Source: https://supreme.justia.com/cases/federal/us/293/379/
Timestamp: 2019-04-25 21:46:23+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 293 › Enelow v. New York Life Ins. Co.
Enelow v. New York Life Insurance Co.
1. A decree of the District Court under Jud.Code, § 274b, staying an action at law pending determination on the equity side of an equitable defense to the action, is, in effect, an injunction, and, being interlocutory, is appealable to the Circuit Court of Appeals under Jud.Code, § 129. P. 293 U. S. 381.
2. An application under Jud.Code, § 274b, to stay (i.e., to enjoin) proceedings of a law action until an equitable defense may be heard will not lie if the defense is one which is completely available in the law action. The test is whether the defendant could have maintained a bill in equity on the same averments. P. 293 U. S. 383.
of their falsity and fraudulently for the purpose of obtaining the insurance, is completely available in the action at law, and therefore affords no basis for a stay under Jud.Code § 274b. P. 293 U. S. 384.
4. In an action on a life insurance policy in which the plaintiff was its sole beneficiary and in which the defendant insurance company sought the remedy of cancellation upon the ground of fraud in the application, and tendered the amount of the premiums to the plaintiff, held that there was no merit in the company's contention that, because the executors of the insured, who were not made parties, would be entitled to the refund if the defense of fraud prevailed, the remedy at law was inadequate. P. 293 U. S. 385.
Certiorari to review the affirmance of a decree of the District Court staying an action at law on an insurance policy to await the hearing of an equitable defense interposed by the Insurance Company.
was made a part of the policy. These statements consisted of the applicant's answers to questions with respect to hospital observation or treatment and to his consultations with physicians. Respondent alleged that, while the applicant had answered these questions with an unqualified negative, he had in fact repeatedly consulted physicians for neurosis and cardiac disease, and had twice been the subject of hospital observation. Respondent further alleged that these answers were made by the applicant "with knowledge of their falsity and fraudulently for the purpose of procuring said insurance." Respondent tendered judgment for the premiums received by it, with interest, and prayed for cancellation of the policy. Petitioner, in her reply, denied that the answers in the application were either false or fraudulent.
Respondent then presented a petition asking that the "equitable issue" raised by the affidavit of defense and the plaintiff's reply should be heard pursuant to § 274b of the Judicial Code (28 U.S.C. § 398) "by a chancellor according to equity procedure in advance of the trial by jury at law of any purely legal issues." The District Court entered a rule to show cause why the petition should not be granted, and, on hearing, made the rule absolute. Its decree was affirmed by the Circuit Court of Appeals. 70 F.2d 728. This Court issued writ of certiorari, October 8, 1934.
First. A preliminary question arises as to the jurisdiction of the Circuit Court of Appeals. The decree of the District Court was interlocutory, and the question is whether it can be considered to be one granting an injunction, and thus within the purview of § 129 of the Judicial Code, as amended (28 U.S.C. § 227), permitting appeal.
"proceedings at law and proceedings in equity in the national courts and between the powers of those courts when sitting as courts of law and when sitting as courts of equity."
Per Van Devanter, J., in Griesa v. Mutual Life Insurance Company, 165 F. 48, 50-51.
of separate courts. Liberty Oil Co. v. Condon Bank, 260 U. S. 235, 260 U. S. 242-243. The trial of the issue at law may be postponed until the equitable issue is first disposed of, and then, if an issue at law remains, it is triable by a jury as the Seventh Amendment requires. Id.
It is thus apparent that, when an order or decree is made under § 274b, requiring, or refusing to require, that an equitable defense shall first be tried, the court, exercising what is essentially an equitable jurisdiction, in effect grants or refuses an injunction restraining proceedings at law precisely as if the court had acted upon a bill of complaint in a separate suit for the same purpose. Such a decree was made in the instant case, and, therefore, although interlocutory, it was appealable to the Circuit Court of Appeals under § 129, as amended. See Ford v. Huff, 296 F. 652, 658; American Cyanamid Co. v. Wilson & Toomer Fertilizer Co., 62 F.2d 1018, 1019-1020. Compare Ementon Refining Co. v. Chambers, 14 F.2d 104.
