Paul E. Kline v. Wheels by Kinney, Inc., and Kinney National Services, Inc.
464 F.2d 184
4th Cir.
1972
Check Treatment

*1 184 sovereign im- doctrine of

barred munity. district court is order of the

versed, to dismiss directions complaint.

amended

Butzner, Judge, filed a dis- senting opinion. KLINE, Appellee, E.

Paul KINNEY, INC.,

WHEELS BY Services, Inc., Appellants. National

No. 71-2020. Appeals,

United States Court of

Fourth Circuit.

Argued March July 6,

Decided denied, (9th 1969), U.S. L.Ed.2d 686 Kalish v. United Cir. cert. 397 1969) ; States, (9th L.Ed.2d 405 411 F.2d 607 90 S.Ct. 25 Cir. States, Battaglia, ; (1970) 406 United F.2d States 410 Simmons United (7th (5th denied, Cir.), denied, Cir.), 395 284 cert. cert. 396 U.S. F.2d 456 L.Ed.2d 770 90 24 L.Ed.2d Ash S.Ct. 23 S.Ct. U.S. Mitchell, (1969) ; States, (8th ton v. United States v. United 404 F.2d 95 denied, (2d 1966), 1968), denied, cert. F.2d Cir. cert. 394 U.S. Cir. 18 L.Ed.2d S.Ct. 22 L.Ed.2d 561 S.Ct. U.S. Cf. Rehfield, United States v. F.2d 273

