Court Opinion

ID: 6861823
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:49:37.484257+00
Date Added: 2024-06-11T16:05:15.534806
License: Public Domain

SOPER, Circuit Judge.
I concur in the general conclusion of the court that a receiver in equity is entitled in certain contingencies to resist the payment of claims against the estate by the presentation of set-offs or counterclaims against the claimants. The opinion holds in effect that the equity court has jurisdiction (1) to pass upon a legal or equitable defense to a claim which grows out of the same transaction and ■ is not in excess of the amount of the claim; (2) to stay action on a claim, if a meritorious set-off or counterclaim in law or equity, growing out of the same transaction, is alleged, and affirmative relief against the-claimant is sought, until adjudication may be had in an independent suit brought by the receiver against the claimant; (3) to stay action on a claim, if a meritorious set-off or counterclaim in law or in equity, growing out of an independent transaction, is alleged, until adjudication may be had in an independent suit brought by the receiver against the claimant.
In my opinion, the jurisdiction of the court to consider a set-off or counterclaim filed by a receiver is even broader. It should be held that the equity court also has jurisdiction (1) to adjudicate fully any set-off or counterclaim in law or. equity, growing out of the same transaction, and to grant affirmative relief to the receiver if the facts warrant such action; and (2) to adjudicate any set-off or counterclaim in equity, based on an independent transaction, and to grant affirmative relief to the receiver if the facts warrant such action.
It seems clear that the court has full power to adjudicate completely all set-offs or counterclaims growing out of the same transaction, and the efficient administration of justice requires it, if it can be done in accordance with the Federal Constitution. Power to pass upon the merits of a claim and to consider all defenses growing out of the same transaction to the amount of the claim is conceded. The limitation implied seems to be unwarranted, and no authority is cited to sustain it. Courts of equity in the administration of estates have long exercised jurisdiction to consider claims presented against the property in their charge, and this function obviously cannot be fully performed, unless all defenses to a claim growing out of the transaction on which the claim is based, whether in excess of the claim or not, may be considered. The right to adjudicate fully all defenses is inherent in the power to adjudicate the claim. The fact that the claimant is deprived o.f a jury trial presents no constitutional difficulty; for the proceeding is in equity, and the claimant may not demand a jury trial even, though his claim ié based upon a right of action at law; and, as to the set-offs or counterclaims presented by the receiver, the court of equity, having acquired jurisdiction, will retain it, in accordance with the well-established principle of equity jurisprudence, until the whole controversy has been disposed of, although rights of action are involved which ordinarily would be cognizable only in a *457court of law. It may be noted in passing that the opinion of the court does not question the power of the chancellor to pass on the merits of a legal defense to a claim not in excess of the claim itself.
Furthermore, there seems to be no important reason why Equity Rule 30, promulgated November 4, 1912 (28 USCA § 723), should not be applied to the situation which arises when a receiver has a set-off or counterclaim in equity, growing out of an independent transaction, against a claimant. This rule provides in substance that the defendant in his answer to a suit in equity may, without cross-bill, set up any set-off or counterclaim against the plaintiff which might be the subject of an independent suit in equity against him, and such set-off or counterclaim shall have the same effect as a cross suit, so as to enable the court to pronounce a final decree in the same suit on both the original and the counterclaim. By the passage of this rule, the Supreme Court, in order to make it possible to put an end to all controversies between the same parties in a single suit, changed the former practice which confined set-offs and counterclaims to those which arose out of the transaction that formed the basis of the original suit. Since the filing of a disputed claim against a receiver in an equity proceeding is in one aspect a separate suit, it falls within the scope of Equity Rule No. 30, and the receiver should have the same right to set-off or counterclaim as would have been accorded to the corporation before the receiver was appointed. The decisions relied on in the opinion of the court, Whelan v. Enterprise Trans. Co. (C. C.) 164 F. 95, and Youtsey v. Hoffman (C. C.) 108 F. 693, were rendered prior to the passage of the rule. It would be of great convenience if independent counterclaims at law might also be adjudicated in the same proceeding, but the Seventh Amendment stands in the way. American Mills Co. v. American Surety Co., 260 U. S. 360, 43 S. Ct. 149, 67 L. Ed. 306.
The suggestion that this form of procedure would be unfair to the claimant, because it would require him to meet a counterclaim in a jurisdiction not of his choice, should not prevail. A suitor is always compelled to bring a suit in the court which has jurisdiction over the defendant, and in many instances there is only one court available for the purpose. His choice of courts may be more restricted when his claim must be filed in a receivership proceeding, but the importance of winding up the affairs of an insolvent corporation, under the supervision of a single court, is so great that this result cannot be avoided. Indeed, in cases of receivership, there is an added reason to that which led the Supreme Court to promulgate Equity Rule No. 30. When an estate is being wound up by a receiver under the supervision of a court of equity, there is more involved than the right of any claimant; and controversies between the receiver and the claimants should be adjudicated expeditiously, so that the estate may be speedily liquidated and all the creditors may receive then-proportionate shares.