New York Life Ins. Co. v. Marshall

• Decision Date: 18 July 1927
• Docket Number: No. 18776.,18776.
• Citation: 21 F.2d 172
• Parties: NEW YORK LIFE INS. CO. v. MARSHALL.
• Court: U.S. District Court — Eastern District of Louisiana

21 F.2d 172 (1927)

NEW YORK LIFE INS. CO. v. MARSHALL.

No. 18776.

District Court, E. D. Louisiana.

July 8, 1927.

On Application for Injunction to Stay Proceedings, July 18, 1927.

Richard B. Montgomery, of Montgomery & Montgomery, of New Orleans, La., and B. D. Talley, of Bogalusa, La., for complainant.

Charles Ellis Ott, of Ott & Rich, of Bogalusa, La., for defendant.

On Application for Injunction to Stay Proceedings in State Court Pending Plaintiff's Appeal, July 18, 1927.

On Motion to Dismiss.

BURNS, District Judge.

The defendant is the widow of Frank A. Marshall, who died November 27, 1926. She is beneficiary under two policies of insurance, for $2,500 each, on the life of her said deceased husband. She moves to dismiss plaintiff's bill in equity, which prays for a cancellation and return of the two policies for alleged misrepresentations and suppressions of fact by the insured with respect to his health and medical history in two applications made by him for the insurance, preceding the issuance of the policies.

Following Frank A. Marshall's death, the insurance company plaintiff had declared the policies rescinded and had offered to return the paid premiums. The widow, now defendant here, thereupon filed suit in the Twenty-Second judicial district court for the parish of Washington, state of Louisiana, upon one policy only, praying for a judgment of $2,500. She has not as yet sued upon the other policy, which is for a like amount. Before defending that suit, which was not removable to this court, the insurance company filed this suit in equity, praying for an injunction to restrain further proceedings by the defendant, as plaintiff, in the said court, during the pendency of this suit, and also praying for the cancellation and return of the policies as hereinabove first stated.

By this motion to dismiss, the defendant attacks the jurisdiction of this court, urging the prohibition of section 265 of the Judicial Code (Comp. St. § 1242) against the granting of injunctions by the courts of the United States to stay proceedings in any court of a state, and also the prohibition of section 267 of the Judicial Code (Comp. St. § 1244), which prohibits suits in equity in the courts of the United States in any case where a plain, adequate, and complete remedy may be had at law.

Ordinarily this court would have and should exercise jurisdiction in a suit for the cancellation of a policy of insurance for fraud between citizens of different states, where the amount in controversy exceeds $3,000, and grant equitable remedy therein, even though the cause of action in the suit arose out of two separate policies or contracts, such as are in question here. These two policies, for $2,500 each, may be considered together for jurisdictional purposes, since they are between the same parties, are of the same character, and, according to the averments of the bill, grew out of substantially the same transaction or negotiation. See Mutual Life Ins. v. Rose (D. C.) 294 F. 122; Mass. Pro Ass'n v. Kittles (C. C. A.) 2 F.(2d) 211. It is the actual matter in dispute, the value of the rights involved, that is controlling in determining the jurisdiction. Wright v. Mut. Life Ins. Co. of N. Y. (D. C.) 3 F.(2d) 501; Mass. Pro. Ass'n v. Kittles, supra.

But, where a court of a state has first assumed jurisdiction of a cause which is lawfully within its jurisdiction, and that cause is not removable to a federal court, equitable jurisdiction does not accrue to such federal court because it is thought that the law as administered by that court is more favorable to the party seeking its aid. Cable v. U. S. Life Ins. Co., 191 U. S. 309, 24 S. Ct. 74, 48 L. Ed. 188.

In Phœnix Mut. Life Ins. Co. v. Bailey, 13 Wall. 621, 20 L. Ed. 501, the Supreme Court distinctly decided that, although equity courts have power to order the delivery of and cancellation of a policy of insurance obtained on fraudulent representations and suppression of facts, yet it will not generally do so when the representations and suppressions can be perfectly well used in a defense at law in a suit upon the policy. Hence a bill for such purpose may be properly dismissed without prejudice.

The Supreme Court made particular reference to Hipp v. Babin, 19 How. 271, 15 L. Ed. 633, repeating the conclusion that, whenever a court of law in such a case is competent to take cognizance of a right, and has power to proceed to a judgment which affords a plain, adequate, and complete remedy without the aid of a court of equity, the plaintiff must in general proceed at law, because the defendant under such circumstances has a right to a trial by jury.

