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PUERTO RICO v. RUSSELL & CO. ET AL.

decided: March 13, 1933.

PUERTO RICO
v.
RUSSELL & CO. ET AL.



CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE FIRST CIRCUIT.

Hughes, Van Devanter, McReynolds, Brandeis, Sutherland, Butler, Stone, Roberts, Cardozo

Author: Stone

[ 288 U.S. Page 477]

 MR. JUSTICE STONE delivered the opinion of the Court.

The people of Puerto Rico, the petitioner, brought this suit in the Insular District Court of San Juan, Puerto Rico, against the respondent, Russell & Co., a sociedad en comandita organized under the laws of Puerto Rico, to recover certain assessments levied on lands of Russell & Co., under an act of the legislature of Puerto Rico. The individual respondents, members of the sociedad, none of whom are citizens of Puerto Rico or domiciled there, were not named as defendants. They appeared specially in the Insular Court and removed the cause to the United States District Court for Puerto Rico. That court denied a motion to remand and gave its decree for respondents on the ground, first raised by the answer, that the assessments

[ 288 U.S. Page 478]

     sued for were levied in violation of § 2 of the Organic Act of Puerto Rico, March 2, 1917, c. 145, 39 Stat. 951, forbidding the enactment of any law impairing the obligation of contract. On appeal the Court of Appeals for the First Circuit affirmed, 60 F.2d 10; this Court granted certiorari. 287 U.S. 593.

Section 41 of the Organic Act confers on the United States District Court for Puerto Rico "jurisdiction of all cases cognizable in the district courts of the United States," and also "jurisdiction of all controversies where all of the parties on either side of the controversy are citizens of a foreign State or States, or citizens of a State, Territory or District of the United States not domiciled in Puerto Rico, wherein the matter in dispute exceeds, exclusive of interest or cost, the sum or value of $3,000." By § 42 "the laws of the United States relating to . . . removal of causes, and other matters or proceedings as between the courts of the United States and the courts of the several States, shall govern in such matters and proceedings as between the district court of the United States and the courts of Porto Rico . . ." Thus suits arising under the Constitution or laws of the United States are within the jurisdiction of the District Court for Puerto Rico (§ 24, Judicial Code; 28 U. S. C., § 41), and civil suits begun in the Insular Court over which the federal court has original jurisdiction may be removed in accordance with the provisions of § 28 of the Judicial Code (28 U. S. C., § 71).

Admittedly, if the individual members of the sociedad are "parties" within the meaning of the Organic Act, § 41, supra, the suit is one within the jurisdiction of the District Court because of their non-residence, diversity of citizenship being unnecessary. See Porto Rico Ry. Light & Power Co. v. Mor, 253 U.S. 345. And if the non-residence of the individual members would confer jurisdiction upon the federal court in a suit against the sociedad

[ 288 U.S. Page 479]

     originally instituted there, we will assume, for present purposes, that it would also suffice to justify removal by the individuals, even though the Insular Court refuses to recognize them as parties. Compare McLaughlin Bros. v. Hallowell, 228 U.S. 278, 290. The petitioner argues, nevertheless, that the suit was not removable because of citizenship for the reason that the sociedad is a juridical entity under Puerto Rican law and, as in the case of a corporation, its domicil rather than that of its members determines citizenship for purposes of federal jurisdiction. If the petitioner's contention is sound, the District Court was without jurisdiction unless the suit was, as the respondents argue, one arising under the laws of the United States. The questions raised by these contentions must therefore first be answered.

For almost a century, in ascertaining whether there is the requisite diversity of citizenship to confer jurisdiction on the federal courts, we have looked to the domicil of a corporation, not that of its individual stockholders, as controlling. Louisville, C. & C. R. Co. v. Letson, 2 How. 497; Rundle v. Delaware & Raritan Canal Co., 14 How. 80; Marshall v. Baltimore & Ohio R. Co., 16 How. 314; Lafayette Insurance Co. v. French, 18 How. 404; Covington Drawbridge Co. v. Shepherd, 20 How, 227; St. Louis & San Francisco Ry. Co. v. James, 161 U.S. 545; Patch v. Wabash R. Co., 207 U.S. 277. In its final form this rule of jurisdiction was stated in terms of a "conclusive presumption" that the stockholders are citizens of the state of the corporate domicil, see Marshall v. Baltimore & Ohio R. Co., supra, 328; Covington Drawbridge Co. v. Shepherd, supra, 233; St. Louis & San Francisco Ry. Co., v. James, supra, 554, but even those who formulated the rule found its theoretical justification only in the complete legal personality with which corporations are endowed. Fictitious that personality may be, in the sense that the fact that the corporation is composed of a plurality

[ 288 U.S. Page 480]

     of individuals, themselves legal persons, is disregarded, but "it is a fiction created by law with intent that it should be acted on as if true." Klein v. Board of Supervisors, 282 U.S. 19, 24. This treatment of the aggregate for other purposes as a person distinct from its members, with capacity to perform all legal acts, made it possible and convenient to treat it so for purposes of federal jurisdiction as well. But status as a unit for purposes of suit alone, as in the case of a joint stock company, see Chapman v. Barney, 129 U.S. 677, 682; Levering & Garrigues Co. v. Morrin, 61 F.2d 115, 117, or a limited partnership, not shown to have the other attributes of a corporation, Great Southern Fireproof Hotel Co. v. Jones, 177 U.S. 449 (compare Thomas v. Board of Trustees, 195 U.S. 207) has ...


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