Baker v. Young

Justice QUINN

delivered the Opinion of the Court.

The United States Circuit Court of Appeals for the Tenth Circuit certified to this court, pursuant to C.A.R. 21.1, the following question of law pertinent to an appeal pending in that 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)[, 7A C.R. S.1989 Supp.], thereby subjecting the obligation to attachment by a Colorado resident seeking to obtain quasi in rem jurisdiction?

We agreed to respond to the certified question and now answer that question in the affirmative.

I.

The certified question arose in a diversity action filed on June 6, 1983, in the United States District Court for the District of Colorado. The action was filed by Marjorie Baker, the plaintiff, against Elizabeth Young and Glynnis Jane Gartside, the defendants, both of whom reside in Australia. The complaint alleged that the plaintiff, a citizen and resident of Colorado, was injured in an automobile accident on September 4, 1981, in Vail, Colorado; that the other vehicle involved in the accident had been rented by the defendant Gartside from Budget-Rent-A-Car Systems; that at the time of the accident the defendant Gartside was riding as a passenger but retained the right to control the vehicle while the defendant Young was operating the vehicle for a common purpose; and that the defendant Young negligently drove the vehicle into the automobile operated by the plaintiff and thereby caused serious and permanent injuries to the plaintiff. Because the plaintiff was unable to effect personal service on the defendants, the district court dismissed the complaint without prejudice on July 31, 1985.

The plaintiff refiled the case on December 12, 1986, but because she was still unable to obtain service on the defendants, she petitioned the court for a writ of attachment pursuant to Federal Rule of Civil Procedure 64. The rule states that “all remedies providing for seizure of ... property for the purpose of securing satisfaction of the judgment ultimately to be entered in the action are available under the circumstances and in the manner provided by the law of the state in which the district court is held.”' The plaintiff claimed that liability insurance furnished to Gartside by Budget-Rent-A-Car Systems as part of the rental agreement constituted nonexempt property subject to attachment before judgment under Colorado Rule of Civil Procedure 102(a), which provides - as follows:

Any party, at the time of filing a claim, in an action on contract, express or implied, or in an action to recover damages for tort committed against the person or property of a resident of this state, or at any time after the filing but before judgment, may have nonexempt property of the party against whom the claim is asserted (hereinafter defendant), attached by an ex parte order of court in the manner and on the grounds prescribed in this Rule, unless the defendant shall give good and sufficient security as required by section (f) of this Rule. No ex parte attachments before judgment shall be permitted other than those specified in this Rule.¹

The district court denied the plaintiffs petition for a writ of attachment. Although the court acknowledged that under Colorado decisional law a potential right of indemnity under a liability insurance contract qualifies as the personal property of an out-of-state decedent under the Colorado Probate Code, see Price v. Sommermeyer, 195 Colo. 285, 577 P.2d 752 (1978), the court nonetheless was of the view that there were significant differences between the insurer’s obligation to defend and indemnify for the purpose of exercising probate jurisdiction and that same obligation as the basis for obtaining a prejudgment writ of attachment. The court described these differences as follows:

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.’ C.R.S. § 15-12-711 (1987). Thus, title of property is not immediately affected by appointment. Further actions, taken by the personal representative, in accordance with his or her fiduciary duties, [are] required in order to change rights in property of the estate. On the other hand, execution of a writ of attachment creates a lien on defendant’s property.

These differences, as well as the contingent nature of the insurer’s obligation under a liability insurance contract, led the court to conclude that “an insurer’s obligation to indemnify and defend is not ‘property’ within the meaning of Colo.R.Civ.P. 102.” ²

The court ruled that its order denying the writ of attachment involved a controlling question of law and that an immediate appeal from the order may materially advance the ultimate termination of the litigation.³ The Tenth Circuit Court of Appeals permitted the plaintiff’s appeal from the district court’s order and then certified the question to this court as involving a matter of state public policy.

II.

