CJ.EAVER 'l1. TRADERS' INS. CO.
711
sued on the 15th of May, 1885, in which case both parties would be interested in one and the same controversy, and the same is true of other single issues .of bonds. As it does not, therefore, certainly appear that the controversy between cOll1plainants and the Orient Insurance Company is separable and distinct from that between complainants and Provost, and as the latter is a citizen of the same state with complainants, it follows that it is not shown that this court has jurisdiction, and the motion to remand must be sustained.
CLEAVER "'. TRADERS' INS.
Co.
(O-lrCW£t Oourt, E. D. MicMgan. July 8. 1889.)
1.
RlIlMOVAL O. CAUSES-PRACTICE AFTER REMOVAL-PRIOR RULINGS B"l' STA.TlI
When an action is from a state court to a federal court, the action continues the same, and all rulings made or opinions expressed in the highest court of the state are treated precisely as if ther had been made in the federal court; otherwise. if the action in the state court be discontinued. and a new action begun in the federal court. Hence, where, in an action upon a policy of insurance the supreme' court of the state had held that certain conduct upon the part of the insurance company sbould insurance, heliL, thatl-such ruling was binding upon the federal court.
Cotmn.
2.
SAME.
be submitted to the jury as evidence of its intention to waive a forfeiture for over-
II.
A forfeiture incurred by running a manufacturing establishment after the hour allowed by the policy should be taken advantage of at the first trial afterknowledlte of the facts is brought home to the insurance company, or it will be considered as waived. . (BvZZabus by th6 Oourt.)
INSURANCE-BREACH OF CONDITION-WAIVER OF OBJECTION.
At Law. This is an action upon a policy of.fire insurance. The action was originally begun in the circuit court for Tuscola county, was tried in May, 1886, and a verdict, returned for the plaintiff. The policy provided that if the insured should procure any other or further insurance upon the property' insured, without the consent of the company written upon the policy, it should become void. There was a further provision that the agent of the company should have no authority to waive, modify, or strike from the policy any of its printed conditions, nor, in case the policy should become void by reason of the violation of any of its conditions, had the agent power to revive the same. The only defense set up upon the trial was an additional insurance of $2,000 in the Michigan Millers' Fire Insurance Company. This policy was put upon the property covered by the defendant's policy about nine months after the latter was written; and the consent of the company to the taking ofthis additional insurance was not indorsed upon the policy. In reply to this defense, evidence was produced tending to show that the agent of the defendant company was informed ofthe plaintiff's intention to take out additional insurance upon his property, and that such
712
FEDERAL REPORTER,
vol. 40.
agent said that it would be all right, and even went so far as to help him fill out the application. After. plaintiff recei\'ed his additional policy, heinfQrmed the agent that he had procured it; to which the agent replied, "All right." Upon the trial.in the circuit court, upon this state Qf facts, the plaintiff recovered a verdict, but, upon writ of error the supreme court reversed the case, and sent it back for a new trial; holding that the company was not estopped by the act of its agent to deny its liability and to declare the policy void, since it might limit the powers ofits agent in any legal way. and make such limitation a part of its contract with the insured. 32 N. W. Rep. 660. Upon a retrial (If the case in the Tuscola circuit, the plaintiff offered inadditional testimony tending to show that the company, after formed of the additional insurance upon the property destroyed, contrary to the terms of the policy, replied to its agent, in a letter, stating it supposed this would be a waiver of its rights on the subject of additional insurance, and sent an adjuster to the plaintiff, who requested the assistance of the insured in adjusting the loss, and offered him a portion of the policy in full satisfaction. The court directed a verdict for the defendant, when the case was again taken to the supreme court upon writ of error, and again reversed, (39 N. W. Rep. 571;) the court holding that the question whether the company had waived the condition of its policy in regard to additional insurance should have been submitted to the jury. Thereupon the defendant caused the case to be removed to this court under the local prejudice subdivision (3) of the Revised Statutes, (section 639,) wheret.he cause was retried before ajury. Two defenses were made upon the trial in this court: (1) The over-insurance; and (2) the running of the flouring-mill after the hours limited in the policy. The case was submitted to the jury upon the facts raised under both defenses, and resulted in a disagreement. It is now submitted to the court, upon a preliminary hearing, to determine the questions of law in the case as the basis of the ruling upon a second trial. T. W. Atwood and C.P. Black, for plaintiff. L. D. Nvrris, for defendant. BROWN, J. Defendant claims that, the taking of the second policy having been fully established, there is no evidence which would authorize a jury to find that the company waived the forfeiture of the policy by reason of such over-insurance, and, inferentially, that the supreme court was wrong in holding that there WIiS. In reply, it is insisted by the plaintiff that the ruling of the supreme court in this connection is res adjudicata, and that we are bound by the of construction given by that court to the evidence upon the waiver. We think the plaintiff is correct in this contention. In the case of Loomis v. Carrington, 18 Fed. Rep. 97, decided some years ago by this court, we had occasion to hold that in cases removed from a state court this court will not review the orders made prior to the removal, but will take the case precisely as it finds it, accepting all prim
·
CLEAVER 'l1. TRADERS' INS. CO.
