Court Opinion

ID: 9587293
Source: CourtListenerOpinion
Date Created: 2023-08-21 23:20:45.873091+00
Date Added: 2024-06-11T17:37:12.538178
License: Public Domain

*896Justice ERICKSON
respectfully dissenting:
The certified question in this case arose out of a federal diversity action, 28 U.S.C. § 1332(a)(2) (1988), wherein plaintiff-appellant Marjorie Baker filed an amended complaint in Colorado federal district court sounding in tort and seeking damages for personal injuries sustained in a September 4, 1981, automobile accident. Baker alleged that the other vehicle involved in the accident was rented by defendant Glyniss Jane Gartside from Budget Rent-A-Car Systems and was driven by defendant Elizabeth Young. Both defendants are Australia residents and Baker has been unable to effect personal service on either defendant.
Baker’s initial complaint was filed on June 6, 1983. The federal district court dismissed the ease without prejudice on July 31, 1985, because Baker was unable to serve the defendants. The case was refiled on December 12, 1986. Despite diligent efforts, Baker was unable to obtain service and petitioned for a writ of attachment prior to judgment, Fed.R.Civ.P. 64, C.R. C.P. 102(a), on the theory that the insurance policy provided by Budget Rent-A-Car to the renter of the car or an authorized driver constituted nonexempt property subject to attachment under C.R.C.P. 102(a).
The federal district court issued a Memorandum Opinion and Order and considered the division of authority,1 but concluded that the obligation to indemnify and defend is not subject to prejudgment attachment. The federal district court therefore denied the petition for the writ of attachment, but certified its order denying the petition to the United States Circuit Court of Appeals for the Tenth Circuit.
The United States Circuit Court of Appeals for the Tenth Circuit concluded that the question of whether an insurer’s obligation to indemnify and defend an insured constitutes property subject to prejudgment attachment under C.R.C.P. 102(a), is a question of state law, Rush v. Savchuk, 444 U.S. 320, 328 n. 14,100 S.Ct. 571, 577 n. 14, 62 L.Ed.2d 516 (1980), and therefore certified the following question to this court:
Whether Colorado law defines an insurer’s obligation to indemnify and defend a non-resident insured as nonexempt property under Colo.R.Civ.P. 102(a) (Supp. 1989), thereby subjecting the obligation to attachment by a Colorado resident seeking to obtain quasi in rem jurisdiction?
The majority finds Price v. Sommermeyer, 577 P.2d 752 (Colo.1978), controlling and answers the question in the affirmative. I agree with the Memorandum Opinion and Order issued by Judge Alfred A. Arraj for the United States District Court and conclude the question should be answered in the negative.
I.
In order to acquire quasi in rem jurisdiction, a two pronged test must be met. The defendant must have sufficient minimum contacts with the state to satisfy the substantial justice and fair play requirements established in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). And, the plaintiff must successfully attach property owned and controlled by the defendant in the state in which the plaintiff seeks jurisdiction. See F. James & G. Hazard, Civil Procedure 75-78 (1985).
The constitutional question of whether the defendant has sufficient minimum contacts with Colorado to constitute a valid basis for the assertion of quasi in rem jurisdiction is not before this court. Whether property exists that may be attached is the question we must address.
II.
Historically, attachable property fell within one of two categories. Such property could be tangible property of the defendant capable of being seized and sold in *897satisfaction of judgment, or it could be a garnishable debt or contractual liability owed to the defendant by a third party. Robinson v. Shearer & Sons, Inc., 429 F.2d 83, 85 (3d Cir.1970). In order to attach a debt owed to the defendant, under C.R.C.P. 102, the plaintiff must garnish the res of the debt in the possession of the third party. Colorado law permits the garnishment of debts and other intangibles in the aid of a writ of attachment pursuant to C.R.C.P. Rule 103 § 5.2
The majority finds that the contingent nature of the insurer’s obligation to indemnify and defend the insured does not prevent it from being attached. However, in Haselden Langley Constructors, Inc. v. Graybar Electric Company, 662 P.2d 1064 (Colo.1983), we unanimously held, “It is well settled [law] that a contingent liability is not garnishable.”3 In reaching its conclusion, the majority follows the analysis of the New York Supreme Court in Seider v. Roth, 17 N.Y.2d 111, 269 N.Y.S.2d 99, 216 N.E.2d 312 (1966).4 The Seider court determined that a liability insurer’s contractual obligation to defend and indemnify a nonresident insured defendant under an automobile liability policy was attachable property under New York Law.5 Id.
