Crown Const. Co. v. Newfoundland American Ins. Co.

• Decision Date: 15 March 1968
• Citation: 239 A.2d 452,429 Pa. 119
• Parties: CROWN CONSTRUCTION COMPANY v. NEWFOUNDLAND AMERICAN INSURANCE COMPANY, Limited, Appellant.
• Court: Pennsylvania Supreme Court

Page 452

239 A.2d 452

429 Pa. 119

CROWN CONSTRUCTION COMPANY v. NEWFOUNDLAND AMERICAN INSURANCE COMPANY, Limited, Appellant.

Supreme Court of Pennsylvania.

March 15, 1968.

John F. Naulty, Philadelphia, George M. Spence, Spence, Custer, Saylor, Wolfe & Rose, Johnstown, for appellant.

Norman A. Krumenacker, Jr., Gleaon & Krumenacker, Johnstown, for appellee.

Before BELL, C.J., and MUSMANNO, JONES, COHEN, EAGEN, O'BRIEN and ROBERTS, JJ.

OPINION

JONES, Justice.

On June 1, 1964, Crown Construction Company (Crown), instituted an assumpsit action against Newfoundland American Insurance Company, Ltd., (Newfoundland), in the Court of Common Pleas of Cambria County. Service of process was made upon the Insurance Commissioner of the Commonwealth on June 3, 1964. ¹

On June 18, 1964, Newfoundland petitioned for removal of this action to the U.S. District Court for the Eastern District of Pennsylvania ² and, on the same day, mailed a copy of the removal petition to Crown's counsel. On June 22, 1964, Newfoundland's counsel mailed a copy of the removal petition to the Prothonotary of Cambria County which was received on June 24, 1964. On June 23, 1964--the 20th day after service of the complaint in the state action--Newfoundland filed its answer to Crown's complaint in the U.S. District Court.

On June 25, 1964--23 days after service of the complaint in the state action--Crown filed a praecipe for a default judgment in the state court because of Newfoundland's failure to file an answer In the state court to Crown's complaint ³ and, on the following day, Crown obtained a rule on the Prothonotary of Cambria County to show cause why Newfoundland's removal petition should not be refused for filing. ⁴ On July 6, 1964--18 days after filing the removal petition in the federal court--Newfoundland, through resident counsel, paid the necessary fee and delivered to the Prothonotary a certified copy of the removal petition which was Then filed in the state court. On August 3, 1964, Newfoundland filed in the state court an answer, containing new matter, to Crown's complaint. ⁵

Meanwhile, in the federal court Crown filed a motion to remand the action to the state court. On December 14, 1964, the U.S. District Court remanded the action to the state court. ⁶ The basis upon which the court directed the remand was that Newfoundland had failed to follow the statutory mandate ⁷ that a copy of the removal petition must be filed Promptly with the clerk (Prothonotary) of the state court. The court stated, inter alia, '* * * (Newfoundland) has asserted no facts of record from which I can find that removal was validly effected.'

On February 8, 1965--7 1/2 months after the entry of the default judgment--Newfoundland petitioned the state court to open the judgment and, thereafter, moved to strike off the judgment. The Court of Common Pleas of Cambria County entered an order refusing either to strike off or to open the judgment. From that order Newfoundland now appeals.

In refusing to strike off the judgment, the court below found that the action had never been Effectively removed from the state court and, therefore, when the default judgment was entered, the state court still retained its jurisdiction. In dismissing the petition to open judgment, the court below found that such petition had not been filed Promptly and its delay had not been reasonably explained or excused.

On the reargument of this appeal, Newfoundland raised several issues: (1) at the time of entry of the default judgment, did the state court, in view of the removal proceedings, have Jurisdiction to entertain a proceeding such as a praecipe for the entry of the default judgment?; (2) was Newfoundland improperly denied an opportunity to present evidence that certain entries which appear in the state court docket were erroneous?

