Trust Co. of Chicago v. Pennsylvania R. Co.

• Decision Date: 21 August 1950
• Docket Number: No. 10003.,10003.
• Parties: TRUST CO. OF CHICAGO v. PENNSYLVANIA R. CO.
• Court: U.S. Court of Appeals — Seventh Circuit

183 F.2d 640 (1950)

TRUST CO. OF CHICAGO v. PENNSYLVANIA R. CO.

No. 10003.

United States Court of Appeals Seventh Circuit.

July 3, 1950.

On Motion to Amend the Mandate August 21, 1950.

Theodore Schmidt, P. J. Cronin, Harry I. Parsons, all of Chicago, Ill. (Fay Warren Johnson, Chicago, Ill., of counsel), for appellant.

Jerome M. Brooks, Chicago, Ill., for appellee.

Before DUFFY, LINDLEY and SWAIM, Circuit Judges.

LINDLEY, Circuit Judge.

Plaintiff's decedent, while a resident of Chicago, on April 28, 1947, was injured at Warsaw, Indiana, while riding as a passenger on defendant's train running from Pittsburgh, through Ohio and Indiana to Chicago. He continued to live in Illinois until July 7, 1948, when he removed to Ohio, where he died September 6, 1948. Plaintiff, appointed and qualified administrator in Illinois, instituted suit in the United States District Court in Illinois, to recover damages because of decedent's death, claimed to have been caused by the injury, relying upon diversity of citizenship for jurisdiction. Defendant's special defense going to the power of the court to entertain the suit was overruled; the ensuing trial resulted in judgment against defendant, from which this appeal has been taken.

At the outset we are confronted with the question as to whether the District Court should have sustained defendant's objection to its authority to entertain and dispose of the cause of action asserted by plaintiff. Chapter 70, Section 2 of the Illinois Revised Statutes, authorizing suits to recover damages for deaths, contains this proviso: "Provided, further, that no action shall be brought or prosecuted in this State to recover damages for a death occurring outside of this State where a right of action for such death exists under the laws of the place where such death occurred and service of process of such suit may be had upon the defendant in such place." Indiana at that time had a statute permitting maintenance of such suits. Burns' Indiana Statutes, Sec. 2, Par. 404; Memphis & C. Packet Co. v. Pikey, 142 Ind. 304, 40 N.E. 527. Ohio, too, had given its courts jurisdiction of similar claims. Loftus v. Pennsylvania Road, 107 Ohio St. 352, 140 N.E. 94; Cincinnati, H. & D. R. Co. v. Thiebaud, 6 Cir., 114 F. 918; Drea v. Carrington, 32 Ohio St. 595. The railroad traversed each state and appropriate statutes provided methods for procuring service of process in the respective jurisdictions.

The District Court, relying on our decisions in Stephenson v. Grand Trunk Western R. Co., 7 Cir., 110 F.2d 401, 132 A.L.R. 455, and Davidson et al. v. Gardner, 7 Cir., 172 F.2d 188, struck that portion of defendant's amended answer which averred that Indiana provided a remedy and that, as a result, the suit could not be maintained in Illinois. Defendant insists that, in view of the provisions of the Illinois statute, the court was without authority to entertain and dispose of plaintiff's claim.

The courts of the United States are of limited jurisdiction, possessing only such powers as are either expressly or by necessary implication conferred on them; the policy of the statute conferring jurisdiction on the ground of diversity of citizenship calls for strict construction. Thomson v. Gaskill, 315 U.S. 442, 62 S.Ct. 673, 86 L.Ed. 951; Kline v. Burke Constr. Co., 260 U.S. 226, 43 S.Ct. 79, 67 L.Ed. 226, 24 A.L. R. 1077. It is provided by act of Congress, Rev.St. Sec. 721, 28 U.S.C.A. § 725 now § 1652, derived from Judiciary Act 1789, Sec. 34, that the laws of the several states, except where the Constitution, treaties, or statutes of the United States otherwise provide, shall be regarded as rules of decision in trials at common law, in the courts of the United States, in cases where they apply. Under this statute, except in matters governed by the Federal Constitution or by acts of congress, the law to be applied is that of the state. The purpose of the act is to avoid maintenance within one state of two divergent or conflicting systems of law, one to be applied in the state courts and the other in federal courts, in case of diversity of citizenship. West v. American Telephone & Telegraph Co., Ohio, 311 U.S. 223, 61 S.Ct. 179, 85 L.Ed. 139, 132 A.L.R. 956, reversing 6 Cir., 108 F.2d 347, certiorari granted 310 U.S. 618, 60 S.Ct. 979, 84 L.Ed. 1392, mandate conformed to 6 Cir., 121 F.2d 142. Thus, a federal court will follow and accept as correct the decisions of the highest court of a state as to the powers and the extent of the jurisdiction of the courts of that state. American Bakeries Co. v. Vining, 5 Cir., 80 F.2d 932, affirming D.C., 13 F.Supp. 323; Manning v. Ketcham, 6 Cir., 58 F.2d 948.

