1. A
sociedad en comandita under the laws of Puerto
Rico is not a limited partnership in the common law sense, but is a
juridical person with a personality like that of a corporation. P.
288 U. S.
478.
2. A suit against a
sociedad en comandita of Puerto
Rico cannot be removed by its members from the Insular Court to the
United States District Court for Puerto Rico, under §§ 41 and 42 of
the Organic Act, upon the ground that the members are not citizens
of or domiciled in Puerto Rico. P.
288 U.S. 482.
3. A suit by the Puerto Rico to recover insular taxes is not to
be classed as a suit arising under the laws of the United
Page 288 U. S. 477
States within the meaning of the jurisdictional statutes
governing removal of causes, either (a) because authority to bring
it comes from an Act of Congress, or (b) because the plaintiff is
recognized as a political entity by the Act of Congress under which
its government is organized. Pp.
288 U.S. 482,
288 U. S.
484.
4. The doctrine that a suit by a corporation organized under an
Act of Congress is within the jurisdiction of the federal courts as
a suit arising under the laws of the United States has been limited
by precedent and by Acts of Congress, and is not to be extended. P.
288 U. S. 485.
60 F.2d 10 reversed.
Certiorari, 287 U.S. 593, to review the affirmance of a decree
of the United States District Court for Puerto Rico dismissing on
the merits a suit removed from the Insular District Court.
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
Page 288 U. S. 478
sued for were levied in violation of § 2 of the Organic Act of
Porto 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 Porto 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 nonresidence, diversity of
citizenship being unnecessary.
See Porto Rico Ry., Light &
Power Co. v. Mor, 253 U. S. 345.
And, if the nonresidence of the individual members would confer
jurisdiction upon the federal court in a suit against the
sociedad
Page 288 U. S. 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 v. Hallowell,
228 U. S. 278,
228 U. S. 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 domicile, 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 domicile of a corporation,
not that of its individual stockholders, as controlling.
Louisville 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 Draw Bridge 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 domicile,
see Marshall v. Baltimore
& Ohio R., supra,
57 U. S. 328;
Covington Draw Bridge Co. v. Shepherd,
supra, 61 U. S. 233;
St. Louis & San Francisco Ry. Co. v. James, supra,
161 U. S. 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
Page 288 U. S. 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,
282 U. S. 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,
129 U. S. 682;
Levering & Garrigues 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 been deemed a legal personality too
incomplete; what was but an association of individuals for so many
ends and a juridical entity for only a few was not easily to be
treated as if it were a single citizen.
The tradition of the common law is to treat as legal persons
only incorporated groups, and to assimilate all others to
partnerships.
Chapman v. Barney, supra; Great Southern
Fireproof Hotel Co. v. Jones, supra. The tradition of the
civil law, as expressed in the Code of Puerto Rico, is otherwise.
* Therefore, to
call the
sociedad en
Page 288 U. S. 481
comandita a limited partnership in the common law
sense, as the respondents and others have done, is to invoke a
false analogy. In the law of its creation, the
sociedad is
consistently regarded as a juridical person. It may contract, own
property, and transact business, sue and be sued in its own name
and right. Civil Code (1930), §§ 27 to 30; Code of Commerce (1930),
§§ 95, 97, 123, 124. Its members are not thought to have a
sufficient personal interest in a suit brought against the entity
to entitle them to intervene as parties defendant.
See People
v. Rivera Zayas, 29 P.R. 423, 430. It is created by articles
of association filed as public records. Code of Commerce, §§ 95,
98;
compare Civil Code, §§ 1558, 1560. Where the articles
so provide, the
sociedad endures for a period prescribed
by them regardless of the death or withdrawal of individual
members. Civil Code, §§ 1591, 1596, 1598; Code of Commerce, § 141.
Powers of management may be vested in managers designated by the
articles from among the members whose participation is unlimited,
and they alone may perform acts legally binding on the
sociedad. Civil Code, §§ 1583, 1589; Code of Commerce, §§
102, 106, 125. Its members are not primarily liable for its acts
and debts (Code of Commerce, § 156), and its creditors are
preferred with respect to its assets and property over the
creditors of individual members, although the latter may reach the
interests of the individual members in the common capital. Civil
Code, § 1590;
see Quintana Bros. & Co. U.S. Ramirez &
Co., 22 P.R. 707, 716. Although the members whose
participation is unlimited are made contingently liable for the
debts of the
sociedad in the event that its assets are
insufficient to satisfy them (Code of Commerce, §§ 125, 156;
see Successors of M. Lamadrid & Co. v. Torrens, Mortorell
& Co., 28 P.R. 824), this liability is of no more
consequence for present purposes than that imposed on corporate
stockholders by the statutes of some states.
