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METROPOLITAN LIFE INS. CO. v. SCHNEIDER

July 19, 1940

METROPOLITAN LIFE INS. CO.
v.
SCHNEIDER et al.



The opinion of the court was delivered by: FORMAN

On June 16, 1922 and December 24, 1926 plaintiff issued policies of insurance on the life of the defendant Simon Schneider in the sum of $5,000 and $20,000 respectively, both of which designated the co-defendant, Rae H. Schneider, wife of the insured, beneficiary. By the terms of a supplemental agreement attached to and a part of each policy, the plaintiff contracted to pay the insured certain fixed money benefits in the event the insured became totally and permanently disabled before he attained the age of sixty years. In the application for each policy the insured stated his date of birth to be December 17, 1880.

On March 7, 1940 the insured commenced an action at law in the District Court of the County of Monmouth, State of New Jersey, to enforce disability payments under the policy of $5,000 upon the plaintiff's refusal to respond under the terms of the policy upon notice that the insured on or about July 17, 1939, and prior to attaining his sixtieth year, had become totally and permanently disabled. No action has been brought for disability payments under the policy of $20,000.

 On May 29, 1940 plaintiff began an action in this court to reform the insurance policy to state the true age of the insured. The ground of reformation is either mutual mistake, or mistake on the part of the plaintiff coupled with fraud on the part of the defendant, Simon Schneider. Affidavits annexed to the complaint show that in an application for citizenship, the insured made affidavit to the naturalization authorities that he was born on March 17, 1875. If this date be the correct date of birth, the insured would have been more than sixty years of age at the time of the alleged total and permanent disability.

 In addition, plaintiff asks this court to restrain the proceedings in the matter presently pending before the Monmouth County District Court.

 An order was issued by this court returnable June 3, 1940 directing the insured, Simon Schneider, to show cause why a preliminary injunction should not issue to restrain the pending action in the Monmouth County District Court, and the matter comes before us on the argument on the order to show cause.

 The problem involves a construction of Section 265 of the Judicial Code, 28 U.S.C.A. ยง 379, providing as follows: "The writ of injunction shall not be granted by any court of the United States to stay proceedings in any court of a State, except in cases where such injunction may be authorized by any law relating to proceedings in bankruptcy."

 Only a superficial examination of cases dealing with this statute is necessary for the conclusion that the above prohibition against injunctions with the one reservation is a flexible rule of law. Hence, our problem is whether or not this statute is applicable to the case at bar.

 Defendants' reliance upon the statute is based upon the fact that the state court first acquired jurisdiction of the controversy, and upon the contention that the allegations set forth in the complaint herein are equally available as a defense to the legal action.

 Plaintiff in rebuttal argues that it is immaterial that the state court first acquired jurisdiction of the controversy, and the fact that it has a defense to the action at law is not the equivalent to nor does it preclude its relief in equity.

 In the case of Smith v. Apple, 264 U.S. 274, 44 S. Ct. 311, 68 L. Ed. 678, the Supreme Court with reference to this statute stated, "* * * It is not a jurisdictional statute. It neither confers jurisdiction upon the District Courts nor takes away the jurisdiction otherwise specifically conferred upon them by the Federal statutes. It merely limits their general equity powers in respect to the granting of a particular form of equitable relief; that is, it prevents them from granting relief by way of injunction in the cases included within its inhibitions. In short, it goes merely to the question of equity in the particular bill. See Simon v. Southern Railway, 236 U.S. 115, 116, 122-124, 35 S. Ct. 255, 59 L. Ed. 492; Wells Fargo & Co. v. Taylor, 254 U.S. 175, 185, 41 S. Ct. 93, 65 L. Ed. 205; Public Service Co. v. Corboy, supra [250 U.S. 153], page 160 (39 S. Ct. 440) [63 L. Ed. 905]; National Surety Co. v. State Bank [8 Cir.] 120 F. 593, 604, 56 C.C.A. 657, 61 L.R.A. 394. This Section, as settled by repeated decisions of this court, does not prohibit in all cases injunctions staying proceedings in a State court. Such injunctions may be granted, consistently with its provisions, in several classes of cases. See Wells Fargo & Co. v. Taylor, supra, at page 183 [of 254 U.S.] (41 S. Ct. 93) [65 L. Ed. 205], in which many decisions on this question are collated and classified." 264 U.S. 274, 279, 44 S. Ct. 311, 313, 68 L. Ed. 678.

 In the case of Wells Fargo & Co. v. Taylor, 254 U.S. 175, 183, 41 S. Ct. 93, 96, 65 L. Ed. 205, the Court in commenting on the statute stated, "* * * As with many other statutory provisions, this one is designed to be in accord with, and not antagonistic to, our dual system of courts. In recognition of this it has come to be settled by repeated decisions and in actual practice that, where the elements of federal and equity jurisdiction are present, the provision does not prevent the federal courts from enjoining the institution in the state courts of proceedings to enforce local statutes which are repugnant to the Constitution of the United States ( Ex parte Young, 209 U.S. 123, 28 S. Ct. 441, 52 L. Ed. 714, 13 L.R.A., N.S., 932, 14 Ann.Cas. 764; Truax v. Raich, 239 U.S. 33, 36 S. Ct. 7, 60 L. Ed. 131, L.R.A.1916D, 545, Ann.Cas. 1917B, 283; Missouri v. Chicago, Burlington & Quincy R.R. Co., 241 U.S. 533, 538, 543, 36 S. Ct. 715, 60 L. Ed. 1148), or prevent them from maintaining and protecting their own jurisdiction, properly acquired and still subsisting, by enjoining attempts to frustrate, defeat or impair it through proceedings in the state courts ( French v. Hay, 22 Wall. 250, note, 22 L. Ed. 857; Julian v. Central Trust Co., 193 U.S. 93, 112, 24 S. Ct. 399, 48 L. Ed. 629; Chesapeake & Ohio Ry. Co. v. McCabe, 213 U.S. 207, 219, 29 S. Ct. 430, 53 L. Ed. 765; Looney v. Eastern Texas R.R. Co., 247 U.S. 214, 221, 38 S. Ct. 460, 62 L. Ed. 1084) * * *."

 The defendants do not contend that the elements of federal jurisdiction are lacking herein. They oppose equitable jurisdiction, however, on the ground that plaintiff may assert its equitable claims defensively in an action at law. In support of this contention defendants cite cases showing concurrent jurisdiction in the courts of law and equity over fraud. Enelow v. New York Life Ins. Co., 293 U.S. 379, 55 S. Ct. 310, 79 L. Ed. 440; Victor Talking Machine Co. v. Caubre, 115 N.J.Eq. 174, 169 A. 669, affirmed, 116 N.J.Eq. 592, 174 A. 525; Scerbak et al. v. Lane, 102 N.J.Eq. 497, 141 A. 582; Commercial Trust, etc., Bank v. Hamilton, 99 ...


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