Source: http://openjurist.org/410/f2d/106/minichiello-v-rosenberg-w-stevens-j-w
Timestamp: 2017-08-19 17:42:53
Document Index: 230671832

Matched Legal Cases: ['§ 5201', '§ 1292', '§ 5201', '§ 1257', '§ 320', '§ 5201', '§ 320', '§ 76', '§ 5201', '§ 320', '§ 40', '§ 260', '§ 22', '§ 6202']

410 F2d 106 Minichiello v. Rosenberg W Stevens J W | OpenJurist
410 F. 2d 106 - Minichiello v. Rosenberg W Stevens J W
410 F2d 106 Minichiello v. Rosenberg W Stevens J W
410 F.2d 106
Marie MINICHIELLO, as Executrix of the Estate of Thomas Minichiello, and Marie Minichiello, Appellees,
Oliver ROSENBERG, Appellant.
Elwin W. STEVENS, on behalf of his son, Dennis J. Stevens, an infant over fourteen years of age, and Elwin W. Stevens, individually, Appellees,
Stephen H. TYNG, Sr. and Stephen H. Tyng, Jr., Appellants.
Nos. 202-203.
Docket 32534.
Dockets 32838-32839.
On Rehearing In Banc April 2, 1969.
These two appeals are from orders denying motions to dismiss complaints of New York residents in automobile accident actions against nonresident defendants wherein jurisdiction was predicated on attachment of the defendants' interests in liability insurance policies issued by companies doing business in New York, CPLR §§ 5201, 6202. They require us to consider the constitutionality of the procedure sanctioned by the New York Court of Appeals in the much discussed case of Seider v. Roth, 17 N.Y. 2d 111, 269 N.Y.S.2d 99, 216 N.E.2d 312 (1966), as elaborated in Simpson v. Loehmann, 21 N.Y.2d 305, 287 N.Y.S.2d 633, 234 N.E.2d 669 (1967), motion for reargument denied, 21 N.Y.2d 990, 290 N.Y.S.2d 914, 238 N.E.2d 319 (1968). See also Victor v. Lyon Associates, Inc., Hanover Ins. Co., Appellant, 21 N.Y.2d 695, 287 N.Y.S.2d 424, 234 N.E.2d 459 (1967), appeal dismissed for want of a substantial federal question, 392 U.S. 8, 89 S.Ct. 44, 21 L.Ed.2d 8 (1968).
Marie Minichiello, a resident of New York, brought suit in the Supreme Court of New York for Schuyler County, in her own right and as executrix of her husband Thomas, to recover $205,050 for injuries to Thomas, for his death, for injuries to herself, and for damage to their car in an accident near Harrisburg, Pa., allegedly caused by the negligence of the defendant Rosenberg, a resident of Pennsylvania. An order of attachment was served at an office in New York on Allstate Insurance Co., which had issued to Rosenberg in Pennsylvania a policy insuring against liability in an amount less than the recovery sought. Rosenberg removed the action to the District Court for the Western District of New York and there sought an order dismissing the complaint on the ground that the procedure sanctioned by Seider v. Roth violated the Federal Constitution. Judge Burke denied the motion1 but later made the certificate required by 28 U.S.C. § 1292(b). Since the problem was of obvious importance and the decision ran counter to Judge Croake's in Podolsky v. Devinney, 281 F.Supp. 488 (S.D.N.Y.1968), we granted leave to appeal.