It is important to clarify at the outset of our analysis the limited nature of the question before us. We must answer whether an insurer’s obligation to defend and indemnify a nonresident insured under a liability insurance contract is a nonexempt property interest subject to attachment under C.R.C.P. 102 for the purpose of quasi in rem jurisdiction.⁴ An entirely separate question is whether, if the insurer’s obligation to defend and indemnify does constitute an attachable nonexempt property interest of the insured, the insured’s property interest is sufficiently related to the forum and the lawsuit as to constitute a valid basis for the court’s assertion of quasi in rem jurisdiction to the extent of the insured’s interest in the property. This latter question is not part of the certified question, and we do not address it in this opinion.

The United States Supreme Court considered the constitutional basis for quasi in rem jurisdiction in Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977), and Rush v. Savchuk, 444 U.S. 320, 100 S.Ct. 571, 62 L.Ed.2d 516 (1980). Shaffer involved a shareholder’s derivative suit by a nonresident of the state of Delaware against several corporate and individual defendants. The Delaware court exercised quasi in rem jurisdiction over the defendants by an order of sequestration directed to various items of the defendants’ Delaware property completely unrelated to the plaintiff’s cause of action. The Supreme Court reversed the sequestration order and held that before a court may exercise quasi in rem jurisdiction over a nonresident defendant there must be a sufficient relationship among the. defendant, the forum, and the litigation such that maintenance of the suit does not offend those traditional notions of fair play and substantial justice which are associated with a court’s power to adjudicate personal rights to property located within a state.

Subsequent to Shaffer, the Supreme Court decided Rush v. Savchuk, 444 U.S. 320, 100 S.Ct. 571. In Rush, the plaintiff, a former resident of Indiana, filed a negligence claim in a Minnesota court against an Indiana resident for damages as a result of injuries suffered by the plaintiff in an automobile accident in Indiana while the plaintiff was riding as a passenger in the defendant’s automobile. The court held that a state could not constitutionally exercise quasi in rem jurisdiction over the nonresident defendant by attaching the contractual obligation of the insurer to defend and indemnify the defendant who had no contacts with the forum state, even though the insurer was licensed to do business in the forum state. In so holding, the court rejected the rule of Seider v. Roth, 17 N.Y.2d 111, 269 N.Y.S.2d 99, 216 N.E.2d 312 (1966). Seider authorized the attachment of a liability insurer's contractual obligation to defend and indemnify a nonresident insured defendant under an automobile liability policy, issued to the nonresident defendant by an insurance company doing business in New York, as the basis for a New York court’s assertion of quasi in rem jurisdiction over the defendant in connection with the plaintiff-resident’s negligence claim against the defendant arising out of an automobile accident on a Vermont highway. In rejecting the Seider rule, the Court in Rush stated:

We held in Shaffer that the mere presence of property in a State does not establish a sufficient relationship between the owner of the property and the State to support the exercise of jurisdiction over an unrelated cause of action. The ownership of property in the State is a contact between the defendant and the forum, and it may suggest the presence of other ties. (Shaffer ] 433 U.S. at 209 [97 S.Ct. at 2582], Jurisdiction is lacking, however, unless there are sufficient contacts to satisfy the fairness standard of International Shoe. [International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945)].

Here, the fact that the defendant’s insurer does business in the forum State suggests no further contacts between the defendant and the forum, and the record supplies no evidence of any. [The insurer’s] decision to do business in Minnesota was completely adventitious as far as [the defendant] was concerned. [The defendant] had no control over that decision, and it is unlikely that he would have expected that by buying insurance in Indiana he had subjected himself to suit in any State to which a potential future plaintiff might decide to move. In short, it cannot be said that the defendant engaged in any purposeful activity related to the forum that would make the exercise of jurisdiction fair, just, or reasonable, see Kulko v. California Superior Court, 436 U.S. 84, 93-94 [98 S.Ct. 1690, 1697-98, 56 L.Ed.2d 132] (1978); Hanson v. Denckla, 357 U.S. 235, 253 [78 S.Ct. 1228, 1239, 2 L.Ed.2d 1283] (1958), merely because his insurer does business there.

