Sykes v. Beal

• Decision Date: 16 April 1975
• Docket Number: Civ. No. H-74-379.
• Citation: 392 F. Supp. 1089
• Court: U.S. District Court — District of Connecticut
• Parties: Bernard Samuel SYKES v. William H. BEAL, Jr. and C. Harrell, Inc.

392 F. Supp. 1089

Bernard Samuel SYKES v. William H. BEAL, Jr. and C. Harrell, Inc.

Civ. No. H-74-379.

United States District Court, D. Connecticut.

April 16, 1975.

M. Donald Cardwell, Hartford, Conn., for plaintiff.

Frank DeNezzo, Hartford, Conn., for defendants.

RULING ON MOTION TO DISMISS

BLUMENFELD, District Judge.

The plaintiff in this suit was allegedly injured in an automobile accident on the New Jersey Turnpike by a tractor-trailer rig driven by the defendant Beal in the course of his employment with the defendant C. Harrell, Inc. Both of the defendants are citizens of New Jersey; Sykes is a citizen of Connecticut. The case is in this court pursuant to 28 U.S. C. § 1332 (1970); more than $10,000, exclusive of interest and costs, is assertedly in controversy.

Service was effected on the defendants in New Jersey: Mr. Harrell was served as an officer of his corporation, and a copy of the summons and complaint were left with someone of suitable age and discretion at the home of Mr. Beal. Both defendants challenge this service, moving to dismiss under Fed.R.Civ.P. 12(b)(2) for lack of personal jurisdiction. The defendants correctly point out that personal service outside of this district is improper except pursuant to a state long-arm statute, Fed.R.Civ.P. 4(e); Heyman v. Kline, 344 F.Supp. 1081, 1087 (D.Conn.1970), rev'd on other grounds, 456 F.2d 123 (2d Cir.), cert. denied, 409 U.S. 847, 93 S.Ct. 53, 34 L.Ed.2d 88 (1972), or in the limited class of cases enumerated by Fed.R.Civ. P. 4(f), which is not apposite here.

The plaintiff does not dispute that his attempted service was improper. He does, however, argue that the case should not be dismissed at this point. In this position he is correct if this court can obtain jurisdiction through some other form of service. See Grammenos v. Lemos, 457 F.2d 1067 (2d Cir. 1972); Aquascutum of London, Inc. v. S. S. Am. Champion, 426 F.2d 205, 210 (2d Cir. 1970).¹ The plaintiff argues that the case may still proceed as a quasi in rem action via local garnishment of the "debt" owed the defendants by reason of their insurance company's duties to them under an automobile accident insurance policy. See Rivera v. New Jersey Bell Tel. Co., 55 F.R.D. 166 (E.D.N. Y.1972); Seider v. Roth, 17 N.Y.2d 111, 269 N.Y.S.2d 99, 216 N.E.2d 312 (1966).² If Connecticut law provides for jurisdiction founded upon garnishment of such "property," and if basing jurisdiction upon such a garnishment would not offend the due process clause in the circumstances of this case, see note 3 infra, the plaintiff's suit may proceed in this court. See Fed.R.Civ.P. 4(e)(2); Rivera v. New Jersey Bell Tel. Co., 55 F.R.D. 166 (E.D.N.Y.1972); Conn.Gen.Stat.Ann. § 52-329 (Supp. 1975). It is clear, however, that this is the only theory on which the suit may be maintained here; if it fails, therefore, the case must be dismissed. See Grammenos v. Lemos, 457 F.2d 1067 (2d Cir. 1972).

The main authority for Sykes' position is Seider v. Roth, 17 N.Y.2d 111, 269 N.Y.S.2d 99, 216 N.E.2d 312 (1966). In Seider the plaintiff, a New York resident injured in a Vermont automobile accident, sued Lemiux, inter alia, a resident of Quebec. As a basis for jurisdiction over Lemiux, the plaintiff garnished Lemiux's insurance company (incorporated in Connecticut and doing business in New York) by reason of its "debt" consisting of its duties to defend and indemnify Lemiux, to investigate the accident, and to pay certain medical expenses of the insured. Most of the prior case law held that contingent obligations may not be garnished, see Comment, Garnishment of Intangibles: Contingent Obligations and the Interstate Corporation, 67 Colum.L.Rev. 550, 553 (1967), and it would have seemed that the duty to indemnify was contingent upon a finding that the insured was liable to the plaintiff. But, relying on In re Estate of Riggle, 11 N.Y.2d 73, 226 N.Y.S.2d 416, 181 N.E.2d 436 (1962), the Court of Appeals in Seider implicitly held that all the insurer's "debts" to Lemiux matured as soon as the accident occurred. 17 N.Y.2d at 113, 269 N.Y.S. 2d at 101, 216 N.E.2d 312. Thus the court reasoned that the insurer could be garnished in New York (because the insurer was subject to process in New York) in order to obtain quasi in rem jurisdiction in the New York courts.³

