Maryland Casualty Company v. Williams

• Citation: 377 F.2d 389
• Decision Date: 04 May 1967
• Docket Number: No. 23520.,23520.
• Parties: MARYLAND CASUALTY COMPANY and United Services Automobile Association, Appellants, v. Orville A. WILLIAMS and County Bank and Trust Company, Co-Executors of the Estate of Ray Warden Williams, Deceased, and Agnes S. Williams, Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

377 F.2d 389 (1967)

MARYLAND CASUALTY COMPANY and United Services Automobile Association, Appellants, v. Orville A. WILLIAMS and County Bank and Trust Company, Co-Executors of the Estate of Ray Warden Williams, Deceased, and Agnes S. Williams, Appellees.

No. 23520.

United States Court of Appeals Fifth Circuit.

May 4, 1967.

COPYRIGHT MATERIAL OMITTED

Nelson, Norvell, Wilson & Thomason by Albert T. McRae, D. J. Smith, Jr., Memphis, Tenn., for appellant United Services Automobile Ass'n.

John R. Gilliland, Memphis, Tenn., Omar D. Craig, Bramlett Roberts, Will A. Hickman, Oxford, Miss., D. J. Jack Smith, Jr., Memphis, Tenn., Montedonico, Gilliland, Heiskell, Davis, Canale & Glankler, Memphis, Tenn., of counsel, for appellant Maryland Casualty Co.

William I. McLain, Memphis, Tenn., for appellees.

Before BELL and GODBOLD, Circuit Judges, and NOEL, District Judge.

NOEL, District Judge:

Mattie Pearl Eskridge, a servant for Mrs. Josephine G. Jacobs of Memphis, Tennessee, drove Mrs. Jacobs' automobile from Memphis into Mississippi. While driving in Mississippi she was involved in an automobile accident in which Mr. and Mrs. Orville A. Williams, occupants of the other automobile, were injured.

Appellees, representatives of Mr. and Mrs. Williams, brought suit against Mrs. Jacobs and Mattie Eskridge in the United States District Court for tthe Western District of Tennessee. A directed verdict was entered in favor of Mrs. Jacobs, and executions issued on judgment against Mattie Pearl Eskridge were returned nulla bona. Appellees then instituted suit against Maryland Casualty Company, hereinafter referred to as "Maryland," and United Services Automobile Association, hereinafter referred to as "United," in the United States District Court for the Northern District of Mississippi in an effort to recover under the omnibus clauses of automobile insurance policies issued by the appellants. Jurisdiction was predicated upon the diversity of citizenship of the parties.

Maryland's policy was issued to Lonnie Eskridge, and provided coverage for his wife, Mattie Pearl Eskridge, while driving a non-owned automobile, "provided the actual use thereof is with the permission of the owner." United's policy was issued to Mrs. Jacobs and insured her automobile when driven by any person, "provided the actual use thereof is with the permission of the named insured." Both policies were issued in Tennessee.

The sole issue before the district court was whether at the time of the accident Mattie Eskridge was driving the automobile with the permission of Mrs. Jacobs so as to be an additional insured under the omnibus clauses of the policies.

Trial was to a jury. United made the following admissions which were admitted in evidence: Mrs. Josephine Jacobs was eighty years old, and was the registered owner of the 1961 Dodge automobile driven by Mattie Eskridge at the time of the accident; for two years preceding the incident Mattie Eskridge had been a maid, companion and nurse for Mrs. Jacobs; when Mrs. Jacobs was not using the automobile, she would occasionally and from time to time allow Mrs. Eskridge to use the car on a Sunday afternoon, to take it home with her on weekends to use to attend church on Sunday mornings, and to run errands for Mrs. Jacobs; neither before nor after the accident did Mrs. Jacobs report the automobile stolen or as being used by anyone without her permission; Mrs. Jacobs never told Mattie that she could not go out of town in the car; the only time Mrs. Jacobs denied Mattie the use of the car was when it was out of fix or in need of repair; Mattie was never discharged by Mrs. Jacobs, and that at the time such admissions were requested by appellees, she had a set of keys to Mrs. Jacobs' automobile.

The only other evidence introduced at the trial was the testimony of Mary Shelton. She testified that she had seen Mrs. Jacobs' automobile parked at Mattie Eskridge's house on numerous occasions, that she had twice ridden to church in the automobile with Mattie Eskridge, and that she was with Mattie Eskridge when she was involved in the automobile accident with the Williams.

The admissions were considered as evidence only against United. The testimony of Mary Shelton was the only evidence against Maryland.

At the close of the evidence, all parties made motions for a directed verdict. We hold that the district court erred in applying the Tennessee presumptions to the construction of the contract and, for the reasons which follow, the judgment of the court is reversed and the case remanded for further proceedings.