444 U.S. at 328-29, 100 S.Ct. at 577-78.⁵

Both Shaffer and Rush addressed whether the attachment of a nonresident defendant’s interest in intangible assets within the forum state — i.e., common stock and options to purchase stock in Shaffer and an insurance contract in Rush — provided a valid basis, consistent with traditional notions of fair play and substantial justice, for a court’s assertion of quasi in rem jurisdiction over a nonresident defendant in connection with a lawsuit filed against the nonresident defendant. See Burnham v. Superior Court of California, Marin County, — U.S. -, 110 S.Ct. 2105, 2115, 109 L.Ed.2d 631 (1990) (opinion by Scalia, J., joined by Chief Justice Rehnquist and Justice Kennedy, noting that Shaffer stands for proposition that “when the ‘minimum contact’ that is a substitute for physical presence consists of property ownership it must, like other minimum contacts, be related to the litigation”). We emphasize again that, in contrast to the issue in Shaffer and Rush, the basic question before us here is limited to whether the interest which the plaintiff attempted to attach is nonexempt property for the purpose of a prejudgment attachment.

The question of whether the insurer’s obligation constitutes attachable “property” is purely a matter of state law, as expressly acknowledged by the Supreme Court in Rush, 444 U.S. at 328 n. 14, 100 S.Ct. at 577 n. 14, and by the Tenth Circuit in certifying the question to this court. If an insurer's obligation to defend and indemnify a nonresident insured defendant under an automobile liability policy constitutes nonexempt property subject to attachment, then, so long as there are other constitutionally sufficient contacts between the nonresident defendant and the forum for the exercise of jurisdiction, a court may properly assert quasi in rem jurisdiction over the nonresident defendant to the extent of the defendant’s interest in the property. If, on the other hand, the insurer’s obligation to defend and indemnify does not constitute property, there would be no basis for the assertion of quasi in rem jurisdiction. It is the “property” question, and only that question, that we address in this case.

III.

The term “property” includes a multiplicity of interests and is commonly used to denote everything that is the subject of ownership, whether tangible or intangible, as well as those rights and interests which have value to the owner. See Black’s Law Dictionary 1095 (5th ed. 1979). The concept of property, therefore, encompasses those enforceable contractual rights that traditionally have been recognized as chos-es in action. See In re Marriage of Grubb, 745 P.2d 661, 665 (Colo.1987) (employee’s vested but unmatured pension right is not a mere expectancy, but rather an enforceable contract right, commonly referred to as a chose in action, and thus a form of property). In the instant case, the federal district court acknowledged that in the context of probate jurisdiction the term “property” includes an insurer’s obligation to defend and indemnify a nonresident insured under an automobile liability policy, but then treated the insurer’s obligation as nonproperty for the purpose of a court’s assertion of quasi in rem jurisdiction over a nonresident insured. We reject such a distinction and conclude that an insurer’s obligation to defend and indemnify an insured under an automobile liability policy does constitute a form of property for purposes of C.R.C.P. 102.

We view our 1978 decision in Price v. Sommermeyer, 195 Colo. 285, 577 P.2d 752, as persuasive authority on the question certified to us in this case. In Som-mermeyer, Mrs. and Mr. Price, domiciliar-les of Nebraska, were involved in an automobile accident near Brush, Colorado. At the time of the accident Mrs. Price was driving the vehicle and crashed into the rear of a truck parked on the shoulder of a highway. Mr. Price was killed instantly, and Mrs. Price died approximately twenty days later. A wrongful death action was filed on behalf of the Price children in the Larimer County District Court, against the estate of their mother, along with a contemporaneous motion for the appointment of a personal representative to administer Mrs. Price’s Colorado estate. Price’s Colorado estate consisted solely of an automobile liability policy issued by Employer’s Mutual Casualty Company, an insurer authorized to transact business in the state of Colorado. The district court granted the motion and appointed Sommermeyer as personal representative of the estate. The case was tried to a jury, and a verdict of $270,000 was returned in favor of the Price children. Pursuant to the stipulation of the parties, the trial court entered judgment for $15,000, which represented the limits of the Price liability insurance policy. The court of appeals reversed the judgment, concluding that the liability policy issued to a non-domiciliary was not an asset subject to Colorado probate administration. This court granted certiorari and reversed the judgment of the court of appeals, reasoning as follows:

