A citizen of Virginia sued a citizen of North Carolina in a
state court of North Carolina for a deficiency judgment on notes
for the purchase price of land in Virginia secured by a deed of
trust on the land. The defendant demurred, relying on N.C.L., 1933,
c. 36, Michie's N.C.Code § 2593(f), which provides that the holder
of such a note "shall not be entitled to a deficiency judgment."
The trial court overruled the demurrer, and the defendant appealed
to the State Supreme Court. There, the plaintiff contended that the
Federal Constitution precluded the State from closing the doors of
its courts to him. Disclaiming any intention of passing on any
question of substantive law, the State Supreme Court held that the
state statute denied the state courts jurisdiction to grant the
relief sought. Accordingly, it reversed the trial court and
dismissed the suit. Without appealing to this Court, the plaintiff
brought a new suit in a Federal District Court in North Carolina on
the ground of diversity of citizenship, seeking the same relief
against the same defendant on the same claim.
the identical issue having been finally
adjudicated in the state courts and, the cause of action being
barred there, it may not be relitigated in the federal courts. Pp.
330 U. S.
(a) The federal question as to the constitutionality of the
state statute having been clearly raised in the State Supreme
Court, it necessarily was adjudicated by that Court,
notwithstanding the Court's disclaimer of any intention to pass on
any question of "substantive law." Pp. 330 U. S.
(b) The plaintiff could have appealed to this Court. Since he
elected not to do so, the decision of the State Supreme Court
became a final adjudication of that question as to this cause of
action. Pp. 330 U. S.
(c) Since the only issue in the state courts was whether all
courts of the State were closed to the litigation, and the State
Supreme Court held that they were, thereby denying enforcement of
an asserted federal claim, the "merits" of the controversy were
Page 330 U. S. 184
adjudicated in the only sense that adjudication of the "merits"
is relevant to the principles of res judicata.
330 U. S.
(d) The decision of the State Supreme Court closed the door not
only to the suit in the state courts, but also to a similar suit in
a federal court in North Carolina based on diversity of
citizenship, since federal court in such suit must follow state law
and policy. Erie R. Co. v. Tompkins, 304 U. S.
. Pp. 330 U. S.
150 F.2d 679 reversed.
In a suit by a citizen of Virginia against a citizen of North
Carolina, the Supreme Court of North Carolina held that N.C.L.,
1933, c. 36, Michie's N.C.Code § 2593(f) denied the state courts
jurisdiction to grant a deficiency judgment on a purchase money
note secured by a deed of trust on land in Virginia. 220 N.C. 18,
16 S.E.2d 411. The plaintiff in that suit then brought a new suit
on the same claim in a Federal District Court in North Carolina on
grounds of diversity of citizenship. The District Court gave
judgment for the plaintiff. The Circuit Court of Appeals affirmed.
150 F.2d 679. This Court granted certiorari. 326 U.S. 713.
p. 330 U. S.
MR. JUSTICE FRANKFURTER delivered the opinion of the Court.
In 1940, Bullington, a citizen of Virginia, sold land in
Virginia to Angel, a citizen of North Carolina. Only part of the
purchase price was paid. For the balance, Angel executed a series
of notes secured by a deed of trust on the land. Upon default on
one of the notes, Bullington acting upon an acceleration clause in
the deed, caused all other notes to become due and called upon the
Page 330 U. S. 185
to sell the land. The sale was duly made in Virginia, and the
proceeds of the sale applied to the payment of the notes. This
controversy concerns attempts to collect the deficiency.
Bullington began suit for the deficiency in the Superior Court
of Macon County, North Carolina. Angel countered with a demurrer,
the substance of which was that a statute of North Carolina (c. 36,
Public Laws 1933, Michie's Code § 2593(f)) precluded recovery of
such a deficiency judgment. This is the relevant portion of that
"In all sales of real property by mortgagees and/or trustees
under powers of sale contained in any mortgage or deed of trust
hereafter executed, . . . the mortgagee or trustee or holder of the
notes secured by such mortgage or deed of trust shall not be
entitled to a deficiency judgment on account of such mortgage, deed
of trust or obligation secured by the same. . . ."
The Superior Court overruled the demurrer, and an appeal to the
Supreme Court of North Carolina followed. Bullington supported his
Superior Court judgment on the ground that the United States
Constitution precluded North Carolina from shutting the doors of
its courts to him. The North Carolina Supreme Court, holding that
the North Carolina Act of 1933 barred Bullington's suit against
Angel, reversed the Superior Court and dismissed the action. 220
N.C. 18, 16 S.E.2d 411. Bullington did not seek to review this
judgment here. Instead, he sued Angel for the deficiency in the
United States District Court for the Western District of North
Carolina. Angel pleaded in bar the judgment in the North Carolina
action. The District Court, 56 F. Supp.
, gave judgment for Bullington, and the Circuit Court of
Appeals for the Fourth Circuit affirmed. 150 F.2d 679. We granted
certiorari, 326 U.S. 713, because the failure
Page 330 U. S. 186
to dismiss this action, on the ground that the judgment in the
North Carolina court precluded the right thereafter to recover on
the same cause of action in the federal court, presented an
important question in the administration of justice.
1. We start with the fact that the prevailing rule as to res
is settled law in North Carolina. An adjudication
bars future litigation between the same parties not only as to all
issues actually raised and decided, but also as to those which
could have been raised. Southern Distributing Co. v.
196 N.C. 58, 60, 61, 144 S.E. 535; Moore v.
179 N.C. 167, 101 S.E. 564. When the disposition of a
prior litigation is invoked as a bar to an action, the identity of
the causes of action in the two suits is usually the bone of
contention. On this score, there can here be no controversy. It is
indisputable that the parties, the nature of the claim, and the
desired relief were precisely the same in the two actions
successively brought by Bullington against Angel, first in the
Superior Court of Macon County and then in the federal district
court. For all practical purposes, the complaint in the present
action was a carbon copy of the complaint in the State court
action. If the North Carolina action had been dismissed because it
was brought in one North Carolina court rather than in another, of
course, no federal issue would have been involved. See, e.g.,
Woods v. Nierstheimer, 328 U. S. 211
that been the case, a suit for the same cause of action could have
been initiated in a North Carolina federal district court, just as
another suit could have been brought in the proper North Carolina
State court. But that is not the present situation. A quite
different situation is before us. Being somewhat unusual, it calls
for a critical consideration of the scope and purpose of the
doctrine of res judicata.
