Lieberthal v. G.F. Indemnity Co. , 316 Mich. 37 ( 1946 )

Plaintiff, Lewis J. Lieberthal, a resident and citizen of the city of Ironwood, Gogebic county, Michigan, on the 5th day of June, 1944, while in the city of Waukesha, Wisconsin, claims he was very severely injured in an automobile collision that occurred through the negligence of the Yellow-White Cab Company, a common carrier in whose cab he was riding. The cab company carried motor vehicle liability insurance in the Glens Falls Indemnity Company of Glens Falls, New York, which also engages in and carries on its automobile insurance business in the States of Wisconsin and Michigan. A policy by virtue of which plaintiff seeks to recover his damages for the injuries was issued to the alleged tortfeasor in the State of Wisconsin, which by section 85.93 of the statutes of Wisconsin creates a direct liability on the part of the insurance company to the party injured through the negligence of the insured named in the policy. In construing section 85.93, supra, in Kujawa v. American Indemnity Co.,245 Wis. 361 (14 N.W. [2d] 31, 151 A.L.R. 1133), the court traced the history of the statute, cited many previous cases, and said:

"There can be no doubt as to the right of plaintiffs to pursue their action against Coaty's insurance carrier alone."

It also said:

"It must be noted that the terms and conditions of section 85.93, Statutes, are a part of the insurance policy with like force and effect as though printed in the policy, and this is true whether the policy be considered an indemnity policy or a liability policy."

Plaintiff brought this suit against defendant insurance company alone in the circuit court for the county of Gogebic, in which he resides. Process was served on the commissioner of insurance. This was proper. 3 Comp. Laws 1929, § 12315, as amended by Act No. 163, Pub. Acts 1931 (Comp. Laws Supp. 1940, § 12315, Stat. Ann. § 24.94). In his declaration plaintiff sets forth the accident, the negligence of the tortfeasor, the damages, and the direct liability of defendant, and plaintiff's right of action without joining the tortfeasor or first obtaining a judgment against the latter.

Defendant appeared specially in a motion to dismiss. On such motion all facts well pleaded by plaintiff must be assumed to be true. General Motors Corp. v. Attorney General, 294 Mich. 558 (130 A.L.R. 429). The trial judge based his order of dismissal partly on section 12460, 3 Comp. Laws 1929 (Stat. Ann. § 24.296), which states that:

"In such original action, such insurance company, or other insurer, shall not be made, or joined as a party defendant, nor shall any reference whatever be made to such an insurance company, or other insurer, or to the question of carrying of such insurance during the course of trial."

The reason for the rule is set forth in Holman v. Cole,242 Mich. 402, as follows:

"It is a fact of which we cannot but take judicial notice that, in cases where jurors obtain information that the damages as fixed by them will be paid by insurance companies, the amount thereof is usually greatly enhanced."

However, section 12460, supra, is limited in haec verba to a policy "issued or delivered in this State by any corporation or other insurer," and in its provisions later refers to "such policy." It is contended that the phrase "or other insurer," as used in the statute refers to an insurer other than one authorized to do business in Michigan. A close reading of the statute, however, shows the true import of this phrase, which is used for the first time at the beginning of the section as follows:

"No policy of insurance * * * shall be issued or delivered inthis State by any corporation or other insurer authorized to dobusiness in this State." (Italics supplied.)

Thereafter, the phrase, "corporation, or other insurer," is used, then "insurance company, or other insurer," as above quoted, then again, "corporation, or other insurer," and, finally, "corporation or other insurer," is used again. That "other insurer" referred to is that first mentioned, "other insurer authorized to do business in this State," seems most logical. The apparent intent of the legislature was to include in this section not only corporations authorized to do business in this State, but private insurers as well. Under the specific wording of the statute it does not apply to a policy issued in another State. It refers solely to those issued in Michigan.

