Title: BENHAM v WOLTERMANN

State: montana

Issuer: Montana Supreme Court

Document:

No. 82-134 I N THE S U P R E M E COURT O F THE STATE O F MONTANA ROBERT S. BENHAM a s r e c e i v e r of M A N U F A C T U R E R S and W H O L E S A L E R S INDEMNITY EXCHANGE, P l a i n t i f f and Appellant, V S . A G N E S WOLTERMANN, GARY G. W O L T E R M A N N and RONALD LEE W O L T E R M A N N , Defendants and Respondents. Appeal from: D i s t r i c t Court of t h e Thirteenth J u d i c i a l D i s t r i c t , I n and f o r t h e County of Yellowstone IIonorable Robert Wilson, Judge presiding. Counsel of Record: For Appellant: Hauf and Forsythe, B i l l i n g s , Montana John Hollow, Helena, Montana Sidney Delong argued, Denver, Colorado For Respondents: Thomas E. Boland argued, Great F a l l s , Montana Submitted: September 8, 1982 Decided: PTovenber 3 , 1982 M r . J u s t i c e John Conway H a r r i s o n d e l i v e r e d t h e Opinion of t h e C o u r t . A p p e l l a n t , Benham, f i l e d a c o m p l a i n t i n t h e T h i r t e e n t h J u d i c i a l D i s t r i c t i n and f o r t h e County of Yellowstone, on May 29, 1981, t o c o l l e c t on a judgment taken a g a i n s t r e s p o n d e n t s , t h e Woltermanns, i n Colorado on October 21, 1980. The Woltermanns l e t t h e Colorado judgment be taken a g a i n s t them by d e f a u l t . When t h e c o m p l a i n t on t h e judgment was f i l e d i n Montana D i s t r i c t C o u r t , t h e Woltermanns moved f o r summary judgment. The Montana District Court g r a n t e d t h e Woltermannls motion and h e l d t h e Colorado D i s t r i c t Court had no p e r s o n a l j u r i s d i c t i o n o v e r t h e Woltermanns and t h e judgment e n t e r e d i n Colorado was void and c o u l d n o t be g i v e n f u l l f a i t h and c r e d i t i n t h e S t a t e of Montana. From t h e summary j udgment , Benham a p p e a l s . I n 1974, t h e Woltermanns purchased a one-year i n s u r a n c e p o l i c y i s s u e d by Manufacturers and W h o l e s a l e r s Indemnity Exchange ( M & W ) t h r o u g h t h e Harris I n s u r a n c e Agency of Columbus, Montana. M & W is a r e c i p r o c a l i n t e r i n s u r a n c e exchange o r g a n i z e d under s e c t i o n 10-13-101, e t s e q . , Colo .Rev . S t a t . ( 1973 ) . R e c i p r o c a l i n t e r i n s u r a n c e exchanges are recognized i n Montana by s e c t i o n 33-5-101 e t s e q . , MCA. An i n t e r i n s u r a n c e exchange is a method of c r e a t i n g an i n s u r a n c e fund whereby t h e p o l i c y h o l d e r s , known as s u b s c r i b e r s , o p e r a t e i n d i v i d u a l l y and c o l l e c t i v e l y through a n a t t o r n e y - i n - f a c t to p r o v i d e r e c i p r o c a l i n s u r a n c e among them- s e l v e s . V i a an exchange of indemnity, each s u b s c r i b e r is b o t h an i n s u r e d and a n i n s u r e r of each of t h e o t h e r s u b s c r i b e r s . Exchange premiums t a k e t h e form of i n i t i a l d e p o s i t s made by e a c h s u b s c r i b e r . A t t h e end of each y e a r t h e s u b s c r i b e r s e i t h e r r e c e i v e t h e e x c e s s of premiums paid o v e r claims and expenses p a i d , or become c o n t i n g e n t l y l i a b l e f o r e x c e s s claims and expen- ses o v e r premiums p a i d . Thus, t h e s u b s c r i b e r s c a n r e c e i v e a r e t u r n i n a good y e a r b u t may have to pay a d d i t i o n a l premiums i n a bad y e a r . I n 1975, M & W 1 s claims and expenses exceeded t h e total amount of premiums p a i d . Thus, M & W was placed i n t o r e c e i v e r s h i p and t h e r e c e i v e r , Benham, i n i t i a t e d l a w s u i t s i n t h e S t a t e of Colorado a g a i n s t former p o l i c y h o l d e r s of M & W i n o r d e r t o collect an assessment l e v i e d by him. The assessment amounts were e q u a l t o one y e a r ' s annual premium paid by t h e p o l i c y h o l d e r s f o r e a c h p o l i c y i n f o r c e d u r i n g 1974 or 1975. The Woltermanns, as p o l i c y h o l d e r s of M & W, were sued by Benham i n one such a c t i o n e n t i t l e d , Robert S. Benham, as R e c e i v e r - - - - -- - - . .