# Petition for a wRIT OF cERTIORARI — Trieber v. England > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386418_0968%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for a wRIT OF cERTIORARI - **Published:** January 1, 1957 - **Citation:** 352 U.S. 967 ## Text Offies - Supreme Court, U FILED Os * In the iene Go Anited States OcrosBer TERM, 1956 No, 55S Morris TRIEBER, vs. JoHN QO. ENGLAND, Trustee in Bank-?; ruptcy of the Estate of Gayne Sales Co., Inc., a corporation, Bankrupt, Respondent. Petitioner, Morris TRIEBER, 2020 St. Francis, San Carlos, California, Petitioner in Propria Persona. JosePH A. Brown, 1020 De Young Building, San Francisco 4, California, Of Counsel. é Subject Index Page (a) Reference to the opinions delivered in the courts below 2 (b) A concise statement of the grounds on which the juris- diction of this court is invoked ................c.00000- 2 (ec) The questions presented for review ................... 2 Se ee CRED NUEINED voce dase ib oS ecbdeee beccection 4 A Mo aie iin ss Gb ew ck ee or ae 4 (f) The federal jurisdiction in the court of first instance... 21 ee ES OE GN GI 5 5 in Ui bee cede s cance beens ose 22 I Oe I ovens ce kivswenebucbeascanes 22 I. The appellate jurisdiction of the Court of Appeals in bankruptcy proceedings includes interlocutory as well Ds Sn 09d, oe. and eo Teeth A HK 23 II. Neither the referee nor the District Court in bank- ruptcy has any jurisdiction to make the order sought by the trustee, or to hear or determine his claim for damages or, more particularly, to make the ‘‘turn- QUE Ge NE PE wack ve cevcncenskesdees swaus 35 A court of bankruptcy has no jurisdiction to try a controversy between the trustee and one not a party to the proceeding; and even the District Court may not, in the exercise of its law or equity jurisdiction, hear and determine such a suit in the absence of diversity of citizenship.... 35 Ili. Neither the referee nor the District Court had any jurisdiction to make the ‘‘turn-over’’ order sought by Tt IED 6. o vvnenba dananenecdsdaeewn ot eeceeccnes 38 IV. The purported claim for affirmative relief by the trus- tee is barred by the statute of limitations ........... 45 V. The proceedings by the trustee are barred by the final judgment of the state court in an action between the bankrupt and Trieber which was an action between the same parties for the same cause ................ 47 Table of Authorities Cited Cases Pages Arkansas Corp. Commission v. Thompson, 116 Fed. 2d 179, reversed on other grounds, 313 U.S. 132, 85 L.Ed. 1244, asl be cock cnubsenncaviesd ven rh seneadeees 26, 32 Chandler v. Perry, 74 Fed. 2d 371 ...........cseceeeceees 40 Cline v. Kaplan, 323 U.S. 97, 65 S.Ct. 155, 89 L.Ed. 97...... 42 Cohen v. Eleven West 42d Street, Inc., 115 Fed. 2d 531.... 33 Columbia Foundry Co. v. Lochner, 179 Fed. 2d 630, 14 noc dkny 4a vende 64 Me agawt en? Sse hanenrens 27, 32 Cragge v. White, 113 C.A. 2d 356, 248 Pac. 2d 193 ........ 47 Crowley v. Modern Faucet Manufacturing Co., 44 Cal. 2d ey eG Se e's Si 05s che eve edd ed eve deredrees 51 Daniel v. Guaranty Trust Co. of New York, 285 U.S. 154, 52 ee ee OE os and our canasarcnne cise Kee v 39 Delatour v. Meredit, 144 Fed. 2d 594..............-0000e- 27 Dwyer v. Franklin, 227 Fed. 2d 152 .........c. ces eeeeees 43 Erganian v. Brightman, 13 C.A. 2d 696, 57 Pac. 2d 971.... 51 Federal Land Bank v. Hansen, 113 Fed. 2d 82............ 28, 30 Freeze v. Salot, 122 C.A. 2d 561, 266 Pac. 2d 140.......... 51 Galbraith v. Vallely, 256 U.S. 46, 41 S.Ct. 415, 65 L.Ed. 823 42 Ge ©. re, Te Ge, GD vc cvteivtdasaveecasvevceee 50 Gibson v. Rath, 13 C.A. 2d 40, 55 Pac. 2d 1219............ 47 ee rs cnaen erat cies sade denvues 31 Goodard v. Security Title Insurance and Guarantee Co., 14 Se PE cus accokdesauht acer vetredeecwetvees sextet 50 Harris v. First National Bank, 216 U.S. 382, 30 S.Ct. 296, SE rent GRradis be anieda tabkiends baes. chen onen « 35 Harris v. Mills Novelty Co., 106 Fed. 2d 976.............. 