1. Where the applicable rule of decision is the state law, the
duty of the federal court is to ascertain and apply that law even
though it has not been expounded by the highest court of the State.
P.
311 U. S.
177.
2. An intermediate state court, in declaring and applying the
state law, is acting as an organ of the State, and its
determination, in the absence of more convincing evidence of what
the state law is, should be followed by a federal court in deciding
a state question. P.
311 U. S.
177.
3. Certain statutes of New Jersey had been held by the state
Court of Chancery, in two cases decided independently by two
Vice-Chancellors, not to have changed the preexisting law of the
State with respect to the insufficiency of a mere savings bank
deposit made by a decedent in his own name as "trustee" for
another, but over which he exercised complete control during his
life, to establish a gift
inter vivos or to create a trust
as against the decedent's legal representatives. So far as
appeared, the Court of Appeals of New Jersey had not expressed any
opinion on the construction or effect of these statutes, and the
decisions of the Chancery court stood as the only exposition of the
relevant state law.
Held, in a case presenting the same
question, that a federal court was bound to follow the decisions of
the Chancery court, and was not at liberty to reject them merely
because it did not agree with their reasoning. P.
311 U. S.
178.
4. It is inadmissible that there should be one rule of state law
for litigants in the state courts and another rule, simply because
of diverse citizenship, for litigants in the federal courts. P.
311 U. S. 180.
108 F.2d 521 reversed; District Court affirmed.
Certiorari, 309 U.S. 652, to review the reversal of a decree of
the District Court which declined to fasten a trust on a savings
bank account. Jurisdiction was by diversity of citizenship.
Page 311 U. S. 174
MR. CHIEF JUSTICE HUGHES delivered the opinion of the Court.
In 1935, Edith M. Peck caused the title of a savings bank
account standing in her name to be transferred on the records of
the bank to "Edith M. Peck, in trust for Ethel Adelaide Field."
Miss Peck retained exclusive control over the account, with sole
right of withdrawal and right of revocation, and gave no further
notice of the existence of a trust.
This suit was brought by Ethel Adelaide Field against the bank
and the executors of Miss Peck to obtain a decree that the credit
balance of the account belonged to the complainant. The executors
denied the validity of the trust, and claimed title. The District
Court found in favor of the executors upon the ground that, under
the law of New Jersey, there was no trust and no valid gift. The
Circuit Court of Appeals reversed the judgment, holding that, under
a state statute, the complainant was entitled to recover. In so
ruling, the court declined
Page 311 U. S. 175
to follow contrary decisions of the Chancery Court of New
Jersey. 108 F.2d 521. In view of the importance of the question
thus presented, we granted certiorari. 309 U.S. 652.
In 1932, the legislature of New Jersey passed four statutes, in
similar terms and approved on the same date, dealing with trust
deposits in banks. The text of one of these provisions is set forth
in the margin. [
Footnote 1]
Prior to these statutes, it had been the law of New Jersey that a
mere savings bank deposit made by a decedent in his own name as
trustee for another, over which the decedent exercised complete
control during his life, was insufficient to establish a gift
inter vivos or to create a trust as against the decedent's
legal representatives.
Nicklas v. Parker, 69 N.J.Eq. 743,
61 A. 267,
aff'd, 71 N.J.Eq. 777, 61 A. 267, 71 A. 1135;
Johnson v. Savings Investment & Trust Company, 107
N.J.Eq. 547, 153 A. 382,
aff'd, 110 N.J.Eq. 466, 160 A.
371.
The statutes of 1932 came before the Chancery Court of New
Jersey in 1936 in two cases decided independently by two
Vice-Chancellors,
Thatcher v. Trenton Trust Company,
Page 311 U. S. 176
119 N.J.Eq. 408, 182 A. 912, and
Travers v. Reid, 119
N.J.Eq. 416, 182 A. 908. In the
Thatcher case, it appeared
that the decedent, at the time of her death in 1934, had two bank
balances standing to her credit "in trust for Clifford Thatcher,"
the complainant. The bill was dismissed. The court found that there
were no facts, beyond the mere opening of the account in that
manner, "in any wise tending to prove the declaration of a trust."
