Fire Ass'n v. General Handkerchief Corp.

Loughran, Ch. J. For convenience we abbreviate the names of the parties to this litigation. The plaintiff Fire Association of Philadelphia will be called the insurance company and its insured — the defendant General Handkerchief Corp.— will be called the insured. The insurance company is a Pennsylvania corporation and the insured is a New York corporation. In 1949, the insured commenced in the New York Supreme Court an action against the insurance company to recover upon a policy issued by it. Upon an application made by the insurance company, that action was removed to the United States District Court for the Southern District of New York where that action is still pending. Thereafter the insurance company commenced in the New York Supreme Court this action against the insured for the recovery of insurance premiums. In its answer, the insured set up a counterclaim in the words of the complaint it had served in the action that had been removed to the Federal court. The insurance company moved at Special Term for judgment dismissing that counterclaim and the motion was granted on the ground that the New York Supreme Court was without jurisdiction, because the counterclaim alleged the same cause of action that the insured had pleaded in the earlier action that had been removed to the Federal court. The Appellate Division affirmed, two Justices dissenting, and after judgment was entered upon its order, that court granted to the insured leave to present the case to us upon a question certified. But the judgment dismissing the counterclaim of the insured was here appealable as of right (Civ. Prac. Act, § 588, subd. 1, cl. [b]; see New York Trap Rock Corp. v. Town of Clarkstown, 299 N. Y. 77, 80). Hence the question certified [385] will not be answered (Matter of Wickwire Spencer Steel Co. v. Kemkit Scientific Corp., 292 N. Y. 139, 143). Hence, too, we treat the appeal of the insured as having been taken from the judgment which dismissed its counterclaim even though the notice of that appeal names the order of the Appellate Division as the appealable paper (see Becker v. Wells, 297 N. Y. 275, 277). There is before us for determination this question: Where a party’s action has been properly removed to a Federal court pursuant to a Federal statute may that party plead the same cause of action as a counterclaim in an action subsequently brought against him in a court of this State? In our judgment, that question should be answered in the negative. After removal of an action to a Federal court has been effected, “ the State court shall proceed no further unless and until the case is remanded.” (U. S. Code, tit. 28, § 1446, subd. [e].) The word “ case ” as thus used by Congress should, we think, be here taken to include the counterclaim in which the insured set forth the selfsame cause of action that had theretofore been removed to the Federal court by the insurance company (cf. Salem Co. v. Manufacturers’ Co., 264 U. S. 182, 189; Barney v. Latham, 103 U. S. 205, 215). On the removal thereof, the New York Supreme Court lost jurisdiction of that cause of action (cf. Traction Company v. Mining Company, 196 U. S. 239, 244; see Moore’s Commentary on the United States Judicial Code, p. 277). The judgment should be affirmed, with costs. The question certified is not answered.