(dissenting).

On the question of diversity of corporate citizenships, the majority opinion is in conflict with the decision of the Fifth Circuit in Louisiana Highway Commission v. Farnsworth, 74 F.2d 910, 912, 913 , 1 certiorari denied 294 U.S. 729 , 55 S.Ct. 638 , 79 L.Ed. 1259 , and with the Supreme Court decision of Port of Seattle v. Oregon & W. R. Co., 255 U.S. 56 , 41 S.Ct. 237 , 65 L.Ed. 500 .

These and other cases establish the law to be that where a state creates separate corporate entities as its agents to perform governmental functions and gives such corporate entities the right to sue and be sued and the state’s Supreme Court, construing the laws creating such corporations, determines that the Legislature has created the corporations to be such separate entities, they are citizens of the creating state subject to be sued in the federal courts by a citizen of another state. The Water Conservation Corporation is such a separate entity.

Appellants’ brief contends that a corporation cannot be a citizen. Before the extended analysis, infra, of the Political and Military Codes of Montana and cases construing their provisions, in disagreement with the equally extended analysis of the majority opinion, it seems proper to comment on the legal fiction which requires such judicial effort on the part of the writer’s associates and himself.

The state, an entity with governmental functions, and a political embodiment ofiall its citizens, is not a citizen and cannot sue *1003 or be sued as such and thereby establish the diversity jurisdiction. Postal Tel. Cable Co. v. State of Alabama, 155 U.S. 482 , 15 S.Ct. 192 , 39 L.Ed. 231 ; 28 U.S.C.A § 41(1). Yet it may incarnate itself into a corporate creature exercising only the state’s governmental functions and which, though it cannot vote, procreate as a human mammal, bleed in battle for its country’s defense, or hang for treason against her, by a legal fiction is, in effect, a citizen for the purpose of creating the diversity jurisdiction. Certainly such an incarnation would have seemed monstrous to the men framing the Constitution if it had been suggested that this was the “citizen” of which they were thinking when they enacted Article III, sec. 2, clause 1 of the Constitution. It so seems to the writer of this opinion, whose views are better expressed in Professor McGovney’s review in the Harvard Law Review of May 1943, at page 853.

Equally astounding to the framers of the Constitution would have seemed the more recent results of the application of the fiction to private corporations. The records of Director Chandler of the Administrative Office of the United States Courts show that in the fiscal year 1942 there were 2,083 cases terminated in the federal District Courts which had been removed from the state courts by corporate defendants on the ground of diversity of citizenship. This is 52-plus percent of the 3,864 cases there terminated in that year in which the federal jurisdiction was based upon a corporate citizenship.

In this circuit, and no doubt elsewhere, corporate defendants use the fiction to transfer cases from the state courts, where their opponents are entitled to verdicts on votes of eight, nine or ten jurors, 2 to the unanimous vote of the federal tribunals. Many more than those so transferred are those unjustly settled under the pressure of the threat of transfer from the lesser jury vote of the state courts of the vicinage to the distant federal courts, often requiring a change or addition of counsel and always the expense of travel of parties and witnesses and the discomfort of living away from home.

In more recent years in the metropolitan centers, the smaller neighborhood stores in which the housewife markets and shops have become parts of chains of stores owned by foreign corporations, of which the profits of such homely local transactions are their sole objectives. As was humorously stated by Judge Yankwich, “A woman slips on a banana peel in a corner grocery and lands in the federal court.” In the particular situation of the judge’s jest, her nine-vote jury would be sitting in the state court house less than a block away. The wrong done her would be all in a very parochial setting; only distant is the distribution of the corporate dividends, all, quite likely, to the citizens of the same state living on the more pretentious streets of the same city. Cf. Bank of United States v. Deveaux, 5 Cranch, 61, 91 , 3 L.Ed. 38 .

It seems clear that, in a very profound sense, the litigant dragged by the foreign corporation from a nine-vote jury to a unanimous jury is as much denied the “equal protection of the law” as he was in his removal from the common law of the state to the federal “general commercial law” of Swift v. Tyson, 16 Pet. 1, 18 , 10 L.Ed. 865 . All that was said in Erie R. Co. v. Tompkins, 304 U.S. 64, 75 , 58 S.Ct. 817 , 82 L.Ed. 1188 , 114 A.L.R. 1487 , about the fiction of a federal general law applies to the corporate citizen fiction in diversity cases. Indeed the argument for a federal commercial law has more respectable support than the legal absurdity of the holding that, though a stockholder in no way is a party to his corporation’s contract, nevertheless, in a suit against the corporation on the contract, the corporation is not being sued but all its stockholders against none of whom can plaintiff have judgment. Marshall v. Baltimore & O. R. Co., 16 How. 314 , 14 L.Ed. 953 .