The court examined the legislation of 1932, which it was argued had
changed the law of the State, and, after considering possible
purposes of the legislature and analyzing the language employed,
which was deemed to be "confused" and "difficult to comprehend,"
the court decided that the legislation was inoperative to change
the law applicable to the facts before the court. In the
Travers case, the decedent had changed his bank account to
his name "in trust for Joseph Jennings," a minor. In a suit by the
decedent's executrix to recover the money, a motion by the minor's
guardian to strike the bill for want of equity and upon the ground
that the fund was the property of the ward or held in trust for him
was denied. After stating the law as it stood before the statutes
of 1932, the court concluded that they had not been effective to
alter the previous legal requirements of a gift
inter
vivos or a valid trust. These cases were not reviewed by the
Court of Errors and Appeals of New Jersey, and, so far as appears,
that court has not expressed an opinion upon the construction and
effect of the statutory provisions. [
Footnote 2]
Page 311 U. S. 177
The Circuit Court of Appeals found it impossible to distinguish
the facts in the two Chancery cases from those shown here. The
court recognized its duty to follow the law of the State, and said
that, where that law had been determined by the state court of last
resort, its decision must be followed irrespective of the federal
court's opinion of what the law ought to be. But the majority of
the Circuit Court of Appeals took the view that it was not so bound
by "the pronouncements of other state courts," but might conclude
that "the decision does not truly express the state law." The court
held that the statute of 1932 was "clearly constitutional and
unambiguous," and that "contrary decisions" of the Chancery Court
of New Jersey were not binding. Accordingly, the judgment of the
District Court was reversed.
We think that this ruling was erroneous. The highest state court
is the final authority on state law (
Beals v.
Hale, 4 How. 37,
45 U. S. 54;
Erie Railroad Co. v. Tompkins, 304 U. S.
64,
304 U. S. 78),
but it is still the duty of the federal courts, where the state law
supplies the rule of decision, [
Footnote 3] to ascertain and apply that law even though it
has not been expounded by the highest court of the State.
See
Ruhlin v. New York Life Insurance Co., 304 U.
S. 202,
304 U. S. 209. An
intermediate state court, in declaring and applying the state law,
is acting as an organ of the State, and its determination,
Page 311 U. S. 178
in the absence of more convincing evidence of what the state law
is, should be followed by a federal court in deciding a state
question. We have declared that principle in
West v. American
Telephone and Telegraph Co., post, p.
311 U. S. 223. It
is true that, in that case, an intermediate appellate court of the
State had determined the immediate question as between the same
parties in a prior suit, and the highest state court had refused to
review the lower court's decision, but we set forth the broader
principle as applicable to the decision of an intermediate court,
in the absence of a decision by the highest court, whether the
question is one of statute or common law.
Here, the question was as to the construction and effect of a
state statute. The federal court was not at liberty to undertake
the determination of that question on its own reasoning independent
of the construction and effect which the State itself accorded to
its statute. That construction and effect are shown by the judicial
action through which the State interprets and applies its
legislation. That judicial action in this instance has been taken
by the Chancery Court of New Jersey, and we have no other evidence
of the state law in this relation. Equity decrees in New Jersey are
entered by the Chancellor, who constitutes the Court of Chancery,
[
Footnote 4] upon the advice of
the Vice-Chancellors, [
Footnote
5] and these decrees, like the judgments of the Supreme Court
of New Jersey, are subject to review only by the Court of Errors
and Appeals. [
Footnote 6] We
have held that the decision of the Supreme Court upon the
construction of a state statute should be followed, in the absence
of an expression of a countervailing view by the State's highest
court (
Erie Railroad Co.
v.
Page 311 U. S. 179
Hilt, 247 U. S. 97,
247 U. S.
100-101;
Erie Railroad Co. v. Duplak,
286 U. S. 440,
286 U. S. 444),
and we think that the decisions of the Court of Chancery are
entitled to like respect as announcing the law of the State.
While, of course, the decisions of the Court of Chancery are not
binding on the Court of Errors and Appeals, a uniform ruling either
by the Court of Chancery or by the Supreme Court over a course of
years will not be set aside by the highest court "except for cogent
and important reasons."
Ramsey v. Hutchinson, 117 N.J.L.
222, 223, 187 A. 650, 651. It appears that ordinarily the decisions
of the Court of Chancery, if they have not been disapproved, are
treated as binding in later cases in chancery (
Philadelphia
& Camden Ferry Co. v. Johnson, 94 N.J.Eq. 296, 297, 121 A.
