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does not involve a controversy between citizens of different States.
1. This is based on the assumption adopted by this court, that stockholders of a corporation are citizens of the State which created the corporation-an assumption physically possible but hardly true in a single instance; and appellants here contend that it should be classed with the fictions of the law and subject to one of their fundamental maxims, and cannot be carried beyond the reasons which caused its adoption necessarily requisite. It is, however, more of a presumption than a fiction, but whether we regard it as either it cannot be pushed to the end contended for by appellees.
The reason of the presumption (we will so denominate it) was to establish the citizenship of the legal entity for the purpose of jurisdiction in the Federal courts. Before its adoption difficulties had been encountered on account of the conditions under which jurisdiction was given to those courts. A corporation is constituted, it is true, of all its stockholders, but it has a legal existence separate from them-rights and obligations separate from them; and may have obligations to them. It can sue and be sued. At first this could be done in the Circuit Court of the United States only when the corporation was composed of citizens of the State which created it. Bank of United States v. Deveaux, 5 Cranch, 61; Hope Insurance Company v. Boardman, 5 Cranch, 57. But the limitation came to be seen as almost a denial of jurisdiction to or against corporations in the Federal courts, and in Louisville &c. Railroad Company v. Letson, 2 How. 497, prior cases were reviewed; and this doctrine laid down:
"That a corporation created by and doing business in a particular State, is to be deemed to all intents and purposes as a person, although an artificial person, capable
of being treated as a citizen of that State, as much as a natural person." And "when the corporation exercises its powers in the State which chartered it, that is its residence, and such an averment is sufficient to give the Circuit Courts jurisdiction."
The presumption that the citizenship of the corporators should be that of the domicil of the corporation was not then formulated. That came afterwards, and overcame the difficulty and objection that the legal creation, the corporation, could not be a citizen within the meaning of the Constitution. Marshal v. B. & O. Railroad Company, 16 How. 314. This, then, was its purpose, and to stretch beyond this is to stretch it to wrong. It is one thing to give to a corporation a status, and another thing to take from a citizen the right given him by the Constitution of the United States. Disregarding the purpose of the presumption, it is easy to represent it, as counsel does, as illogical if not extended to every stockholder; but as easy it would be to show its falseness if so applied. But such charges and countercharges are aside from the question. To the fact and place of incorporation the law attaches its presumption for a special purpose. Perhaps, as intimated in St. Louis & San Francisco Ry. v. James, 161 U. S. 545, 563, this "went to the very verge of judicial power." Against the further step urged by appellees we encounter the Constitution of the United States.
2. The ninety-fourth rule in equity contemplates that there may be, and provides for, a suit brought by a stockholder in a corporation founded on rights which may properly be asserted by the corporation. And the decisions of this court establish that such a suit, when between citizens of different States, involves a controversy cognizable in a Circuit Court of the United States. The ultimate interest of the corporation made defendant may be the same as that of the stockholder made plaintiff, but the corporation may be under a control antagonistic to him, and made to act in a way detrimental to his rights. In other words, his interests, and the interests of the corporation, may be made subservient to some illegal purpose. If a controversy hence arise, and the other conditions of jurisdiction exist, it can be litigated in a Federal
In Detroit v. Dean, 106 U. S. 537, Dean, who was a citizen
of New York and a stockholder in the Mutual Gas Light Company, a Michigan corporation, in order to protect its right and property against the threatened action of a third party brought suit against the latter and the corporation in the Circuit Court of the United States for the Eastern District of Michigan. This court ordered the bill dismissed, not because Dean and the corporation had identical interests, but because the refusal of the directors of the corporation to sue was collusive. The right of a stockholder to sue a corporation for the protection of his rights was recognized, the condition only being the refusal of the directors to act, which refusal, it is said, must be real, not feigned. Hawes v. Oakland, 104 U. S. 450, was cited, where a like right was decided to exist. See also Dodge v. Woolsey, 18 How. 331; Davenport v. Dows, 18 Wall. 626; Memphis v. Dean, 8 Wall. 64; Greenwood v. Freight Company 105 U. S. 13; Quincy v. Steel, 120 U. S. 241. It was said in Dodge v. Woolsey, that the refusal of the directors to sue caused them and Woolsey, who was a stockholder in a corporation of which they were directors, "to occupy antagonistic grounds in respect to the controversy, which their refusal to sue forced him to take in defense of his rights." Dodge v. Woolsey was modified by Hawes v. Oakland, as to what circumstances would justify a suit by a stockholder if the directors refuse to sue. See also Quincy v. Steel, supra.