2. The judgment of the Supreme Court of North Carolina would
clearly bar this suit had it been brought anew
Page 330 U. S. 187
in a state court. For purposes of diversity jurisdiction, a
federal court is "in effect, only another court of the State."
Guaranty Trust Co. v. York, 326 U. S.
, 326 U. S. 108
see Madisonville Traction Company v. Saint Bernard Mining
Company, 196 U. S. 239
196 U. S. 253
Ex parte Schollenberger, 96 U. S. 369
96 U. S. 377
Of course, Bullington could not have succeeded in the District
Court for the Western District of North Carolina after an adverse
judgment in the State courts had the decision in this case involved
no federal ground. That is equally true where a federal question
was decided in the State courts. That the adjudication of federal
questions by the North Carolina Supreme Court may have been
erroneous is immaterial for purposes of res judicata.
Baltimore S.S. Co. v. Phillips, 274 U.
, 274 U. S. 325
higher court was available for an authoritative adjudication of the
federal questions involved. And so the question is whether federal
rights were necessarily involved and adjudicated in the litigation
in the State courts.
3. For purposes of res judicata,
the significance of
what a court says it decides is controlled by the issues that were
open for decision. What were the issues in the North Carolina
litigation? Bullington sought a deficiency judgment. Angel, by
demurrer, resisted on the ground that a North Carolina statute
precluded a deficiency judgment. The North Carolina Supreme Court,
reversing the trial court, found the North Carolina statute a bar
to such a suit. It said that
"the limitation created by the statute is upon the jurisdiction
of the court, in that it is declared that the holder of notes given
to secure the purchase price of real property 'shall not be
entitled to a deficiency judgment on account' thereof. This closes
the courts of this state to one who seeks a deficiency judgment on
a note given for the purchase price of real property. The statute
operates upon the adjective law of the state, which pertains to the
practice and procedure,
Page 330 U. S. 188
or legal machinery by which the substantive law is made
effective, and not upon the substantive law itself. It is a
limitation of the jurisdiction of the courts of this state."
220 N.C. 18, 20, 16 S.E.2d 411, 412.
But the allowable "limitation of the jurisdiction of the courts"
of North Carolina presents more than a question of local law for
determination by the North Carolina Supreme Court. Speaking for a
unanimous Court, Mr. Justice Brandeis thus expressed the
subordination to the requirements of the Constitution of the power
of a State to withdraw jurisdiction from its courts:
"The power of a state to determine the limits of the
jurisdiction of its courts and the character of the controversies
which shall be heard in them is, of course, subject to the
restrictions imposed by the Federal Constitution."
McKnett v. St. Louis & S.F. R. Co., 292 U.
, 292 U. S. 233
The Contract Clause, U.S.Const. Art. 1, § 10, the Full Faith and
Credit Clause, U.S.Const. art. 4, § 1, the Privileges or Immunities
Clause, U.S.Const. art. 4, § 2, all fetter the freedom of a State
to deny access to its courts howsoever much it may regard such
withdrawal of jurisdiction "the adjective law of the State," or the
exercise of its right to regulate "the practice and procedure" of
its courts. Broderick v. Rosner, 294 U.
, 294 U. S. 642
A State "cannot escape its constitutional obligations by the simple
device of denying jurisdiction in such cases to Courts otherwise
competent." Kenney v. Supreme Lodge, 252 U.
, 252 U. S. 415
and see 80 U. S. Hart,
13 Wall. 646. This pervasive principle of our federal law,
constitutional and statutory, was thus put by Mr. Justice
"Whatever springes the State may set for those who are
endeavoring to assert rights that the State confers, the assertion
of Federal rights, when plainly and reasonably made, is not to be
defeated under the name of local practice."
Davis v. Wechsler, 263 U. S. 22
263 U. S.
4. Here, claims based on the United States Constitution were
plainly and reasonably made in the North Carolina
Page 330 U. S. 189
suit. The North Carolina Supreme Court met these claims. It met
them by saying that the North Carolina statute did not deal with
substantive matters, but merely with matters regulating local
procedure. But whether the claims are based on a federal right, or
are merely of local concern, is itself a federal question on which
this Court, and not the Supreme Court of North Carolina, has the
last say. That Court could not put a federal claim aside, as though
it were not in litigation, by the talismanic word "jurisdiction."
When an asserted federal right is denied, the sufficiency of the
grounds of denial is for this Court to decide. Titus v.
Wallick, 306 U. S. 282
306 U. S. 291
Bullington could have come here not merely by the grace of this
Court on certiorari, but on appeal, as did White in White v.
to challenge, successfully, the right of Georgia
to limit the jurisdiction of the Georgia courts; as did the East
New York Savings Bank in the recent case of East New York Sav.
Bank v. Hahn, 326 U. S. 230
challenge, though unsuccessfully, the limitation which New York
placed upon the jurisdiction of its courts. Cf. Kenney v.
Supreme Lodge, 252 U. S. 411
252 U. S. 416
Since it was open for Bullington to come here to seek reversal of
the decision of the North Carolina Supreme Court shutting him out
of the North Carolina courts, and he chose not to do so, the
decision of the North Carolina Supreme Court concluded an
adjudication of a federal question even though it was not couched
in those terms. For purposes of litigating the issues in
controversy in the North Carolina action, the North Carolina
Supreme Court was an intermediate tribunal. If a litigant chooses
not to continue to assert his rights after an intermediate tribunal
has decided against him, he has concluded his litigation as
effectively as though he had proceeded through the highest tribunal
available to him. An adjudication of an issue implies that a man
had a chance to win his case. The chance was necessarily afforded
by the North Carolina litigation.
Page 330 U. S. 190
It was in process of determination when the Supreme Court of
North Carolina decided against him. He forewent his right to have a
higher court -- this Court -- enable him to win his chance by
holding that he was right and that the North Carolina Supreme Court
was wrong. He cannot begin all over again in an action involving
the same issues before another forum in the same State.
