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September 18, 1968

Kenneth BARKER, Plaintiff,
Richard Monroe SMITH and Graff Trucking Company, Inc., Defendants

The opinion of the court was delivered by: MANSFIELD

MANSFIELD, District Judge.

 In this diversity suit for personal injuries arising out of an automobile collision, instituted by a New York resident against an individual and a Michigan corporation, neither subject to this Court's personal jurisdiction, the Michigan corporation, Graff Trucking Company, Inc., and a Michigan insurance company doing business in New York, Michigan Mutual Liability Company ("Mutual" herein), move to vacate an order of attachment upon Mutual's obligations as an insurer under a comprehensive automobile liability policy, to vacate the levy made thereunder, and to set aside service of the summons and complaint upon Graff. The principal question for decision is whether the Due Process Clause of the Fourteenth Amendment of the United States Constitution prevents the New York courts from exercising quasi in rem jurisdiction over a Michigan insured whose employee allegedly collided with a New York resident in Michigan. The res attached consisted of the obligations of the insurer, Mutual, under a liability policy written in Michigan to defend any suit for bodily injury under the policy and to pay on behalf of the insured damages caused by reason of such bodily injury.

 According to the moving papers and related affidavits, on May 31, 1967, Kenneth Barker, a New York resident, while stopped at a red light at the Raisin River Bridge in Palmyra, Michigan, was rammed from behind by a tractor trailer, owned and driven by one Smith. As a result, Barker sustained a herniated disc.

 At the scene of the accident, Smith told Barker that he was employed by Graff, a Michigan corporation that operates vehicles in Illinois, Iowa, Kentucky, Michigan, Missouri and Ohio, pursuant to a certificate issued by the Interstate Commerce Commission. However, Graff is not licensed to do business in New York and does not do any business in New York.

 On April 25, 1967, Graff renewed its comprehensive automobile liability policy taken out with Mutual in Michigan, which obligated Mutual (1) to pay on Graff's behalf "all sums which [Graff] shall become legally obligated to pay as damages" because of bodily injury or property damage * * * arising out of the ownership, maintenance or use of any automobile; and (2) to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if the allegations of the suit are groundless, false or fraudulent, but Mutual is not obligated to pay any claim or judgment or to defend any suit after the applicable limit of Mutual's liability has been exhausted by payment of judgments or settlements.

 The policy further provided that "no action shall lie against the company [Mutual] unless, as a condition precedent thereto, there shall have been full compliance with all of the terms of this policy, or until the amount of the insured's obligation to pay shall have been finally determined either by judgment against the insured after actual trial, or by written agreement of the insured, the claimant and the company."

 Upon Barker's return to New York after the accident he underwent medical treatment for his injuries necessitating four days in the hospital, and at least two subsequent visits to his physician, with the possibility that surgery might be necessary in the future.

 On March 13, 1968, Barker obtained an order of attachment in the Supreme Court of New York County upon Mutual's obligations under the policy. Mutual has an office within New York City, and is "doing business" within the state. Following the sheriff's levy on these obligations, on March 29, 1968 the action was commenced by out-of-state service of the summons and complaint upon Graff.

 On April 23, 1968, the action was removed to this Court. On this motion counsel appearing specially on behalf of Mutual and Graff seeks to vacate the order of attachment and to dismiss the summons and complaint on the grounds that (1) Barker's affidavit that Smith told him at the scene of the accident that the latter was a Graff employee is insufficient under New York law to support the issuance of an order of attachment; (2) under state choice of law principles, the insurance policy was not a debt that could be attached to give this Court quasi in rem jurisdiction over Graff; and (3) New York could not, consistent with the Due Process Clause, rule that, on this fact pattern, the insurance policy is a debt located in New York.

 The first contention is meritless. The fact that Barker's affidavit contains hearsay as to Smith's statement regarding his employment is insufficient to warrant vacating the order of attachment. As was recently said in Swiss Bank Corp. v. Eatessami, 26 A.D.2d 287, 273 N.Y.S.2d 935, 939 (1st Dept. 1966):

"'It is not necessary to the validity of an attachment that the individual upon whose affidavit the application for the warrant is made shall personally know all the facts required to be stated. He may state them upon information and belief, but that information must be competently derived. Murphy v. Jack et al., 142 N.Y. 215, 36 N.E. 882.' Hawkins v. Pakas, 39 App.Div. 506, 507-508, 57 N.Y.S. 317, 318. The sources of such hearsay evidence must be disclosed that the judge may determine if the belief is well founded, the information competently derived and has such probative force as to justify the issuance of the warrant."

 In the Swiss Bank case, the agency relationship was held to be sufficiently supported for purposes of obtaining an order of attachment where plaintiff submitted an unsigned statement given by Kamyar, the alleged agent to Swiss and Israeli police officials, together with an affidavit from the Swiss police official that Kamyar made the statement to him. That case is on all fours with the present one in which Barker has filed an affidavit stating that Smith informed him at the scene of the accident that he was driving the tractor trailer while employed by Graff. To lend further support to the credibility of this information, if necessary, Barker's affidavit is undisputed. The Court therefore concludes that Barker has presented sufficient evidentiary facts to lead the Court to conclude, for purposes of this motion, that he has a valid claim. See Gitlin v. Stone, 262 F. Supp. 500 (S.D.N.Y.1967).

 Turning to the next ground of attack, it is elementary that if Mutual's obligation under the policy constitutes a "debt," then an attachable res exists in any jurisdiction wherein the debtor, i.e., Mutual, may be found. Harris v. Balk, 198 U.S. 215, 25 S. Ct. 625, 49 L. Ed. 1023 (1905). For this purpose, a state may rule that a corporate debtor is located in that state if it is doing business therein. See Curry v. McCanless, 307 U.S. 357, 366-371, 59 S. Ct. 900, 83 L. Ed. 1339 (1939); Chicago, R.I. & P. Ry. v. Sturm, 174 U.S. 710, 19 S. Ct. 797, 43 L. Ed. 1144 (1899); see Comment, Garnishment of Intangibles: Contingent Obligations and the Interstate Corporation, 67 Colum.L.Rev. 550, 562-571 (1967). And assuming presence of the debtor within the state, quasi in rem jurisdiction may be exercised over the creditor provided that there has been effective seizure and adequate notice to its owner. Pennoyer v. Neff, 95 U.S. 714, 722-723, 24 L. Ed. 565 (1878); Podolsky v. Devinney, 281 F. Supp. 488, 493 (S.D.N.Y.1968).

 Graff and Mutual urge that the question of whether Mutual's obligations constitute a debt should be determined by Michigan (rather than New York) law, since they are Michigan corporations, the policy was written in Michigan, and the accident, forming the basis of Barker's claim, occurred in Michigan. Pointing out that neither Michigan law nor the policy here obligates the insurer to defend before in personam jurisdiction is acquired over the insured, that the insurance contract permits no action to be brought against the insurer (Mutual) until judgment against the insured (Graff) has been obtained, and that § 500.3006 of the Michigan Insurance Code of 1956 permits an action against the insured "in the nature of a writ of garnishment" only after execution, defendants argue that the Michigan courts, which have not passed on the question, would probably adopt the reasoning ...

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