Seider v. Roth received a poor press from the commentators. See, e. g., Reese, The Expanding Scope of Jurisdiction over Non-Residents — New York Goes Wild, 35 Ins. Counsel J. 118 (1968); Comment, Attachment of "Obligations" — A New Chapter in Long-Arm Jurisdiction, 16 Buffalo L.Rev. 769 (1967); Comment, Garnishment of Intangibles: Contingent Obligations and the Interstate Corporation, 67 Colum.L.Rev. 550 (1967); Note, Seider v. Roth: The Constitutional Phase, 43 St. John's L. Rev. 58 (1968); Comment, Quasi in Rem Jurisdiction Based on Insurer's Obligations, 19 Stan.L.Rev. 654 (1967); and a number of comments by Professor David Siegel of St. John's University School of Law, one antedating the Court of Appeals' decision, which have appeared in the annual supplements to CPLR § 5201 in McKinney's Consolidated Laws of New York. In Simpson v. Loehmann, supra, 21 N.Y.2d 305, 287 N.Y.S.2d 633, 234 N.E.2d 669, the court was asked to reconsider Seider v. Roth not only as going beyond the New York attachment statutes but as offending the due process clause of the Fourteenth Amendment, imposing an undue burden on interstate commerce in insurance, and impairing the obligations of the policy. The court reaffirmed its earlier ruling. While only Judges Burke and Scileppi dissented from this, Judges Breitel4 and Bergan concurred solely "on constraint of Seider v. Roth," saying that "only a major reappraisal by the court, rather than the accident of a change in its composition, would justify the overruling of that precedent," which, however, they severely criticized "if only, perhaps, to hasten the day of its overruling or its annulment by legislation."
On the constitutional claims, Chief Judge Fuld, writing for himself and Judge Van Voorhis, summarily disposed of the interstate commerce and impairment of contract obligation arguments, 21 N.Y.2d at 309 n. 2, 287 N.Y.S.2d at 635 n. 2, 234 N.E.2d at 670 n. 2. He then pointed out that under modern views the sufficiency of a basis for jurisdiction depends on "a practical appraisal of the situation of the various parties rather than an emphasis upon somewhat magical and medieval concepts of presence and power." 21 N.Y.2d at 311, 287 N.Y.S.2d at 637, 234 N.E.2d at 672. He stressed the insurer's control of the litigation and that "where the plaintiff is a resident of the forum state and the insurer is present in and regulated by it, the State has a substantial and continuing relation with the controversy." Judge Keating, concurring, reasoned that New York could validly enact a direct action statute in favor of its residents for out-of-state accidents and that there was "no policy reason for not holding that service of process on the real party defendant — the insurer — is sufficient to compel it to defend in this State, provided it transacts business here and is thus subject to the jurisdiction of our courts." 21 N. Y. 2d at 312-314, 287 N.Y.S.2d at 638, 234 N.E.2d at 673. Judges Breitel and Bergan found it unnecessary to deal with the constitutional issues since, on their view, "if the court was right in the Seider case, then there is no constitutional question," 21 N.Y.2d at 316, 287 N.Y.S.2d at 642, 234 N.E.2d at 675. Judges Burke and Scileppi thought Seider was of doubtful constitutionality on any of the bases asserted in its support.
In Watson v. Employers Liability Assurance Corp., 348 U.S. 66, 75 S.Ct. 166, 99 L.Ed. 74 (1954), the Supreme Court sustained Louisiana's direct action statute, which overrode contrary provisions in liability policies issued by insurers doing business in that state whether or not the policy had been written or delivered within it. The statute, however, applied only to accidents or injuries occurring in Louisiana. The first set of considerations marshaled by Mr. Justice Black in favor of its validity, 348 U.S. at 72-73, 75 S.Ct. 166, 170, would relate with equal force to one on behalf of residents. He stressed that "persons injured or killed in Louisiana are most likely to be Louisiana residents, and even if not, Louisiana may have to care for them. Serious injuries may require treatment in Louisiana homes or hospitals by Louisiana doctors. The injured may be destitute. They may be compelled to call upon friends, relatives or the public for help." On the other hand, his next argument, that "Louisiana courts in most instances provide the most convenient forum for trial of these cases," by its very terms could not apply. While the place of the plaintiff's residence may be a convenient forum for the trial of an action arising from an out-of-state accident in that not only he but much of the evidence of damages may be there, it will rarely be "the most convenient" one since the other witnesses to the accident are elsewhere — possibly far away.5 But the Justice's final consideration — the plaintiff's difficulty in bringing the defendant before the forum — applies with even greater force to the state of plaintiff's residence than to that of injury in light of the development of long-arm statutes that will generally allow the state of injury to obtain personal jurisdiction of the insured and so avoid the need for a direct action against the insurer.