Since the Stephenson and Davidson decisions by this court, the Supreme Court has made it clear, we think, that the authorities upon which we relied in those cases are no longer decisive. Thus, in Ragan v. Merchants Transfer & Warehouse Co., 337 U.S. 530, 69 S.Ct. 1233, 1234, after commenting that "it is conceded that if the present case were in the Kansas court it would be barred," the cout said: "Since that cause of action is created by local law, the measure of it is to be found only in local law. It carries the same burden and is subject to the same defenses in the federal court as in the state court. See Cities Service Co. v. Dunlap, 308 U.S. 208, 60 S.Ct. 201, 84 L.Ed. 196; Palmer v. Hoffman, 318 U.S. 109, 117, 63 S.Ct. 477, 87 L.Ed. 645, 144 A.L.R. 719. It accrues and comes to an end when local law so declares. West v. American Tel. & T. Co., 311 U.S. 223, 61 S.Ct. 179, 85 L.Ed. 139, 132 A.L.R. 956; Guaranty Trust Co. v. York, supra, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079, 160 A.L.R. 1231. 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, 304 U.S. 64, 58 S.Ct. 817, 82 L. Ed. 1188, 114 A.L.R. 1487 is transgressed." It added that the court is powerless to give the cause of action "longer life in the federal court than it would have had in the state court without adding something to the cause of action."

In Woods v. Interstate Realty Co., 337 U.S. 535, 69 S.Ct. 1235, decided at the same time, where a Mississippi statute provided that a contract with a nonresident corporation which had not been authorized to do business within the state was void, plaintiff, such a corporation, brought suit in the federal court; the state statute was interposed as a defense. The Court of Appeals, in reliance on David Lupton's Sons Co. v. Automobile Club, 225 U.S. 489, 32 S.Ct. 711, 56 L.Ed. 1177, Ann.Cas.1914A, 699, held that the fact that respondent could not sue in Mississippi did not close the doors of the federal court sitting in that state. The Supreme Court reversed saying: "We said in Angel v. Bullington that the case of Lupton's Sons had become `obsolete' insofar as it was `based on a view of diversity jurisdiction which came to an end with Erie Railroad v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487,' 330 U.S. 183, 192, 67 S.Ct. 657, 662, 91 L.Ed. 832. Bullington had sued Angel in a North Carolina court for a deficiency judgment on the sale of realty under a deed of trust. The Supreme Court of North Carolina dismissed the action because of a North Carolina statute which disallowed a deficiency judgment in such a case and which the North Carolina Supreme Court construed to be `a limitation of the jurisdiction of the courts of this state.' Bullington v. Angel, 220 N.C. 18, 20, 16 S.E.2d 411, 412, 136 A.L.R. 1054. Thereafter Bullington sued in the federal court of North Carolina by reason of diversity of citizenship. We held that that suit could not be maintained because (1) the prior suit was res judicata; and (2) the policy of Erie R. Co. v. Tompkins precluded maintenance in the federal court in diversity cases of suits to which the State had closed its courts." 337 U.S. 535, 69 S.Ct. 1236 (Emphasis supplied.) The court added "Angel v. Bullington * * * followed the view of Guaranty Trust Co. v. York, 326 U.S. 99, 108, 65 S. Ct. 1464, 89 L.Ed. 2079, 60 A.L.R. 1231, that for purposes of diversity jurisdiction a federal court is `in effect, only another court of the State * * *.' In that case we required the federal court in a diversity case to apply the statute of limitations of the State in equity actions and thus to follow local law, as had previously been done in cases involving burden of proof, (Cities Service Co. v. Dunlap, 308 U.S. 208, 60 S.Ct. 201, 84 L.Ed. 196; cf. Stoner v. New York Life Ins. Co., 311 U.S. 464, 61 S.Ct. 336, 85 L.Ed. 284); contributory negligence (Palmer v. Hoffman, 318 U.S. 109, 117, 63 S.Ct. 477, 87 L.Ed. 645, 144 A.L.R. 719); conflict of laws (Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477; Griffin v. McCoach, 313 U.S. 498, 61 S.Ct. 1023, 85 L.Ed. 1481, 134 A.L.R. 1462); and accrual of the cause of action (West v. American Tel. & T. Co., 311 U.S. 223, 61 S.Ct. 179, 85 L.Ed. 139, 132 A.L.R. 956). The York case was premised on the theory that a right which local law creates but which it does not supply with a remedy is no right at all for purposes of enforcement in a federal court in a diversity case; that where in such cases one is barred from recovery in the state court, he should likewise be barred in the federal court. (Emphasis supplied.) The contrary result would create discriminations against citizens of the State in favor of those authorized to invoke the diversity jurisdiction of the federal courts. It was that element of discrimination that Erie R. Co. v. Tompkins was designed to eliminate." In Cohen v. Beneficial Loan Corp., 337 U.S. 541 at page 555, 69 S.Ct. 1221, 1230, the court said: "* * * Erie R. Co. v. Tompkins and its progeny have wrought a more far-reaching change in the relation of state and federal courts and the application of state law in the...