Sobina v. Busby

• Decision Date: 18 March 1965
• Docket Number: Gen. No. 49441
• Citation: 210 N.E.2d 769,62 Ill.App.2d 1
• Parties: Paula M. SOBINA, Rudolf Edward Sobina and Rudolf Edward Sobina, Jr., a minor, by Paula M. Sobina, his mother and next friend, Plaintiffs-Appellees, v. James A. BUSBY, Defendant. Appeal of SAFECO INSURANCE COMPANY OF AMERICA, a corporation, Citation Defendant.
• Court: United States Appellate Court of Illinois

Page 769

210 N.E.2d 769

62 Ill.App.2d 1

Paula M. SOBINA, Rudolf Edward Sobina and Rudolf Edward Sobina, Jr., a minor, by Paula M. Sobina, his mother and next friend, Plaintiffs-Appellees, v. James A. BUSBY, Defendant Appeal of SAFECO INSURANCE COMPANY OF AMERICA, a corporation, Citation Defendant.

Gen. No. 49441.

Appellate Court of Illinois, First District, Third Division.

March 18, 1965.

Rehearing Denied Sept. 16, 1965.

Berchem, Schwantes & Thuma, Chicago, Michael J. Thuma, Richard Owen Young Warren E. Eagle, Chicago, of counsel, for Safeco Ins. Co., citation defendant.

James A. Dooley, Chicago, for appellees.

SCHWARTZ, Justice.

In this action for personal injuries, judgments were entered in favor of plaintiffs and against the defendant James A. Busby on verdicts aggregating $26,000. Plaintiffs thereupon instituted supplemental citation proceedings under Section 73 of the Civil Practice Act (Ill.Rev.Stat. Ch. 110, § 73 (1963)) for the purpose of subjecting the coverage provided by an insurance policy issued by Safeco Insurance Company of America (citation defendant) to the payment of the judgments. The trial court on motion of plaintiffs entered summary judgment against the citation defendant, and the latter has appealed.

The principal contention of citation defendant is that a decree was rendered against James Busby in the Circuit Court of Walker County, Alabama, finding that the insurance policy was void on the ground that it was procured by fradulent misrepresentations and that this decree is entitled here to full faith and credit, notwithstanding the fact that the personal injury plaintiffs were not made parties to the Alabama proceeding. The background of these proceedings follows:

On July 9, 1955, plaintiffs, residents of New York, were injured in a collision at Markham, Cook County, Illinois, between an automobile driven by James A. Busby of Jasper, Alabama, and one in which plaintiffs were riding. Plaintiffs instituted suit in the Superior Court of Cook County on December 28, 1955, to recover for personal injuries sustained. The insurance policy in question had been issued by the citation defendant in Jasper, Alabama, on July 23, 1954, on the application of Lane Busby, the father of James. It covered the operation of the automobile by James at the time of the accident. Attorneys designated by the citation defendant entered their appearance in the personal injury suit and filed an answer for the Busbys.

On April 22, 1957, the citation defendant, without notice of plaintiffs, instituted the Alabama suit, seeking to void the policy on the ground that in the application for the insurance, material misrepresentations had been made with respect to the age of James Busby, who was then nineteen, and as to the percentage of time the car would be driven by operators under the age of twenty-five. In the complaint, the citation defendant alleged that it had been called on to defend James Busby in the personal injury suit and had first learned of the misrepresentations in the application for the policy after the accident had occurred. On May 28, 1960, after a hearing (the personal injury claimants still being without notice or knowledge), a decree was entered in the Circuit Court of Walker County, Alabama, declaring the policy in question void ab initio.

Following the decree, the attorneys for the citation defendant who had filed an appearance on behalf of Busby in the personal injury suit, made a motion to withdraw, setting forth the decree of the Alabama court and averring that no contractual or other obligation of any kind existed requiring the citation defendant to provide for the defense. It is significant that this motion was not made within thirty days, the period within which courts generally, including Alabama, (Code of Alabama, Title 13, § 119 (1958)) have broad discretion to set aside their orders. Submitted with that motion was a letter to James A. Busby and his father Lane Busby, advising them that the insurance policy had been declared void and that they should provide their own defense to the personal injury suit. On November 10, 1960, an order was entered granting the requested leave to withdraw. On February 19, 1962, an order of the Superior Court of Cook County found James A. Busby in default and ordered that the cause be heard on complaint and answer. Thereupon, the cause was submitted to a jury, a verdict was rendered, and judgments entered for $26,000. Following this, the supplemental proceedings here involved were commenced.