We thus believe that, all things considered, the Supreme Court would sustain the validity of a state statute permitting direct actions against insurers doing business in the state in favor of residents as well as on behalf of persons injured within it. See Note, Direct-Action Statutes: Their Operational and Conflict-of-Law Problems, 74 Harv.L. Rev. 357, 361 (1960). The state's interest in protecting its residents is as great as in the case of nonresidents injured within the state. While the burden on the insurer in trying a case in a state other than the locus of the accident is heavier, there has been, as we have recently noted, "`a movement away from the bias favoring the defendant,' in matters of personal jurisdiction `toward permitting the plaintiff to insist that the defendant come to him' when there is a sufficient basis for doing so," Buckley v. New York Post Corp., 373 F.2d 175, 181 (2 Cir. 1967), quoting Von Mehren & Trautman, Jurisdiction to Adjudicate: A Suggested Analysis, 79 Harv.L.Rev. 1121, 1128 (1966). Indeed, the Supreme Court may have already decided this point by dismissing Hanover Ins. Co. v. Victor, 1968, "for want of a substantial federal question," see 393 U.S. 7, 89 S.Ct. 44 (1968), although the order there sought to be reviewed would not seem to have been appealable under 28 U.S.C. § 1257. Since, on the other hand, we doubt that the Court would sanction a direct action statute where the state was neither the place of injury nor the plaintiff's residence, we equally doubt whether Seider could validly be applied in such a case.6
In Podolsky v. Devinney, supra, 281 F.Supp. at 495-497, Judge Croake cogently argued that Seider v. Roth came close enough to this to constitute a denial of due process. He thought that, under the seemingly clear language of CPLR § 320(c), if the insured defended on the merits, he would subject himself to in personam jurisdiction with consequent personal liability for any judgment in excess of the policy limits. On the other hand, if the insured did not defend and judgment was entered by default, the insurer should be able to resist a levy on the basis of the insured's non-corporation. In cases where the plaintiff's claim exceeded the policy limits, Seider thus produced either a constitutionally unacceptable result or a nullity.
These difficulties were largely swept away by what has been termed "a miraculous per curiam opinion," see Commentary on CPLR § 5201, at 15 (McKinney Supp. 1968), denying reargument in Simpson v. Loehmann, 21 N.Y.2d 990, 290 N.Y.S.2d 914, 238 N.E.2d 319 (1968). The Court of Appeals began by criticizing the argument just summarized, which had not been earlier advanced before it, as failing to take account of its statement, 21 N.Y.2d at 310, 287 N.Y.S. 2d at 636, 234 N.E.2d at 671, that the Seider doctrine did not "expand the basis for in persona jurisdiction in view of the fact that the recovery is necessarily limited to the value of the asset attached, that is, the liability insurance policy." The "miracle" lay in the next sentences:
Appellants respond that while this unexpected construction of CPLR § 320(c) protects the defendant in the New York Seider action, it does not fully meet the problem where as here the demands exceed the policy limits. Their fear is that if the plaintiff sues later for the unmet balance in a state where he has acquired jurisdiction in personam, a plaintiff's judgment in the New York Seider action will be taken to have adjudicated the defendant's liability. It is plain that the New York judgment could not be given effect as such beyond the amount of the insurance; the troubling issue is whether a state could deem it effective as a collateral estoppel. Commentators have indicated that the due process clause prevents a state from giving a quasi in rem judgment such effect. Carrington, Collateral Estoppel and Foreign Judgments, 24 Ohio State L.J. 381, 384 (1963); Cramton & D. Currie, Conflict of Laws, 645-646 (1968); Developments in the Law — Res judicata, 65 Harv.L.Rev. 818, 835 (1952). Accord, Combs v. Combs, 249 Ky. 155, 60 S.W.2d 368, 89 A.L.R. 1095 (1933); contra, Harnischfeger Sales Corp. v. Sternberg Dredging Co., 189 Miss. 73, 191 So. 94, 195 So. 322 (1940). Other authorities have concluded that a quasi in rem judgment may work an estoppel on issues of fact that the defendant has actually litigated, at least where he has had a fair opportunity to do this. See Restatement of Judgments § 76(2) (1942); Taintor, supra, 8 U.Pittsburgh L.Rev. at 235; cf. Sherman v. Jacobson, 247 F.Supp. 261, 266-267 (S.D.N.Y.1963); Sherman v. Kirshman, 369 F.2d 886, 890 (2 Cir. 1966). Whatever the right rule may be as to quasi in rem judgments generally, we think it clear that neither New York nor any other state could constitutionally give collateral estoppel effect to a Seider judgment when the whole theory behind this procedure is that it is in effect a direct action against the insurer and that the latter rather than the insured will conduct the defense. To be sure it may be cold comfort to a nonresident defendant to have our assurance that if some state should be so misguided as to consider a New York Seider judgment as concluding him, he will be able to have this ruling overturned by the Supreme Court of the United States. But we cannot fairly hold that New York has denied due process merely because of the possibility that some other state may do so.
