Source: https://supreme.justia.com/cases/federal/us/300/203/
Timestamp: 2019-04-26 02:20:26+00:00

Document:
Equitable jurisdiction is not removed when a party introduces a legal claim. The court can decide whether to address the equitable or the legal claim first.
A life insurance policy that American Insurance Co. issued to Stewart included a clause that prevented any challenge to an attempt to collect on the policy made after one year from its issuance if the insured was still alive or after two years if he was dead. The insured died three months later, and American Insurance sought to rescind on the grounds of fraud, while Stewart brought an action to collect the proceeds on the policy. The parties agreed that the equity action would be considered before the damages claim. Stewart failed to allege an adequate remedy at law in his answer to the American Insurance action.
There is a general rule that an action may not be brought in equity if there is an adequate remedy at law. However, the insurance policy allowed the beneficiary to wait two years, which would make the policy incontestable. Fraud may be raised as a defense in a legal action to collect the proceeds, but the insurer would have had to wait until that action was brought to raise the defense. This means that the legal remedy was inadequate, since the insurer would depend on the opposing party to bring the action. If an action in equity is filed before a legal remedy becomes available, the court retains equitable jurisdiction. The court could have considered the action at law first, however, if the parties had not stipulated to the contrary.
Since common law did not have trials in equitable actions, they are not covered by the Seventh Amendment's right to a jury trial. The insurer may have chosen to file an equitable rather than legal action because it would have been more difficult to establish fraud in a legal action.
1. Fraud in the procurement of insurance is provable as a defense in an action at law upon the policy. P. 300 U. S. 212.
2. A "contest," within the purview of a provision of a life insurance policy that it shall be incontestable after a period defined, has generally been held to mean a present contest in a court, not a notice of repudiation or of a contest to be waged thereafter. P. 300 U. S. 212.
3. No action at law having been brought on the policy, an insurer whose attack upon the ground of fraud is endangered by the running of the time limited by the policy for contest may sue in equity for cancellation. P. 300 U. S. 212.
In the present cases, the period allowed for contest was two years from the date of the two policies. The assurance Company's suits for cancellation were brought when six months and ten days of that period had passed.
4. Where equity can give relief, plaintiff ought not to be compelled to speculate upon his chance of obtaining relief at law, or to incur the danger that witnesses may disappear and evidence be lost if he waits to be sued by his antagonist. P. 300 U. S. 213.
5. A remedy at law does not exclude one in equity unless it is equally prompt and certain and in other ways efficient. P. 300 U. S. 214.
6. A remedy at law is not adequate if its adequacy depends upon the will of the opposing party. P. 300 U. S. 214.
7. Equitable jurisdiction existing at the filing of the bill is not destroyed by the subsequent availability of an adequate legal remedy. P. 300 U. S. 215.
In these cases, the equity jurisdiction which attached on the filing of the bills by the Insurance Company was not lost when actions on the policies were brought in the same court; though the court, if requested, might have tried the law suits first.
80 F.2d 600, 85 id. 791, reversed.
Certiorari, 299 U.S. 536, to review the reversal of decrees for the cancellation and surrender of policies of life insurance.
In these cases, suits have been brought for the cancellation of policies of life insurance on the ground of fraud in their procurement, the policies providing that they shall cease to be contestable unless contest shall be begun within a stated time. The question to be determined is the existence, in the circumstances, of a remedy in equity.
"shall be incontestable, except for nonpayment of the premium, after one year from its date of issue if the Insured be then living, otherwise after two years from its date of issue."
has gone by, or, beginning such an action within the period, may afterwards dismiss it and then begin anew. The insurer asks the court to act while yet the barrier is down.
"before said law action is tried, Provided, however, that the issues in said law action shall in the meantime be made up in order that said law issues thus joined shall stand ready for trial, with the understanding that said law issues, if any remain for trial, shall be tried as soon after the trial of the suit in equity as the court shall determine,"
and this stipulation was approved by the court, and an order made accordingly. On October 10, 1933, the defendants in each of the equity suits filed their answers to the bills, denying the fraud, admitting the making of the "incontestability clause" as stated in paragraph 8, and, as to the other allegations of that paragraph, denying any knowledge or information sufficient to form a belief. The answers did not state that the remedy at law was adequate.
had an adequate remedy at law. 80 F.2d 600; 85 F.2d 791. We granted certiorari to settle an important question, and one likely to recur, as to the scope of equitable remedies.
