Travelers Fire Ins. Co. v. Ranney-Davis Mercantile Co.

• Decision Date: 25 March 1949
• Docket Number: No. 3795-3797.,3795-3797.
• Citation: 173 F.2d 844
• Parties: TRAVELERS FIRE INS. CO. v. RANNEY-DAVIS MERCANTILE CO. NEW YORK UNDERWRITERS INS. CO. v. RANNEY-DAVIS MERCANTILE CO. GRAIN DEALERS NAT. MUT. FIRE INS. CO. et al. v. RANNEY-DAVIS MERCANTILE CO.
• Court: U.S. Court of Appeals — Tenth Circuit

173 F.2d 844 (1949)

TRAVELERS FIRE INS. CO. v. RANNEY-DAVIS MERCANTILE CO. NEW YORK UNDERWRITERS INS. CO. v. RANNEY-DAVIS MERCANTILE CO. GRAIN DEALERS NAT. MUT. FIRE INS. CO. et al. v. RANNEY-DAVIS MERCANTILE CO.

Nos. 3795-3797.

United States Court of Appeals Tenth Circuit.

March 25, 1949.

COPYRIGHT MATERIAL OMITTED

F. A. Rittenhouse, of Oklahoma City, Okl. (Walter D. Hanson, Olive R. Rittenhouse, and John F. Webster, all of Oklahoma City, Okl., and W. D. Jochems, J. Wirth Sargent, and Emmet A. Blaes, all of Wichita, Kan., on the brief), for appellants.

W. L. Cunningham, of Arkansas City, Kan. (A. M. Dean, D. Arthur Walker, Wm. E. Cunningham, and William R. Howard, all of Arkansas City, Kan., on the brief), for appellee.

Before BRATTON, HUXMAN, and MURRAH, Circuit Judges.

HUXMAN, Circuit Judge.

Ranney-Davis Mercantile Company is a Kansas corporation with its principal place of business and head office in Arkansas City, Kansas. It was authorized to do business in Oklahoma. It operated a wholesale grocery and merchandise business carried on in a building owned by it at Woodward, Oklahoma. It took out three separate policies of insurance on the building, fixtures and equipment with each of the appellant insurance companies, insuring against all loss resulting from fire, lightning, wind storms, etc. All three policies were standard form Oklahoma policies and were substantially alike in coverage. All the insurance companies were duly licensed to do business in both Oklahoma and Kansas.

On April 9, 1947, during the coverage period, a tornado partially destroyed the building. Being a partial loss, the 90% co-insurance clause of the policies, under which the Mercantile Company was a co-insurer to the extent that 90% of the value of the building exceeded the insurance in force, applied. A dispute arose between the insured and the companies as to the amount of their liability by virtue of the co-insurance clause. Failing to reach a settlement, the Mercantile Company instituted a suit for $6,000 against the Travelers Fire Insurance Company at Wichita, Kansas, in the United States District Court for the District of Kansas; a second suit for $6,000 in the same court against the New York Underwriters Insurance Company; and a third suit for $12,000 against the Grain Dealers National Fire Insurance Company et al., in the State District Court of Cowley County, Kansas. This last suit was removed to the United States District Court for the District of Kansas, sitting at Wichita, Kansas. There was diversity of citizenship between the Mercantile Company and the three insurance companies.

The three cases were consolidated and were tried to the court with a jury sitting in an advisory capacity. Special questions were submitted to the jury, and based on its answers, judgment was entered August 12, 1948, against the Travelers Fire Insurance Company for $5,036.85; against the New York Underwriters Insurance Company for $5,036.85; and against the Mills Mutuals consisting of the Grain Dealers National Mutual Fire Insurance Company, Pennsylvania Millers Mutual Fire Insurance Company, Millers Mutual Fire Insurance Association, Michigan Millers Mutual Fire Insurance Company, Western Millers Mutual Fire Insurance Company, and The Millers Mutual Fire Insurance Company, for $10,973.70 with interest on such judgment of 6% from October 20, 1947. This appeal followed.

It is urged that the trial court lacked jurisdiction and therefore erred in overruling appellants' motion to quash service of summons. Service was had on the appellants by serving the Commissioner of Insurance as required by Kansas law in case of foreign insurance companies authorized to do business in Kansas.¹

It is appellants' position that under this Kansas Statute, foreign insurance companies authorized to do business in Kansas may be sued in that state and served with summons directed to the Insurance Commissioner only with respect to a cause of action arising by reason of business done in the state. They take the position that since the building was located in Woodward, Oklahoma, and the policies were written by their agents in Woodward, on approved Oklahoma forms, the transactions were Oklahoma transactions and that no business was done in Kansas with respect to these policies. We doubt whether the contention that no business with respect to these policies was transacted in Kansas is well taken under all the facts in this case, but since, in our opinion, it is not decisive of the question, the subject will not be developed further, and for the purpose of this opinion only it may be assumed that the business transacted in connection with these policies was done in Oklahoma.

