1. The right of a plaintiff in equity to dismiss his bill when
the defendant cannot have affirmative relief on the pleadings and
can suffer no prejudice save for the vexation and expense of a
second suit is subject to modification by rule of court. P.
297 U. S.
2. Under a rule in the Southern District of New York, the
bankruptcy court may refuse to permit the withdrawal of a
creditor's claim after issue joined upon it. P. 297 U. S.
3. Palmer Clay Products Co. v. Brown, Trustee, ante,
297 U. S. 227
followed on a construction of § 60(a), (b), Bankruptcy Act,
concerning preferences. P.
297 U. S. 232
76 F.2d 935 affirmed.
Certiorari, 296 U.S. 565, to review the affirmance of an order
denying a claim in bankruptcy.
MR. JUSTICE BRANDEIS delivered the opinion of the Court.
J. R. Palmenberg Sons, Inc., was adjudged bankrupt in the
Federal Court for Southern New York in August, 1933. In September,
Bronx Brass Foundry, Inc., filed its proof of claim. In January,
1934, the Irving Trust Company, trustee in bankruptcy, moved to
expunge the claim on the ground that the creditor had received,
within the four months preceding the bankruptcy, payments on
Page 297 U. S. 231
aggregating $1,000 which were unlawful preferences. The creditor
denied the allegations of preference.
On the issue thus raised, several hearings were had before the
referee, and the evidence introduced clearly indicated that the
payments would, upon bankruptcy, effect a preference over other
creditors of the same class, and that the claimant had received
them having reasonable cause to believe the debtor insolvent. But
it left uncertain whether the amount received was more than its
share would have been if the then existing assets
had been ratably distributed among all the then creditors. Before
the hearing closed, and in view of an adverse ruling on the
admission of evidence, the creditor filed a withdrawal of its claim
and left the hearing.
The trustee objected to allowance of the withdrawal, and
introduced further evidence, insisting that it was entitled to an
adjudication of the question whether the payments made were
unlawful preferences. The referee, at the close of the hearing,
ordered that the claim be expunged unless the creditor within 20
days repaid the preference to the trustee, with interest from the
date of service of the motion to expunge. He said:
"When a creditor files a claim against the bankrupt estate, he
elects a forum which may hear and determine whether a preference to
him was made. Although judgment of recovery may not be granted, the
finding thereon, subject to review, is conclusive as between the
parties. It is not intended that a party shall have two trials of
the same issue or be permitted to present the same issue to
different tribunals for determination. When issue is joined upon
the question whether a voidable preference has been received, the
creditor may not withdraw, of his own motion, and thereby avoid
such determination as the proof warrants."
The District Court approved the order of the referee. Its
judgment was affirmed by the Circuit Court of Appeals,
Page 297 U. S. 232
which held that the creditor had received a preference, although
the proof did not show that, at the times of the payments, the
assets of the debtor were insufficient to pay proportional amounts
to all the other creditors, 76 F.2d 935. We granted certiorari
because the ruling on the right of the creditor to withdraw its
claim appeared to conflict with Scholl Mfg. Co. v.
51 F.2d 971, decided by the Circuit Court of Appeals
for the Eighth Circuit, and because the ruling on the question of
preference conflicted with W. S. Peck & Co. v.
231 F. 893, also decided by that court.
The referee was justified in refusing to permit
the creditor to withdraw its claim. The Circuit Court of Appeals
recognized that, ordinarily, a plaintiff in equity has, as stated
in Ex parte Skinner & Eddy Corp., 265 U. S.
, 265 U. S. 93
the absolute right to dismiss his bill. Its approval of the
referee's refusal to permit the creditor to withdraw rested on the
ground that the District Court had adopted a rule which authorized
the court to refuse, after issue joined,
"to permit the plaintiff to discontinue, even though the
defendant cannot have affirmative relief under the pleadings and
though his only prejudice be the vexation and expense of a possible
second suit upon the same cause of action,"
that this modification of the right of voluntary discontinuance
was within the judicial power, since it dealt with procedure, that
the rule had been approved by the Circuit Court of Appeals, that it
was applicable also to bankruptcy proceedings, and that it had been
properly applied below. We agree with the reasoning and the
The ruling of the referee on the question of
preference was correct for the reasons stated in Palmer Clay
Products Co. v. Brown, ante,
p. 297 U. S. 227