713
decrees and orders as adjudications in the cause. In this case the judgment of the federal court had been garnished by a proceeding in the stu te court, and that court had made an order upholding such proceeding; and it was held that, although our own opinion might be that a judgment of the federal court could not be garnished by the process of a state court, yet that we ought to decline to review the propriety of this order. This principle has frequently been applied in other cases. Thus, in Brooks v. FarweU, 4 Fed. Rep. 166, it was held that an order of the state court overruling a motion to quash the service of a writ, could not be reviewed, or in any manner set aside in the federal court. "We do not," says Judge HALLETT, "on the removal of a cause from a court of the state, review or attempt to reverse any proceedings that may have been had there before the removal of the cause into this court." So, in Smith v. Schwed, 6 Fed. Rep. 455, it was held that, upon the removal of a cause from a state court, an injunction would not be dissolve'd upon the ground that the bill filed in the state court was not verified according to law and the practice of the courts of chancery. In Duncan v. Gegan, 101 U. S. 810, it was held that proceedings had in a cause were not vacated by its removal from a state court to the circuit court. "The circuit court," says the chief justice, "when a transfer is effected, takes the case in the condition it was when the state court was deprived of its jurisdiction. The circuit court has no more power over what was done before the removal than the state court would have had if the suit had remained there. It takes the Case up where the state court left it off." See, also, Werthein v. Railway 00., 11 Fed. Rep. 689; Milli.qan v.Manufacturing Co., 17 Fed. Rep. 465. These cases, it is true, apply to interlocutory orders made in the state court, but the precise question involved in this case appears to have been settled in the recent case of Williamsv. Conger, 125 U. S. 397,418,8 Sup. Ct. Rep. 933. This case was originally tried before ajury in a state court, and, being taken to the highest court of the state, that court ordered a new trial, deciding that a certain document was admissible in evidence as an ancient deed. Afterwards the cause was removed to the circuit court of the United States, and it was held that the decision of the state supreme court upon the question of admissibility was binding upon the courts of the United States. In delivering the opinion, Mr. Justice BRADLEY remarked that "if the action had originally been brought in the circuit court upon proper jurisdictional grounds, and had been tried as it was in the state court, and if, on a writ of error from this court, we had decided as the supreme court of Texas did, we should have felt bound by our first decision. We would not have allowed it to be questioned." "The present case is in exactly the same category. The removal of the cause from the state court does not put us in the position of a court of review over the supreme court of Texas. 'When it acted t it was the highest court that could act in the cause, and stood in precisely the same position that we stand now. Its action ruust be accepted by us as that of a court having plenary and final jurisdiction." We think this case is decisive of the one under consideration. Had this
FEDERAL Rl\1PORTEB,
case been originally commenced in this court we should have felt at liberty to review the ruling of the state court,as we have sometimes done where the decision of t:qe state court was adverse to the plaintiff, and he has discontinued and begun again in this court. The case of Bucher v.RaiJrroad 00., 125U. S. 555,8 Sup. Ct. Rep. 974, is an illustration oObis principle. This was an action to recoverdaulages for personal in· juries inflicted upon the plaintiff while he was traveling as a passenger upon a .railroad train. Before the commencement of the action the plaintiff had sued defendants upon the same cause of action in the state court, .and had obtained judgment-against them, which was reversed by the supreme court of Massachusetts, and the case remanded for a new plaintiff thereupon became nonsuit, and began the action in the court. The question was whether the plaintiff could recover for an,inlury sustained while traveling upon Sunday. The state court heldthat,thefacts set out in the bill of exceptionsd,id not show that the plaintiff'was tra-veling, at the time. of the accident, ejther from neces· aity or for charity. The federal circuit court followed this ruling, upon ,the ground question having been submitted to the jury in thestate,CQurt, and h.avi,ng been passed upon by the supreme court of the:stllte,;iHelt itself bound by that adjudication. "The supreme court, however"held that it was not a matter of estoppel which bound the par· ties in court, because there was no entered in the case in which, the ruling of the state court wasmad,e, but affirmed the actiQn of circuit QOurt upon other grounds. It that when an action is removed from the state court the action coritin,ues thesl1lme, and that all rulings