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Vol. IV.)

BALTIMORE & On10 RAILROAD Co. v. Cary.

[No. 9.

The B. & O. R. R. Co. derives all its powers to lease and operate this road from the State of Ohio. Its Maryland charter was inoperative here, It can do no act as a corporation except such as the Central O. R. R. Co. was authorized to do.

From a careful analysis of the foregoing cases, the following rules are deducible :

1. That a corporation created by the laws of a given state, as a legal entity, can have no legal existence outside of that state ; and that if the state of its creation permits or authorizes it to transact any of its corporate business outside of such state, it can only exercise such extra-territorial powers by the license or permission of other states, or under principles of comity between states.

2. That where such a corporation, deriving all its corporate power to act from the state of its creation, exercises these granted powers in other states, it is conclusively presumed to be a citizen of the state of its creation for the purposes of determining the jurisdiction of the United States.

3. But where a corporation, as for instance a railroad company, created by the separate but concurrent acts of two or more states, and by each is authorized to construct a road in each state, making together one continuous line of road, all operated by one corporation, with one board of officers, and one place of business in one of such states; it is nevertheless a citizen of each of the states granting it such powers, and in which it may be served.

4. So, where existing corporations of different states, owning and operating roads in their respective states, are authorized by their respective states to consolidate and form one company, the latter takes the place of each original company, and is, as to that part of the road and business in any one of the states, a citizen of that state, whatever may be its status in the other state or states.

That where the matter in controversy is the result of the exercise of its franchises in any one of such states, it is an inhabitant and citizen of that state if by the law of that state it can be served there.

5. Where a corporation originally created by one state, with authority to construct and operate a road therein, is authorized by another state to extend its road through the latter state, or to purchase or lease such a road already constructed, it thereby becomes a corporation of such latter state, as to all exercise of corporate powers therein. Its powers and franchises are measured by the laws of the state wherein it exercises its functions, and not by those of the state of its original creation.

6. Apply these principles to the case at bar. The lessee succeeds only to the powers and franchises of the lessor, and is subject to the same liabilities. All these are derived from the laws governing the Central Ohio Railroad Company as reorganized. By the lease they were transferred to the Baltimore and Ohio Railroad Company. It was thus clothed with authority to own and operate a road in Ohio. It conferred on a corporation, originally created by the State of Maryland, the right to be a corporation in Ohio.

In legal effect, it was an authority to an existing foreign corporation to become an Ohio corporation, and enjoy the corporate powers conferred on the Central Ohio Railroad Company.

Vol. IV.]

BALTIMORE & Onio RAILROAD Co. v. CARY.

[No. 9.

It was a legislative authority for a foreign corporation to become an Ohio corporation by lease or purchase from a domestic corporation its charter and property, with all its powers, immunities, and privileges. The lessee became the bailiffs of the lessor for part of the term of the lessor, and therefore stands in his stead. Co. Lit. 239 b, note 2.

The legislature adopts a corporation of another state, so far as to permit it to take the place of one created by Ohio law. Instead of requiring the stockholders of the Maryland corporation to take out a certificate and become a de jure corporation under our statute, it permits a corporation already formed to dispense with this step in the creation of a domestic corporation to become such under its existing name.

It is claimed that the case of Ohio ex rel. v. Sherman, 22 Ohio St. 411, is in conflict with the conclusion here reached, but a careful examination of the issue there presented will show that such is not the fact.

There the question was by what authority certain persons were assum. ing to act as directors of the Pittsburg, Ft. Wayne, and Chicago Railway Company, which was the owner of and operating a road through the state. That company was the vendee or grantee of the road and franchises of the Pittsburg, Ft. Wayne, and Chicago Railroad Company, which had been formed by the consolidation of distinct companies and roads existing by the laws of Pennsylvania, Ohio, Indiana, and Illinois. The road, while owned by the consolidated company, was sold by order of court, and passed to the Pittsburg, Ft. Wayne, and Chicago Railway Company.

The inquiry was based on the expressed assumption that the consolidated company was an Ohio corporation, and the real question was, did the conveyance pass to the railway company its right to be an Ohio corporation? The court held that this deed of conveyance, made under the Act of 1863 to this Pennsylvania corporation, did not transfer the right of the Pittsburg, Ft. Wayne, and Chicago Railroad Company, an Ohio corporation, to be an Ohio corporation, because the law of 1863 did not provide for the individual liability of its members.

