173 F.2d 890 (2nd Cir. 1949), 21331, American Mach. & Metals v. De Bothezat Impeller Co.

Docket Nº:21331.
Citation:173 F.2d 890, 81 U.S.P.Q. 504
Case Date:April 08, 1949
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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173 F.2d 890 (2nd Cir. 1949)

81 U.S.P.Q. 504




No. 21331.

United States Court of Appeals, Second Circuit.

April 8, 1949

Where plaintiff brought action for declaratory judgment determining right to terminate contract with defendant, and defendant filed counterclaim, alleging plaintiff had wrongfully violated contract obligation, and pleaded that, if plaintiff otherwise had right to terminate, court should not permit right to be exercised because of plaintiff's inequitable conduct, and pre-trial order finally rejected defendant's claim for equitable relief, motion to dismiss defendant's appeal on ground that order was not appealable was granted.

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Alphonse Kenison, of New York City (Leonard P. Moore, of New York City, of counsel), for plaintiff-appellee.

Perkins, Malone & Washburn, of New York City (Watson Washburn, of New York City, of counsel), for defendant-appellant.

Before CHASE, CLARK, and FRANK, Circuit Judges.


Motion (for a stay) denied. Motion (to dismiss appeal) granted.

FRANK, Circuit Judge (dissenting).

This appeal relates to a suit by plaintiff for a declaratory judgment to determine whether it has the right to terminate a contract with the defendant. See our former decision, 2 Cir., 166 F.2d 535.

Defendant in its pleadings (1) set up plaintiff's lack of right to terminate in any circumstances, and (2) pleaded that, if plaintiff would otherwise have had such a right, the court should not permit that right to be exercised because of plaintiff's inequitable conduct, 1 and prayed appropriate relief; 2 (3) defendant also asked a money judgment because of such conduct. By pre-trial order, the judge ordered (a) that the trial of defendant's claim for damages should be postponed until after the trial on plaintiff's complaint; and (b) that defendant's claim for equitable relief should, once and for all, be rejected, i.e., should never be tried either in connection with the trial of plaintiff's complaint or otherwise. From that part of the order described in (b)- i.e., that part rejecting defendant's claim for equitable relief- defendant has appealed. Plaintiff has moved to dismiss the appeal (without consideration of the merits) 3 on the ground that the order is not appealable. I think that motion should be denied.

Before the enactment of the statute of 1915, 38 Stat. 956, permitting the assertion of equitable defenses in actions at law, defendant's claim for equitable relief would have taken the form of a suit in equity to enjoin the maintenance of plaintiff's action. In Enelow v. New York Life Insurance Co., 293 U.S. 379, 55 S.Ct. 310, 79 L.Ed. 440, the Court held that, notwithstanding

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that, under the 1915 statute, such relief could be sought, without a separate suit, by law of an equitable defense in an action at law, nevertheless an order granting or denying such relief was one which granted or refused an injunction and which, therefore, whether or not interlocutory, was appealable under the statute, now 28 U.S.C.A. § 1292, authorizing appeals from that particular kind of order. A similar result was reached in Shanferoke Coal & Supply Corporation v. Westchester Service Company, 293 U.S. 449, 55 S.Ct. 313, 79 L.Ed. 583.

There was some belief that the promulgation in 1938 of the Rules of Civil Procedure, 28 U.S.C.A., eliminated the doctrine of the Enelow case. This court so held in Beaunit Mills, Inc., v. Eday Fabrics Sales Corp., 2 Cir., 124 F.2d 563. A few months later, however, the Supreme Court, in Ettelson v. Metropolitan Life Ins. Co., 317 U.S. 188, 63 S.Ct. 163, 87 L.Ed. 176, ruled to the contrary, holding that the Enelow case still has full vitality.

Although I concurred in the decision of the Beaunit Mills case, I think our court should no longer adhere to it, but should ungrudgingly follow the Ettelson case. For that reason, it seems to me that we ought not to dismiss this appeal, as the order rejecting defendant's claim for equitable relief seems to me to come within the Ettelson-Enelow-Shanferoke doctrine.

To be sure, in Ettelson, Enelow and Shanferoke, there were motions to stay a hearing of the 'legal' issues until the 'equitable' issues were tried and determined, and no such motion was made by defendant here. But that is a distinction without a difference. Cf. General Electric Co. v. Marvel Rare Metals Co., 287 U.S. 430, 53 S.Ct. 202, 77 L.Ed. 408, which was cited with...

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