mad.e or opinions ex· .pressed in the highest:collrt of the state are considered precisely as if they ,hadb.een made here. We merely take up the case as it leftthe state CQurt, and 9l,I.rry it on to its con<,llusion. If, however, the ell-se in the state ,court ia. discontinued, and a new action begun here, such rulings not binding upQn us. :From this review ofthe law it results that in this case we are bound ,by ,the ruling .of the state court to submit the upon the subject of;:waiver to the jury, as. that COUl't decided that. circuit court for Tuscph1. county should have done. In this connljctipn, however, we at liberty to call the attention of the jUl;y to theletter of Janul!.l1y,'i25th, wbich seems to have been overlooked in the consideration of the, case by the SuprElme 'Court of the state. ,2" The,question;ofrunningafter hours is llo. more serious one., There . in the policy thfl,tif it (the insur¢d property) be a manu· running in whole or inpal't over, or extra, time, ,or. 'run,ningbetween 6, o'clock P. M·. and 6 o'clock A.. M., then, and in evis void, and all insurance thereunder shall im· mediately,cease aI),d d!3termine. It was undisputed that upon.the night of the fire the .mill ,was run until about half past 9 o'clock. The ev,ide,nQe tended toshpw. that at the time the adjuster Berne went to Cato ·.tQ determine tbil loss he inquired· of one Wilders, who was the ,{l,gtlllloi tbeplainUff, in, regard torunping the mill atnigbt l f!,nd WlliS in·
715 formed that he ran it until afterf9 o'clock. :There was furtqer evidence tending to show that the plaintiff had a conversation with the agent of the company at the time the policy of which this was a renewal was issued, and that when the agent read it over to the plaintiff he told him that it would never do, because he sometimes ran the mill all night, and that the agent replied, "That is all right," and that he never heard anything from it. The court then asked the question whether this was the first time this defense had been made, to which counsel replied: "It is the first time it was ever known. The first time it came out was on the criminal examination at Caro for burning the building, when Wilders wasput on,the stand, and testified that the mill had run that night up to half past 9." The agent, who testified on behalf of the plaintiff, also said that he was satisfied that he knew the mill was being run at night: "It is not Ii. very great ways to where I live. I certainly knew it a.t the time I wrote that letter to the company, because I had a talk with Mr. Wilders about when he left the mill, and what he was doing there that night. I knew that the, mill was running,"-though he said he had no distinct recollection of being informed of the fact. The fact that Quinn knew of this at the time the prior policy was taken out, or afterwards, we think, is immaterial, since his knowledge is of no greater weight than his express consent, and by the provisions of the policy he had no power to waive, modify, or strike from the policy any of its printed conditions, or to revive the policy after it had been forfeited. It will be observed that this view of the power of the agent was sustained by the state supreme court when the case was first before it, and we are as much bound by that ruling as we are by its subsequent ruling, that' the evidence upon the subject of waiver was sufficient to be submitted' to the jury, nor would the fact that Berne was subsequently informed tbaf the mill was ,run by night be any evidence of a waiver since it would be nothing more than knowledge that the insured had voluntarily seen fif to terminate the policy· Illsurance Co. v. Watson, 23 Mich. 488; Insuranc6 Go.v. Riker, 10 Mich. 279; Insurance Co. v. Fay, 22 Mich. 467. The real question connected with this branch of the case, liS it seems to us, is this: Did the company have notice, at the time the case was tried in the state court, of this defense? If it did not, then, clearly, it is not estopped to set up that defense now. If it did, we are inclined to the opinion tbat it was bound to set it up as a defense at that time, and that it is estopped to do so now. There is no doubt of the general rule that where a company intends to insist upon the failure to comply with the clause requiring proofs of loss to be furnished, and bases its refusal upon other grounds, it cannot set up upon the trial the non-receipt of proper proofs of loss. Weare inclined to the opinion that this principle ought to be extended to all defenses, not involving the merits, which are claimed to work a forfeiture of the policy, and that in justice to the plaintiff all such causes of forfeiture ought to be set up at the time the case is first tried, if the company is shown at that time to have had knowledge of them. In this case, it was asserted by counsel that they knew nothing of the fact
nDERAL REJ>ORTER,
