1. Section 267 of the Judicial Code, providing 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," is declaratory of the rule followed by courts of equity, and
should be liberally construed as serving to guard the right of
trial by jury preserved by the Seventh Amendment. P.
287 U. S.
94.
2. The question whether a case should be tried at law or in
equity depends upon the facts stated in the bill. P.
287 U. S.
95.
Page 287 U. S. 93
3. A suit by a trustee in bankruptcy to recover preferential
payment of ascertained and definite amount and in which the
complaint aver no facts that call for an accounting or other
equitable relief should be tried at law.
Id.
4. Defendants who answered a bill putting all its allegations in
issue, including the allegation that plaintiff had no adequate
remedy at law, and who, after the case was advanced on the equity
calendar but before it was reached for trial, made their motion for
a transfer under the 22d Equity Rule,
held not to have
waived their right to such transfer. Pp.
287 U. S.
96-97.
54 F.2d 1079 reversed.
CERTIORARI, 285 U.S. 536, to review the affirmance of a decree
in a suit by a trustee in bankruptcy to recover the amount of
payments made by a bankrupt which the bill challenged as
preferences.
MR. JUSTICE BUTLER delivered the opinion of the Court.
This is a suit in equity brought by respondent in the District
Court for Southern New York to recover from Morris Schoenthal $500
and from Fannie Schoenthal $1,000 paid them by the bankrupt. The
bill alleged facts sufficient to show that each of these payments
operated as a preference under § 60b of the Bankruptcy Act, 11
U.S.C. § 96(b), asserted that plaintiff had no adequate remedy at
law, and prayed decree declaring the payments preferential and
directing defendants to account for and pay to plaintiff the
amounts so received with interest and costs. October 27, 1930,
defendants separately answered and put in issue all the allegations
of the bill.
The case was advanced to the February, 1931, calendar. February
13, invoking equity rule 22, defendants, on petition and notice of
motion to be heard four days
Page 287 U. S. 94
later, applied for an order transferring the suit to the law
side of the court and for a trial by jury. On the return day, the
application was referred to the judge sitting in equity, and was
taken up February 24. After hearing counsel, the court denied the
motion and immediately proceeded to trial in equity. It heard
evidence, filed findings of fact and conclusions of law, and
entered judgment that plaintiff recover from Morris Schoenthal
$538.74 and from Fannie Schoenthal $1,075.84, and have executions
therefor. The Circuit Court of Appeals affirmed.
The principal question is whether, assuming they made timely
application under Rule 22, defendants were entitled to have the
suit tried at law.
Section 267 of the Judicial Code provides:
"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."
28 U.S.C. § 384. That rule has always been followed in courts of
equity. The enactment gives it emphasis, and indicates legislative
purpose that it shall not be relaxed.
New York Guaranty Co. v.
Memphis Water Co., 107 U. S. 205,
107 U. S. 214;
Matthews v. Rodgers, 284 U. S. 521,
284 U. S. 525.
It serves to guard the right of trial by jury preserved by the
Seventh Amendment, and to that end it should be liberally
construed.
Cf. 75 U. S. 8
Wall. 85,
75 U. S.
101-103. In England, long prior to the enactment of our
first Judiciary Act, common law actions of trover and money had and
received were resorted to for the recovery of preferential payments
by bankrupts. [
Footnote 1]
Suits to recover preferences constitute no
Page 287 U. S. 95
part of the proceedings in bankruptcy, but concern controversies
arising out of it.
Taylor v. Voss, 271 U.
S. 176,
271 U. S. 182.
They may be brought in the state courts, as well as in the
bankruptcy courts.
Collett v. Adams, 249 U.
S. 545,
249 U. S. 549.
The question whether remedy must be by action at law or may be
pursued in equity notwithstanding objection by defendant depends
upon the facts stated in the bill. And, in absence of a clear
showing that a court of law lacks capacity to give the relief which
the allegations show plaintiff entitled to have, a suit in equity
cannot be maintained.
Boyce v.
Grundy, 3 Pet. 210,
28 U. S. 215;
Buzard v. Houston, 119 U. S. 347,
119 U. S. 352;
United States v. Bitter Root Dev. Co., 200 U.
S. 451,
200 U. S. 472.
The facts here alleged give no support to plaintiff's assertion
that it has no adequate remedy at law. The preferences sued for
were money payments of ascertained and definite amounts. The bill
discloses no facts that call for an accounting or other equitable
relief. It is clear that there may be had at law a remedy "as
practical and efficient to the ends of justice and its prompt
administration, as the remedy in equity."
Boyce v. Grundy, ubi
supra. The contention that § 267 prohibits the maintenance of
this suit in equity is sustained in principle by numerous decisions
of this Court. [
Footnote 2]
And, upon the very question here presented, the weight of judicial
opinion in the lower federal courts [
Footnote 3] and in the state courts [
Footnote 4] is that suits such as this cannot be
sustained in equity.