We have taken note of a similar decision by Judge McLean in the Southern District of New York in Jarvik v. Magic Mountain Corp., 290 F.Supp. 998 (1968)
Judge Breitel filled the vacancy created by Chief Judge Desmond's retirement. Subsequently Judge Van Voorhis, who was in the majority in bothSeider and Simpson, retired and has been succeeded by Judge Jasen.
It would be a serious misreading of Hughes v. Fetter, 341 U.S. 609, 71 S.Ct. 980, 95 L.Ed. 1212 (1951), and First Nat'l Bank of Chicago v. United Air Lines, Inc., 342 U.S. 396, 72 S.Ct. 421, 96 L.Ed. 441 (1952), to suppose that these cases would prohibit New York from creating a remedy against nonresident defendants in out-of-state accidents solely for its residents, particularly when an attempt to include nonresidents not injured within the state might make the remedy unavailable for anyone. Where neither party is a resident and the accident was out of state, a refusal to exercise jurisdiction would be a permissible application offorum non conveniens. See Hughes v. Fetter, supra, 341 U.S. at 612-613, 71 S.Ct. 980; B. Currie, The Constitution and the "Transitory" Cause of Action, in Selected Essays on the Conflict of Laws 282-360, and especially 320.
Although Professor Siegel is doubtless right in saying that "not even a prophet would have guessed at this result if the statement had not been added," Commentary on CPLR § 5201, at 17 (McKinney Supp.1968), the "miracle" may not really have been so great. The Court of Appeals may have entertained qualms about the constitutionality of CPLR § 320(c) both in theSeider situation and, as indicated by the last sentence of the quotation, in other instances of quasi in rem jurisdiction. There is substantial authority that where the presence of property within the state is the sole basis for jurisdiction, it is unfair to require the defendant to choose between forfeiting this and subjecting himself to liability for a larger claim. See Cheshire Nat'l Bank v. Jaynes, 224 Mass. 14, 112 N.E. 500 (1916); Salmon Falls Mfg. Co. v. Midland Tire & Rubber Co., 285 F. 214 (6 Cir. 1922); McQuillen v. Nat'l Cash Register Co., 112 F.2d 877 (4 Cir.), cert. denied, 311 U.S. 695, 61 S.Ct. 140, 85 L. Ed. 450 (1940); Miller Bros. v. State, 201 Md. 535, 95 A.2d 286 (1953), rev'd on other grounds, 347 U.S. 340, 74 S.Ct. 535, 98 L.Ed. 744 (1954). But see, contra, Campbell v. Murdock, 90 F.Supp. 297 (N.D.Ohio 1950); Anderson v. Benson, 117 F.Supp. 765 (D.Neb.1953); Sands v. Lefcourt Realty Corp., 35 Del. Ch. 340, 117 A.2d 365 (1955); United States v. Balanovski, 236 F.2d 298 (2 Cir. 1956), cert. denied, 352 U.S. 968, 77 S.Ct. 357, 1 L.Ed.2d 322 (1957). Although the commentators are likewise divided, several suggest that to deny the defendant an opportunity to defend without submitting to in personam jurisdiction violates due process. See Taintor, Foreign Judgment in Rem: Full Faith and Credit v. Res Judicata in Personam, 8 U.Pittsburgh L.Rev. 223 (1942); and B. Currie, Attachment and Garnishment in the Federal Courts, 59 Mich.L.Rev. 337, 379-80 (1961); cf. Restatement of Judgments § 40 (1942). But see 2A Moore, Federal Practice ¶12.13 (2d ed. 1948 & Supp. 1967); Blume, Actions Quasi in Rem under Section 1655, Title 28, U.S. C., 50 Mich.L.Rev. 1, 22-24 (1951).