took place after the trial in the state court; but the evidence of the plaintiff in this connection tends to show that Berne was informed of it when he went to paro, to adjust the loss. If this be so, and we are correct in our impression of the law, the defense should have been made in the state coutt, and the defendant is estopped to make. it here. Cobbs v Association, 36 N. W. Rep. 222; Carpenter v. Insurance 00., 28 N W Rep. 749; Insurance Co. v, Norton, 96 U. S. 234; Castner v. Insurance Co., 50 Mich. 273, 15 N. W. Rep. 452; Insurance Co. v. Kittle, 39 Mich. 51; North Berwick Co. v. Insurance Co., 52 Me. 336. In.. this connection, counsel for the plaintiff rely with great confidence upon the case of Moulor v. Insurance Co., 111 U. S. 335,4 Sup. Ct, Rep.-466.. This was an action upon a policy of life insurance. Upon the first trial it went to the jury upon the singleissue of an alleged breach of warranty. Upon the next trial a "erdict was instructed for the defendant, which was set aside by the supreme court. Upon the next trial, evidence was offered of death by suicide, and it was held by the supreme court that the fact that it did not insist upon this defense upon the 'previous trials did not operate as a waiver. The case is distinguish.from the one under consideration in two important particulars: Fi?,8t, the report of the case does not show that the fact of suicide was known to company at the time of the prior trials; second, the defense was one which went to the merits' of the case,-such a defense as, in this case, that the plaintiff had burned his own property. It was a defense that went to the very basis of liability, and tended to show that the defendant was not responsible for that kind of loss. In delivering opinion, the court confined itself to such defenses as involve the merits, and held that as to those defenses there was no waiver from the fact that it had neglected to insist upon them upon a former trial. In the case under consideration the fact that the plaintiff ran his mill after the hour specified in the policy isa technical defense, not involving the merits of the case, and not tending in any way to show that the defendant had suffered any actual injury or prejudice.
Ulll.t the mill was run at night until the criminal examination, whicL
ABRAHAM fl. BORTH GERlIIAB
:ms.
00.
'lli
ABRAHAM tI. NORTH GERMAN INS.
(Of.rcuit Oourt, N. D. Iowa, E. D. December 50, 18811.) L INSUlU.NCE-REFORMATION OF POLICY.
Where the agent of an insurance company agrees to insure properly for the benefit and protR.ction of the owner. and receives the consideration for such contract of insurance, but, in writing out the policy, falls to make it express the real contract entered into, equity will reform the policy, if the company is bound to make good the contract which the agent in fact made in its behalf. 1 Where an insurance company issues a P9licy of insuranca in pursuance of a con. tract made by one assuming to be its agent, it is estopped to deny the agency. The company is bound, not On11 by the contract appearing upon the face of policy, but by that actually made by such agent.
2. 8.
SAME-AGENTS.
In Equity. Bill to reform policy of insurance. Blake & Harmel and Ohas. A. Clark, for complainant. " Henderson, Hurd, Daniel8 & Kiesel, for defendant. SHffiAs, J. From the evidence in this case it appears that in 1883 the complainant owned an elevator building at Newhall, Iowa, together with the machinety therein, the same being placed on the land of the Chicago, Milwaukee & St. Paul Railroad Company; the same being used for the reception and forwarding of grain upon said railway. The business was carried on in the name of H. Eyler, and the title of the property was ostensibly in him, but in fact the prope.rtyand business belonged to complainant; Eyler being merely an employe, receiving a fixed salary of $50 per month. In September, 1882, a policy of insurance was issued upon the property by the Coun<;:il Bluffs Insurance Compa.ny, through its agent. George Snyder, then residing at Cedar Rapids, Iowa; the written portion oftha policy being as follows: "$2,500.. H. Eyler, Newhall. $1,300 on his two-story frame, shingle roofed elevator, situated on railroad ground of the C., 101. & St. P. R. R. Co., in the town of Newhall, Benton county, Iowa; $200 on his steam-engine contained therein; $1,000 on his grain therein. Loss, if any, payable to G·.G. Abraham, mortgagee, as his interest may appear." On the 2d day of January, 1883, a policy was iBBued by the North German Insurance Company, the written portion of which is as follows: "$1,000. H. Eyler, Newhall, Benton county, Iowa. One thOlisand on his two-story frame, shingle roofed elevator building, situated on railt'oad ground of the C., M.& St.P. Ry., in the town of Newhall. Benton county,lowa." On the '12th of September, 1883, a fire occurred, destroyingtbe elevator and its contents. Notice of the fire was given to the 'com'panyin the form of an affidavit signed by Eyler, in which' he ai1 As to when equity will grant reformation of writtenlnstruments or other reiiehn the ground of mistake, see "Critchfield v. Kline, (Kan.) 18 Pac. Rep. 898, andno1)e; Appeal of Hollenback, (Pa.) 15 Atl. Rep. 616, and note;. Schwass v. Hershey, (Ill.) 18 N. E. Rep. 272, and. note; Gerdinev. Menage, (Minn.) (8'N. W. Rep. Ill, and note;:a:errick v. Starkweather,S N. Y. Supp. 145. . .