MULLER V. DOWS

• Decision Date: 01 January 1876
• Citation: 94 U. S. 444
• Court: U.S. Supreme Court

Muller v. Dows

94 U.S. 444

APPEAL FROM THE CIRCUIT COURT OF THE

UNITED STATES FOR THE DISTRICT OF IOWA

Syllabus

1. A suit by or against a corporation in a court of the United States is regarded as brought by or against its stockholders, all of whom are, for the purposes of jurisdiction, conclusively presumed to be citizens of the state which created it.

2. It should appear by the declaration or bill of complaint that the corporation was created by the state whereof the adverse party is not a citizen, but a defective averment of that fact may be cured by the subsequent pleadings.

3. A corporation created by the laws of Iowa, although consolidated with another of the same name in Missouri under the authority of a statute of each state, is nevertheless in Iowa a corporation existing there under the laws of that state alone.

4. A decree foreclosing a mortgage executed by the Chicago & Southwestern Railroad Company of its entire railroad and franchises and ordering a sale of them, passed by the Circuit Court of the United States for the District of Iowa, which, in a suit there pending, had jurisdiction of the mortgagor and the trustees in the mortgage, is not invalid because a part of the property ordered to be sold is situate in the State of Missouri.

5. The Court holds that there was no waiver by the Chicago, Rock Island & Pacific Railroad Company of its right to foreclose the mortgage.

6. A surety who holds several securities by way of indemnity may resort to either of them for payment.

The facts are stated in the opinion of the Court.

Page 94 U. S. 445

MR. JUSTICE STRONG delivered the opinion of the Court.

The decree made below is assailed here for several reasons. The first is that the court had no jurisdiction of the suit in consequence of the want of proper and necessary citizenship of the parties. This objection was not taken in the circuit court, but it is of such a nature that if well founded, it must be regarded as fatal to the decree. The bill avers that Dows and Winston, two of the complainants, are citizens and residents of the State of New York and that Burnes, the other complainant, is a citizen and resident of the State of Missouri. The two original defendants, the Chicago & Southwestern Railway Company and the Chicago, Rock Island & Pacific Railroad Company, are averred to be citizens of the State of Iowa. Were this all that the pleadings exhibit of the citizenship of the parties, it would not be enough to give the circuit court jurisdiction of the case. In Lafayette Insurance Company v. French, 18 How. 404, a similar averment was held to be insufficient because it did not appear from it that the Lafayette Insurance Company was a corporation, or, if it was, that it did not appear by the law of what state it was made a corporation. It was therefore ruled that, if the defective averment had not been otherwise supplied, the suit must have been dismissed. A corporation itself can be a citizen of no state in the sense in which the word "citizen" is used in the Constitution of the United States. A suit may be brought in the federal courts by or against a corporation, but in such a case it is regarded as a suit brought by or against the stockholders of the corporation, and, for the purposes of jurisdiction, it is conclusively presumed that all the stockholders are citizens of the state which by its laws created the corporation. It is therefore necessary that it be made to appear that the artificial being was brought into existence by the law of some state other than that of which the adverse party is a citizen. Such an averment is usually made in the introduction or in the stating part of the bill. It is always there made if the bill is formally drafted. But if made anywhere in the pleadings, it is sufficient. In Lafayette Insurance Company v. French, supra, the defective averment of citizenship was held to have been supplied by the plaintiff's replication to the plea, which alleged that the defendants