The case at bar is brought within the doctrine of those cases by the allegations of the bill. The defendant corporations are alleged to be under the control of John J. and Dennis A. Harrington, and that complainants are unable to secure any corporate action on the part of the defendant, the Sol Sayles Company, to redress the wrongs complained of. It is also alleged that the Harringtons control the action of the stockholders, and have declined to redress the wrongs complained of or give complainants any opportunity to lay before the board of directors or the stockholders of the Sol Sayles Company the facts alleged. It is also alleged the suit is not collusive. It is manifest that if the matter alleged be true, com
plainants will suffer irremediable loss if not permitted to sue, and as they had a cause of action they rightly brought it in the Circuit Court of the United States.
CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SECOND
No. 128. Argued January 13, 16, 1905-Decided February 20, 1905.
A foreign vessel from Liverpool arrived at its destination, New York, and made fast to the wharf. Owing to unusual gales and weather she was heavily weighted with snow and ice and made top heavy. While the cargo was being unloaded she suddenly rolled over and sank, damaging the cargo remaining in her, some of which had been shipped from points east of Liverpool on bills of lading to Liverpool, thence to be forwarded to New York, and containing certain exemptions of the carrier from liability. The owners and insurers of cargo libelled the vessel; it was found by the District Court and the Circuit Court of Appeals that the damage was due to negligence in unloading cargo and ruled that the negligence fell within section one of the Harter Act and not within section three of the same as negligence in the navigation or management of the vessel. Held, that:
This court will not go behind the findings of the two courts as to negligence and that the rule was correct.
When a case may fall under section one and section three of the Harter Act the question which section is to govern must be determined by the primary nature and object of the acts which cause the loss.
Semble. The standard of conduct is external and not merely co-extensive with the judgment of the individual.
The Harter Act will be applied to foreign vessels in suits brought in the United States, and where claimants set up and rely upon the act they must take the burden with the benefits and cannot claim a greater limitation of liability under provisions of bills of lading.
THE facts are stated in the opinion.
Argument for Petitioner.
Mr. Everett P. Wheeler for petitioner:
196 U. S.
The Harter Act exempts the ship from liability. She was seaworthy when she left Liverpool and the cargo was in good order when she arrived in New York. Even if the captain was negligent his treatment of the ship and cargo was part of her management under the act. For history of the act see 24 Cong. Rec. 147, 171, 1180.
The exemption under the act continues until the cargo is delivered from the ship. The Glenochil, Prob. (1896) 10; The Silvia, 171 U. S. 462; Knott v. Botany Mills, 179 U. S. 69; The Wildcroft, 130 Fed. Rep. 521, affirming 124 Fed. Rep. 631; The Rotherfield, 8 Revue Int. du Droit Mar. 103. The object of the Harter Act is to regulate the relation between carriers and shippers. The Delaware, 161 U. S. 459; The Viola, 59 Fed. Rep. 632; The Berkshire, 59 Fed. Rep. 1007.
Both of the courts below held that the steamer was liable because a condition of instability brought about by improper unloading, care and custody of the cargo is not a fault in the management of the vessel. This was error. This was error. Cases cited supra; Knott v. Botany Mills, 76 Fed. Rep. 582; The Mississippi, 113 Fed. Rep. 985; S. C., 120 Fed. Rep. 1020; The Canon Park, 15 Prob. Div. 203; The Southgate, Prob. (1893) 329, 337, all really support petitioner's contention.
Management of the vessel includes management of any part of the vessel. Rowson v. Atlantic Transport Co., (1903) 1 K. B. Div. 114; S. C., 9 Maritime Law Cas. U. S. 347; K. B., (1903) Div. 666; 19 Times L. R. 668; The Rodney, Prob. Div. (1900) 112, 117.
The doctrine of the opinions of the courts below are opposed to The Sandfield, 79 Fed. Rep. 371; S. C., 92 Fed. Rep. 663; Am. Sug. Rfg. Co. v. Rickinson, 124 Fed. Rep. 188; The Mexican Prince, 82 Fed. Rep. 484; S. C., 91 Fed. Fep. 1003. The loading and discharge of cargo and the coaling were under the captain's direction. He always has the control. The distinction is unimportant. Int. Nav. Co. v. Farr & Bailey