Provident Tradesmens Bank Trust Co v. Patterson

• Decision Date: 29 January 1968
• Docket Number: No. 28,28
• Citation: 390 U.S. 102,19 L.Ed.2d 936,88 S.Ct. 733
• Parties: PROVIDENT TRADESMENS BANK & TRUST CO., Administrator of the Estate of John R. Lynch, etc., Petitioner, v. George M. PATTERSON, Administrator of the Estate of Donald Cionci et al
• Court: U.S. Supreme Court

390 U.S. 102

88 S.Ct. 733

19 L.Ed.2d 936

PROVIDENT TRADESMENS BANK & TRUST CO., Administrator of the Estate of John R. Lynch, etc., Petitioner,

v George M. PATTERSON, Administrator of the Estate of Donald Cionci et al.

No. 28.

Argued Nov. 6 and 7, 1967.

Decided Jan. 29, 1968.

[Syllabus from pages 102-103 intentionally omitted] Avram G. Adler, Philadelphia, Pa., for petitioner.

Norman Paul Harvey, Philadelphia, Pa., for respondents.

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 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, Provident Tradesmens Bank and Trust Company v. Lumbermens Mutual Casualty Company, 218 F.Supp. 802 had ruled that, as a matter of the 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 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, Provident Tradesmens Bank and Trust Company v. Lumbermens Mutual Casualty Company, 365 F.2d 802 (C.A.3d Cir.) 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 stated pragmatic considerations. It held, to the contrary, that the right of a person who 'may be affected' by the judgment to be joined is a 'substantive' right, unaffected by the federal rules; that a trial court 'may not proceed' in the absence of such a person; and that since Dutcher could not be joined as a defendant without destroying diversity jurisdiction the action had to be dismissed.

Since this ruling presented a serious challenge to the scope of the newly amended Rule 19, we granted certiorari. 386 U.S. 940, 87 S.Ct. 972, 17 L.Ed.2d 872. Concluding that the inflexible approach adopted by the Court of Appeals in this case exemplifies the kind of reasoning that the Rule was designed to avoid, we reverse.

I.

The applicable parts of Rule 19 read as follows:

'Rule 19. Joinder of Persons Needed for Just Adjudication

'(a) Persons to be Joined if Feasible. A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action if (1) in his absence complete relief cannot be accorded among those already parties, or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest. If he has not been so joined, the court shall order that he be made a party. If he should join as a plaintiff but refuses to do so, he may be made a defendant or, in a proper case, an involuntary plaintiff. If the joined party objects to venue and his joinder would render the venue of the action improper, he shall be dismissed from the action.

'(b) Determination by Court Whenever Joinder not Feasible. If a person as described in subdivision (a)(1)—(2) hereof cannot be made a party, the court shall determine whether in equity and good conscience the action should proceed among the parties before it, or should be dismissed, the absent person being thus regarded as indispensable. The factors to be considered by the court include: first, to what extent a judgment rendered in the person's absence might be prejudicial to him or those already parties; second, the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; third, whether a judgment rendered in the person's absence will be adequate; fourth, whether the plaintiff will have an adequate remedy if the action is dismissed for non-joinder.'

We may assume, at the outset, that Dutcher falls within the category of persons who, under § (a), should be 'joined if feasible.' The action was for an adjudication of the validity of certain claims against a fund. Dutcher, faced with the possibility of judgments against him, had an interest in having the fund preserved to cover that potential liability. Hence there existed, when this case went to trial, at least the possibility that a judgment might impede Dutcher's ability to protect his interest, or lead to later relitigation by him.

The optimum solution, an adjudication of the permission question that would be binding on all interested persons, was not 'feasible,' however, for Dutcher could not be made a defendant without destroying diversity. Hence the problem was the one to which Rule 19(b) appears to address itself: in the absence of a person who 'should be joined if feasible,' should the court dismiss the action or proceed without him? Since this problem emerged for the first time in the Court of Appeals, there were also two subsidiary questions. First, what was the effect, if any, of the failure of the defendants to raise the matter in the District Court? Second, what was the importance, if any, of the fact that a judgment, binding on the parties although not binding on Dutcher, had already been reached after extensive litigation? The three questions prove, on examination, to be interwoven.

We conclude, upon consideration of the record and applying the 'equity and good conscience' test of Rule 19(b),...