Kline, a citizen and resident of Vir- ginia, personal instituted this action for *2 injuries against Kinney. McCorkle and originally The action filed in was Eastern District of North Carolina but the case was transferred to the Eastern Virginia pursuant District of to 28 U.S. 1404(a). charged complaint C.A. The negligence part on the of McCorkle and alleged further that she was Kinney’s permission the vehicle with agent employee. Kinney or admit- ownership ted of the automobile as well permissive as the use thereof Miss McCorkle, but denied that was its she agent employee exercised any control over the while she vehicle possession. inwas was evidence uncontradicted that Miss McCorkle was agent employee neither the nor an Kinney, and the District so found. However, the case to the was submitted (Sea- Winston, Norfolk, Va. John W. jury as to all the defendants based Norfolk, well, McCoy, Dalton, & Winston upon the of Miss McCorkle Va., brief), appellants. on against and a verdict was rendered both News, Topping, Newport Larry M. Kinney. Kinney Thereafter, her and Topping, Newport (Hall, Fox Va. News, & judgment v., moved for mo- n. o. Va., brief), appellee. appeal tion was denied and this followed. Judge, HAYNSWORTH, Chief Before Kinney’s motion to set aside FIELD, and BUTZNER presented the verdict the District Court Judges. question with a laws, of conflict of having originally the action insti Judge: FIELD, Circuit Carolina, tuted in North the transferee diversity case, Upon appeal Virginia required court was appellants, Kinney,1 urge including that the Dis- the law of North Judge trict erred choice of law. in his rule on the choice Van Dusen v. of law. Barrack, U.S. S.Ct. dispute. The facts not in are On Au- (1964); Company L.Ed.2d 945 Klaxon gust 4, 1968, McCorkle, Miss a citizen Mfg. Co., Inc., Stentor Electric 313 U.S. and resident of New York rented an L.Ed. 1477 S.Ct. period automobile from for a long In tort actions North Carolina has one ex- month. lease controlling followed rule that the ecuted and the vehicle which li- loci the lex Petrea v. delicti. registered censed and in New York was Lines, Inc., 141 S.E. delivered to McCorkle state. Lee, 2d 278 609, Shaw Miss McCorkle drove from New York to (1963). Kinney, 129 S.E.2d 288 Nags Head, Carolina, on a vaca- course, contends that since the accident trip, August 25, 1968, tion and on while in cases occurred require these driving vicinity the vehicle in of North Caroli Nags Head, plaintiff, she struck the na law. law the Kline, inflicting Under North Carolina permanent serious and injuries. non-present owner of a vehicle incurs “Kinney” Services, by Kinney, 1. As used herein refers to Inc. and National Inc. Wheels Renting purpose Levy Auto family v. Daniels’ U-Drive liability under negligent 143 A. doctrine,2 Conn. entrustment3 had case Daniels 846. In that spondeat superior;4 A.L.R. since one Sack suffice, upon rented an automobile alone will sive user operated the who thereafter Connecticut would be this case Kline facts of in the Kinney. in a manner recovery cluded from injured the state of Massachusetts plaintiff, Judge recognized these The District Levy. Acts Connect- Public respect liability un- limitations “Any provides: icut, 1925, ch. but der the law of North any leasing renting person to another that under the circumstances cluded by him shall be lia- motor vehicle owned of New the law of any damage ble for *3 control reason York should operation property of such the caused provisions and the York of New Vehicle or rented leased.” vehicle while so motor Although Consol.Laws, Law, McKinney’s Traffic c. alleged complaint the tor- the Consol.Laws, 388(1) (McKinney’s 71, § automobile, operation the of tious the 1970), e. which states: the Connecticut court held op- “Every owner of vehicle used or right plaintiff ac- had a contractual of liable erated state shall be renting against com- the tion defendant injuries responsible for or death hiring theory upon pany the the resulting any of contract was for the benefit operation of in the use or general public who member of the vehicle, in of the business such damaged the of the be person us- by any or otherwise, owner opinion, leased vehicle. are of We ing with the same disposition however, that in the of the express implied, permission, of present reliance District Court’s such owner.” Levy inappropriate. By its upon was specific was no While there reference to spe- was terms the Connecticut statute agreement leasing in statute be renting persons cifically directed toward Kinney McCorkle, tween the District such, leasing and, as motor vehicles agree Court determined that since the part properly of could considered ment in was made of New any leasing executed in that imposing York the statute vi absolute the New York hand state. On other part carious became a of the leasing on such statute is focused Following contract. line reason of arrangements. By de- terms it ing ac concluded that Kline’s signed upon impose liability the own- against Kinney tion contractual in resulting injuries any of er nature and that under the law of North negligent conduct of from the place Carolina law of the con an It therefore becomes inte- sive user. Roomy tract should v. Allstate control. gral part law of torts New York Company, Insurance 123 independent any contraetural relation- (1962). Accordingly, S.E.2d 817 ship. District held Court New York is, course, reasonably certain It apply statute should to this case and presented present case were that if the thereunder liable court, that forum would to a New York lessee, Mc conduct of the It the law New was so York. Corkle. Corp., Hertz in Johnson reaching (D.C.N.Y.1970), this decision the F.Supp. 302 Judge upon District relied the case of the court extended the benefit Watts, 2. Metcalf, Grindstaff v. N.C. N.C. Duckworth (1961). S.E.2d 784 S.E.2d 485 Hill, Roberts v. plaintiff open the resi- door York statute to to a New multitude claims founded on an action the assertion Massachusetts that the dents corporate resident of New of the lex domicilii is equitable more growing just justifying out of an accident which than the lex loci— District occurred of our substantive law in the area instead of observed the lex We do not Court loci. voyage deem it wise to an flict laws the courts into such leaving adopted “grouping sea, of contacts uncharted es- behind well have theory” attempt to ascertain tablished conflict laws an rules.” apply the law of state with the Similarly, in Petrea v. litigation in the interest dominant Lines, Inc., supra, urged court was question expressed a the statute in adopt “grouping of contacts theo- out-weighed policy of New York which ry,” firmly but elected to stand interest of either Massachusetts position as stated in the Shaw case. Jersey.5 Under we are circumstances opinion improp- that the District Court no North ease With erly applied the law New York to this directly point, judicial our chore is to case, Kinney’s and erred in its denial of “determine the that the rule North Car judgment motion for n. o. v.6 Supreme probably olina fol low, we, not fashion an a rule which Reversed court, might independent federal consid Judge BUTZNER, (dissent- *4 er best.” Lowe’s North Wilkesboro ing) : Fidelity v. Life Hdwre. Mut. Ins. (4 1963). controversy 319 F.2d 469 the aspects Cir. Since tort of this tortious oc quite briefly. conduct and resultant can be recounted Mc- curred in North un Corkle, resident, we think a New York while questionably Kline, Virginian, a of that court state would ran toxicated down a apply edge North Head, Carolina The North Nags law. at the near a road steadfastly Carolina courts have adhered Applying North North Carolina. Caroli- principle delicti, law, to the lex loci al jury na tort the found Mc- urged though adopt a more to flexible Corkle was and awarded Kline Lee, supra, In $52,000 the North injuries. rule. Shaw v. Unques- for his severe applied tionably, Carolina court the restrictive properly the tort issues were Virginia recovery law denied a law, decided under the North Carolina involving interspousal liability de place case spite occurred, where the accident Pe- plaintiff the fact that the Lines, Inc., trea v. 230, 264 N.C. resident North Carolina and would 141 S.E.2d 278 Shaw v. Lee, vested a cause of action have 129 S.E.2d statutory (1963), under the law of that state. appeal and no them has been reviewing line the After decisions noted. 293): (129 court stated Kinney, company the that rented car depart principles “To McCorkle, from on to contends under North which those cases were based will Carolina tort law it is not liable for subject 5. This is agreement decision of the District Court 6. The lease states not, course, conclusive on the New the vehicle and customer are covered question. by liability policy York choice of covering The New insurance interpret bodily injury damage York State courts well designed protect single per this statute $1,000,000 to combined limits New York Nothing opinion, and others on New citizens occurrence. in this highways give course, precludes decline to either Kline or SIc- any rights pursuing they extraterritorial effect. Corkle have agreement under lease or insurance its insur- and/or ance carrier. Although negligence. The flaw York. accident occurred McCorkle’s poli- Kinney’s relationship and an identical is that contention cy written in out of North Carolina would have did not arise with McCorkle by coverage, afforded was created tort. The deny coverage. exe- New York law to and McCorkle contract car, it is cuted for the rental of public policy not North Carolina’s will to as- we should look to the contract following by be offended New York law. agree Kinney’s responsibility. I certain dangers to Sensible which judge rental with the district public exposed operators is Kinney. liability imposes on may carry insurance, rented no cars McCorkle, F.Supp. 1089 Kline v. legislature requires the North Carolina (E.D.Va.1971). carry covering lessor insurance Supreme of North his own and that of his custom- I Court believe the (Supp. ers. rental 20-281 car N.C.Gen.Stat. Carolina would determine company’s 1971). Although of its North for the torts Carolina’s securing protection examining terms of method dif- customer public poli- York’s, fers from executed for contract which the certainly essentially cies of both are simi- states of the car. This hire way lar. determine the common sense company’s method liability, it is the course, surveying Of New York by Levy Daniel’s U-Drive followed law, the North Renting Co., A. 333, 143 Auto 108 Conn. give initial to New York’s consideration (1928), court the district question, This conflict of rules. laws Therefore, apply the we should relied. however, presents problem for it little rules of contracts conflict of laws reasonably clear that New York would aspect of On this Carolina. own law. Bab substantive See absence there be no can doubt. Jackson, cock v. 240 N. exceptional which are circumstances Y.S.2d Au Cannaday present here, Atlan- see Auten, ten N.Y. R., 439, 55 S. tic Line Coast R. settled E. interpret step next Kin- *5 is law of Carolina rule that the is ney-McCorkle in contract accordance governs made in which the contract was Although with the laws of New York. obligations parties. rights the Roomy of the does not recite that Kin- 256 Allstate Insurance v. ney will assume for McCorkle’s 817, 820 123 S.E.2d negligence, imposes by this case, in In contract was made expressly conforming our to terms all York resident New York between New pertinent York Para- New statutes. having corporation its office and and a graph provides of the rental contract 9 principal place in state. business part: in began journey in McCorkle’s “CONFLICT WITH STATE STAT- fact, to end there. In Notwithstanding anything UTES: dispute and between the connection contained, any of the if terms herein purely fortui- was the North Carolina Agree- Rental conditions accident, in- is tous but this site of ment with the statutes conflict require sufficient to rented, is state wherein Vehicle to construction law the Agreement hereby is amended Rental issue, agreement. of the rental On this ” . . to such . conform statutes. Roomy Co., 256 v. Allstate Insurance N. significant (1962), purposes, it For our C. 123 817 to have cisely point. note that contracted in That case involved dispute coverage the law insur- their determined over the an agree- York, rental in New of where the had issued ance

