Before MAJOR, Chief Judge, DUFFY and LINDLEY, Circuit Judges.
Central States Cooperatives, Inc. (hereinafter referred to as Central States) on October 2, 1946, filed in the Municipal Court of Chicago its complaint against Watson Brothers Transportation Company, Inc. (hereinafter referred to as Watson Brothers), for possession of certain described premises based upon the forcible entry and detainer statute of the State of Illinois, Ill. Rev. Stat. 1949, Ch. 57. Upon petition of Watson Brothers the cause was removed to the United States District Court. Watson Brothers by its answer denied that it was wrongfully in possession of the premises and relied upon the terms and provisions of an oral lease made with Central States. The cause was tried to a jury, and admittedly Watson Brothers had the burden of proving its affirmative defense, that is, that it was entitled to possession because of such oral lease. At the conclusion of the evidence offered by Watson Brothers, the court directed a verdict in favor of Central States, and on December 23, 1946, entered its judgment, decreeing that Watson Brothers restore possession to Central States and reciting that on the motion of Watson Brothers "supersedeas bond on appeal be and it is hereby fixed at the sum of Twenty Thousand Dollars ($20,000.00)."
Thereupon, Watson Brothers perfected its appeal to this court. On September 23, 1947, during the pendency of such appeal, Watson Brothers filed in this court its motion for an order to reverse the judgment appealed from and to remand the cause to the District Court with instructions to dismiss the complaint for the reason that there was no longer any actual controversy involving real and substantial rights between the parties but only an abstract and moot question. The motion also requested in the alternative that the judgment be reversed and the cause remanded with instructions to the District Court to remand the cause to the State court on the ground that the District Court was without jurisdiction.
On October 30, 1947, this court entered an order denying the motion by Watson Brothers, without prejudice to its right to renew the same at the time of hearing on the merits. Thereupon this court held that the court below was without jurisdiction. Central States Co-ops. v. Watson Bros. Transp. Co., 7 Cir., 165 F.2d 392. This holding was reversed by the Supreme Court, 337 U.S. 951, 69 S. Ct. 1525, in the light of its decision in National Mutual Ins. Co. v. Tidewater Transfer Co., 337 U.S. 582, 69 S. Ct. 1173, and the cause remanded for further consideration, whereupon this court, on September 14, 1949, in conformity with the mandate of the Supreme Court, vacated its previous judgment predicated upon lack of jurisdiction. The case was set for oral argument and Watson Brothers renewed its motion, originally denied without prejudice, to reverse and remand with directions that the complaint be dismissed as no actual controversy remained between the parties and that the issue for decision was moot.
There is no dispute as to the facts relied upon by Watson Brothers in support of this motion. As shown in the original motion, Central States on July 14, 1947 sold and conveyed the premises in controversy to Yellow Terminals, Inc., whereupon the latter company on August 5, 1947 filed in the United States District Court its suit against Watson Brothers for possession of the same premises. By the renewed motion it was further shown that Watson Brothers on December 4, 1947 surrendered possession of the premises in controversy to Yellow Terminals, Inc., and that the latter took possession on said date. Also, it is shown that Central States on or about February 7, 1948, instituted an action in the Superior Court of Cook County against Watson Brothers to recover for the reasonable rental value of the premises in controversy and for numerous other items of damage alleged to have been sustained on account of Watson Brothers' wrongful possession of the property.
Thus there is no question but that Central States has sold and conveyed the property to Yellow Terminals, Inc., that Watson Brothers has surrendered possession to Yellow Terminals, and that Central States has pending in the State court an action for damages against Watson Brothers for its wrongful possession.
In support of its motion, Watson Brothers cites and relies entirely upon Heitmuller v. Stokes, 256 U.S. 359, 41 S. Ct. 522, 65 L. Ed. 990. There the court, with a situation before it quite similar to that which now confronts us, held that the question of the right to possession had become moot and it reversed and remanded the cause to the court of original jurisdiction with directions that the complaint be dismissed. The holding in that case, if controlling, would seem to require affirmative action on the motion under consideration. Since then, however, we have had Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188, 114 A.L.R. 1487, which calls for the invocation of the State rule where substantive rights are affected. The question thus posed is whether the issue on the motion is substantive or procedural. If the former, the rights of the parties must be determined by the Illinois law; if the latter, the Heitmuller case, supra, governs.
