American Mut. Liability Ins. Co. v. Volpe

• Decision Date: 28 September 1922
• Docket Number: 2858.
• Citation: 284 F. 75
• Parties: AMERICAN MUTUAL LIABILITY INS. CO. v. VOLPE et al.
• Court: U.S. Court of Appeals — Third Circuit

284 F. 75

AMERICAN MUTUAL LIABILITY INS. CO. v. VOLPE et al.

No. 2858.

United States Court of Appeals, Third Circuit.

September 28, 1922

Joseph Coult, Jr., of Newark, N.J. (Robert H. Southard, of New York City, of counsel), for appellant.

Robert H. Doherty, of Jersey City, N.J. (George S. Hobart, of Newark, N.J., of counsel), for appellees.

Before BUFFINGTON, WOOLLEY, and DAVIS, Circuit Judges.

DAVIS Circuit Judge.

This is an appeal from an order of the District Court refusing to enjoin John Volpe, a minor, and the Hamersley Manufacturing Company from enforcing a judgment secured in the Supreme Court of New Jersey against the Hamersley Manufacturing Company. Volpe, 39 days under 16 years of age, while employed by the Hamersley Company sustained an injury resulting in the loss of his left arm. He secured employment by representing that he was Dominic Morriggi, who was over sixteen years of age, and whose 'birth certificate and employment papers' he produced to secure the employment. Volpe worked on a printing press, and it was unlawful to employ any one under 16 years on this character of work 'after seven o'clock in the afternoon or before seven o'clock in the morning of any DAY. ' P.L.N.J. 1914, pp. 524, 528. He was injured at 9 o'clock at night while working. After the injury the Hamersley Company for the first time discovered the identity of Volpe, who made claim for compensation under the Workmen's Compensation Act of New Jersey, 1911 (P.L. 134), and the first payment thereunder was made on January 6, 1919. After this payment, John Volpe acting for himself and by his father, Joseph Volpe, who was represented to be guardian of John, with full knowledge that the injury to John did not come within the provisions of the Employers' Liability Act of New Jersey, agreed with the complainant to accept in satisfaction of the claim and in settlement of any cause of action which John might have against the complainant, at common law or otherwise, the same compensation which would have been allowed to him under the New Jersey Compensation Act, if it had been applicable. Compensation was accordingly made in biweekly payments until February 14, 1920, $469.80 in all being paid.

On March 20, 1920, Volpe refused to accept further money under the agreement, and brought suit against the Hamersley Company in the Supreme Court of New Jersey, and secured a verdict of $15,000 damages, which was reduced on appeal to the Court of Errors and Appeals to $10,000. 115 A. 665. Thereupon the complainant filed on the equity side of the District Court its complaint, wherein it set out the facts and misrepresentations by means of which Volpe secured employment with the Hamersley Company, inducing it to assume a liability not contemplated by the contract of employment, and thus working a fraud upon it. On the theory that the defendant Volpe was bound in equity to accept the compensation agreed upon, and that complainant was liable for the payment of the judgment thus obtained because of a policy of insurance issued by it to the Hamersley Company on February 1, 1918 whereby it undertook and agreed to indemnify and insure that company against loss and damage by reason of accidents occurring on its premises, it prayed that John Volpe, his guardians, attorneys, etc., be enjoined from collecting assigning, disposing of, or from proceeding with execution on the $10,000 judgment. The injunction was refused, and bill dismissed, and complainant appealed to this court.

The complainant at the argument pressed upon us with great earnestness that the agreement between it and Volpe was duly and deliberately entered into, and its performance in good faith undertaken and partly executed, and that, while it was unconscionable for defendant to ignore the agreement and prosecute his common-law right of action, the defense of accord and satisfaction was not available in the Supreme Court. The contention by defendant that complainant's rights were foreclosed by the judgment in the Supreme Court should be sustained if the jurisdiction of the court was complete. But it was not complete, for the defense of accord and satisfaction is not available in a court of law when the accord is unexecuted or only partly executed. Line and Nelson v. Nelson and Smalley, 38 N.J.Law, 358, 362; Stone v. Todd, 49 N.J.Law, 274, 281, 8 A. 300; Volpe v. Hamersley Manufacturing Co. (N.J. Err. & App.) 115 A. 665. But the defense of an executory accord is good in equity if the agreement is lawful at its inception. Headley v. Leavitt, 65 N.J.Eq. 748, 754, 55 A. 731; Trenton Street Railway Co. v. Lawlor, 74 N.J.Eq. 828, 832, 71 A. 234, 74 A. 668. Consequently the contention that accord and satisfaction was passed upon in the New Jersey state courts cannot prevail because that defense was not open to defendant.