At the original argument of this appeal, another issue was presented. Newfoundland challenged the propriety of the entry of the default judgment on the ground that, if service of process had been made under the terms of the Unauthorized Insurers Process Act, supra, § 2(b), then this judgment was prematurely entered since, under that statute, a judgment could not be taken until 30 days had elapsed after service of the complaint whereas the instant judgment was entered 23 days after service of the complaint. Responding to this contention, Crown took the position that service had not been effected under the authority of the statute but rather under express authority contained in Newfoundland's insurance policy which designated the Insurance Commissioner as The agent of Newfoundland and, thus, permitted resort to the ordinary rules for the service of process. Such argument brought Crown's position into direct conflict with Pa.R.C.P. 2180, 12 P.S. Appendix, which, in the instant factual situation, would require personal service rather than service by registered mail as was made in this case. However, this question of defective service should have been raised by Newfoundland under Pa.R.C.P. 1017(b)(1) and it was not so raised. On the contrary, Newfoundland not only did not question the jurisdiction over its person by reason of defective service but if filed an answer on the merits. That jurisdiction over the person may be waived is clear: Yentzer v. Taylor Wine Co., 409 Pa. 338, 342, 186 A.2d 396 (1962) and authorities therein cited. Under Pa.R.C.P. 1032, Newfoundland's failure to raise the question of defective service, by way of preliminary objections, as well as its answer on the merits waived any defect in the service. Moreover, at the reargument of this appeal, Newfoundland did not urge any defect in service as a basis for a reversal of the instant order. However, we still must consider whether the service was made under the Unauthorized Insurers Process Act, supra, or under the terms of the insurance contract for the purpose of determining whether the judgment was Prematurely entered.

Whether when the default judgment was entered the state court still retained jurisdiction depends upon whether Newfoundland At that time had fully and strictly complied with the federal statute providing for the removal of actions from state to federal courts. A removal statute is subject to strict construction and its provisions must be strictly complied with before the jurisdiction of a state court can be ousted: Kovell v. Pennsylvania Railroad Co. (N.D. Ohio), 129 F.Supp. 906 (1954); Hamilton v. Hayes Freight Lines (E.D. Ky.), 102 F.Supp. 594 (1952). When a removal has been effected In strict compliance with the statutory requirements, then the state court's jurisdiction ceases and any further proceeding in the state court is a nullity so long as the action is pending in the federal court.

The procedure for the removal of actions has been promulgated by the Congress. ⁸ Inter alia, the federal statute (28 U.S.C.A. § 1446(e) requires that 'Promptly after the filing of such (removal) petition and bond the defendant or defendants shall give written notice thereof to all adverse parties and shall file a copy of the (removal) petition with the clerk of such State court, Which shall effect the removal and the State court shall proceed no further unless and until the case is remanded.' (Emphasis supplied). Unlike the prior law on the subject ⁹ which provided that, upon the filing, in due time, of the removal petition, with sufficient bond, the state court would lose jurisdiction to proceed further, the present federal statute provides that, in addition to filing, in due time, the removal petition with sufficient bond, the removing party must give Prompt notice to the adverse party and Promptly file a copy of the removal petition with the clerk of the state court before the state court loses its jurisdiction. Both the statutory language and case law indicate that, until Prompt notice is given and a copy of the removal petition Promptly filed with the clerk of the state court, the state court retains its jurisdiction: Donlan v. F. H. McGraw & Co. (E.D. N.Y.), 81 F.Supp. 599 (1948); Beleos v. Life and Casualty Insurance Co. of Tennessee, (E.D. S.C.), 161 F.Supp. 627 (1956). In Donlan, supra, the court stated: 'It is clear that it was not contemplated that the removal be considered complete until the requirements of subdivision (e) (28 U.S.C.A. § 1446(e)) were complied with. It follows therefore that in the interim between the filing of the petition and bond by the defendant in the federal court, and the giving of notice to the plaintiff and the filing of a copy of the petition with the clerk of the state court, the plaintiff would be free to proceed with the action in the state court. He would in no sense be stayed.' (81 F.Supp. p. 600). In Beleos, supra, it was held that the requirements of filing of petitions for removal with the clerk of the state court and the giving of notice to the adverse party were not 'modal' or 'formal' but mandatory conditions precedent to the termination of state court jurisdiction. The district court said '(S)ubsection (e) is designed so that a State Court and a Federal Court cannot both have jurisdiction of the same case at the same time. Until the State Court loses jurisdiction, the Federal Court cannot acquire it.' (161 F.Supp. p. 628).

In the case at bar, Newfoundland did not follow the mandate of Section 1446 (e) and did not Promptly file a copy of the removal petition with the Prothonotary of the state court. The record clearly shows that Newfoundland did not file a copy of the removal petition with the Prothonotary of Cambria County until 18 days after filing the removal petition in the federal court. That such filing fell far short of compliance with the mandate of Section 1446(e) was recognized by Judge Joseph S. Lord, III of the U.S. District Court who stated, in remanding this case to the state court, '* * * (Newfoundland) has not even come close to sustaining its burden of showing that the case was effectively removed *...