There can be no doubt that the Alabama suit to void the policy was for the main, if not the only, purpose of avoiding any obligation which might arise in the Illinois suit, and that the personal injury plaintiffs were not made parties defendant to that suit or given notice thereof, so that they could not participate in the defense.

Lane Busby, in his deposition taken in support of the plaintiffs' motion for summary judgment in the citation proceeding, testified that the 1948 Chevrolet which James bought for a few hundred dollars in 1954 in his (Lane Busby's) name, had been purchased so that James could go to Chicago to look for a job. Lane Busby was a miner in Alabama. The policy initially was issued for a six-month period and was renewed by Lane Busby on instructions from James, who was then in Chicago.

It thus appears that James Busby's financial responsibility was such as to make his ability to pay any judgment which might be obtained against him in the Illinois suit doubtful, and that the people who were substantially and definitely interested in the insurance policy and in the Alabama suit were the plaintiffs in the Illinois suit.

Under the Federal Constitution a judgment rendered by a court of a sister state must be given full faith and credit by the courts of other states. Where a court has jurisdiction of the parties and the subject matter, its judgment regularly entered, even though erroneous, is valid until reversed on appeal and cannot be subject to collateral attack in another state. This has been stated so often, it needs no citation to support it, but it does not answer the question here involved. If James Busby had paid the judgments and had then sued the insurance company in the courts of Illinois, there is no doubt that the full faith and credit clause of the Federal Constitution would have made the Alabama decree a complete defense. That is not the situation. He has not paid the judgments nor is there any prospect of his doing so. The rights to be determined are not those of James Busby, but of the injured plaintiffs.

With this in mind we proceed to a consideration of the full faith and credit clause of the Federal Constitution as it applies to the decree of the Alabama court voiding the policy of insurance on the ground of misrepresentation. The case relied upon by defendant, so far as Illinois is concerned is Western States Mut. Auto. Ins. Co. v. May, 18 Ill.App.2d 442, 152 N.E.2d 608. There the insurance company brought a declaratory judgment action in Illinois seeking to have its automobile insurance liability policy declared void on the ground of a misrepresentation, in the application for the policy, that the automobile owner was an adult. The actual owner was a minor, the son of the named insured. The minor and two passengers were killed and three others were injured in an accident in Tennessee. Suits were filed in Tennessee and thereafter the declaratory action in Illinois was filed. The plaintiffs in the Tennessee action were not made parties to the Illinois suit. The trial court declared the policy void. On appeal this court affirmed and held that the Tennessee plaintiffs were not necessary parties; that the fact that 'a claim or series of claims has been filed against the purported insured is of no significance in determining whether or not the insurance relationship ever existed.' We will consider Western States Mut. Auto. Ins. Co. v. May further after examining the cases to the contrary.

There is ample authority holding that the plaintiffs in the underlying tort action are not in privity with the insured, that the insurance policy is one against liability and not against loss, that the plaintiffs' rights accrued at the time of the accident and were not cut off in a later decree entered in proceedings to which the plaintiffs were not parties. New Amsterdam Casualty Co. v. Murray, 242 F.2d 549 (6th Cir., 1957); Spann v. Commercial Standard Ins. Co., 82 F.2d 593 (8th Cir., 1936); Dransfield v. Citizens Casualty Co., 5 N.J. 190, 74 A.2d 304, 18 A.L.R.2d 887 (1950); Shapiro v. Republic Indemnity Co., 52 Cal.2d 437, 341 P.2d 289 (1959); Hocken v. Allstate Insurance Co., 235 Mo.App. 991, 147 S.W.2d 182 (1941); Bailey v. United States F. & G. Co., 185 S.C. 169, 193 S.E. 638 (1937); Storm v. Nationwide Mutual Ins. Co., 199 Va. 130, 97 S.E.2d 759, 69 A.L.R.2d 849 (1957); Southern Farm Bureau Cas. Ins. Co. v. Robinson, 236 Ark. 268, 365 S.W.2d 454 (1963).

In New Amsterdam Casualty Co. v. Murray, supra, the defendant's insurance company brought suit in Virginia to cancel the insurance on the ground that it was procured by false representations. A default judgment was entered, cancelling the policy as of a date before the accident. The party injured in the accident, who was not made a party to the Virginia action and had no knowledge of it, brought suit in Kentucky and obtained a judgment. He then sued the defendant's insurance company, which defended on the ground that the Virginia judgment cancelling the policy was binding on the plaintiff, regardless of the fact that the latter was not a party to the suit. The court held that as to the insurance company, the injured party's rights arose upon the happening of the accident and could not thereafter be abridged by the judgment to which she was not a party, citing Spann v. Commercial Standard Ins. Co., supra. The insurance policy was for indemnity against liability, and...