The Wisconsin statute in effect creates a liability to a third-party beneficiary. The record does not indicate whether the insurance companies increased their rates after the adoption of section 85.93 because of any increased risk through the direct liability to injured parties. The principle hereinbefore set forth in Holman v. Cole, supra, holds true in all States. Making an insurance company a party defendant, or referring to a policy in a suit against a tortfeasor, at most is to prevent amalum prohibitum, not a malum in se as to policies issued in Michigan. In Larabell v. Schuknecht, 308 Mich. 419, we upheld the right to bring suit against a tavernkeeper and also his bonding company for injuries arising out of the illegal sale of liquor to the injured party, thus permitting the joining of an insurance company as party defendant. This was permitted by Act No. 8, § 22, Pub. Acts 1933 (Ex. Sess.), as amended by Act No. 281, Pub. Acts 1937 (Comp. Laws Supp. 1940, § 9209-37, Stat. Ann. 1946 Cum. Supp. § 18.993).

It is not against public policy to enforce in the courts of this State a liability that arose in another State even though it could not have been enforced if it had arisen in this State. InEskovitz v. Berger, 276 Mich. 536, involving an Ohio accident, the State of Michigan at the time of the accident and trial not only imputed a driver's negligence to his passenger, but prevented recovery by a guest against his host except in cases of gross negligence. The Ohio law contained no similar provisions, and a guest was permitted to recover in a Michigan court on the ground that the liability arose under the Ohio law.

In Kaiser v. North, 292 Mich. 49, we said:

"The fact Michigan statutory regulations of the rights of a motor vehicle guest passenger may differ from Ontario statutory provisions, or even the provisions of the common law governing like rights, is not a reason for holding the statute of the foreign jurisdiction contravenes public policy here."

In Annis v. Pilkewitz, 287 Mich. 68, 77, we again said:

"The substantive provisions of a contract, valid by the law of the State where the contract is made and is to be performed, create a right of property enforceable in another jurisdiction provided it is not contrary to the public policy of the forum."

In Roethke v. Philip Best Brewing Co., 33 Mich. 340, we held, as stated in the headnote:

"A contract made in another State for the sale of liquors to be delivered in Michigan, such as would be valid at common law, and which is not shown to be invalid where made, cannot be held void by virtue of the prohibitory liquor law of Michigan."

The general principle of law is stated by Judge Cardozo inLoucks v. Standard Oil Co., 224 N.Y. 99, 110 (120 N.E. 198):

"A foreign statute is not law in this State, but it gives rise to an obligation, which, if transitory, `follows the person and may be enforced wherever the person may be found.' * * * `No law can exist as such except the law of the land; but * * * it is a principle of every civilized law that vested rights shall be protected.' * * * The plaintiff owns something, and we help him to get it. * * *

"A right of action is property. If a foreign statute gives the right, the mere fact that we do not give a like right is no reason for refusing to help the plaintiff in getting what belongs to him."

We find that it is not against public policy to enforce in our courts the right given by the Wisconsin statute to bring suit directly against the insurer. In Loucks v. Standard OilCompany of New York, supra, the court said:

"We are not so provincial as to say that every solution of a problem is wrong because we deal with it otherwise at home."

Also, see Rick v. Saginaw Bay Towing Co., 132 Mich. 237 (102 Am. St. Rep. 422, 13 Am. Neg. Rep. 342). The right relates to the right of action, is one of contract, a substantive one, not one of procedure, and, therefore, should be recognized and enforced in our courts. See Slayton v. Boesch, 315 Mich. 1.

To state that comity rests within the discretion of the forum to enforce substantive provisions of a contract, valid by the law of a sister State where the contract is made and performed, is error. A right of property enforceable in the courts of sister States, provided it is not contrary to the public policy of the forum, is created and existing.

"Refusal of courts in other jurisdictions than the place of contract to enforce such provisions is a violation of the full faith and credit clause of the Federal Constitution (U.S. Const. art. 4, § 1). Supreme Council of Royal Arcanum v. Green,237 U.S. 531 (35 Sup. Ct. 724, 59 L.Ed. 1089, L.R.A. 1916 A, 771);Modern Woodmen of America v. Mixer, 267 U.S. 544 (45 Sup. Ct. 389, 69 L.Ed. 783, 41 A.L.R. 1384).

