Holden v. . the Putnam Fire Insurance Co. , 46 N.Y. 1 ( 1871 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] The defendant is a corporation created by the law of Connecticut, and is a citizen of that State within the federal judiciary act of 1789. Its citizenship was not changed, nor was its right to apply for a removal of the action from the State to the federal court affected by the fact, that it made contracts of insurance in this State, and had complied with the provisions of our statute respecting foreign insurance companies, and subjected itself to the visitatorial power of the State. (Stevens et al v. Phoenix Insurance Company, 41 N.Y., 149.)

If the proceedings on the part of the defendant, to remove the case to the Circuit Court of the United States, were in accordance with the twelfth section of the act of congress referred to, and if the facts presented to the court upon that application, established a case within the act, then the State court eo instanti, lost jurisdiction of the case, and it was by operation of law vested in the federal court, and all subsequent proceedings in the action in the State court were void. (Gordon v. Longest, 16 Peter's 97; Kanouse v. Martin, 15 How., U.S., 198.)

As we have reached a conclusion adverse to the defendant, upon the merits of the application for the removal of the cause, it is unnecessary to decide the point made by the respondent, that this court cannot review the order denying the application for the removal. (Illius v. The New York and N.H.R.R. Co., 3 Kern., 597.)

The petition and papers used upon the application to remove the cause, are attached to and made a part of the record, and if upon them a case was made, which entitled the defendant to have the cause removed, this court could not disregard the error of the court below and affirm the judgment, although the order made upon the application was not appealable within section 11 of the Code. The mandate of the statute of 1789, that in such a case the State court "should proceed no further in the cause," is obligatory as well upon a court of appellate as of original jurisdiction. This court could not give judgment of affirmance without disregarding the statute, but it could suspend or dismiss the appeal, leaving the defendant to pursue his remedy in the federal court, to correct the error of the State court in denying the application. The fact that the defendant was a citizen of Connecticut was not alone sufficient, to authorize the removal of the cause to the federal court under the twelfth section of the act. It was also necessary, that the suit should have been brought by a plaintiff, who at the time of the commencement of the action, was a citizen of the State in which the action was brought. The language of the statute does not admit of any other construction. The right of removal is confined to suits against aliens, and to suits commenced, "by a citizen of the State in which the suit is brought, against a citizen of another State." It was as essential for the defendant to show, upon the application to remove the cause, that it was brought by a citizen of this State as that it was brought against the citizen of another State. The State court had jurisdiction of the action, and it could only be deprived of its jurisdiction, by proceedings in conformity with the act of congress, and upon proof presented to the court of the facts, which under the act determined its jurisdiction, and entitled the defendant to have the cause transferred to the Circuit Court of the United States. The only proof of the citizenship of the plaintiff, made upon the application, is found in the petition of the defendant made and verified April 5, 1867, which recites, that the action was commenced March 25, 1867, and after stating the nature of the action, and that the defendant is a citizen of Connecticut, proceeds as follows: "That Delos L. Holden, the plaintiff in said action, is a citizen of the State of New York." This is simply an averment, that when the petition was drawn the plaintiff was a citizen of this State, but no legal presumption arises from this fact, that he was a citizen at the time of the commencement of the action.

The rights of the parties under this statute, are governed by the facts existing at the commencement of the suit, and a subsequent change of residence or citizenship does not confer or defeat a right to proceed under it. (Clark v. Mathewson, etal., 12 Pet., 164; Morgan v. Morgan, 2 Wheat., 290.) The case of Mollau v. Torrance (9 Wheat., 537), is an authority very much in point upon this question in the case.

The statute of 1789 gives jurisdiction to the Circuit and District Courts of the United States, in civil actions between citizens of different States, when the amount in controversy exceeds five hundred dollars. In the case cited the action was brought in the District Court of Mississippi, by the plaintiff claiming title by assignment, to the claim upon which the action was founded. The defendant pleaded to the jurisdiction of the District Court, that the person under whom the plaintiff claimed, was a citizen of Mississippi, of which State the defendant was also a citizen. The court sustained the demurrer to the plea and MARSHALL, Ch. J., said: "A plea to the jurisdiction of the court must show, that the parties were citizens of the same State, at the time the action was brought and not merely at the time of the plea, pleaded. The jurisdiction depends on the state of things at the time of the action brought."

