Knoch, Senior Circuit Judge, and Fairchild and Cummings, Circuit Judges.
Plaintiff Esquire Restaurant, Inc., an Illinois corporation, is the lessee of part of the building at 12 South Grove Avenue, Elgin, Illinois. In 1962, it filed a suit in the Superior Court of Cook County, Illinois, to recover for losses allegedly covered by five fire insurance policies. Pursuant to Section 1441 of the Judicial Code (28 U.S.C. § 1441), the suit was removed by defendant insurers to the United States District Court.
About 4:45 a.m. on October 16, 1961, a fire occurred in the restaurant, damaging the contents, improvements and betterments. The complaint alleged that the sound value of the insured property at the time of loss was about $114,000, and that plaintiff's loss was about $84,000.
At the time of the fire, Phil Anaston had been succeeded as president of the restaurant corporation by his son Louis Manolis. Anaston and his wife then owned all the corporation's outstanding stock. Ten weeks before the fire, Charles Seidel and his wife sold their stock in the restaurant to the corporation, which had lost considerable money for the years 1957 through 1961. The Seidels' 250 shares were acquired by the issuance of the restaurant's promissory note for $28,400, secured by a chattel mortgage on all its assets, and were to be retained as treasury shares upon their transfer.
After the fire, the Elgin Fire Department found two 5-gallon fuel oil cans and various pots and pans containing fuel oil in the restaurant. Its deputy chief testified that in his opinion the fire was deliberately set.
The testimony showed that the front door of the restaurant was locked but the rear door was ajar after the fire. The rear door had been locked with a padlock and hasp on the inside of the basement, but after the fire was extinguished, the padlock was found hanging on the hasp in an open position. The rear door and padlock had not been forced open.
At 2:30 a.m. on the morning of the fire, Louis Manolis, son of the owner, inspected and locked all the restaurant doors. He and his brother, Leo, and their father, Phil Anaston, had three sets of keys to the restaurant, and the fourth set was usually kept hanging in the back room of the restaurant. This fourth set was being used by Leo Manolis at the time of the fire because he had lost his own set, which he found afterwards in his raincoat pocket.
In their answer, as amended, the defendants set out the following affirmative defenses:
1. Neglect of the insured to use all reasonable means to save the property.
2. False swearing in the proofs of loss that the origin of the fire was unknown, whereas it was known to be incendiary.
3. False swearing in the proofs of loss concerning the cash value of the property and damage thereto.
4. False testimony that the origin of the fire and those who ...