US SUPREME COURT DECISIONS

It is established doctrine, to which the Court adheres, that the constitutional privilege of a grantee or purchaser of property, being a citizen of one of the states, to invoke the jurisdiction of a circuit court of the United States for the protection of his rights as against a citizen of another state -- the value of the matter in dispute being sufficient for the purpose -- cannot be affected or impaired merely because of the motive that induced his grantor to convey, or his vendee to sell and deliver, the property, provided such conveyance or such sale and delivery was a real transaction by which the title passed without the grantor or vendor reserving or having any right or power to compel or require a reconveyance or return to him of the property in question.

Citizens of Virginia were in possession of lands in that state, claiming title, to which also a corporation organized under the laws of Virginia had for some years laid claim. In order to transfer the corporation's title and claim to a citizen of another state, thus giving a circuit court of the United States jurisdiction over an action to recover the lands, the stockholders of the Virginia corporation organized themselves into a corporation under the laws of Pennsylvania, and the Virginia corporation then conveyed the lands to the Pennsylvania corporation, and the latter corporation brought this action against the citizens of Virginia to recover possession of the lands. No consideration passed for the transfer. Both corporations still exist. Held that these facts took this case out of the operation of the established doctrine above stated and made of the transaction a mere device to give jurisdiction to the circuit court, and that it was a fraud upon that court, as well as a wrong to the defendants.

This action was brought in the Circuit Court of the United States for the Western District of Virginia by the Lehigh Mining & Manufacturing Company, as a corporation organized under the laws of the Commonwealth of Pennsylvania. Its object was to recover from the defendants, who are citizens of Virginia, the possession of certain lands within the territorial jurisdiction of that court. chanrobles.com-red

Page 160 U. S. 328

The defendants pleaded not guilty of the trespass alleged, and also filed two pleas, upon which the plaintiff took issue.

The first plea was that

"the Virginia Coal and Iron Company is a corporation organized and existing under the laws of Virginia. That as such it has been for the last ten years claiming title to the lands of the defendant J. J. Kelly, Jr., described in the declaration in this case. And said defendants say that for the purpose of fraudulently imposing on the jurisdiction of this court, said Virginia Coal and Iron Company has, during the year 1893, attempted to organize, form, and create, under the laws of the State of Pennsylvania, a corporation out of its (the Virginia Coal and Iron Company's) own members, stockholders, and officers, to whom it has fraudulently and collusively conveyed the land in the declaration mentioned, for the purpose of enabling this plaintiff to institute this suit in this United States court, and said defendants say that said Lehigh Mining and Manufacturing Company is simply another name for the Virginia Coal and Iron Company, composed of the same parties, and organized alone for the purpose of giving jurisdiction of this case on [to] this court. Wherefore defendants say that this suit is in fraud of the jurisdiction of this court, and should be abated."

The second plea was that

"said plaintiff should not further have or maintain said suit against them, because they say there was no such legally organized corporation as the plaintiff company at the date of the institution of this suit, and they say that the real and substantial plaintiff in this suit is the Virginia Coal and Iron Company, which is a corporation organized and existing under the laws of Virginia, and a citizen of Virginia. And said defendants further say that said Virginia Coal and Iron Company, for the purpose and with the view of instituting and prosecuting this suit in the United States court and of conferring an apparent jurisdiction on said court, did, by prearrangement, fraud, and collusion, attempt to organize said Lehigh Mining and Manufacturing Company as a corporation of a foreign state, to take and hold the land in the declaration mentioned, for the purpose of giving this court jurisdiction of said suit. Wherefore defendants say that

Page 160 U. S. 329

the said plaintiff has wrongfully and fraudulently imposed itself on the jurisdiction of this court, has abused its process, and wrongfully impleaded these defendants in this court. Wherefore they pray judgment, etc., that this suit be abated and dismissed as brought in fraud of this court's jurisdiction."

The cause was submitted by the parties upon the two pleas to the jurisdiction, and upon a general replication to each plea, as well as upon an agreed statement of facts.

The agreed statement of facts was as follows:

"1. That the land in controversy in this case was prior to March 1, 1893, claimed by the Virginia Coal and Iron Company, and had been claimed by said last-named company for some twelve years prior to said date. 2. That said Virginia Coal and Iron Company is a corporation organized and existing under the laws of the State of Virginia, and is a citizen of Virginia. 3. That on March 1, 1893, said Virginia Coal and Iron Company executed and delivered a deed of bargain and sale to said Lehigh Mining and Manufacturing Company, by which it conveyed all its right, title, and interest in and to the land in controversy to said last-named company in fee simple. 4. That said Lehigh Mining and Manufacturing Company is a corporation duly organized and existing under the laws of the State of Pennsylvania; that it was organized in February, 1893, prior to said conveyance, and is, and was at the date of commencement of this action, a citizen of the State of Pennsylvania, and that it was organized by the individual stockholders and officers of the Virginia Coal and Iron Company. 5. That the purpose in organizing said Lehigh Mining and Manufacturing Company, and in making to it said conveyance, was to give to this Court jurisdiction in this case, but that said conveyance passed to said Lehigh Mining and Manufacturing Company all of the right, title, and interest of said Virginia Coal and Iron Company in and to said land, and that, since said conveyance, said Virginia Coal and Iron Company has had no interest in said land and has not, and never has had, any interest in this suit, and that it owns none of the stock of said Lehigh Mining and Manufacturing Company, and has no interest therein whatever. "

Page 160 U. S. 330

It was also agreed that the two pleas should be tried by the court, without a jury, upon the above statement of facts, with the right in either party to object to any fact stated in it on the ground of irrelevancy or incompetency.

The plaintiff, by counsel, objected and excepted to the statement in the first part of the fifth clause of the foregoing statement, viz.,

"that the purpose of organizing the Lehigh Mining and Manufacturing Company, and in making to it said conveyance, was to give to this court jurisdiction in this case,"

because the same was irrelevant and immaterial.

The circuit court, Judge Paul presiding, dismissed the action for want of jurisdiction in the circuit court. 64 F.4d 1.