Aerial Agricultural Service of Montana, Inc. v. Till, G-C-24-61.

• Decision Date: 15 June 1962
• Docket Number: No. G-C-24-61.,G-C-24-61.
• Parties: AERIAL AGRICULTURAL SERVICE OF MONTANA, INC., and Wilton Richard, Plaintiffs, v. Neill Hutchison TILL, Underwriter for Lloyd's, London, Defendant.
• Court: U.S. District Court — Northern District of Mississippi

207 F. Supp. 50

AERIAL AGRICULTURAL SERVICE OF MONTANA, INC., and Wilton Richard, Plaintiffs, v. Neill Hutchison TILL, Underwriter for Lloyd's, London, Defendant.

No. G-C-24-61.

United States District Court N. D. Mississippi, Greenville Division.

June 15, 1962.

Keady, Campbell & DeLong, Greenville, Miss., for plaintiffs.

Wynn, Hafter, Lake & Tindall, Greenville, Miss., for defendant.

CLAYTON, District Judge.

This is a suit by Aerial Agricultural Service of Montana, Incorporated, and Wilton Richard against Underwriters at Lloyd's, London, represented in this cause by an underwriter who voluntarily appeared for the insurance carriers concerned with this litigation.

The case was tried to the court without a jury and submitted on briefs. Simply stated, the plaintiffs seek to recover upon a judgment previously obtained by Richard against Aerial Agricultural Service of Montana, Incorporated in this court (Aerial Agricultural Service of Montana, Inc. v. Richard (5 Cir. 1959), 264 F.2d 341) and the attorney's fees and costs of court and defense incurred in defending and appealing in that case. Richard seeks to collect on his judgment, while Aerial seeks to collect all of the expenses incurred in its defense and appeal.

For simplification, the corporate plaintiff will be referred to as "Aerial" and the defendant will be referred to as "Lloyd's".

Two basic issues are presented. They are (1) Aerial's right to use the courts of Mississippi, which Lloyd's by its motion to dismiss, claims Aerial cannot, and (2) whether coverage is afforded for the Richard claim and judgment and the expense of defense in that suit by the policy of insurance involved, which Lloyd's claims is not. Most of the material facts are without contradiction. Aerial is a corporation under the laws of the State of Montana and had engaged in aerial agricultural work in that state only until April, 1956. It has never qualified to do business in Mississippi. Lloyd's issued a policy of liability insurance in Oregon to Aerial as the named insured on March 14, 1956. Aerial's suit here is to enforce rights it claims under this policy.

In April of 1956, Aerial came into Mississippi and here engaged in work in keeping with the authorization of its corporate charter to the extent hereafter shown. Two or three of Aerial's regular employees came into the State of Mississippi about mid April, 1956, and remained here until May 14, 1956. Aerial employed one Cole (who had been engaged in aerial agricultural work, but who could no longer fly because of injuries) to solicit for it his former customer-farmers for aerial agricultural work. An advertising letter was sent out to Cole's customers in the Mississippi Delta area on Aerial's letterhead. This letter showed that Aerial maintained an office in Greenville, Mississippi; that Cole was Aerial's agent and that Aerial maintained a branch office in Hollandale, Mississippi. Aerial brought two of its airplanes and a pickup truck into this state and these planes performed, in six flying jobs, the work required by contracts which were made by Aerial, with four different farmers. The first flight was on April 27, 1956, and the last flight was made on May 10, 1956. Pilots regularly employed by Aerial flew Aerial's planes in doing this work. Aerial maintained and paid for telephone service in Mississippi and opened a bank account in this state on May 17, 1956, by depositing two checks totaling approximately $200.00. By May 18, 1956, all of its employees, its equipment and other property were withdrawn from Mississippi. Its gross income from these Mississippi flights did not exceed $500.00.

One of the jobs undertaken by Aerial in Mississippi was a rice seeding or planting operation for the plaintiff Richard. Several weeks after Aerial had withdrawn entirely from Mississippi, as the rice sowed by Aerial began to sprout and grow, Richard discovered that this work had been done improperly.

On September 13, 1956, Richard filed suit in this court against Aerial and on a trial on the merits, he obtained judgment. There was a vigorous defense by Aerial. An appeal was perfected to the Court of Appeals and the judgment of this court was affirmed. (Aerial Agricultural Service of Montana, Inc. v. Richard, supra.) This was a tort action and recovery was predicated upon a finding of negligence on the part of Aerial in the aforesaid seeding operation.

