Smoke Mount Industries, Inc. v. Eureka Security Fire & Marine Insurance, 224 N.C. 93 (1944)

March 1, 1944 · Supreme Court of North Carolina

224 N.C. 93

SMOKE MOUNT INDUSTRIES, INC., v. THE EUREKA SECURITY FIRE & MARINE INSURANCE COMPANY OF CINCINNATI, OHIO, and BANK OF ASHEVILLE, ASHEVILLE, N. C.

(Filed 1 March, 1944.)

1. Removal of Causes § 2—

In considering a petition for the removal of a cause to the Federal Courts, the allegations of the complaint are admitted to be true and the rights of the parties must be determined upon the allegations contained, therein.

2. Same—

A purely nominal party, or technical arrangement of parties, will not. oust the jurisdiction of the Federal Courts, nor prevent the removal of a. cause thereto. The courts will look to the actual interest and the real contest between the parties for a determination of the question.

3. Removal of Causes §§ 4a, 4b—

Where insured brought suit in the State courts, alleging a loss under a fire policy, against insurer, a foreign corporation, and also against a resident mortgagee, named with plaintiff in the loss payable clause as its interest might appear, and the complaint alleged that the mortgagee had' been paid in full, jurisdictional amount and diverse citizenship being-admitted, petition for removal to the Federal Court should have been granted.

Appeal by defendant, The Eureka Security Fire & Marine Insurance-Company, from Nettles, J., at January Term, 1944, of BuNCOmbe.

Civil action instituted by plaintiff, a resident of North Carolina, to-recover the proceeds of a fire insurance policy which contained a loss payable clause to a resident bank as mortgagee. The complaint alleges-that the indebtedness secured by the mortgages held by the bank was paid in full prior to the institution of the action.

The defendant, The Eureka Security Eire & Marine Insurance Company, duly filed its petition for removal of this cause to the United States-District Court for the "Western District of North Carolina, within the time required, together with a good and sufficient bond duly conditioned as provided by law. Upon a hearing on the petition to remove, before-the clerk of the Superior Court of Buncombe County, N. 0., the defendant’s bond was approved, but the motion for removal was denied. Upon appeal to his Honor, Nettles, J., at the January Term, 1944, of the Superior Court of Buncombe County, the motion to remove was likewise denied, and the defendant, The Eureka Security Eire & Marine Insurance Company, appeals to the Supreme Court.

J. A. Patla and Geo. A. Shuford for plaintiff.

Robinson & Jones for defendant, appellant.

Denny, J.

The petition for removal, in addition to the allegations as to jurisdictional amount, and diverse citizenship, further alleges (1) no-subsisting cause of action against the resident defendant, the Bank of Asheville; (2) fraudulent joinder; and (3) the cause of action alleged in the complaint can be fully and completely determined between the petitioner and the plaintiff; and that said cause of action or controversy is ■entirely separate and distinct from any controversy involving petitioner’s codefendant.

In considering a petition for removal, tbe allegations of tbe complaint are admitted to be true and tbe rights of tbe parties must be determined upon tbe allegations contained therein. Plaintiff alleges that it executed certain chattel mortgages to tbe Bank of Asheville to secure its indebtedness to said bank, that tbe bank required tbe plaintiff to have the property, on which it executed tbe chattel mortgages, insured against loss by fire and to have tbe proceeds of tbe policy, in tbe event of loss or damage, payable to tbe Bank of Asheville, as its interest may appear. Thereafter a loss occurred and before instituting this action, plaintiff paid all its indebtedness to tbe Bank of Asheville which was secured by tbe aforesaid chattel mortgages and tbe fire insurance policy now in controversy. It is not necessary to have tbe bank as a party to tbe action in order to prove tbe payment of plaintiff’s indebtedness to the bank; and if this indebtedness has been paid, as alleged, tbe Bank of Asheville bad no interest in tbe proceeds of tbe fire insurance policy, which may be recovered by plaintiff from tbe nonresident defendant. Therefore, we bold that tbe Bank of Asheville is not a necessary party. Simmons v. Ins. Co., 196 N. C., 667, 146 S. E., 567; Timber Co. v. Ins. Co., 190 N. C., 801, 130 S. E., 864; Christiansen v. Bankers’ & Shippers’ Ins. Co., 207 N. W., 108. In tbe last case tbe facts are similar to those in tbe instant case. There tbe Supreme Court of South Dakota held: “As to tbe contention that tbe policy was issued to tbe National Bond & Investment Company, and tbe corporation was a necessary party plaintiff, tbe admissions of tbe answer show that tbe policy was issued to respondent on a car owned by her, and tbe policy held by tbe corporation to protect its mortgage lien. There is no merit in tbe contention that tbe corporation was a necessary party, and proof that its claim was fully paid at tbe time shows that there is no merit in tbe contention.”

A purely nominal party, or technical arrangement of parties, will not oust tbe jurisdiction of tbe Federal Court. Brown v. R. R., 204 N. C., 25, 167 S. E., 479; Allred v. Lumber Co., 194 N. C., 547, 140 S. E., 157; Calloway v. The Ore Knob Copper Co., 74 N. C., 200. In Niccum v. Northern Assur. Co., 17 F. (2d), 160 (Ind.), tbe Court said: “Actual interest, and not technical arrangement of tbe parties to a suit, is decisive. Evers v. Watson, 156 U. S., 527, 15 S. Ct., 430, 39 L. Ed., 520; Removal Cases, 100 U. S., 457, 25 L. Ed., 593; Pacific Ry. Co. v. Ketchum, 101 U. S., 289, 25 L. Ed., 932. Under these decisions, and many others not necessary to cite, it seems to be tbe settled law that tbe courts, in determining tbe question of removability, will not be bound by any arrangement or alignment fixed in tbe pleadings, but will look to tbe real contest between tbe parties for a determination of tbe question.”

Tbe appellee insists tbat tbe ease of Proctor v. Ins. Co., 124 N. C., 265, 32 S. E., 716, is controlling and supports its contention tbat tbe defendant bank is a necessary party. We do not so bold. In tbe Proctor case, supra, McOullers, tbe mortgagor, procured tbe insurance and bad tbe loss payable clause made to tbe assured and tbe mortgagee “as tbeir interests may appear.” Tbe mortgagee undertook to collect tbe insurance without making tbe assured a party. There was no allegation tbat tbe insured bad no interest in tbe proceeds of tbe policy. Furthermore, tbe Court pointed out tbat tbe assured should be a party plaintiff, and upon failure to come in and make himself coplaintiff, tbe statute (Code, 185 j C. S., 457, now G. S., 1-70) provides tbat be may be made a defendant.

There was error in refusing to grant tbe motion for removal of this cause to tbe Federal Court.

Reversed.