Bergeron v. Estate of Loeb

• Decision Date: 20 November 1985
• Docket Number: No. 85-1340,85-1340
• Citation: 777 F.2d 792
• Parties: Richard R. BERGERON, Plaintiff, Appellant, v. ESTATE OF William LOEB, et al., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

Page 792

777 F.2d 792

Richard R. BERGERON, Plaintiff, Appellant, v. ESTATE OF William LOEB, et al., Defendants, Appellees.

No. 85-1340.

United States Court of Appeals, First Circuit.

Argued Sept. 13, 1985.

Decided Nov. 20, 1985.

Michael C. Harvell with whom Mark F. Weaver and Sheehan, Phinney, Bass & Green Professional Ass'n, Manchester, N.H., were on brief for plaintiff, appellant.

Ralph Warren Sullivan with whom Gregory V. Sullivan, L. Michael Hankes, Malloy & Sullivan, Manchester, N.H., were on brief for defendants, appellees.

Before CAMPBELL, Chief Judge, ALDRICH and TORRUELLA, Circuit Judges.

LEVIN H. CAMPBELL, Chief Judge.

Plaintiff-appellant Richard R. Bergeron appeals from a decision and order of the United States District Court for the District of New Hampshire granting defendants-appellees' motions to dismiss his complaint and for summary judgment. We affirm in part, vacate in part, and remand.

BACKGROUND

Plaintiff-appellant Richard R. Bergeron, a New Hampshire resident, is employed by the Union Leader Corporation, which publishes New Hampshire's largest newspaper, the Manchester Union Leader. Until his death in 1981, William Loeb was the president and principal stockholder of the Union Leader Corporation. Bergeron's complaint alleges that he and other employees of the Union Leader Corporation entered into an agreement with Loeb during Loeb's lifetime whereby Loeb promised to transfer his stock in the Corporation to them upon his death. According to the complaint, Loeb breached this agreement by making an inter vivos transfer of his stock in the Corporation to the William Loeb Union Leader trust, which will not terminate until the deaths of the acting trustee, Loeb's widow Nackey S. Loeb, and her nine named successors. Bergeron alleges that, in further violation of the agreement, when the stock is eventually distributed on termination of the trust, it will go to those who are then employed by the Union Leader Corporation, and not to those employed by the Corporation as of the date of Loeb's death.

William Loeb died on September 13, 1981. Both his estate and the trust which holds the disputed stock are being administered in the Second Judicial District Court for the State of Nevada, in and for the County of Washoe. In accordance with Nevada law, Bergeron filed a general claim against Loeb's estate in the Nevada court on March 17, 1982. ¹ Loeb's widow and executrix, Nackey S. Loeb, filed a rejection of Bergeron's claim in the Nevada court on April 5, 1982, and a copy of the rejection and notice of rejection was sent to Bergeron by certified mail.

On June 7, 1982, Bergeron instituted a class action "for himself ... and on behalf of the entire class of Union Leader Corporation employees similarly situated" in the United States District Court for the District of New Hampshire. The named defendants in Bergeron's federal action were the estate of William Loeb, the William Loeb Union Leader trust, Nackey S. Loeb in her capacity as both executrix of Loeb's estate and acting trustee of the Union Leader trust, and the Security National Bank of Nevada, which allegedly holds a security interest in the trust. Bergeron's complaint sought declaratory and equitable relief, and alleged violations of the federal securities laws as well as breach of contract and fraud under New Hampshire law. Jurisdiction over Bergeron's state law claims was based on diversity of citizenship; according to Bergeron's complaint, defendant Nackey S. Loeb is a resident and domiciliary of Massachusetts, and defendant Security National Bank is located in Reno, Nevada.

On June 18, 1982, Nackey S. Loeb filed a declaratory judgment action in her capacity as executrix of Loeb's estate against Bergeron in the Nevada state district court under Nev.Rev.Stat. Sec. 147.130(1) (1983), which provides in relevant part,

When a claim is rejected by the executor or administrator or the district judge, in whole or in part, the holder shall be immediately notified by the executor or administrator, and the holder must bring suit in the proper court against the executor or administrator within 60 days after such notice, whether the claim is due or not; otherwise the claim shall be forever barred....

The executrix argued that Bergeron had failed to comply with section 147.130(1), because the federal district court in New Hampshire was not a "proper court" within the meaning of the statute. She also contended that, even if the federal district court was a "proper court," Bergeron's action was time-barred under section 147.130(1) because it was brought more than 60 days after she had filed a rejection of his claim.

