Prashar v. Volkswagen of America, Inc.

• Decision Date: 27 June 1973
• Docket Number: 72-1670.,No. 72-1625,72-1625
• Parties: Paul D. PRASHAR and Darlene Prashar, Appellants, v. VOLKSWAGEN OF AMERICA, INC., a corporation, and Import Motors of Chicago, Inc., a corporation, Appellees. VOLKSWAGENWERK AKTIENGESELLSCHAFT, a corporation, also known as Volkswagenwerk, G.m.B.H., Appellant, v. Paul D. PRASHAR and Darlene Prashar, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

480 F.2d 947 (1973)

Paul D. PRASHAR and Darlene Prashar, Appellants, v. VOLKSWAGEN OF AMERICA, INC., a corporation, and Import Motors of Chicago, Inc., a corporation, Appellees.

VOLKSWAGENWERK AKTIENGESELLSCHAFT, a corporation, also known as Volkswagenwerk, G.m.B.H., Appellant, v. Paul D. PRASHAR and Darlene Prashar, Appellees.

Nos. 72-1625, 72-1670.

United States Court of Appeals, Eighth Circuit.

Submitted April 11, 1973.

Decided June 27, 1973.

Rehearings Denied July 19, 1973.

Timothy J. Nimick, Sioux Falls, S. D., for Prashar and others.

George J. Danforth, Jr., Sioux Falls, S. D., for Volkswagen.

Harold C. Doyle, Sioux Falls, S. D., for Import Motors.

Before LAY and STEPHENSON, Circuit Judges, and TALBOT SMITH,^* Senior District Judge.

LAY, Circuit Judge.

This is a diversity of citizenship case arising in the State of South Dakota. Both appeals revolve around the same basic question — whether compliance with Rule 3 of the Federal Rules of Civil Procedure constitutes "commencement of an action" sufficient to toll the South Dakota statute of limitations. Plaintiffs brought an action to recover for personal injuries incurred on October 5, 1968, while operating a Volkswagen on a South Dakota highway. The defendants were the manufacturer, Volkswagenwerk Aktiengesellschaft; the importer, Volkswagen of America, Inc.; and the regional distributor, Import Motors of Chicago, Inc. The complaint was filed on October 4, 1971, one day prior to the running of the South Dakota statute of limitations, in the office of the clerk of the United States District Court for the District of South Dakota. However, the defendants were not personally served with process until after the applicable statute of limitations had run. Each of the defendants moved for summary judgment alleging that the period of limitations had not been tolled by the filing of the complaint in the federal district court. For under South Dakota law an action is "commenced" when either the summons is served on the defendant or the summons is delivered to the sheriff with the intent that it actually be served.¹ The district court acknowledged that if the action could be deemed "commenced" under the federal rules the applicable period of the statute of limitations would be tolled. However, the trial court felt bound by Ragan v. Merchants Transfer & Warehouse Co., 337 U.S. 530, 69 S.Ct. 1233, 93 L.Ed. 1520 (1949), and Groninger v. Davison, 364 F.2d 638 (8 Cir. 1966),² and granted summary judgment to Volkswagen of America and Import Motors, 347 F. Supp. 129. The court denied Volkswagenwerk Aktiengesellschaft's motion for summary judgment, holding that Rule 4(i)(1), Fed.R.Civ.P., governed service on the foreign corporation and since South Dakota had no comparable provision for such service, the filing of the complaint tolled the statute against this foreign corporation. In denying the motion, the district court granted a certificate pursuant to 28 U.S.C. § 1292(b) enabling Volkswagenwerk Aktiengesellschaft to appeal along with the plaintiffs.

We find that Rule 3 of the Federal Rules of Civil Procedure governs both appeals and order the reinstatement of the action against all defendants.

The Ragan case involved a diversity suit brought to recover damages for personal injuries occurring in Kansas. The complaint was filed within the applicable Kansas statute of limitations. However, the summons was not served on the defendant until after the time period had expired. The Kansas statute of limitations provided that an action would be deemed commenced at the time the summons was served. The Supreme Court held that even though the plaintiff had complied with Rule 3 of the Federal rules, the action was nevertheless barred. The Court reasoned that:

"Where local law qualifies or abridges it, the federal court must follow suit. Otherwise there is a different measure of the cause of action in one court than in the other, and the principle of Erie R. Co. v. Tompkins is transgressed." Ragan v. Merchants Transfer Co., 337 U.S. at 533, 69 S.Ct. at 1235.