Page 287 U. S. 96
Plaintiff insists that defendants waived their right to have the
suit transferred to the law side.
Rule 22 declares:
"If at any time it appear that a suit commenced in equity should
have been brought as an action on the law side of the court, it
shall be forthwith transferred to the law side and be there
proceeded with, with only such alteration in the pleadings as shall
be essential."
As plaintiff's bill shows that it had a plain, adequate, and
complete remedy at law, defendants were entitled upon proper
application to have the suit transferred and trial by jury.
Undoubtedly they might have waived that right.
Reynes v.
Dumont, 130 U. S. 354,
130 U. S. 395;
American Mills Co. v. American Surety Co., 260 U.
S. 360,
260 U. S. 363.
But the record discloses no act or omission of theirs at all
inconsistent with their denial by answer of the assertion in the
bill that plaintiff had no remedy at law or, to suggest that they
were willing that the case should be
Page 287 U. S. 97
tried in equity. Their application was noticed to be heard about
a week before the case was reached for trial. It is not shown that
they delayed the hearing of the motion. Presumably the matter was
referred to the judge sitting in equity to serve the convenience of
the court. The rule directs the transfer if "at any time" it shall
appear that the suit should have been brought as an action at law.
An application for transfer brought on for hearing before the
commencement of the trial is not too late.
Parkerson v.
Borst, 251 F. 242, 245. Plaintiff's claim that defendants
waived their right under the rule is without merit.
Reversed.
[
Footnote 1]
Meggott v. Mills, 1 Ld.Raym. 286;
Atkin v.
Barwick, 1 Strange, 165;
Alderson v. Temple, Burr.
2235;
Harman v. Fishar, Cowp. 117;
Rust v.
Cooper, Cowp. 629;
Thompson v. Freeman, 1 Durn. &
E. 155;
Barnes v. Freeland, 6 Durn. & E. 80;
Smith
v. Payne, 6 Durn. & E. 152;
Nixon v. Jenkins, 2
H.Bl. 135;
Marks v. Feldman, L.R. 5 Q.B. 275, 280-281;
cf. Ex parte Scudamore, 3 Ves. 85, 87;
Farrow v.
Mayes, 18 Q.B. 516.
[
Footnote 2]
Hipp v. Babin,
19 How. 271,
60 U. S. 279;
Parker v. Winnipiseogee Lake
Co., 2 Black 545,
67 U. S. 550
et seq. Kennedy v.
Gibson, 8 Wall. 498,
75 U. S. 505;
Insurance Co. v.
Bailey, 13 Wall. 616,
80 U. S.
620-621;
Grand Chute v.
Winegar, 15 Wall. 373,
82 U. S. 376;
Lewis v.
Cocks, 23 Wall. 466,
90 U. S. 469;
New York Guaranty Co. v. Memphis Water Co., 107 U.
S. 205,
107 U. S. 214;
Buzard v. Houston, 119 U. S. 347,
119 U. S.
352-353;
Whitehead v. Shattuck, 138 U.
S. 146,
138 U. S.
150-151;
United States v. Bitter Root Dev. Co.,
200 U. S. 451,
200 U. S.
472.
[
Footnote 3]
Warmath v. O'Daniel, 159 F. 87, 90;
Sessler v.
Nemcof, 183 F. 656;
Grant v. National Bank of Auburn,
197 F. 581, 590;
First State Bank v. Spencer, 219 F. 503;
Simpson v. Western Hardware & Metal Co., 227 F. 304,
313;
Edwards Co. v. La Dow, 230 F. 378, 381;
Turner v.
Schaeffer, 249 F. 654;
Rosenthal v. Heller, 266 F.
563;
Morris v. Neumann, 293 F. 974, 978;
Adams v.
Jones, 11 F.2d 759,
cert. denied, 271 U.S. 685;
Lewinson v. Hobart Service Trust Co., 49 F.2d 356;
Gelinas v. Buffum, 52 F.2d 598.
Contra: Pond v. New York National Exch. Bank, 124 F.
992;
Off v. Hakes, 142 F. 364, 366;
In re Plant,
148 F. 37;
Parker v. Black, 151 F. 18;
Parker v.
Sherman, 212 F. 917, 918;
Reed v. Guaranty Security
Corp., 291 F. 580.
[
Footnote 4]
McCormick v. Page, 96 Ill.App. 447;
Detroit Trust
Co. v. Old National Bank, 155 Mich. 61, 64, 118 N.W. 729;
Boonville Nat. Bank v. Blakey, 166 Ind. 427, 442, 76 N.E.
529;
Irons v. Bias, 85 W.Va. 493, 102 S.E. 126;
People's Bank v. McAleer, 204 Ala. 101, 103, 85 So.
413.