Pet. 210; Drexel v. Berney, 122 U. S. 241; Walla Walla v. Walla Walla Water Co., 172 U. S. 1; Union Pac. R. Co. v. Weld County, 247 U. S. 282, 247 U. S. 287. "It must be a remedy which may be resorted to without impediment created otherwise than by the act of the party." Cable v. United States Life Ins. Co., supra, at p. 191 U. S. 303. Here, the insurer had no remedy at law at all except at the pleasure of an adversary. There was neither equality in efficiency nor equality in certainty nor equality in promptness. "The remedy at law cannot be adequate if its adequacy depends upon the will of the opposing party." Bank of Kentucky v. Stone, 88 F. 383, 391; cf. Lincoln National Life Ins. Co. v. Hammer, 41 F.2d 12, 16. To make a contract incontestable after the lapse of a brief time is to confer upon its holder extraordinary privileges. We must be on our guard against turning them into weapons of oppression.
the suits in equity till the other causes were disposed of, the District Court could have considered whether justice would not be done by pursuing such a course, the remedy in equity being exceptional and the outcome of necessity. Cf. Harnischfeger Sales Corp. v. National Life Ins. Co., 72 F.2d 921, 922, 923. There would be many circumstances to be weighed, as, for instance, the condition of the court calendar, whether the insurer had been precipitate or its adversaries dilatory, as well as other factors. In the end, benefit and hardship would have to be set off, the one against the other, and a balance ascertained. Landis v. North American Co., supra. But respondents, as already indicated, gave that possibility away. They stipulated that the issues in equity should be tried in advance of those at law, and that only such issues, if any, as were left should be disposed of later on. The cases were allowed to stand as if challenge to the suits had been made by a demurrer only. So challenged, they prevail.
The decree should be reversed, and the cause remanded to the Court of Appeals for a consideration of the merits and for other proceedings in accord with this opinion.
* Together with No. 441, American Life Insurance Co. v. Ora Inez Stewart et al. Certiorari to the Circuit Court of Appeals for the Tenth Circuit.
From the fourth circuit: Jefferson Standard Life Ins. Co. v. Keeton, 292 F. 53, 54-56; Jones v. Reliance Life Ins. Co., 11 F.2d 69, 70; Brown v. Pacific Mutual Life Ins. Co., 62 F.2d 711, 712; New York Life Ins. Co. v. Truesdale, 79 F.2d 481, 485; Pacific Mutual Life Ins. Co. v. Parker, 71 F.2d 872, 874. From the fifth circuit: Jefferson Standard Life Ins. Co. v. McIntyre, 294 F. 886, 888. From the sixth circuit: New York Life Ins. Co. v. Seymour, 45 F. 2d 47, 48, 49; Rose v. Mutual Life Ins. Co., 19 F. 2d 280, 282. From the seventh circuit: Harnischfeger Sales Corp. v. National Life Ins. Co., 72 F.2d 921, 922, 923. From the eighth circuit: Peake v. Lincoln National Life Ins. Co., 15 F.2d 303, 305, 306; Lincoln National Life Ins. Co. v. Hammer, 41 F.2d 12, 17. From the ninth circuit: Massachusetts Bonding & Ins. Co. v. Anderegg, 83 F.2d 622, 625. From the tenth circuit: New York Life Ins. Co. v. Thompson, 78 F.2d 946, 947 (semble). From the District of Columbia: Densby v. Acacia Mutual Life Assn., 64 App.D.C. 319, 78 F.2d 203, 206.
New York Life Ins. Co. v. Rigas, 117 Conn. 437, 168 A. 22; Ebner v. Ohio State Life Ins. Co., 69 Ind.App. 32, 121 N.E. 315; Aetna Life Ins. Co. v. Daniel, 328 Mo. 876, 42 S.W.2d 584; New York Life Ins. Co. v. Cobb, 219 Mo.App. 609, 282 S.W. 494; New York Life Ins. Co. v. Steinman, 103 N.J.Eq. 403, 143 A. 529; American Trust Co. v. Life Ins. Co. of Virginia, 173 N.C. 558, 92 S.E. 706; Prudential Ins. Co. v. Tanenbaum, 53 R.I. 355, 167 A. 147.
"The instant case is not one in which there is resort to equity for cancellation of the policy during the life of the insured and no opportunity exists to contest liability at law. Nor is it a case where, although death may have occurred, action has not been brought to recover upon the policy, and equitable relief is sought to protect the insurer against loss of its defense by the expiration of the period after which the policy, by its terms, is to become incontestable."

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