Messer v. American Gems, Inc.

• Decision Date: 03 January 1980
• Docket Number: No. 79-1189,79-1189
• Citation: 612 F.2d 1367
• Parties: Cynthia K. MESSER, Administratrix of the Estate of James Richard Braedyn, deceased, Appellant, v. AMERICAN GEMS, INC.; Emerald Valley Camper's Club, Inc.; Emerald Valley Distribution Corp., Inc., Lois R. Rist, Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1367

612 F.2d 1367

Cynthia K. MESSER, Administratrix of the Estate of James Richard Braedyn, deceased, Appellant, v. AMERICAN GEMS, INC.; Emerald Valley Camper's Club, Inc. Emerald Valley Distribution Corp., Inc., Lois R Rist, Appellees.

No. 79-1189.

United States Court of Appeals Fourth Circuit.

Argued Dec. 7, 1979.

Decided Jan. 3, 1980.

Creighton W. Sossomon, Sylva, N.C., for appellant.

William C. Gray, Jr., Wilkesboro, N.C. (Max F. Ferree, P.A., Wilkesboro, N.C., on brief), for appellees.

Before BRYAN, BUTZNER and MURNAGHAN, Circuit Judges.

MURNAGHAN, Circuit Judge:

On July 11, 1976, James Richard Braedyn, a nonresident of North Carolina, ¹ was killed in an accident on the North Carolina premises of the sole remaining defendant, American Gems, Inc. American Gems, Inc., a Maryland corporation, because it had its principal place of business in North Carolina, was a citizen of North Carolina for purposes of determining whether there was diversity jurisdiction. ²

The district court accepted, for purposes of the ruling it made, and so do we, the representation that decedent had no assets subject to administration, and that the claims for wrongful death were the only ones which would be asserted by any personal representative. ³ The rule that claims for wrongful death, while not constituting assets of the true estate, must be asserted by a personal representative applies both in North Carolina, N.C.G.S. § 28A-18-2, and in Florida, Fla.Stat. § 768.20 (Supp.1978).

The widow did not seek primary administration in Florida, or any administration in North Carolina. It appears that she left to North Carolina counsel retained to pursue the wrongful death claims the taking of all necessary steps. With the statute of limitations about to run, ⁴ counsel obtained letters of administration for Cynthia K. Messer, a member of his office staff and a resident of North Carolina, in whose name, as administratrix, the action in the United States District Court for the Western District of North Carolina was filed. Cynthia K. Messer had no other acquaintance or relationship with those entitled to claim wrongful death benefits because of the death of James Richard Braedyn. ⁵

The district judge raised Sua sponte the question of whether the citizenship of the administratrix or the citizenship of the beneficiaries controlled for purposes of determining diversity jurisdiction. He held that the citizenship of the administratrix controlled and dismissed for want of jurisdiction.

Prior to 1975, a statute of North Carolina, N.C.G.S. § 28A-8-2, required that a wrongful death action, particularly one growing out of the death of a non-resident, be instituted by a personal representative who was a North Carolina resident. Since 1975 a non-resident has not been precluded by North Carolina law from qualifying as an administrator or ancillary administrator and bringing a wrongful death action. N.C.G.S. § 28A-4-2 disqualifies a non-resident only if he or she fails to appoint a resident to accept service of process. N.C.G.S. § 28A-26-3(a) permits a domiciliary personal representative in the state of the decedent's residence to take out ancillary letters, although a non-resident of North Carolina.

Had those changes in the statutory law of North Carolina not taken place, clearly diversity jurisdiction existed. Miller v. Perry, 456 F.2d 63, 68 (4th Cir. 1972) dealt with a situation identical with the instant case in all respects save one. The difference lay in the fact that the decedent's father took out domiciliary letters of administration in Florida, the state of residence of the decedent and of the father, and the decedent's grandfather, a North Carolina resident, solely because of the then extant statutory requirement, qualified in North Carolina as ancillary administrator and instituted the North Carolina wrongful death action in the United States District Court for the Eastern District of North Carolina. Chief Judge Haynsworth, speaking for the Court, held:

We conclude, therefore, that in determining the presence of diversity of citizenship when state law requires that the action be prosecuted in the name of a resident administrator, the citizenship of the beneficiaries, rather than that of the administrator, is relevant, and that such diversity is present here.

