the plaintiff's right to sue it in the circuit court of Arkansas, waives its statutory privilege of being sued only in the district in which it has its habitat.

It must be regarded, to begin with, as finally settled, by repeated decisions of this court, that, for the purpose of jurisdiction in the federal courts, a state corporation is deemed to be indisputably composed of citizens of such state. It is equally true that, without objection so far from the federal anthority, whether legislative or judicial, it has become customary for a state adjacent to the state creating a railroad corporation to legislatively grant authority to such foreign corporation to enter its territory with its road,-to make running arrangements with its own railroads, to buy or lease them, or to consolidate with the companies owning them. Sometimes, as in the present case, such foreign corporation is declared, upon its acceptance of prescribed terms and conditions, to become a domestic corporation of such adjacent state, and to be endowed with all the rights and privileges enjoyed by similar corporations created by such state.

We have already said that the rule that state corporations are indisputably composed of citizens of the states creating them is finally settled. But, in view of the question now before us, it may be well to briefly review some of the cases.

In the case of Bank v. Deveaux, 5 Cranch, 61, where an action had been brought against citizens of the state of Georgia in the circuit court of the United States for the district of Georgia, by a petition of 'the president, directors, and company of the Bank of the United States,' wherein it was alleged that the petitioners were citizens of the state of Pennsylvania, it was held that a corporation aggregate, composed of citizens of the state, may sue a citizen of another state in the circuit court of the United States; and Chief Justice Marshall, in giving the opinion of the court, said: 'Substantially and essentially, the parties in such a case, where the members of the corporation are aliens or citizens of a different state from the opposite party, come within the spirit and terms of the jurisdiction conferred by the constitution on the national tribunals.'

Before leaving this case, it should be noted that the United States Bank was not a corporation of the state of Pennsylvania, but of the United States. The decision, therefore, was to the effect that where it appeared that a corporation plaintiff, regardless of its origin, was composed of aliens of of citizens of a different state from the defendant, the plaintiff, though suing in its corporate name, could make the averment that the individuals who composed the corporation were such aliens or citizens of a different state, and such averment, if not traversed, would sustain the jurisdiction. The principal of the case makes the individual corporators the real parties to the suit.

In Railroad Co. v. Letson, 2 How. 497, an action was brought, in the circuit court of the United States for the district of South Carolina, by a citizen of the state of New York, against a corporation whose members were alleged to be citizens of South Carolina. A plea to the jurisdiction was set up that there were members of the defendant company who were not citizens of the state of South Carolina, but of another state than New York or South Carolina. In the opinion in this case, Bank, v. Deveaux was said to have gone too far, and that consequences and inferences had been argumentatively drawn from it which ought not to be followed; and it was said that 'a corporation created by a state to perform its functions under the authority of that state, and only suable there, though it may have members out of the state, seems to us to be a person, though an artificial one, inhabiting and belonging to that state, and therefore entitled, for the purpose of suing and being sued, to be deemed a citizen of that state'; and accordingly the judgment of the circuit court, overruling the plea to its jurisdiction, was sustained.

Marshall v. Railroad Co., 16 How. 314, was a case tried in the circuit court of the United States for the district of Maryland, wherein the plaintiff alleged that he was a citizen of the state of Virginia, and that the Baltimore & Ohio Railroad Company, the defendant, was a body corporate by an act of the general assembly of Maryland; and it was suggested, when the case came into this court, that such an averment was insufficient to show jurisdiction in the courts of the United States over the suits, and it was denied that the decision in Railroad Co. v. Letson, 2 How. 297, sanctioned it, or, if some of the doctrines there advanced seemed to do so, it was said that they were extrajudicial, and therefore not authoritative. Several judges dissented, but the court, speaking through Mr. Justice Grier, held that, 'if the declaration set forth facts from which the citizenship of the parties may be presumed or legally inferred, it is sufficient. The presumption arising from the habitat of a corporation in the place of its creation being conclusive as to the residence or citizenship of those who use the corporate name and exercise the faculties conferred by it, the allegation that 'the defendants are a body corporate, by the act of the general assembly of Maryland,' is a sufficient averment that the real defendants are citizens of that state.'

In Drawbridge Co. v. Shepherd, 20 How. 233, Chief Justice Taney, speaking for the court, said: 'The question as to the jurisdiction of the courts of the United States in cases where a corporation is a party was argued and considered in this court, for the first time, in the cases of Insurance Co. v. Boardman and of Bank v. Deveaux, 5 Cranch, 57, 61. These two cases were argued at the same term, and were, as appears by the report, decided at the same time. And in the last-mentioned case the court held that in a suit by or against a corporation, in its corporate name, this court might look beyond the mere legal being which the charter created, and regard it as a suit brought by or against the individual persons who composed the corporation; and an averment that they were citizens of a particular state (if such was the fact) would be sufficient to give jurisdiction to a court of the United States, although the suit was in the corporate name, and the individual corporators were not named in the suit or the averment.

