Davis v. St. Paul-Mercury Indemnity Company

• Decision Date: 28 August 1961
• Docket Number: No. 8309.,8309.
• Citation: 294 F.2d 641
• Parties: Sarah Etta DAVIS, Administratrix of the Estate of Earl Sinclair Davis, Deceased, Appellee, v. ST. PAUL-MERCURY INDEMNITY COMPANY, Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

294 F.2d 641 (1961)

Sarah Etta DAVIS, Administratrix of the Estate of Earl Sinclair Davis, Deceased, Appellee, v. ST. PAUL-MERCURY INDEMNITY COMPANY, Appellant.

No. 8309.

United States Court of Appeals Fourth Circuit.

Argued April 12, 1961.

Decided August 28, 1961.

John H. Anderson, Jr., Raleigh, N. C. (Willis Smith, Jr., and Smith, Leach, Anderson & Dorsett, Raleigh, N. C., on brief), for appellant.

Joseph C. Moore, Jr., and Charles H. Young, Raleigh, N. C. (Ruark, Young, Moore & Henderson, Raleigh, N. C., on brief), for appellee.

Before SOBELOFF, Chief Judge, BOREMAN, Circuit Judge, and HARRY E. WATKINS, District Judge.

SOBELOFF, Chief Judge.

This case presents the important question of the power of a state through its courts to exercise jurisdiction over a nonresident whose automobile was used in that state with her permission, though not by her personally. There was no personal service of process upon the nonresident, but substituted service in accordance with the state's Non-Resident Motorist Statute, N.C.Gen.Stat. § 1-105 (Supp.1959).

Mrs. Ida Weitz, whose home is in Victoria, Texas, purchased an automobile to be used by her minor son while stationed as a marine at Camp Lejeune, North Carolina. A liability insurance policy, limited to $5,000, was issued by St. Paul-Mercury Indemnity Company which contained the standard omnibus clause that extends coverage not only to the named insured, but to anyone driving with the permission of the named insured. Mrs. Weitz admonished her son to "be careful how he drove and who he let drive." On September 28, 1952, Earl Sinclair Davis, a resident of North Carolina, was killed in Wilmington, North Carolina, by this automobile while it was being driven with the son's permission by a fellow marine.

In a suit brought by the widow as administratrix of the decedent's estate, judgment by default was recovered against Mrs. Weitz in a North Carolina court after statutory substituted service. Mrs. Weitz had knowledge of the suit, as did her insurance company which elected not to defend. Judgment was entered on April 21, 1955, for $25,000, with interest from that date. Later, on April 26, 1960, a judgment in the same amount was recovered against Jerome S. Curcuro, the driver at the time of the fatal accident. The plaintiff, unable to collect from the judgment debtors, brought suit in the United States District Court against the insurance company on its policy. Jurisdiction over the subject matter was predicated upon diversity of citizenship. Recovery was allowed for $5,000, the limit of the policy, plus interest on the $25,000 face amount of the judgment, as provided in the policy, from the date of the judgment against Mrs. Weitz. The insurer seeks by this appeal to set aside the judgment entered against it.

We are not here concerned with the correctness of the North Carolina court's substantive finding of liability against Mrs. Weitz or Curcuro. This matter has been adjudicated by the North Carolina court. These judgments, not having been appealed, are final. However, they constitute a proper basis for the plaintiff's recovery against the insurance company and are immune from collateral attack only if the North Carolina court had jurisdiction over the defendants. It is a well-settled rule that a judgment, void for lack of jurisdiction over the person of the defendant, may be collaterally attacked in a second proceeding unless the jurisdictional question has already been adjudicated between the parties. Ehrenzweig, Conflict of Laws 205 (1959); Goodrich, Conflict of Laws 611-612, 634 (3rd ed., 1949); Restatement, Judgments §§ 9, 11, 14 (1942). In the present case, the question of jurisdiction is not res judicata because Mrs. Weitz did not make an appearance to contest jurisdiction. There is no question of North Carolina's jurisdiction as to Curcuro who drove the car because he appeared to defend after substituted service was made on him.

Whether the defendant, Mrs. Weitz, is within the reach of the North Carolina jurisdictional statute and whether she had sufficient contacts with North Carolina to enable the courts of that state to render a constitutionally valid in personam judgment against her are the principal questions to be decided. Two other questions arise out of the suit on the policy. One is whether Mrs. Weitz was the real owner of the automobile, for if she was not the owner, the policy may be voided for false representation and lack of insurable interest. The other is whether Curcuro may be deemed to have been driving with the permission of Mrs. Weitz, thereby bringing him within the definition of an "insured" under the policy's omnibus clause.

