JEFFERSON STANDARD LIFE INS. CO. v. KEETON; EQUITABLE LIFE ASSUR. SOC. OF THE UNITED STATES v. SAME, 292 F. 53

ROSE, Circuit Judge. For the purposes of this appeal, the facts in these two cases are legally indistinguishable. They have been argued and submitted together and will be dealt with in a single opinion. In the months of April and May of 1921, one Joseph S. Keeton, of whom the appellee is the widow and the executrix, took out three policies of life insurance for $5,000 each, two with the Jefferson Standard Life Insurance Company and one with the Equitable Life Assurance Society of the United States. Each of them contained a provision that it should be incontestable after one year from the date of its issue.

On August 26, 1921, Keeton died. In a couple of weeks or so thereafter, the appellants allege that for the first time they learned that Keeton in his application for insurance had made certain false statements which would avoid the policies provided the appellants sought cancellation within one year of their respective dates. On the 28th of November, 1921, the. appellants tendered back the premiums to the appellee and demanded the surrender of the policies. This demand was refused and on the next day, the original bills of complaint were filed in the court below.

Each of them alleged that the appellee had not sued on the policies and that appellants believed she would not until more than a year had elapsed from their issue and that then no defense would be open. The prayers of the bills were for cancellation of the policies. The appéllee answered ‘ denying jurisdiction of the court sitting as a court of equity. After argument, the learned judge below, on the 31st of March, 1922, overruled the motions to dismiss, holding that there was jurisdiction in equity.

He, however, added that he did not mean to say that the pendency of the equity suits was a bar to the institution of actions at law on the policies. The appellants at once asked for a prompt hearing of the equity causes, but ten days later, and before any date for sjich hearing was fixed, the appellee brought' actions at law in the state court. The appellants countered by supplemental bill in the federal court, asking that the appellee be enjoined from prosecuting.

The injunctions being refused, the appellants removed the law cases to the United States court and then' by second supplemental bills renewed their motion for injunctions to stay the appellee’s, prosecution of them. They asked that she be required to defend such rights as she had in the equity suits. Again injunctions were denied. By these appeals the appellants seek to have reviewed the refusal of the court to enjoin the suits at law first, when they were pending in the state court and, second, after they had been removed to the Court of the United States.

The appellants had the right to file their bills of complaint when and as they did. They had no adequate remedy at law. Before suing upon the policies, the appellee could have waited until they were more than a year old and then appellants could have made no defense. Ebner v. Ohio Life Insurance Co., 69 Ind. App. 32, 121 N. E. 315, 320; Ramsey v. Old Colony Life Insurance Co., 297 Ill. 592, 131 N. E. 108; Monahan v. Metropolitan Life Insurance Co., 283 Ill. 136, 119 N. E. 68, L. R. A. 1918D, 1196; American Trust Co. v. Life Insurance Co. of Virginia, 173 N. C. 558, 92 S. E. 707.

That fact makes inapplicable such cases as the Insurance Co. v. Bailey, 13 Wall. 616, 20 L. Ed. 501, and Cable v. United States Life Insurance Co., 191 U. S. 305, 24 Sup. Ct. 74, 48 L. Ed. 188. It was said many years ago, there is no head of equity jurisdiction more firmly established than that which embraces the cancellation of instruments which are capable of a vexatious use after the means of defense at law may become impaired or lost or when they are calculated to throw a cloud upon the title or interest of the parties seeking relief. Railroad Co. v. Schuyler, 17 N. Y. 592, 599, and Sharon v. Terry (C.

C.) 36 Fed. 337, 351. Having properly brought their suits in equity, appellants were entitled to have them heard and disposed of in ordinary course, and the appellee had no right to ask that their disposition should be postponed until the determination of any actions at law which she might see fit to bring. Liberty Oil Co. v. Condon National Bank, 260 U. S. 235, 43 Sup. Ct. 118, 67 L. Ed. 232, decided by Supreme Court November 27, 1922.