Compare
Louisville
Page 288 U. S. 482
R. Co. v. Letson, supra, 43 U. S.
557-558;
Liverpool Insurance Co. v.
Massachusetts, 10 Wall. 566,
77 U. S. 575.
These characteristics under the Codes of Puerto Rico give content
to their declaration that the
sociedad is a juridical
person. That personality is so complete in contemplation of the law
of Puerto Rico that we see no adequate reason for holding that the
sociedad has a different status for purposes of federal
jurisdiction than a corporation organized under that law. In
neither case may nonresidents of Puerto Rico, who have taken
advantage of its laws to organize a juridical entity for the
purpose of carrying on business there, remove from the Insular
Courts controversies arising under local law.
Respondents' contention that the suit is one arising under the
laws of the United States, and therefore removable irrespective of
the citizenship of the defendant, rests upon two grounds: first,
that the suit was brought pursuant to an Act of Congress of April
23, 1928, 45 Stat. 447, and second that the plaintiff in the
District Court, the People of Puerto Rico, derives its power as a
sovereign political entity from the Organic Act, under which the
insular government was organized.
The Act of Congress first mentioned was adopted as a result of
earlier litigation with respect to the present tax. Respondent and
others originally brought suits in the federal District Court of
Puerto Rico to enjoin collection of the tax, pending which
Congress, by Act of March 4, 1927, 44 Stat. 1421, forbade the
maintenance of any suit in the United States District Court for
Puerto Rico to restrain the collection of any tax imposed by the
laws of Puerto Rico. Following that prohibition, this Court, in
Smallwood v. Gallardo, 275 U. S. 56, held
that all such injunction cases then pending in the federal courts
were abated by the statute, and the suit brought by respondents was
accordingly dismissed.
Gallardo v. Havemeyer, 21 F.2d
1012. Subsequently, Congress passed the law of
Page 288 U. S. 483
April 23, 1928, by which it was provided that, in cases where
the taxpayer had by such suits obtained an injunction restraining
collection of the tax, the Treasurer of Puerto Rico should
"enforce the collection of the tax so enjoined . . . by a suit
at law, instead of by attachment, embargo, distraint, or any other
form of summary administrative proceeding. . . ."
Respondents argue that, as the authority to recover the tax by
suit, rather than by attachment or other summary method, was
conferred by act of Congress, the suit is one arising under the
laws of the United States.
We do not stop to examine the answering contention of petitioner
that the act of Congress was not an enabling act, but operated only
to preclude resort by the insular government to the summary
remedies otherwise available for the collection of the tax. For we
think that, even though petitioner derived its authority to
maintain the suit from the act of Congress, it did not arise under
the laws of the United States within the meaning of the
jurisdictional statutes.
The suit was brought to recover assessments levied under the act
of the Puerto Rican Legislature, but not to enforce a right created
by a law of the United States. No question of interpretation or
enforcement of the federal statute appears upon the face of the
complaint. Federal jurisdiction may be invoked to vindicate a right
or privilege claimed under a federal statute. It may not be invoked
where the right asserted is nonfederal, merely because the
plaintiff's right to sue is derived from federal law, or because
the property involved was obtained under federal statute. The
federal nature of the right to be established is decisive -- not
the source of the authority to establish it.
Shoshone Mining
Co. v. Rutter, 177 U. S. 505;
Blackburn v. Portland Gold Mining Co., 175 U.
S. 571;
Little York Gold Washing & Water Co. v.
Keyes, 96 U. S. 199,
96 U. S. 203;
see McGoon v. Northern Pacific Ry. Co., 204 F.
Page 288 U. S. 484
998, 1001;
compare Swafford v. Templeton, 185 U.
S. 487. The case is analogous to those involving rights
to land granted under laws or treaties of the United States. Where
the complaint shows only that such was the source of the
plaintiff's title, the case is not one within the jurisdiction of
the federal courts.
