A corporation created by one state can transact business in
another state only with the consent of the latter, which may
accompany its consent with such conditions as it thinks proper to
impose, provided they are not repugnant to the Constitution and
laws of the United States or inconsistent either with those rules
of public law which secure the jurisdiction and authority of each
state from encroachment by all others or those principles of
natural justice which forbid condemnation without opportunity for
defense.
Where an insurance company, citizen of one state, has
voluntarily accepted
Page 191 U. S. 289
a license from another state, and has been sued in a court of
that state, the fact that the license is subject to be revoked if
the company should remove the action to the federal courts
furnishes no ground for appealing to a federal court to take
jurisdiction of a suit in equity to cancel the policy if otherwise
the court would have no jurisdiction.
The theory that a complainant has no adequate remedy at law
because it would not have the same control over an action brought
against it as defendant as it would have as plaintiff in a suit
brought by it, does not lay the foundation for the jurisdiction of
a federal court in an action in equity to enjoin the prosecution of
the suit against it.
Equitable jurisdiction does not accrue to the federal court
because it is thought that the law as administered by it is more
favorable to a party seeking its aid than the law as administered
by the courts of a state in which it has been sued.
This case comes here upon certiorari, applied for by the
petitioner, who was the administratrix of the estate of Herman D.
Cable, deceased. 186 U.S. 482. The suit was brought in the Circuit
Court of the United States for the Northern District of Illinois by
complainant, the United States Life Insurance Company, of the City
of New York and a citizen of that state, against Alice A. Cable, a
citizen of the State of Illinois, to have a certain policy of
insurance for $50,000, payable as therein stated, upon the life of
the said Herman D. Cable, delivered up for cancellation on the
ground that the same had been procured by the fraud of the agents
of the deceased. The bill averred that the complainant was an
insurance company of New York, lawfully engaged in doing business
throughout the United States, and particularly in Illinois, under a
permit or license duly granted therefor; that it had issued its
policy upon the life of Herman D. Cable, and that it was procured
by the fraud and fraudulent representations of his agents, such
fraud and fraudulent representations being set forth at length;
also that defendant had commenced a suit in the state court of
Illinois to recover upon the policy, which suit was instituted
about one and a half hours prior to the filing of complainant's
original bill. A supplemental and amended bill was filed, in which,
among other things, it was alleged:
Page 191 U. S. 290
"10. Your orator further avers that the Constitution and laws of
the United States of America confer upon your orator the right to
remove into this court said action at law so begun against your
orator; that, on the other hand, the State of Illinois, by
legislative enactment, has sought to prevent the removal to this
court by insurance companies of actions similar to said action so
begun by said administratrix, and has practically destroyed such
right or made its exercise impracticable by providing in substance
that an insurance company shall forfeit and lose its right to do
business in the State of Illinois upon removing any such action
into this court; that, by removing said action to this court, your
orator might lose its right to transact business in the State of
Illinois, and would certainly become involved in serious
controversy with said state respecting the transaction of any
subsequent business by your orator in said state; that the laws of
said state upon certain questions of general insurance law, as
interpreted by its highest legal tribunal, and applicable to the
facts in this case, are somewhat different from the laws of the
United States as interpreted by the federal courts, upon the same
questions, and from the standpoint of the laws of the United States
are unduly and erroneously adverse to insurance companies; that
your orator is entitled to an application of the law according to
the decisions of the federal courts, and that, under the facts and
circumstances hereinbefore set forth in this bill, your orator is
without a due and proper remedy at law in respect to the claim of
said administratrix under said policy of insurance, but is without
any remedy at law whatever in this Court."
To this bill the defendant interposed a demurrer, among other
things, for want of equity, and that demurrer was sustained by the
circuit court, but upon appeal to the Circuit Court of Appeals for
the Seventh Circuit, the decree sustaining the demurrer was
overruled and the case remanded to the circuit court. 98 F.
761.
An answer was then put in by the administratrix of Cable's
Page 191 U. S. 291
estate denying any fraud and averring that she had, before the
suit in the federal court was commenced, herself commenced an
action upon the policy in a proper state court of Illinois, and
that it was her intention and desire to push such action to a
speedy conclusion if permitted by the federal court.
The suit herein was tried and a decree entered that the policy
was procured on behalf of the deceased by constructive fraud, and
that no actual fraud was intended or practiced in the delivery of
the same, and it was thereupon decreed that the policy should be
delivered up and cancelled. The defendant appealed from such decree
to the circuit court of appeals, and the complainant took a
cross-appeal so as to bring up the findings of fact as to the
constructive fraud, so that, as counsel said,
"the case might be heard and considered in the circuit court of
appeals upon the whole evidence, regardless of the findings of the
master and of the circuit court."
