Provident Tradesmens Bank & Trust Company v. Patterson

An automobile owned by Dutcher, driven by Cionci, to whom Dutcher had given the keys, in which Lynch and Harris were passengers, collided with a truck driven by Smith. Cionci, Lynch and Smith were killed and Harris was injured. The administrator of Lynch's estate, the petitioner here, sued Cionci's estate in a diversity action which was settled for $50,000, which was not paid as Cionci's estate was penniless. Smith's administratrix and Harris each brought a state-court action against Cionci's estate, Dutcher, and Lynch's estate, but these suits have never gone to trial. Dutcher had an automobile policy with Lumbermans Mutual Casualty Co., a respondent here, which had a limit of $100,000 for an accident. The policy covered Dutcher's potential liability as Cionci's "principal" and the direct liability of anyone driving the car with Dutcher's permission. Lumbermans had declined to defend in petitioner's action against Cionci's estate, believing that Cionci lacked permission and thus was not covered by the policy. Petitioner then brought this diversity action for a declaration that Cionci's use of the car had been "with permission" of Dutcher, naming as defendants Lumbermens and Cionci's estate. The state-court tort plaintiffs were joined as plaintiffs, but Dutcher, a Pennsylvania resident, as were all the plaintiffs, was not joined either as plaintiff or defendant, a fact not adverted to at trial. The District Court ruled that under Pennsylvania law the driver is presumed to have the owner's permission, and the State's "Dead Man Rule" did not permit Dutcher to testify in the two estate claims as his interest was adverse. The court directed verdicts in favor of the two estates. Dutcher was allowed to testify as against Harris, but the jury found that Cionci had had permission and awarded a verdict to Harris. Lumbermens appealed on state-law grounds, which the Court of Appeals did not reach. That court reversed on the grounds that Dutcher was an indispensable party, that the right of any person who "may be affected" by the judgment to be joined is a "substantive" right, unaffected by Rule 19 of the Fed. Rules of Civ. Proc., and that since Dutcher could not be joined without destroying diversity jurisdiction, the action had to be dismissed. The court also concluded that since the state-court actions "presented the mooted question as to the coverage of the policy," the issue here, the District Court should have declined jurisdiction to allow the state courts to settle this question of state law.

Held:


 * 1. On the basis of the record and applying the "equity and good conscience" test of Rule 19 (b), the Court of Appeals erred in not allowing the judgment to stand. Pp. 107-116.


 * (a) Here, where Dutcher was assumedly a party who should, under Rule 19 (a), be "joined if feasible," but where his joinder as a defendant would destroy diversity, is a problem within the scope of Rule 19 (b). Pp. 108-109.


 * (b) Rule 19 (b) has four "interests" to be examined, in this case from an appellate perspective: plaintiff's interest in having a forum, defendant's interest in avoiding multiple litigation, interest of the outsider whom it would have been desirable to join, and interests of courts and the public in complete, consistent, and efficient settlement of controversies. Pp. 109-111.


 * (c) Application of Rule 19's criteria by the Court of Appeals would have resulted in a different conclusion. Pp. 112-116.


 * 2. The Court of Appeals' dismissal of Rule 19 (b) as an ineffective attempt to change the "substantive rights" stated in Shields v. Barrow, 17 How. 130, was erroneous, as the Rule is a valid statement of the criteria for determining whether to proceed or dismiss in the forced absence of an interested person. Pp. 116-125.


 * 3. The Court of Appeals decided the procedural question incorrectly. Pp. 125-128.


 * (a) In deciding this discretionary matter the court should have considered the existence of a verdict reached after a prolonged trial in which the defendants did not invoke the pending state actions. Pp. 125-126.


 * (b) The issue in the state-court actions, whether Cionci was acting as Dutcher's agent, differs from the question in this case of whether Ciongi had "permission" within the scope of the insurance policy. P. 127.

365 F. 2d 802, vacated and remanded.

Avram G. Adler argued the cause for petitioner. With him on the brief were Abraham E. Freedman, J. Willison Smith and Bayard M. Graf.

Norman Paul Harvey argued the cause and filed a brief for respondents.