The foregoing analysis of Seider reveals the three questions that must be answered under Connecticut law⁴ in order to decide this case. First, does such a noncontingent obligation as the insurer's duty to defend⁵ constitute a "debt"?⁶ Second, does a contingent liability constitute a "debt"? Third, if a contingent liability is not a "debt," does an insurer's duty to indemnify its insured under an automobile accident insurance policy mature as soon as the accident occurs and thus constitute a "debt" for purposes of garnishment in Connecticut as Seider held that it does under New York law? The first and third questions are novel ones for Connecticut law.⁷

A. The Duty to Defend

Connecticut provides by statute for attachment or garnishment "when a debt is due from any person to a defendant" "in any civil action in which a judgment or decree for the payment of money may be rendered." Conn.Gen. Stat.Ann. § 52-329 (Supp.1975). See generally Conn.Gen.Stat.Ann. §§ 52-329 to 52-346 (1960; Supp.1975). There are several analytic forks in the road that must be traversed in considering whether the courts of this state would hold that the duty to defend is a garnishable "debt." Commentators and other courts have, in considering similar questions, implicitly viewed the duty to defend in two different ways. One school of thought seems to be that the duty to defend is simply a duty to pay the amount of money necessary for the insured's defense.⁸ The other school of thought is that the duty to defend is a duty to perform a service:

"A typical defense clause reads: `The company shall . . . defend in his the insured's name and behalf any suit covered by this policy . . even if such suit is groundless, false or fraudulent; but the company shall have the right to make such investigation, negotiation and settlement . . . as may be deemed expedient . . . .' 4 Richards on the Law of Insurance 2043 (5th ed. 1952). The wording of this clause rebuts any notion that the insurer promises only to pay money for a defense provided by some independent attorney. This conclusion is further supported by the fact that the usual insurance contract gives the insurer complete control over the arrangements for and conduct of the defense. See 4 id. at 2050."

19 Stan.L.Rev. 654, 656 n. 13 (1967). The view that the obligation to defend is a duty to provide services seems to be the one Connecticut would adopt:⁹ the Connecticut cases speak of a breach of the duty to defend occurring when a request to defend is refused, not when a request for reimbursement of counsel fees is denied. See Missionaries of the Co. of Mary, Inc. v. Aetna Cas. & Sur. Co., 155 Conn. 104, 109, 113, 230 A.2d 21 (1967); Lewis v. Michigan Millers Mut. Ins. Co., 154 Conn. 660, 662, 667, 228 A. 2d 803 (1967).

The next issue to resolve is whether the duty to defend qua duty to perform services is subject to garnishment. There are two somewhat interrelated possible approaches to this question also, and there is no clear indication of which the Connecticut courts would adopt. The first approach is to consider that the duty to defend may be translated into some liquidated amount of money, which might be treated as a debt for the purpose of garnishing the obligor insurance company. See, e. g., Robinson v. O. F. Shearer & Sons, Inc., 429 F.2d 83, 86 (3d Cir. 1970); Simpson v. Loehmann, 21 N.Y.2d 305, 314, 315, 287 N.Y.S.2d 633, 640, 641, 234 N.E.2d 669 (1967) (Breitel, J., concurring). The second possible approach is that the duty may not be translated into money, but nonetheless remains as an obligation to perform the services which may be the subject of garnishment.

Courts in other states have refused to allow garnishment under the first approach because of the inherent unfairness that it would work on a party to a contract who had obligated himself to perform services. See 19 Stan.L.Rev. 654, 655-656 (1967) and cases cited therein. Consider, for instance, a hypothetical starving artist who is paid in advance to paint a portrait and then pays off his debts and buys food with his commission. If he stands ready and willing to paint a portrait, it would be very unfair to garnish the liquidated value of this obligation and demand money from him.¹⁰ Furthermore, allowing garnishment under the first approach might subject the insurer, as a practical matter, to double liability on the duty to defend. An insurer has not only a duty to defend but an interest in defending, for it has a substantial stake in the outcome of the litigation. See Podolsky v. Devinney, 281 F.Supp. 488, 499 (S.D.N.Y.1968); 19 Stan.L.Rev. 654, 656 (1967). Thus it may well feel the necessity of defending even after its obligation to defend has been attached. If the plaintiff wins, the insurer will lose not only the costs of the defense but also the plaintiff's recovery from the prior attachment of the duty to defend. See Robinson v. O. F. Shearer & Sons, Inc., 429 F.2d 83, 86 (3d Cir. 1970); cf. Podolsky v. Devinney, 281 F.Supp. 488, 495 (S.D.N.Y.1968). This result may not be unconstitutional, cf. Western Union Tel. Co. v. Pennsylvania, 368 U.S. 71, 82 S.Ct. 199, 7 L.Ed.2d 139 (1961), for the insurer is under no legal compulsion to incur double liability, see 19 Stan.L.Rev. 654, 656 n.17 (1967), but it is certainly unfair. In view of these problems, it seems unlikely that Connecticut would allow garnishment of a liquidated duty to defend qua duty to provide services.¹¹Cf. Molloy v. Prudential Ins. Co. of America, 129 Conn. 251, 27 A.2d 387 (1942) (held that two life insurance policies with no immediate right of cash redemption could not be reached by garnishment; the court did...