Rhody v. State Farm Mut. Ins. Co., 83-2065

• Decision Date: 30 August 1985
• Docket Number: No. 83-2065,83-2065
• Citation: 771 F.2d 1416
• Parties: Jeanne Armsted RHODY and Donnell Rhody, Plaintiffs-Appellants, v. STATE FARM MUTUAL INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1416

771 F.2d 1416

Jeanne Armsted RHODY and Donnell Rhody, Plaintiffs-Appellants, v. STATE FARM MUTUAL INSURANCE COMPANY, Defendant-Appellee.

No. 83-2065.

United States Court of Appeals, Tenth Circuit.

Aug. 30, 1985.

Howard K. Berry, III, Oklahoma City, Okl. (Howard K. Berry, Jr., Oklahoma City, Okl., on briefs) of Berry & Berry, P.C., Oklahoma City, Okl., for plaintiffs-appellants.

Brian M. Dell of Speck & Dell, Oklahoma City, Okl., for defendant-appellee.

Before McKAY, BREITENSTEIN and MOORE, Circuit Judges.

JOHN P. MOORE, Circuit Judge.

The issue presented by this diversity action is whether, under Oklahoma conflict of laws rules, Texas or Oklahoma law should be applied to determine the benefits due appellants under an uninsured motorist policy issued by appellee. The precise question to be answered is whether Oklahoma applies the doctrine of lex loci contractus in an action arising from injuries sustained in Oklahoma by an Oklahoma resident who is insured under a policy issued in Texas. We find that, where a contract does not indicate a place of performance, the doctrine applies, and the law of the place where the contract is made governs its interpretation. In this case, the contract is silent as to its place of performance; therefore, Texas law must apply. Accordingly, we affirm the district court's grant of partial summary judgment in favor of appellee as well as its denial of appellants' motion for summary judgment in their favor.

Appellants, Jeanne Armsted Rhody and Donnell Rhody, are Texas residents. On March 1, 1981, their son, Donnell Rhody, Jr., was fatally injured in a head-on collision between his car and another automobile in Oklahoma City, Oklahoma. The driver of the second vehicle, an Oklahoma resident, carried no public liability insurance. Appellants filed suit against appellee, State Farm Automobile Insurance Company, seeking to recover benefits under the uninsured motorist coverage included in an insurance policy issued to them by appellee's agent in Texas. State Farm did not dispute its liability under the policy, but it did dispute the amount of recovery.

At the time of the accident, Donnell Rhody, Jr., was a resident of the state of Oklahoma. He was employed in Oklahoma during the two and one-half years that he resided in the state. He had an Oklahoma driver's license and garaged his car at his Oklahoma residence. The car was originally purchased in Oklahoma by his mother, appellant Jeanne Armsted Rhody. While title to the automobile remained in the mother's name, the son was in the process of purchasing the automobile at the time of his death.

Donnell Rhody, Jr., was insured under his parents' State Farm policy, and his car was listed in the policy along with two other automobiles garaged at appellants' Texas residence. At the time the insurance policy was issued, the State Farm agent from whom appellants purchased the policy knew that the son's car would be garaged at his Oklahoma residence. For each of the three vehicles listed, the policy provided uninsured motorist coverage in the amount of $10,000.

This suit was filed because Oklahoma law provides for "stacking" of uninsured motorist coverage. Stacking permits the total amount of uninsured motorist coverage provided for all vehicles listed in an insurance policy to be applied to the damages resulting from an accident involving only one of the vehicles. Texas law makes no provision for stacking. Therefore, if Oklahoma law is applied to determine the proceeds of appellants' uninsured motorist coverage, appellants will receive $30,000, the total amount of coverage provided for the three vehicles listed in their policy. ¹ Under Texas law, appellants are only entitled to the $10,000 individual coverage provided in the policy for their son's car.

Appellants moved the district court to grant summary judgment that Oklahoma law applies to determine their benefits under the insurance policy. State Farm moved for summary judgment that Texas law applies. After determining that Oklahoma conflict of laws rules require the application of the law of the state in which an insurance policy was made and executed, the district court held that Texas law applies. Consequently, the court granted State Farm's motion for summary judgment.

I.

The conflict of laws rules of the forum state, Oklahoma, must be applied to determine whether Texas or Oklahoma law governs the interpretation of the appellants' insurance policy. Klaxon v. Stentor Electric Manufacturing Co., 313 U.S. 487, 491, 61 S.Ct. 1020, 1020, 85 L.Ed. 1477 (1941). In the instant case, however, the parties dispute the nature of the rule in Oklahoma to resolve conflict of laws problems in contract cases. State Farm contends that lex loci contractus, which provides that matters bearing upon the interpretation, execution, and validity of a contract are to be determined by the law of the place where the contract is made, has been adopted and repeatedly affirmed by the Oklahoma courts. In addition, State Farm argues that this rule is also embodied in Okla.Stat. tit. 15, Sec. 162 (1971), which states:

A contract is to be interpreted according to the law and usage of the place where it is to be performed or, if it does not indicate a place of performance, according to the law and usage of the place where it is made.