Nevertheless, the appellee insists that conceding so much, it does not follow that they thereby became entitled to have her enjoined from instituting such suits and from prosecuting them with whatever speed she could. She argues that ordinarily the pendency of a suit in one court is no bar to the institution of a second in a court of a different sovereignty even though it be on the same cause of action and between the same parties. McClellan v. Carland, 217 U. S. 268, 282, 30 Sup. Ct. 501, 54 L. Ed. 762; Barber Asphalt Co. v. Morris, 132 Fed. 945, 948, 66 C. C. A. 55, 67 L. R. A. 761.

However well established the general principle may be, there are nevertheless important exceptions to its application when as here, “both suits are substantially the same, that is to say, when there is substantial identity in the interests represented, in the rights asserted and in the purposes sought.” Pacific Live Stock Co. v. Oregon Water Board, 241 U. S. 440, 447, 36 Sup. Ct. 637, 641 (60 L. Ed. 1084). There can be but little room for controversy that a suit in equity to cancel a particular instrument may fall within these exceptions at least where the circumstances are peculiar. Sharon v.

Terry, supra, and then

section 720 of the Revised Statutes (Comp. St. § 1242), prohibiting injunctions to stay proceedings in a state court, will not prevent the federal court from talcing the steps necessary to insure that its decree shall effectively bind all the parties. Sharon v. Terry, supra.

It has been more than once held that where the jurisdiction of a court of the United States has first been properly invoked on the ground of diversity of citizenship, that court will enjoin any attempt by the defendant by subsequently instituted proceeding in the state court to render nugatory the constitutional right of the plaintiff to have the judgment of the federal tribunal. Burke Construction Co. v. Kline et al. (C. C. A.) 271 Fed. 605; Brown v. Fletcher, 231 Fed. 92, 145 C. C. A. 280.

The Supreme Court itself has said that the jurisdiction of the federal court “could not be defeated or impaired by the institution, by one of the parties, of subsequent proceedings, whether civil or criminal, involving the same legal questions in the state court.” Prout v. Starr, 188 U. S. 537, 544, 23 Sup. Ct. 398, 401 (47 L. Ed. 584). In the instant cases, a further analysis of the authorities is unnecessary.

The actions at law have been removed from the state to the federal courts, and therefore whether an injunction should or shoqld not issue out of the latter to stay their prosecution while they were still pending in the former has become moot. For that reason, the appeals from the order denying injunctions to stay proceedings in the state court will be dismissed. The actions at law and the suits in equity are now pending before the same tribunal.

That fact may not alter the substantial rights of the parties, although it should put an end to any race of diligence between them,-and necessarily avoids all possibility of friction between courts of different sovereignties. The appellants were entitled to go into equity when they did, and indeed as a practical matter were forced to do so. They have the right to insist as they do that the chancellor shall pass upon all the issues properly raised by their bill. Liberty Oil Co. v. Condon National Bank, supra.

Conditions which came into existence after the commencement of their causes cannot take from the court of equity its jurisdiction if that existed upon the facts as they were when the suit was instituted. Busch v. Jones, 184 U. S. 598, 22 Sup. Ct. 511, 46 L. Ed. 707; Camp v. Boyd, 229 U. S. 530, 33 Sup. Ct. 785, 57 L. Ed. 1317. Nor has the equity judge any right to stay his hand until the actions at law have been tried.

If the latter were still pending before another court, he could be compelled by mandamus, if necessary, to hear and determine the causes before him without waiting upon the proceedings of the other forum. McClellan v. Carland, supra; Barber Asphalt Co. v. Morris, supra. They are now all before the court below and should stand for trial in the order in which they were instituted. The appellants, however, call attention to the clear intimation o.f the learned judge below that he proposes to postpone the hearing of the equity causes until after the determination of the actions at law.

This, for reasons stated in'authorities already cited, he may not do. There is, of course, no doubt of the power of a court, which has both legal and equitable jurisdiction, by injunction to stay the trial of actions pending on its law side. 2 Story’s Equity Jurisprudence, §§ 874, 879. Most of the grounds for questioning the power of a court of the United States to enjoin the prosecution of actions pending before a state court have no relevancv to the present state of things. Neither the letter of

section 720 nor the great reasons of public policy which dictated that enactment have any application. The injunctions to stay the proceedings -in the District Court of the actions at law there pending should have been granted, and for the error in denying them, the orders of the court below must be reversed and the causes remanded for further proceedings not inconsistent with this opinion. Reversed.