There is practically no difference in antiquity of the two fictions, that is the century and one year back of Swift v. Tyson and the ninety-five years back to Louisville, C. & C. R. Co. v. Letson, 2 How. 497 , 11 L.Ed. 353 . Hence the passage of time no more stands in the way of restoring to wronged litigants the equal protection of the law in the one case than in the other. As stated of the fiction of a federal general commercial law in Erie R. Co. v. Tompkins, supra, 304 U.S. at page 79 , 58 S.Ct. 823 , 82 L.Ed. 1188 , 114 A.L.R. 1487 , the doctrine of corporate citizenship is “an unconstitutional assumption of powers by the Courts of the United States which no lapse of time or respectable array of opinion should make us hesitate to correct.”

*1004 Unfortunately, this court must consider the surviving fiction as a fact.

The statute creating the State Water Conservation Board made it “a body corporate and politic,” and “a board to be known as the ■ ‘state water conservation board,’ and by that.' name the board may sue and be sued, plead and be impleaded, and contract and be contracted with.” Revised' Statutes of Montana, 1935, Political Code §§ 349.23, 349.3.

The sole question decided by the majority is whether this Montana corporation has a corporate existence separate and apart from the state and is not merely a group of state officers exercising state functions. If it has such a separate corporate existence' it has the requisite corporate citizenship to remove it from the prohibition of the Eleventh Amendment’under the decisions in Port of Seattle v. Oregon & W. R. Co., 255 U.S. 56, 58, 71 , 41 S.Ct. 237 , 65 L.Ed. 500 ; Lincoln County v. Luning, 133 U.S. 529 , 10 S.Ct. 363 , 33 L.Ed. 766 , and Chicot County v. Sherwood, 148 U.S. 529 , 13 S.Ct. 695 , 37 L.Ed. 546 .

The fact that the corporation exercises, asan agent of the state, governmental functions over various stream and river waters located in different parts of the state is not controlling. Montana created the Montana Armory Board, a “body politic .and' corporate,” in a part of that state’s Military Code 3 as a state agency “to foster and build armories” in the State of Montana, that is to exercise one of the highest functions of any state — the providing of armories in all parts of the state, from which-will be gathered the soldiers for an army of the state to protect its citizens as a whole or those requiring-protectiop in various localities: Immediately upon-the building of the various armories, the state’ acquired the exclusive property right therein to lease them (§ 1400.4(g)-. Only on non-payment of the rental reserved could they be leased to anyone else. Such a state agency is held by the Montana Supreme Court to be a “public corporation separate and apart from the state.” Geboski v. Montana Armory Board, 110 Mont. 487, 492 , 103 P.2d 679, 682 .

The corporation of the Port of Seattle had delegated to it the state’s control over the flow of goods of shippers and. consignees of the greater part of the production of Washington’s farms and industries which pass over its waterfront, 4 of its principal port, a waterfront owned by the state and not by. the corporation. Nevertheless, in a suit involving the exercise of that function by such a state agency and that control over state property it was held to be a corporate citizen of Washington suable by a corporate citizen of Oregon in the United States District. Court for the Western District of Washington. Port of Seattle v. Oregon & W. R. Co., supra.

The very subject matter of the instant appeal shows the necessity that the corporation be deemed an entity apart from the state. Though a state agency, as are all political corporations exercising the functions delegated to them, here the corporation is to deal with the state in a separate and adversary function. It is to acquire title from the state as its grantee of property of which it is to continue to hold the title' for the benefit not of the state but for private persons.

.The suit is to quiet title to certain properties called water rights, acquired by appropriation from the state, in waters in certain of its many streams and rivers. Under the law of Montana such water, coming from the skies above, is the property of.the State of Montana. “* * * the state of Montana has by necessary implication assumed to itself the ownership, sub modo," of the rivers and streams of this state, and, by section 1880 et seq. of the Civil Code, has expressly granted the right to appropriate the waters of such streams, which right, if properly exercised in compliance with the requirements of the statutes, vests in the appropriated full legal title to the use of such waters by virtue of the grant made by- this state as owner of *1005 ihe water. * * *” (Emphasis supplied.) Smith v. Denniff, 24 Mont. 20, 21 , 60 P. 398 , 50 L.R.A. 737 , 81 Am.St.Rep. 408 .