Recognizing exceptions to that rule in cases where preventive relief was administered by injunction, the Supreme Court declared that such relief was granted in such cases to prevent irreparable injury or a multiplicity of suits, or where the injury is of such a nature that it cannot be adequately compensated at law, or is such as from its continuance or permanent mischief must occasion constantly recurring grievance, which cannot be removed or corrected otherwise than by the preventive remedy afforded by equity.

The bill presented here, against which the motion to dismiss is directed, seeks to bring this case into the excepted class, urging that the policies in question contain a limitation upon its right of action. The clause reads: "This policy shall be incontestable after two years from this date."

Plaintiff contends that, because of this clause, irreparable injury is threatened, since the defendant beneficiary has sued upon only one policy in the state court, and can refuse to sue upon the second until after the contractual period of limitation against the plaintiff insurer has elapsed; that therefore, whilst the rescission for fraudulent representations and suppressions may be pleaded in defense of the suit now pending, the remedy at law is not adequate and complete, because the two policies are not before the court.

Plaintiff contends additionally that it is threatened with a multiplicity of suits, since another suit for a like amount may be brought against it under the other policy, and therefore it is entitled to invoke the equity jurisdiction of this court, because the phrase "multiplicity of suits" may mean but two suits between the same persons. Plaintiff cites in support of this last contention South Penn. Oil Co. v. Calf Creek Oil & Gas Co. (C. C.) 140 F. 507, and other cases. It also cites Mut. Life Ins. v. Rose and Mass. Pro. Ass'n v. Kittles, supra, to the effect that death does not interrupt the incontestability period, where the policy prescribes a specified time, and that such a clause will furnish the special circumstances for equitable cognizance, and Lincoln Nat. Life Ins. Co. v. Peake (D. C.) 10 F.(2d) 366, to the effect that delay by the beneficiary or assignee in filing suit on the policy would defeat plaintiff's right under such a clause.

A consideration of these and other authorities cited in the briefs persuades me that the rule applied in Cable v. U. S. Life Ins. Co. and in Phœnix Mut. Life Ins. Co. v. Bailey, supra, is decisive of this case. Where a plaintiff in a state court which has jurisdiction over the subject-matter brings the defendant properly within such jurisdiction, he or she is entitled to a trial of his or her case in that court, unless the same may be removed to a federal court upon some constitutional ground. If that ground does not exist, equitable jurisdiction does not accrue to the federal court. Upon the death of the insured, the obligation to pay sums certain as expressed in the policies became fixed and absolute, precisely the same as in the Bailey Case, where the Supreme Court held that the demand for payment was a purely legal demand, and declared that it was difficult to see what remedy more clearly perfect and complete could be afforded the insurer than the right to make its defense at law; that, where a party has a good defense at law to a purely legal demand, he has no occasion to resort to a court of equity for relief, unless he is prepared to prove some special circumstance to show that he may suffer irreparable injury.

To my mind the plaintiff fails to show a special circumstance of the character contemplated. Its contention that it does is merely colorable. The defendant has already proceeded upon one policy, and there are yet some 14 months of the contestable period to run, under the clause in question. The fixed and absolute amount of each of the separate policies is below the jurisdictional minimum of this court, and the suits separately brought thereunder are not removable here. This court cannot assume, for the purpose of this motion to dismiss, that the sole reason of the defendant for bringing suit upon only one policy was to deprive the plaintiff insurer of the benefit of the contestability clause. There may be some recognized defect in the other policy, or it may be that the terms and conditions of both policies and all of the attendant circumstances are identical as to each policy, because of which the defendant insurer assumed that a decision of the issues in one such suit would suffice to conclude her dispute with the insurer. However this may be, and although I am not unmindful of the elementary rule in equity that, to constitute an adequate remedy at law, the remedy must be as complete, practical, and efficient both in respect to the final relief sought, and the mode of obtaining it as the remedy in equity, and must be available to the plaintiff in a federal court (Boise Artesian Water Co. v. Boise, 213 U. S. 276, 29 S. Ct. 426, 53 L. Ed. 796, and other cases cited in Standard Oil Co. v. Atlantic Coast Line R. Co. D. C. 13 F.2d 633), I cannot overlook the fact that this insurance company...