[W]e conclude that a decedent’s potential right of indemnity under a liability insurance policy is personal property encompassed within the comprehensive meaning of “property” as defined in the Colorado Probate Code, which provides that: “ ‘Property’ includes both real and personal property or any interest therein and means anything that may be the subject of ownership.” Section 15-10-201(36), C.R.S.1973. A potential right of indemnity under a liability insurance policy is a contingent contract right which vests when a liability claim against the insured ripens into judgment. Neither the intangible character nor the contingent nature of the right under the policy should logically prevent it from being the subject of ownership. See generally 63 Am.Jur.2d Property § 27.

The general rule is that the right of indemnity under a liability insurance policy is property justifying the grant of administration. At least twenty-one other states have considered this issue and have concluded that such a right under a liability insurance policy constitutes a sufficient asset or property for the appointment of an administrator and the probate of an estate. We adopt the general rule and therefore hold that a potential right of indemnity is personal property in the ownership of which the decedent had a right to be protected by law.

195 Colo, at 288-89, 577 P.2d at 755 (footnote omitted).

In light of our holding in Sommermeyer that an insurer’s obligation to defend and indemnify a nonresident insured under an automobile liability policy constitutes a property interest of the insured for the purpose of a court’s assertion of probate jurisdiction under the Colorado Probate Code, we would be indulging in nothing less than strained and artificial refinement were we to now hold that this same contractual obligation does not qualify as property of the insured for the purpose of a court’s assertion of quasi in rem jurisdiction. To engraft such a refinement on our law would result in defining the term “property” solely on the basis of the type of jurisdiction asserted by the court and would deprive the term of any objective content by creating a distinction without any meaningful difference.⁶

The insurer’s obligation to indemnify and defend an insured is contractual in nature and provides the insured with the right to a defense in the event a claim is made against the insured and the right to indemnification, up to the limits of the policy, in the event an adverse judgment is entered against the insured. The insured’s contractual right, while intangible and contingent upon future events, as are many other contractual rights, clearly has economic value to the insured. Whether considered in the context of probate jurisdiction or quasi in rem jurisdiction, the insured’s right to receive performance of the insurer’s contractual obligation constitutes an enforceable contractual right, commonly referred to as a chose in action. We conclude, therefore, that an insurer’s obligation to defend and indemnify a nonresident insured under an automobile liability policy vests the insured with a cognizable property interest under Colorado law.

The only remaining question is whether this property interest is exempt from attachment under Colorado law. The exemptions are set forth in section 13-54-102(1), 6A C.R.S. (1987), and do not include the property subject to this proceeding.⁷ We thus answer the certified question as follows: Colorado law defines an insurer’s obligation to indemnify and defend a nonresident insured as nonexempt property under C.R.C.P. 102(a), thereby subjecting the obligation to attachment by a Colorado resident seeking to obtain quasi in rem jurisdiction.

ERICKSON, J„ dissents. ROVIRA, C.J., and KIRSHBAUM, J., join in the dissent.

1 . C.R.C.P. 102(c)(2) provides, in pertinent part, that no writ of attachment shall issue unless it be shown by affidavit that a reasonable probability exists that the defendant has for more than four months been absent from the state, or the whereabouts of the defendant are unknown, or the defendant is a nonresident of the state, and all reasonable efforts to obtain in personam jurisdiction over the defendant have failed. C.R.C.P. 102(d) states that before issuance of a writ of attachment the plaintiff is obliged to furnish a written undertaking by a corporate surety company, or by two or more sufficient sureties, in an amount set by the court, not exceeding double the amount claimed, "to the effect that if the defendant recover judgment, or if the court shall finally decide that the plaintiff was not entitled to an attachment, the plaintiff will pay all costs that may be awarded to the defendant, and all damages defendant may sustain by reason of the wrongful suing out of the attachment.” C.R.C.P. 102(f) provides that if the defendant, upon service of the writ, deposits the amount of money claimed by the plaintiff or gives an adequate surety undertaking to satisfy the claim, the sheriff shall take the money or undertaking in lieu of the property.