This was done for the reason that, in counsel's belief, the
evidence showed a deliberate and intentional concealment on the
part of Lord, the agent of the deceased, and therefore a plain
fraud perpetrated by such agent. The circuit court of appeals
affirmed the judgment, and upon application, this Court granted the
writ of certiorari as stated.
Page 191 U. S. 302
MR. JUSTICE PECKHAM, after making the foregoing statement of
facts, delivered the opinion of the Court.
It is contended upon the part of the administratrix of the
estate of the assured that the court below had no jurisdiction, on
the ground that there existed a complete and adequate remedy (or
defense) at law when the company was sued upon the policy, and that
the effect of allowing this jurisdiction in the circuit court is to
improperly deprive the defendant herein of a trial by jury.
It is conceded by the plaintiff in error that no cause of action
existed in favor of the complainant herein upon the law side of the
federal court, the contention being that the company could set up,
as a defense to any action brought against it in the federal court,
those allegations of fraud which, being proved, would constitute a
perfect and complete defense to any action upon the policy.
Page 191 U. S. 303
The company, however, avers that the administratrix has elected
not to bring her action in the federal court, although she might
have done so on the ground of diversity of citizenship, but has,
instead of so doing, brought it in the state court, and hence the
company would have no opportunity of setting up its defense in a
federal court in an action brought on the policy, and it insists
that on that account it has not that complete and adequate remedy
or defense at law in the same jurisdiction which it contends is
necessary in such case.
It is true that the remedy or defense which will oust an equity
court of jurisdiction must be as complete and as adequate, as
sufficient, and as final as the remedy in equity, or else the
latter court retains jurisdiction, and it must be a remedy which
may be resorted to without impediment created otherwise than by the
act of the party, and the remedy of defense must be capable of
being asserted without rendering the party asserting it liable to
the imposition of heavy penalties or forfeitures, arising other
than by reason of its own act.
It is also urged, as an answer to the claim of the company as to
jurisdiction, that, even though the remedy or defense at law must
exist in the same (federal) jurisdiction, yet it is within the
power of the company, if it see fit to do so, to remove the action
in the state court to the federal court, and thus its defense at
law, while adequate, would also be within the same jurisdiction in
which its suit in equity was commenced.
It is further insisted by the administratrix that it is
unnecessary that an action at law should have been commenced in the
same jurisdiction, but it is sufficient that the defense would be
available and complete if such an action should be commenced in a
federal court of law.
As to the removal of the action from the state to the federal
court, the company avers that, even assuming it had the right so to
remove, yet it insists that such removal would be too hazardous to
the company by subjecting it to a possible revocation of its
license to do business in the state, to be of any adequate
avail.
Page 191 U. S. 304
It is also argued upon the part of the company that the position
of a defendant in an action is not so advantageous as that of a
plaintiff, as the plaintiff has the conduct of a cause largely
within his own control, and it is said that the law as administered
in the state court is not so favorable to insurance companies as is
the case in the federal courts, and that the company had the right
to an administration of the law by the federal, instead of the
state, court by reason of the diversity of citizenship.
These objections are to be considered.
In Hurd's Revised Statutes of Illinois, c. 73, title
"Insurance," in relation to foreign insurance companies, it is
provided that any such company must first file a written
application for a license, in which it shall state that it desires
to transact the business of insurance, and that it will accept a
license according to the laws of the state,
"and that said license shall cease and terminate in case and
whenever it shall remove or make application to remove into any
United States courts any action or proceeding commenced in any of
the state courts of this state, upon any claim or cause of action
arising out of any business transaction, in fact done in this
state,"
etc. The statute also provides that if any company thereafter
removes or applies to remove into the United States court any
action commenced in a state court of the kind above mentioned,
"it is hereby made the imperative duty of the auditor of public
accounts at once to revoke, cancel, and annul the license issued to
such incorporated company, association, or partnership, and
thereafter no such incorporated company, association, or
partnership shall transact within this state any of the business
for which it was incorporated, until again duly licensed. In case
such revocation of license shall be made because of the removal of
or the attempt to remove any action from a state court of this
state to any United States court, no renewal of such license shall
be made within three years after such revocation."
Provision is also made that, if the license is revoked,
publication of the fact shall be made in the newspapers.
