Navarro Savings Assn. v. Lee

PETITIONER: Navarro Savings Assn.
LOCATION: Elkhart, Indiana

DOCKET NO.: 79-465
DECIDED BY: Burger Court (1975-1981)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 446 US 458 (1980)
ARGUED: Mar 18, 1980
DECIDED: May 19, 1980

Bernus Wm. Fischman -
Bernus William Fischman - for petitioner
James A. Ellis, Jr. - for respondents

Facts of the case


Media for Navarro Savings Assn. v. Lee

Audio Transcription for Oral Argument - March 18, 1980 in Navarro Savings Assn. v. Lee

Warren E. Burger:

And we'll hear arguments next in Navarro Savings Association against Lee.

Mr. Fischman, you may proceed whenever you are ready.

Bernus Wm. Fischman:

Mr. Chief Justice, may it please the Court.

Bernus Fischman of Houston, Texas for the petitioner, Navarro Savings.

Your Honors, certiorari was granted in this case to review a decision of the Court of Appeals for the Fifth Circuit which held that the citizenship of a Massachusetts business trust, in this case, a real estate investment trust, was that of each of its trustees as opposed to its some 9500 beneficial shareholders.

The petitioner believes that the case although one of first impression on the narrow point now before this Court, that is as to a real estate investment trust as a particular species of business organization, although it is a case of first impression that it is well governed by previous decisions of this Court.

The -- the principal decision or pair of decisions which believe are governing in this case are Morrissey versus Commissioner, cited in the brief, and that of United Steelworkers versus R.H. Bouligny and company.

The Bouligny case – well, let me do it first with Morrissey.

Morrissey holds that a real estate investment trust is an association as opposed to some other species of entity.

It says in effect in the – the holding of the case is that it would be taxed as an association under the applicable provisions of the Internal Revenue Code.

William H. Rehnquist:

They don't purport to govern jurist -- diversity jurisdiction?

Bernus Wm. Fischman:

No, Your Honor.

The -- the Morrissey case is addressed particularly to the statutory construction of the Internal Revenue Act, but I think a careful reading of a case and we say this in our brief.

The case does not confine itself to application on the narrow issue of what is this entity for purposes of the Internal Revenue Code.

What it does say is this entity is a business trust and we will treat as such incidentally for tax purposes.

William H. Rehnquist:


My -- my question was not so much that the Morrissey case may not have relied on the Internal Revenue Code, but that perhaps, it may have been wrong in relying on the Internal Revenue Code.

Since we do have a diversity jurisdiction and for fairly, carefully defined statute setting out what shall be this test and for jurisdiction of the federal courts.

Why go to the Internal Revenue clauses?

Bernus Wm. Fischman:

I don't believe we're looking to the Internal Revenue Code, Your Honor, to determine where the jurisdiction lies.

As we say in the brief, it's really a two – a two-point analysis.

All Morrissey says is, “This entity is a business association.”

We're not going to treat it as a conventional trust, because it has the features of continuity or perhaps perpetual life.

It has the features of transferability of interest.

It's an active, ongoing business organization that has the object of making money and distributing the gains to the -- the beneficial interest holders.

It's not a trust.

That's all that we say Morrissey holds.

To find out where the jurisdiction lies, one must then look to the Bouligny case, which is in itself only the natural outcropping of it's antecedents, the prior decision of this Court in Chapman versus Barney in 1887 I believe, decision of this Court, in which it was held as a matter noticed by the Court as opposed to anything that was suggested by either of the parties in their -- in their briefs that -- that the District Court or excuse me, the Circuit Court at that time did not have jurisdiction because the -- the entity there was – it's called an express company.

It was in essence, of joint-stock association and therefore, as it has been characterized, a -- a mere partnership.

And the Court said, “We must look to the citizenship of each of the constituent members of this entity that have aggregated themselves for the purposes of conducting business.