Friday, December 6, 2013

Guaranty Trust Co. v. York case brief

Guaranty Trust Co. v. York case brief summary
326 U.S. 99 (1945)

Certiorari granted to the United States Court of Appeals for the Second Circuit to review the reversal of a summary judgment for petitioner trustee, decided on grounds that respondent noteholder's suit alleging petitioner's breach of trust was barred by state statute of limitations, and to determine the binding effect of state statutes and remedies on a federal diversity court.

Petitioner trustee appealed reversal of a summary judgment that would have barred respondent noteholder's action for petitioner's breach of trust.


  • The decision was reversed on grounds that a federal court sitting in diversity was not bound in equity by the state statute of limitations that barred the suit in the state court. 
  • The court noted that under the Erie Doctrine, in all cases where a federal court had jurisdiction solely because of diversity of citizenship, the outcome of the litigation in the federal court should be substantially the same, so far as legal rules determine the outcome of a litigation, as it would be if tried in a state court. 
  • The doctrine required the federal diversity court to follow state law, and if the statute of limitations under state law barred recovery in a state court, the federal court could not afford recovery. 
  • The court reiterated that the source of substantive rights enforced by a federal diversity court was state law, and that this law determined the outcome regardless of the forum or whether the remedy was in law or in equity.

The judgment that a federal diversity court was not bound by a state statute of limitations was reversed. The court concluded that the federal diversity courts were required to apply state law to determine the outcome of litigation, regardless of whether the remedy was in law or in equity. Respondent noteholder's suit against petitioner trustee arising from an alleged breach of trust was remanded for further proceedings.

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