Some sixteen years later in Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965), the Court was faced with a direct conflict between Federal Rule of Civil Procedure 4(d)(1) and a state law governing service of process. A diversity suit was timely filed in the Massachusetts federal district court. Service of process was made pursuant to Rule 4(d)(1) by leaving copies of the summons and complaint with the defendant's wife at his residence. The defendant urged that the action should be dismissed since the service of process was contrary to state law which required "in hand" delivery of the summons to the defendant. The federal district court, relying on Ragan and Guaranty Trust Co. v. York, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945), granted summary judgment to the defendant. On appeal the Supreme Court reversed. This time the Court did not apply the state law and through Chief Justice Warren wrote:

"It cannot be forgotten that the Erie rule, and the guidelines suggested in York, were created to serve another purpose altogether. To hold that a Federal Rule of Civil Procedure must cease to function whenever it alters the mode of enforcing state-created rights would be to disembowel either the Constitution\'s grant of power over federal procedure or Congress\' attempt to exercise that power in the Enabling Act." Hanna v. Plumer, 380 U.S. at 473-474, 85 S.Ct. at 1145.

Some courts have taken umbrage in the Hanna language to believe that Ragan was overruled.³ Several commentators have joined in this belief.⁴ Other courts, such as our own, have disagreed and under circumstances on all fours with Ragan have reluctantly felt compelled to apply the law of Ragan.⁵ Undoubtedly the total demise of Ragan would not sadden anyone — perhaps only because of the harshness of the rule to the individual case.⁶

However, it is not the prerogative of this court to overrule Ragan. And there should be little doubt as to the verity of Judge Vogel's observation in Groninger: Hanna did not overrule Ragan. The Supreme Court, although perhaps tenuously in the eyes of many, still sought to distinguish Ragan in Hanna. The Court made direct reference to the fact that Ragan did not involve a federal rule as broad as the state rule with which it purportedly clashed,⁷ 380 U.S. at 470, 85 S.Ct. 1136, and the Court additionally observed that following Rule 4(d)(1) did not involve, as it did in Ragan, "a situation where application of the state rule would wholly bar recovery. . . ." Id. at 469, 85 S.Ct. at 1143. Thus we reaffirm, as we did in Groninger, that for us to ignore Ragan would abdicate our trust as an inferior federal court bound by higher law. However, contrary to the defendants' urging, this does not conclude the matter.

It is recalled that Hanna distinguished Ragan on the ground that Federal Rule 3 was not broad enough to cover the particular problem involved in Ragan. Federal Rule 3 does not attempt to specify that filing tolls the controlling statute of limitations. On the other hand the Kansas statute in Ragan did specifically address itself to the manner of tolling the period of limitations.⁸ The significance of this relates to our reading of Ragan that Rule 3 was not controlling since the Kansas commencement of action statute was so intimately bound up with the rights and obligations created by the state statute of limitations that the state law governed under Erie principles.

In this regard, the Ragan Court specifically considered the fact that under Kansas law the commencement of actions was an integral part of the statute of limitations. Ragan, supra, 337 U.S. at 532, 534, 69 S.Ct. 1233, 93 L.Ed. 1520. In the instant case it is urged that the South Dakota statute on commencement of action is not an integral part of the statute of limitations. Although contained in the same chapter along with the statute of limitations,⁹ the South Dakota statute defining when an action is commenced does not refer to the limitations statute. We deem it significant that the South Dakota Supreme Court has held that the commencement of actions statute is a general statute. Thus in Taylor v. McCarty, 68 S.D. 510, 4 N.W.2d 816, 817-818 (1942), the South Dakota Supreme Court specifically observed:

"SDC 33.0202 commencement of action statute appears as part of a chapter of our Code dealing with the limitations of actions. Similar provisions have been construed by other courts as only fixing the time of commencement of the action for the purpose of applying the statute of limitations. See Wait\'s New York Practice Simplified, 4th Ed., Vol. 1, p. 717; H. L. Spencer Co. v. Koell, 91 Minn. 226, 97 N.W. 974. However, in the case of Tabour Realty Co. v. Nelson, et al., 56 S.D. 405, 228 N.W. 807, the quoted statute was interpreted as a rule of general application in fixing the commencement of actions. That interpretation has been adopted by the Legislature through enactment of the South Dakota Code of 1939 (In re Gooder\'s Estate, S.D., 68 S.D. 415, 3 N.W.2d 478), and we are not at liberty to reconsider its construction."¹⁰

Even though one may conclude that the South Dakota commencement statute is not an integral part of that state's statute of limitations, the question remains whether this should constitute a material difference. The defendants urge that it does not since Ragan stressed that "where one is barred from recovery in the state court, he should likewise be barred in the federal court," 337 U.S. at 532, 69 S.Ct. at 1234, and consequently, it is immaterial whether or not the "commencement" provision was or was not intended to be an integral part of the statute of limitations. Cf. 2 Moore, Federal Practice § 3.074.-3-1 at 779 (2d ed. 1970).

In applying Ragan and its analysis of Erie and Guaranty Trust, we adhere to Chief Justice Warren's admonition in Hanna that the "out-come determination" test cannot be read without reference to the...