Calvert v. Southern Ry. Co.

• Decision Date: 06 May 1902
• Citation: 41 S.E. 963,64 S.C. 139
• Parties: CALVERT v. SOUTHERN RY. CO.
• Court: South Carolina Supreme Court

41 S.E. 963

64 S.C. 139

CALVERT v. SOUTHERN RY. CO.

Supreme Court of South Carolina

May 6, 1902

On petition for rehearing. Reversed.

For former opinion, see 36 S.E. 750.

Gary A. J., Pope, J., and Townsend, Circuit Judge, dissenting.

JONES J.

The question presented in this case is whether the defendant Southern Railway Company, being sued in the state court by a citizen of this state, was entitled to remove the cause to the United States circuit court upon the ground of diverse citizenship. It appears that a petition for removal, with a properly executed bond, was duly filed. The petition shows that the defendant company was incorporated under the laws of Virginia on the 18th day of June, 1894, and subsequently complied with the act approved March 9, 1896, entitled "An act to provide the manner in which railroad companies incorporated under the laws of other states or countries may become incorporated in this state," by filing a certified copy of its charter in the office of the secretary of state, and causing a certified copy thereof to be recorded in the office of the register of mesne conveyances or clerk of the court of common pleas in each county in which such corporation proposed to carry on business or acquire property. The third section of said act provides: "That when a foreign corporation complies with the provisions and requirements of this act, it shall ipso facto become a domestic corporation, and shall enjoy the rights and be subject to the liabilities of such domestic corporation; it may sue and be sued in the courts of this state, and shall be subject to the jurisdiction of this state as fully as if it were originally created under laws of the state of South Carolina." 22 St. at Large, pp. 114, 115. The question, then, is whether a corporation originally created in one state and subsequently adopted in another state becomes a "citizen" of the latter state for purposes of federal jurisdiction, so as to be entitled to remove the cause to the federal court, when the plaintiff is a citizen of the state adopting the foreign corporation. Strictly speaking, corporations are not citizens, but artificial persons or bodies. The federal courts, however take jurisdiction of corporations by looking beyond the artificial body to the individuals of which it is composed as the real parties in interest. The rule at one time prevailed that federal jurisdiction existed when all the corporation or stockholders were citizens of a state or states different from that of the adverse party. Bank v. De Veaux, 5 Cranch, 61, 3 L.Ed. 38; Bank v. Slocomb, 14 Pet. 60, 10 L.Ed. 354. But the practical difficulty in applying this rule, in view of the unknown and ever varying list of changing stockholders, or the fact that federal jurisdiction over the vast interests represented by corporations could be wholly defeated by having but a single stockholder in every state wherein the corporation did business, doubtless led to the rule which now prevails. Since the case of Railroad v. Letson, 2 How. 497, 11 L.Ed 353, it has been firmly established that there is an indisputable presumption that the corporators of a corporation are citizens of the state which originally created the corporation. Railroad Co. v. James, 161 U.S. 545, 16 S.Ct. 621, 40 L.Ed. 802; Louisville, N. A. & C. R. Co. v. Louisville Trust Co., 174 U.S. 552, 19 S.Ct. 817, 43 L.Ed. 1081. In the James Case, supra, Etta James, a citizen of Missouri, brought an action for the negligent killing of her husband at Monett, in Missouri, where he resided, in the United States circuit court in Arkansas, against the St. Louis, etc., Railroad Company, originally created a corporation in Missouri and domesticated in Arkansas by compliance with the Arkansas statute, substantially as the act of 1896, supra. The defendant waived its personal privilege of being sued in the district of which he was an inhabitant, but raised the objection that the circuit court in Arkansas had no jurisdiction, on ground that the defendant was not a citizen of Arkansas, but was a citizen of Missouri, of which state the plaintiff was a resident and citizen. The United States supreme court held, on the question proposed for determination, that the Missouri corporation, by compliance with the Arkansas statute, did not become an Arkansas corporation in such a sense as to make it a citizen of Arkansas, so as to subject it to a suit in the federal circuit court by a citizen of the state of its origin. The facts which may be said to distinguish the James Case from the case at bar do not seem to be at all material, for the question was one of citizenship, and the vital principle announced is that a corporation originally created in one state does not, for purposes of federal jurisdiction, become a citizen of another state by compliance with a statute of the latter state with provisions like our statute of 1896. In the case of Louisville, N. A. & C. R. Co. v. Louisville Trust Co., 174 U.S. 552, 19 S.Ct. 817, 43 L.Ed. 1081, a corporation created in Indiana brought an action in the federal court in Kentucky against several Kentucky corporations. There was a plea to the jurisdiction, asserting that the plaintiff was a corporation and citizen of Kentucky, of which state the defendants were corporations. There was a contest as to whether the Indiana corporation had accepted the provisions of a Kentucky statute, which it was alleged constituted it a corporation of Kentucky. The supreme court, on the question of jurisdiction, said: "The acts done by the Louisville, New Albany & Chicago Railway Company under the statute of Kentucky, while affording ample evidence that it had accepted the grants thereby made, can hardly affect the question whether the terms of these statutes were sufficient to make the company a corporation of Kentucky. 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 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." It is true that the Southern Railway Company became a corporation of South Carolina by compliance with the act of 1896 ( Railway Co. v. Tompkins, 48 S.C. 49, 25 S.E. 982), but, as shown above, this fact is not material on the question whether the Southern Railway Company thereby became a citizen of South Carolina for purposes of federal jurisdiction, when it appeared that said corporation was originally created in, and thereby became a citizen of, Virginia. Let us for a moment examine the act of 1896, supra. By its title it purports to provide the manner in which railroad corporations, companies incorporated in other states, may become incorporated in this state. By the third section, quoted already, it is provided that when the foreign corporation complies with the provisions and requirements of the act it (the foreign corporation) shall ipso facto become a domestic corporation, etc. The act does not provide for the creation of a new and distinct corporation out of natural persons or other corporations, whose citizenship could be imputed to the new corporation, but it operates solely on the foreign corporation, as to which there is an indisputable presumption that its corporators are citizens of the state originally creating it. So to speak, the only corporator in the South Carolina corporation is the foreign corporation or its corporators, conclusively presumed to be citizens of Virginia. It would seem clear in such case that the indisputable presumption of citizenship which attaches to the foreign corporation for purposes of federal jurisdiction would follow it on its mere adoption as a domestic corporation in another state. Keeping in mind that the mere fact that the Southern Railway Company became a South Carolina corporation is not conclusive as to the question of citizenship, as shown in the Louisville Trust Co. Case, supra, and keeping in mind that the federal courts look beyond the mere corporate entity, and impute to the corporation the citizenship of its corporators, it would seem inevitable that the indisputable presumption of citizenship attaching to a foreign corporation would not be overthrown by another contrary indisputable presumption,--the foreign corporation by filing a certified copy of its charter with the secretary of state and the county recording officer, ipso facto became a domestic corporation. Quite a different question was presented in Memphis & C. R. Co. v. Alabama, 2 Sup. Ct. 432, 27 L.Ed. 518, for by the Alabama statute, which sought to incorporate the Memphis & Charleston Railroad Company, there being a railroad of the same name incorporated in Tennessee, it was provided, among other things, that books of subscription to the capital stock should be opened in Alabama, so as to afford the citizens thereof an opportunity to take stock. This and other provisions of the act shows that the Alabama corporation, although of the same name as the Tennessee corporation, was to be a new corporation, composed of natural persons, and organized under the laws of Alabama, and hence was not entitled to remove to the federal court a suit against it by the state of Alabama, for the use of Jackson county th...