Second. We come to the merits. Was the defense set up by the defendant of such a nature that defendant was entitled to have it heard and determined in equity, and to enjoin the proceedings at law pending that determination? The test under § 274b is whether the defendant could have maintained a bill in equity on the same averments. The unequivocal language of the provision leaves no room for the argument that the substantive jurisdiction of equity was sought to be changed or enlarged. The defendant's rights to a hearing in equity are "the same," not greater, when he resorts to the summary procedure.
See Liberty Oil Co. v. Condon Nat. Bank, supra; Union Pacific R. Co. v. Syas, 246 F. 561, 565; American Cyanamid Co. v. Wilson & Toomer Fertilizer Co., supra; New York Life Insurance Co. v. Miller, 73 F.2d 350. Compare Phillips-Morefield v. Southern States Life Ins. Co., 66 F.2d 29, 30; New York Life Ins. Co. v. Marotta, 57 F.2d 1038. And it necessarily follows that this summary procedure cannot aid the defendant when a bill for the same relief would not lie because the defense is one which is completely available in the action at law. Emphasizing the fundamental principle of the equitable jurisdiction, the Congress, from the first Judiciary Act, has declared that suits in equity shall not be sustained in any court of the United States in any case where a "plain, adequate and complete remedy" may be had at law. Act of September 24, 1789, § 16, 1 Stat. 82, Jud.Code, § 267, 28 U.S.C. § 384.
was solely that the defendant had been induced to issue the policy by false answers in the application which were alleged to have been made by the applicant "with knowledge of their falsity and fraudulently" in order to obtain the insurance. The affidavit of defense showed nothing whatever as a further ground for equitable relief, and the respondent is necessarily confined to the case it made. In such a case, the defense of fraud is completely available in the action at law, and a bill in equity would not lie to stay proceedings in that action in order to have the defense heard and determined in equity. Phoenix Mut. Life Ins. Co. v. Bailey, 13 Wall. 616, 80 U. S. 623; New York Life Ins. Co. v. Bangs, 103 U. S. 780, 103 U. S. 782; Cable v. United States Life Ins. Co., 191 U. S. 288, 191 U. S. 305; American Mills Co. v. American Surety Co., 260 U. S. 360, 260 U. S. 363; New York Life Ins. Co. v. Marshall, 23 F.2d 225; New York Life Ins. Co. v. Miller, supra. Respondent was in no better position under § 274b.
Nor is there merit in the contention that the remedy at law is not adequate because petitioner is not the only person interested in the policy, and that the premiums paid would be refundable to the decedent's executors. The executors have no interest entitling them to enforce the policy. Petitioner is the sole beneficiary of the policy, and is entitled to recover upon it if it is valid, and cannot prevail if the defense of fraud is established. Insurance Co. v. Bailey, supra; Cable v. United States Life Ins. Co., supra. The affidavit of defense raised no question as to petitioner's standing as beneficiary of the policy, and, indeed, it expressly offered judgment in favor of the petitioner for the amount of the premiums in accordance with a tender previously made.
District Court, with direction to vacate its order for a hearing in equity and to proceed with the trial of the action at law.
"Equitable defenses and equitable relief in actions at law. In all actions at law, equitable defenses may be interposed by answer, plea, or replication, without the necessity of filing a bill on the equity side of the court. The defendant shall have the same rights in such case as if he had filed a bill embodying the defense of seeking the relief prayed for in such answer or plea. Equitable relief respecting the subject matter of the suit may thus be obtained by answer or plea. In case affirmative relief is prayed in such answer or plea, the plaintiff shall file a replication. Review of the judgment or decree entered in such case shall be regulated by rule of court. Whether such review be sought by writ of error or by appeal, the appellate court shall have full power to render such judgment upon the records as law and justice shall require."
See Mutual Life Ins. Co. v. Hurni Packing Co., 263 U. S. 167, 263 U. S. 177; Jefferson Standard Life Insurance Co. v. Keeton, 292 F. 53, 54; Jefferson Standard Life Insurance Co. v. McIntyre, 294 F. 886; Jones v. Reliance Life Ins. Co., 11 F.2d 69, 70; Peake v. Lincoln National Life Ins. Co., 15 F.2d 303, 305, 306; Keystone Dairy Co. v. New York Life Ins. Co., 19 F.2d 68; Rose v. Mutual Life Ins. Co., 19 F.2d 280, 282; Brown v. Pacific Mutual Life Ins. Co., 62 F.2d 711, 712.

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