Fisher v. Home Indemnity Co., 13810.

Decision Date30 June 1952
Docket NumberNo. 13810.,13810.
Citation198 F.2d 218
PartiesFISHER et ux. v. HOME INDEMNITY CO.
CourtU.S. Court of Appeals — Fifth Circuit

Lansing L. Mitchell, New Orleans, La., for appellants.

St. Clair Adams, Jr., New Orleans, La., for appellee.

Before HUTCHESON, Chief Judge, and RUSSELL and STRUM, Circuit Judges.

HUTCHESON, Chief Judge.

Filed January 6, 1950, the suit, from the judgment in which this appeal comes, sought the recovery of damages by reason of the alleged injurious effect of consuming a product known as Westsal, between the dates of January 19, 1949, and February 20, 1949. This product was manufactured by Foster-Milburn Company, Inc., of Buffalo, New York, and its wholly owned subsidiaries, including among others and particularly its Westwood Pharmaceutical Division and Westwood Pharmacal Corporation, both of Buffalo, New York. The Home Indemnity Company, which is a corporation organized under the laws of the State of New York, and has qualified to transact business in the State of Louisiana, is the public liability insurer of the manufacturer of Westsal, and, as such, it issued and delivered in New York the policy sued on.

The product Westsal was sold by Foster-Milburn Company, Inc., or its subsidiaries, in drug stores in the State of Louisiana, but neither that company nor its subsidiaries were qualified to, nor did they, transact business in the State of Louisiana, or have an agent for the service of process there. The policy of insurance, a certified copy of which appears in the supplemental record, contains a clause designated as "Action Against Company", which reads as follows:

"Condition E: No action shall lie against the Company to recover upon any claim, or for any loss, unless brought after the amount of such claim or loss shall have been fixed and rendered certain, either by final judgment against the Assured after trial of the issue, or by agreement between the parties with the written consent of the Company, nor unless brought within two (2) years from the date of such judgment or agreement."

This clause, which is commonly referred to as a "No Action Clause", is valid and enforcible in the State of New York where defendant has its domicile and where the policy of insurance was issued and delivered.

The action having been brought against defendant without complying with, indeed in direct disregard of the condition above set out, the defendant moved to dismiss the action because the complaint failed to state a claim against defendant upon which relief could be granted.

Full briefs having been filed and argument had, the district judge, on July 18, 1951, filing a brief statement1 of his reasons for doing so, dismissed the action, and plaintiffs on the same day appealed to this court.

On May 20, 1952, after this cause had been set for argument here, plaintiff filed a motion in the court below to make a supplemental part of the record the "Consent to be sued",2 filed by defendant with the Secretary of State, provided for by Act 542 of 1950, approved July 10, 1950, LSA-R.S. 22:983.

Here, citing decisions of the Louisiana courts, including the latest, Churchman v. Ingram, La.App., 56 So.2d 297, by the Court of Appeal for the Second Circuit, and our case of Wells v. American Employers Ins. Co., 5 Cir., 132 F.2d 316, as in accord, appellants, with apparent confidence, urge upon us that the decision below was wrong, and the judgment should be reversed.

In addition, appellants put their reliance on the "Consent to be sued", which, given after the suit had been filed, was not pleaded or relied on by them, or otherwise called to the attention of the court until after the cause had been decided and the record on appeal had been lodged here.

The appellee, planting itself firmly on the opinion of the district court in Belanger v. Great American Indemnity Co., D.C., 89 F. Supp. 736, on which the district judge based his decision, that the direct action statute of Louisiana could not be invoked to destroy or impair the "no action" condition of the policy, and, citing the many cases3 which hold to the same effect, insists that the Louisiana decisions, particularly Churchman v. Ingram, supra, and West v. Monroe Bakery, 217 La. 189, 46 So.2d 122, which refuse to give effect to valid policy provisions, are not correctly decided and, upon the federal constitutional question involved here, are without authority. We agree.

In complete agreement with the views of the district judge as they are set forth in the Belanger case, supra, we find ourselves unable to improve upon the clear and forceful statement and correct application of the general principles controlling here. We will not, therefore, attempt to restate them. We will content ourselves with announcing our adherence to them, and will confine our elaboration upon the opinion to matters not touched upon, or, if touched upon, not dealt with fully, therein.

One of these is the question so much and so vainly labored in the Churchman case, that, in the opinion of the courts of Louisiana, the direct action statute is not substantive but procedural, and, being procedural cannot be said to impair the no action clause of the policy. We may put to one side the fact that, contrary to the opinion in the Churchman case, supra, the Act 55 of 1930, LSA-R.S. 22:655, which purports to grant a direct right of action, has been expressly held in the latest decision of the Supreme Court of Louisiana, West v. Monroe Baking Co., supra 46 So.2d 123, to confer "substantive rights on third parties to contracts of public liability insurance, which become vested at the moment of the accident in which they are injured", and that that case holds that all provisions in the policy imposing restrictions upon those rights are invalid. Indeed, without appellants' taking any benefit from the concession, we might concede, though the decisions are to the contrary, that the uniform construction of the statute by the Louisiana courts is still, as it seemed to a majority of the court to be when the court decided the case of Wells v. American Employers Ins. Co., 5 Cir., 132 F.2d 316, that the statute is merely procedural. The question for decision here, (where the attempt is made, by a construction of a state statute, to invalidate a provision of a contract made outside the state, which was valid where made,) whether this may be constitutionally done, is quite a different one from that presented and decided in the Wells case, whether extra territorial effect could be given in a suit in Texas to a Louisiana statute held by Louisiana courts to be procedural.

Pointing out in the Wells case that the Louisiana Courts were then holding that the statute was procedural, and, accepting that holding as authoritative for the point before us, we correctly held that, of course, extra territorial effect could not be given to it in the Texas courts.

In our later decision, Soileau v. New Amsterdam, 5 Cir., 167 F.2d 767, 769, 6 A. L.R.2d 128, where we undertook to determine for ourselves the effect of the statute and not merely what the Louisiana courts had said the effect was, the court, speaking through the late lamented Judge Lee, a Louisiana lawyer of great distinction and ability, said, "The 1930 Act is not wholly procedural, for it confers also a substantive right upon the injured party in the direct action granted such party against the insurer". It is significant that the latest and most authoritative pronouncement of the Supreme Court of Louisiana, in the Monroe Bakery case, supra, is in precise accord with this view. The difference here between the authoritative holding of the Louisiana courts and that of the federal courts, as to the meaning and effect of the statute, is not to be found in the construction of the statute as substantive or procedural, a field in which, if there were differences, the Louisiana courts would be supreme. It is to be found in the determination of the Louisiana courts that the statute may constitutionally impair the obligation...

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