Woods v. Interstate Realty Company/Opinion of the Court

This case was brought in the District Court for Mississippi on the grounds of diversity of citizenship. Respondent, a Tennessee corporation, sued petitioner, a resident of Mississippi, for a broker's commission alleged to be due for the sale of real estate of petitioner in Mississippi. The District Court found on motion for summary judgment that the contract was void under Mississippi law, since respondent was doing business in Mississippi without qualifying under a Mississippi statute. It therefore dismissed the complaint with prejudice.

The Court of Appeals reversed. It reviewed the Mississippi decisions under the Mississippi statute and concluded that the contract was not void but only unenforcible in the Mississippi courts. It held in reliance on David Lupton's Sons Co. v. Automobile Club of America, 225 U.S. 489, 32 S.Ct. 711, 56 L.Ed. 1177, Ann.Cas.1914A, 699, that the fact that respondent could not sue in the Mississippi courts did not close the doors of the federal court sitting in that State. Accordingly it reversed the judgment of the District Court. 168 F.2d 701.

The case is here on a petition for writ of certiorari which we granted because of the seeming conflict of that holding with our recent ruling in Angel v. Bullington, 330 U.S. 183, 67 S.Ct. 657, 91 L.Ed. 832.

If the Lupton's Sons case controls, it is clear that the Court of Appeals was right in allowing the action to be maintained in the federal court. In that case a New York statute provided that no foreign corporation could 'maintain any action in this state' without a certificate that it had qualified to do business there. The Court held that a contract on which the corporation could not sue in the courts of New York by reason of that statute nevertheless could be enforced in the federal court in a diversity suit. The Court said, 225 U.S. at page 500, 32 S.Ct. at page 714, 56 L.Ed. 1177, Ann.Cas.1914A, 699, 'The state could not prescribe the qualifications of suitors in the courts of the United States, and could not deprive of their privileges those who were entitled under the Constitution and laws of the United States to resort to the Federal courts for the enforcement of a valid contract.'

We said in Angel v. Bullington that the case of Lupton's Sons had become 'obsolete' insofar as it was 'based on a view of diversity jurisdiction which came to an end with Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487.' 330 U.S. at page 192, 67 S.Ct. at page 662, 91 L.Ed. 832. Bullington had sued Angel in a North Carolina court for a deficiency judgment on the sale of realty under a deed of trust. The Supreme Court of North Carolina dismissed the action because of a North Carolina statute which disallowed a deficiency judgment in such a case and which the North Carolina Supreme Court construed to be 'a limitation of the jurisdiction of the courts of this state.' Bullington v. Angel, 220 N.C. 18, 16 S.E.2d 411, 412, 136 A.L.R. 1054. Thereafter Bullington sued in the federal court of North Carolina by reason of diversity of citizenship. We held that that suit could not be maintained because (1) the prior suit was res judicata; and (2) the policy of Erie R. Co. v. Tompkins precluded maintenance in the federal court in diversity cases of suits to which the State ad closed its courts.

The Court of Appeals concluded that the latter reason was argumentary, the real basis of the decision being that Bullington was denied recovery on the doctrine of res judicata. But where a decision rests on two or more grounds, none can be relegated to the category of obiter dictum. United States v. Title Ins. & Trust Co., 265 U.S. 472, 486, 44 S.Ct. 621, 623, 68 L.Ed. 1110; Commonwealth of Massachusetts v. United States, 333 U.S. 611, 623, 68 S.Ct. 747, 754, 755, 92 L.Ed. 968.

Angel v. Bullington in its alternative ground followed the view of Guaranty Trust Co. of New York v. York, 326 U.S. 99, 108, 65 S.Ct. 1464, 1469, 89 L.Ed. 2079, 160 A.L.R. 1231, that for purposes of diversity jurisdiction a federal court is 'in effect, only another court of the State. * *  * .' In that case we required the federal court in a diversity case to apply the statute of limitations of the State in equity actions and thus to follow local law, as had previously been done in cases involving burden of proof, Cities Service Oil Co. v. Dunlap, 308 U.S. 208, 60 S.Ct. 201, 84 L.Ed. 196; cf. Stoner v. New York Life Ins. Co., 311 U.S. 464, 61 S.Ct. 336, 85 L.Ed. 284; contributory negligence, Palmer v. Hoffman, 318 U.S. 109, 117, 63 S.Ct. 477, 482, 87 L.Ed. 645, 144 A.L.R. 719; conflict of laws, Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477; Griffin v. McCoach, 313 U.S. 498, 61 S.Ct. 1023, 85 L.Ed. 1481, 134 A.L.R. 1462; and accrual of the cause of action, West v. American Tel. & Tel. Co., 311 U.S. 223, 61 S.Ct. 179, 85 L.Ed. 139, 132 A.L.R. 956. The York case was premised on the theory that a right which local law creates but which it does not supply with a remedy is no right at all for purposes of enforcement in a federal court in a diversity case; that where in such cases one is barred from recovery in the state court, he should likewise be barred in the federal court. The contrary result would create discriminations against citizens of the State in favor of those authorized to invoke the diversity jurisdiction of the federal courts. It was that element of discrimination that Erie R. Co. v. Tompkins was designed to eliminate.

Reversed.

Mr. Justice RUTLEDGE dissents. See his dissenting opinion in Nos. 442 and 512, Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221.

Mr. Justice JACKSON, dissenting.