5. It is suggested that the North Carolina Supreme Court did not
adjudicate the "merits" of the controversy. It is a misconception
of res judicata
to assume that the doctrine does not come
into operation if a court has not passed on the "merits," in the
sense of the ultimate substantive issues of a litigation. An
adjudication declining to reach such ultimate substantive issues
may bar a second attempt to reach them in another court of the
State. Such a situation is presented when the first decision is
based not on the ground that the distribution of judicial power
among the various courts of the State requires the suit to be
brought in another court in the State, but on the inaccessibility
of all the courts of the State to such litigation. And that is the
essence of the present case. The only issue in controversy in the
first North Carolina litigation was whether or not all the courts
of North Carolina were closed to that litigation. The merits of
that issue were adjudicated. And that was the issue raised in the
second litigation in North Carolina -- that in the federal district
court. The merits of this issue having been adjudicated, they
cannot be relitigated.
The "merits" of a claim are disposed of when hey are refused
enforcement. If an asserted federal claim is denied enforcement on
a professed local ground, but a so-called local ground which is
subject to review here because it is in fact the adjudication of a
federal question, then the "merits" of that claim were adjudicated
in the only sense that adjudication of the "merits" is relevant to
the principles of res judicata.
A State court cannot
Page 330 U. S. 191
sterilize federal claims by putting on the adjudication a local
6. The merits of this controversy were adjudicated by the North
Carolina Supreme Court, since that court, or this Court on appeal,
might have decided that the North Carolina statute did not bar
Bullington's first action. The North Carolina statute might have
been found unconstitutional. Federal issues were thus involved in
the adjudication by the North Carolina Supreme Court. Bullington
knew that there were federal issues in the State suit, because he
raised them. He was then content to drop them, and let the
intermediate adjudication stand. Now he wants an encore.
7. It is suggested that the North Carolina Supreme Court
construed the North Carolina statute to close only the North
Carolina State courts, but not the federal court sitting in North
Carolina. In the first place, the North Carolina Supreme Court said
no such thing. It construed the statute expressive of State policy,
and spoke only of the jurisdiction of the State courts because it
was concerned only with the State courts. Secondly, it is most
incongruous to attribute to the legislature and judiciary of North
Carolina the imposition of a restriction against all its citizens
from suing for a deficiency judgment, while impliedly authorizing
citizens of other States to secure such deficiency judgments
against North Carolinians. Thirdly, a North Carolina statute,
upheld by the highest court of North Carolina, is, of course,
expressive of North Carolina policy. The essence of diversity
jurisdiction is that a federal court enforces State law and State
policy. If North Carolina has authoritatively announced that
deficiency judgments cannot be secured within its borders, it
contradicts the presuppositions of diversity jurisdiction for a
federal court in that State to give such a deficiency judgment.
North Carolina would hardly allow defeat of a State-wide policy
through occasional suits in a federal
Page 330 U. S. 192
court. What is more important, diversity jurisdiction must
follow State law and policy. A federal court in North Carolina,
when invoked on grounds of diversity of citizenship, cannot give
that which North Carolina has withheld. Availability of diversity
jurisdiction which was put into the Constitution so as to prevent
discrimination against outsiders is not to effect discrimination
against the great body of local citizens.
Cases like Lupton's Sons Co. v. Automobile Club,
225 U. S. 489
obsolete insofar as they are based on a view of diversity
jurisdiction which came to an end with Erie Railroad Co. v.
Tompkins, 304 U. S. 64
decision drastically limited the power of federal district courts
to entertain suits in diversity cases that could not be brought in
the respective State courts or were barred by defenses controlling
in the State courts. Compare 39 U. S.
14 Pet. 67,
39 U. S. 75
. Of course, where resort is had to a federal
court not on grounds of diversity of citizenship, but because a
federal right is claimed, the limitations upon the courts of a
State do not control a federal court sitting in the State.
Holmberg v. Armbrecht, 327 U. S. 392
8. After an adverse decision against Bullington on a cause of
action created by State law, Bullington wants to start all over
again in another North Carolina court, albeit a federal court. The
first litigation raised and adjudicated federal issues every one of
which is again involved in the second suit. To allow such a second
suit is to say that a federal right in issue in a State court
evaporates because the State court calls it a State right and the
litigant accepts the decision. If tolerated, our federal system
would afford fine opportunities for needlessly multiplying
litigation in this way. The doctrine of res judicata
barrier against it. Litigation is the means for vindicating rights,
but it may also involve unwarranted friction and waste. The
doctrine of res judicata
reflects the refusal of law to
Page 330 U. S. 193
needless litigation. Litigation is needless if, by fair process,
a controversy has once gone through the courts to conclusion.
Compare, e.g., Hazel-Atlas Glass Co. v. Hartford Empire
Co., 322 U. S. 238
322 U. S. 244
And it has gone through, if issues that were or could have been
dealt with in an earlier litigation are raised anew between the
same parties. Chicot County Drainage Dist. v. Baxter State
Bank, 308 U. S. 371
MR. JUSTICE REED, dissenting.