26 Hoehn v. McIntosh, 110 Fed. 2d 199...............20000e- 28 In re Chicago & E.I.R. Co., 121 Fed. 2d 785, certiorari de- nied, 314 U.S. 653, 86 L.Ed. 528, 62 S.Ct. 102............ 27 In re Cox-Rackley Co., 245 Fed. 376 .............eeeeeeee 40, 43 TABLE OF AUTHORITIES CITED iii Pages In re Federal Photo Engraving Corp., 54 Fed. 2d 628...... 32 In re Joslyn’s Estate, 168 Fed. 2d 803 ................... 43 ee Sa, Be es We 8 ev cides Fikid danse celles vevnee 28 In re Luma Camera Service, 157 Fed. 2d 951.............. 41 rr rr Me ks 64 e's0-4a5 ¢ecnnaen ss ceenen’ 42, 43 In re Winton Shirt Corp., 104 Fed. 2d 777................ 27 Jackson v. Master Holding Corp., 16 Cal. 2d 824, 108 Pace. DN ccivecnthtd ebehe Wan sexes ve wes 6b oasaeseeden 47 Kaigler v. Gibson, 264 Fed. 240 ............... 0.0.2 ee eee 36 Keidatz v. Albany, 39 Cal. 2d 826, 249 Pac. 2d 264........ 50 Kelso v. Maclaren, 122 Fed. 2d 867..................006. 27 Lake Washington Consolidated Co. v. Wood, 113 Cal. 482, ca teh Mca cncweneénencedéeuececceanene 46, 49, 50 Lewis v. Security-First National Bank of Los Angeles, 58 ee ee ee WU BP Ri wv cv enndnect ceck es c4a0 orca 47 Lieberman v. Bankcroft, 59 Fed. 2d 202.................. 32 Lovell v. Newman, 227 U.S. 412, 33 S.Ct. 375............ 36 Maggio v. Zeitz, 333 U.S. 56, 68 S.Ct. 401, 82 L.Ed. 476..... 40 Morris Plan Industrial Bank v. Schorn, 135 Fed. 2d 538.... 28 Mortimer v. Loynes, 74 C.A. 2d 160.................0000- 50 Original Mining and Milling Co. v. Casad, 210 Cal. 71...... 50 Pearson v. Higgins, 34 Fed. 2d 27.............ccceeeeeees 30, 32 R. J. Rosen & Sons, Inc., 1380 Fed. 2d 81.................. 28 Re Bush Terminal Co., 105 Fed. 2d 150................4.. 26 Robertson v. Berger, 102 Fed. 2d 530................585. 26 Robinson v. Howard, 5 Cal. 429 .........cscccccesccceee 50 Sacramento Suburban Fruit Lands Co. v. Lindquist, 39 Fed. 2d 900, certiorari denied, 282 U.S. 853, 51 S.Ct. 31, 75 BAU FOE kwh ecee need acdews ce eeedeetusvacuededeudne 46 Seeger v. Odell, 18 Cal. 2d 409, 115 Pac. 2d 977, 136 A.L.R. BE Rie en pcos eceevs00ce sche accesndavessnttesseens 47 Sides v. Sides, 119 C.A. 2d 349, 259 Pac. 2d 708............ 47 State Trust & Savings Bank v. Dunne, 278 U.S. 582, 73 L.Ed. nc ces cine She ekeeweenTeveeenneasee 37 iv TABLE OF AUTHORITIES CITED Pages Taubel-Scott-Kitzmiller Co. v. Fox, 264 U.S. 426, 68 L.Ed. oe Fe Se een erro rerrr rT tere Tre 42 Theard v. Fidelity & Deposit Co., 202 Fed. 2d 880.......... 26 Vertex Investment Company v. Schwabacher, 57 C.A. 2d See SE, EEUU vecenatyedssces ecancdreresee eserves 46 Watkins v. Bryant, 91 Cal. 492, 27 Pac. 775............... 46 Weidhorn v. Levy, 253 U.S. 268, 40 S.Ct. 534.............. 35 West v. Great Western Power Co., 36 C.A. 2d 403, 97 Pae. Be cocatuvesdkiees ¢0as sedi e cds Cid asaediaesoes 46 Wilmans v. Weissman, 38 C.A. 693, 102 Pac. 2d 382........ 46 Rules Rules of the Supreme Court of the United States: ee oe Pe 2 eeccveneds tennant vhuees 564 22 PEED. ccevorecrcnevesvevecedeuane 3 Statutes Bankruptcy Act: Section 21(a), 11 U.S.C. Section 44(a) ............... 26, 27 Section 24 as amended in 1938, 11 U.S.C. Sections 47 GE SEE cad canes bas dedh raed dsedennsvesees 4, 23, 25, 31 Cn se ekdbbhebvende tebe annette. anne 37 Section 75, 11 U.S.C. Section 203 ...............0006- 28 Chandler Act, amendment of June 22, 1938 .............. 31 Code of Civil Procedure, Section 338, subdivision 4........ 20 28 U.S.C. Section 1254, subdivision (1) ................-- 2 OE Ut, MD DU bo cencccdctedebedeiecsadevvecdees 21 Texts 7 GS Remington, p. BBS 2... ncccccccecccccccsccccccgewceeses 24 In the Supreme Court Huited States OcToBER TERM, 1956 No. Morris T'RIEBER, : Petitioner, vs. JoHN O. ENGLAND, Trustee in Bank-} ruptey of the Estate of Gayne Sales Co., Inec., a corporation, Bankrupt, Respondent. 