Victory Cabinet Co. v. Insurance Co.

• Decision Date: 30 June 1950
• Docket Number: No. 9985.,9985.
• Citation: 183 F.2d 360
• Parties: VICTORY CABINET CO. v. INSURANCE CO. OF NORTH AMERICA.
• Court: U.S. Court of Appeals — Seventh Circuit

183 F.2d 360 (1950)

VICTORY CABINET CO. v. INSURANCE CO. OF NORTH AMERICA.

No. 9985.

United States Court of Appeals Seventh Circuit.

June 30, 1950.

Alvin E. Stein, Max Satt, Irving Rothholtz, Chicago, Ill. (Pines & Stein, Chicago, Ill., of counsel), for appellant.

Paul H. Heineke, Clarence R. Conklin, Abner Goldenson, Chicago, Ill. (Heineke & Conklin, Chicago, Ill., of counsel), for appellee.

Before MAJOR, Chief Judge, and DUFFY and FINNEGAN, Circuit Judges.

FINNEGAN, Circuit Judge.

This suit was instituted in the Circuit Court of Cook County on October 16, 1947. The plaintiff Victory Cabinet Company, an Illinois corporation, sought to recover from six insurance companies the sum of $25,000 with interest under the terms of business interruption policies issued by the defendants. The Baltimore American Insurance Company of New York filed its petition and bond for the removal of the cause to the District Court of the United States for the Northern District of Illinois, Eastern Division.

The transcript of removal record was filed in the District Court on December 10, 1947. On December 17, 1947, plaintiff moved to remand the cause to the Circuit Court of Illinois. The motion to remand was denied on January 19, 1948.

Thereafter, in February 1949, the cause was heard by the District Court, without the intervention of a jury. Judgment was entered for the defendants and against the plaintiff for costs.

On this appeal the plaintiff-appellant contends:

1. That the trial court erred in refusing to remand the case to the state court.

2. It was error to hold that plaintiff had no cause of action because it failed to file proof of loss — (a) because no proof of loss was required under the business interruption provisions of the policies, and (b) because the defendants waived proof of loss, and

3. The trial court erred in failing to find issues for plaintiff.

We propose to examine these contentions in the order in which they are stated.

I. Since the removal of this case from the courts of Illinois took place prior to September 1, 1948, the applicable statute is the Act of March 3, 1875 as amended and in force in December 1947, 28 U.S.C.A. §§ 71-72, 1927 Edition.

That statute provides: "When in any suit mentioned in this section there shall be a controversy which is wholly between citizens of different states, and which can be fully determined as between them, then either one or more of the defendants actually interested in such controversy may remove said suit into the district court of the United States for the proper district." 28 U.S.C.A. § 71, 1927 Ed.¹

In Madisonville Traction Co. v. St. Bernard Mining Co., 196 U.S. 239, on page 244, 25 S.Ct. 251 on page 253, 49 L.Ed. 462, the Supreme Court said:

"Certain principles, relating to the removal of cases, have been settled by former adjudications. They are:

"1. If a case be a removable one, that is, if the suit, in its nature, be one of which the Circuit Court could rightfully take jurisdiction, then upon the filing of a petition for removal, in due time, with a sufficient bond, the case is, in law, removed, and the state court in which it is pending will lose jurisdiction to proceed further, and all subsequent proceedings in that court will be void. New Orleans M. & F. Railroad Company v. Mississippi, 102 U.S. 135, 141, 26 L.Ed. 96, 98; Baltimore & O. Railroad Co. v. Koontz, 104 U.S. 5, 14, 26 L.Ed. 643, 645; National Steamship Company v. Tugman, 106 U.S. 118, 122, 1 S.Ct. 58, 27 L.Ed. 87, 89; St. Paul & Chicago Ry. Co. v. McLean, 108 U.S. 212, 216, 2 S.Ct. 498, 27 L.Ed. 703, 704; Crehore v. Ohio, etc. Railway Co., 131 U.S. 240, 243, 9 S.Ct. 692, 33 L.Ed. 144; Kern v. Huidekoper, 103 U.S. 485-493, 26 L.Ed. 354, 357; * * *.

"2. After the presentation of a sufficient petition and bond to the state court in a removal case, it is competent for the circuit court, by a proceeding ancillary in its nature — without violating § 720 of the Revised Statutes * * * forbidding a court of the United States from enjoining proceedings in a state court — to restrain the party against whom a cause has been legally removed from taking further steps in the state court. (Citing cases.)