900), but there is always, as respondent urges, the possibility
that a particular decision of the Court of Chancery will not be
followed by the Supreme Court (
see Flagg v. Johansen, 124
N.J.L. 456, 461, 12 A.2d 374) or even by the Court of Chancery
itself.
See Kicey v. Kicey, 112 N.J.Eq. 459, 461, 164 A.
684. It is the function of the court of last resort to resolve such
conflicts as may be created by decisions of the lower courts. and.
except in rare instances. that function is performed. and the law
is settled accordingly. Here, however, there is no conflict of
decision. Whether there ever will be, or the Court of Errors and
Appeals will disapprove the rulings in the
Thatcher and
Travers cases, is merely a matter of conjecture.
See
West v. American Telephone and Telegraph Co., supra. At the
present time, the
Thatcher and
Travers cases
stand as the only exposition of the law of the State with respect
to the construction and effect of the statutes of 1932, and the
Circuit Court of Appeals was not at liberty to reject these
decisions merely because it did not agree with their reasoning.
The question has practical aspects of great importance in the
proper administration of justice in the federal
Page 311 U. S. 180
courts. It is inadmissible that there should be one rule of
state law for litigants in the state courts and another rule for
litigants who bring the same question before the federal courts
owing to the circumstance of diversity of citizenship. In the
absence of any contrary showing, the rule of the
Thatcher
and
Travers cases appears to be the one which would be
applied in litigation in the state court, and whether believed to
be sound or unsound, it should have been followed by the Circuit
Court of Appeals.
The decree of the Circuit Court of Appeals is reversed, and that
of the District Court is affirmed.
Reversed.
[
Footnote 1]
Chapter 40, New Jersey Session Laws of 1932, § 1, is as
follows:
"1. Whenever any deposit shall be made with any savings bank,
trust company, or bank by any person in trust for another, and no
other or further notice of the existence and terms of a legal and
valid trust shall have been given in writing to the savings bank,
trust company or bank, in the event of the death of the trustee,
the same or any part thereof, together with the dividends or
interest thereon, shall be paid to the person in trust for whom the
said deposit was made, or to his or her legal representatives, and
the legal representatives of the deceased trustee shall not be
entitled to the funds so deposited nor to the dividends or interest
thereon notwithstanding that the funds so deposited may have been
the property of the trustee;
provided, that the person for
whom the deposit was made, if a minor, shall not draw the same
during his or her minority without the written consent of the legal
representatives of said trustee."
See Revised Statutes of New Jersey, 1937, 17:9-4.
[
Footnote 2]
In
Cutts v. Najdrowski, 1938, 123 N.J.Eq. 481, 198 A.
885, the Court of Errors and Appeals held that the validity of a
trust of choses in action created by a transaction
inter
vivos was determined by the law of the place where the
transaction occurred, in that case, New York. In
Trust Company
of New Jersey v. Farawell, 1940, 127 N.J.Eq. 45, 11 A.2d 98,
the Court of Errors and Appeals held that, where the decedent had
made a deposit in her name in trust for her daughters, and the
savings bank book was thereafter in the possession of the daughters
and withdrawals were made upon the signatures of the mother and the
daughters and were used for maintaining properties devised to the
daughters by the mother shortly after the account was opened, there
was sufficient evidence to show a presently effective trust. The
court said that such a trust depends essentially upon the same
principles
"that activate a gift
inter vivos, comprising donative
intent, delivery of the subject matter to the extent that delivery
is possible or can be indicated, and the abdication by the donor of
dominion over the subject matter."
Id., p. 48. In these cases, the court did not refer to
the statutes of 1932 or to the Chancery decisions cited in the
above text.
[
Footnote 3]
Judiciary Act of 1789, § 34; R.S. § 721, 28 U.S.C. § 725.
[
Footnote 4]
N.J.Constitution, Art. VI, §. 4.
[
Footnote 5]
See Gregory v. Gregory, 67 N.J.Eq. 7, 10, 11, 58 A.
287;
In re Appointment of Vice-Chancellors, 105 N.J.Eq.
759, 148 A. 570.
[
Footnote 6]
Revised Statutes of New Jersey, 2:27-350, 2:29-117.