Miller v. AMERICAN INSURANCE COMPANY OF NEWARK, NJ

• Decision Date: 20 August 1954
• Docket Number: Civ. A. No. T-519.
• Parties: Curtis C. MILLER, Plaintiff, v. The AMERICAN INSURANCE COMPANY OF NEWARK, NEW JERSEY, Defendant, Yellow Manufacturing Acceptance Corporation, Intervenor.
• Court: U.S. District Court — Western District of Arkansas

124 F. Supp. 160

Curtis C. MILLER, Plaintiff, v. The AMERICAN INSURANCE COMPANY OF NEWARK, NEW JERSEY, Defendant, Yellow Manufacturing Acceptance Corporation, Intervenor.

Civ. A. No. T-519.

United States District Court W. D. Arkansas, Texarkana Division.

August 20, 1954.

Boyd Tackett, of Shaver, Tackett & Jones, Texarkana, Ark., for plaintiff.

James I. Teague, of McMillen, Teague & Coates, Little Rock, Ark., for defendant.

W. H. Arnold, Jr., and W. H. Arnold, III, Texarkana, Ark., for intervenor.

LEMLEY, Chief Judge.

This cause comes on to be heard upon the defendant's plea, set out in the third paragraph of its answer, to the effect that this action has been prematurely brought and should be dismissed for that reason, and has been submitted upon written briefs. The facts necessary for decision are not in dispute and are substantially as follows:

On or about October 4, 1952, Curtis C. Miller, the plaintiff, a citizen of Texas, obtained from the defendant a policy of insurance covering a certain 1952 Model GMC truck owned by him; under the terms of this policy, which policy was written and delivered in Texas, the defendant agreed, among other things, to pay to the plaintiff the actual cash value of any loss of or damage to the truck and its equipment caused by fire. At the time the policy was issued, plaintiff's ownership of the truck was subject to a lien in favor of Yellow Manufacturing Acceptance Corporation, intervenor herein, and said policy contained a loss payable clause in favor of said corporation. On January 19, 1953, while plaintiff was driving the truck along U. S. Highway No. 71 near Mena, Arkansas, the vehicle took fire and was materially damaged. The defendant concedes that at the time of the fire the plaintiff's policy was in full force and effect. The policy contained a provision to the effect that should a loss occur and a disagreement arise as to the amount of such loss, the dispute should be submitted to arbitration¹. After the fire a dispute did arise between the plaintiff and the defendant as to the amount of loss, and the latter demanded arbitration in accordance with the terms of the policy. The plaintiff, however, refused to submit to such arbitration and commenced this action, after the defendant had refused to pay the amount which he demanded.

It is the contention of the defendant that since the policy in suit was a Texas policy, the validity and effect of the arbitration provision are governed by the law of that state; that under Texas law said provision is reasonable and valid, and that compliance with its terms is a condition precedent to suit.² Hence, defendant argues, the plaintiff was required to submit to arbitration, and since he refused to do so, his action is premature.

The plaintiff does not deny that the policy provision in question was valid under Texas law, nor does he deny that as a general rule the validity of contractual provisions, including provisions contained in an insurance policy, is to be determined by the law of the place where the contract is made. He contends, however, that by virtue of Act 111 of the Acts of the General Assembly of the State of Arkansas for the year 1903, Ark. Stats.1947, § 66-509, said provision is void in Arkansas³, that the Arkansas statute manifests a settled public policy of the State hostile to such provisions, and that the arbitration clause here involved is not enforceable in Arkansas, notwithstanding its validity in Texas⁴.

From these contentions of the parties it is clear that the problem here is purely one of conflict of laws; and in solving this problem we are required to ascertain and apply the Arkansas law of conflict of laws. Klaxon Co. v. Stentor Electric Manufacturing Co., Inc., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477. While the Supreme Court of Arkansas has apparently not had occasion to determine whether or not Act 111 of 1903 is applicable to an insurance policy executed in another state in favor of a citizen of such state, we are satisfied from our consideration of the matter that if and when such question is presented to that Court, it will hold that said statute does not apply to an out-of-state policy, and will uphold an arbitration provision in such a policy if valid under the law of the state where the policy was executed; and we so hold in the instant case.

The general rule that a contractual provision which offends the settled public policy of the forum will not be enforced notwithstanding its validity under the lex loci contracti is not one of universal application. Such is applicable only in cases where the public policy which is offended is a strong public policy of the forum; to hold otherwise would leave practically nothing of the rule that the validity of a contract is governed by the law of the place where the contract is made and would do violence to the doctrine of comity upon which so much of the law of conflict of laws is built.

The mere fact that a contractual provision, valid under the lex loci contracti, is violative of a statute of the forum does not necessarily mean, as the plaintiff appears to contend, that said provision will not be enforced at the forum. This is illustrated by the decisions in Dodd v. Axle-Nut Sign Co., 126 Ark. 14, 189 S.W. 663, Smith v. Brokaw, 174 Ark. 609, 297 S.W. 1031, and Swann v. Swann, C.C.Ark., 21 F. 299. In Dodd v. Axle-Nut Sign Co. the defendant executed in Missouri a note evidencing the unpaid purchase price for certain rights in a patented article, which note was secured by a mortgage on Arkansas land; said note was valid under the laws of Missouri but was invalid under the Arkansas law because it did not comply with the provisions of Act 162 of 1891, Ark.Stats.1947, § 68-901, which required such notes to be executed on a printed form and to show on their face for what they were given. Suit on the note and mortgage was brought in Arkansas, and in allowing recovery the Court applied the law of Missouri notwithstanding the provisions of the Arkansas statute. In the Brokaw case a note and a mortgage covering Arkansas land were executed in Oklahoma; the note was valid under Oklahoma law but was absolutely void for usury under the provisions of Article 19, Section 13 of the Arkansas Constitution of 1874, as implemented by Act 56 of 1875, Ark. Stats.1947, §§ 68-602, 68-603 and 68-608; the Court in allowing recovery applied Oklahoma law. And in Swann v. Swann suit was brought in a federal court in Arkansas upon a note executed in Tennessee on a Sunday; the note was valid under Tennessee law but was invalid in Arkansas by virtue of an Arkansas statute, Rev.Stat. Ch. 44, div. 7, art. 2, sec. 1; Ark.Stats.1947, § 41-3801; the Court allowed recovery by applying the lex loci contracti. It will...