Except in matters governed by federal law, when as here a federal court's jurisdiction is predicated upon the diversity of citizenship of the parties, the federal court must apply the substantive law of the state in which it is sitting. Erie R. R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L. Ed. 1188 (1938); Shirey v. Louisville & Nashville R. R. Co., 327 F.2d 549 (5th Cir. 1964). If, in a diversity case, the court is required to construe an insurance contract, the federal court will apply applicable state law. Ruhlin v. New York Life Ins. Co., 304 U.S. 202, 58 S.Ct. 860, 82 L.Ed. 1290 (1938). When there is a question as to which state law should be applied, the federal court must follow a conflict of laws rule which conforms to those prevailing in the state in which it sits; viz., the conflict of laws rules of the state. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). The purpose of applying the state law of the forum is to assure equal administration of justice in coordinate state and federal courts. Ibid. See also Sampson v. Channell, 110 F.2d 754 (1st Cir.), cert. denied, 310 U.S. 650, 60 S.Ct. 1099, 84 L.Ed. 1415 (1940).

Here we have a suit initiated in federal district court in Mississippi, where the accident occurred, which involves the construction of an insurance contract issued in Tennessee. The district court was required to apply to the construction of the contract the law which would be applied under Mississippi conflict of laws rules.

For choice of law purposes, Mississippi, the lex fori, characterizes the law as "substantive" or "procedural." If the applicable law is substantive, the courts of Mississippi will apply foreign law; i. e., the law of the state where the cause of action, about which the controversy revolves, arose. Mississippi characterizes law governing the construction or interpretation of a contract as substantive, but will apply its own fundamental rules of evidence and procedure, in any event. Nationwide Mutual Ins. Co. v. Tillman, 249 Miss. 141, 161 So.2d 604, 613 (1964); United States Fidelity & Guaranty Co. v. Yost, 183 Miss. 65, 183 So. 260, 263, 185 So. 564 (1938); Interstate Life & Accident Co. v. Pannell, 169 Miss. 50, 152 So. 635, 638 (1934).

In applying these general rules to the case at hand, the substantive issue involved being the construction of a clause in an insurance contract, the trial court was required to follow Tennessee law (lex loci contractus) which, under Mississippi conflict of laws rules, would be considered substantive. See Wells v. American Employers' Ins. Co., 132 F.2d 316, 317 (5th Cir. 1942).¹

In reaching its decision that Mattie Eskridge was driving the automobile at the time of the accident with the permission of Mrs. Jacobs, the district court relied upon two Tennessee presumptions: a statute making proof of registration of an automobile prima facie evidence of ownership, permissive use, and operation of the automobile within the scope of the driver's employment; and, a presumption of compliance with the law. Would the Mississippi courts categorize these presumptions as substantive?

The Mississippi cases do not speak specifically of presumptions, but generally of procedure and burden of proof — which are to be controlled by the law of Mississippi. United States Fidelity & Guaranty Co. v. Yost, 183 Miss 65, 183 So. 260, 263-264, 185 So. 564 (1938); Boothe v. Teche Lines, 165 Miss. 343, 143 So. 418, 420 (1932).

If the forum state has not passed upon the characterization to be accorded to presumptions, and from our research we are persuaded that Mississippi has not passed upon such characterization, we conclude that they would be treated as other matters of evidence, burden of proof, and with the general rule. See United Air Lines, Inc. v. Wiener, 335 F.2d 379, 391 (9th Cir.), cert. dismissed, 379 U.S. 951, 85 S.Ct. 452, 13 L.Ed.2d 549 (1964); Lobel v. American Airlines, Inc., 192 F.2d 217, 219 (2d Cir. 1951), cert. denied, 342 U.S. 945, 72 S.Ct. 558, 96 L.Ed. 703 (1952).

The general and prevailing rule is that presumptions, when examined as to whether they are procedural or substantive in nature for choice of law purposes, are matters of procedure.² In this context presumptions are closely akin to burden of proof. Thus, the law of the forum governs proof of facts, as well as presumptions and inferences to be drawn from the evidence. Restatement, Conflict of Laws § 595(2) (1934); Goodrich, Conflict of Laws § 84, at 150-151 (4th ed. 1964); 15A C.J.S. Conflict of Laws § 22(9) (1967), and cases cited therein; Morgan, Choice of Law Governing Proof, 58 Harv.L.Rev. 153, 192 n. 91 (1944), and accompanying text.

There are two exceptions to the general rule that presumptions are procedural in nature. The first exception is a "conclusive" presumption. It is difficult to draw a line between what is a conclusive, or substantive, presumption and what is a procedural presumption — but a conclusive presumption may be described as one which is final and irrebuttable, an inference which must be drawn from proof of given facts which no evidence, however strong, can overcome.³ By contrast, a procedural presumption is one which is rebuttable; it operates to require the production of credible evidence to refute the presumption, after which the presumption disappears.⁴ See Pilot Life Ins. Co. v. Boone, 236...