Page 191 U. S. 305
This Court has held that, although there may be power in a
federal court of equity in a proper case to order the delivery up
and cancellation of a policy of insurance obtained upon fraudulent
representations and suppression of facts, yet it will not generally
do so when those representations and suppressions can be perfectly
well established in a defense at law in a suit upon the policy, and
it therefore affirmed a decree which dismissed, without prejudice,
a bill filed for obtaining the delivery up and cancellation of a
policy so issued, although the evidences of the fraud were
considerable, and a suit on the policy had been begun in an action
at law after the bill in equity was filed.
Insurance
Co. v. Bailey, 13 Wall. 616.
That was a suit by the company to obtain the delivery up and
cancellation of certain policies of life insurance after the death
of the assured on the ground that the policies had been procured by
the defendant, the widow of the deceased, by fraudulent suppression
of material facts, and by the misrepresentation of others of the
same class. The answer denied the allegations made. It was held
that the company would have a perfect defense at law in an action
by the holder upon the policy of insurance, and for that reason
equity would refuse to take jurisdiction of an action to compel the
delivery up and cancellation of the policy. The Court said:
"By the death of the
cestui que vie, the obligation to
pay, as expressed in the policies, became fixed and absolute,
subject only to the condition to give notice and furnish proof of
that event within ninety days. Notice having been given and the
required proof furnished, the obligation to pay certainly became
fixed by the terms of the policies, and the sums insured became a
purely legal demand, and if so, it is difficult to see what remedy
more nearly perfect and complete the appellants can have than is
afforded them by their right to make defense at law, which secures
to them the right of trial by jury. Where a party, if his theory of
the controversy is correct, has a good defense at law to 'a purely
legal demand,' he should be left to that means of defense, as he
has no occasion to resort
Page 191 U. S. 306
to a court of equity for relief unless he is prepared to allege
and prove some special circumstances to show that he may suffer
irreparable injury if he is denied a preventive remedy."
To the same effect are
Home Insurance Co. v.
Stanchfield, 1 Dillon 424;
Aetna Life Insurance Co. v.
Smith, 73 F. 318.
Complainant insists that, in this case, special circumstances
are shown that it may suffer irreparable injury if jurisdiction be
denied. Those special circumstances have already been mentioned,
and the question is whether they are sufficient to furnish ground
for a federal court of equity to take jurisdiction herein.
We start with the proposition that, to any action brought upon
the policy in a federal court, the company would have a complete
and adequate defense by proving the fraud as alleged in the bill
herein. That shows a defense in the same jurisdiction resorted to
by the complainant herein. It is answered, however, that the action
has not been commenced in the federal court, but, on the contrary,
the administratrix has commenced her action in the state court, and
hence the defense, if made in the state court, is not in the same
jurisdiction as that in which the bill in this case was filed. But
the company may bring its defense within the same jurisdiction by
removing the case from the state to the federal court, which it has
the right to do on account of the diversity of citizenship of the
parties thereto. No stipulation or agreement, founded on a state
statute or otherwise, which the company may have entered into could
prevent the removal of the case in the exercise of its
constitutional right. This has been so held in
Insurance
Co. v. Morse, 20 Wall. 445, and that case has been
repeatedly approved.
See Doyle v. Continental Insurance
Co., 94 U. S. 535;
Barron v. Burnside, 121 U. S. 186.
In
Doyle v. Continental Insurance Co., supra, it was
held that a state had the right to impose conditions not in
conflict with the Constitution nor the laws of the United States,
to the transaction of business within its territory by a foreign
insurance
Page 191 U. S. 307
company, and to exclude such company from its territory, or,
having given a license, to revoke it, with or without cause, and it
was further decided that an injunction to restrain a state officer
from revoking and cancelling a license to a foreign company to do
business within the state, because the company has, contrary to the
state statute, removed a case from the state to the federal court,
would not be granted, and it was remarked that, as the state had
the right to exclude a foreign insurance company, the means by
which she caused such exclusion, or the motives of her action, were
not the subject of judicial inquiry. Whether this case has been
shaken by the subsequent cases of
Barron v. Burnside,
121 U. S. 186,
121 U. S. 199;
Blake v. McClung, 172 U. S. 239,
172 U. S. 254,
and
Dayton Coal & Iron Co. v. Barton, 183 U. S.
