US SUPREME COURT DECISIONS

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.

Held: 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. 186-193.

(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. 187-188.

(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. 188-190.

(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 chanrobles.com-red

Page 330 U. S. 184

adjudicated in the only sense that adjudication of the "merits" is relevant to the principles of res judicata. Pp. 330 U. S. 190-191.

(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. 64. Pp. 330 U. S. 191-192.

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. Reversed, p. 330 U. S. 193.