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Southern R. Co. v. Allison, 190 U.S. 326 (1903)
Southern R. Co. v. Allison, 190 U.S. 326 (1903)
326
23 S.Ct. 713
47 L.Ed. 1078
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. Comp. 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.
'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.'
9
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:
10
'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?
11
'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?
12
'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?
13
'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?'
14
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.
15
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.
16
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.
It is stated in the opinion:
17
18
'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.
19
20
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):
21
'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.'
22
23
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.
24
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:
25
'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.'
26
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.
27
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.
28
29
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.
30
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.
31
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.
32
So ordered.
business, in this state without having fully complied with the requirements of
this act.
Sec. 5. Any such corporation violating any of the provisions of this act shall
forfeit to the state of North Carolina a penalty of $200 for each and every day
after the 1st day of June, to operate and do business without having complied
with the requirements of this act. Such penalty shall be recovered by the
treasurer of the state for the benefit of the state of North Carolina, and it shall
be his duty to sue for such forfeitures in the superior court of Wake county as
the same accrued.
Sec. 6. No telegraph, telephone, express, insurance, steamboat, or railroad
company, which is a foreign corporation of another state dofrom business in
North Carolina, shall be allowed to sue in the courts of North Carolina on or
after June 1st, 1899, until such foreign corporation has become a domestic
corporation, either by a special act of the legislature, or under the provisions of
this act.
Sec. 7. No such foreign corporation, mentioned in the preceding section of this
act, shall be allowed to enter into a contract in the state of North Carolina on or
after the 1st day of June, 1899, nor shall any such contract heretofore or
hereafter made, or attempted to be made and entered into by such corporation in
the state of North Carolina, be enforceable by such corporation unless such
corporation shall, on or before the 1st day of June, 1899, become a domestic
corporation under and by virtue of the laws of North Carolina.
Sec. 8. Any such corporation violating the provisions of this act by doing any
business in this state without first becoming a comestic corporation in the
manner prescribed by law shall, in addition to the penalty prescribed in 5 of
this act, forfeit a penalty of $500 for each day any such business shall be done
by it in the state of North Carolina on or after the 1st day of June, 1899. The
amount so forfeited under the provisions of this section shall be recovered by
the treasurer of North Carolina, and it shall be the duty of said state treasurer to
institute suit for same in the superior court of Wake county: Provided, The
business contemplated in this section of this act does not embrace such business
as is strictly the business of interstate commerce.
Sec. 9. That all laws and clauses of laws in conflict with the provisions of this
act are hereby repealed.
Sec. 10. That this act shall be in force from and after its ratification.
Ratified the 10th day of February, A. D. 1899.