'But in the case of Railroad Co. v. Letson, the court overruled as much of this opinion as authorized a corporation to plead in abatement that one or more of the corporators, plaintiff or defendants, were citizens of a different state from the one described, and held that the members of the corporate body must be presumed to be citizens of the state in which the corporation was domiciled, and that both parties were estopped from denying it; and that inasmuch as the corporators were not parties to the suit in their individual characters, but merely as members and component parts of the body or legal entity which the charter created, the members who composed it ought to be presumed, so far as its contracts and liabilities are concerned, to reside where the domicile of the body was fixed by law, and where alone they could act as one person; and to the same extent, and for the same purposes, be also regarded as citizens of the state from which this legal being derived its existence and its faculties and powers.'

The previous cases were reviewed in Railroad Co. v. Wheeler, 1 Black, 286. That was the case of an action brought in the circuit court of the United States for the district of Indiana against Wheeler, a citizen of that state, to recover the amount due on his subscription to stock of the Ohio & Mississippi Railroad Company. The declaration described the plaintiffs as 'the president and directors of the Ohio and Mississippi Railroad Company, a corporation created by the laws of the states of Indiana and Ohio, and having its principal place of business in Cincinnati, in the state of Ohio, a citizen of the state of Ohio.' The defendant pleaded to the jurisdiction by alleging that the plaintiff company, although a corporation of the state of Ohio in the first instance, had been incorporated by an act of assembly of the state of Indiana, and thus had become a body corporate of the same state whereof he was a citizen.

The question thus raised was, on a certificate of a division of opinion between the judges of the circuit court, brought to this court, and was answered as follows: 'This suit in the corporate name is, in contemplation of law, the suit of the individual persons who compose it, and must therefore be regarded and treated as a suit in which citizens of Ohio and Indiana are joined as plaintiffs in an action against a citizen of the last-mentioned state. Such an action cannot be maintained in a court of the United States, where jurisdiction of the case depends altogether on the citizenship of the parties. And in such a suit it can make no difference whether the plaintiffs sue in their own proper names, or by the corporate name and style by which they are described. The averments in the declaration would seem to imply that the plaintiffs claim to have been created a corporate body, and to have been endued with the capacities and faculties it possesses by the co-operating legislation of the two states, and to be one and the same legal being in both states. If this were the case, it would not affect the question of jurisdiction in this case. But such a corporation can have no legal existence upon the principles of the common law or under the decision of this court in the case of Bank v. Earle. It is true that a corporation by the name and style of the plaintiffs appears to have been chartered by the states of Ohio and Indiana, clothed with the same capacities and powers, and intended to accomplish the same objects, and it is spoken of in the laws of those states as one corporate body, exercising the same powers and fulfilling the same duties in both states. Yet it has not legal existence in either state, except by the law of the state. And neither state could confer on it a corporate existence in the other, nor add to or diminish the powers to be there exercised. It may, indeed, be composed of and represent, under the corporate name, the same natural persons. But the legal entity or person which exists by force of law can have no existence beyond the limits of the state or sovereignty which brings it into life, and endues it with its faculties and powers. The president and directors of the Ohio & Mississippi Railroad Company are therefore a distinct and separate corporate body in Indiana from the corporate body of the same name in Ohio, and they cannot be joined in a suit as one and the same plaintiff, nor maintain a suit in that character against a citizen of Ohio or Indiana in a circuit court of the United States. * *  * And we shall certify to the circuit court that it has no jurisdiction of the case on the facts presented by the pleadings.'

Memphis & C.R. Co. v. State, 107 U.S. 581, 2 Sup. Ct. 432, was where an action had been brought by the state of Alabama, for the use of a county of that state, in a court of that state, against a railroad corporation whose road passed through that state and county, to recover the amount of a county tax assessed upon its property; and the cause was removed into the circuit court of the United States for the Northern district of Alabama; and, upon motion, the cause was remanded to the state court, upon the ground that the defendant, although incorporated in Tennessee also, was a corporation of the state of Alabama. On error, the judgment of the court below was affirmed, and this court, per Mr. Justice Gray, said: 'The defendant, being a corporation of the state of Alabama, has no existence in this state as a legal entity or person, except under and by force of its incorporation by this state, and, although also incorporated in the state of Tennessee, must, as to all its doings within the state of Alabama, be considered a citizen of the state of Alabama, which cannot sue or be sued by another citizen of Alabama in the courts of the United States.'