189 made, subject. Thirty-one ment was and not years law of later, Farber Smolack, accident oc- v. 20 N.Y.2d 282 N.Y.S.2d conformity curred. I believe the clause 229 (1967), expressly N.E.2d 39 enough repudiated is broad the rental amend Chenoien’s “restrictive view.” agreement by incorporating N.Y.Vehicle New York now holds that statute & Traffic Law (Mc- subd. 1 has despite ap- extraterritorial effect Kinney 1970), provides part: parent operation restriction to of a vehi- “in Applying cle this state.” the statute “Every owner of a used or gratuitous to a bailment made operated in this state shall be liable York when a New York resident was in- responsible injuries for death or jured the Court said: property resulting negligence in the use or place “Nor should emphasis we undue vehicle, such in the business on the term to which reference has owner, otherwise, by any person us- been made ‘in this state’ in the stat- ing the same with the ute. It adding is clear that permission, express implied, words ‘in predecessor this state’ to the ” such owner . . . . ., subdivision 1 of section 388 . . Legislature was not concerned interpreted This statute has been to al- with extraterritorial effect. It was low the victim of driver’s substituting ‘in this state’ a direct cause action the own- ‘upon former public highway’ words Justus, er of the Plath car. See 28 in order to cover the situation an N.Y.S.2d private roadways accident (1971). Moreover, no there can be parking ...” lots. N.E.2d at doubt statute embraces agree- sive use evidenced a rental Corp. Moreover, ment. Continental Auto Lease the extraterritorial effect Cf. Campbell, recognized 19 N.Y.2d N.Y.S.2d statute has been even when the victim is not a New York resi Corp., In dent. Johnson Hertz conformity Were it not for the clause F.Supp. (S.D.N.Y.1970), the court agreement, of the rental there operator the statute when the propriety some doubt incor- about a vehicle which had been rented in New porating the statute into the contract. resident Massachusetts Geiter, Cherwien v. 272 N.Y. Judge Tyler premised in New N.E.2d held part upon interplay his conclusion by implication this statute was between the statute and extraterrito corporated gratu- into the terms of a legislature rial effect the New York has itous bailment made in New York. ascribed to its insurance laws. He noted Pennsylvania visiting There a resident requires that subdivision 4 of all son, in New York lent his car to his coverage insurance to afford for the lia *6 injured New York in an acci- residents bility created subd. He 1.1 § dent that occurred in New pointed also out that & N.Y.Vehicle liability, Court absolved the owner of 4(a) (Mc Traffic Law subd. § reasoning applied only that the statute Kinney 1970), specifies insurance that operated while the motor vehicle was required registered public highway vehicles in New for in New York. Even so, coverage Cherwien is not the last word on the York oc- include for accidents indemnity provision 1. N.Y. Vehicle & Traffic Law subd. for § contain security against 4: policies provided sponsibility “All . . . of insurance is- section. subject sued the owner of provisions of this section shall Therefore, may that we assume curring in the United States.2 elsewhere in- recognized be contract would undoubtedly that Judge Tyler correct of terpreted the laws in accordance with giving to the close effect risk wherever York to continue its in- New and New between the statute operated. I confident insep- am car for their The reason surance law. nor New that neither North Carolina arability explained Continental give Kinney or its insurance York would Corp. Campbell, Auto Lease expense be- at Kline’s carrier a windfall 280 N.Y.S.2d acci- of the fortuitous site cause said: where the Court judgment of I affirm the dent. imputes to the “Section 388 . . . the district court. negli- of motor vehicle the owner gence operates it one of who uses purpose permission his