The case which must provide the cue for the resolution of the issue is Watson v. Employers Liability Insurance Corp., 348 U.S. 66, 75 S.Ct. 166, 99 L.Ed. 74 (1954). Considerations which governed the decision in that case appear in the following portion of the opinion:
348 U.S. at 72, 75 S.Ct. at 170.
The legislatures which have enacted long-arm statutes and courts which have interpreted them have been motivated and restrained by considerations of fairness and reasonableness. In deciding the due process issue,5 as it relates to the Seider procedure, "traditional notions of fair play and substantial justice," International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945),6 must be used to determine whether or not it falls within permissible bounds. Weighed in this light, it seems to me that only the long-arm statutes asserting jurisdiction of the state where the accident occurred7 qualify as due process, whereas the assertion of jurisdiction by the state of the plaintiff's residence does not.
348 U.S. at 72-73, 75 S.Ct. at 170
Cf. Schmidt v. Driscoll Hotel, 249 Minn. 376, 82 N.W.2d 365, 368 (1957): "The result [of refusing to allow suit in Minnesota] would be that here both the interest of Wisconsin in affording whatever remedies it deems proper for those injured there as the result of foreign violations of liquor laws, Watson v. Employers Liability Assur. Corp., 348 U.S. 66, 75 S.Ct. 166, 99 L.Ed. 74, and the interest of Minnesota in admonishing a liquor dealer whose violation of its statutes was the cause of such injuries; and in providing for the injured party a remedy therefor under the civil damage act would become ineffective."
Although Driscoll Hotel involved a choice of law determination rather than the exercise of legislative power over the limits of judicial in-personam jurisdiction, its `interest' analysis is relevant to both issues because of their focus on `contacts', which is to say, the relation of the controversy to the community. See von Mehren and Trautman, Jurisdiction to Adjudicate: A Suggested Analysis, 79 Harv.L.Rev. 1121, 1166-1167 (1966). The degree of interest necessary to validate a legislative determination of judicial in-personam jurisdiction is greater, however, than the degree of interest required to support a decision concerning choice of law.
Compare, Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239, 2 L.Ed.2d 1283 (1958):
See especially the excellent Comment, Garnishment of Intangibles, 67 Colum.L. Rev. 550, 559: "It is evident that the Court attached great importance to the occurrence of the accident within the forum state. These same factors — trial convenience and the forum's interest in protecting parties injured within its bounds — have been reiterated in more recent decisions concerning direct action statutes." [Footnote omitted.] See also Note, 74 Harv.L.Rev. 357, 389 (1960): "The occurrence of the accident in Louisiana was stressed by the Court in theWatson case."
It should be noted that theSeider result could not have been reached under either of the legislatively-created direct action statutes, which permit a direct action only if the accident occurs within the state. Wis.Stat.Ann. § 260.11 (Supp. 1966); La.Rev.Stat.Ann. § 22.655 (Supp. 1965); Koss v. Hartford Acc. & Indem. Co., 341 F.2d 472 (7 Cir. 1965) (Wisconsin statute); Guess v. Read, 290 F.2d 622 (5 Cir. 1961), cert. denied, 368 U.S. 957, 82 S.Ct. 394, 7 L.Ed.2d 388 (1962) (Louisiana statute); Honeycutt v. Indiana Lumbermans Mut. Ins. Co., 130 So. 2d 770 (La.Ct.App.1961) (Louisiana statute).