Other decisions of this Court, in related circumstances, make clear that the result should not be different simply because the named plaintiff is an administrator of a non-resident decedent rather than an ancillary administrator. The role, in either case, is that of a nominal party, and attention should be focused on the beneficiaries, the parties to whom the outcome will be significant. Such was the holding in Lester v. McFaddon, 415 F.2d 1101, 1103-4 (4th Cir. 1969). In that wrongful death action brought in the United States District Court for the District of South Carolina, the beneficiaries and defendants were all South Carolina residents. The decedent had died a South Carolina domiciliary. A Georgia attorney was appointed South Carolina administrator (not ancillary administrator) for the purpose of bringing the wrongful death action. No contention was made in the district court or on appeal that diversity jurisdiction was lacking. On appeal, after a full trial on the merits below, this Court raised the jurisdictional issue Sua sponte, and determined that the purely nominal role of the administrator made it inappropriate to measure diversity on the basis of his citizenship. Rather the citizenship of the beneficiaries was deemed controlling. Again Chief Judge Haynsworth spoke for the Court:

In the circumstances of this case the administrator has no stake in the litigation. In South Carolina an action for wrongful death may be maintained only by an executor or administrator of the decedent's estate. The cause of action inheres in the personal representative, and the statutory beneficiaries cannot proceed in their own names. Any amount recovered, however, does not go into the decedent's general estate but is payable, upon receipt by the personal representative, directly to the statutory beneficiaries, here the decedent's numerous children. Had there been assets in the general estate of the decedent, the administrator would have been required to administer them, but there were no such assets here so that this administrator has as yet had no duties to perform.

Unless there is a recovery of some damages in the wrongful death action, the administrator here would never have anything to do; if there is a recovery, his duty is limited to receipt of the funds and their disbursement to a guardian of the statutory beneficiaries. He, of course, has a fiduciary duty to see that the litigation is pressed to a conclusion as long as there is any reasonable expectation of a recovery, but when the foreign administrator is procured by the lawyers handling the litigation he can hardly be expected to ride herd upon them or exercise any effective supervision of their conduct of the litigation. Except that he acquired his authority from the South Carolina Probate Court, he has no greater standing than the next friend of a minor or incompetent or a guardian ad litem whose residence has not been thought to be controlling of the question of diversity.

Such a person is indeed a "straw party" . . . .

The result was further buttressed, in Chief Judge Haynsworth's view, because appointment of the diverse Georgia resident was "an improper manufacture of jurisdiction", and therefore, within the prohibition of 28 U.S.C. § 1359. ⁶

Bishop v. Hendricks, 495 F.2d 289 (4th Cir. 1974) on facts virtually identical to those of Lester likewise reached the result that there was no diversity jurisdiction even though there was the significant difference from Lester that the lower court determined that the motive for the securing of a South Carolina appointment of a Georgia resident as general administrator "was not the creation of federal jurisdiction".

In Bishop, the Court, while alluding to Lester, did so mainly to minimize the suggestion that a finding of collusive motive was necessary in order for a court to disregard the citizenship of a general administrator, and look instead to those who would benefit from any wrongful death recovery. The Court primarily based its result on Miller and particularly the holding "that when the responsibilities of the administrator are solely to institute the wrongful death action when he is what one Court has described as 'an administrator Ad litem ' and no more the Court would 'hinge the diversity determination to the citizenship of the wrongful death action beneficiaries, rather than to that of their representative.' " 495 F.2d at 291-92. It was the administrator's status as "an agent to sue 'without stake' in the litigation" which was deemed controlling. The Court acknowledged that the citizenship of a general administrator might be controlling "when a general administrator, having assets other than the wrongful death suit to administer and who, incidental to his duties as general administrator, files a wrongful death suit . . . ". Id. at 295.

However, Judge Russell explained that the general administrator in Bishop was not in such a position, 495 F.2d at 295-6:

In this case, the administrator has failed to establish any substantive facts or to assign any valid reasons for his appointment that would give 'substance' to his representation or fix his status in the suit as different from nominal. Without any 'real (or) substantial interest in the outcome of the litigation', he possesses 'no stake in the litigation'. He has nothing to gain by the suit save a fee for the use of his name if successful, and, if the suit is lost, nothing to lose. In fact, it would seem that the beneficiaries of the action, if they chose to, could settle the action, with or without consulting him. Nor is the prosecution of the action incidental to any general fiduciary duties of...