My understanding of the Court's decision is that the doctrine of
that is, a former adjudication, defeats
Bullington's claim against Angel. The opinion is limited to that
point. In my view, the conclusion reached by the Court is
erroneous. To narrow the line of my disagreement, I shall state the
issues treated in the opinion with which I agree. The causes of
action and the parties in the two suits are identical. Federal
questions were raised by Bullington's contention that the North
Carolina statute, sufficiently quoted at the beginning of the
Court's opinion, Michie's Code, 2593(f), was unconstitutional by
federal tests because it barred the North Carolina courts to
Bullington's suit on his notes. It is immaterial, for the purposes
of determining the availability of a plea of res judicata,
whether the North Carolina judgment was erroneous or not. I agree,
further, that, on the ground that a state cannot bar this cause of
action from its courts, Bullington could have had review in this
Court of the North Carolina judgment, and that this Court, if it
did not conclude that the North Carolina judgment rested on an
adequate state ground, could have finally settled that federal
The reasoning of the Court leads to the announced result because
of these presuppositions with which I differ: (1) "For purposes of
the significance of what a court says it
decides is controlled by the issues that
Page 330 U. S. 194
were open for decision." (II) "The merits' of a claim are
disposed of when they are refused enforcement." (III) "Since it was
open for Bullington to come here to seek reversal of the decision
of the North Carolina Supreme Court shutting him out of the North
Carolina courts and he chose not to do so, the decision of the
North Carolina Supreme Court concluded an adjudication of a federal
question even though it was not couched in those terms." (IV) "For
purposes of diversity jurisdiction, a federal court is, `in effect,
only another court of the State.'" "He cannot begin all over again
in an action involving the same issues before another forum in the
I. To say that, for purposes of res judicata,
significance of what a court says it decides is controlled by the
issues announces a rule which, so far as I know, has no prior
authority. To adopt such a rule is to declare that a decision in a
cause of action is final between the same parties although the
court specifically reserves certain questions not necessary for its
decision. Res judicata
settles all questions which were
raised, or those that might have been raised, but it settles them
in accordance with the decision that is made. Of course, when a
decision is upon the merits -- a matter discussed later -- the
entire cause of action is adjudicated finally. But this North
Carolina adjudication was not upon the merits. It was upon a
question of judicial power. The pertinent excerpts from the opinion
appear below. *
The fact that
Page 330 U. S. 195
issues, going to the merits of the cause of action, might have
been decided seems immaterial.
The rule which I consider sound appears in the Restatement of
the Law, Judgments § 49, as follows:
"Where a valid and final personal judgment not on the merits is
rendered in favor of the defendant, the plaintiff is not thereby
precluded from thereafter maintaining an action on the original
cause of action, and the judgment is conclusive only as to what is
The way to know what was actually decided in this case is to
read the applicable portion of the opinion printed in the preceding
note. The result of the decision was to leave the cause of action
unaffected, because, when a state denies a remedy, it leaves
"unimpaired the plaintiff's substantive right, so that he is free
to enforce it elsewhere." Bradford Electric Light Co. v.
Clapper, 286 U. S. 145
286 U.S. 160
; Dalton v.
82 N.C. 279.
Page 330 U. S. 196
II. It is now to be considered whether or not this judgment of
the state court was on the merits. That court said it had no "power
to render a judgment for the plaintiff in the cause of action
alleged." This Court now says that such a decision is a disposition
on the merits. Evidently, what is meant is that, when a litigant
who has raised a federal constitutional question has his case
dismissed on the ground that the court "has no power to render a
judgment for the plaintiff in the cause of action alleged," there
is a judgment on the merits on the constitutional question as well
as upon the right to recover in North Carolina on any other ground.
If we have power to declare that it "concluded an adjudication of a
federal question even though it professed not to do so," I would
reach the opposite conclusion based upon what the North Carolina
court did. In my view, the North Carolina court merely decided that
it had no power to adjudicate the cause of action. Certainly the
state court had the power to interpret its own statute. Knights
of Pythias v. Meyer, 265 U. S. 30
265 U. S. 32
Chaplinsky v. New Hampshire, 315 U.
. The withdrawal of jurisdiction surely does not
make a judgment one upon the merits. The state court cited
7 Wall. 506, to emphasize what it meant.
If there was a suit on this note in a federal court on an
allegation of diversity of citizenship and the federal court
dismissed the suit with an opinion saying that the case was
dismissed because of lack of jurisdiction -- e.g.,
of nondiversity of citizenship -- no state court would hold that
there had been a decision upon the merits. Where there is no
jurisdiction of the subject of the action, the judgment is not upon
the merits. Stoll v. Gottlieb, 305 U.
, 305 U. S.
-172. Of course, if there is a judgment upon the
merits, that judgment would be binding on both federal and state
courts. Even if the North Carolina decision is not upon the merits,
it is conclusive on North Carolina courts and upon federal courts
in North Carolina,
Page 330 U. S. 197
if those federal courts are courts of the North Carolina in the
sense that they must follow state decisions upon the power of state
courts, under the rule of Guaranty Trust Co. v. York,
326 U. S. 99
. I do
not think that the Guaranty
rule applies. See
III. If the two preceding numbered divisions of this opinion are
sound, there was no occasion for Bullington to seek a review of the
first judgment in this Court. He was in the position of the owner
of a cause of action, dismissed because prematurely brought or
brought in the wrong county. The judgment that the Supreme Court of
North Carolina ordered was "dismissed" not on the merits, not with
prejudice, and not judgment for the defendant, but a simple
dismissal. North Carolina might have declared, by statute, that no
cause of action would be recognized in North Carolina for the
recovery of a deficiency on a mortgage indebtedness. Instead of
this, we are told authoritatively by the Supreme Court of North
Carolina that North Carolina has withdrawn the jurisdiction of its
courts from such a cause of action. This produces quite a different
IV. The pith of the problem, as I see it, is laid bare by the
foregoing differentiations. It consists of the question whether the
North Carolina decision establishes a controlling rule of law upon
the constitutionality of the state statute as tested by the federal
Constitution, or adjudicates that the statute merely withdraws
jurisdiction from state courts over a type of action. This Court
concludes that the state decision determined the constitutionality
of the statute, and that its holding was binding on all federal
courts in North Carolina, as well as state courts. This idea is
comprehended in the Court's opinion by the statements that the
federal courts are courts of the state in diversity cases, and that
a litigant cannot stop with an intermediate court decision against
him and begin a new litigation on the same cause of action.
Page 330 U. S. 198
The Court reaches the conclusion that res judicata
should apply by an application of Erie Railroad Co. v.
Tompkins, 304 U. S. 64
Guaranty Trust Co. v. York, 326 U. S.
. The teaching of those cases is accepted by me. They
lead to the conclusion that, in diversity cases, legal or equitable
-- and this proceeding is a diversity case -- the federal courts in
a state apply the law of that state in matters of substantive law.