Thus, in Pugh v. Oklahoma Farm Bureau Mutual Insurance Co., 159 F.Supp. 155, 159 (E.D.La.1958), Judge Wright, in holding that the Louisiana statute permitting suit against a non-resident insurer by service of process upon the Secretary of State did not deny due process, stated:
"The interest of the state in the safety of her highways, the care and hospitalization of persons injured thereon, the availability within the state of witnesses to the accident, the fact that Louisiana law will determine the liability for damages arising from the accident, * * * all combine to make certain that the maintenance of the suit within the state does not offend `traditional notions of fair play and substantial justice.' Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 343, 85 L.Ed. 278."
We find this argument unpersuasive so long as Harris v. Balk, 198 U.S. 215, 25 S.Ct. 625, 49 L.Ed. 1023 (1905), stands. Balk, a North Carolinian, had no more control over the peregrinations of his fellow-citizen, Harris, which caused the latter to be garnisheed in Maryland by Balk's alleged creditor, Epstein, than these appellants have over their insurers' decisions where to do business.2 In contrast, appellants' problem is significantly less serious than was Balk's in several respects. Balk had to decide whether to hire a Maryland lawyer to protect his interest in the $180 debt Harris owed him; the appellants are entitled to have lawyers in New York furnished by their insurers without expense. The Maryland judgment deprived Balk of money he could have used for whatever purpose he willed; a Seider judgment would mean simply that liability policies, on which appellants could not have realized for any purpose other than to protect themselves against losses to others, will be applied to the very objective for which they were procured. Whatever Balk's situation may have been, appellants are assured that they may defend the New York actions without exposing themselves to personal liability and that any recovery by the plaintiffs "is necessarily limited to the value of the asset attached, that is, the liability insurance policy." Simpson v. Loehmann, 21 N.Y.2d 990, 290 N.Y.S.2d 914, 238 N.E.2d 319 (1968), discussed at 111.
The only new point made with respect to the situation of the insurer is that in Watson v. Employers Liability Assurance Corp., 348 U.S. 66, 75 S.Ct. 166, 99 L.Ed. 74 (1954), the insurer had consented in writing to the application of the direct action statute, and the statute had become effective before the insurance contract was made. 348 U.S. at 68-70, 75 S.Ct. 166. However, the Supreme Court made it clear, in upholding a provision of the Louisiana statute that authorized direct action regardless of consent, that "Louisiana has a constitutional right to subject foreign liability insurance companies to the direct action provisions of its laws whether they consent or not."Id. at 74, 75 S.Ct. at 171. On the basis of this determination, it held there could be no constitutional objection to the supplemental provision requiring consent as a condition to doing business in the state. If we were right in believing that a New York direct action statute in favor of residents would be constitutional even as regards out-of-state accidents, the new point would thus be limited on any view to whether achieving the same result by judicial action creates a problem on the score of retroactivity with respect to policies issued before the Seider decision, at least where the insurer had no sufficient opportunity before the accident to withdraw from doing business in New York. Seider plaintiffs would answer, among other things, that the insurers were on notice all along that CPLR § 6202 was applicable. It would be premature to consider such questions in interlocutory appeals where only the insureds have appealed and the facts relevant to the situation of the insurers have not been fully developed.
These have recently been catalogued again at some length. See Stein, Jurisdiction by Attachment of Liability Insurance, 43 N.Y.U.L.Rev. 1075 (1968)
Exceptions would be where the amount claimed did not exceed $10,000; cases, doubtless quite rare, where a New Yorker was joined as a defendant; and perhaps cases where a citizen of the state of defendant's residence was appointed as a representative of a decedent or minor on whose behalf the action was brought. See Mecom v. Fitzsimmons Drilling Co., 284 U.S. 183, 52 S.Ct. 84, 76 L.Ed. 233 (1931); but cf. McSparran v. Weist, 402 F.2d 867 (3 Cir. 1968), taking a different view with respect to appointment of a resident of another state to create federal jurisdiction
"This State, and particularly its chief city, is the mecca for those seeking high verdicts in personal injury cases (see e. g., Gilchrist v. Trans-Canada Air Lines, 27 A.D.2d 524, 275 N.Y.S.2d 394). On the basis of the rule in theSeider case, it will be the rare plaintiff who cannot invoke the jurisdiction of New York courts, even though only quasi in rem, since it will be a very small insurance company that does not have a palpable contact with this State."