2 . Neither the federal district court's ruling nor the record submitted on the certified question shows where the car rental agreement between Gartside and Budget-Rent-A-Car Systems was executed. We note, however, that the-plaintiff's complaint alleged that Gartside's vehicle had a Colorado license plate. It thus could be inferred that the rental agreement was executed in Colorado and that Budget-Rent-A-Car Systems, the insurer, was authorized to transact its business in this state. These inferences, however, are unnecessary to resolve the limited nature of the question before us.

3 . 28 U.S.C. § 1292(b) (1982) authorizes a district judge, in entering an order not otherwise ap-pealable in a civil action, to state in writing that the order involves "a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation.” The Court of Appeals, in its discretion, may permit the appeal to be taken from the order if application is made within ten days after entry of the order.

4 . A judgment in rem affects the interests of all persons in designated property, while a judgment quasi in rem affects the interests of a particular person or persons in designated property. Shaffer v. Heitner, 433 U.S. 186, 199 n. 17, 97 S.Ct. 2569, 2577 n. 17, 53 L.Ed.2d 683 (1977); ReMine ex rel. Liley v. District Court, 709 P.2d 1379, 1382 (Colo.1985).

5 . The Court in Rush noted that the only affiliating circumstance offered to show a relationship among the defendant, the state of Minnesota, and the plaintiff's lawsuit was that the defendant's insurance company conducts business in the state, but went on to state that the insurer’s obligation to defend and indemnify the insured was not sufficient to provide the state with the power to determine the defendant’s liability for an out of state accident. 444 U.S. at 328-29, 100 S.Ct. at 577-78. In addition, the Court concluded that the requisite minimum contacts with the forum cannot be established by treating the attachment procedure as the functional equivalent of a direct action against the insurer and thereby considering the insured "a nominal deT fendant" in order to obtain jurisdiction over the insurer. Id. at 330-31, 100 S.Ct. at 578-79. The question certified to us, of course, does not involve these issues.

6 . We find the federal district court’s attempt to distinguish Sommermeyer unpersuasive. Although a personal representative must take steps to change rights in the property of the estate while a writ of attachment creates a lien upon the property upon the issuance of the writ, these differences relate only to the form of jurisdiction exercised by the court over the underlying interest in question and do not affect the nature of the underlying interest as property or nonproperty.

We acknowledge that some states have held that an insurer's obligation to indemnify an insured is so contingent and uncertain that it is not subject to prejudgment attachment or garnishment. See, e.g., Javorek v. Superior Court, 17 Cal.3d 629, 131 Cal.Rptr. 768, 552 P.2d 728 (1976); Belcher v. Government Employees Insurance Co., 282 Md. 718, 387 A.2d 770 (1978); Howard v. Allen, 254 S.C. 455, 176 S.E.2d 127 (1970). We reject the reasoning of these cases and instead follow our reasoning in Sommer-meyer in reaching a contrary result. See also Rintala v. Shoemaker, 362 F.Supp. 1044 (D.Minn.1973) (contractual obligation of insurer to defend and indemnify insured is contractual obligation subject to prejudgment attachment); Forbes v. Boynton, 113 N.H. 617, 313 A.2d 129 (1973) (same).

