Morris & Co. v. Skandinavia Ins. Co.

• Decision Date: 26 February 1936
• Docket Number: No. 5517.,5517.
• Parties: MORRIS & CO. v. SKANDINAVIA INS. CO., Limited.
• Court: U.S. Court of Appeals — Seventh Circuit

81 F.2d 346 (1936)

MORRIS & CO. v. SKANDINAVIA INS. CO., Limited.

No. 5517.

Circuit Court of Appeals, Seventh Circuit.

January 16, 1936.

Rehearing Denied February 26, 1936.

Walter E. Lindgren, of Springfield, Ill., and John M. Lee and Carl M. Loos, both of Chicago, Ill., for appellant.

W. Edgar Sampson, C. Terry Lindner, and Doyle, Sampson & Giffin, all of Springfield, Ill., and Bigham, Englar, Jones & Houston, of New York City, for appellee.

Before EVANS, SPARKS, and ALSCHULER, Circuit Judges.

SPARKS, Circuit Judge.

This action was brought by appellant upon a marine insurance policy to recover for a loss sustained by fire of a cargo of meat shipped from Montevideo, Uruguay, to Havana, Cuba. The action was instituted in the circuit court of Sangamon county, Illinois. Upon petition of appellee under a special limited appearance, the cause was transferred to the District Court on the ground of diversity of citizenship. There a plea to the jurisdiction was sustained and judgment was entered quashing the summons and purported service, abating the action, and dismissing it for lack of jurisdiction over appellee's person, and taxing all costs against appellant. It is from this judgment that the appeal is prosecuted.

The declaration alleged that appellant was a Louisiana corporation, and that appellee was organized under the laws of the Kingdom of Denmark and was doing an insurance business in Illinois; that about July 11, 1918, in Buenos Aires, Argentine Republic, appellee, for a consideration, made and delivered a policy to appellant insuring it against fire to the amount of $50,000 on a shipment of jerked beef, as above stated, and averred a total loss by fire. The policy provided that notice of loss was to be given to appellee at Havana, and the payment of loss, if any, was to be made at Buenos Aires. Appellee filed a special plea to the jurisdiction specifically alleging that it was not amenable to be sued or served with process in Illinois for the following reasons: (1) The alleged cause of action did not arise in that state, (2) appellee was not doing business in Illinois when the suit was instituted, (3) appellee was not found nor was it within that state at the time of the attempted service, (4) neither party was a citizen or resident of Illinois, and (5) it never consented to suits against it in Illinois upon causes of action arising outside of that state. The appellant replied that at the time the suit was brought appellee was doing business in Illinois and was found in that state, and that it had consented to such suit in Illinois. It did not, however, deny that the cause of action did not arise in Illinois. The issues were formally joined by the similiter. The return of the sheriff appears in the margin.¹

Proof of the facts not admitted by the pleadings was made by stipulation and certain exhibits attached thereto, as follows: Appellant had never been licensed to do and never has done business in Illinois, although all of its capital stock is owned by a Maine corporation of the same name, which was authorized to do, and was actually doing, business in Illinois. Appellee was licensed to do business in Illinois on December 28, 1916, and such license had been renewed from year to year, for which appellee had paid the license fees, together with the state fire marshal tax.

The principal business of appellee, and the only business conducted by appellee in the United States, was that of reinsuring other companies against a specific portion of the risks assumed by the latter. The direct writing companies issued their policies directly to the owners, with whom appellee as a reinsuring company had no relation, contractual or otherwise, its only obligation being to indemnify the direct writing companies for a specified portion of the loss sustained by them by reason of the policies which they had written. None of the reinsuring contracts to which appellee was a party were ever made, or to be performed, in Illinois, but all were in New York. Appellee had never at any material time had any transactions of insurance or reinsurance with any insurance company which had its home office in Illinois. It had never directly effected any insurance upon any property located in whole or in part in Illinois, nor had it maintained any office there. Except for agents for the sole purpose of service of process, appellee had never employed or engaged any agent, servant or employee in Illinois, or had knowledge of or consented to or acquiesced in any person, firm or corporation acting or assuming to act within that state as its agent, servant, or employee in connection with its business. It had never had any property or bank account in Illinois, or received or made any payment of returned premiums, or paid within that state any losses sustained by it under any contract of insurance or reinsurance.

