Layden v. Endowment Rank Knights of Pythias of the World ( 1901 )

From an order refusing to remove this cause to the (550) Federal Court, the defendant appealed. The point directly presented to us is whether a corporation originally organized under the laws of the United States, but which has become a domestic corporation of this State, under the provisions of ch. 62, Laws 1899, can remove a cause into the Circuit Court of the United States when expressly sued as a domestic corporation. That such a corporation, originally organized under the laws of another State, can not do so, is settled in the recent case of Debnam v. TelephoneCompany, 126 N.C. 831, which is adopted as a part of this opinion. Whether the present defendant comes within the operation of that decision, is the question before us. We think it does.

We are not prepared to say that the United States are on a level in all respects with the States, which are considered as foreign jurisdictions. The National Government, while a distinct sovereignty, is not a foreign State, because it is composed of all the States, and is equally at home in all of them. The line of demarkation between State and Federal authority does not depend upon territorial limits, but entirely upon the subject matter of legislation or judicial construction as defined by the Constitution of the United States. This doctrine applies to the Federal Government only in its relation to the States, as it is controlled by principles essentially different when dealing with the District of Columbia, or other territories (551) of the United States. Congress is the Supreme lawmaking power of all territories, certainly unrestrained by any local authority, and it would seem but indefinitely so even by the Federal Constitution. In such cases it seems to us that Congress acts, not in its national capacity, but as a local Legislature, and its acts, unless otherwise clearly expressed, are confined in their binding operation to the jurisdictions for which they were originally intended. We therefore think that corporations, chartered primarily to do business in the District of Columbia, have no right, beyond that of comity, to operate in any of the States, unless expressly authorized by their charters. They therefore stand on the same footing as corporations of other States so far as the Act of 1899 is concerned. By that act the right of comity was withdrawn from them in common with all other foreign corporations, and they were forbidden to exercise their corporate powers within this State, unless they became domestic corporations. It is admitted that the defendant domesticated under that act, and as we have held that the legal effect of the act "was to charter, and not to license," we are compelled to hold that the defendant has no right to remove the case at bar into the Federal Court.

We can find no provision in the Constitution of the United States directly authorizing the formation of corporations by the Federal Government. That it has the implied authority to do so whenever necessary and proper for carrying into effect its express powers, was finally settled by the case of McCulloch v.Maryland, 4 Wheat, 316, but it is interesting to note the limitations placed upon such authority in the opinion of the Court. Chief Justice Marshall, speaking for the Court, says, on page 411: "The power of creating a corporation is never used for its own sake, but for the purpose of effecting something else. No sufficient reason is therefore perceived, why it may (552) not pass as incidental to those powers which are expressly given, if it be a direct mode of executing them." And again, on page 421, alluding to the fact that the Constitution gave to Congress no express authority to create corporations, he says: "Had it been intended to grant this power (of creating corporations), as one which should be distinct and independent, to be exercised in any case whatever, it would have found a place among the enumerated powers of the government. But being considered merely as a means to be employed only for the purpose of carrying into execution the given powers, there could be no motive for particularly mentioning it."

Again, the great Chief Justice, speaking for the Court, in Osborn v.Bank, 9 Wheat, 738, 860, says: "The bank is not considered as a private corporation, whose principal object is individual trade and individual profit; but as a public corporation, created for public and national purposes. That the mere business of banking is, in its own nature, a private business, and may be carried on by individuals or companies having no political connection with the government, is admitted; but the bank is not such an individual or company. It was not created for its own sake, or for private purposes. It has never been supposed that Congress could create such a corporation. The whole opinion of the Court, in McCulloch v.Maryland, is founded on and sustained by, the idea that the bank is an instrument which is `necessary and proper for carrying into effect the powers vested in the government of the United States.'"

These questions become important in construing the opinionin R. R., v. Myers, 115 U.S. 1, wherein the Court says: "We are of opinion that corporations of the United States, created by and organized under Acts of Congress, like the plaintiffs inerror in these cases, are entitled as such to remove into the Circuit Court of the United States suits brought against (553) them in the State courts, under and by virtue of the Act of 3 March, 1875, on the ground that such suits are suits `arising under the laws of the United States.' We do not propose to go into a lengthy argument on the subject; we think that the question has been substantially decided long ago by this Court. The exhaustive argument by Chief Justice Marshall in Osborn v. Bank, 9 Wheat, 817, 828, delivered more than sixty years ago, and always acquiesced in, renders any further discussion unnecessary to show that a suit by or against a corporation of the United States is a suit arising under the laws of the United States."

