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.
2. An application under Jud.Code, § 274b, to stay
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.
3. In an action brought by the sole beneficiary of a life
insurance policy to collect the insurance after the death of the
insured, a defense that the policy was procured by false answers in
the application, alleged to have been made by the insured with
Page 293 U. S. 380
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.
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.
70 F.2d 728 reversed.
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
MR. CHIEF JUSTICE HUGHES delivered the opinion of the Court.
This is an action at law upon a policy of life insurance issued
by respondent in December, 1931, on the life of petitioner's
husband, Max Enelow, who died in May, 1933. The action was brought
in a state court in Pennsylvania, in July, 1933, and was removed to
the federal court. The policy provided that it should be
incontestable after two years from date of issue. In its affidavit
of defense, respondent set up the affirmative defense that the
policy had been obtained by means of false and fraudulent
statements in the decedent's application which
Page 293 U. S. 381
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.
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.
This section contemplates interlocutory orders or decrees which
constitute an exercise of equitable jurisdiction in granting or
refusing an injunction, as distinguished from a mere stay of
proceedings which a court of law, as
Page 293 U. S. 382
well as a court of equity, may grant in a cause pending before
it by virtue of its inherent power to control the progress of the
cause so as to maintain the orderly processes of justice. The power
to stay proceedings in another court appertains distinctively to
equity in the enforcement of equitable principles, and the grant or
refusal of such a stay by a court of equity of proceedings at law
is a grant or refusal of an injunction within the meaning of § 129,
as amended. And, in this aspect, it makes no difference that the
two cases, the suit in equity for an injunction and the action at
law in which proceedings are stayed, are both pending in the same
court, in view of the established distinction between
"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
165 F. 48, 50-51.
When the Congress enacted § 274b of the Judicial Code, providing
for equitable defenses in actions at law and the granting of
affirmative equitable relief, the procedure was simplified, but the
substance of the authorized intervention of equity was not altered.
The court was empowered to exercise a summary equitable
jurisdiction. Equitable defenses were permitted to be interposed in
actions at law "by answer, plea or replication without the
necessity of filing a bill on the equity side of the court."
] The defendant is
to have "the same rights" as if he had filed a bill seeking the
same relief. The equitable issue "is to be tried to the judge as a
chancellor." The same order of trial is preserved as under the
Page 293 U. S. 383
of separate courts. Liberty Oil Co. v. Condon Bank,
260 U. S. 235
260 U. S.
-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.
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.
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.
Page 293 U. S. 384
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.,
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.
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. [Footnote
] Here, on the death of the insured, an action at law was
brought on the policy, and the defendant had opportunity in that
action at law, and before the policy, by its terms, became
incontestable, to contest its liability, and accordingly filed its
affidavit of defense. That defense
Page 293 U. S. 385
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.
, 103 U. S. 782
Cable v. United States Life Ins. Co., 191 U.
, 191 U. S. 305
American Mills Co. v. American Surety Co., 260 U.
, 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
Respondent's petition for a hearing and determination in equity
in advance of the trial of the action at law should have been
denied. The decree of the Circuit Court of Appeals is reversed, and
the action is remanded to the
Page 293 U. S. 386
District Court, with direction to vacate its order for a hearing
in equity and to proceed with the trial of the action at law.
It is so ordered.
The text of § 274b (28 U.S.C. 398) is as follows:
"Equitable defenses and equitable relief in actions at
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,
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.,
68; Rose v. Mutual Life Ins. Co.,
19 F.2d 280, 282;
Brown v. Pacific Mutual Life Ins. Co.,
62 F.2d 711,