Cities Service Oil Co. v. Dunlap
60 S. Ct. 201, 1939 U.S. LEXIS 985, 308 U.S. 208 (1939)
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Rule of Law:
In a diversity jurisdiction case, a federal court must apply state law to determine which party bears the burden of proof on a substantive issue, as this allocation is a matter of substantive law under the Erie doctrine, not merely a rule of procedure.
Facts:
- In 1899, the heirs of Louisa Rogers partitioned a 320-acre tract of land in Gregg County, Texas.
- A deed conveyed a portion of the land to J. F. Rogers, with a description that included a call to run 440 yards to 'Wiley Davis N. E, corner.'
- A physical measurement revealed that the 440-yard call ended 66 feet east of the actual 'Davis N. E. corner,' creating a disputed 66-foot strip of land.
- In 1930, J. F. Rogers' heirs granted an oil and gas lease for the land described in the 1899 deed, which petitioner Cities Service Oil Co. later acquired.
- In 1934, respondent Dunlap obtained an oil and gas lease for the disputed 66-foot strip from the heirs of J. F. Rogers' brothers.
- Dunlap and the other heirs contended that the call to the 'Davis N. E. corner' in the 1899 deed was a mistake and that the 66-foot strip was intentionally left as common property.
- Cities Service Oil Co. asserted it was a bona fide purchaser for value without notice of any alleged mistake in the original deed.
Procedural Posture:
- Cities Service Oil Co. filed an original bill in the United States District Court to quiet title to the disputed property.
- Dunlap and the Rogers heirs filed an answer and a cross-bill, asserting their equitable claim based on an alleged mistake in the original deed.
- The U.S. District Court found in favor of Dunlap and the Rogers heirs.
- Cities Service Oil Co., as appellant, appealed the decision to the U.S. Circuit Court of Appeals.
- The Circuit Court of Appeals affirmed the District Court's judgment, refusing to apply the Texas rule on the burden of proof.
- The U.S. Supreme Court granted certiorari to review the decision of the Circuit Court of Appeals.
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Issue:
In a diversity suit concerning title to Texas land, must a federal court apply the Texas state rule that places the burden of proof on the party asserting an equitable claim to show that the holder of the legal title was not a bona fide purchaser for value?
Opinions:
Majority - Mr. Justice McReynolds
Yes. A federal court must apply the Texas state rule regarding the burden of proof in a bona fide purchaser dispute. The Circuit Court of Appeals erred by treating the state rule as a mere matter of procedure and instead applying what it considered a better, general rule of equity. The Texas rule, which places the burden on the claimant with the equitable interest to prove the legal title holder was not a bona fide purchaser, is a matter of substantive law. It confers a 'substantial right' upon the holder of a recorded legal title in Texas, and to disregard it would violate the principles of Erie R. Co. v. Tompkins. Proof that the petitioner was not a bona fide purchaser was 'part of the very substance' of the respondents' cause of action.
Analysis:
This case is a significant early interpretation of the Erie doctrine, extending its reach from state statutes to state common law rules that are outcome-determinative. By classifying the allocation of the burden of proof in a real property dispute as substantive law, the Supreme Court narrowed the ability of federal courts to apply their own 'general law' or procedural rules in diversity cases. This decision reinforces the core Erie principle that the outcome of litigation in federal court should not differ substantially from the outcome in state court simply because of the forum, thereby promoting uniformity and discouraging forum-shopping.
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