23,
183 U. S. 25, it is
not material here to discuss. It has from an early day been held
that a corporation created by one state could transact business in
another state only with the consent, expressed or implied, of the
latter state, and that such consent might be accompanied by such
conditions as the latter state might think fit to impose, provided
they were not repugnant to the Constitution or laws of the United
States, or inconsistent with those rules of public law which secure
the jurisdiction and authority of each state free from encroachment
by all others, or that principle of natural justice which forbids
condemnation without opportunity for defense.
Lafayette Insurance Co. v.
French, 18 How. 407;
Waters-Pierce Oil Co. v.
Texas, 177 U. S. 28;
New York Life Insurance Co. v. Cravens, 178 U.
S. 389,
178 U. S. 401;
Hancock Mutual Life Insurance Co. v. Warren, 181 U. S.
73,
181 U. S.
76.
One thing is entirely clear -- that the company could have
removed this case from the state to the federal court
notwithstanding the state statute or anything contained in its
application for a license to do business within the state. Upon
removal, the company would have the full and adequate defense,
under the law as administered by the federal courts, that it would
have in the equity case. Whether, as a result of such removal, the
state would have the right by reason of the statute
Page 191 U. S. 308
to revoke the license given to the company is not a question
which it is necessary for us to here discuss or determine. But,
assuming the right of removal, the company says that it may thereby
subject itself to a revocation of its license, or at least to
litigation to prevent the state authorities from revoking it, and
it ought not to be put to any such litigation or possible injury or
inconvenience.
The embarrassment attaching to the complainant herein on account
of a removal, if any, is one of its own creation. As a condition
upon which it was admitted to do business in the state, it
voluntarily signed the application, in which it promised to accept
a license according to the laws of Illinois and agreed that the
license should terminate in case the company should remove any
action commenced in the state court to the United States court, as
already stated. We think the existence of these facts furnishes no
ground for appealing to a federal court of equity to take
jurisdiction of a suit to cancel the policy where otherwise the
court would have none. The state statute could not prevent the
removal. If, because of a removal, ground was furnished for the
revocation of the license, that fact would not justify a resort to
a federal court, and ought not to, because, as we have said
already, the contingency is one of the complainant's own creation,
and it ought not therefore to be able to avail itself of an
embarrassment which it has voluntarily created as a foundation for
jurisdiction in a federal court which would not otherwise
exist.
It signed its application to do business, in order to come into
the state and reap the profits which it thought it might earn by
transacting its business in the state. There was no coercion upon
it to make the application or to take the permit on the condition
stated. Upon the whole, it chose to make such application and
receive the license upon that condition.
If the condition be illegal and no ground for a revocation of
the license, any subsequent litigation which the company may have
by reason of such removal with the state officials to prevent the
revocation of the license on that account is still
Page 191 U. S. 309
matter caused by its own action, and cannot, in our judgment,
furnish any ground for jurisdiction in the federal courts.
Still less do we think that any foundation is laid for that
jurisdiction based upon the theory that the company would not have
the same control of the case as a defendant that it would as
plaintiff. That is not the case in modern practice. The defendant
can urge the case to trial against the desires of the plaintiff,
and its defense may be shown as well and conveniently by a
defendant as the cause of action may be shown by the plaintiff. The
right of the plaintiff to discontinue the action does not furnish
ground for equitable jurisdiction. If it did, then equity would
always have jurisdiction, and the rule would be worthless.
The other ground stated as furnishing a special circumstance to
show that complainant may suffer some irreparable injury if equity
does not take jurisdiction --
viz., that the law is more
favorable to insurance companies as administered in the federal
than in the state court, and therefore equity ought to take
jurisdiction in this case upon the ground of the diversity of
citizenship -- cannot be regarded for a moment.
It is immaterial whether the assertion be conceded or denied. It
furnishes no ground for equitable jurisdiction in a case like this.
Where a plaintiff in a state court which has jurisdiction over the
subject matter brings the defendant properly within such
jurisdiction, he is entitled to a trial of his cause in that court
unless the case be removed to a federal court upon some
constitutional ground. If that ground exist, the removal can be
made, but if it do not, equitable jurisdiction does not accrue to a
federal court because it is thought the law as administered by that
court more favorable to the party seeking its aid.
We think that, within the rule in
Insurance Co. v. Bailey,
supra, the circuit court has no jurisdiction in this case. The
judgment of the Circuit Court of Appeals for the Seventh Circuit
and of the Circuit Court for the Northern District of Illinois must
therefore be reversed, and the case remanded to
Page 191 U. S. 310
the circuit court with directions to dismiss the bill, without
prejudice.
It is so ordered.
MR. JUSTICE HARLAN and MR. JUSTICE WHITE dissented.