It did not appear upon the application made in this case, that the plaintiff was at the time of the commencement of the action a citizen of New York, and the court properly denied the application and retained jurisdiction of the action. (People v.Chicago, 34 Ill., 356; Savings Bank v. Benton, 2 Metc., Ky., 242.)

The remaining question in the case, relates to the effect of the receipt of December 18, 1866, given by the plaintiff. The counsel for the defendant requested the court to instruct the jury, that if this receipt was signed by the plaintiff, at the request of McKinney Brown or either of them, to enable them, to adjust their account with the defendant, and that subsequently and before the fire, such adjustment was made upon the basis, that the policy to the plaintiff had been surrendered, the plaintiff was estopped and could not recover. This instruction was refused and the defendant excepted. It is not controverted, that up to the time the receipt was given, the contract of insurance between the parties was in full force, notwithstanding the instructions which had been given by the defendant to its agent McKinney Brown to cancel it, and their representation to the company that such cancellation had been made. The right reserved to the defendant, to cancel the policy on returning the unearned portion of the premium, had not been exercised. The plaintiff had assented to the proposal of McKinney made in September, to surrender the policy upon being furnished with one of like amount in another company, but the arrangement was not consummated; no policy was furnished and the unearned premium was not paid or tendered. The receipt acknowledged the payment and declared, that the policy was surrendered and canceled, but no money was in fact paid, nor was any consideration received by the plaintiff for a surrender or cancellation of the instrument. The receipt was procured by Brown, acting in that business at the instance and at the request of the defendant, and upon his representation and assurance to the plaintiff, that the arrangement proposed by McKinney had been consummated, and that a policy in another company, had been issued to the plaintiff in place of the policy of the defendant.

There is no contradiction on any material point of the statement made by the plaintiff, of the circumstances under which the receipt was given. The plaintiff signed the receipt under a misapprehension of and in ignorance of material facts, and relying upon the statements of Brown, which though made in good faith were false in fact. It is the constant practice of courts of equity, to relieve parties from contracts grounded in material error and mistake of fact, although both parties were innocent and free from fraud; and the act of the plaintiff, in executing an instrument purporting to cancel the contract of insurance, induced, in part at least, by false information, communicated by the agent of the other party to the contract, should not conclude him, and the case is within the remedial jurisdiction of the court. (Story's Eq. Jur., §§ 142, 167; Hore v. Becher, 12 Sim., 465; East India Co. v.Donald, 9 Ves., Jr., 275.)

Nor is there any ground for the application of the doctrine of equitable estoppel. The defendant claims to have been discharged from the contract, without performance, because the company acted upon the faith of the declaration contained in the receipt to its prejudice. But this declaration was induced by the conduct of its agent. It cannot claim the benefit of the receipt and repudiate the representations upon which it was given. It is not claimed, that there was any collusion between the plaintiff and Brown, or that the plaintiff did not act in good faith.

The defendant may have reason to complain of the negligence of its agent, but the consequences of his negligence should not be visited upon the plaintiff.

If the plaintiff and Brown were mutually negligent in failing to prosecute the inquiry, or if the former failed to exercise the vigilance of a cautious and prudent man in ascertaining the facts, the defendant cannot complain that he reposed an undue confidence in its agent.

The defendant undertook, for a valuable consideration, to insure the property of the plaintiff against loss by fire, for a term which had not expired when the loss occurred. It was for the defendant to show, that the contract had been terminated prior to that time.

The receipt did not, for the reasons stated, in equity extinguish the right of the plaintiff under the contract, nor was he estopped from claiming to recover in opposition to it.

The judgment should be affirmed with costs.

All concur. Judgment affirmed.