- . - ----- of Manufacturers and W h o l e s a l e r s Indemnity Exchange v. Frank . - - - - Whitson, Jr. d/b/a A-1 Auto P a r t s and Used C a r , e t a l . T h i s -- - - . - - - - -- - - a c t i o n was f i l e d i n t h e District C o u r t , i n and f o r t h e C i t y and County of Denver, S t a t e of Colorado. The Woltermanns were s e w e d w i t h a copy of t h e summons and complaint by t h e S t i l l w a t e r County s h e r i f f on J u n e 3 , 1980. The Woltermanns d i d not a p p e a r i n t h e Colorado a c t i o n and t h e Colorado District Court e n t e r e d a d e f a u l t judgment a g a i n s t them on O c t o b e r 1, 1980, i n t h e amount Benham t h e n f i l e d a complaint on t h e Colorado judgment i n t h e District Court of t h e T h i r t e e n t h J u d i c i a l District, i n and f o r t h e County of Yellowstone, S t a t e of Montana. The Woltermanns moved f o r summary judgment on t h e c o m p l a i n t . The Montana D i s t r i c t Court g r a n t e d t h e motion f o r summary judgment and h e l d t h e Colorado D i s t r i c t Court had no p e r s o n a l j u r i s d i c t i o n o v e r t h e Woltermanns. I n h o l d i n g t h a t t h e judgment taken by d e f a u l t i n Colorado was v o i d , t h e c o u r t h e l d t h a t it could not be g i v e n f u l l f a i t h and c r e d i t i n t h e S t a t e of Montana. Benham a p p e a l s t h e D i s t r i c t C o u r t ' s summary judgment . The i s s u e r a i s e d on a p p e a l is whether t h e Montana D i s t r i c t C o u r t e r r e d i n g r a n t i n g t h e Woltermanns' motion f o r summary judgment, and i n f i n d i n g t h a t t h e Colorado D i s t r i c t Court d i d n o t have j u r i s d i c t i o n o v e r t h e Woltermanns when judgment was e n t e r e d a g a i n s t them by d e f a u l t . Benham claims Colorado h a s j u r i s d i c t i o n of t h e Woltermanns v i a s e c t i o n 13-1-124, Colo.Rev.Stat., which p r o v i d e s : " J u r i s d i c t i o n - - -- - of c o u r t s . (1) Engaging i n any act enumerated i n t h i s s e c t i o n by any p e r s o n , whether or n o t a r e s i d e n t of t h e state of Colorado, e i t h e r i n person o r by an a g e n t sub- m i t s such p e r s o n , and, i f a n a t u r a l p e r s o n h i s p e r s o n a l r e p r e s e n t a t i v e to t h e j u r i s d i c t i o n of t h e c o u r t s of t h i s state concerning any cause o f a c t i o n a r i s i n g from: " ( a ) t h e t r a n s a c t i o n of any b u s i n e s s w i t h i n t h i s s t a t e ; " ( d ) c o n t r a c t i n g to i n s u r e any p e r s o n , pro- p e r t y , o r r i s k r e s i d i n g o r l o c a t e d w i t h i n t h i s state a t t h e t i m e of c o n t r a c t i n g . " Benham a r g u e s Colorado had j u r i s d i c t i o n o v e r t h e Woltermanns because as s u b s c r i b e r s t o t h e i n s u r a n c e exchange t h e Woltermanns b o t h t r a n s a c t e d i n s u r a n c e b u s i n e s s i n Colorado through t h e i r a p p o i n t e d a t t o r n e y - i n - f a c t , and i n s u r e d r i s k s i n Colorado through t h e exchange of indemnity. However, t h e Colorado long-arm stat- u t e cannot be u t i l i z e d to o b t a i n p e r s o n a l j u r i s d i c t i o n where it would deny o n e ' s r i g h t to due p r o c e s s of law. I n S a f a r i O u t f i t t e r s , I n c . v . S u p e r i o r Court ( 1 9 6 8 ) r 167 Colo. 456, 448 P.2d 783, t h e Colorado Supreme Court h e l d : "By e n a c t i n g t h e l a t t e r s t a t u t e s , o u r l e g i s l a t u r e intended to extend t h e j u r i s d i c - t i o n of o u r c o u r t s to t h e f u l l e s t e x t e n t p e r m i t t e d by t h e due p r o c e s s c l a u s e of t h e United S t a t e s C o n s t i t u t i o n . " The United S t a t e s Supreme Court h a s addressed t h e q u e s t i o n of p e r s o n a l j u r i s d i c t i o n s e v e r a l times. I n I n t e r n a t i o n a l Shoe Co. v . S t a t e o f Washington ( 1 9 4 5 ) r 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, t h e Supreme Court s t a t e d : ". . . due p r o c e s s r e q u i r e s o n l y t h a t i n o r d e r to s u b j e c t a d e f e n d a n t to a judgment - - i n p e r - sonam, i f he be not p r e s e n t w i t h i n t h e terri- - - t o r y of t h e forum, he have