"Mere presence of the insurer in this State, which is all thatSeider appears to require, based as it is on a highly formalistic in rem attachment approach, would not seem sufficient to establish such an interest,2 [2Illustrative of the type of case Seider would appear to invite into our courts in the Vaage case (see Nationwide Mut. Ins. Co. v. Vaage, 265 F.Supp. 556 [S.D., N.Y., 1967]). Vaage, a citizen and resident of Norway, has commenced, by means of a Seider-type attachment, an action in New York based upon an automobile accident in which he was involved in North Carolina. Defendant is a North Carolina resident and the liability policy was issued there. What purpose allowing suit to be brought here, other than possibly increasing Vaage's hoped for damage award, is beyond me.] and even if Seider is to be read as requiring that the plaintiff must have been a New York resident at the time of the accident,3 [3 This might pose a problem under the Federal Constitution if Seider's in rem basis were carried to its logical extreme. See Harris v. Balk (198 U.S. 215, 223-224, 25 S.Ct. 625, 49 L.Ed. 1023).] these would not seem sufficient additional circumstances to warrant interference with the rights and obligations of the parties to the out-of-State contract."
In view of the majority's strong reliance on Harris v. Balk, 198 U.S. 215, 25 S.Ct. 625, 49 L.Ed. 1023 (1905), as a justification for brushing aside the argument of the appellants, on their motion for rehearing, that the majority holding places an unfair burden on a non-resident (thereby compelled to defend an action in New York, regardless of other contacts, provided only that in personam jurisdiction can be obtained over his insurance company) it is necessary to comment on the Harris case.
Assuming the continued constitutional viability of the Harris rule,1 that the obligation of a debtor to pay clings to and accompanies him wherever he goes and that the debt is subject to garnishment in any state in which the debtor is subject to in personam jurisdiction,2 nevertheless that case is clearly distinguishable from the procedure sanctioned by Seider, Simpson, et al. In the first place, the Supreme Court in Harris was considering "ordinary debts,"3 whereas the complex package of rights and duties which derive from an automobile liability insurance policy is something quite different. The debt in Harris was fixed in amount, and concededly currently owed, but the Seider "debt," consisting of the obligations to defend and indemnify, is indefinite, not readily ascertainable in amount, and contingent, i. e. with respect to the obligation to defend, upon the obtaining of jurisdiction over and the commencement of suit against the insured, and also, with respect to the obligation to indemnify, upon the security by the plaintiff of a judgment against the defendant insured. Moreover, as Judge Croake noted in Podolsky v. Devinney, 281 F.Supp. 488, 494 (S.D.N.Y.1968), "the obligation to defend is an important right of the insurer, essential in protecting its financial interest in the outcome of the litigation." Seider is the first case ever to hold that an insurer's contractual obligations under an automobile liability policy are subject to foreign attachment and thereby furnish quasi in rem jurisdiction over a non-resident defendant. See the excellent article entitled "Jurisdiction by Attachment of Liability Insurance" by Malcolm L. Stein, 43 N.Y.U. L.Rev. 1075, Dec. 1968.
The rule of Harris, which in effect sanctions the mere presence of the garnishee as a sufficient jurisdictional base, "cannot be justified in terms of fairness." Developments in the Law-State Court Jurisdiction, 73 Harv.L.Rev. 909, 960 (1960). In other words, the relevant contact with the forum state which establishes a jurisdictional base is not attuned to the modern jurisdictional search to attain substantial justice by balancing interests.
Several commentators have noted that Harris v. Balk is, from the point of view of modern jurisdictional thinking, an anachronism. E. g., von Mehren & Trautman, Jurisdiction to Adjudicate: A Suggested Analysis, 79 Harv.L.Rev. 1121, 1178 (1966); Developments in the Law-State Court Jurisdiction, 73 Harv.L.Rev. 909, 957-960 (1960). The following passage suggests that it may have outlived its usefulness:
198 U.S. at 222-223, 25 S.Ct. at 626-627
"We speak of ordinary debts, such as the one in this case."Id., at 223, 25 S.Ct. at 626.