Every state, except New Hampshire,6 that has considered whether a liability insurer’s contractual obligation to defend and indemnify is attachable property has rejected the Seider analysis and conclusion.7 The United States Court of Appeals for the Third Circuit has also rejected the Seider rule,8 concluding that the insurer’s obligation to indemnify the insured is not an attachable property interest, the insurer’s obligation to defend the insured is not an attachable property interest, and practical considerations outweigh the utility of judicially establishing such a rule.
III.
Because it may never become due and payable, a contingent indemnification obligation is too uncertain, inchoate and aleato*898ry to amount to a “debt.”9 Belcher v. Government Employees Ins. Co., 387 A.2d at 773. Before the insurer’s obligation may become a debt, an external event must occur that is within the coverage of the policy, and the insured must perform all conditions precedent, and must cooperate with the insurer. Howard v. Allen, 176 S.E.2d at 129. In addition, a final judgment must be entered in order to transform the obligation into a debt. Id.; Sommermeyer 195 Colo. at 288-89, 577 P.2d at 755. In the case before the federal district court, no final judgment has been obtained and thus the obligation to indemnify has not vested and become a debt, therefore no property exists which may be attached or garnished.
A contingent liability may not be attached because an attaching creditor can acquire no greater right in attached property than the defendant possesses at the time of the attachment. Howard v. Allen, 176 S.E.2d at 130; see Keck v. Vogt, 108 Colo, at 385, 117 P.2d 1005. The judgment creditor may not garnish property which the judgment debtor himself may not recover from the garnishee. Green v. Green, 108 Colo, at 18, 113 P.2d 427. Therefore, if the defendant has not yet acquired an interest in the obligation to indemnify, which he cannot without a judgment, then his rights may not be disposed of or transferred, and are thus not attachable. Howard v. Allen, 176 S.E.2d at 130.
To subject a contingent obligation to attachment for the purposes of quasi in rem jurisdiction is to engage in circular and bootstrap reasoning. State, Government Employees Ins. Co. v. Lasky, 454 S.W.2d at 947. Such reasoning permits a court to assert jurisdiction and attach the purported obligation before any judgment in order to enable the court to then render a judgment, which is in fact the only event that can create the obligation in the first place. Belcher v. Government Employees Ins. Co., 387 A.2d at 773.
Until a judgment is rendered against the insured, the funds necessary to meet the insurer’s indemnity obligation are under the sole control and ownership of the insurer.10 By allowing the attachment of the insurer’s property, this court is allowing the plaintiff to physically attach and sequester the property of a third party for the purposes of obtaining quasi in rem jurisdiction over the defendant. C.R.C.P. 102 makes no provision for the attachment of the property of a third party to satisfy the liabilities of the defendant.
IV.
The majority holds that the obligation of the insurer to defend the insured is an attachable property interest. The record before us does not include the liability insurance policy and is limited to the rental agreement, which makes no mention of the insurer’s duty to defend the insured.11
Assuming the question is properly before this court, the obligation to defend is not an attachable property interest. Like the obligation to indemnify, the obligation to defend is too contingent, uncertain, and aleatory to constitute debt prior to the proper commencement of an action against the insured. Javorek v. Superior Court of Monterey County, 131 Cal.Rptr. at 780, 552 P.2d at 740. A determination that the *899obligation to defend is attachable suffers from the same bootstrap and circular reasoning flaws as the attachment of the obligation to indemnify. Robinson v. Shearer, 429 F.2d at 86. And, like the obligation to indemnify, the res of the obligation to defend is the property of a third party until an action has been commenced, and therefore it may not be attached under C.R.C.P. 102.
The obligation to defend is not an obligation to pay money to the insured so that she may provide her own defense. Rather, it is an obligation to provide personal services. Belcher v. Government Employees Ins. Co., 387 A.2d at 774. The value of these services are personal to the insured, and are thus not capable of being transferred or assigned. Robinson v. Shearer, 429 F.2d at 86. If services may not be transferred or assigned, they may not be attached. Javorek v. Superior Court of Monterey County, 131 Cal.Rptr. at 780, 552 P.2d at 740. See Comment, Quasi in Rem Jurisdiction Based on Insurer’s Obligations, 19 Stan.L.Rev. 654, 655-56 (1967).