c e r t a i n minimum c o n t a c t s w i t h it such t h a t t h e maintenance of t h e s u i t does n o t o f f e n d ' t r a d i t i o n a l n o t i o n s o f f a i r p l a y and s u b s t a n t i a l j u s t i c e . I " 3 26 U.S. a t 316, 66 S.Ct. a t 158. The Supreme Court f u r t h e r s t a t e d : "Whether due p r o c e s s is s a t i s f i e d must depend r a t h e r upon t h e q u a l i t y and n a t u r e of t h e a c t i v i t y i n r e l a t i o n t o t h e f a i r and o r d e r l y a d m i n i s t r a t i o n of t h e laws which it was t h e purpose of t h e due p r o c e s s c l a u s e to i n s u r e . " 326 U.S. a t 319, 66 S.Ct. a t 160. The d e t e r m i n a t i o n of whether t h e r e a r e s u f f i c i e n t minimum c o n t a c t s t o w a r r a n t p e r s o n a l j u r i s d i c t i o n h i n g e s upon t h e f a c t s of each i n d i v i d u a l case. I n May v. F i g g i n s ( 1 9 8 0 ) , - - . . - Mont. - - - - . -. 607 P.2d 1132, 37 St.Rep. 493, t h i s Court t r a c e d t h e development and a p p l i c a t i o n of t h e minimum c o n t a c t s r u l e i n t h e United S t a t e s Supreme C o u r t . W e do n o t f i n d it n e c e s s a r y to ela- b o r a t e on t h e r u l e h e r e . However , t h e f a c t s of - May, s u p r a , are h e l p f u l i n d e t e r m i n i n g t h e outcome of t h e p r e s e n t case. I n -- May, s u p r a , F i g g i n s was a road c o n t r a c t o r who d i d road work i n Montana. P u r s u a n t to a c o l l e c t i v e b a r g a i n i n g compliance agreement w i t h the t e a m s t e r ' s union, F i g g i n s was r e q u i r e d to make c o n t r i b u t i o n s to t h e Teamsters Pension T r u s t Fund a t t h e deposi- t o r y bank i n Denver, Colorado. F i g g i n s s e n t t h i r t y - f i v e checks t o t h e t r u s t account i n Denver, Colorado. A f t e r an a u d i t , t h e a d m i n i s t r a t o r of t h e t r u s t brought an a c t i o n i n Colorado t o c o l l e c t d e l i n q u e n t employer c o n t r i b u t i o n s from F i g g i n s . F i g g i n s was s e r v e d w i t h a summons i n Montana, b u t he d i d n o t defend t h e l a w s u i t and judgment was t a k e n a g a i n s t him by d e f a u l t . The p l a i n t i f f t h e n f i l e d a complaint on t h e judgment i n Montana. F i g g i n s moved f o r summary judgment claiming Colorado had no per- s o n a l j u r i s d i c t i o n b u t t h e Montana District Court denied summary judgment and found f o r t h e p l a i n t i f f . On a p p e a l t h i s Court r e v e r s e d t h e d e c i s i o n of t h e lower c o u r t because t h e r e was an i n s u f f i c i e n t showing of t h e r e q u i s i t e minimum c o n t a c t s as man- d a t e d by t h e United S t a t e s Supreme C o u r t . T h i s Court h e l d a l t h o u g h F i g g i n s had s e n t checks t o a Colorado t r u s t a c c o u n t , t h e r e w a s no a c t by which t h e d e f e n d a n t p u r p o s e l y a v a i l e d himself o f t h e p r i v i l e g e of conducting a c t i v i t i e s w i t h i n the forum s t a t e , t h u s invoking t h e b e n e f i t s and p r o t e c t i o n s of its laws. T h i s r e q u i r e m e n t w a s d e f i n e d by t h e United S t a t e s Supreme Court i n Hanson v. Denkla ( 1 9 5 8 ) , 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283. I n t h e p r e s e n t c a s e we f i n d a similar f a c t u a l s i t u a t i o n . The Woltermanns purchased an i n s u r a n c e p o l i c y from an i n s u r a n c e a g e n t i n Columbus, Montana. They d i d n o t even know t h e name of t h e company t h a t i s s u e d t h e p o l i c y . The Woltermanns s i m p l y had no c o n t a c t w i t h t h e S t a t e of Colorado. T h i s type of i n s u r a n c e "company" is n o t what was contemplated when t h e long-arm s t a t u t e s were d r a f t e d . These s t a t u t e s were intended to remedy t h e type of s i t u a t i o n t h a t arose i n MaGee v. I n t e r n a t i o n a l L i f e I n s . C o . ( 1 9 5 7 ) , 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223. I n Magee, a b e n e f i c i a r y of a l i f e i n s u r a n c e p o l i c y purchased by t h e d e c e d e n t from an Arizona company, brought s u i t i n C a l i f o