It is an ownership in the water which begins when the rain or snow falls on the state and terminates when the water flows out of the state. It is not unlike the state property in migratory wild fowl which begins when the fowl fly from the skies into che state and ends when they fly out over its borders.

It is obvious that such ownership of the water is a “bundle of rights,” among them its use for irrigation or for power. The title to each and all of these rights is in the state. The state could have declared that it held in trust the right to the use of any local water of a stream or streams for irrigation of the particular lands owned below its How for the benefit of the particular land users to whom it was available. Likewise the state as such could have acquired and owned land and erected structures on it to store and divert the water to the use of the particular irrigator to whom it could be delivered.

However, Montana chose not to create its irrigation and power enterprises by such a method. Instead of the state retaining its ownership in the water it created a separate corporate entity to appropriate from it water rights in certain waters, here for the irrigation of another corporation, an association of land users. The statutory provisions for the corporation’s appropriation from the state, that is to take a position, in law, necessarily adverse to the state, is

The Montana Supreme Court defines such an appropriation vesting in the appropriator title in the water right as “by reason of a statutory grant.” Smith v. Denniff, supra, 24 Mont, at page 24 , 60 P. at page 399 , 50 L.R.A. 737 , 81 Am.St.Rep. 408 .

Having thus by grant from the state had vested in the corporation the title to certain water rights, the statute provides that the corporation may add to them other Montana water rights similarly secured by the appropriation of other persons of which it takes “the title” by purchase or condemnation, and also “the title” to land and “other property deemed necessary or proper for the construction, operation and maintenance of such works,” (Montana Political Code, § 349.4) that is, here, an establishment for storage and distribution of water for irrigation.

. Not only is the corporation to acquire and be vested with title to property within the state, but it is empowered to go outside the state and acquire, by purchase, lands and erect works or appropriate water rights under the laws of such other states.

The statute provides that the moneys for the acquisition of these corporate properties are to come from private sources other than the state or, by later legislation, from the federal government.

The corporation thus having vested in it, by action adversary to the state, the title to' certain water rights and having vested in it title to other water rights and land and structures for utilizing the water rights, is empowered to convey to a private person, as trustee, all these properties including the water rights to secure the repayment of moneys borrowed to purchase the water rights and plant. Under such an instrument the corporation “is to retain ownership and control of the project so long as the bonds are outstanding.” State v. Cooney, 100 Mont. 391, 396 , 47 P.2d 637, *1006 640 . On foreclosure the purchaser “shall obtain title to such work or project.” Montana Political Code § 349Í9. The moneys so borrowed are to be placed in funds created by the corporation and deposited, not in the state treasury, but in “any bank or trust company.” Political Code § 349.10.

Here, in addition to the corporation’s separation from the state, necessary to become a statutory grantee by its appropriation of water rights from the water owned by the state, are all the indicia of a corporate structure owning and disposing of its own property. It is difficult to see how the separateness of such an agency from the state could be more clearly expressed.

In a broad sense the state, though without liability for the bonds promising to pay the loaned money, may be said to own the property because the corporation, like other political corporations, is its agency, but it has given to the corporation separateness from itself to accomplish the result. Hence, as held by the Montana Supreme Court in State v. Cooney, 100 Mont. 391, 412 , 47 P.2d 637, 648 , in determining the legality of a contract for such a project, “Under the plan outlined in the Water Conservation Act and under the contract here attacked, the board will own the project and the water rights acquired for its operation.”

As held in Geboski v. Montana Armory Board, supra, such a corporate agency of the state so holding property, there for military purposes as here for irrigation and power, is an entity separate and apart from the state, — not a municipal corporation, but like it in such separateness. The acquisition by the Armory Board for the state of title to armories of which the state becomes at once lessee and ultimately, on their becoming debt free, the owner, is not greater in separateness of political function than the acquisition by grant to the Water Board of the title to water rights which the board “will own” for the benefit of private persons. It seems clear that we are bound by this decision of the Montana court as to the separate corporate character of such a political agency as Montana has created in the Water Conservation Board.