As Richard's claim, which gave rise to the aforementioned litigation, developed Aerial called on Lloyd's to service this claim under the aforementioned policy of insurance and demanded that Lloyd's defend the action when suit was filed. There were numerous conferences between Aerial and Lloyd's and voluminous correspondence between Aerial and its attorneys and Lloyd's and its agents and attorneys with reference to this claim, but the end result was that Lloyd's denied coverage and Aerial was compelled to "go it alone" in the defense and in the appeal from an adverse judgment in that case. Aerial's out of pocket expense, its obligation for attorney's fees and its liability for the judgment and court costs are substantial. Most of these items are still owed by Aerial.

In the case of Richard against Aerial, no question with respect to the failure of Aerial to qualify to do business under statutes of Mississippi so requiring¹ was raised or considered by this court or by the Court of Appeals. However, in the case now before this court, Lloyd's strongly challenges the right of Aerial to use the courts of Mississippi for its claim presented here. Simply stated, it says that Aerial was doing business in the State of Mississippi at the time it undertook the seeding operation for Richard and that since Richard's claim arose from the doing of business in Mississippi by Aerial, at a time when Aerial had not complied with the aforementioned statute of Mississippi, then Aerial, under this statute, and the settled case law of Mississippi may not be permitted to use the courts of this state to sue on its part of the claim herein made against Lloyd's. Cited not only as supporting but as deciding conclusively this question in their favor are the cases of Perterman Construction and Supply Co. v. Blumenfeld, 156 Miss. 55, 125 So. 548; Newell Contracting Co. v. State Highway Commission, 195 Miss. 395, 15 So.2d 700; Marx and Bensdorf, Inc. v. First Joint Stock Land Bank, 178 Miss. 345, 173 So. 297 and Case v. Mills Novelty Company, 187 Miss. 673, 193 So. 625, 126 A.L.R. 1102.

Accepting arguendo that Aerial was doing business in Mississippi within the meaning of Mississippi law, at the time when it undertook the seeding operation for Richard, that does not settle the question raised by the motion to dismiss. In each of the aforementioned cases, the suit was by a corporation to enforce rights it claimed under a contract made with a resident (or legal entity) of Mississippi at a time when the corporation was not qualified as required by Mississippi law. All of these contracts except one² were made in Mississippi. Each of these suits was against a resident contracting defendant — a party to the original contract made with the unqualified foreign corporation. The case here is basically different. Aerial sues to enforce rights it claims under a policy of insurance issued to it in Oregon by Lloyd's before Aerial had done any business in the State of Mississippi. Additionally, it must be noted that Richard's case against Aerial was in no wise dependent upon the existence of any contract between Aerial and Lloyd's. His case against Aerial was based on negligence which arose in the performance of a contract made between Richard and Aerial. His claim against Aerial became known or ripened some time after Aerial had withdrawn from Mississippi entirely, and suit was not filed thereon until approximately four months after such withdrawal.

"The validity of a contract of a foreign corporation which has not complied with statutory requirements is affected by such noncompliance only if the enacting state has jurisdiction over the contract or some feature thereof. Thus the fact that a foreign corporation is doing business in the state in violation of a statute requiring it to comply with certain requirements does not ordinarily affect the validity of contracts made outside the state." 20 C.J.S. Corporations § 1856, page 78. (Emphasis added.)

The State of Mississippi had no jurisdiction over Aerial or Lloyd's when the policy being sued on here was issued by Lloyd's to Aerial in Oregon.

An Oregon corporation did business in Alaska without qualifying under Alaska law which provided that any noncomplying foreign corporation could not enforce its contracts. After it had ceased to do business in Alaska, it sued one Ohlsen on an old matter and recovered judgment. Attachment was sued out for his property for which forthcoming bond was executed by Protzman and Gordon payable to the United States Marshal conditioned for the redelivery of the attached goods or the payment of their value to the Marshal should the foreign corporation recover judgment against Ohlsen. After judgment was recovered the Marshal assigned the forthcoming bond to the suing foreign corporation, Ross-Higgins Company, and it then filed suit against Protzman and Gordon. The defendants contended that the plaintiff could not recover as assignee because it had done business illegally in Alaska. The Circuit Court of Appeals for the Ninth Circuit (Ross-Higgins Company v. Protzman et al. (9 Cir. 1922), 278 F. 699) dealt with that defense in the following language:

"This being so, the assignee, which was not engaged in business in Alaska at the time of the assignment, or at the time of the institution of the present action, may enforce the obligation, and the court will not in this action permit the signers of the bond to inquire whether at the date of the notes involved in the action against Ohlsen the contract between him and the corporation was voidable for

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