In matters of procedure and jurisdiction, I take it, no one would
contend that the doctrine of Erie Railroad Co. v. Tompkins
is applicable. One may regret that the line of the Great Divide
between substance and procedure cannot be clearly marked, so that
all may agree as to its location in any one case. But that line
exists. We have said that federal courts must follow the law of the
state as to burden of proof. Cities Service Oil Co. v.
Dunlap, 308 U. S. 208
Palmer v. Hoffman, 318 U. S. 109
318 U. S. 117
as to conflict of laws, Griffin v. McCoach, 313 U.
; Klaxon Co. v. Stentor Electric Mfg.
Co., 313 U. S. 487
as to state statutes of limitation in equity cases, Guaranty
Trust Co. v. York, supra.
The reason for these conclusions is
to gain the desirable end of a symmetry of law within each state.
The momentum of the opinions just cited and of the desire for
uniformity should not cause us to disregard the rule that state
law, statutory or judicial, directed at remedies or powers of
courts, cannot affect the federal system. Each of the cases just
cited follows the declarations of state law by state courts. In
this case, this Court departs from the state court's interpretation
of the meaning of a state statute in order to bring about the
federal policy of uniformity. By this, the Court departs from the
sound rule that a state court's interpretation of state statutes is
binding on federal courts. In reaching the conclusion which it
does, this Court decides that, if a state court does not have power
to adjudicate a cause, neither does a federal court in that state.
It also departs from controlling precedents that state enactments
Page 330 U. S. 199
remedies, and procedures do not affect the jurisdiction,
remedies, or procedures of federal courts. It is true that these
antedate the Erie
case, but that case did not change the
state and federal jurisdiction.
In Pusey & Jones Co. v. Hanessen, 261 U.
, this Court held that an authority given by
Delaware to its Chancellor to appoint a receiver for an insolvent
corporation on the application of any creditor did not give
additional power to the federal court to appoint a receiver in a
diversity case on the application of a simple creditor, although
the federal courts had long exercised the right to appoint
receivers on the application of a secured creditor. This Court
"That a remedial right to proceed in a federal court sitting in
equity cannot be enlarged by a state statute is likewise clear,
Scott v. Neely, 140 U. S. 106
; Cates v.
Allen, 149 U. S. 451
. Nor can it be so
narrowed. Mississippi Mills v. Cohn, 150 U. S.
; Guffey v. Smith, 237 U. S.
, 237 U. S. 114
. The federal
court may therefore be obliged to deny an equitable remedy which
the plaintiff might have secured in a state court. Hanessen's
contention is that the statute does not enlarge the equitable
jurisdiction or remedies, and that it confers upon creditors of a
Delaware corporation, if the company is insolvent, a substantive
equitable right to have a receiver appointed. If this were true the
right conferred could be enforced in the federal courts (Scott
v. Neely, 140 U. S. 106
, 140 U. S.
), since the proceeding is in pleading and practice
conformable to those commonly entertained by a court of equity. But
it is not true that this statute confers upon the creditor a
See Henrietta Mills v. Rutherford County, 281 U.
, 291 U. S.
-128; Kelleam v. Maryland Casualty Co.,
312 U. S. 377
312 U. S.
Page 330 U. S. 200
In Lupton's Sons Co. v. Automobile Club, 225 U.
, this Court held that a contract which could not
be sued upon in the courts of New York because a New York statute
provided that no foreign corporation could "maintain any action in
this state" without a certificate that it had complied with certain
state requirements to do business in the state could nevertheless
be sued upon in the federal court. It was said, p. 225 U. S.
"The state could not prescribe the qualifications of suitors in
the courts of the United States, and could not deprive of their
privileges those who were entitled under the Constitution and laws
of the United States to resort to the Federal courts for the
enforcement of a valid contract. . . . The State, in the statute
before us, made no such attempt. The only penalty is imposed, to
quote again from the Mahar
case, was a disability to sue
'in the courts of New York.'"
These cases make clear that, in diversity litigation, the
federal courts are not simply courts of the state. They are so far
as the enforcement of the substantive laws of the state are
concerned, but not when procedure or power to act is involved. The
case shows, too, that, when a state denies power to
its courts to adjudicate a cause, that denial does not affect the
power of the federal courts to decide the case. As I am of the
opinion that the state court merely denied its power to adjudge
between these parties, and did not decide the merits of
Bullington's cause of action, the state court judgment cannot be
in the federal court.
If it is true that, in passing upon the meaning of a state
statute, a federal court is not required to follow the state
court's characterization of its statute as remedial or substantive,
this Court's present determination that the statute is substantive
for our purposes cannot change the effect in this litigation of the
state's decision to the contrary.
Page 330 U. S. 201
When the state court held that, for its purposes, the statute
was remedial, it was remedial in that court. If remedial, the state
judgment was not upon the merits, and could not be res
in any court as to the right to recover on the cause
If the plea of res judicata
is not good, and this Court
should decide that the state statute is substantive law --
a declaration of the policy of North Carolina
against claims on deficiencies after sales of incumbered property
-- it would be necessary to determine the constitutionality of the
North Carolina statute that declares uncollectible in North
Carolina a claim on a contract that was good in Virginia. In view
of this Court's present decision, I express no opinion upon this
MR. JUSTICE JACKSON and MR. JUSTICE RUTLEDGE join in this
* 220 N.C. at 20, 21, 16 S.E.2d at 412:
"The statute operates upon the adjective law of the State, which
pertains to the practice and procedure, or legal machinery by which
the substantive law is made effective, and not upon the substantive
law itself. It is a limitation of the jurisdiction of the courts of
"The Legislature, within constitutional limitations, can fix and
circumscribe the jurisdiction of the courts of this State. The
Legislature has exercised its prerogative to so limit the
jurisdiction of the courts of this State that holders of notes
given for purchase price of real estate are not entitled to a
deficiency judgment thereon in such courts. We cannot hold that
this action upon part of the legislative branch of our government
impinged the full faith and credit clause of the Constitution of
the United States, Art. 4, § 1, or the general doctrine that the
validity of a contract is determined by the law of the place where
made, the lex loci contractus,
as distinguished from the
Both the constitutional provision urged and the
general doctrine invoked by the appellee are substantive law, and
the statute involved, as aforesaid, relates solely to the adjective
law. No denial of the full force and credit of the Virginia
contract is made, and no interpretation or construction of the
contract involved is attempted. The court, being deprived of its
jurisdiction, has no power to render a judgment for the plaintiff
in the cause of action alleged."
