Kneberg v. HL Green Co.

• Decision Date: 23 March 1937
• Docket Number: No. 5997.,5997.
• Citation: 89 F.2d 100
• Parties: KNEBERG v. H. L. GREEN CO., Inc.
• Court: U.S. Court of Appeals — Seventh Circuit

89 F.2d 100 (1937)

KNEBERG v. H. L. GREEN CO., Inc.

No. 5997.

Circuit Court of Appeals, Seventh Circuit.

March 23, 1937.

Geo. W. Wood and Dan H. McNeal, both of Moline, Ill., and Edward W. Schoede, of Rock Island, Ill., for appellant.

Cutting, Moore & Sidley, of Chicago, Ill., and Clarence W. Heyl, of Peoria, Ill. (Donald F. McPherson and Howard Neitzert, both of Chicago, Ill., of counsel), for appellee.

Before EVANS, Circuit Judge, and LINDLEY and BRIGGLE, District Judges.

LINDLEY, District Judge.

Appellant contracted that upon payment of an aggregate sum of some $160,000, she would convey, and furnish merchantable abstract of title to, certain real estate to appellee's assignor, who in turn promised to make the payments provided. One covenant was that the agreement should be binding upon the assigns of the respective parties. The purchaser assigned the contract to the Metropolitan Investment Company which, later, was adjudicated a bankrupt. Still later its trustee in bankruptcy, by authority of the court, assigned the agreement, all rights growing out of same and all sums recoverable on account thereof to appellee. Haber, the original vendee, had paid part of the purchase price, $15,000, and appellee filed this suit alleging that appellant had failed to comply with the contract, in that she had failed to furnish merchantable abstract of title; that, thereby, the contract had been discharged and terminated; and seeking to recover the partial payment made.

Appellant answered, denying the allegations of the complaint, and filed a crosscomplaint of equitable character, alleging that, by the acceptance of the contract providing that the covenants and agreements thereof should extend to and be binding upon the assigns of the parties, appellee had assumed and was bound by the obligations of the original purchaser; that by acceptance of the contract, the attempt to terminate same and commencement of the suit, appellee had by implication assumed the original purchaser's obligations; that appellant had not defaulted but was ready, willing, and able to perform. She prayed that the court might enter a decree of specific performance, awarding to her the balance of the purchase price. The cross-complaint contained, as an alternative prayer for relief, the request that if for any reason specific performance might be denied, appellee might be decreed to cancel and surrender the contract and release it of record. There was also a prayer for general relief. The court sustained appellee's motion to strike and dismiss the counterclaim. From this order the present appeal was taken.

A motion to dismiss the appeal has been filed. By inadvertence the record of this court indicates that the motion was overruled, whereas the order should have been that action was reserved until hearing upon the merits. Irrespective of our formal order, therefore, of our own motion, we have examined the question of the propriety of the appeal, for if we are without jurisdiction, it is our duty to observe that fact.

Appellee contends that an order dismissing a counterclaim in equity is not appealable; that it is not final in character and not the kind of interlocutory order reviewable by appeal. 28 U.S.C.A. §§ 225-227; 45 U.S.C.A. § 159.

An order dismissing a counterclaim is not a final order within the meaning of section 128, Judicial Code, 28 U.S.C.A. § 225. Winters v. Ethell, 132 U.S. 207, 10 S.Ct. 56, 33 L.Ed. 339; Ayres v. Carver, 17 How. (58 U.S.) 591, 15 L.Ed. 179. But appellant insists that the order is appealable under section 129 of the Judicial Code, title 28 U.S.C.A. § 227 in part as follows: "Where, upon a hearing in a district court, * * * an injunction is granted, continued, modified, refused, or dissolved by an interlocutory order or decree, or an application to dissolve or modify an injunction is refused, * * * an appeal may be taken from such interlocutory order or decree to the circuit court of appeals."

Appellant's position in this respect is founded upon her theory of her remedies under section 274b of the Judicial Code, title 28 U.S.C.A. § 398, which provides that: "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 or 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. * * * 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."

It is insisted that when equitable relief is prayed as here, in an answer or counterclaim, in a suit at law, in pursuance of the statute, the dismissal of the same is, in effect, the denial of a prayer to enjoin the suit at law and is, therefore, appealable.

In Liberty Oil Co. v. Condon Nat. Bank, 260 U.S. 235, 43 S.Ct. 118, 121, 67 L.Ed. 232, the vendee in an executory contract for sale of real estate sued the bank to recover the purchase price. The bank answered alleging that it held the money but that the fund was claimed by both vendee and vendor. The vendor filed a cross-petition denying default and asking specific performance. A decree was entered in favor of defendant, and plaintiff appealed. The Supreme Court reversed an order of the Circuit Court of Appeals (271 F. 928) dismissing the appeal on the ground that it was an action at law and could not be reviewed by appeal, and held that: "Where an equitable defense is interposed to a suit at law, the equitable issue raised should first be disposed of as in a court of equity, and then, if an issue at law remains, it is triable to a jury."

The later case, Enelow v. New York Life Ins. Co., 293 U.S. 379, 55 S.Ct. 310, 311, 79 L.Ed. 440, was an action at law upon a life insurance policy. The defendant included an affirmative equitable defense and asked the court to hear this cause of action in equity prior to the determination of the suit at law. This the District Court did. The decree which followed was affirmed by the Circuit Court of Appeals. 70 F.(2d) 728. The Supreme Court granted certiorari. Concerning the propriety of the appeal the court said: "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 section 129 of the Judicial Code, as amended (28 U.S.C. § 227 28 U.S.C.A. § 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 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 section 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. * * * When the Congress enacted section 274b of the Judicial Code (28 U.S.C.A. § 398), 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 system of separate courts. Liberty Oil Co. v. Condon Bank, 260 U.S. 235, 242, 243, 43 S.Ct. 118, 67 L.Ed. 232. * * * It is thus apparent that when an order or decree is made under section 274b (28 U.S.C.A. § 398), 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 section 129, as amended (28 U.S.C.A. § 227)."

The Circuit Court of Appeals for the Eighth Circuit, in Pacific Mutual Life Ins. Co. v. Andrews, 73 F.(2d) 839, was dealing with a similar situation, where, to an action at law to recover on an insurance policy, defendant filed a counterclaim asking that the policy be canceled. The District Court sustained the motion to dismiss the amended counterclaim; the defendant appealed. The Court of Appeals concluded that the order was not appealable and reversed the judgment. A motion for rehearing was made and granted because of the decision of the Supreme Court in the last-mentioned case, the court saying (C.C.A.) 77 F.(2d) 692, 693: "Pending a motion in this court for a rehearing, the Supreme Court of the United States handed down an opinion in the case of Enelow v. New York Life Insurance Co., ...