7 . Section 13-54-102, 6A C.R.S. (1987), provides as follows:

(1) The following property is exempt from levy and sale under writ of attachment or writ of execution:

(a) The necessary wearing apparel of the debtor and each dependent to the extent of seven hundred fifty dollars in value;

(b) Watches, jewelry, and articles of adornment of the debtor and each dependent to the extent of five hundred dollars in value;

(c) The library, family pictures, and school books of the debtor and his dependents to the extent of seven hundred fifty dollars in value; except that this paragraph (c) shall not apply to any such property constituting all or part of the stock in trade of the debtor;

(d) Burial sites, including spaces in mausoleums, to the extent of one site or space for the debtor and each dependent;

(e) The household goods owned and used by the debtor and used by his dependents to the extent of fifteen hundred dollars in value;

(f) Provisions and fuel on hand for the use or consumption of the debtor or his dependents to the extent of three hundred dollars in value;

(g) In the case of every debtor engaged, as his principal occupation, in agriculture or livestock or poultry raising, livestock and poultry not exceeding in the aggregate a value of three thousand dollars, and horses, mules, wagons, carts, machinery, harness, implements, and tools not exceeding in the aggregate a value of two thousand dollars.

(h) Except for amounts due under court-ordered support of children or spouse which are subject to the exemption provisions of section 13-54-104, all money received by any person as a pension, compensation, or allowance for any purpose on account or arising out of the services of such person as a member of the armed forces of the United States in time of war or armed conflict, and whether in the actual possession of the recipient thereof or deposited or loaned by him, and a like exemption to the unremarried widow or widower and the children of such person who receive a pension, compensation, or allowance of any kind from the United States on account or arising out of such service by a deceased member of such armed forces; and when a debtor entitled to exemption under this paragraph (h) dies or leaves his family said exemption shall extend to the dependents of said debtor;

(i) The stock in trade, supplies, fixtures, maps, machines, tools, equipment, books, and business materials of any debtor used and kept for the purpose of carrying on any gainful occupation in the aggregate value of fifteen hundred dollars;

(j)(I) One or more motor vehicles kept and used by any debtor for the purpose of carrying on any gainful occupation in the aggregate value of one thousand dollars;

(II)(A) One motor vehicle kept and used by any elderly or disabled debtor for the purpose of obtaining medical care for himself or his elderly or disabled dependent. The value of the vehicle shall not exceed three thousand dollars.

(B) For the purposes of this subparagraph (II): "Disabled person” means any person who has a physical or mental impairment which is disabling and which, because of other factors such as age, training, experience, and social setting, substantially precludes the person having such impairment from engaging in a useful occupation as a homemaker or as a wage earner in any employment which exists in the community for which he has competence; and "elderly person" means any person who is sixty-five years of age or older.

(k)The library of any debtor who is a professional person, including a minister or priest of any faith, kept and used by him in carrying on his profession, in the value of fifteen hundred dollars; except that exemptions with respect to any of the property described in this paragraph (k) may not also be claimed under paragraph (i) of this subsection (i);

Cl) the avails of policies or certificates of life insurance to the extent of five thousand dollars;

(m) The proceeds of any claim for loss, destruction, or damage and the avails of any fire or casualty insurance payable because of loss, destruction, or damage to any property which would have been exempt under this article to the extent of the exemptions incident to such property;

(n) The proceeds of any claim for damages for personal injuries suffered by any debtor except for obligations incurred for treatment of any kind for such injuries or collection of such damages;

(o)(I) One house trailer or trailer coach to the extent of three thousand five hundred dollars in value while used and occupied as a place of residence by the owner;

(II) One mobile home to the extent of six thousand dollars while used and occupied as a place of residence by the owner;

(p) Professionally prescribed health aids for the debtor or a dependent of the debtor;

(q) The debtor’s right to receive, or property that is traceable to, an award under a crime victim’s reparation law;

(r) For purposes of garnishment proceedings pursuant to the provisions of article 54.5 of this title, any amount held by a third party as a security deposit, as defined in section 38-12-102(2), C.R.S., or any amount held by a third party as a utility deposit to secure payment for utility goods or services used or consumed by the debtor' or his dependents.

(2) Notwithstanding the provisions of paragraph (h) of subsection (1) of this section and section 13-54-104, military pensions shall be subject to court-ordered support of children or spouse.