"Jurisdiction is power to declare the law, and when it ceases to
exist, the only function remaining to the court is that of
announcing the fact and dismissing the cause. And this is not less
clear upon authority than upon principle."
MR. JUSTICE RUTLEDGE, dissenting.
This is a hard casemaking, I think, proverbially bad law. On the
surface, what seems to be decided is simply a question of res
Actually the decision rests on an "and/or"
hodgepodge of res judicata
] In my judgment,
the admixture not only is unnecessary, but distorts and misapplies
both doctrines. If res judicata
properly applies, and is
adequate to dispose of the cause, there is no occasion for the
sidewise introduction of Erie
ideas. Likewise, if
appropriately governs the case, the Court's elaborate
and altogether novel discussion of res judicata
The Court has not decided this case on any basis of full faith
and credit. [Footnote 2
Accordingly, res judicata,
as it is applied
Page 330 U. S. 202
has neither constitutional nor statutory status. For present
purposes, it is therefore purely a rule of judicial administration
to be applied, like all such rules, as considerations of justice
and right application of the policy require, not omitting due
regard for its appropriate limits.
is a generally sound but by no means
unlimited policy of judicial action. The doctrine is grounded in
the need for putting an end to litigation. [Footnote 3
] It does this by precluding the parties from
showing what is or may be the truth. [Footnote 4
] The sound core of the policy is that,
ordinarily, one suit which determines or gives a full and fair
Page 330 U. S. 203
for determining causes of action and issues [Footnote 5
] between litigants should be enough,
and, when this much has been given, further opportunity should be
Stated so simply, however, the doctrine would be as much trap
for the unwary as boon for the wise or lucky litigant. Exceptions
and qualifications are so numerous as to make the field not only
technical, but treacherous, this case being a nice illustration.
Qualification may itself lose sight of basic policy, and become
sheer technicality. [Footnote
] But general rules are not qualified so extensively as this
one has been without reason. There is good reason for much of what
has been done in this respect with res judicata.
The effect of the rule qualifies its scope. It is not every case
in which a litigant has had "one bite at the cherry" that the law
forbids another. In other words, it is not every such case in which
the policy of stopping litigation outweighs that of showing the
truth. This is so not only where the first suit actually gives no
real chance to secure a substantial determination, [Footnote 7
] but also, though less generally,
of others in which the litigant has such a chance, and foregoes or
misses it. [Footnote 8
] It is
so, too, whether the claimed
Page 330 U. S. 204
estoppel by prior suit is "direct" or "indirect" -- that is, on
the same or a different cause of action. [Footnote 9
Upon the law, as well as the policy, the question has been one
of balancing considerations of justice and convenience between
stopping litigation and stopping the showing of the truth.
] That balance
has never been so one-sided in favor of the former that the matter
is ended simply by showing that a party has had some chance,
however slight, in a previous litigation to secure a favorable
If this were the law, every case where a party takes a nonsuit
or a dismissal expressly for the purpose of starting over again
would be a final and conclusive determination against him. I know
of no jurisdiction where the law has been so harsh. Nor do I think
it should be in this one.
There are too many good reasons why persons starting out in
litigation should not be barred of their rights by the fact alone
that they withdraw in order to start again -- even though, by going
on to the end, they might pull through successfully against great
odds. Crucial witnesses may disappear or die, and time be required
for finding them or others. Surprise in the course of trial may
occur justifying withdrawal without fatal loss of rights. Even as
Page 330 U. S. 205
this case, jurisdictional and other uncertainties may arise
putting in jeopardy or making comparatively or completely futile
further pursuit of the pending litigation when another suit in the
same or a different court might provide a more certain and less
expensive mode of disposing of the controversy for all the
These and other reasons have qualified flat application of
too long and too universally for their
qualifying effects to be thrown overboard now simply because a
withdrawing litigant might conceivably have come out victorious had
he gone on to the very farthest end. [Footnote 11
] Such a criterion would turn res
into a rigid rule requiring exhaustion of judicial
remedies -- a notion heretofore wholly alien to the doctrine.
This course, moreover, seems to be justified on the basis that
the grounds of an adjudication have nothing to do with the
adjudication or its effects for purposes of applying res
That is true, apparently, for applying res
to Bullington's failure to take his appeal here in
the North Carolina state court suit, so as to cut off his right
ever to secure a decision on the "merits' in the sense of the
ultimate substantive issues of a litigation." But it is not true
apparently, for application of the doctrine to different
jurisdictional rulings. For
"an adjudication declining to reach such ultimate substantive
issues may bar a second attempt to reach them in another court of
Page 330 U. S. 206
State. Such a situation is presented when the first decision is
based not on the ground
that the distribution of judicial
power among the various courts of the State requires the suit to be
brought in another court in the State, but on
inaccessibility of all the courts of the State to such litigation.
And that is the essence of the present case."
I can understand the distinction drawn. But I find difficulty in
understanding why res judicata
turns for application in
this case to cut off determination of substantive issues not at all
upon the grounds of decision, but only on the fact of adverse
decision; but, for application to such issues when a jurisdictional
question is also involved, it turns not simply upon the
adjudication, but upon the grounds for the jurisdictional
determination. If res judicata
is governed solely by the
adjudication, without reference to what is adjudicated -- that is,
merely by the fact of adverse decision -- I should think that rule
would apply in all cases. If, on the contrary, the grounds of
adjudication are relevant and controlling for the one class of
questions, I should think they would be for the other.
The fallacy lies in the novel and unprecedented idea that the
groundings of a court's decision have nothing to do with whether
applies, except when they relate to one kind
of jurisdictional determination rather than another. Apart from the
exception, the idea ignores the vast body of law which has grown up
on the basis that the grounding of the decision is the criterion
for applying the doctrine. [Footnote 13
] And much of that case law has been that, if
the "merits,' in the sense of the ultimate substantive issues
of a litigation," are not reached, their later determination is not
foreclosed. [Footnote 14]
This is true whether or not the jurisdictional
Page 330 U. S.
ruling is erroneous or valid, and whether or not, if
erroneous, it might have been corrected on appeal.