"3. It is well settled that if, upon the face of the record, including the petition for removal, a suit does not appear to be a removable one, then the state court is not bound to surrender its jurisdiction, and may proceed as if no application for removal had been made. Stone v. South Carolina, 117 U.S. 430, 432, 6 S.Ct. 799, 29 L.Ed. 962, 963; Carson v. Hyatt, 118 U.S. 279, 281, 6 S.Ct. 1050, 30 L.Ed. 167, 168; Marshall v. Holmes, 141 U.S. 589, 595, 12 S.Ct. 62, 35 L.Ed. 870; Burlington, C. R. & N. Ry. Co. v. Dunn, 122 U.S. 513, 515, 7 S.Ct. 1262, 30 L.Ed. 1159."

In Des Moines Elevator & Grain Co. v. Underwriters' Grain Association, 63 F.2d 103, 106, the Court of Appeals for the Eighth Circuit had for consideration among other things the action of the trial court in denying a motion to remand. The appeal was from a judgment entered upon a directed verdict in an action brought against the defendants, the Underwriters' Grain Association and 112 insurers doing business in Iowa, upon a contract of fire insurance covering a building and its contents belonging to the plaintiff in that suit. The action was originally commenced in the state court in Iowa and removed to the Federal Court by two of the defendants on the ground that diversity of citizenship and jurisdictional amount existed between the insurer and each of the removing defendants. A motion to remand had been made by the plaintiff and denied and the action of the trial court in so doing was assigned as error.

Judge Sanborn, who delivered the opinion, said:

"While the liability of each of the insurers here arises out of the same undertaking, that liability is separate and distinct from the liability of any other insurer, and the happening of the contingency insured against, instead of giving rise to a single cause of action against all of the insurers, gives rise to 112 separate causes of action, which, under the Iowa statute, may be united in one action. The loss is not the cause of action, but the happening of the loss gives rise to a separate cause of action against each insurer. Had the plaintiff sued separately each of the removing defendants in the state court, as it might have done, the suits could have been removed to the federal court. The fact that, under the state statute, the plaintiff had the right to combine the causes of action in a single suit could not affect the right granted to the defendants by the laws of the United States to remove the controversy to the federal court.

* * * * * *

"Our conclusion is that, since the undertaking which gave rise to the plaintiff's suit created no joint liability and no joint cause of action against the insurers, there were as many separate causes of action as there were insurers, and the joining of all the insurers in the single action did not affect the right of any of them to remove the case to the federal court."

The test of the existence of a separable controversy is almost universally stated to be that "Where there exists in any suit a separate and distinct cause of action on which a separate and distinct suit might properly have been brought, and complete relief afforded as to such cause of action, there is a separable controversy."

In the case at bar, the petition for removal alleged that the action was of a civil nature; that plaintiff sought to recover from the petitioner, Baltimore American Insurance Company of New York an amount in excess of $3,000 exclusive of interest and costs; that the claim was based upon an alleged loss sustained by plaintiff because of a business interruption caused by fire, against which loss petitioner had insured plaintiff by a policy of insurance which it had issued to plaintiff and under the terms and provisions of which it was liable to plaintiff for the loss claimed to have been sustained; that as between plaintiff and petitioner there existed a controversy which was separable from the controversy between the plaintiff and the other defendants; that at the time of the commencement of the action and at the time of the filing of the petition there was diversity of citizenship — plaintiff being a resident and citizen of the State of Illinois, and defendant being a citizen and resident of the State of New York.

The petition of removal was filed within the time fixed by the statute, 28 U.S.C.A. § 72, 1927 Ed.,² and no question is raised as to the sufficiency of the removal bond filed with the petitions.

The transcript of removal record filed in the District Court showed that the suit was based upon six separate policies of insurance, issued by six separate and distinct companies to the plaintiff, each distinctly undertaking to indemnify plaintiff against business interruption due to fire. Photostatic copies of the policies were attached to the complaint. In the case of the petitioning defendant it appeared that more than $3,000, exclusive of interest and costs, was involved.

In other words, the "face of the record" clearly disclosed that six separate and distinct suits might have been instituted, and the plaintiff might in such case have obtained complete relief against the petitioning defendant. The mere fact that state law permitted the joinder of the six distinct causes of action in a single suit did not and could not affect the defendant's right to remove under Federal Statutes. Texas Employers Ins. Ass'n v. Felt, 5 Cir., 150 F.2d 227.

The plaintiff in its argument calls attention to the fact that the Circuit Court of Cook County denied the prayer of the petition to remove and expressly found "that said defendant's petition fails to set forth facts showing the existence of a separable controversy between the plaintiff and this defendant." The authorities which we have cited hold that under such circumstances as appear in this case...