Savchuk v. Rush

• Decision Date: 10 September 1976
• Docket Number: No. 45556,45556
• Citation: 311 Minn. 480,245 N.W.2d 624
• Parties: Jeffrey D. SAVCHUK, Respondent, v. Randal RUSH and State Farm Mutual Automobile Insurance Company, garnishee, Appellants.
• Court: Minnesota Supreme Court

Page 624

245 N.W.2d 624

311 Minn. 480

Jeffrey D. SAVCHUK, Respondent, v. Randal RUSH and State Farm Mutual Automobile Insurance Company, garnishee, Appellants.

No. 45556.

Supreme Court of Minnesota.

Sept. 10, 1976.

Syllabus by the Court

1. Minn.St. 571.41, subd. 2, was enacted by the legislature to permit garnishment of an insurer's obligation to an insured, even though not due absolutely and without contingency.

2. Rule 4.04(2), Rules of Civil Procedure, which provides inpart, 'When quasi in rem jurisdiction (is) obtained, a party defending such action thereby submits personally to the jurisdiction of the court,' applies in cases where jurisdiction is obtained pursuant to § 571.41, subd. 2, only to the extent of the defendant's policy limits.

3. Possible injustice to the defendant in situations where jurisdiction is obtained pursuant to § 571.41, subd. 2, can be controlled by application of the doctrine of forum non conveniens.

Meagher, Geer, Markham, Anderson, Adamson, Flaskamp & Brennan, O. C. Adamson, II, and James F. Roegge, Minneapolis, for appellants.

Schermer, Schwappach, Borkon & Ramstead and John D. Mariani and Richard I. Diamond, Minneapolis, for respondent.

Heard before SHERAN, C.J., and OTIS, TODD, MacLAUGHLIN, and SCOTT, JJ., and considered and decided by the court en banc.

SHERAN, Chief Justice.

Appeal by defendant, Randal Rush, and garnishee, State Farm Mutual Automobile Insurance Company (State Farm), from an order by the district court granting plaintiff's motion to file and serve a supplemental complaint and denying appellants' motion to dismiss the complaint. We affirm the decision of the trial court for these reasons:

(1) Minn.St. 571.41, subd. 2, was enacted by the legislature to permit garnishment of an insurer's obligation to an insured, even though not due absolutely and without contingency.

(2) Rule 4.04(2), Rules of Civil Procedure, which provides in part, 'When quasi in rem jurisdiction (is) obtained, a party defending such action thereby submits personally to the jurisdiction of the court,' applies in cases where jurisdiction is obtained pursuant to § 571.41, subd. 2, only to the extent of the defendant's policy limits.

(3) Possible injustice to the defendant in situations where jurisdiction is obtained pursuant to § 571.41, subd. 2, can be controlled by application of the doctrine of forum non conveniens.

The case arose out of a single-car accident which occurred January 13, 1972, in Elkhart, Indiana. The accident involved a car driven by Rush and owned by his father, in which Jeffrey D. Savchuk was a passenger. The Rush car was insured by State Farm. Rush and Savchuk were both residents of Indiana at the time of the accident. Savchuk, a senior in high school when the accident occurred, moved to Minnesota with his parents in June 1973 and is now an employed and married resident of this state.

The instant action was commenced May 28, 1974, when Savchuk served a garnishment summons on State Farm. Service was made by delivery of a copy of the summons to the commissioner of insurance for the state of Minnesota, pursuant to Minn.St. 60A.19. A copy of the garnishment summons, along with copies of the summons and complaint, was also served personally on Rush in Indiana. The complaint alleged negligence and sought $125,000 in damages.

In response to the garnishment summons, State Farm disclosed pursuant to § 571.49 that nothing was due and owing Rush as judgment debtor. Savchuk then moved the trial court for permission to file a supplemental complaint making the garnishee, State Farm, a party to the action pursuant to § 571.51. Rush and State Farm responded by moving for dismissal on the following grounds: Lack of subject-matter jurisdiction, lack of jurisdiction over the defendant, insufficiency of process, and insufficiency of service of process. Since the jurisdictional challenge raised by the motion to dismiss also raised a question as to the constitutionality of the application on these facts of § 571.41, the attorney general was invited to intervene. That invitation was declined. The respective motions were then heard by the court. His order granting Savchuk's motion for leave to file a supplemental complaint and denying the motion of Rush and State Farm to dismiss precipitated this appeal.

Two main issues are presented: (1) Is the obligation of an insurance company to defend and indemnify a nonresident insured under an automobile liability insurance policy a garnishable res in Minnesota for the purpose of obtaining quasi-in-rem jurisdiction when the incident giving rise to the action occurs outside Minnesota but the plaintiff in the action is a resident of Minnesota? (2) If the obligation of an insurance company to defend and indemnify its insured is a garnishable res, does its seizure and the resultant quasi-in-rem jurisdiction conform with constitutional requirements of due process?

