UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA
December 28, 1956
DELAWARE RIVER JOINT TOLL BRIDGE COMMISSION
Alexander R. MILLER and R. Chapman Carver
The opinion of the court was delivered by: DUSEN
This case comes before the court on defendants' motions to dismiss the action on the ground of lack of jurisdiction over the subject matter of the action.
The complaint contains two alternative causes of action against each defendant, members of plaintiff Commission (a public corporation created by the laws of Pennsylvania, 36 P.S. 3401 and New Jersey, N.J.S.A. 32:8-1 ff. and consent
to the creation of which was given by Congress) during the period covered by the complaint, for the recovery of amounts alleged to be paid to each of them as salaries without legal authority. One cause of action against each defendant is based on the right to recover money had and received by defendants from, and on account of, plaintiff and the alternative cause of action is based on the allegation that the money has been received by defendants in breach of trust.
Plaintiff contends this court has jurisdiction on two distinct grounds: first, diversity of citizenship, 28 U.S.C.A. § 1332(a)(1), since it alleges that it is a New Jersey corporation and the defendants are Pennsylvania citizens; and, second, the case 'arises under the Constitution (or) laws * * * of the United States' as those terms are used in 28 U.S.C.A. § 1331. These contentions will be treated separately.
I. Diversity of citizenship
In order to decide this question, a federal district court finds itself in the unhappy position of being asked to choose between two opposing 19th Century decisions of the United States Supreme Court, containing language developing the doctrine that a corporation is a citizen of the state of its incorporation because all its shareholders are presumed to be citizens of that state.
The position, supporting defendants' contention in this case, taken by Chief Justice Taney in the Wheeler case finds direct support in dictum in Memphis & C.R. Co. v. State of Alabama, 1883, 107 U.S. 581, 585, 2 S. Ct. 432, 436, 27 L. Ed. 518, where the court said:
'The defendant, being a corporation of the state of Alabama, has no existence in this state as a legal entity or person, except under and by force of its incorporation by this state; and, although also incorporated in the state of Tennessee, must, as to all its doings within the state of Alabama, be considered a citizen of Alabama, which cannot sue or be sued by another citizen of Alabama in the courts of the United States.' (Emphasis supplied.0
This rule of the Memphis case appears to have been followed by the United States Supreme Court in all its decisions since the Nashua case. See Patch v. Wabash R. Co., 1907, 207 U.S. 277, 283, 28 S. Ct. 80, 52 L. Ed. 204; Jacobson v. New York, New Haven & Hartford Railroad Co., 1945, 347 U.S. 909, 74 S. Ct. 474, 98 L. Ed. 1067;
and Seavey case, supra (footnote 4), 197 F.2d at page 487; and cases cited in those cases.
Under these circumstances, the United States Supreme Court would appear to require that defendants, being sued by a multistate corporation in a federal court located in any state where it had been incorporated, must be citizens of a state other than the state of the forum if jurisdiction is to be based on diversity of citizenship.
Such a conclusion is in accordance with the public policy, recognized in this Circuit,
that federal courts "should not be astute to widen federal diversity jurisdiction."
This result is not inconsistent with the underlying purpose of the diversity clause in Article III, Section 2, of the Constitution,
which was to prevent the obstruction of the administration of justice by 'state attachments, state prejudices, state jealousies and state interests,'
since plaintiff, as a creature of the Pennsylvania legislature, will clearly receive fair treatment in the Pennsylvania courts.
II. A case arising under the Constitution or laws of the United States
Plaintiff's other ground for claiming that jurisdiction exists is that this case 'arises under the Constitution, laws or treaties of the United States.' 28 U.S.C.A. § 1331.
Plaintiff contends that this is such a case, both because of the acts of Congress consenting to the compact creating plaintiff corporation (see footnote 2 above) and because of other Congressional statutes
concerning the amount of the tolls to be levied for use of plaintiff's bridges across the Delaware River.
The Supreme Court has held that 28 U.S.C.A. 1331 only applies where an essential element of the plaintiff's cause of action, which is disclosed upon the face of the complaint, is a controversy as to the construction of a right or immunity created by the Constitution or laws of the United States. Gully v. First National Bank, 1936, 299 U.S. 109, 112-114, 57 S. Ct. 96, 81 L. Ed. 70. Since these causes of action are based on state-created rights for money had and received and for breach of trust, no rights or immunities created by the Constitution or Congressional statutes are essential elements of the cause of action and the fact that such rights or immunities are 'lurking in the background' (Gully case, 299 U.S. at page 117, 57 S. Ct. at page 100) is not sufficient to make 28 U.S.C.A. § 1331 applicable. See Driscoll v. Burlington-Bristol Bridge Co., D.C.D.N.J.1949, 82 F.Supp. 975. Furthermore, no such right or immunity is created by an act of Congress consenting to a compact between states.
The framers of the Constitution apparently envisioned Congressional consent to such a compact as a stamp of approval that such an arrangement would not fall within the class of a prohibited 'treaty, alliance or confederation,'
and also as a national, legal control over affairs that are projected beyond state lines and yet may not call for, nor be capable of, national treatment.
Though the state laws creating the compact must be consistent with the Constitution and existing federal law, the consent of Congress to the compact is only evidence to prove the statute valid, and a suit such as this for money had and received, and for a breach of trust, is based on state law. See Gully v. First National Bank, supra.
Also, there is nothing in the other statutes relied on by plaintiff (see footnote 13 above) constituting an essential element of these causes of action. Such acts would not prevent plaintiff from raising the tolls
in order to enable it to pay salaries to its commission members, as long as such tolls are reasonable and produce sufficient revenue to cover the requirements contained in the terms of these statutes.
Furthermore, such acts create rights enforcible by the Federal Government and not by a corporation in an action such as this.
Hence, this case is not one that 'arises' under these 'laws of the United States.' See Driscoll v. Burlington-Bristol Bridge Co., supra.
In addition to the authorities cited above, the conclusions reached under I and II above are supported by able opinions of this District Court and of the District Court for New Jersey, which have been of substantial assistance in the decision of this case. See opinion of Judge Fee filed 10/28/49 in Bowyer v. Delaware River Joint Toll Bridge Commission (Civil Action No. 9706 in this court) and opinion of Judge Smith in Delaware River Joint Toll Bridge Commission v. Stults, D.C.D.N.J., 146 F.Supp. 241.
In view of the conclusions reached, it is not necessary to consider defendants' contention that this court should delay any further proceedings in this case until a suit pending in a Pennsylvania court
proceeds to decision, clarifying the questions of state public policy involved in this case.
And now, December 28, 1956, it is ordered that this action be dismissed, with prejudice, for lack of jurisdiction over the subject matter.