That law, I think, is sound, and I think it is just as sound
when the jurisdictional decision goes off erroneously on a federal
ground, or erroneously ignoring one, as when it rests on a valid
basis. It is grounded in the policy that, unless a litigant gets a
real bite at the apple of discord, he should not be foreclosed from
another attempt. Its basis is that, in such a case, it is better
and more just not to stop litigation than it is to stop the showing
of the truth, and thereby bring about a forfeiture of valuable
substantive rights without giving at least one full and fair --
which means fairly certain -- opportunity for securing decision
Bullington has not had such an opportunity. He has never
received, and now never can receive, a decision on the substantive
merits of his claim unless possibly he can catch and serve Angel in
another state and, after prolonged further litigation, succeed in
inducing this Court to hold the North Carolina bar and res
not operative there. See Riley v. New York Trust
Co., 315 U. S. 343
315 U. S.
"By the Constitutional provision for full faith and credit, the
local doctrines of res judicata,
become a part of national jurisprudence, and therefore federal
questions cognizable here."
Conceivably, Bullington, by coming here in the North Carolina
suit, might have secured a decision that the North Carolina statute
and decision were invalid constitutionally in excluding him from
all the state's courts, and that the state must afford him a remedy
on proof of his substantive claim. But the very multiplicity of the
constitutional questions enumerated in the Court's opinion which
were or might have been pertinent made that chance slim indeed.
What is more important is that, if the judgment had been thus
reversed and remanded, it would have been
Page 330 U. S. 208
wiped out, and he then would have been free to dismiss the suit
and start over again in the federal courts sitting in the state or
in the state courts. Bucher v. Cheshire R. Co.,
125 U. S. 555
125 U. S.
On the other hand, if the case had gone against him here, then
his right to start over in the federal court in North Carolina
would depend upon whether one of two grounds were accepted for this
Court's decision -- namely, on the one hand, that North Carolina
had power to bar his substantive claim and had done so in effect,
though not in words, thus closing the doors of the federal court to
it under the Erie
rule; on the other, that the state had
power to close its courts against his claim without adjudicating
its substantive validity, thus leaving him free to go to the
federal court under the Erie
rule. Either result was a
conceivable one, depending on whether the Court should conclude
that a "right without a remedy" remains a right, for this purpose,
or becomes none at all. But the only chance for Bullington's
ultimate success, in the event of adverse decision
Page 330 U. S. 209
here, would have been for the decision to have turned out on the
That chance was hardly worth the gamble. For this Court has
declared in Guaranty Trust Co. v. York, 326 U. S.
, 326 U. S.
-109, that a right without a remedy is no right at
all for purposes of enforcement by a diversity suit in a federal
court sitting in the state. [Footnote 16
] And the nature of the North Carolina
statute, as construed by the state court, reaches exactly the
result which the York
case says precludes resort to the
federal court on the same cause in a diversity suit. [Footnote 17
] Indeed, this seems to
be an alternative basis for the present decision. [Footnote 18
] Buillington's chance to get to
the federal court on such a basis was therefore practically
Should he now be barred because he did not take the extremely
remote chance of securing a favorable decision, reversing the state
court's judgment, and forcing the state to hear his case on the
merits? Not, I think, unless we can say he then would have been
forced, if successful, to continue the litigation in the state
courts, and could not withdraw to start over in the North Carolina
federal court. This we could not say unless we were to overrule the
case, which Bullington had a right to assume we
would not do. Why he should be barred from doing now, because he
did not take his almost hopeless appeal, what he would have been at
liberty to do if he had taken it successfully I am not able to
understand. No sound policy of ending litigation, conserving
judicial time or litigants' rights, or in any other respect can
possibly be served by
Page 330 U. S. 210
such a ruling. [Footnote
] Moreover, the very difficulties in his way for securing a
successful determination here, which would give him some certain
remedy either in the state or in the federal courts, were
sufficient reason, in my opinion, to justify his foregoing that
dubious procedure and starting over again in the federal court.
The real trouble here is not with the law of res
for that law has no valid application to these
facts. It is that the doctrine is used as an escape from facing
squarely the real question presented. This is whether North
Carolina's decision made the Erie
doctrine applicable. The
Court's opinion does state expressly that the effect of the North
Carolina decision was to create a policy of the state against the
validity of all claims for deficiency judgments, and comes almost,
but not quite, to saying this requires the case to go off on
application of the York
That issue is inescapable here. The Erie
rule did not
purport to change the law of federal jurisdiction in diversity
cases, taking it out of the hands of Congress and the federal
courts and putting it within the states' power to determine. It
purported only to prescribe the rule federal courts should follow
in applying the substantive law. If the North Carolina decision was
exclusively a jurisdictional
Page 330 U. S. 211
one, it had no effect on the power of the federal courts in that
state to hear controversies excluded by it from the state courts,
and the decision neither reached the merits of the controversy "in
the sense of the ultimate substantive issues of a litigation" nor
barred Bullington from going to the federal court. See Lupton's
Sons Co. v. Automobile Club, 225 U. S. 489
on the other hand, the decision was, in effect, although not in
words, a determination of the merits in that sense, it both
adjudicated Bullington's substantive rights and barred him from
maintaining the later suit successfully in the federal court. That
question is here, and, until it is resolved, he is deprived of any
day in court except to go from one to another without securing
decision either on the merits substantially or "on the merits"
From the Court's opinion, I cannot say whether the question has
been resolved. Its discussion of North Carolina's "policy" and its
overruling of the Lupton's Sons
case, supra, would
seem to indicate that it is applying
York, though without
saying so frankly. But, if so, why speak also of
The law should not be made into such a merry-go-round. Bullington
is entitled to one full day in court on the substance of his claim.
This he has not had.
I hardly need add that I agree with the views expressed by MR.
MR. JUSTICE JACKSON joins in this opinion.
Erie R. Co. v. Tompkins, 304 U. S.