The words "like the plaintiffs in error," which we have italicised, taken in connection with the limitations in the cited opinion of Osborn v. Bank, would indicate that there might be other classes of corporations organized under the authority of Congress that would not have the inherent power of removal in all cases. Such, for instance, would be the corporations authorized by Congress under its special powers of legislation for territories directly under its control, and not intended to be used in any way as governmental agencies or in furtherance of interstate commerce. The petitioner at bar, whether viewed as a life insurance company or as a fraternal organization, is in no sense a governmental agency, and we do not think that life or fire insurance can be brought within the definition of interstate commerce. We think that the petitioner was incorporated by Congress to operate primarily in the District of Columbia, with only such incidental powers outside of said District as it might have by the law of comity. Therefore, we think that it comes within the principle of the decision in R. R.,v. Skottowe, 162 U.S. 490, in which the Court says, on page 497: "But even if the Court were obliged, under the allegations of the plaintiff's complaint, to take judicial notice of the defendant company's charter, no act of Congress was pointed out under which it was acting when operating (554) the railroad in the State of Oregon. So far as appears, the defendant company existed and was doing business in the State of Oregon solely under the authority of that State whether express or permissive. The two Acts of Congress referred to do not disclose any intention on the part of Congress to confer powers or right to be exercised outside of the territories named therein." Such a principle relating to relating to railroads, which are admittedly instruments of interstate commerce, would apply with even greater force to a corporation having no such character.

An examination of the acts under which the petitioner was incorporated will clearly show its local character. It was originally incorporated, as shown by its petition, under ch. 80 of 18 U.S., Statutes-at-Large, entitled "An act to provide for the creation of corporations in the District of Columbia by general law," approved 5 May, 1870. It was again incorporated by special act, approved 29 June, 1894, 28 U.S., Statutes-at-Large, ch. 119. The first section of this act reads as follows: "That George B. Shaw (and others), officers and members of the Supreme Lodge Knights of Pythias, and their successors, be and they are hereby incorporated and made a body politic and corporate, in the District of Columbia, by the name of `The Supreme Lodge Knights Pythias,' and by that name it may sue and be sued, plead and be impleaded in any court of law or equity, and may have and use a common seal, and change the same at pleasure, and be entitled to use and exercise all the powers, rights and privileges incidental to fraternal and benevolent corporations within the District of Columbia." Neither of these acts give any authority, either express or implied, to the petitioner to exercise any of its corporate powers outside of the District of Columbia. We are not now dealing with the right of comity, for that has been expressly withdrawn by (555) the State of North Carolina by the Act of 10 February, 1899. Nor do we mean to treat petitioner as a citizen of District of Columbia, but as a Federal corporation, created for local and not for national purposes. As such, it has no inherent right to do business in this State in violation of our statute.

It seems to have recognized this fact, and took advantage of the provisions of the statute to become a "domestic corporation," as therein provided. Its status as such is settled by the decision of this Court inDebnam v. Telephone Co., supra. Acting, therefore, as a domestic corporation, the only capacity in which it could then lawfully act, at the time this cause of action accrued, and sued only as a domestic corporation, we see no legal grounds for removal.

We are not inadvertent to Knights of Pythias v. Hill, 76 Fed., 468, andKnights of Pythias v. England, 94 Fed., 369, in which it is held this petitioner has right of removal to the Federal Courts; nor to the case ofKnights of Pythias v. Kalinski, 163 U.S. 289, in which the Court entertained the appeal. In the last case the question of jurisdiction does not seem to have been raised, nor do any of the cases refer to the petition in its relation as a domestic corporation, the essential question in the case at bar.

We have considered the line of cases holding the doctrine that, in all cases of removal, the jurisdiction of the subject matter of the action must appear on the face of the complaint as filed by the plaintiff, and can not be injected into the record by the defendant in making out his case for removal. Metcalf v. Watertown, 128 U.S. 586; Tennessee v. Bank,152 U.S. 454; Chappell v. Waterworth, 155 U.S. 102; Land Co. v.Brown, 155 U.S. 488; R. R. v. Skottowe, 162 U.S. 490;R. R. v. Texas, 170 U.S. 226; R. R. v. Texas, 177 U.S. 66. As we have some doubt of the application of these cases to that at bar as precluding an inquiry as to the origin (556) of its incorporation, in view of the decision in R. R., v.Cody, 166 U.S. 606, and as a determination of the point is not necessary to our decision, we prefer to rest our opinion on the grounds already stated.

As we said in Debnam's case, we must say now: We are of the opinion that as the defendant has become a domestic corporation of the State of North Carolina, and in contemplation of law a citizen thereof, and as the plaintiff has sued the defendant as a North Carolina corporation, upon a cause of action which discloses no Federal question whatever, the case can not be removed into the Circuit Court of the United States, therefore, the judgment of the Court below is

Affirmed.

Cited: Allison v. R. R., 129 N.C. 337; Beach v. R. R., 131 N.C. 400.