Since the insurance policy was issued and executed in Texas, State Farm reasons that Texas law must govern its interpretation.

Appellants argue that lex loci contractus is outmoded as a conflict of laws rule. Appellants contend that, if the recent trends in the substantive law of Oklahoma are carefully examined, a shift from rigid conflict of laws doctrines like lex loci contractus to an interest or contacts analysis becomes evident. Under the interest analysis approach, the laws of the state with the most significant or substantial relationship to the parties and the transaction underlying the lawsuit must govern the dispute. ² In support of their argument, appellants point to Brickner v. Gooden, 525 P.2d 632 (Okla.1974) in which the Oklahoma Supreme Court adopted the most significant relationship test for the resolution of conflict of laws problems in tort cases. Appellants also rely on Collins Radio Co. of Dallas v. Bell, 623 P.2d 1039 (Okla.App.1980), where that contacts test was adopted in the context of contracts for sales covered by the Uniform Commercial Code. Appellants conclude, under the most significant relationship test, Oklahoma has a greater relationship to the instant dispute than any other state. Thus, Oklahoma law must be applied to determine benefits under their insurance policy.

No Oklahoma court has ruled on the precise conflict of laws question presented by the facts in this case. Where there is no authoritative decision of a state court on an issue under purely local law, great deference must be paid to the views of a federal judge who is familiar with the local law and practice. Bishop v. Wood, 426 U.S. 341, 345, 96 S.Ct. 2074, 2077, 48 L.Ed.2d 684 (1976); Township of Hillsborough v. Cromwell, 326 U.S. 620, 629-30, 66 S.Ct. 445, 451, 90 L.Ed. 358 (1946); Huddleston v. Dwyer, 322 U.S. 232, 237, 64 S.Ct. 1015, 1018, 88 L.Ed. 1246 (1944); Budde v. Ling-Temco-Vought, Inc., 511 F.2d 1033, 1036 (10th Cir.1975); Binkley v. Manufacturers Life Ins. Co., 471 F.2d 889, 891 (10th Cir.1973). The Supreme Court has demonstrated reluctance "to overrule decisions of federal courts skilled in the law of particular states unless their conclusions are shown to be unreasonable." Propper v. Clark, 337 U.S. 472, 486-87, 69 S.Ct. 1333, 1342, 93 L.Ed. 1480 (1949). Here, a United States district judge sitting in Oklahoma determined that the Oklahoma courts have not adopted the most significant relationship test in contract actions, despite their application of that test in tort cases and in the context of sales covered by the Uniform Commercial Code. Absent a demonstration that this conclusion is unreasonable, we pay it deference and are reluctant to overrule.

Appellants' arguments regarding the existence of a trend in Oklahoma toward the adoption of an interest analysis approach to conflict of laws problems do not compel the conclusion that the district court's application of lex loci contractus is unreasonable. In fact, the district court's holding is consistent with the cases cited by appellants in support of their argument. In Brickner v. Gooden, supra, for example, the Oklahoma Supreme Court adopted the most significant relationship test only in the context of tort actions. Four years after Brickner, the Oklahoma Supreme Court reiterated that in contract actions, the law of the place where the contract is made governs with respect to its nature, validity, and interpretation. Telex Corp. v. Hamilton, 576 P.2d 767, 768 (Okla.1978). Two years after Telex, in Collins Radio Co. of Dallas v. Bell, supra, the Oklahoma Court of Appeals recognized that the rule generally invoked in contract cases is the choice of law rule embodied in Okla.Stat. tit. 15, Sec. 162 (1971). The court, however, chose to apply the most significant relationship test to a contract for a sale covered by the Uniform Commercial Code only because it found the specific choice of law rule provided in U.C.C. Sec. 1-105 superseded the general rule under Okla.Stat. tit. 15, Sec. 162 (1971).

After examining the cases upon which appellants rely, we find no indication of a trend toward the adoption of the most significant relationship test in Oklahoma law. Accordingly, we agree with the district court's conclusion that the Oklahoma courts have not adopted the most significant relationship test as the conflict of laws rule for contract actions.

II.

Appellants argue that if we reject the most significant relationship test, we must examine the place of performance of the insurance policy, as well as the place where the policy was issued and executed, in determining whose law will apply in the...