"`Where a contract of life insurance is made wholly in and subject to the laws of one State, the law of another State cannot determine the substantive rights created by the contract. * * *

"`Refusal by the courts of another State to recognize the right thus arising under the statute, was a failure to give full faith and credit to a "public act" of the State in which the contract was made and the cause of action accrued. U.S. Const. art. 4, § 1.' John Hancock MutualLife Ins. Co., v. Yates (syllabus), 299 U.S. 178 (57 Sup. Ct. 129, 81 L.Ed. 106).

"To the same effect, see Aetna Life Ins. Co. v. Dunken,266 U.S. 389 (45 Sup. Ct. 129, 69 L.Ed. 342); Boseman v.Connecticut General Life Ins. Co., 301 U.S. 196 (57 Sup. Ct. 686, 81 L.Ed. 1036, 110 A.L.R. 732). The law set forth in the foregoing citations has been followed in the recent decisions of this court. State of Ohio, ex rel. Fulton, v. James N. Purse,273 Mich. 502; Alropa Corporation v. King's Estate, 279 Mich. 418. " Annis v. Pilkewitz, supra, 77.

The above principles are clearly set forth in Bond v. Hume,243 U.S. 15, 22 (37 Sup. Ct. 366, 61 L.Ed. 565), cited in my Brother's opinion, wherein the United States supreme court stated:

"It is certain that these principles which govern as between countries foreign to each other apply with greater force to the relation of the several States to each other, since the obligations of the Constitution which bind them all in a common orbit of national unity impose of necessity restrictions which otherwise would not obtain and exact a greater degree of respect for each other than otherwise by the principles of comity would be expected. It is unnecessary to cite authority for these several doctrines since, as we have said, they are indisputable, but they nowhere find a more lucid exposition than that long ago made by Mr. Chief Justice Taney in Bank of Augusta v. Earle, 13 Pet. (38 U.S.) 519, 589, 590 (10 L.Ed. 274)."

In Bond v. Hume, supra, the United States supreme court even held that the United States district court sitting in Texas was required to enforce a "bucket shop" contract legally made in New York, which, if entered into in Texas, would be a criminal act. The Kensington, 183 U.S. 263 (22 Sup. Ct. 102,46 L.Ed. 190), which was cited along with Bond v. Hume, supra, concerned an attempt to enforce the law of a foreign country, namely, Belgium. As shown, then "comity" enters, and the discretion of the forum is greater. But where substantive rights derived under the law of a sister State are involved, State courts are restricted by the "full faith and credit" clause of the United States Constitution (Annis v. Pilkewitz, supra, and cases cited), and also by the due process clause of the Fourteenth Amendment which protects the rights of plaintiff.

"Conceding that ordinarily a State may prohibit performance within its borders even of a contract validly made elsewhere, if the performance would violate its laws (Home Insurance Co. v.Dick, 281 U.S. 397, 408 [50 Sup. Ct. 338, 74 L.Ed. 926, 74 A.L.R. 701]), it may not, on grounds of policy, ignore a right which has lawfully vested elsewhere, if, as here, the interest of the forum has but slight connection with the substance of the contract obligations. Here performance at most involved only the casual payment of money in Mississippi. In such a case the question ought to be regarded as a domestic one to be settled by the law of the State where the contract was made. A legislative policy which attempts to draw to the State of the forum control over the obligations of contracts elsewhere validly consummated and to convert them for all purposes into contracts of forum regardless of the relative importance of the interests of the forum as contrasted with those created at the place of the contract, conflicts with the guaranties of the Fourteenth Amendment. Aetna Life Ins. Co. v. Dunken, 266 U.S. 389 (45 Sup. Ct. 129, 69 L.Ed. 342); Home Insurance Co. v. Dick,supra. Cases may occur in which enforcement of a contract as made outside a State may be so repugnant to its vital interests as to justify enforcement in a different manner. Compare Bond v. Hume, 243 U.S. 15, 22 (37 Sup. Ct. 366,61 L.Ed. 565). But clearly this is not such a case.

"Our conclusion renders unnecessary a consideration of the claims made under the full faith and credit and contract clauses of the Federal Constitution." Hartford Accident Indemnity Co. v. Delta Pine Land Co., 292 U.S. 143 (54 Sup. Ct. 634,78 L.Ed. 1178, 92 A.L.R. 928), decided April 9, 1934.