1. Appellants contend that an insurance company's obligation to defend and indemnify its insured cannot constitute a res garnishable under Minn.St. 571.41, subd. 2, because such an obligation is not 'due absolutely, and without depending on any contingency,' as required by § 571.43(1). ¹ In effect, appellants argue that the prejudgment garnishment sanctioned by subd. 2 of Minn.St. 571.41 can be obtained only when the 'due absolutely, and without * * * any contingency' language of § 571.43(1) is first satisfied.

It seems to us that the intent of the legislature in enacting § 571.41, subd. 2, was to specify a limited number of instances in which garnishment (and quasi-in-rem jurisdiction) would be available Before judgment, regardless of whether the debt on which the garnishment was predicated was due absolutely.

Several reasons support this conclusion. First, the language of § 571.41, subd. 2, itself indicates that the test for determining the validity of prejudgment garnishment when the garnishee and debtor are parties to a contract of insurance is not whether the debt is due absolutely but rather whether the garnishee 'May be held to respond' for the claim asserted against the debtor. State Farm's Potential liability is conceded here, and Potential liability is all that subd. 2 requires. ²

Second, § 571.41, subd. 2, is both more recent in origin and more specific in language than § 571.43. ³ Because we perceive an irreconcilable conflict between these two statutory provisions, § 571.41, subd. 2, controls. ⁴ Minn.St. 645.26.

Third, our interpretation of § 571.41, subd. 2, as permitting prejudgment garnishment and the establishment of quasi-in-rem jurisdiction in the circumstances here presented is consistent with two often-stated positions of this court--namely, our interest in providing a forum to residents of this state and our determination in longarm cases to extend the jurisdiction of our courts to the maximum limits consistent with due process. ⁵

We therefore hold that under § 571.41, subd. 2, an automobile insurance company's obligation to defend and indemnify its insured is a res subject to prejudgment garnishment for the purpose of obtaining quasi-in-rem jurisdiction when the incident giving rise to the action occurs outside the state of Minnesota but the plaintiff in the action is a resident of Minnesota.

2. The test for determining the constitutionality of the prejudgment garnishment procedure authorized by Minn.St. 571.41, subd. 2, is threefold: (1) Proper notice must be given to the defendant-insured, affording him adequate opportunity to defend his property; (2) the defendant cannot be exposed to liability greater than the amount of his insurance policy; (3) the procedure may be utilized only by residents of the forum state. Minichiello v. Rosenberg, 410 F.2d 106, 117 (2 Cir. 1968, 1969); Rintala v. Shoemaker, 362 F.Supp. 1044 (D.Minn.1973).

Plaintiff was a resident of the state at the time this action was commenced, ⁶ and proper notice was given. ⁷ The constitutional issue therefore reduces to a question of defendant's potential liability if the procedure authorized by subd. 2 of § 571.41 is permitted. Appellants argue that Rule 4.04(2), Rules of Civil Procedure, which states in part that '(w)hen quasi in rem jurisdiction (is) obtained, a party defending such action thereby submits personally to the jurisdiction of the court,' means that a defendant in Rush's position ⁸ would find himself exposed to potentially unlimited personal liability in an action in which the plaintiff originally could have obtained only quasi-in-rem jurisdiction. Because of Rule 4.04(2), appellants argue, quasi-in-rem jurisdiction, with liability limited to the policy amount, is transformed into personal jurisdiction with potential liability extended beyond the policy limits.

If appellants correctly state the effect of Rule 4.04(2) in these circumstances, it is obvious that due process would be violated. Rintala v. Shoemaker, 362 F.Supp. 1044, 1054; Podolsky v. Devinney, 281 F.Supp. 488 (S.D.N.Y.1968). The underlying question here, however, is not the Effect of Rule 4.04(2), but whether in fact the rule applies to a case of this kind.

New York was the first state to permit a procedure for obtaining jurisdiction similar to the procedure invoked here. Seider v Roth, 17 N.Y.2d 111, 269 N.Y.S.2d 99, 216 N.E.2d 312 (1966). New York also had a rule similar to Rule 4.04(2), but when the issue of the rule's applicability was raised, the New York Court of Appeals simply held that it did not apply in Seider-type cases. Simpson v. Loehmann, 21 N.Y.2d 990, 290 N.Y.S.2d 914, 238 N.E.2d 319 (1968) (per curiam opinion denying reargument). Thus, in New York, even though the defendant proceeds with the defense on the merits, he does not become personally exposed. New Hampshire has reached a similar conclusion. Forbes v. Boynton, 113 N.H. 617, 313 A.2d 129 (1973). Today we do likewise.

Basic considerations of fairness underlie our decision. The United States Supreme Court has indicated...