It will be noted that nowhere in the Kansas Statute relating to an action in the state court is the action limited to business transactions arising in the state. The consent which is required of foreign insurance companies is that actions may be commenced against them. The only limitation is that the action must be filed in the county in which it arose or in which the plaintiff resides. If the controversy, which is but another name for a cause of action, arose in Kansas, whether with respect to a transaction had within or without the state, suit may be filed either in the county in which the cause of action arose or in the county in which the plaintiff resides. This construction seems to be required by the clear language of the statute.

All legislation making foreign corporations amenable to judicial process in the state in which they seek the privilege of doing business is predicated upon the right of the state to protect its citizens in their controversies with such corporations by requiring that the same be adjudicated in the courts of the state rather than compelling its citizens to travel to remote places to litigate such controversies. Judicial decisions upholding such legislation are likewise founded upon the same logic. No sound reason appears why the state should not have power to compel foreign corporations seeking entrance to the state to agree that while engaged in business under such license, the state court should have jurisdiction of all controversies arising between it and the citizens of the state.

The Supreme Court cases cited by appellants do not sustain their contention that the power of a state to compel foreign corporations, licensed in the state, to litigate their controversies with citizens thereof in the state courts is limited to causes of action arising with respect to business transacted in the state.

The question in Old Wayne Mutual Life Association v. McDonough, 204 U.S. 8, 27 S.Ct. 236, 241, 51 L.Ed. 345, was whether an Indiana insurance company which was doing business in Pennsylvania, without having complied with the Pennsylvania statute for service, could be sued in the court of Pennsylvania by a Pennsylvania citizen on a contract of insurance made in Indiana. Applying the doctrine of implied consent, since the insurance company had not specifically consented to the provisions of the statute, the court held that, "While the highest considerations of public policy demand that an insurance corporation, entering a state in defiance of a statute which lawfully prescribes the terms upon which it may exert its powers there, should be held to have assented to such terms as to business there transacted by it, it would be going very far to imply, and we do not imply, such assent as to business transacted in another state, although citizens of the former state may be interested in such business." In Simon v. Southern Railway Company, 236 U.S. 115, 35 S.Ct. 255, 59 L.Ed. 492, the Supreme Court construed a similar statute of Louisiana applying to railroads and held it did not contemplate suits against foreign corporations authorized to do business in the state with respect to causes of action arising outside the state.² In Morris and Company v. Skandinavia Insurance Company, 279 U.S. 405, 49 S.Ct. 360, 73 L. Ed. 762, the Supreme Court construed a similar statute of the state of Mississippi and held that it was limited to controversies growing out of transactions within the state. The Supreme Court called attention to the fact that Mississippi had not construed its statute. In Mitchell Furniture Company v. Selden Breck Construction Company, 257 U.S. 213, 42 S.Ct. 84, 85, 66 L.Ed. 201, the Supreme Court construed a similar Ohio statute and held that it was limited to causes of action arising out of transactions within the state. In none of these cases was the question involved whether a statute could lawfully subject foreign corporations, authorized to do business in the state, to the jurisdictions of its courts with respect to a cause of action arising with citizens of the state, although growing out of transactions carried on outside the state. The opinion of the Supreme Court in the Mitchell Furniture Company case, supra, however, indicates that a statute relating to all causes of action, whether growing out of business transactions within or without the state, would be valid. Thus the court said:

"Of course when a foreign corporation appoints one as required by statute it takes the risk of the construction that will be put upon the statute and the scope of the agency by the State Court. Pennsylvania Fire Insurance Company v. Gold Issue Mining and Milling Company, 243 U.S. 93, 37 S.Ct. 344, 61 L.Ed. 610. * * * Unless the state law either expressly or by local construction gives to the appointment a larger scope, we should not construe it to extend to suits in respect of business transacted by the foreign corporation elsewhere, at least if begun, as this was, when the long previous appointment of the agent is the only ground for imputing to the defendant an even technical presence."

The Kansas Supreme Court has held that in order to acquire jurisdiction, a cause of action must have arisen in the county in which the suit is instituted or the plaintiff must reside...