But for this it is implied, though not expressed, that this is the only reason why it is not a legal corporation of Ohio. The whole reasoning of the court rests upon this ground. It is held that the transfer of the franchises to be a corporation under the Ohio law was in legal effect a surrender of the old charter and taking out a new, similar to the grantee; but as such grant of this new charter could not be made, except incumbered with the individual liability imposed by the Constitution of Ohio, and as this was not done, the grantee was not a “ legal Ohio corporation."

But for this constitutional provision there can scarcely be a doubt the court would have held that this transfer of the franchise and property of the Pittsburg, Ft. Wayne, and Chicago Railroad Company to the Pittsburg, Ft. Wayne, and Chicago Railway Company, under Ohio laws, made the vendee an Ohio corporation, as was held in the numerous cases cited.

There, the real question was, whether, by the deed of conveyance, under the Act of 1863, the vendees became an Ohio corporation. The answer is in the negative for the reason stated, and not because, upon comVOL. IV.)

BALTIMORE & 0110 RAILROAD Co. v. Cary.

[No. 9.

mon law principles, it was not competent for the legislature, in the absence of the constitutional provision, to authorize such transfer.

In the case at bar, the question of individual liability is wholly immaterial to the question at bar.

Here, the sole question is, whether the defendant, within the meaning of the Constitution of the United States, is in fact a citizen of Ohio.

This does not depend on individual liability clauses, or absence of them, in state constitutions, but on the meaning of the word citizen as found in the judiciary article of the Constitution of the United States. Upon the facts stated, there can be no doubt that, under the rules laid down in 0. & M. R. R. Co. v. Wheeler, and in Railway v. Whitten, and the numerous other cases cited, the Pittsburg, Ft. Wayne, and Chicago Railway Company was in fact a citizen of each of the states through which its road runs, and from which it has derived its corporate powers within such state. And upon the question of jurisdiction of the federal courts, this corporation is in fact an inhabitant and citizen of each of such states, although, under the peculiar provisions of the Constitution of Ohio, it is not de jure a domestic corporation.

Again, it is said the decision of this court, in Passenger Ass'n Co. v. Pierce, 27 Ohio St. 155, controls this case. That case follows that of Insurance Co. v. Morse, 20 How. (U. S.) 455.

Both these cases turn on the validity of an act of a state requiring a foreign corporation to waive its right, as a citizen of another state, to remove a case to the federal courts.

In both, the foreign citizenship is admitted, and the right of a state to exact a waiver of such citizenship was the only point.

Here the foreign citizenship is denied, and the claim is made that it is a domestic citizen. The question of waiver does not arise upon the record in the case before us.

Again, those cases were unlike this. They were all cases of foreign corporations, exercising in other states, through courtesy or by legislative permission, the powers and franchises conferred by the state of their creation. They derived none of their corporate franchises from the state where doing business, but acted entirely under their home charters, while in this case they derive none of their powers from their home charters, but all from the state where the business is done.

But for that provision of our Constitution as to the individual liability of stockholders, there can be no doubt that the plaintiff in error became a de jure as well as a de facto domestic corporation, subject to the sovereign control of the state as fully as the lessor corporation. It assented to the legislation authorizing it to have and operate the road under its Obio charter. By this legislation a condition was imposed that it might be sued in Ohio. It thus, to all intents, became de facto, if not de jure, an Ohio corporation — a citizen of Ohio - as fully as if the stockholders of this Maryland corporation had taken out an Ohio charter. For these reasons the judgment of the common pleas and district court should have been affirmed.

(No. 9.

Vol. IV.)

THE John T. MOORE.

CIRCUIT COURT OF THE UNITED STATES FOR THE DIS

TRICT OF LOUISIANA.

[APRIL, 1877.]

ADMIRALTY. — MARITIME LIEN. — MATERIALS FURNISHED IN HOME

PORT. - MORTGAGE. — REGISTRY. — NOTICE. — WAGES OF WATCHMAN. — INSURANCE, ETC.

THE JOHN T. MOORE.

1. Under the local law of Louisiana claims for materials and supplies furnished a vessel

in her home port are a lien on the vessel if recorded in the proper parish. Without such registry they have no privilege or priority over subsequent mortgages recorded by authority of the act of Congress, or claims of later date recorded by authority of

the state law. 2. Claims for materials and supplies furnished in the home port, even if duly recorded,

are postponed to maritime liens. 3. The registry of a mortgage on a vessel, to be effectual, must be made in the custom

house of her home port. 4. Where the mortgagee of a mortgage on a vessel, which was recorded in the proper

custom house, had notice of a prior unrecorded mortgage, his mortgage was postponed

to the unrecorded mortgage. 5. Where A. had an unrecorded mortgage on a vessel, and B. had a mortgage on the