Assuming that a contract for personal services or to defend is attachable, there is no means to determine the value of an obligation to defend a party in a lawsuit. Because the extent of the obligation to defend is inchoate and uncertain at the time of attachment, it can not be translated into an economically valuable tangible property. See Comment, Jurisdiction by Attachment of Liability Insurance, 43 N.Y.U.L.Rev. 1075, 1083 (1968). If the obligation to defend did vest, it would be impossible to estimate the amount of money that will be spent on attorney’s fees and court costs over the course of the litigation.
If the insurer fulfills his obligation to defend the insured, as the lawsuit reaches a conclusion, the value of the obligation will approach zero. At the time a judgment is entered, the value of the obligation to defend will be exhausted and there will be no proceeds out of which the plaintiffs will be able to satisfy their judgment.12 Javorek v. Superior Court of Monterey County, 131 Cal.Rptr. at 780, 552 P.2d at 740. See Comment, Garnishment of Intangibles: Contingent Obligations and the Interstate Corporation, 67 -Colum.L. Rev. 550, 552 (1967).
If the court attaches an amount of money equal to that which it determines will be the value of the services to be rendered in defense of the insured, and allows the plaintiff to satisfy her judgment out of this fund, and then requires the insurer to defend the insured, the insurer will be subject to double liability for the obligation to defend. See Comment, Quasi In Rem Jurisdiction Based on Insurer’s Obligations, 19 Stan.L.Rev. 654, 656 (1967). If the court requires the defendants to pay for their own defense, then the court defeats one of the main purposes of the insurance contract.
V.
The practical considerations of a rule creating a property interest in contingent obligations to indemnify and defend outweigh the utility of establishing such a rule. The determination that contingent obligations are attachable property will allow a general creditor of the insured, or a second plaintiff to attach the obligation of the insurer and exhaust the res before the intended plaintiff receives a judgment. For instance, if a plaintiff obtains personal jurisdiction, creditors could use the holding of this court to attach the insurer’s obligation. If the creditor successfully attaches the obligation, then the successful plaintiff will be deprived of the proceeds because the creditor will have a prior levy on the property. Javorek v. Superior Court of Monterey County, 131 Cal.Rptr. at 774, 552 P.2d at 734. See Stein, Jurisdiction by Attachment of Liability Insurance, 43 N.Y.U.L. Rev. 1075, 1124 (1968).
VI.
In my view, Price v. Sommermeyer, 195 Colo. 285, 577 P.2d 752 (1978) is not per*900suasive authority governing whether contingent obligations are property for purposes of attachment. Although Sommer-meyer determined that contingent obligations were property for purposes of the grant of probate administration, such a determination does not necessarily require that contingent obligations are property for the purpose of quasi in rem jurisdiction. In fact, the California Supreme Court and an Illinois appellate court have held that a determination that a contingent obligation is property for probate matters does not provide authority for quasi in rem jurisdiction over a suit against a nonresident defendant.13 Javorek v. Superior Court of Monterey County, 131 Cal.Rptr. at 781, 552 P.2d at 741; Longo v. AAA-Michigan, 201 Ill.App.3d 543, 147 Ill.Dec. 150, 559 N.E.2d 150 (1990).
The Sommermeyer ruling is an exception to the general rule that contingent obligations are not property subject to attachment and should not be expanded. Haselden v. Graybar, 662 P.2d at 1064. See Javorek v. Superior Court of Monterey County, 131 Cal.Rptr. at 775, 552 P.2d at 735. The primary reason for not expanding the exception to cover quasi in rem jurisdiction is that the impact on the property of the defendant in an attachment action is significantly different than that in a mere grant of probate administration. An administrator is vested with the “same power over the title to property of the estate that an absolute owner would have, in trust however, for the benefit of the creditors and others interested in the estate.” § 15-12-711, 6A C.R.S. (1987). The title of the property is thus not immediately affected by the appointment. Yet, when a writ of attachment is executed, it requires the attachee to turn over to the sheriff the property attached. The property is then held by the court until a final judgment is rendered in the dispute.
If the court grants probate administration and ultimately makes a disposition of the case in favor of the defendant, the defendant has suffered no undue hardship. However, if the court attaches the property for quasi in rem jurisdiction and ultimately rules in favor of the defendant, the defendant has lost the use of his property for the entire period of the time of the trial. In fact, if the court makes an ultimate ruling in favor of the defendant, then the res was never the property of the insured, and the court never had a right to attach the property.
Accordingly, I respectfully dissent.
I am authorized to say that Chief Justice ROVIRA and Justice KIRSHBAUM join in this dissent.

