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ENELOW v. NEW YORK LIFE INSURANCE CO.

decided: January 7, 1935.

ENELOW
v.
NEW YORK LIFE INSURANCE CO.



CERTIORARI TO THE CIRCUIT OF APPEALS FOR THE THIRD CIRCUIT.

Hughes, Van Devanter, McReynolds, Brandeis, Sutherland, Butler, Stone, Roberts, Cardozo

Author: Hughes

[ 293 U.S. Page 380]

 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

[ 293 U.S. Page 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.

First. 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 (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

[ 293 U.S. Page 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. 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 Ins. Co., 165 Fed. 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."*fn1 The defendant is to have "the same rights" as if he had filed a bill ...


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