390 U.S. 102 (1968), 28, Provident Tradesmens Bank & Trust Co. v. Patterson

Docket Nº:No. 28
Citation:390 U.S. 102, 88 S.Ct. 733, 19 L.Ed.2d 936
Party Name:Provident Tradesmens Bank & Trust Co. v. Patterson
Case Date:January 29, 1968
Court:United States Supreme Court
 
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390 U.S. 102 (1968)

88 S.Ct. 733, 19 L.Ed.2d 936

Provident Tradesmens Bank & Trust Co.

v.

Patterson

No. 28

United States Supreme Court

Jan. 29, 1968

Argued November 6-7, 1967

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Syllabus

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 Lumbermens 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. Lumbermens 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

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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 Cionci had "permission" within the scope of the insurance policy. P. 127.

365 F.2d 802, vacated and remanded.

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HARLAN, J., lead opinion

MR. JUSTICE HARLAN delivered the opinion of the Court.

This controversy, involving in its present posture the dismissal of a declaratory judgment action for nonjoinder of an "indispensable" party, began nearly 10 years ago with a traffic accident. An automobile owned by Edward Dutcher, who was not present when the accident occurred, was being driven by Donald Cionci, to whom Dutcher had given the keys. John Lynch and John Harris were passengers. The automobile crossed the median strip of the highway and collided with a truck being driven by Thomas Smith. Cionci, Lynch, and Smith were killed, and Harris was severely injured.

Three tort actions were brought. Provident Tradesmens Bank, the administrator of the estate of passenger Lynch and petitioner here, sued the estate of the driver, Cionci, in a diversity action. Smith's administratrix, and Harris in person, each brought a state court action against the estate of Cionci, Dutcher the owner, and the estate of Lynch. These Smith and Harris actions, for unknown reasons, have never gone to trial, and are still pending. The Lynch action against Cionci's estate was settled for $50,000, which the estate of Cionci, being penniless, has never paid.

Dutcher, the owner of the automobile and a defendant in the as -yet untried tort actions, had an automobile liability insurance policy with Lumbermens Mutual Casualty Company, a respondent here. That policy had an upper limit of $100,000 for all claims arising out of a

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single accident. This fund was potentially subject to two different sorts of claims by the tort plaintiffs. First, Dutcher himself might be held vicariously liable as Cionci's "principal"; the likelihood of such a judgment against Dutcher is a matter of considerable doubt and dispute. Second, the policy, by its terms, covered the direct liability of any person driving Dutcher's car with Dutcher's "permission."

The insurance company had declined, after notice, to defend in the tort action brought by Lynch's estate against the estate of Cionci, believing that Cionci had not had permission, and hence was not covered by the policy. The facts allegedly were that Dutcher had entrusted his car to Cionci, but that Cionci had made a detour from the errand for which Dutcher allowed his car to be taken. The estate of Lynch, armed with its $50,000 liquidated claim against the estate of Cionci, brought the present diversity action for a declaration that Cionci's use of the car had been "with permission" of Dutcher. The only named defendants were the company and the estate of Cionci. The other two tort plaintiffs were joined as plaintiffs. Dutcher, a resident of the State of Pennsylvania, as were all the plaintiffs, was not joined either as plaintiff or defendant. The failure to join him was not adverted to at the trial level.

The major question of law contested at trial was a state law question. The District Court had ruled that, as a matter of the [88 S.Ct. 736] applicable (Pennsylvania) law, the driver of an automobile is presumed to have the permission of the owner. Hence, unless contrary evidence could be introduced, the tort plaintiffs, now declaratory judgment plaintiffs, would be entitled to a directed verdict against the insurance company. The only possible contrary evidence was testimony by Dutcher as to restrictions he had imposed on Cionci's use of the automobile. The two estate plaintiffs claimed, however, that,

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under the Pennsylvania "Dead Man Rule," Dutcher was incompetent to testify on this matter as against them. The District Court upheld this claim. It ruled that, under Pennsylvania law, Dutcher was incompetent to testify against an estate if he had an "adverse" interest to that of the estate. It found such adversity in Dutcher's potential need to call upon the insurance fund to pay judgments against himself, and his consequent interest in not having part or all of the fund used to pay judgments against Cionci. The District Court, therefore, directed verdicts in favor of the two estates. Dutcher was, however, allowed to testify as against the live plaintiff, Harris. The jury, nonetheless, found that Cionci had had permission, and hence awarded a verdict to Harris also.

Lumbermens appealed the judgment to the Court of Appeals for the Third Circuit, raising various state law questions.1 The Court of Appeals did not reach any of these issues. Instead, after reargument en banc, it decided, 5-2, to reverse on two alternative grounds, neither of which had been raised in the District Court or by the appellant.

The first of these grounds was that Dutcher was an indispensable party. The court held that the "adverse interests" that had rendered Dutcher incompetent to testify under the Pennsylvania Dead Man Rule also required him to be made a party. The court did not consider whether the fact that a verdict had already been rendered, without objection to the nonjoinder of Dutcher, affected the matter. Nor did it follow the provision of Rule 19 of the Federal Rules of Civil Procedure that findings of "indispensability" must be based on

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stated pragmatic considerations...

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