r n i a t o e n f o r c e t h e terms of t h e p o l i c y . The o n l y c o n n e c t i o n t h e i n s u r a n c e com- pany had w i t h t h e S t a t e of C a l i f o r n i a was t h a t it had mailed a r e i n s u r a n c e certificate t o t h e d e c e d e n t i n C a l i f o r n i a and l a t e r d e l i v e r e d t h e i n s u r a n c e c o n t r a c t t h e r e . When t h e Texas c o u r t s r e f u s e d to g i v e f u l l f a i t h and c r e d i t to a judgment t h e b e n e f i - c i a r y o b t a i n e d i n C a l i f o r n i a on t h e grounds t h a t C a l i f o r n i a had no p e r s o n a l j u r i s d i c t i o n o v e r t h e i n s u r a n c e company, t h e United S t a t e s Supreme Court r e v e r s e d holding t h e r e was p e r s o n a l j u r i s - d i c t i o n i n C a l i f o r n i a based on t h e minimum c o n t a c t s r a t i o n a l e of I n t e r n a t i o n a l - -- Shoe, s u p r a . The Court s t a t e d : " I t cannot be denied t h a t C a l i f o r n i a h a s a m a n i f e s t i n t e r e s t i n p r o v i d i n g e f f e c t i v e means o f r e d r e s s f o r its r e s i d e n t s when t h e i r i n s u r e r s r e f u s e t o pay claims. These resi- d e n t s would be a t a s e v e r e d i s a d v a n t a g e i f t h e y were f o r c e d to f o l l o w an i n s u r a n c e com- pany t o a d i s t a n t S t a t e i n o r d e r to hold it l e g a l l y a c c o u n t a b l e . When claims were small o r moderate i n d i v i d u a l s could n o t a f f o r d t h e cost of b r i n g i n g an a c t i o n i n a f o r e i g n forum - t h u s i n e f f e c t making t h e company judgment proof ." 355 U.S. a t 223, 78 S.Ct. a t 201. Obviously, t h i s is n o t t h e same type of s i t u a t i o n t h a t c o n f r o n t s u s i n t h e p r e s e n t case. F u r t h e r , t h e r e c o r d does n o t i n d i c a t e t h e Woltermanns pur- p o s e l y a v a i l e d themselves of t h e p r i v i l e g e of conducting act i v i - t i e s i n t h e S t a t e of Colorado. A s was s t a t e d above, t h e Woltermanns d i d n o t even know t h e name of t h e i n s u r a n c e company t h a t i s s u e d t h e p o l i c y . Thus, we f i n d t h e r e w a s not t h e r e q u i r e d minimum c o n t a c t w i t h t h e S t a t e of Colorado n e c e s s a r y to g i v e t h a t state p e r s o n a l j u r i s d i c t i o n of t h e Woltermanns, n o r is t h e r e any showing t h a t the Woltermanns purposely a v a i l e d themselves t o Colorado's j u r i s d i c t i o n . Judgment is a£ f irmed . W e concur: Chief ~ u s ' t i c e cveeq J u s t i c e s Honorable L. C. Gulbrandson, D i s t r i c t Judge, s i t t i n g i n p l a c e of M r . J u s t i c e John C. Sheehy Mr. Justice Frank B. Morrison, Jr., dissenting: I respectfully dissent. The majority correctly notes that Colorado's "long- arm" statute provides for jurisdiction where persons have contracted to insure any person, property, or risk located within the State of Colorado. There can be little question that the defendants, Woltermann, contracted to insure other members of the exchange who resided in Colorado, and thereby fall within the ambent of Colorado's "long-arm" statute. The majority apparently feels that Colorado's "long- arm" statute offends due process notions articulated in International Shoe Co. v. State of Washington (1945), 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95. However, since the Woltermanns contracted to insure people and risks in the State of Colorado, they did business within the State of Colorado and no violence is done to due process concepts. As the majority opinion points out, Woltermanns dealt through an insurance agency in Columbus, Montana. It is true that Woltermanns may not have fully understood the ramifications of their insurance contract. This is no excuse. Under such circumstances, Woltermanns' remedy would be against their agent. The agent did, in fact, bind the Woltermanns to an insurance contract insuring risks and persons in the State of Colorado thereby subjecting Woltermanns to the jurisdiction of Colorado courts. In my opinion, the majority here denies full faith and credit to a valid judgment of a / District Judge, sitting in place o f M r . ustice John C. Sheehy k