It is true that Loughran v. Loughran, 292 U.S. 216 (54 Sup. Ct. 684, 78 L.Ed. 1219), decided April 30, 1934, at page 227, sets forth the paragraph cited by my Brother, Justice NORTH, but the United States supreme court recognizes that this is a mere general statement with many exceptions, and in Loughran v.Loughran, supra, refuses to apply the rule stated, and specifically directs the lower court to recognize a monetary claim which the lower court did not wish to recognize, and this latter opinion is in accordance with the supreme court's decision delivered 21 days earlier, Hartford Accident Indemnity Co. v.Delta Pine Land Co., supra. In Loughran v. Loughran,supra, the court recognizes the principle stated and cited by Justice NORTH in Bothwell v. Buckbee, Mears Co., 275 U.S. 274 (48 Sup. Ct. 124, 72 L.Ed. 277), but still ruled contrary to the general statement. Further, the inapplicability of the BothwellCase to the instant case may be seen by quoting headnote 4 (L.Ed.) of that case:

"A contract of insurance executed in one State in accordance with an application illegally secured in another State is tainted with illegality, so that the courts of the State where the application was secured may refuse to enforce it."

No illegality is involved in the case at bar.

We are in accord with Kertson v. Johnson, 185 Minn. 591 (242 N.W. 329, 85 A.L.R. 1), where under very similar conditions as in the instant case the court held that the suit could be maintained in a Minnesota court against an insurance company on a liability insurance policy issued in Wisconsin and arising out of an accident that occurred in Wisconsin. It also held that this was a substantive right, transitory in its nature, and that it did not violate public policy to bring the suit in Minnesota. Also, see Biller v. Meyer (C.C.A.),33 F.2d 440 (66 A.L.R. 436). To like effect, see Aetna Casualty SuretyCo. v. Gentry, 191 Okla. 659 (132 Pac. [2d] 326, 145 A.L.R. 623); Lundblad v. New Amsterdam Casualty Co., 265 Mass. 158 (163 N.E. 874); Myers v. Ocean Accident Guarantee Corp.,99 F.2d 485. The case of McArthur v. Maryland Casualty Co.,184 Miss. 663 (186 So. 305, 120 A.L.R. 846), in holding to the contrary overrules the Mississippi court's prior decision inBurkett v. Globe Indemnity Co., 182 Miss. 423 (181 So. 316) . The latter case, based on a Louisiana statute, permitted a direct action against the insurance company. The Mississippi court cited with approval Kertson v. Johnson, 185 Minn. 591 (242 N.W. 329, 85 A.L.R. 1), and held:

"An action for damages to a person is transitory in its nature. Act No. 55, Louisiana Laws of 1930, is the controlling law of Louisiana invoked here and confers more than a procedural right; it creates a right of action against the insurer in favor of third parties not a party to the contract, for whose ultimate benefit the contract of insurance may be said to have been procured by the insured. When a statute of another State confers a right of action that is substantive this court will enforce it where it has the machinery with which to do so. In Travelers'Ins. Co. v. Inman, supra [157 Miss. 810 (126 So. 399,128 So. 877)], we permitted a third person to maintain the action on a similar statute to the one here under consideration, conferring upon a third party the right of direct action against the insurer for the liability of the insured. Likewise, we so held in Floyd v. Vicksburg CooperageCo., supra [156 Miss. 567 (126 So. 395)]."

This opinion was subsequently overruled by a divided court inMcArthur v. Maryland Casualty Co., supra. The majority, ignoring the well established conflict of laws theory of "qualifications," stated that despite its view set forth inBurkett v. Globe Indemnity Co., supra, that the Louisiana statute was substantive in character, it would accept the Louisiana interpretation that the statute was merely remedial, and therefore would deny plaintiff relief. The dissenting opinion states:

"When a statute of another State confers a right of action for the recovery of a sum of money, here damages, that right, in a transitory action, will be enforced by the courts of another State. Restatement, Conflict of Laws, § 607, comment a.

"Where the question simply is who are proper and necessary parties to an action, the law of the forum governs, but when a right of action is expressly conferred against a designated party no such question arises.