The defendant contends that the District Court has no jurisdiction to enjoin proceedings in the state court unless they involved rights secured by the Constitution, the laws of the United States, or are unconscionable, none of which, it alleges, was present in this case. Section 265 of the Judicial Code (Comp. St. Sec. 1242) provides that:

'The writ of injunction shall not be granted by any court of the United States to stay proceedings in any court of a state, except in cases where such injunction may be authorized by any law relating to proceedings in bankruptcy.'

Where the elements of federal and equity jurisdiction are present this provision of the Judicial Code, which has been in force for more than a century, does not prevent federal courts from enjoining proceedings: (1) To enforce local statutes which are repugnant to the Constitution of the United States, Ex parte Young, 209 U.S. 123, 28 Sup.Ct. 441, 52 L.Ed. 714, 13 L.R.A. (N.S.) 932, 14 Ann.Cas. 764; Truax v. Raich, 239 U.S. 33, 36 Sup.Ct. 7, 60 L.Ed. 131, Ann. Cas. 1917B, 283; Missouri v. Chicago, Burlington & Quincy Railroad Co., 241 U.S. 533, 538, 543, 36 Sup.Ct. 715, 60 L.Ed. 1148; (2) to maintain and protect their own jurisdiction, properly acquired and still subsisting, by enjoining attempts to frustrate, defeat, or impair it through proceedings in state courts, French v. Hay, 89 U.S. (22 Wall.) 250, 22 L.Ed. 857; Julian v. Central Trust Co., 193 U.S. 93, 112, 24 Sup.Ct. 399, 48 L.Ed. 629; Chesapeake & Ohio Railway Co. v. McCabe, 213 U.S. 207, 219, 29 Sup.Ct. 430, 53 L.Ed. 765; Looney v. Eastern Texas R.R. Co., 247 U.S. 214, 221, 38 Sup.Ct. 460, 62 L.Ed. 1084; or (3) to deprive a party, by means of an injunction, of the benefit of a judgment obtained in a state court under circumstances where its enforcement will be contrary to recognized principles of equity and the standards of good conscience, Marshall v. Holmes, 141 U.S. 589, 12 Sup.Ct. 62, 35 L.Ed. 870; Ex parte Simon, 208 U.S. 144, 28 Sup.Ct. 238, 52 L.Ed. 429; Simon v. Southern Ry. Co., 236 U.S. 115, 35 Sup.Ct. 255, 59 L.Ed. 492; Public Service Co. v. Corboy, 250 U.S. 153, 160, 39 Sup.Ct. 440, 63 L.Ed. 905.

Complainant maintains that this case comes under the third division above enumerated, and it is directly controlled by the cases of Headley v. Leavitt, supra; Trenton Railway Co. v. Lawlor, supra, and Wells Fargo & Co. v. Taylor, 247 U.S. 175, 38 Sup.Ct. 581, 62 L.Ed. 1244. Unless the case sub judice can be distinguished from these cases, the decree of the District Court must be reversed and the defendants enjoined.

The New Jersey cases differ from the case at bar, in that the agreement on which the proceedings in the state courts were based was made directly by defendant with complainant to extinguish the common-law right of action which defendant had directly against complainant, while in the case at bar Volpe had no common-law right of action against the complainant which is liable, if liable at all, on a policy of insurance issued by it to the Hamersley Manufacturing Company, to which Volpe was in no way a party. But in the case of Wells Fargo & Co. v. Taylor, 254 U.S. 175, 41 Sup.Ct. 93, 65 L.Ed. 205, the facts are almost identical with those involved in the case under consideration. In that case Wells Fargo &amp Co., hereafter called the express company, and the St. Louis & San Francisco Railroad Company, called the railroad company, entered into an agreement wherein the railroad company agreed to transport by suitable cars provided by it and attached to its passenger trains all express matter of the express company and the messengers accompanying the same, and the express company to indemnify and hold harmless the railroad company in respect to all claims for damages suffered by such agents and employees (of the express company) while engaged in the transportation of express matter on the trains of the railroad company. The messenger, Taylor, entered into a separate agreement, called a messenger's agreement, with the express company, wherein it was stipulated as a term or condition of his employment that neither the express company nor the railroad company should, under any circumstances or in any case, be liable for any injury which he might receive while on the railroad company's trains as messenger, whether caused by negligence of the railroad company or otherwise, and that he would assume all and every risk incidental to such employment, from whatever cause arising. Taylor was injured while riding in one of the cars of the railroad company, and brought suit against that company and obtained a judgment for $4,000 damages. The express company filed a bill in the United States District Court for the Northern District of Mississippi, based upon diversity of citizenship to restrain Taylor from enforcing the judgment. That court enjoined the enforcement of the judgment, which was reversed by the Circuit Court of Appeals, but affirmed by the United...