Source: https://supreme.justia.com/cases/federal/us/260/360/
Timestamp: 2019-04-25 09:53:17+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 260 › American Mills Co. v. American Surety Co.
1. In a suit to cancel a written guaranty for fraud, the defense that the plaintiff has an adequate remedy at law by defending actions brought by the defendant on the guaranty is waived by the defendant where, without insisting upon it, as he might, he introduces proof, under a counterclaim for the amount of the guaranty, putting the instrument in evidence. P. 260 U. S. 363.
2. The provision of Equity Rule 30 that the answer must state any counterclaim arising out of the transaction which is the subject matter of the suit applies only to equitable, not to legal, claims. P. 260 U. S. 363.
Certiorari to a decree of the circuit court of appeals affirming a decree of the district court which cancelled a written guaranty for fraud.
This case involves a question of procedure, and turns on the construction of Equity Rule 30. An understanding of the point at issue requires a statement of the facts and the course of the litigation.
that the defendant had waived his defense that there was an adequate remedy at law, and had thereby given the court of equity jurisdiction to grant the relief prayed for by cancellation of the guaranty. American Surety Co. v. American Mills Co., 262 F. 691. On appeal, the decree was affirmed by the circuit court of appeals, 273 F. 68.
It is conceded by the respondent that its bill in equity in the district court should have been dismissed because it had an adequate remedy at law. The cases of Insurance Co. v. Bailey, 13 Wall. 616, 80 U. S. 622, and Cable v. U.S. Life Insurance Co., 191 U. S. 288, 191 U. S. 306-307, settle that. Respondent therefore relies solely on the waiver of this defect by the Mills Company in doing what it did in the district court. A defendant in a bill of equity may waive such a defect. McGowan v. Parish, 237 U. S. 285, 237 U. S. 295; Metropolitan Railway Receivership, 208 U. S. 90, 208 U. S. 109-110; Hollins v. Brierfield Coal & Iron Co., 150 U. S. 371, 150 U. S. 380; Reynes v. Dumont, 130 U. S. 354, 130 U. S. 395; 1 Daniell's Ch. Pr. (4th Amer. ed.) 555.
subject matter of the suit, and may, without cross-bill, set out any set-off or counterclaim against the plaintiffs which might be the subject of an independent suit in equity against him, and such set-off or counterclaim so set up shall have the same effect as a cross-suit, so as to enable the court to pronounce a final judgment in the same suit both on the original and cross claims."
The petitioner argues that must any may are here set over against one another for the purpose of enforcing the intention and effect of the rule to require the defendant in an action in equity to set out any counterclaim arising out of the subject matter of the bill, but to leave it to the option of the defendant whether a counterclaim or set-off not arising out of the same transaction shall be interposed, or shall be prosecuted by independent bill. The respondent contends that, while this may be correct, the counterclaim growing out of the same transaction must be an equitable claim, and not a legal one, as here. We concur in this view.
equity -- Hopkins' Federal Equity Rules, 3d ed., p. 195 -- and consideration of it does not aid us in the question we are discussing.
The result is that the petitioner, as defendant, was not obliged to set up and prove its action at law under Rule 30, and when it did so by its affirmative action, it waived its previous objection to the equitable jurisdiction, and also its right of trial by jury. An analogous effect of such affirmative action in pressing a counterclaim is seen in Merchants Heat & Light Co. v. J. B. Clow & Sons, 204 U. S. 286, 204 U. S. 289-290, where a nonresident corporation, having saved its right to object to the service of summons, lost it not by answer, but by a counterclaim.

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