Bott v. American Hydrocarbon Corporation, 29379.

• Decision Date: 28 April 1971
• Docket Number: No. 29379.,29379.
• Citation: 441 F.2d 896
• Parties: G. R. BOTT, Plaintiff-Appellant, v. AMERICAN HYDROCARBON CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

441 F.2d 896 (1971)

G. R. BOTT, Plaintiff-Appellant, v. AMERICAN HYDROCARBON CORPORATION, Defendant-Appellee.

No. 29379.

United States Court of Appeals, Fifth Circuit.

April 28, 1971.

Alan M. Mund, Beverly Hills, Cal., Michael Lowenberg, Dallas, Tex., Fulop, Rolston & Burns, Beverly Hills, Cal., and Akin, Gump, Strauss, Hauer & Feld, Dallas, Tex., for plaintiff-appellant.

Dean Carlton, Dallas, Tex., for defendant-appellee.

Before COLEMAN, AINSWORTH and GODBOLD, Circuit Judges.

GODBOLD, Circuit Judge:

Appellant Bott brought two identical suits against the appellee American Hydrocarbon Corporation (AHC), a Delaware corporation, his former employer. The first was filed in United States District Court in Texas, the second a few months later in the state courts of California. Both were on the same cause of action and concerned claims that arose in California.

The California action was removed to United States District Court in that state, which, on the suggestion of the court, with the concurrence of the defendant, and with the statement of plaintiff that he did not oppose it, ordered the California suit transferred to the Texas District Court where the first-filed action was pending. The transfer order stated that transfer was without prejudice to the rights of the parties in the Texas case but did not refer to their rights in the California case. Bott then moved the Texas District Court to consolidate the cases for purposes of trial, and the court ordered consolidation "without prejudice to the rights of the parties therein."

In the suits Bott claimed that AHC was indebted to him by account (and account stated) consisting of seven specific items, all unwritten. Six items concerned payments or advances of money or property allegedly made by Bott to discharge debts or obligations of the corporation. A seventh item was for salary. In the trial of the consolidated cases Bott was successful in winning a jury verdict on some of his claims, but as to them the court granted a judgment n/o/v for AHC. Also it granted AHC's alternative motion for new trial. We reverse both the grant of judgment n/o/v and alternative grant of new trial.

AHC asserted the defense of the statute of limitations. At trial Bott introduced evidence tending to show that limitations had been avoided by acknowledgment of the debts and by the corporation's departure from California after the claims had accrued but before the limitations period had expired. AHC offered no evidence but moved for a directed verdict as to all claims on the grounds that they were barred by the Texas statute of limitations and that there was insufficient evidence of any avoidance of the statutory period. This was denied. However, a directed verdict was granted for AHC as to three of the expense items for failure of proof. The jury considered the remaining three expense claims and the salary claim. Responding to special interrogatories, the jury found that Bott had paid AHC's bank overdraft of $15,000 on or about December 30, 1964, and had paid $4,000 to a stock registrar for the benefit of AHC on or about April 22, 1965, and that between 1965 and 1968 AHC acknowledged and agreed to pay each of these debts. On the third expense item submitted to it, the jury found the item was not owing. As to salary, the jury found that AHC owed Bott $6,527.28, and that between 1965 and 1968 appellee acknowledged and agreed to pay this debt. On the issue of tolling by the corporation's ceasing to do business in California, the jury found that AHC had not done business in that state since May 1965.

In considering the motion for judgment n/o/v, the District Judge concluded that the Texas statute of limitations governed the Texas suit, and that the California statute no longer applied to the California suit after it had been transferred to Texas "at the instance of the California court and without a motion by defendant," with the result that the two-year Texas statute for unwritten claims, Art. 5526, governed the consolidated cases.¹ She concluded also that the writings relied on by Bott to avoid the statutory period did not contain an acknowledgment as required by Art. 5535 sic — Art. 5539 Vernon's Civil Statutes.² The order granting judgment n/o/v made no reference to tolling by AHC's ceasing to do business in California. Presumably, in view of its conclusion that the California statute of limitations was inapplicable, the court considered that this California rule of tolling also did not apply.

The problems of this case center around choices of governing law. No choice of law need be made as to the governing statute of limitations, because in both California and Texas the period for suit on an unwritten claim is two years. Art. 5526, Vernon's Civil Statutes; Cal. Code Civil Proc. § 339.

As to tolling by the corporation's ceasing to do business in California, we doubt that there is a conflict of law, but we conclude that, if there is, the California law is the correct choice. Applying that law, the jury finding that AHC did no business in California after May 1965 entitles the plaintiff to entry of judgment on the jury verdict.

We begin with the California Code of Civil Procedure, § 351, which provides:

If, when the cause of action accrues against a person, he is out of the State, the action may be commenced within the term herein limited, after his return to the State, and if, after the cause of action accrues, he departs from the State, the time of his absence is not part of the time limited for the commencement of the action.

We consider this section in the light of the transfer of the California case to Texas and the subsequent consolidation. In Van Dusen v. Barrack, 376 U.S. 612, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964), the Supreme Court held that wrongful death actions brought in Pennsylvania and transferred to Massachusetts on petition of the defendant under 28 U.S.C. § 1404 must be tried under substantive Pennsylvania law, that a change of venue under § 1404(a) "generally should be, with respect to state law, but a change of courtrooms." 376 U.S. at 639, 84 S.Ct. at 821, 11 L.Ed.2d at 962. The Court specified that it did not consider whether all § 1404(a) cases, including those where transfer is not at the instance of the defendant, required application of the law of the transferor state. But the Court's holding paid great deference not only to the plaintiff's choice of forum and to having its laws apply, but also to sound Erie principles dictating that transfer should not be used to achieve a result which could not have been achieved in the courts of the state of filing. 376 U.S. at 638, 84 S.Ct. 805, 11 L.Ed.2d at 962. This policy of Van Dusen is not made inapplicable by the fact that the application for transfer originated in a suggestion by the court and with concurrence by the defendant and not in a motion by defendant.³ Therefore, we conclude that when the California action was transferred to Texas the California law went with it. But this is only the first step, because the Texas District Court found pending before it two separate but identical actions between the same parties, which it consolidated. As that court recognized in its order, consolidation must not prejudice the rights of parties. See 5 Moore, Federal Practice, ¶ 42.02, at 42-21 (2d Ed.1969). The Texas court could not try the consolidated cases under two sets of laws if to do so would produce differing results. If there was a conflict, it was required to make a choice of law.

We can safely assume that in a California action the courts of that state would apply California principles relating to tolling caused by a corporation's ceasing to do business in that state. We think it likely that, in a Texas action, the courts of Texas, as a part of its conflict of laws rules, would also apply the California standards of this particular type of tolling. This cause arose in California between a foreign corporation doing business there and a California resident employed by it. The state in which the cause arises has a unique interest in preserving the viability of claims of its residents against foreign corporations which cease to do business after the causes of action have arisen — this is the raison d'etre for this type of tolling. AHC is a Delaware corporation. Texas' status as forum arose only because AHC was amenable to process there. Moreover, Texas has the same policy of protecting its residents in their claims against departing corporations as does California, Art. 5537, Vernon's Civil Statute.⁴ Cf. State of California v. Copus, 158 Tex. 196, 309 S.W.2d 227 (1958). This section was enacted to protect domestic creditors from inconvenience and loss occasioned by...