The Court does not hold that the full faith and credit clause,
Const., Art. IV, § 1, binds the federal courts to give the North
Carolina judgment the effect of precluding a further suit in the
federal courts on the substantive cause of action. Two difficulties
would arise. (1) If, as the Court asserts, the federal court in
diversity cases were only "another North Carolina court," the full
faith and credit clause would have no application; but, that it
may, see Cooper v. Newell, 173 U.
, 173 U. S.
". . . the courts of the United States are tribunals of a
different sovereignty, and exercise a distinct and independent
jurisdiction from that exercised by the state courts, and this is
true in respect of the courts of the several States as between each
other. And the courts of the United States are bound to give to the
judgments of the state courts the same faith and credit that the
courts of one state and bound to give to the judgments of the
courts of her sister states."
See also American Surety Co. v. Baldwin, 287 U.
, where Mr. Justice Brandeis spoke of the full
faith and credit clause in connection with the obligation of a
federal court sitting in Idaho to follow, as res judicata,
a previous Idaho decision. (2) The decision would contradict, not
confirm, as full faith and credit require, the basis for the North
Carolina court's judgment, namely, that the statute does not outlaw
substantive claims, but only deprives the state courts of power to
Moschzisker, Res Judicata (1929) 38 Yale L.J. 299,
300. In this respect, of course, res judicata
both statutes of limitations and the doctrine of laches in equity,
as well as full faith and credit when applicable to judgments.
Scott, Collateral Estoppel by Judgment (1942) 56 Harv.L.Rev. 1.
So do statutes of limitations, laches, and full faith and credit
judgments, when applicable.
Cf. note 9
A sign generally that something is radically wrong with the rule
or with it and the exceptions together. Cf. Georgetown College
76 U.S.App.D.C. 123, 130 F.2d 810.
See Walden v.
14 Pet. 156, 39 U. S. 161
4 Wall. 232, 71 U. S. 237
Restatement, Judgments (1942) § 49.
"Judgments of nonsuit, of non prosequitur,
of discontinuance, and of dismissal generally are
exceptions to the general rule that, when the pleadings, the court,
and the parties are such as to permit of a trial on the merits, the
judgment will be considered as final and conclusive of all matters
which could have been so tried."
2 Freeman, Judgments (5th Ed.) 1579, 1580. And,
"generally speaking, judgments merely of dismissal, whether
voluntary or involuntary, in actions at law are not on the merits,
and do not operate as a bar or estoppel is subsequent proceedings
involving the same matters."
at 1582. See Haldeman v. United States,
91 U. S. 584
Jacobs v. Marks, 182 U. S. 583
Manhattan Life Ins. Co. v. Broughton, 109 U.
; Restatement, Judgments (1942) §§ 53, 54.
Scott, op. cit. supra, note 4
p. 2; Restatement, Judgments (1942) 175, 176.
Usually "direct" estoppel is said to preclude redetermination of
issues actually determined or which might have been determined "on
the merits." Ibid.
But "indirect" estoppel precludes
relitigating only issues actually decided. Cromwell v. County
of Sac, 94 U. S. 351
94 U. S.
The process, of course, crystalizes in definite rules for types
of cases, but the important fact is that these rules do not all
come out the same way for application of the rule of preclusion,
and that, in the process of crystalization, the weighing of the
opposing considerations forms the rule for or against that
The Court clearly implies that Bullington would not be
foreclosed on res judicata
by the North Carolina decision
if his route to this Court for review had been by certiorari,
rather than by appeal. But the ruling as made, insofar as it rests
on the failure to appeal, ignores the settled law that, for
purposes of applying res judicata,
failure to take appeal
has no bearing once the judgment becomes final. See
It also defeats the
policy of res judicata;
for a party, instead of being
allowed to accept the jurisdictional ruling, is forced to appeal to
the highest court in order to save his rights, no matter how
meritless the appeal, thus prolonging, rather than shortening,
See note 19
Scott, op. cit. supra, note 4; Restatement
Judgments (1942) §§ 49, 50,
authorities cited in note 7 supra.
"If . . . a judgment has been vacated by the trial court or
reversed by an appellate court, it is no longer conclusive between
the parties, either as a merger of the original cause of action or
as a bar to an action upon the original cause of action. . . ."
Restatement, Judgments (1942) 163.
"Ordinarily, after a judgment has been reversed on appeal and
the cause remanded, the case stands for trial de novo
the issues properly joined. . . . With respect to the right of
plaintiff to take a voluntary nonsuit, it stands in the same
relative position which it occupied before the trial in the first
Shell Petroleum Corp. v. Shore,
80 F.2d 785, 786.
This is the general rule. 89 A.L.R. 109; 126 A.L.R. 305. It
would seem to apply in North Carolina. North Carolina follows both
the doctrine that the trial court, upon remand by an appellate
court, is to proceed as if there had been no previous trial, and
the doctrine that judgments not on the merits do not constitute an
estoppel to subsequent actions. Hickory v. Southern R.,
138 N.C. 311, 318, 50 S.E. 683; Grimes v. Andrews,
N.C. 515, 87 S.E. 341; cf.
Gen.Stat.N.C. (1943) § 1-25, as
interpreted in Grimes v. Andrews,
170 N.C. at 522, 87 S.E.
case, however, did not purport to apply or
extend the rule to a cause of action arising under and governed by
the laws of another state than that in which the federal court was
sitting. But cf. Klaxon Co. v. Stentor Elec. Mfg. Co.,
313 U. S. 487
Except for the factor noted in Note 16
"The application of the principle of res judicata
not in any way been made to depend upon whether the judgment in
question is subject to review in another tribunal. Except insofar
as it may affect the question of its finality, as in the case of
orders on motions, the fact that a judgment may or may not be
appealable should have no bearing upon its effect as res
2 Freeman, Judgments (5th ed.) 1339.
Thus, there is no doctrine of exhaustion of judicial remedies.
If the judgment of a court goes on jurisdictional grounds, the
party may accept it and, instead of appealing, may institute
another action where he will not be met by the jurisdictional bar.
Restatement, Judgments (1942) 194, 195; Cook, The
Logical and Legal Bases of the Conflict of Laws (1942) 133-135.