4 PETITION OF MORRIS TRIEBER FOR A WRIT OF CERTIORARI to the United States Court of Appeals for the Ninth Circuit. The petition of Morris Trieber for a writ of cer- tiorari to the United States Court of Appeals for the Ninth Circuit respectfully shows to Your Honors: (8) REFERENCE TO THE OPINIONS DELIVERED IN THE COURTS BELOW. The opinion of the Court of Appeals for the Ninth Circuit is reported in ........ Fed. 2d ........ The District Court did not file a written opinion. The order of the District Court dismissing the petition for review of the order of the referee in bankruptcy by a judge is set forth at page 52 of the transcript of record. (b) A CONCISE STATEMENT OF THE GROUNDS ON WHICH THE JURISDICTION OF THIS COURT IS INVOKED. (1) The date of the judgment or decree of the Court of Appeals sought to be reviewed and the time of its entry: Sept. 5, 1956. (ii) The date of the order of the Court of Appeals respecting a rehearing: Rehearing denied October 8, 1956. (iii) The statutory provision believed to con- fer upon this Court jurisdiction to review the judgment or decree in question by writ of cer- tiorari: U. 8S. Code, Title 28, Section 1254, sub- division (1). (c) THE QUESTIONS PRESENTED FOR REVIEW. On petition of the respondent, the referee in bank- ruptey at San Francisco in the Northern District of California issued an order directed to the petitioner requiring him to show cause why he should not be ESI ee required to pay to the respondent, as trustee of the estate of the said bankrupt, the sum of $40,000 as compensatory and punitive damages for alleged fraud upon the bankrupt corporation. For answer and return to the said order, the peti- tioner moved to dismiss the petition and to discharge the order to show cause for want of jurisdiction. The referee made what was styled, ‘‘An Order, Judgment and Decree’’ overruling petitioner’s objection to his jurisdiction to make the turnover order. Petitioner petitioned the District Court for a review of the referee’s order, which petition was denied by the Dis- trict Court upon the ground that the order was inter- loeutory and not final. (TR 52.) Petitioner appealed to the United States Court of Appeals for the Ninth Circuit, which, on motion of respondent, dismissed the appeal upon the ground that the order was interlocutory and that the Court had no jurisdiction of the appeal. A copy of the opinion of the Court of Appeals is appended to this petition pursuant to the provisions of subdivision 1(i) of Rule 23 of this Court. These are set forth in detail hereafter in the state- ment of the case, and are here omitted in the interest of brevity. + (d) THE STATUTE INVOLVED. The statute involved in this case is Section 47, Title 11, U. S. Code: ‘Jurisdiction of Appellate Courts: 9a) The United States Courts of Appeals, in vacation, in chambers, and during their re- spective terms, as now or as they may be here- after held, are invested with appellate jurisdiction from the several courts of bankruptcy in their respective jurisdictions in proceedings in bank- ruptey, either interlocutory or final, and in con- troversies arising in proceedings in bankruptcy to review, affirm, revise or reverse, both in mat- ters of law and in matters of fact.’’ (e) STATEMENT OF THE CASE. Gayne Sales Co., Inc., a Cailfornia corporation, was adjudicated a bankrupt on August 24, 1954, and the proceeding was referred to the referee in bank- ruptey. (TR 2.) On October 15, 1954, Morris Trieber filed a proof of claim, setting forth that the bankrupt corporation was at the time of the filing of its petition and there- tofore justly indebted to him in the sum of $3,162.24, itemized as follows: For salary for services performed for the corpora- tion pursuant to an oral agreement, $1,600.00; for money paid by claimant on a note owing by the bank- rupt, which note claimant had guaranteed and on which note claimant paid $750.00; for goods, wares 5 and merchandise sold and delivered to the bankrupt, $382.65; paid by claimant on behalf of bankrupt on a judgment rendered against the bankrupt, which judg- ment this claimant guaranteed, $407.89 ; total $3,141.54. It was further alleged that no part of the debt or liability had been paid. On June 20, 1955, the trustee filed a document entitled ‘‘Trustee’s Objection to the Allowance of the Claim of Morris Trieber and Peti- tion for Turnover Order.’’ This pleading, after deny- ing the indebtedness, sets forth what is denominated : ‘“‘A further, separate and distinct defense to the allow- ance of said claim, and as grounds for further relief.”’ This contains the following allegations: “‘That from the inception of the said incorpora- tion and during all of the times mentioned herein, the said Morris Trieber was one of the incorpora- tors of the said corporation, and together with I. E. Arian, Jerome R. Gayne and Samuel Gayne, was during all of the times herein referred to, a director of said corporation, and that the said Morris Trieber was at all times herein referred to an officer of said corporation, to wit, the secre- tary thereof. “That heretofore and on or about the 8th day of March, 1951, at a meeting of the Board of Directors of said corporation, at which all of the directors aforenamed were present, and at which meeting the said Morris Trieber was present as director and as secretary of the said corporation, the said corporation adopted the following resolu- tion: ‘* ‘Resolved, that the Secretary of this corpora- tion, Morris Trieber, shall forthwith make ap- 6 plication to the Commissioner of Corporations of the State of California for permission to issue capital stock of this corporation, as follows: ‘““*To I. E. Arian, for the transfer by him to this corporation of the business carried on and conducted by him at 1151 Mission Street, includ- ing generally U. S. merchandise, new and used clothing, camping equipment, hunting clothes, shoes and leggings, and general merchandise of all kinds, including fixtures and office equipment and the good will of said company now operated under the name of U. S. Army Surplus and I. E. Arian, one hundred (100) shares of the capital stock of this corporation of the par value of Ten Thousand Dollars ($10,000.00), and to pay to him tlie sum of Twenty-five Hundred Dollars ($2500), which sum has already been paid. “**To Jerome R. Gayne, one hundred (100) shares of the capital stock of this corporation representing Ten Thousand Dollars ($10,000) par value, for the sum of Ten Thousand Dollars ($10,000) in cash. ‘**To Samuel Gayne, one hundred (100) shares of the capital stock of this corporation represent- ing Ten Thousand Dollars ($10,000) par value, for the transfer to this corporation of merchan- dise of the fair and reasonable value of $6,708.18, and the payment in cash of $3,291.82. *¢ “To Morris Trieber, one hundred (100) shares of the capital stock of this corporation represent- ing Ten Thousand Dollars ($10,000) par value, for the transfer by him to this corporation of merchandise of the fair and reasonable value of $8,967.10 and payment in addition thereto of cash in the sum of $1,032.90.’ ELINA ISON PRG OGRE TTS NOWRA VT CE GELOMELS 1 2B PEE SORBET 7 ‘That said resolution was adopted upon the reliance of said Board of Directors upon the representations of the said Morris Trieber at that said meeting that he, the said Trieber, owned sur- plus merchandise of the kind and character which said corporation was organized to sell of the fair and reasonable market value of $15,675.28; that he, the said Morris Trieber, was indebted to Samuel Gayne, one of the directors of the said corporation, in the sum of $6,708.18; that he, the said Trieber, and Samuel Gayne had agreed be- tween themselves that said indebtedness of Trieber to Gayne was to be paid by the said Trieber delivering to the said corporation on be- half of Gayne, merchandise of ‘the reasonable value of $6,708.18 in partial payment of stock to be issued to Samuel Gayne by the said corpora- tion upon approval by the Department of Invest- ment, Division of Corporations of the State of California and that he, the said Trieber, would in consideration of the said Samuel Gayne, I. E. Arian and Jerome Gayne, subscribing for $10,000 worth of stock to be paid for as follows: ‘By I. E. Arian, by merchandise of the reason- able value of his $10,000.00 subscription; ‘‘By Jerome Gayne, by the payment of cash for his $10,000.00 worth of stock; ‘‘By Samuel Gayne, by the payment by Trieber in his behalf of merchandise of the value of $6,708.18, and cash in the sum of $3,291.82. “That he, Trieber, would deliver to said cor- poration, in payment of his subscription, merchan- dise of the reasonable value of $8,967.10 and cash in the sum of $1,032.90. 8 ‘‘That said directors, relying upon said repre- sentations, and believing the same to be true, did adopt the resolution aforementioned. ‘‘That thereafter and on or about the 22nd day of March 1951, in line with said resolution, and with the full knowledge and consent of the said Trieber, and believing the representations afore- mentioned of the said Trieber, and in reliance thereon, the officers and directors of said corpora- tion filed an Application for Permit to Sell and Issue Stock, to wit, one hundred (100) shares to each of the persons heretofore named, for Ten Thousand Dollars ($10,000.00), which said stock was paid for as set forth in said resolution afore- mentioned. ‘‘That thereafter and on the 28th day of March, 1951, the Commissioner of Corporations, State of California, issued a permit for the issuance and the sale of four hundred (400) shares of stock to the said persons named, for the consideration set forth in the resolution aforementioned; that said permit further provided that the stock shall be issued by the 28th day of September, 1951; that said permit further required the appointment of an escrow holder to be approved by the said Com- missioner, which escrow holder was to hold the stock issued to the persons aforementioned until the further order of the said Commissioner of Corporations; that no further order of the said Commissioner of Corporations was thereafter made. ‘‘That thereafter the directors of said corpora- tion, with the full knowledge and consent of the said Morris Trieber, and in reliance on the said 9 representations of the said Trieber, and with the approval of the Commissioner of Corporations, named and designated one Joseph A. Brown, an attorney at law, as said escrow holder; that the resolution appointing the said Joseph A. Brown as said escrow holder was adopted at a special meeting duly and regularly held on the 29th day of March, 1951, and a certified copy thereof was duly filed with the Division of Corporations by the said Morris Trieber as secretary on the 4th day of April, 1951, and said escrow holder was approved by the Commissioner of Corporations on the 6th day of April, 1951. ‘“‘That thereafter the said Morris Trieber, on or about the 30th day of April, 1951, represented to the directors and officers of said corporation that he had delivered to the said corporation merchandise of the reasonable value of $15,675.28, being the merchandise hereinabove referred to and delivered to said corporation in payment of stock, as follows: ‘*$6708.18 against the stock to be issued to Sam- uel Gayne; “$8,967.10, in payment of the stock to be issued to Morris Trieber. ‘‘That in reliance upon the said representations of the said Trieber, so made on or about April 30, 1951, and believing the same to be true, the said corporation, on the said 30th day of April, 1951, pursuant to the Permit aforementioned, issued one hundred (100) shares of stock to each of the following named persons, for which stock said persons paid, or in the instance of Morris Trieber and Samuel Gayne, allegedly paid, the considera- tion therefor: REAL Se OEE SO HE SE LTE ERE ONL LAE REI SD 10 “‘T. E. Irian, 100 shares of the par value of $100.00 each, $10,000.00 paid for by the said I. E. Arian in merchandise of the reasonable value of $10,000 ; ‘*Jerome R. Gayne, 100 shares of the par value of $100.00 each, for $10,000.00 cash; ‘‘Samuel Gayne, 100 shares of the par value of $100.00 each, in consideration of the alleged delivery to the said corporation in his behalf of merchandise of the reasonable value of $6,708.18, as represented to said corporation by the said Morris Trieber, was delivered by him to said cor- poration, and cash in the sum of $3,291.82; ‘‘Morris Trieber, 100 shares of the par value of $100.00 each, in consideration of the alleged delivery to said corporation of merchandise of the reasonable value of $8,967.10, as was repre- sented by said Trieber, was by him delivered to said corporation, and cash in the sum of $1,032.90. “‘That certificates numbered 1, 2, 3 and 4, re- spectively, were issued to said parties and deliv- ered to the escrow holder on the 12th day of July, 1951, on behalf of said parties respectively, which escrow holder in turn issued a receipt to each of said parties for his said shares, setting forth that he held said certificates for the said parties, and filed a copy thereof with the Commissioner of Corporations of the State of California. “That thereafter and within three years last past, the officers and directors of said corporation, other than the said Trieber, for the first time dis- covered that the representations of the said Trieber made to the said corporate officers and directors as above alleged on or about the 8th 11 day of March, 1951, were false and untrue and were known by the said Morris Trieber to be false and untrue, and discovered that said Trieber did not own or control any surplus or other property which was of the value of $15,675.28, or of any value whatsoever; that but for said false and untrue representations, said directors would not have adopted the said resolution so adopted on said day, nor would they have taken the further steps hereinabove outlined as having been taken, before the Division of Corporations of the State of California; that within the three years last past, the said officers and directors of said cor- poration, for the first time, discovered that the representations of the said Morris Trieber made to the officers and directors of said corporation on or about the 30th day of April, 1951, to the effect that he had delivered to the said corpora- tion merchandise of the fair and reasonable value of $15,675.28 in partial payment of the stock as hereinabove alleged, for which stock was issued to him and Samuel Gayne, were in each and every instance false, fraudulent and untrue, and that the said Morris Trieber did not deliver any mer- chandise to the said corporation of any value whatsoever, either in payment of any stock issued to him, or in payment of the stock issued to the said Samuel Gayne as aforementioned, and that the said Morris Trieber falsely, fraudulently and wilfully misrepresented to the said corporation the delivery of said merchandise. That the said officers and directors of the said corporation be- lieved said representations to be true and relied thereon, and but for said belief and reliance, would not have issued the stock hereinabove re- BST Rs tye ite yu 4s no ace nips 5 I RF ESTERS GRAIL OE LEE RE GLIA ORLES ELLE ISL EE EE 12 ferred to the said Morris