Watson Brothers contends that there is no subject matter upon which the judgment of the court can now operate. Of course, that is true provided the assertion is limited solely to the right of possession. But the judgment taxes costs of suit against Watson Brothers. More than that, the judgment, at Watson Brothers' request, provides for a supersedeas bond so that it might upon the giving of such bond continue its decreed wrongful possession pending appeal. Such bond in the amount of $20,000.00 was filed, on condition that it "shall prosecute said appeal with effect and moreover pay all rent now due or that may become due before the final determination of this suit, and also all damages and losses which the said Central States Cooperatives, Inc., may sustain by reason of the withholding of the premises in controversy and by reason of any injury done thereto during such withholding, until the restitution of the possession thereof to the plaintiff, together with all costs accrued or that may accrue in case the judgment from which the appeal is taken is affirmed or said appeal dismissed, then the above bounded obligation to be void, otherwise to remain in full force and effect."
Central States makes an impressive showing as to the damages it has sustained by reason of the retention of possession of the property by Watson Brothers. While the amount of damages sustained by reason thereof may or may not be material to the instant motion, it is shown, among other things, that Central States collected no rent from Watson Brothers after October 1, 1946 (the date it was decreed entitled to possession), and that it could not accept such rent without waiving its right to possession. It was required to pay taxes, insurance and other maintenance expenses on the premises, as well as rental for other property which it acquired for the conduct of its business. That Central States was forced into this position by reason of the supersedeas bond given by Watson Brothers, and that the latter was enabled to enjoy the benefits accruing from possession by reason of such bond, is not open to question. Watson Brothers asserts that the only purpose of Central States in resisting the motion and in arguing for an affirmance of the judgment is that it may be placed in a position to bring suit on the bond for its damages.Even so, that was the very purpose for which the bond was given, which by its terms obligated Watson Brothers to respond in damages in case the judgment was "affirmed or said appeal dismissed."
Neither does the fact that Central States, subsequent to October 1, 1946, sold the premises nor that more than a year later possession was relinquished by Watson Brothers, negative the fact that Central States acquired a valuable and substantial right against Watson Brothers by reason of the bond. Nor do we think that the rights of Central States have been impaired by its suit in the State court for damages which may or may not be covered by the supersedeas bond. It would appear in the event the judgment appealed from is affirmed that Central States is entitled to recover its damages from Watson Brothers, and we need not now be concerned with the forum where such recovery is sought. And it may be noted that the appearance of Central States in the Federal court was involuntary. It was brought into the District Court on the petition of Watson Brothers and into this court on that latter's appeal.
We think that the question presented involves substantive rather than procedural rights.There was inherent in the judgment for possession in favor of Central States rights which were substantial. By that judgment it was awarded its costs of suit against Watson Brothers and it acquired the right to be protected in the event there was an appeal by the latter. And such right was clearly recognized by Watson Brothers by its supersedeas bond, which enabled it to retain possession upon the assumption of an obligation to protect Central States against damage by reason thereof. So we must look to the rule of the State in determining the rights of the parties.
The rule in Illinois by a long line of authorities clearly requires that Watson Brothers' motion be denied. In Daggitt v. Mensch, 41 Ill.App. 403, 405, affirmed 141 Ill. 395, 31 N.E. 153, the court stated: "We have held that a conveyance pendente lite by the plaintiff in an action of forcible detainer, does not affect his right to recover, if at the commencement of the suit he was entitled to the possession. Bell v. Bruhn, 30 Ill.App. 300. And the same result attends any change of possession. Patterson v. Graham, 40 Ill.App. 399."
In Hickox v. Armstrong, 181 Ill.App. 107, 109, the court, quoting from Patterson v. Graham, 40 Ill.App. 399, stated: "'The plaintiff has a right to pursue his proceeding to judgment, after he has, pending the action, obtained possession, for the purpose of fixing ...