. See Annot., Potential Liability of Insurer Under Liability Policy as Subject of Attachment, 33 A.L. R.3rd 992, 996-1002 (1970 & 1989 Supp.).

. C.R.C.P. 103 § 5(a) states,
"Writ of garnishment in aid of writ of attachment” means the exclusive procedure through which personal property of any kind of a defendant in an attachment action ... in the possession or control of the garnishee including the credits, debts, choses in action, or money owed to the judgment debtor, whether they are due at the time of the service of the writ or are to become due thereafter, is required to be held by a garnishee.

. The court cites as precedent: Keck v. Vogt, 108 Colo. 382, 117 P.2d 1005 (1941); Green v. Green, 108 Colo. 10, 113 P.2d 427 (1941); In re Stone, 194 Colo. 394, 573 P.2d 98 (1977). The Haselden court further quotes Stone, "[A] judgment creditor [cannot] garnish sums which the judgment debtor himself could not recover from the garnishee.” Haselden, 662 P.2d at 1065.

. Although the majority does not rely on Seider for precedent, the majority’s reasoning is parallel to that of the Seider court.

. As the majority notes, the Seider rule was later modified by the United States Supreme Court to require that, in addition to attachable property, sufficient minimum contacts must exist to satisfy the requirements of International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Rush v. Savchuk, 444 U.S. 320, 328-29, 100 S.Ct. 571, 577-78, 62 L.Ed.2d 516 (1980).

. Forbes v. Boynton, 113 N.H. 617, 313 A.2d 129, 132 (1973).

. California, Utah, Oklahoma, Missouri, Louisiana, South Carolina, Rhode Island, Pennsylvania, Maryland, Vermont, and Illinois have rejected the Seider rule in name or in principle. Javorek v. Superior Court of Monterey County, 17 Cal.3d 629, 552 P.2d 728, 741, 131 Cal.Rptr. 768, 781 (1976); Housley v. Anaconda Co., 19 Utah 2d 124, 427 P.2d 390, 392 (1967); Johnson v. Farmers Alliance Mut. Ins. Co., 499 P.2d 1387, 1390 (Okla.1972); State, Government Employees Co. v. Lasky, 454 S.W.2d 942, 947-48 (Mo.Ct.App.1970); Kirchman v. Mikula, 258 So.2d 701, 703 (La.Ct.App.1972); Howard v. Allen, 254 S.C. 455, 176 S.E.2d 127, 130 (1970); De Rentiis v. Lewis, 106 R.I. 240, 258 A.2d 464, 467 (1969); Jardine v. Donnelly, 413 Pa. 474, 198 A.2d 513 (1964); Belcher v. Government Employees Ins. Co., 282 Md. 718, 387 A.2d 770, 773-74 (1978); Ricker v. Lajoie, 314 F.Supp. 401, 403 (D.Vt.1970) (applying Vermont Law); Longo v. AAA-Michigan, 201 Ill.App.3d 543, 147 Ill.Dec. 150, 559 N.E.2d 150 (1990). The United States district court in Minnesota found that a contingent liability contract is attachable under a Minnesota statute that specifically states that such contracts are attachable. Rintala v. Shoemaker, 362 F.Supp. 1044, 1050 (D.Minn.1973).

. Robinson v. Shearer, 429 F.2d at 86.

. Recognizing the contingent nature of the obligation to indemnify, the Seider court based its holding on the duty to defend and not the duty to indemnify. Seider v. Roth, 17 N.Y.2d at 113— 14, 269 N.Y.S.2d at 101-02, 216 N.E.2d at 314-15. See Comment, Long-Arm and Quasi in Rem Jurisdiction and the Fundamental Test of Fairness, 69 Mich.L.Rev. 300, 327 (1970).

. The Pennsylvania Supreme Court has held that even after a judgment has been obtained against the defendant, the plaintiff may not attach the funds or property of the insurance carrier unless a judgment has also been rendered against the insurer. Jardine v. Donnelly, 198 A.2d at 513.

.The United States Court of Appeals for the Tenth Circuit’s certified question asks this court to determine the appropriateness of attaching both the obligation to indemnify and the obligation to defend. The federal district court, however, pointed out, "that the rental agreement details the liability limits but does not detail the terms, conditions, limitations, and restrictions of the policy. There is no mention of a duty to defend the insured in this agreement.” Memorandum Opinion and Order at 23.

. Alternatively, if the defendants fail to appear, as is likely when the defendants reside in Australia, a default judgement will be entered. As a result, the duty to defend will never arise and thus there will be nothing of value to attach.

. The court in Javorek stated, "[w)e believe that there are sufficiently different factors and considerations involved in the situation where the nonresident defendant is deceased, as opposed to the instant case where the defendants are alive, that the argument in favor of the existence of an estate for purposes of probate jurisdiction is not persuasive as to whether contingent obligations of an insurer are attachable.” Javorek v. Superior Court of Monterey County, 131 Cal.Rptr. at 781 n. 11, 552 P.2d at 740 n. 11.