The cases hold that in determining the right to sue a corporation created by the state for the exercise of governmental functions, the court should look to the decisions of the courts of the state to determine the character of the state governmental corporation and will be bound thereby. Since this is the established rule, it is a matter of indifference whether it flow from the comity existing between the federal and the state governments and tribunals or whether, in cases like this, in the nature of a common law suit to try title to property, the state laws are controlling because of 28 U.S.C.A. § 725 .

“§ 725. Laws of States as rules of decision. The laws of the several States, except where the Constitution, treaties, or statutes of the United States otherwise require or provide, shall be regarded as rules of decision in trials at common law, in the courts of the United States, in cases where they apply.”

In Lincoln County v. Luning, 133 U.S. 529 , 10 S.Ct. 363 , 33 L.Ed. 766 , Lincoln County was held a separate entity despite the delegation of the state’s governmental functions to it on the authority of decisions of the Nevada Supreme Court construing the provisions of the Nevada Constitution creating such corporations ( 133 U.S. at page 532 , 10 S.Ct. at page 364 , 33 L.Ed. 766 ). We have seen that the Supreme Court similarly relied on the decision of the Washington Supreme Court in Port of Seattle v. Oregon & W. R. Co., supra. Both these cases decided the corporations were separate entities.

In State Highway Commission of Wyoming v. Utah Const. Co., 278 U.S. 194 , 49 S.Ct. 104 , 73 L.Ed. 262 , the Commission was not a corporation. In holding that it was not acting as a separate suable entity the Supreme Court ( 278 U.S. at page 199 , 49 S.Ct. at page 106 , 73 L.Ed. 262 ) relies on the decisions of the Supreme Court of Wyoming in determining the Commission’s suable character.

In this court’s decision in Fowler v. California Toll-Bridge Authority, 9 Cir., 128 F.2d 549 , Judge Garrecht’s opinion was considering the contracting power of the Authority, a nonincorporated body of state officers. In holding that the Commission’s contractual obligation was not that of an entity separate from the state, the opinion relies on a decision of the California Supreme Court.

The California Toll Bridge case also relies upon the fact that, unlike the instant corporation which is a statutory grantee from Montana of its water rights, “the title to the property constructed or acquired is in the State of California, and the construction or acquisition is by the state de *1007 partment of public works, [still another group of state officers] which has full charge of the operation and maintenance of the toll bridges and the collection of tolls thereon.” ( 128 F.2d at page 551 .) It is thus seen that Judge Garrecht’s opinion in the California Toll Bridge case, on which the majority opinion relies, seems to support the contrary construction.

The Fifth Circuit case of Kansas City Bridge Co. v. Alabama State Bridge Corporation, 59 F.2d 48 , also relied upon by the majority, that circuit distinguishes in Louisiana Highway Commission v. Farnsworth, 74 F.2d 910, 913 , on the ground that the Louisiana Supreme Court had decided the Highway Commission, a corporation, was suable as such a separate entity and that under the Supreme Court’s rule in State Highway Commission v. Utah Const. Co., 278 U.S. 194 , 49 S.Ct. 104 , 73 L.Ed. 262 , it must find that the Louisiana Commission had citizenship.

It seems clear that under Judge Garrecht’s criteria, in the California Toll Bridge case and under these other cases, we must consider the Montana decision in the Gebaski case holding separateness in this class of corporations and the separate grantee ownership of the instant corporation’s water rights, of which the title is sought to be quieted, and the other statutory attributes of the Water Conservation Corporation, and hold that it has the separateness of corporate entity, to invoke the fiction of diversity of citizenship.

The court should have decided that the District Court has jurisdiction over the controversy. It is with regret that the writer agrees we cannot sustain the appellants’ contention that a corporation cannot be deemed a citizen.

Distinguishing an earlier Fifth Circuit case, Kansas City Bridge Co. v. Alabama State Bridge Corp., 59 F.2d 48 , on which the majority relies.

Montana 8 votes; California, Oregon and Idaho 9 votes; Washington 10 votes.

Montana Military Code, Revised Codes of Montana, Supp.1939 § 1400.49.

The Supreme Court’s decision in a footnote’on page 58 of 255 U.S., 41 S.Ct. at page 238, 65 L.Ed. 500 , of the Port of Seattle case quotes the following powers conferred on. the corporation, by the Washington statutes: