Brief for the Respondents in Opposition — Engebretson v. West

Point III

INDEX

Pages

QuEsTIONS PRESENTED 2,3

STATEMENT oF Facts 3-12

Potnts AND AUTHORITIES:

Point I 12

A judgment rendered by a State Court of

competent jurisdiction is binding and conclusive

upon the parties when made the basis of a claim

or defense in any court of the United States, and

cannot be rebuked or reexamined as to the mer-

its of the original controversy. It will be con-

clusive as to all points and questions actually put

in issue and decided in the action in the State

Court, whether federal, general or local.

Point II

Proceedings in a State Court, which resulted

in appointment of trustees to take over the prop-

erty of corporation for liquidation and distribu-

tion prior to four months’ period preceding fil-

ing of involuntary bankruptcy petition, withdrew

property of corporation from jurisdiction of

bankruptcy court and subsequent bankruptcy

proceedings, though State Court trustees had not

come into possession of property.

Judgments entered in Brictson Manufactur-

ing Company v. Close, et al, 25 Fed. (2d) 794

Marceli vs. Engebretson, 74 Fed. (2d) 93, 76

Fed. (2d) 876, and Engebretson v. Marcell, et al,

84 Fed. (2d) 315, are res judicata between the

parties thereto and their privies and the Trus-

tee in Bankruptcy is estopped to assert a claim

for damages against the Surety of the State

Trustees based upon wrongful conversion of the

property taken over by the State Trustees in

their official. capacity.

12-13

13-14

CARRE OL EE BO

25, phen oT

or A lipee

ii

INDEX (Continued)

Pages

ARGUMENT 14-17

CoNCLUSION 18

TABLE OF CASES CITED

Pages

Brictson v. Close, 280 Fed. 297 3

Brictson Manufacturing Company v. Close, et al,

25 F. (2d) 794 4, 5, 6, 12, 13, 14, 15

City of Watertown vs. Eastern Dakota Electric Co.,

296 Fed. 832, 834, 835 14

Columbia Fire Ins. Co. of New Jersey vs. Mart

Waterman Co., Inc., 11 Fed. (2d) 216, 219............... 13

34 Corpus Juris, 1158, Section 1640 12

Cromwell vs. Sac County, 94 U. 8S. 351 14

Culhane, et al v. Anderson, et al, 17 Fed. (2d) 559..... 6

Engebretson v. Marcell, et al, 84 F (2d) 315... 2, 9, 13, 17

Engebretson, Trustee, Petitioner v. Marcell, et al, 56

Supreme Court Rep. 89 8, 16

Engebretson, Trustee, Petitioner v. Marcell, et al, 299

U. S. 566 9,17

Engebretson, Trustee, Petitioner v. Marcell, et al,

299 U. S. 621 9

Frazier, et al v. Southern Loan and Trust Co., 99

Fed. 707 13

Hartford Life Insurance Co. v. Ibs, 237 U. S. 662..... 13

Howe & Rogers Co. v. Crittenden, et al, 76 Fed. (2d)

749 13

Lion Bonding and Surety Company v. Karatz, 262

U. S. 77, 43 S. Ct. 480 12, 13

ee |

i

“SS Go i he WH

Yo

ili

TABLE OF CASES CITED (Continued)

Pages

Miller v. Belvy Oil Co., 248 Fed. 83 14

Mitchell v. First National Bank of Chicago, 180 U.

S. 471, 481, 21 S. Ct. 418, 422 (45 L. Ed. 627)........

12, 14, 15, 18

National Surety Corporation of New York v. Ellison,

88 Fed. (2d) 399, 407 13

North American Union v. Hart, 250 Fed. 390 sn 14

Palmer v. State of Texas, et al, 212 U.S. 118, 129

29 S. Ct. 230, 233 13

Pickens v. Roy, 187 U.S. 177, 23 S. Ot. 18 cccoocemmeeeccoee 13

Rader v. Star Mill, etc., Co., 258 Fed. 599 ccc 14

Remington on Bankruptcy, Third Edition, Vol. 5,

Section 2042 13

Scholtz, Governor, for Use of Barnett National

Bank, v. Hartford Accident and Indemnity Co.,

88 Fed. (2) 184 13

State ex rel. Spillman v. Brictson Manufacturing

Company, 114 Neb. 341; 207 N. W. 664... 2

State v. Brictson Manufacturing Company, 205 N. W.

246 and 207 N. W. 664 4)

STATUTES CITED

Pages

Compiled Statutes of Nebraska, 1922, Sec. 9298 ........ 5

Compiled Statutes of Nebraska, 1929, Chapter 20,

Article 21, Sub-division (h) Sections 20-21,112 to

20-21,133, inclusive ...... 4

In the

Supreme Court of the United States

OCTOBER TERM, 1939

—

eiiictseciiuiadane

MARTIN ENGEBRETSON, TRUSTEE OF THE ES-

TATE OF THE BRICTSON MANUFACTURING

COMPANY, A CORPORATION, BANKRUPT,

Petitioner,

vs.

RALPH M. WEST, AND THE AETNA CASUALTY

AND SURETY COMPANY, A CORPORATION,

Respondents.

ERR Aaa

MARTIN ENGEBRETSON, TRUSTEE OF THE ES-

TATE OF THE BRICTSON MANUFACTURING

COMPANY, A CORPORATION, BANKRUPT,

Petitioner,

vs.

JOHN T. MARCELL, HARRY S. BYRNE, AND FI-

DELITY AND DEPOSIT COMPANY OF MARY-

LAND, A CORPORATION,

Respondents.

BRIEF OF RESPONDENTS FIDELITY AND DEPOSIT

COMPANY OF MARYLAND, A CORPORATION,

AND THE AETNA CASUALTY AND SURETY

COMPANY, A CORPORATION, IN OPPOSITION TO

PETITION FOR A WRIT OF CERTIORARI.

—

May iT PLEASE THE CouRT:

The petition for a writ of certiorari seeks to review

judgments of the Cireuit Court of Appeals for the Eighth

Cireuit, affirming decisions of the United States District

Court, for the District of South Dakota, Southern Division.

alta

ec |

Ee ee ee eee eee ne cn er an

2

The two cases presented involve the same state of facts,

and in the interest of brevity, respondents in the two

actions have joined in one brief in opposition to the

petition for the writ.

The two actions were consolidated for trial before the

trial court. Separate appeals were perfected. The rec-

ord in the first case numbered 11,590 in the Cireuit Court

of Appeals contains the evidence. Reference in this brief

to the record in the first case will be referred to as “R”

and to the record in the second case as ‘‘R - hae

The questions presented are:

(1) Whether the judgments of the Cireuit Court of

Appeals entered in the case of Marcell, et al, vs. Enge-

bretson, 74 F. (2d) 93 and in the case of Engebretson vs.

Marcell, et al, 84 F. (2d) 315, or either of them, con-

stituted res judicata of the issues presented in the case at

bar.

(2) Whether the judgment of the Supreme Court

of the State of Nebraska in the quo warranto action en-

titled State ex rel Spillman vs. Brictson Manufacturing

Company, 114 Neb. 341; 207 N. W. 664, was superseded by

the National Bankruptey Act under bankruptcy proceed-

ings subsequently instituted agaist the Brictson Manu-

facturing Compapny.

(3) Whether Ralph M. West, appointed by the

United States District Court for the District of Ne-

braska, Omaha Division, was justified in turning over the

assets of the Brictson Manufacturing Company, then in

his possession as Receiver, upon order of that court to

the Trustees appointed by the Nebraska Supreme Court

after supervening bankruptcy in the United States Dis-

3

trict Court for the District of South Dakota, Southern

Division.

(4) Whether the order of the State Court in the

quo warranto action refusing to direct the Nebraska Trus-

tees to deliver the assets of the Brictson Manufacturing

Company, then in their possession, to the Trustee in Bank-

ruptcy constituted res judicata of the issue of whether the

Nebraska Trustees breached their bond as Trustees by

taking possession of the assets of the Brictson Manufac-

turing Company after the company had been adjudicated

a bankrupt in the South Dakota Court.

—,'

Vv

STATEMENT OF FACTS

The proceedings, so far as here relevant, are brief-

ly summarized as follows:

August 2, 1921. Bill of complaint was filed in the United

States District Court, for the District of Nebraska,

Omaha Division, by stockholders, against the Brictson

Manufacturing Company, a South Dakota corporation,

then doing business in Nebraska, praying among other

things, for the appointment of a receiver (R. 95-103).

September 3, 1921. That Court appointed Ralph M. West

of Omaha, Nebraska, receiver, and under this appoint-

ment the receiver took possession of the property

and assets of the defendant company, including the

property involved in this proceeding (R. 24).

April 5, 1922. The United States Circuit Court of Ap-

peals for the Eighth Circuit, entered a judgment

reversing the order appointing the receiver (Brictson

vs. Close, 280 Fed. 297).

March 13, 1923. The Attorney General of the State of

Nebraska commenced an action in the District Court

4

of Douglas County, Nebraska, in the nature of a

quo warranto proceeding (R. 129-1438).

The corporation appeared in the action (R. 143).

February 16, 1924. After hearing, a decree was entered

in that Court, finding generally for the plaintiff and

against the defendant, ousting the corporation from

the State of Nebraska and appointing John F. Mo-

riarty, Charles E. Foster and John T. Marcell, trustees,

and directing the trustees so appointed to collect

the debts, property and assets of the corporation in

the State of Nebraska, to pay the liabilities of the

corporation and divide the surplus, if any, among

those lawfully entitled thereto (R. 154-158). The

quo warranto proceedings were instituted pursuant to

the provisions of Chapter 20, Article 21 Sub-division

(h), Sees. 20-21,112 to 20-21,133, inclusive, Compiled

Statutes of Nebraska, 1929.

November 24, 1925. The corporation filed a petition in

the original proceeding in the United States District

Court, for the District of Nebraska, Omaha Division

(Close vs. Brictson Mfg. Co.) for an order to show

cause, directed to the Attorney General of the State

of Nebraska and the trustees appointed by the Dis-

trict Court of Douglas County, requiring them to

show cause why the receiver (West) should not com-

ply with the mandate theretofore issued by the Cir-

cuit Court of Appeals and return the property then

in his hands to those from whom he had received

it (Brictson Mfg. Co. vs. Close, et al, 25 F. (2d) 794).

Ora S. Spillman, as Attorney General, of the State of

Nebraska and the Trustees to whom the order was

directed filed answers to the orders to show cause (R.

112-114).

5

March 25, 1926. The Supreme Court of the State of Ne-

braska, on hearing upon appeal prosecuted by the

corporation to that Court, issued its mandate to the

District Court of Douglas County, Nebraska, affirm-

ing the judgment of ouster of the corporation, modify-

ing the judgment of the lower court so as to require ie

the trustees to collect the debts due the corporation,

pay the liabilities of the corporation and when proper- .

ly ordered, to pay out the surplus, if any, to those i

lawfully entitled thereto, as provided by Section

9298, Compiled Statutes of Nebraska for 1922, and as 3

thus modified the judgment of the District Court of ‘

Douglas County, Nebraska, to stand affirmed (R. 159-

160) (Opinions reported in State vs. Brictson Man-

ufacturing Co., 205 N. W. 246 and 207 N. W. 664).

November 3, 1926. After hearing upon the issues joined,

Honorable Thomas C. Munger, Judge of the United

States District Court for the District of Nebraska,

entered a decree ordering and directing the receiver

to turn the property involved in this proceeding

over to the trustees appointed by the Nebraska Court,

said order to be held in abeyance, however, with

respect to an aggregate sum of $50,000.00 pending

a final determination of the rights of one Frank L.

Weaver, William N. Giller and M. E. Culhane, then

pending in the United States Cireuit Court of Appeals,

on appeal from an order of the court made June 30,

1925, and further providing that in event an appeal

should be taken by any of the parties that the receiver

make none of the payments nor surrender any of

the property withont a further order of the Court

(Brictson Mfe. Co. vs. Close, et al, 25 F. (2d) 794).

6

January 31, 1927. The appeal to determine the rights .

of Frank L. Weaver, William N. Giller and M. K. Cul-

hane, which was an action to impress a lien upon the

funds then in the hands of the receiver, for services

rendered, was determined adversely to the appellants

(Culhane, et al, vs. Anderson, et al, 17 Fed. (2d) 559).

April 2, 1928. Upon an appeal perfected by the corpora-

tion from the decree of the United States District

Court, entered upon the 3rd day of November, 1926,

the United States Circuit Court of Appeals for the

Kighth Circuit, affirmed the decree directing the

receiver West to turn the property involved in

this proceeding over to the trustees appointed by the

Nebraska Court (Brictson Mfg. Co. vs. Close, et al,

25 Fed. (2d) 794).

June 24, 1929. Order was entered by Judge Munger in

that proceeding, directing the receiver, after making

certain specific payments, to deliver all of the re-

mainder of the money, funds, credits and property,

real, personal and mixed, to the State trustees (R. 2,

41-43).

August 3, 1929. Petition in bankruptey filed against the

Briectson Manufacturing Company in the District

Court of South Dakota, Southern Division, and on

August 21, 1929, the Brictson Manufacturing Com-

pany was adjudicated a bankrupt, the petitioner here-

in, Martin Engebretson, being appointed trustee in

bankruptey in said proceeding (alleged in complaint

R. 2,19; admitted by answer R. 2, 33).

September 9, 1929. No supersedeas having been filed, the

receiver did, on that date, comply with the order en-

tered by United States District Court for District

7

of Nebraska, entered June 24, 1929, and turned over

to the trustees appointed by the State Court, certain

property, being the property involved in this pro-

ceeding (R. 188).

January 30, 1933. Petitioner Kngebretson, as trustee

in bankruptcy, upon a petition filed by him in the bank-

ruptey proceeding pending in South Dakota, procured

an order to show cause, directed to the trustees ap-

pointed by the Nebraska Court, requiring them to

appear before that Court to show cause why it should

not be decreed that they had no right, title and in-

terest in and to the assets of the Brictson Manufac-

turing Company, or any part thereof, or why they

should not be ordered and directed to turn over to

the petitioner all assets that they might have received

after the filing of the petition in bankruptcy and

be restrained and enjoined from in any manner inter-

fering with the property of the bankrupt estate or

with the trustee in bankruptcy in the administration

of said estate.

The Nebraska trustees appeared specially, objected

to the jurisdiction of the court over their persons,

and asserted that, being adverse claimants, the court

of bankruptey was without power, in a summary pro-

ceeding, to determine the question of title or right

to possession of the property in question, without their

consent. The court of bankruptcy overruled the spe-

cial appearance and entered an order adjudging that

the trustee in bankruptcy was the owner and entitled

to the possession of the property, and authorizing

him to take all necessary and proper measures to se-

cure its possession. An appeal was perfected to the

Cirenit Court of Appeals for the Eighth Circuit,

: PIPPI TEL A ics oe

8

and that Court on November 22, 1934, filed its opin-

ion in the appellate proceedings, holding the court

below was without jurisdiction to adjudicate title to

the property in the hands of the trustees appointed

by the State Court, reversed the order, and remanded

the case with directions to grant a dismissal (Marcell

vs. Engebretson, 74 Fed. (2d) 93).

A rehearing was granted, the case reargued be-

fore the Cireuit Court of Appeals, and on April 15,

1935, the court filed its opinion adhering to its former

decision (Marcell vs. Engebretson, 76 Fed. (2d) 876).

The trustee in bankruptcy filed a petition for a writ

of certiorari in the Supreme Court of the United

States to review the opinion and judgment of the

Cirenit Court of Appeals. This petition was denied

by this Court on the 14th day of October, 1935 (Enge-

bretson, Trustee, Petitioner, Vs. Marcell, et al, 56

Supreme Court Rep. 89).

Thereafter, the trustee in bankruptey brought a

plenary action in the United States District Court for

the District of Nebraska in the nature of a suit in equity,

praying ror a decree requiring the Nebraska trustees to

account for and turn over to the trustee in bankruptcy

all of the property formerly belonging to the Brictson

Manufacturing Company which had come into their hands,

this being the property involved in the present suit. The

trustees filed a motion to dismiss on the ground that the

Federal Court was without jurisdiction over the subject

matter. The motion was sustained and an order entered

dismissing the complaint. The trustee prosecuted an ap-

peal to the Cireuit Court of Appeals for the Kighth Cir-

cuit, and on June 12, 1936, that Court filed its opinion

9

Pastas

Sr Ya,

Bele ti

affirming the order of the United States District Court

for the District of Nebraska, again holding that the Ne-

braska State Court in the quo warranto proceedings had

pe

acquired jurisdiction to administer the assets free from

interference from the other courts, including the court of s

bankruptey (Engebretson vs. Marcell, et al, 84 Fed. (2d) e

The trustee in bankruptcy filed a petition for writ

aDY, Fs

Stata

Go Oe

of certiorari in this Court to review the opinion and

judgment entered by the Cireuit Court of Appeals. The

petition was denied by this Court on the 12th day of Octo-

ber, 1936. (Engebretson, Trustee, Petitioner, vs. Marcell,

et al, 299 U. S. 566).

Petition for rehearing was denied November 9, 1936

(Engebretson, Trustee, Petitioner, vs. Marcell, et al, 299

U. S. 621).

On the 25th day of July, 1938, the trustee in bank-

ruptey filed an action in the Cireuit Court of the State of

South Dakota, for the Second Judicial District against

John T. Marcell, Harry S. Byrne and Fidelity & Deposit

Company of Maryland, a corporation, alleging that the

defendants Marcell and Byrne, as trustees appointed by

the Nebraska State Court, had wrongfully converted

property of the Brictson Manufacturing Company and

that the defendant Fidelity & Deposit Company of Mary-

land was liable to the plaintiff by virtue of a faithful per-

formance bond executed on behalf of the said Marcell and

Byrne as trustees appointed by the State Court of Nebras-

ka. The prayer of the petition was for a money judgment

against Marcell and Byrne in the sum of $78,398.88 and

for a judgment against Fidelity & Deposit Company of

Maryland as bondsman in the sum of $50,000.00, this

MEO SS ties Me EE AAT Wt NC ROS Be RT ye ie cern » 9 ttepaers> aries ot mutase ASS tO Es j

ET LNT NST ee SEER SS ie Ce re oe NS SRI igh SSE Rito She

RELA A GEN

10

being the face amount of the bond (R. 2, 17-22). A similar

action was filed against Ralph M. West and the Aetna

Casualty and Surety Company (R. 19-23).

No service having been made upon defendants Mar-

cell, Byrne or West within the jurisdiction of the South

Dakota Court, they filed special appearances, challenging

the jurisdiction of the Court over their person, and peti-

tions for removal to the United States District Court

for the District of South Dakota, Southern Division (R.

2, 9-11) (R. 2, 10-14).

The defendants Fidelity Deposit Company of Mary-

land and the Aetna Casualty and Surety Company filed

separate petitions for removal to the Federal Court (R.

2, 12, 13) (R. 5-7).

Removal orders were entered by the State Court

(R. 2, page 3) (R. 1-2).

Orders sustaining the special appearances and grant-

ing the motion to quash service on the defendants Mar-

cell, Byrne and West were entered by the Honorable A.

Lee Wyman, Judge of the United States District Court

for the District of South Dakota, Southern Division (R. 2,

44, 45) (R. 50).

A jury was waived and the causes consolidated for

trial (R. 2, 55). The cases as consolidated were tried be-

fore the Honorable A. Lee Wyman, Judge of the United

States District Court for the District of South Dakota.

On the 17th day of April, 1939, that Court filed find-

ings of fact and conclusions of law finding that the Ne-

braska State Court trustees were rightfully entitlea to

the possession of the property at the time it was turned

11

over to them by West as receiver, and that the plain-

tiff, as trustee in bankruptcy of the Brictson Manu-

facturing Company, was not the owner thereof and was

not entitled to the possession thereof, either at said time

or at any other time, and that the property was not a

part of the bankrupt estate. The Court further found

that there was no evidence that the Nebraska State Court

trustees, or any of them, ever breached any of the terms

of the bond, upon which the action is based, or that any

of them converted or misapplied any of the property

referred to in the action (R. 2, 60).

In its conclusions of law, the Court found that none

of the State Court trustees misapplied or converted any of

the property referred to in the plaintiff’s complaint or

breached any of the terms of the bond upon which the

action was based; that the property did not become a part

of the bankrupt estate, and the trustee in bankruptcy was

not entitled to possession of it; that at the time the property

was turned over to the Nebraska State Court trustees,

they were the owners thereof and entitled to possession ;

that the decision of the United States Circuit Court of

Appeals, reported in 25 Fed. (2d) 794, constitutes a final

determination that the property, which the plaintiff al-

leges was converted, belonged to the Nebraska State

Court trustees to be administered by them under its

direction; that the decision of the United States Circuit

Court of Appeals in the cases reported in 74 Fed (2d) 93,

and 84 Fed. (2d) 315, respectively, are res judicata and

binding upon the plaintiff in this action, and that those

decisions finally determined that the plaintiff was not the

owner of the property and not entitled to possession there-

of; that the order of the Nebraska State Court in the quo

sera! ihe a ayiaeeaghae

ae corneal

ae

v

y

3

&

5

eer a ane a a

12

warranto proceedings on June 18, 1930, was a final order

and is res judicata upon the question of the right of the

plaintiff to possession of the property and bars the plain-

tiff a right of recovery in this action (R. 2, 63, 64).

Similar findings of fact and conclusions of law were

filed in the action against West and the Aetna Casualty

and Surety Company, 4 corporation (R. 60-67).

April 17, 1939. Pursuant to the findings of fact and con-

clusions of law, judgments were entered dismissing

the plaintiff’s complaints upon the merits (R. 2, 65

66) (R. 68).

ae

ay eat

POINTS AND AUTHORITIES

&

A judgment rendered by a State Court of competent

jurisdiction is binding and conclusive upon the parties

when made the basis of a claim or defense in any court of

the United States, and cannot be reviewed or re-examined

as to the merits of the ori i controversy. It will be

conclusive as to all points and questions actually put in

issue and decided in the action in the State Court, whether

federal, general or local.

Mitchell v. First National Bank of Chicago, 180

U. S. 471, 481, 21 S. Ct. 418, 422.

Lion Bonding and Surety Company v. Karatz,

962 U. 8. 77, 43 S. Ct. 480.

Brictson Manufacturing Company ¥. Close, 25

Fed. (2d) 794, 800.

Marcell, et al v. Engebretson, 74 Fed. (2d) 93, 95.

34 OC. J., 1158, Section 1640.

II.

Proceedings in a State Court, which resulted in ap-

pointment of trustees to take over property of corpora-

tion for liquidation and distribution prior to four months’

RPA eRe By

2 RAP ESRI Erna ety ones ye ysy i '

LR RAP ALT ERE O .

’ ee se ERA GY . ae

: ete. ‘ —_ “oe

ee,

13

period preceding filing of involuntary bankruptcy petition,

withdrew property of corporation from jurisdiction of

bankruptcy court and subsequent bankruptcy proceedings,

though State Court trustees had not come into possession

of property.

Marcell v. Engebretson, 74 Fed. (2d) 93.

Palmer v. State of Texas, et al, 212 U. S. 118,

129, 29 S. Ct. 230, 233.

Pickens v. Roy, 187 U. 8. 177, 23 8. Ct. 78.

Frazier, et al, v. Southern Loan and Trust Co.,

99 Fed. 707.

Lion Bonding and Surety Company v. Karatz,

262 U. 8. 7.

Remington on Bankruptcy, Third Edition, Vol. 5,

Section 2042.

III.

Judgments entered in Brictson Manufacturing Com-

pany v. Close, et al, 25 Fed. (2d) 794; Marcell vs. Enge-

bretson, 74 Fed. (2d) 93, 76 Fed. (2) 876, and Engebretson

v. Mexcei, et al, 84 Fed. (2d) 315, are res judicata be-

tween the parties thereto and their privies and the Trus-

tee in Bankruptcy is estopped to assert a claim for dam-

ages against the Surety of the State Trustees based upon

wrongful conversion of the property taken over by the

State Trustees in their official capacity.

Howe & Rogers Co. v. Crittenden, et al, 76 Fed.

(2d) 749.

Columbia Fire Ins. Co. of New Jersey vs. Mart

Waterman Co., Inc., 11 Fed. (2d) 216, 219.

Scholtz, Governor, for Use of Barnett National

Bank, vs. Hartford Accident and Indemnity Co.,

88 Fed. (2d) 184.

National Surety Corporation of New York vs.

Ellison, 88 Fed. (2d) 399, 407. ,

Hartford Life Insurance Co. vs. Ibs, 237 U. S.

662.

a a le OSES

8

re

is

De

ae

ie

$s

¢

a

14

City of Watertown vs. Eastern Dakota Electric

Co., 296 Fed. 832, 834, 835.

Cromwell vs. Sac County, 94 U.S. 351.

Miller vs. Belvy Ow Co., 248 Fed. 83.

North American Union vs. Hart, 250 Fed. 390.

Rader vs. Star Mill, ete. Co., 258 Fed. 599.

Mitchell vs. First National Bank of Chicago, 180

U. S. 471.

Brictson Manufacturing Co. vs. Close, et al, 25

Fed. (2d) 794.

—— ||

af all

ARGUMENT

The Cireuit Court of Appeals, for the reason stated in

its opinion (R. 911-219) entered its judgment affirming

the decisions of the District Court (R. 219, 220) (R. , a

99-100).

The facts disclosed by the record, the issues raised

thereby, and the law applicable thereto are fairly and

fully set forth in the opinion. The merits of -this con-

troversy have actually peen finally determined on five dif-

ferent occasions.

The Brictson Manufacturing Company, on November

94, 1925, nearly four years before bankruptcy intervened,

raised the issue of the right of possession to the property

involved in this proceeding. Under issues joined between

the parties in the original proceeding pending in the

United States District Court for the District of Nebraska,

that Court held that under the proceedings instituted by

the Attorney General in the State Court of Nebraska, the

state trustees acquired jurisdiction of the property in

Nebraska held by West as receiver, and were entitled to

possession thereof. The Brictson Manufacturing Com-

15

pany appealed to the Cireuit Court of Appeals for the

Kighth Cireuit, and that Court held that the judgment of

the Supreme Court of the State of Nebraska in the

ouster proceedings was a final adjudication and binding

upon the corporation. In its opinion, the Court said:

‘‘In Mitchell v. First National Bank of Chicago,

180 U. 8. 471, 481, 21 S. Ct. 418, 422 (45 L. Ed. 627)

it is said:

‘¢ ‘Whatever may be the nature of a question

presented for judicial determination—whether de-

pending on federal, general, or local law—if it be em-

braced by the issues made, its determination by a

court having jurisdiction of the parties and of the

subject-matter binds the parties and their privies so

long as the judgment remains unmodified or unre-

versed.’

‘“The Supreme Court of Nebraska in the quo

warranto proceeding brought by the Attorney General

on behalf of the state found that the District Court

was justified in ousting the Brictson Manufacturing

Company from doing business in Nebraska; found that

the trustees were entitled to take charge of the prop-

erty of said corporation within the state for the pur-

pose of paying the creditors, and that the balance

should be turned over to the parties whom the court

might direct. It seems to us the federal court had

no other alternative than to abide by the binding ef-

fect upon appellant of that unchallenged decision.

***») (Brictson Mfg. Co. v. Close, 25 Fed. (2d) 794,

800.)

Thereafter the trustee in bankruptcy appeared in the

quo warranto proceedings in the Nebraska State Court

and made application for an order requiring the state

trustees to turn over the property involved in this pro-

ceeding to the trustee in bankruptey (R. 170, 171). This

Pas

dese

1K

Pay

Deere eeererr

16

application was overruled by the State Court (R. 2, 43,

44). No appeal was taken from this order (R. 190).

It is respondents’ contention that this order is a final

order involving the issues presented in this proceeding

and is res judicata under the rule above set forth. The

Cireuit Court of Appeals for the Eighth Circuit was again

called upon to pass upon this question in the case of

Marcell, et al vs. Engebretson, 74 Fed. (2d) 93, 96. In

that case the Appellate Court held that ‘‘at the time the

involuntary petition in bankruptcy was filed, the cor-

poration had neither the actual possession of its property

in the State of Nebraska nor the right to such posses-

sion. * * * ’? The Court applied the rule announced by

this Court that ‘‘when a court of competent jurisdiction

takes possession of property through its officers, this

withdraws the property from the jurisdiction of all other

courts which, though of concurrent jurisdiction, may not

disturb that possession; and that the court originally ac-

quiring jurisdiction is competent to hear and determine

all questions respecting title, possession, and control of

the property.’’

The trustee in bankruptcy filed a petition for writ of

certiorari in this Court to review the opinion and judg-

ment entered by the Appellate Court, and the petition was

denied on the 14th day of October, 1935. Engebretson,

Trustee, Petitioner vs. Marcell, et al, 56 Supreme Court

Rep. 89.

At the conclusion of this litigation, the trustee in

bankruptcy commenced a plenary action in the United

States District Court for the District of Nebraska, ask-

ing for a decree requiring the trustees appointed by the

17

State Court of Nebraska to account for and turn over the

identical property that is the basis of the present action.

That Court sustained a motion to dismiss the plaintiff’s

petition for lack of jurisdiction. The trustee again prose-

cuted an appeal to the Cireuit Court of Appeals for the

Kighth Cireuit, and again that Court was called upon to

pass upon the right of possession to the property. In

sustaining the trial court’s order dismissing the case for

lack of jurisdiction, the Court said:

‘o* * * We have again reached the same con-

clusions to which we gave expression in the Marcell

Case. It is, of course, clear that, if our decision in

that case to the effect that the Nebraska state court

in the quo warranto proceedings had acquired juris-

diction to administer the assets free from interference

by other courts, including the court of bankruptcy,

was correct, then this case is governed by that deci-

sion, and the court below had no other recourse than

to dismiss the complaint.’’ Engebretson vs. Marcell,

84 Fed. (2d) 315, 316.

The trustee in bankruptcy filed a peittion for a writ

of certiorari in this Court to review the opinion and

judgment of the Appellate Court. The petition was de-

nied by this Court on the 12th day of October, 1936.

Engebretson, Trustee, Petitioner vs. Marcell, et al, 299

U. S. 566.

It would extend this brief unnecessarily to recapitu-

late the reasons an *itations supporting the decisions of

the Cireuit Court of Appeals for the Eighth Cireuit above

set forth since the citations are incorporated in the respee-

tive opinions.

i

a RED RM TRAE, 25 ATE

oni Vi EE EN AE ENS PURDUE ESOT ee aS

yen Ni HAE SEN PN SRE eae STS Me ow enone

bea

*

PRA ARS eee

18

CONCLUSION

We submit that the decision of the Cireuit Court of

Appeals is consistent with the decisions of this Court and

that it is clearly established on the record:

1. The trustee in bankruptcy did not acquire the

right of possession to the property involved by virtue of

the bankruptcy proceedings for the reason that title and

right of possession to the property had passed into the

jurisdiction of the State Court by virtue of the quo war-

ranto proceedings which had finally been concluded more

than four months prior to the filing of the petition in

bankruptcy.

29 That the decision of the Supreme Court of the

State of Nebraska in the quo warranto proceeding, the

decision of the District Court of Douglas County, Nebras-

ka, in the quo warranto proceedings denying the applica-

tion of the trustee for a turn-over order of the property

involved, from which no appeal was taken, and the three

decisions of the United States Circuit Court of Appeals

for the Eighth Circuit, all determining the right of the

State Trustees to possession of the property, which the

Trustee in Bankruptcy now claims was wrongfully con-

verted, were each res judicata under the rule announced

in Mitchell v. First National Bank of Chicago, 180 U. S.

471, 481, 21 S. Ct. 418, 422.

pends so

19

Respectfully subjnifted,

Omaha, Nebraska,

Counsel for Respondents,

Cuinton Brome,

Rosert Fircw,

Omaha, Nebraska,

U. S. G. CHERRY,

Gate B. BrairHwalTeE,

Sioux Falls, South Dakota,

Of Counsel.

LPG LEE DS LALO SI LLIN SEES TO ILLEGIBLE OE AED NEE IRR SANE LYRA TREES GG EIR