imposing liability to an on the owner

injured party. third This enactment injured

expresses policy one negligent operation a motor a fi- have recourse to

vehicle should responsible

nancially defendant.

owner of the automobile is obvious candidate, easily car- for he can most Plaintiff-Appellant, HEARD, James ry insurance to cover the risk.” Appeals has York Court The New COMPANY, Defendant- The MUELLER on the extraterritorial also commented Appellee, of the New York insurance law. effect Judge Tyler Speaking America, on which AFL- United Steelworkers Defendant-Appellee. legis- Intervening CIO, relied, the Court observed lature “has evinced commendable No. 72-1189. State, residents of this cern Appeals, States Court United may but residents of other States Circuit. Sixth a result the activities July Lopez, Tooker v. York residents.” 569, 577, N.Y.S.2d 24 N.Y.2d statutory light liability of les- links scheme requirement sor of a car with insurance, apparent carry

he intended that some provide paid by McCorkle was to rent it as- for the risk with insurance moreover, agreement, al-

sumed. The no discount when she

lowed McCorkle New York.

used the car outside of or destruction son Law subd. N.Y. Vehicle & Traffic ownership, arising 4(a) out of the : “ use, maintenance, Every owner’s . . . specific vehicles provide motor motor vehicle or insurance shall York, else- regulation subject the state of within said surance *7 imposed United States loss from damages of Canada. damages, including the Dominion America law for services, and loss of because for care any per- bodily, to or death