Bergeron brought a motion to enjoin the executrix's Nevada action in the federal district court in New Hampshire, but the motion was denied. Thereafter, Bergeron filed an answer in the Nevada action and defended the executrix's suit on the merits. The Nevada state district court held for the executrix and, on appeal, its decision was affirmed by the Nevada Supreme Court. ² Bergeron v. Loeb, 675 P.2d 397 (Nev.1984) (per curiam). The Nevada Supreme Court denied Bergeron's petition for rehearing, and the United States Supreme Court subsequently denied his petition for a writ of certiorari. Bergeron v. Loeb, --- U.S. ----, 105 S.Ct. 1182, 84 L.Ed.2d 330 (1985).

After the Nevada Supreme Court had ruled that Bergeron's claim against the Loeb estate was "forever barred" under Nev.Rev.Stat. Sec. 147.130(1), the defendants in Bergeron's action in the federal district court in New Hampshire moved in that case for dismissal of his state law claims and for summary judgment on his claim under the federal securities laws. On October 12, 1984, the federal district court in New Hampshire granted both of these motions. In this appeal, Bergeron argues that the federal district court erred in dismissing his state law claims, but does not contest the district court's award of summary judgment under the federal securities laws.

I.

Bergeron's first argument on appeal is that the federal district court in New Hampshire erred in according preclusive effect to the judgment of the Nevada Supreme Court, because the Nevada decision is repugnant to the federal Constitution. Specifically, Bergeron contends that the Nevada Supreme Court's interpretation of Nev.Rev.Stat. Sec. 147.130(1) is not entitled to full faith and credit because it was "beyond [the Nevada court's] power" to deprive the federal district court in New Hampshire of jurisdiction over a claim that was not within the probate exception to federal diversity jurisdiction. ³

We decline to consider this question because, in our view, the constitutionality vel non of the Nevada Supreme Court's judgment is res judicata, and must be accorded full faith and credit here. As the Supreme Court observed in Allen v. McCurry, 449 U.S. 90, 94, 101 S.Ct. 411, 414, 66 L.Ed.2d 308 (1980), under the doctrine of res judicata "a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action."

The issue before the Nevada Supreme Court was whether the federal district court in New Hampshire was, for the purposes of Nev.Rev.Stat. Sec. 147.130(1), a "proper court" in which to bring an action against the Nevada executrix. Bergeron v. Loeb, 675 P.2d at 399. The Nevada Supreme Court concluded that it was not. Regardless of whether Bergeron adequately raised the question of the constitutionality of this interpretation in the Nevada courts, it is clear that he could have. ⁴ Moreover, it is beyond doubt that the Nevada judgment is a final judgment; not only has the Nevada Supreme Court rendered a decision on the merits, but the United States Supreme Court has denied Bergeron's petition for a writ of certiorari. See Diaz-Buxo v. Trias Monge, 593 F.2d 153, 157 (1st Cir.), cert. denied, 444 U.S. 833, 100 S.Ct. 64, 62 L.Ed.2d 42 (1979).

Res judicata would preclude review here even if we believed that the Nevada Supreme Court's decision was unconstitutional on its face. It has been said that "res judicata renders white that which is black, and straight that which is crooked." Jeter v. Hewitt, 63 U.S. (22 How.) 352, 364, 16 L.Ed. 345 (1859). In the federal system, federal courts are required by the full faith and credit statute, 28 U.S.C. Sec. 1738 (1982), to give the same res judicata effect to final judgments rendered in state courts that they would be entitled to in the forum in which they were rendered.

In the leading case of Milliken v. Meyer, 311 U.S. 457, 61 S.Ct. 339, 85 L.Ed. 278 (1940), the Supreme Court reviewed a decision of the Colorado Supreme Court which refused to accord full faith and credit to the decision of a Wyoming court on the grounds that "the Wyoming decree was void on its face because of an irreconcilable contradiction between the findings and the decree." 311 U.S. at 461, 61 S.Ct. at 341. The Supreme Court reversed, writing,

Where a judgment rendered in one state is challenged in another, a want of jurisdiction over either the person or the subject matter is of course open to inquiry.... But if the judgment on its face appears to be a "record of a court of general jurisdiction, such jurisdiction over the cause and the parties is to be presumed unless disproved by extrinsic evidence, or by the record itself." ... In such case the full faith and credit clause of the Constitution precludes any inquiry into the merits of the cause of action, the logic or consistency of the decision, or the validity of the legal principles on which the judgment is based.... Whatever mistakes of law may underlie the judgment ... it is "conclusive as to all the media concludendi."

311 U.S. at 462, 61 S.Ct. at 342 (citations omitted). The reasoning expressed in Milliken is equally applicable where, as here, a state court's judgment is challenged in a federal court. 18 U.S.C. Sec. 1738 (1982); Allen v. McCurry, 449 U.S. at 95-96, ...