Barnett v. Kunkel, 264 U. S.
16,
264 U. S. 20;
Shulthis v. McDougal, 225 U. S. 561;
Devine v. Los Angeles, 202 U. S. 313,
202 U. S. 337;
compare Hopkins v. Walker, 244 U.
S. 486,
244 U. S. 489;
Lancaster v. Kathleen Oil Co., 241 U.
S. 551;
Wilson Cypress Co. v. Del Pozo,
236 U. S. 635,
236 U. S. 643;
Northern Pacific Ry. Co. v. Soderberg, 188 U.
S. 526.
For similar reasons, the case stands in no different aspect
because the people of Puerto Rico is a political entity, recognized
as such by the act of Congress under which its government is
organized. A state brought into the federal Union by act of
Congress is likewise a political entity, and, although not a
citizen of the United States within the meaning of the statutes
conferring jurisdiction on federal courts,
Stone v. South
Carolina, 117 U. S. 430;
Postal Telegraph-Cable Co. v. Alabama, 155 U.
S. 482;
see Arkansas v. Kansas & Texas Coal
Co., 183 U. S. 185, a
suit brought by it presenting a federal question is within the
jurisdiction of the district courts,
Railroad Co. v.
Mississippi, 102 U. S. 135,
102 U. S. 140;
Ames v. Kansas, 111 U. S. 449;
Southern Pacific R. Co. v. California, 118 U.
S. 109. But a suit does not arise under the Constitution
or laws of the United States merely because a state is the
plaintiff, though the state derives its authority to maintain the
suit from the federal Constitution and laws.
Postal Telegraph
Cable Co. v. Alabama, supra, 155 U. S. 487;
Minnesota v. Northern Securities Co., 194 U. S.
48;
Germania Insurance Co. v. Wisconsin,
119 U. S. 473,
119 U. S. 475;
Arkansas v. Kansas & Texas Coal Co., supra; see Missouri,
Kansas & Texas Ry. Co. v. Commissioners, 183 U. S.
53,
183 U. S. 58;
Stone v. South Carolina, supra, 117 U. S.
433.
Page 288 U. S. 485
We do not overlook the point that a suit by a corporation
organized under an act of Congress has been held to be within the
jurisdiction of the federal courts as one arising under the laws of
the United States.
Osborn v. Bank of United
States, 9 Wheat. 738;
Pacific Railroad Removal
Cases, 115 U. S. 1. Whether
or not these cases are distinguishable from others on the ground,
usually urged in their support, that a corporation has no powers
and can incur no obligations except as authorized by federal law,
Osborn v. Bank of United States, supra, 22 U. S. 823;
see Pacific Railroad Removal cases, supra, 115 U. S. 13,
their doctrine has not been extended to other classes of cases, and
has been restricted by successive statutes (Act of July 12, 1882,
c. 290, § 4, 22 Stat. 162, 163; Act of January 28, 1915, c. 22, §
5, 38 Stat. 803, 804; Act of February 13, 1925, c. 229, § 12, 43
Stat. 936, 941), the last of which limits it to cases of
government-owned corporations alone. We should fly in the face of
this legislative policy and disregard precedents which we think
controlling were we to extend the doctrine now.
The judgment below will be reversed, and the cause remanded,
with instructions to remand it to the Insular Court from which it
was removed.
Reversed.
*
Compare the decision of the United States and Chilean
Claims Commission, established by virtue of the Convention of May
24, 1897, in Chauncey v. The Republic of Chile, No. 3, that a claim
by a
society en comandita organized by citizens of the
United States under Chilean law was not a claim by "corporations,
companies or private individuals, citizens of the United States."
And see Pic, Societes Commerciales (2d ed.1925), v. 1, pp.
107, 118, 137, 194, 216; Lastig, Die Accomendatio (1907), viii, xi,
xviii, 165; Goldschmidt, Universalgeschichte des Handelsrechts
(1891), 257 ff.; Gierke, Die Genossenschafts-theorie (1887), 51;
Young, Foreign Companies and other Corporations (1912), 114;
compare Saleilles, Etude sur l'histoire des Societes en
Commandite, Annales de Droit Commercial v. 9 (1895) pp. 10, 49.