Page 94 U. S. 446

were a corporation created under the laws of Indiana, having its principal place of business in that state. And in the present case we think the averment in the introduction of the bill, that the two defendant corporations were citizens of Iowa, which, if standing alone, would be insufficient to show jurisdiction in the federal court, has been supplemented by other averments which satisfactorily show that the court had jurisdiction of the case. The bill in its stating part alleges that the Chicago & Southwestern Railway Company, of the State of Iowa, was organized by the adoption of articles of association in the manner provided by the laws of said state, and that, with all the powers, rights, and privileges granted and conferred on corporations by the then existing laws of the said state, it assumed to act. The articles of association are appended to the bill as an exhibit, and made part of it by proper reference. So are the articles of consolidation with a corporation of the same name of Missouri, in which the Chicago & Southwestern Railway Company in Iowa is recited to be a body politic and corporate, organized and existing under and by virtue of the laws of the State of Iowa. The averments of the bill were generally admitted in the answers of both the defendant companies. But this is not all. Throughout the pleadings, the corporate existence under the laws of Iowa of both the companies is either admitted or asserted by all the original parties, and by the appellants, who were made parties after the suit had been some time in progress. The petition of the appellants to be made parties adopted another petition, in which it was alleged that the Chicago, Rock Island & Pacific Railroad Company was and is a corporation organized under and in pursuance of the laws of the States of Illinois and Iowa, and that the Chicago & Southwestern Railway Company was and is a corporation created under and by virtue of the laws of the States of Missouri and Iowa. Having been made parties, the appellants filed cross-bills against the present complainants and the two companies, in which they repeated the averments they had previously adopted, and the answer to the cross-bill made by all the defendants therein expressly admitted them. The record is thus seen to be full of showing that both the defendant corporations derived their existence as corporate bodies under the laws of Iowa, at least in part, and that they were corporations of that state.

Page 94 U. S. 447

Still it is argued on behalf of the appellants that the Chicago & Southwestern Railway Company cannot claim to be a corporation created by the laws of Iowa because it was formed by a consolidation of the Iowa company with another of the same name, chartered by the laws of Missouri, the consolidation having been allowed by the statutes of each state. Hence, it is argued the corporation was created by the laws of Iowa and of Missouri; and as Burnes, one of the plaintiffs, is a citizen of Missouri, it is inferred that the circuit court had no jurisdiction. We cannot assent to this inference. It is true the provisions of the statutes of Iowa, respecting railroad consolidation of roads within the state with others outside of the state, were that any railroad company, organized under the laws of the state, or that might thus be organized, should have power to intersect, join, and unite their railroads constructed or to be constructed in the state, or in any adjoining state, at such point on the state line, or at any other point, as might be mutually agreed upon by said companies; and such railroads were authorized to "merge and consolidate the stock of the respective companies, making one joint-stock company of the railroads thus connected." The Missouri statutes contained similar provisions; and with these laws in force the consolidation of the Chicago & Southwestern railways was effected. The two companies became one. But in the State of Iowa that one was an Iowa corporation, existing under the laws of that state alone. The laws of Missouri had no operation in Iowa. It is, however, unnecessary to discuss this subject further. Doubt in regard to it is put at rest by the decision of this Court in Railway Company v. Whitton's Administrator, 13 Wall. 270. There a similar question arose. A suit was brought by a citizen of Illinois in the state of Wisconsin, and it became a question whether the federal circuit court of the latter state could entertain jurisdiction. The company, sued at first in the state court, resisted an application to remove the case into the United States circuit court, on affidavits that it was a corporation created by and existing under the laws of the States of Illinois, Wisconsin, and Michigan; that its line of railway was located, in part, in each of these states; that its entire line of railway was managed and controlled by the defendant as a single corporation;

Page 94 U. S. 448

that all its powers and franchises were exercised, and its affairs managed and controlled, by one board of directors and officers; that its principal office and place of business was at the City of Chicago, in the State of Illinois, and that there was no office for the control or management of the general business and affairs of the corporation in Wisconsin. Nevertheless, the circuit court took jurisdiction of the case, and this Court held correctly, remarking that

"the defendant is a corporation, and as such a citizen of Wisconsin by the laws of that state. It is not there a corporation or citizen of any other state. Being there sued, it can only be brought into court as a citizen of that state, whatever its status or citizenship may be elsewhere."

In view of this decision, it must be held that the objection to the jurisdiction of the Circuit Court of Iowa is unsustainable.

The next objection urged against the decree of the court below is that it is void so far as it directed the usual foreclosure and sale of property not within the territorial...