On March 29, 1929, appellee made and executed a power of attorney, designating C. J. Doyle its true and lawful attorney in and for the state of Illinois, on whom all process of law, whether mesne or final, against the company might be served, in any action, suit or special proceedings against said company in the state of Illinois, subject to and in accordance with all the statutes and laws of Illinois then in force, and such other acts and laws as might be thereafter amendatory thereof and supplementary thereto. And the attorney was thereby duly authorized and empowered, as the agent of the company, to receive and accept service of process in all cases as provided for by the laws of that state, and such service should be deemed valid personal service upon said company. The only reason for executing that power of attorney was that under the laws of Illinois, Smith-Hurd Ann.St. c. 73, §§ 91, 37, Cahill's Illinois Statutes 1933, c. 73, pars. 18, 150, no insurance company doing business in that state was permitted to reinsure its risks in another company which was not licensed to do business in Illinois.

Appellant formerly sued upon this claim in a state court of Mississippi. The suit was thereupon removed to a federal court in the Fifth circuit. Upon hearing, a motion to quash the summons and service, and a plea to the jurisdiction both were sustained. A verdict was directed for the insurance company, and the suit was dismissed. There was an appeal to the Circuit Court of Appeals, and the judgment of the District Court was affirmed, 27 F.(2d) 329, 330. The record in that appeal conclusively showed that the appellee did only a reinsurance business in the United States and all of it was transacted in New York City, the transaction being between the appellee's agent and the original insurer. The insurance company had reinsured risks on property situated in Mississippi, and in compliance with the laws of that state had appointed the Insurance Commissioner of Mississippi its agent for the purpose of service. It had also appointed Wilkerson, Inc., its nominal agent; but that agent had never had any transaction of reinsurance or otherwise for the appellee, all business being negotiated and transacted in New York. The record further disclosed that, in compliance with the Mississippi law, appellee had filed annual statements of its reinsurance of risks on Mississippi property and had annually paid taxes based thereon.

The court said:

"We think it is clear appellee was not doing business in Mississippi, so as to be subject to suit in that state on a cause of action arising elsewhere. Citing cases. It may be conceded that, if the statutes of Mississippi requiring appellee to appoint agents in Mississippi made service on those agents good as to a transitory cause of action arising elsewhere, appellee would be bound thereby; but we find nothing in the laws or jurisprudence of Mississippi going to that extent.

"It is also contended by appellant that by removing the case to the District Court, by appearing by counsel, and by subsequently filing the plea of lis pendens, appellee has made a personal appearance and waived any defect of service. Citation of authorities is unnecessary to show that this contention is untenable."

Upon appeal to the Supreme Court, that Court, in affirming the decision of the Circuit Court of Appeals, 279 U.S. 405, 49 S.Ct. 360, 361, 73 L.Ed. 762, said in part:

"Reinsurance involves no transaction or privity between the reinsurer and those originally assured. The lower courts rightly held that the making of the reinsurance compacts in New York between respondent and insurers of property in Mississippi was not the doing of business in that state. And, as its consent to be sued there cannot be implied from any transactions within the state, there is no jurisdiction, unless respondent's authorization in respect of service is broad enough to extend to this case. Phila. & Reading R. Co. v. McKibbin, 243 U.S. 264, 37 S.Ct. 280, 61 L.Ed. 710.

"The policy sued on was issued and the loss occurred in South America. The importation of such controversies would not serve any interest of Mississippi. The purpose of state statutes requiring the appointment by foreign corporations of agents upon whom process may be served is primarily to subject them to the jurisdiction of local courts in controversies growing out of transactions within the state. Citing cases. The language of the appointment and of the statute under which it was made plainly implies that the scope of the agency is intended to be so limited. By the terms of both, the authority continues only so long as any liability of the company remains outstanding in Mississippi. No decision of the state Supreme Court supports the construction for which petitioner contends. And, in the absence of language compelling it, such a statute ought not to be construed to impose upon the courts of the state the duty, or to give them power, to take cases arising out of transactions so foreign to its interests. The service of the summons cannot be sustained.

"Petitioner suggests...