same vessel of later date, duly recorded under the act of Congress, but had actual notice of the mortgage of A., and C. had a lien by virtue of the registry of his claim under the state law, subsequent in date to the mortgages of both A. and B., but C. had no notice of the mortgage of A., and the claim of either A. or B. was sufficient to absorb all the proceeds of the sale of the vessel : Held, that said proceeds should be

first applied to the mortgage of A. 6. The fact that a mortgage on a vessel has not been acknowledged before a notary

public, or other officer authorized to take acknowledgment of deeds, precludes its registry, but does not render it void as against the mortgagor, nor postpone it to the recorded mortgage of a subsequent mortgagee who had notice of such unrecorded mortgage. 7. The wages of a watchman employed on a vessel while lying-up in port are not a

maritime lien. 8. There is no maritime lien for the premium due on a policy of insurance taken on a

vessel by her owners.

The judge of the United States district court, in which this cause was pending, having been of counsel for one of the parties, the cause was transferred into this court by virtue of the provisions of section 601 Revised Statutes.

The steamboat John T. Moore, whose home port was New Orleans, was libelled in the United States district court for the District of Louisiana, by A. M. Simonds and others, was seized and sold, and the proceeds of sale, amounting to $24,000, paid into the registry of the court.

The case was referred to J. Ward Gurley as master, to report a tableau of distribution of the proceeds of the sale of the boat. He made a report by which he allowed as mariner's wages the sum of $3,150.97, and as costs $2,190.15, leaving a balance of $18,658.88.

The master then reported that there was due to various persons who had furnished supplies, materials, and repairs to the steamer in her home

Vol. IV.]

THE John T. MOORE.

[No. 9.

port, New Orleans, the sum of $32,251.45, which was more than sufficient to absorb the sum remaining in the registry of the court after the payment of the mariner's wages and costs.

He reported these claims as a first lien next after the costs and mariner's wages upon the fund remaining in the registry.

Swift's Iron & Steel Works of Cincinnati, Ohio, and Dennis Long of Louisville, Kentucky, claimed the said residue of the proceeds of the sale, by virtue of a mortgage executed to them jointly upon the steamer, dated January 27, 1871, and recorded in the custom house at Cincinnati on February 8, 1871, whereby the sum of $21,902.98 was secured to Swift's Iron & Steel Works, and the sum of $9,206.52 was secured to Dennis Long. These debts were contracted for work done and materials supplied in the construction of the boat.

The commercial firm of John T. Moore & Co. of New Orleans claimed to be first paid out of the fund remaining in the registry of the court next after the payment of seamen's wages and costs, by virtue of a mortgage npon the boat, executed to secure to them the sum of $14,669.22, dated January 3, 1872, and recorded in the United States custom house at New Orleans on January 4, 1872.

The commercial firm of W. G. Coyle & Co. of New Orleans claimed to be paid out of said proceeds so remaining in the registry, by virtue of a claim for $1,032.73 for supplies furnished said boat in her home port, and recorded in the office of the recorder of mortgages for the parish of Orleans on January 9, 1874.

Exceptions were taken to the report of the master by the several claimants of the fund, and upon these exceptions the cause was heard.

Mr. M. M. Cohen appeared for certain mariners whose wages had been rejected by the master.

Mr. B. Egan, for the furnishers of materials, supplies, and repairs.
Mr. R. De Gray, for Swift's Iron & Steel Works and Dennis Long.
Mr. C. B. Singleton, for John T. Moore & Co.
Mr. James McConnell, for W. G. Coyle & Co.

WOODS, Circuit Judge. It is conceded that the $24,000, the proceeds of the sale of the John T. Moore, is first subject to the payment of the costs and seamen's wages, amounting as reported by the master to the sum of $5,341.12. The residue $18,658.88 is insufficient to pay all the claims preferred against it. It therefore becomes necessary to decide what claims are entitled to precedence.

The first contest is between the claims for supplies, materials, and repairs furnished the boat in her home port, and the mortgages (above mentioned) to Swift's Iron & Steel Works and Dennis Long, and to John T. Moore & Co., and the recorded claims of W. G. Coyle & Co.

The claims for materials and supplies furnished, and repairs done in the home port, cannot take precedence over the mortgage of John T. Moore & Co., and the recorded claims of Wm. G. Coyle & Co., for the supplies, &c., were furnished in the home port of the boat, and the claims therefor were not recorded under the state law so as to acquire a lien as against third persons.

By article 3237, Revised Civil Code, debts due to creditors for supplies, labor, repairing, victuals, armament, and equipment are privileged on the

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