"In this day when the tendency is toward uniformity in the administration of justice among the States of our Federal union, it is unfortunate that it should be held that the rights and obligations that inhere in this insurance policy vary because of the forum in which an action is brought for their enforcement. Restatement, Conflict of Laws, § 699. The effect of what is here being held is to deny to a citizen of this State access to its courts for the enforcement of a right accruing to him under the laws of another State against a corporation doing business in this State. Whether this violates the full faith and credit clause of the Federal Constitution, U.S. Const., art. 4, § 1, I will not pause to inquire."

For a severe criticism of the majority opinion in the McArthurCase, see Hancock on "Torts in the Conflict of Laws" (Michigan Legal Studies) at page 243, where the author states:

"By a process of mechanical reasoning, the Mississippi court reached a speedy solution of the case before it which cannot be commended."

The policy issued to the tortfeasor contains a clause, herein called the "no action" clause, which provides that no action shall lie against the company, unless, as a condition precedent thereto, the insured shall have fully complied with all the terms of the policy, nor until the amount of the insured's obligation to pay shall have been finally determined either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and the company. It further provided that nothing contained in the policy shall give any person or organization any right to join the insurer as a codefendant in any action against the insurer to determine the insured's liability. Defendant pleads this "no action" clause as one of its defenses. By sections 85.93 and 260.11 of the Wisconsin statutes, the "no action" clause has been made ineffective, Lang v.Baumann, 213 Wis. 258 (251 N.W. 461), and is nullified.Sheehan v. Lewis, 218 Wis. 588 (260 N.W. 633). The ineffectiveness of the "no action" clause was passed upon inOertel v. Fidelity Casualty Company of New York,214 Wis. 68 (251 N.W. 465), in which plaintiff, a New York resident, was permitted to maintain a suit solely against the insurance company for damages arising out of an accident occurring in Indiana involving an insured, a Pennsylvania resident, who formerly had been a resident of Wisconsin, where he had taken out the policy containing a "no action" clause. Under our decisions "Insurance contracts are subject to statutory regulation. They should be construed in the light of statutory requirements, and mandatory statutory provisions should be read into such insurance contracts." Galkin v. Lincoln MutualCasualty Co., 279 Mich. 327.

The trial court also based its order of dismissal on section 261.01 of the laws of Wisconsin, which states the place of trial. It reads as follows:

"(11) Auto Accident Actions. Of an action growing out of the negligent operation of a motor vehicle, the county in which the cause of action arose or where the defendant resides."

The court stated that the plaintiff would have no right to plead his action in a court of his choice in Wisconsin. The statute, however, defines venue as strictly procedural and it does not apply to a transitory action brought in Michigan in a county in which plaintiff is a resident. Defendant was duly served. That this procedural statute is no bar to a suit in Michigan, or any other State of the Union, has been clearly stated in Tennessee Coal, I. Railroad Co. v. George,233 U.S. 354 (34 Sup. Ct. 587, 58 L.Ed. 997, L.R.A. 1916 D, 685), to which reference is made. Its headnote (L.Ed.) clearly sets forth the legal principle applicable.

"The enforcement by the Georgia courts of the cause of action given by Alabama Code, § 3910, to a servant against the master, for injuries occasioned by defective machinery, does not deny full faith and credit to the provision of section 6115 of that Code, that `all actions under section 3910 must be brought in a court of competent jurisdiction within the State of Alabama, and not elsewhere.'"

The court says:

"The courts of the sister State, trying the case, would be bound to give full faith and credit to all those substantial provisions of the statute which inhered in the cause of action, or which name conditions on which the right to sue depend. But venue is no part of the right; and a State cannot create a transitory cause of action and at the same time destroy the right to sue on that transitory cause of action in any court having jurisdiction. That jurisdiction is to be determined by the law of the court's creation, and cannot be defeated by the extraterritorial operation of a statute of another State, even though it created the right of action."

Some other questions raised in the briefs were not raised in the court below and need not be discussed at the present time.

Order of dismissal should be reversed, with costs to plaintiff, and the cause remanded for trial to the trial court.

REID, J., concurred with BUTZEL, C.J. STARR, J., took no part in the decision of this case.