Opinion · Supreme Court of the United States

Schoenthal v. Irving Trust Co.

53 S. Ct. 50

Type
Opinion
Court
Supreme Court of the United States
Jurisdiction
Federal
Date
1932-11-07
Topic
general

holding that a suit by a trustee in bankruptcy to recover preferential payments on behalf of the estate should be tried before a jury | jury trial ordered in trustee’s suit to recover preference; traditional legal remedy of trover adequate | “Suits to recover preferences constitute no part of the proceedings in bankruptcy but concern controversies arising out of it.” | suits to recover preferences do not constitute proceedings in bankruptcy because there is an adequate remedy at law | “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.” | “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. That rule has always been followed in courts of equity.” | legal remedy of trover adequate; jury trial permitted

Citator

Cited by
64 opinions
SCHOENTHALv. IRVING TRUST CO.,287 U.S. 92(1932)
53 S.Ct. 50
SCHOENTHAL ET AL.v. IRVING TRUST CO., TRUSTEE IN BANKRUPTCY.
CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SECOND CIRCUIT.
No. 14.
Argued October 18, 1932.
Decided November 7, 1932.
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. 94. 2. The question whether a case should be tried at law or in equity depends upon the facts stated in the bill. P. 95.Page 933. A suit by a trustee in bankruptcy to recover preferential payments of ascertained and definite amounts and in which the complaint avers 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,heldnot to have waived their right to such transfer. Pp. 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. Leo Guzik, with whomMr. Horace Londonwas on the brief, for petitioners.Mr. George C. Levinfor respondent.
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. § 96b, 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 daysPage 94later, 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 YorkGuaranty Co. v.Memphis Water Co.,107 U.S. 205,214.Matthewsv.Rodgers,284 U.S. 521,525. 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.Ex parteYerger, 8 Wall. 85, 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.1Suits to recover preferences constitute noPage 95part of the proceedings in bankruptcy but concern controversies arising out of it.Taylorv.Voss,271 U.S. 176,182. They may be brought in the state courts as well as in the bankruptcy courts.Collettv.Adams,249 U.S. 545,549. 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's Executorsv.Grundy, 3 Pet. 210, 215.Buzardv.Houston,119 U.S. 347,352.UnitedStatesv.Bitter Root Co.,200 U.S. 451,472. 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 as efficient to the ends of justice and its prompt administration, as the remedy in equity."Boyce's Executorsv.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.2And upon the very question here presented the weight of judicial opinion in the lower federal courts3and in the state courts4is that suits such as this cannot be sustained in equity.Page 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.Reynesv.Dumont,130 U.S. 354,395.AmericanMills Co. v.American Surety Co.,260 U.S. 360,363. 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 bePage 97tried 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.Parkersonv.Borst, 251 F. 242, 245. Plaintiff's claim that defendants waived their right under the rule is without merit.Reversed.
  1. Page 94Meggottv.Mills, 1 Ld. Raym. 286.Atkinv.Barwick, 1 Stra. 165.Aldersonv.Temple, Burr. 2235.Harmanv.Fishar, Cowp. 117.Rustv.Cooper, Cowp. 629.Thompsonv.Freeman, 1 D. E. 155.Barnesv.Freeland, 6 D. E. 80.Smithv.Payne, 6 D. E. 152.Nixonv.Jenkins, 2 H. Bl. 135.Marksv.Feldman, L.R. 5 Q.B. 275, 280-281. Cf.Exparte Scudamore, 3 Ves. 85, 87.Farrowv.Mayes, 18 Q.B. 516. ↩
  2. Page 95Hippv.Babin, 19 How. 271, 279.Parkerv.WinnipiseogeeLake Co., 2 Black 545, 550et seq. Kennedyv.Gibson, 8 Wall. 498, 505.Insurance Co. v.Bailey, 13 Wall. 616, 620-621.Grand Chutev.Winegar, 15 Wall. 373, 376.Lewisv.Cocks, 23 Wall. 466, 469.New York Guaranty Co. v.Memphis Water Co.,107 U.S. 205,214.Buzardv.Houston,119 U.S. 347,352-353.Whiteheadv.Shattuck,138 U.S. 146,150-151.United Statesv.Bitter Root Co.,200 U.S. 451,472. ↩
  3. Page 95Warmathv.O'Daniel(C.C.A.-6, 1908) 159 F. 87, 90.Sesslerv.Nemcof(E.D. Pa., 1910) 183 F. 656.Grantv.National BankPage 96of Auburn(N.D.N.Y., 1912) 197 F. 581, 590.First State Bankv.Spencer(C.C.A.-8, 1915) 219 F. 503.Simpsonv.WesternHardware Metal Co. (W.D. Wash., 1915) 227 F. 304, 313.Edwards Co. v.La Dow(C.C.A.-6, 1916) 230 F. 378, 381.Turnerv.Schaeffer(C.C.A.-6, 1918) 249 F. 654.Rosenthalv.Heller(M.D. Pa., 1920) 266 F. 563.Morrisv.Neumann(C.C.A.-8, 1923) 293 F. 974, 978.Adamsv.Jones(C.C.A.-5, 1926)11 F.2d 759, certiorari denied,271 U.S. 685.Lewinsonv.Hobart Trust Co. (N.J., 1931)49 F.2d 356.Gelinasv.Buffum(C.C.A.-9, 1931)52 F.2d 598.

    Contra:Pondv.New York National Exch. Bank(S.D.N.Y., 1903) 124 F. 992.Offv.Hakes(C.C.A.-7, 1905) 142 F. 364, 366.In re Plant(S.D. Ga., 1906) 148 F. 37.Parkerv.Black(C.C.A.-2, 1907) 151 F. 18.Parkerv.Sherman(C.C.A.-2, 1914) 212 F. 917, 918.Reedv.Guaranty SecurityCorp. (Mass., 1925) 291 F. 580. ↩
  4. Page 96McCormickv.Page(1901)96 Ill. App. 447.Detroit TrustCo. v.Old National Bank(1908)155 Mich. 61,64;118 N.W. 729.Boonville National Bankv.Blakey(1906)166 Ind. 427,442;76 N.E. 529.Ironsv.Bias(1920)85 W. Va. 493;102 S.E. 126.People's Bankv.McAleer(1920)204 Ala. 101,103;85 So. 413. ↩