In an action brought by a foreign corporation in a Federal
District Court solely on rounds of diversity of citizenship to
recover a broker's commission for the sale of real estate in the
State, defendant moved for summary judgment on the ground that
plaintiff had not qualified to do business in the State under a
state statute which the Court of Appeals construed as not making
the contract void, but only unenforceable, in the state courts.
Held: the motion for summary judgment was properly
granted.
Erie R. Co. v. Tompkins, 304 U. S.
64. Pp.
337 U. S.
535-538.
170 F.2d 694 reversed.
Having jurisdiction solely on grounds of diversity of
citizenship, a Federal District Court granted a defendant's motion
for summary judgment in a suit to recover a broker's commission, on
the ground that the plaintiff, a foreign corporation, had not
qualified to do business in the State as required by state law. The
Court of Appeals reversed, 168 F.2d 701, granted rehearing, 170
F.2d 74, and reaffirmed its reversal, 170 F.2d 694. This Court
granted certiorari. 336 U.S. 909.
Reversed, p.
337 U. S.
538.
MR. JUSTICE DOUGLAS delivered the opinion of the Court.
This case was brought in the District Court for Mississippi on
the grounds of diversity of citizenship. Respondent, a Tennessee
corporation, sued petitioner, a
Page 337 U. S. 536
resident of Mississippi, for a broker's commission alleged to be
due for the sale of real estate of petitioner in Mississippi. The
District Court found on motion for summary judgment that the
contract was void under Mississippi law, since respondent was doing
business in Mississippi without qualifying under a Mississippi
statute.
* It therefore
dismissed the complaint with prejudice.
The Court of Appeals reversed. It reviewed the Mississippi
decisions under the Mississippi statute and concluded that the
contract was not void, but only unenforceable, in the Mississippi
courts. It held, in reliance on
David Lupton's Sons Co. v.
Automobile Club of America, 225 U. S. 489,
that the fact that respondent could not sue in the Mississippi
courts did not close the doors of the federal court sitting in that
State. Accordingly, it reversed the judgment of the District Court.
168 F.2d 701.
The case is here on a petition for writ of certiorari which we
granted because of the seeming conflict of that holding with our
recent ruling in
Angel v. Bullington, 330 U.
S. 183.
If the
Lupton's Sons case controls, it is clear that
the Court of Appeals was right in allowing the action to be
maintained in the federal court. In that case, a New York statute
provided that no foreign corporation could "maintain any action in
this state" without a certificate that it had qualified to do
business there. The Court held that a contract on which the
corporation could not
Page 337 U. S. 537
sue in the courts of New York by reason of that statute
nevertheless could be enforced in the federal court in a diversity
suit. The Court said, 225 U.S. p.
225 U. S.
500,
"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."
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 Co. v. Tompkins, 304 U. S.
64." 330 U.S. at
330 U. S. 192.
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. 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
and closed its courts.
The Court of Appeals concluded that the latter reason was
argumentary, the real basis of the decision being that Bullington
was denied recovery on the doctrine of
res judicata. But
where a decision rests on two or more grounds, none can be
relegated to the category of
obiter dictum. United
States v. Title Ins. & Trust Co., 265 U.
S. 472,
265 U. S. 486;
Massachusetts v. United States, 333 U.
S. 611,
333 U. S.
623.
Page 337 U. S. 538
Angel v. Bullington, in its alternative ground,
followed the view of
Guaranty Trust Co. v. York,
326 U. S. 99,
326 U. S. 108,
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 Oil Co. v. Dunlap,
308 U. S. 208;
cf. Stoner v. New York Life Ins. Co., 311 U.
S. 464; contributory negligence,
Palmer v.
Hoffman, 318 U. S. 109,
318 U. S. 117;
conflict of laws,
Klaxon Co. v. Stentor Electric Mfg. Co.,
313 U. S. 487;
Griffin v. McCoach, 313 U. S. 498, and
accrual of the cause of action,
West v. American Tel. &
Tel. Co., 311 U. S. 223. 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. 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.
Reversed.
MR. JUSTICE RUTLEDGE dissents.
See his dissenting
opinion in Nos. 442 and 512,
Cohen v. Beneficial Industrial
Loan Corp., post, p.
337 U. S.
557.
* Miss.Code 1942, ยง 5319, requires a foreign corporation doing
business in the State to file a written power of attorney
designating an agent on whom service of process may be had. It also
provides,
"Any foreign corporation failing to comply with the above
provisions shall not be permitted to bring or maintain any action
or suit in any of the courts of this state."
MR. JUSTICE JACKSON, dissenting.
Erie R. Co. v. Tompkins, 304 U. S.
64, required federal courts in diversity cases to apply
state decisional law as the Rules of Decision Act required them to
apply state statutes.
Page 337 U. S. 539
That is what the Court of Appeals tried to do in this case. The
Mississippi has a statute which says that, if a corporation does
not qualify to do business within the State, it "shall not be
permitted to bring or maintain any action or suit
in any of the
courts of this state." (Emphasis supplied.) The Court of
Appeals reviewed state court decisions, some of which are not free
from ambiguity, and found that the law of Mississippi intends to go
no farther than to withhold the aid of state-maintained courts from
a noncomplying corporation, and that the state law does not deprive
contracts of their validity or intend to foreclose foreign
corporations from resort to federal courts or to any self-enforcing
remedies they may have.
This Court refuses to give the statute that limited effect. I
understand it to rule that Mississippi cannot enact a law closing
its own courts to such foreign corporations without also closing
the federal courts. In this, we seem to be doing the very thing we
profess to avoid -- that is, give the state law a different meaning
in federal court than the state courts have given it.
The Mississippi statute follows a pattern general among the
states in requiring qualification and payment of fees by foreign
corporations. State courts have generally held such Acts to do no
more than to withhold state help from the noncomplying corporation,
but to leave their rights otherwise unimpaired. This interpretation
left such corporations a basis on which to get the help of any
other court -- federal or state -- that could otherwise take
jurisdiction, and free to resort to pledged property, offset and
various other methods of self-help.
The state statute, as now interpreted by this Court, is a harsh,
capricious, and vindictive measure. It either refuses to entertain
a cause of action not impaired by state law or it holds it invalid
with unknown effects on
Page 337 U. S. 540
amounts already collected. In either case, the amount of this
punishment bears no relation to the amount of wrong done the State
in failure to qualify and pay its taxes. The penalty thus suffered
does not go to the State, which sustained the injury, but results
in unjust enrichment of the debtor, who has suffered no injury from
the creditors' default in qualification. If the state court had
held its statute to have this effect, I should agree that federal
courts should so apply it; but the whole basis of our decision is
contrary to that of the state courts.
I think the Court's action in refusing to accept the state
court's determination of the effect of its own statute is a
perversion of the
Erie R. Co. v. Tompkins doctrine.
I would affirm the court below.
MR. JUSTICE RUTLEDGE and MR. JUSTICE BURTON join in this
opinion.