I.

The first issue to be considered is whether the North Carolina statute authorizes service of process on a nonresident owner of an automobile driven by a sub-permittee at the time of the accident. North Carolina Gen.Stat. § 1-105 (Supp. 1959) provides that process may be served on a nonresident in any action "growing out of any accident or collision in which said nonresident may be involved by reason of the operation by him, for him, and under his control or direction, express or implied, of a motor vehicle on such public highways of this State * * *."¹ In construing this statute, we are bound by the interpretation given it by the North Carolina courts. Three North Carolina cases require examination.

In Pressley v. Turner, 1958, 249 N.C. 102, 105 S.E.2d 289, service of process over a nonresident corporation, pursuant to N.C.Gen.Stat. § 1-105 (Supp.1959), was upheld on the finding that the driver who owned the car was acting as its agent. Important in this case is the language of the court. "Neither ownership nor physical presence in the motor vehicle is necessary for valid service. It is sufficient if the nonresident had the legal right to exercise control at the moment the asserted cause of action arose." Id., 249 N.C. at page 104, 105 S.E.2d at pages 291-292. (Emphasis supplied.) An owner may not unreasonably be presumed to have such right of control. See N.C.Gen.Stat. § 20-71.1.

In Ewing v. Thompson, 1951, 233 N.C. 564, 65 S.E.2d 17, the court upheld service over a nonresident owner of an automobile which had been operated by his son. While it is true that the court stressed the fact that the case fell within the "family purpose" doctrine of vicarious tort liability, the decision does not limit jurisdiction over the owner to that situation. Under this doctrine, a parent who owns an automobile which his family is permitted to use is held responsible for the torts of his minor children. Grier v. Woodside, 1931, 200 N.C. 759, 158 S.E. 491. Recognizing that minors are generally propertyless, the purpose of the rule is to enable the injured party to recover compensation from one whom it is not unreasonable to hold liable. 2 Harper & James, The Law of Torts 1419-1420 (1956); Prosser, Torts 369 (2d ed. 1955). This doctrine is not determinative in interpreting the jurisdictional statute where "control or direction" are the standards. While such "control or direction" was under the particular facts based on the "family purpose" doctrine, the decision does not stand as authority to limit "control or direction" to that precise situation. Mrs. Weitz's control over the car is not reduced by the fact that her son's permittee was driving and not the son. It will be recalled that in our case, the District Judge found that in turning the automobile over to her son, Mrs. Weitz expressly authorized him to permit others to drive it.

A situation factually closer, indeed practically identical, to the present case was before the court in Howard v. Sasso, 1960, 253 N.C. 185, 116 S.E.2d 341. A nonresident owner permitted her automobile to be driven in North Carolina by her son who loaned it to a fellow soldier who in turn loaned it to the driver allegedly responsible for the accident. In support of the court's jurisdiction, the plaintiff relied on the defendant's admitted ownership of the automobile and the provision of the North Carolina statute whereby ownership raises a rebuttable presumption that the car was driven with the "authority, consent, and knowledge of the owner." N.C.Gen.Stat. § 20-71.1. The trial court was sustained in upholding substituted service on the nonresident owner.

In light of these cases, it is concluded that service of process on Mrs. Weitz was authorized by the North Carolina law. The statute does not require that the owner be physically in a position to direct the driver's every move. Nor does it require that the driver be acting for the pecuniary benefit of the owner. The words "express or implied" suggest only a minimal connection between the driver and the owner which is satisfied if the owner, as in this case, has a legal right to control the operation of the automobile. The unlikelihood that the owner will in fact exercise his legal right is immaterial. After all, the evident purpose of the statute is to extend the state's judicial power broadly to permit North Carolina residents to acquire jurisdiction over nonresidents who may be held responsible for injuries or death caused by their automobiles. A narrow interpretation of the statute would defeat this purpose, and we perceive no disposition in the North Carolina court to interpret it narrowly.

II.

We turn next to the question of the state's constitutional power to apply the statute in the present circumstances. Traditionally the basis of in personam jurisdiction over a defendant was his physical presence within the forum state or his consent to its jurisdiction.² Under the famous dictum of Mr. Justice Field in Pennoyer v. Neff, 1877, 95 U.S. 714, 733, 24 L.Ed. 565, no other method of acquiring in personam jurisdiction could satisfy the due process clause of the Fourteenth Amendment. The rationale was supplied by Mr. Justice Holmes by his assertion that "the foundation of jurisdiction is physical power * * *." McDonald v. Mabee, 1917, 243...