In this case Railroad Co. v. Wheeler, 1 Black, 286, and Railway Co. v. Whitton, 13 Wall. 270, were cited. The former has already been noticed, and of the latter it may be said, by way of distinguishing it from the present case, that while it was held that a citizen of Illinois might sue the railroad company in the circuit court of Wisconsin, although the company had been likewise incorporated in Illinois, yet the cause of action arose in Wisconsin; nor does it appear in the report of that case what was the character of the legislation by which the Wisconsin company was created, nor was the question now before us there considered. It is also observable that in the latter case Railroad Co. v. Wheeler was cited with approval.

One phase of the subject was before the court in the case of Pennsylvania R. Co. v. St. Louis, A. & T. H. R. Co., 118 U.S. 290, 6 Sup. Ct. 1094. A suit had been brought in the circuit court of the United States for the district of Indiana, by the St. Louis, Alton & Terre Haute Railroad Company, alleging that it was a corporation organized under the laws of the state of Illinois, and a citizen of that state, against the Indianapolis & St. Louis Company, a corporation organized under the laws of the state of Indiana, and a citizen of that state, and against other corporations mentioned in the bill as citizens of Indiana, or of other states than Illinois. An objection to the jurisdiction was made on the ground that the St. Louis, Alton & Terre Haute Railroad Company was organized under laws of both Illinois and Indiana, and was therefore a citizen of the latter state. In treating this question, this court said, by Mr. Justice Miller: 'It does not seem to admit of question that a corporation of one state, owning property and doing business in another state by permission of the latter, does not become a citizen of this state also. And so a corporation of Illinois, authorized by its laws to build a railroad across the state from the Mississippi river to its eastern boundary, may, by permission of the state of Indiana, extend its road a few miles within the limits of the latter, or, indeed, through the entire state, without thereby becoming a corporation or a citizen of the state of Indiana. Nor does it seem to us that an act of the legislature conferring upon this corporation of Illinois, by its Illinois corporate name, such powers to enable it to use and control that portion of the road within the state of Indiana as have been conferred on it by the state which created it, constitutes it a corporation of the state of Indiana. It may not be easy in all such cases to distinguish between the purpose to create a new corporation which shall owe its existence to the law or statute under consideration and the intent to enable the corporation already in existence under laws of another state to exercise its functions in the state where it is so received. The latter class of laws are common in authorizing insurance companies, banking companies, and others to do business in other states than those which have chartered them. To make such a company a corporation of another state, the language must imply creation or adoption in such form as to confer the power usually exercised over corporations by the state or by the legislature, and such allegiance as a state corporation owes to its creator. The mere grant of powers and privileges to it as an existing corporation, without more, does not do this, and does not make it a citizen of the state conferring such powers.'

So, in Nashna & L. R. Corp. v. Boston & L. R. Corp., 136 U.S. 356, 10 Sup. Ct. 1004, it was held that railroad corporations created by two or more states, though joined in their interests, in the operation of their roads, in the issue of their stock, and in the division of their profits, so as practically to be a single corporation, do not lose their identity; but each has its existence and its standing in the courts of the country only by virtue of the legislation of the state by which it was created, and the union of name, of officers, of business, and property does not change their distinctive character as separate corporations.

To fully reconcile all the expressions used in these cases would be no easy task, but we think the following propositions may be fairly deduced from them: There is an indisputable legal presumption that a state corporation, when sued or suing in a circuit court of the United States, is composed of citizens of the state which created it, and hence such a corporation is itself deemed to come within that provision of the constitution of the United States which confers jurisdiction upon the federal courts in 'controversies between citizens of different states.'

It is competent for a railroad corporation organized under the laws of one state, when authorized so to do by the consent of the state which created it, to accept authority from another state to extend its railroad into such state, and to receive a grant of powers to own and control, by lease or purchase, railroads therein, and to subject itself to such rules and regulations as may be prescribed by the second state. Such legislation on the part of two or more states is not, in the absence of inhibitory legislation by congress, regarded as within the constitutional prohibition of agreements or compacts between states.

Such corporations may be treated by each of the states whose legislative grants they accept as domestic corporations.

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.

It should be observed that, in the present case, the corporation defendant was not incorporated as such by the state of Arkansas. The legislation of that state was professedly dealing with the railroad corporation of other states. The constitution of Arkansas provides that 'foreign corporations may be authorized to do business in this state under such limitations and restrictions as may be prescribed by law,' but 'they shall not have power to condemn or appropriate private property.'

