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SCHINDLER v. AMERICAN MOTORISTS INS. CO.

October 8, 1986

PATRICIA SCHINDLER, Executrix of the Estate of Catherine Plecha, Deceased, and PATRICIA SCHINDLER, Executrix of the Estate of James Plecha, Deceased
v.
AMERICAN MOTORISTS INSURANCE COMPANY, an Illinois corporation



The opinion of the court was delivered by: WEBER

 This motion for summary judgment involves whether full faith and credit shall be given to a New York declaratory default judgment. A second issue, the effect to be given in Pennsylvania of a statutory provision of New York insurance law barring the cause of action pleaded here becomes moot if full faith and credit is accorded.

 The facts are involved. Husband and wife, residents of New York, driving their automobile licensed in New York and insured in New York by the husband as named insured, were both killed in an automobile accident in Pennsylvania. Schindler, plaintiff herein, was appointed Executrix of both estates. Schindler, wife's executrix, brought suit against herself as husband's executrix in a state court in Pennsylvania, on May 6, 1982 claiming that wife's death resulted from the negligence of husband driver. Notice of this suit was given to American Motorists Insurance Company, husband's insurer, which refused to appear, defend, or provide coverage. The Pennsylvania court action proceeded to a default judgment which was not appealed.

 On June 18, 1982, American Motorists brought suit in the New York state court against husband's Executrix asking for a declaratory judgment that it owed no coverage and had no obligation to defend the Pennsylvania state action. The Executrix was duly served but entered no appearance, and the matter proceeded to default judgment of no obligation to defend, and no liability.

 We must note at this time that Patricia Schindler is Executrix for both decedents, and in the New York action she was named defendant and served but allowed that action to go by default; in the Pennsylvania action she was both plaintiff and defendant and allowed that to go to default. She appears to have created a conflict of interests and to have violated her duty as a fiduciary to protect the assets of husband's estate. This could easily have been avoided.

 With this background, Patricia Schindler, as the Executrix of both husband and wife, brought suit in Erie County, Pennsylvania, in Common Pleas Court, for a declaratory judgment against husband's insurer, American Motorists, to establish its liability for the amount of the default judgment previously entered in that court and for excess liability for the insurance carrier's breach of its fiduciary duty. American Motorists removed this action to this court under 28 U.S.C. 1441(a) and here we are.

 The issue here, the liability of American Motorists Insurance Company for coverage and representation, has been raised and answered in a New York state court in a prior action between these same parties. The plaintiff here was the defendant in the New York state action. She was duly served, but allowed the action to go to default. The New York state court, on July 27, 1982, entered an order that American Motorists Insurance Company had no duty to defend or obligation to pay any judgment in an action by the estate of the deceased husband.

 Defendant has moved to dismiss the present suit under F.R.C.P. 56 on the grounds, inter alia, that the New York state judgment is res judicata on this issue between the parties and that the New York state judgment is entitled to full faith and credit. We find no disputed genuine issues of material fact and the matter is proper for consideration under Rule 56.

 Article IV Section 1 of the Constitution of the United States says:

 
Full Faith and Credit shall be given in each State to the public Acts, Records and Judicial Proceedings of every other State.

 And Congress has provided that:

 
Such Acts, records and judicial proceedings or copies thereof, so authenticated, shall have the same full faith and credit in every court within the United States and its Territories and Possessions as they have by law or usage in the courts of such State, Territory or Possession from which they are taken.

 28 U.S.C. 1738.

 To begin, we note that a judgment by default, "a judgment of a court having jurisdiction of the parties and of the subject matter operates as res judicata, in the absence of fraud or collusion, even if obtained upon a default." Morris v. ...


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