Section 5 of the act of March 16, 1881, as shown in the preliminary statement, provides that 'any railroad company incorporated by or under the laws of any other state, and having a line of railroad built, or partly built, to or near any boundary of this state, and desiring to continue its line of railroad into or through this state, or any branch thereof, may, for the purpose of acquiring the right to build its line of railroad, lease or purchase the property, rights, privileges, lands, tenements, immunities, and franchises of any railroad company organized under the laws of this state, which said lease or purchase shall carry with it the right of eminent domain held and acquired by said company at the time of lease or sale, and thereafter hold, use, maintain, build, construct, own, and operate the said railroad so leased or purchased as fully and to the same extent as the company organized under the laws of this state might or could have done; and the rights and powers of such company, and its corporate name, may be held and used by such foreign railroad company as will best subserve its purpose, and the building of said line of railroad. * *  * In all other matters said foreign railroad company shall be subject to all the provisions of all acts in relation to railroads, the liabilities and forfeitures thereby imposed, and may sue and be sued in the same manner as other railroad corporations, and subject to the same service of process, and shall keep an office of offices in said state as required by *  *  * the constitution of this state.'

It was under the provisions of this section that the St. Louis & San Francisco Railroad Company, in 1882, purchased from corporations of Arkansas the railroad already built by them, extending from the southern boundary of Missouri to Ft. Smith, in Arkansas. These Arkansas corporations have since maintained their separate organizations as corporations of that state, but do not operate railroads. It is therefore obvious that such purchase by the Missouri corporation of the railroad and franchises of the Arkansas companies did not convert it into an Arkansas corporation. The terms of the statute show that it merely granted rights and powers to an existing foreign corporation, which was to continue to exist as such, subject only to certain conditions; among others, that of keeping an office in the state, so as to be subject to process of the Arkansas courts.

It is true that by the subsequent act of 1889, by the proviso to the second section, it was provided that every railroad corporation of any other state, which had theretofore leased or purchased any railroad in Arkansas, should, within 60 days from the passage of the act, file a certified copy of its articles of incorporation or charter with the secretary of state, and shall thereupon become a corporation of Arkansas, anything in its articles of incorporation or charter to the contrary notwithstanding; and it appears that the defendant company did accordingly file a copy of its articles of incorporation with the secretary of the state. But whatever may be the effect of such legislation, in the way of subjecting foreign railroad companies to control and regulation by the local laws of Arkansas, we cannot concede that it availed to create an Arkansas corporation out of a foreign corporation in such a sense as to make it a citizen of Arkansas within the meaning of the federal constitution, so as to subject it as such to a suit by a citizen of the state of its origin. In order to bring such an artificial body as a corporation within the spirit and letter of that constitution, as construed by the decisions of this court, it would be necessary to create it out of natural persons, whose citizenship of the state creating it could be imputed to the corporation itself. But it is not pretended in the present case that natural persons, resident in and citizens of Arkansas, were, by the legislation in question, created a corporation, and that therefore the citizenship of the individual corporators is imputable to the corporation.

It is further contended, on behalf of the defendant in error, the plaintiff below, that as the plaintiff described herself as a citizen of Missouri, and the defendant company as a citizen of Arkansas, and as the cause of action, though arising in Missouri, was transitory in its nature, jurisdiction was thus formally conferred upon the circuit court of the United States for the district of Arkansas; and that the only question left for inquiry was whether the defendant company, alleged to be a citizen of Arkansas, was legally responsible for the conduct of the Missouri company of the same name, and such responsibility is supposed to be found in the fact that the railroad running through both states was under the common management of both companies.

But even if it be admitted that a common management of a railroad running through two states, and participation in its earnings and losses, by two companies, might make both responsible, jointly and severally, for a tortious cause of action, and that such cause of action might be maintained in the courts of either state, the question of the jurisdiction of the federal court still remains. The defendant was not content to leave that question to be decided by the plaintiff's allegations, but pleaded that it was in law a corporation of the state of Missouri, and that, therefore, an action could not be maintained against it, in the federal court, by a citizen of that state. In other words, the defendant company claimed that while it had voluntarily subjected itself to the laws of Arkansas, as interpreted and enforced by the courts of that state, it still remained a corporation of the state of Missouri, disabled from suing or being sued by a citizen of that state in a federal court, and that such disability was not, and could not be, removed by state legislation.

The result of these views is that we answer the second question put to us by the circuit court of appeals in the negative, and to render it unnecessary to answer the other questions.