Trieber and/or Samuel Gayne. “‘That by reason of the said Morris Trieber’s false, fraudulent and wilful misrepresentations as hereinabove set forth, and the reliance thereon by the said corporation’s directors and officers, the said corporation and the creditors of said corporation have been damaged in the sum of $15,975.28, plus interest at the rate of seven per cent (7%) per annum on said sum from the 7th day of April, 1951, to date. “‘That in doing the things herein alleged, the said Trieber acted wilfully, maliciously and wan- tonly and has been guilty of oppression, fraud and malice and the said Trieber’s acts were in direct violation of the Rules and Regulations and Laws applicable to the sale of corporate stock and the payment therefor, and by reason thereof caused said corporation embarrassment, caused said corporation to issue false and fraudulent statements to creditors and banks, to the further damage of the said corporation in the sum of $10,000.00, and by reason of the foregoing, the said corporation demands exemplary and punitive damages against the said Morris Trieber in the sum of $15,000.00. ‘*Wherefore, said Trustee prays that an Order be made and entered disallowing the claim of the said Morris Trieber in the sum of $3,162.24, and the whole thereof, and that no allowance be made for any sum whatsoever on said claim, and for an Order disallowing said claim unless and until said claimant pays to said Trustee the sum of $40,- 675.28, together with interest at legal rate of $15,675.28 from April 30, 1951, forward, and that xtansepeseas sith ISVS LAEY TNR AINE LLG LOTTI LTE GLE ELLE IES BPN TES OT ed 13 said claimant be ordered to pay said sum te the Trustee herein, together with said Trustee’s costs incurred herein, and for such further and differ- ent Order as may be just and proper in the premises. ”’ On the same day the Referee issued an order that petitioner appear before him on July 7, 1955, to show cause ‘‘why the relief prayed for by the trustee in said objections to the allowance of the claim of Morris Trieber should not be granted. (TR 19.) On July 20, 1954, the petitioner filed a document entitled, ‘‘Answer and return of Morris Trieber to order to show cause and motion to dismiss petition of trustee and to discharge order to show cause for want of jurisdiction.’’ The grounds of motion to dismiss the order to show cause for want of juris- diction are thus stated in the said answer and return (TR 20): ‘That this Honorable Court has not, nor has your Honor as Referee in bankruptcy of said Honorable Court any jurisdiction to hear or de- termine the petition of said Referee which is annexed to the said order to show cause, or to make any order thereon or to grant any of the relief prayed for by the said Trustee; and in this behalf the said Morris Trieber further shows to your Honor that this proceeding presents a ease of a contest between the Trustee in bank- ruptey and a third person who is not a party to the bankruptcy proceeding and whose rights, claims and defense cannot be summarily adjud- icated by your Honor or by this Honorable Court a ik ‘ f SER ees Ps a i i 14 in this proceeding; and that it further appears that the aforesaid petition of said referee in bankruptcy is a purported claim against the said Morris Trieber for damages alleged to have been made by said Morris Trieber, and that it is further alleged in Paragraph X of said petition that the said bankrupt corporation suffered addi- tional damages in the sum of $10,000; and that it is further alleged that the said corporation demands exemplary and punitive damages against the said Morris Trieber in the sum of $15,000; and the said Trustee as the party of said petition prays for an order by your Honor that the said Morris Trieber pay to said Trustee the sum of $40,675.28 together with interest at legal rate of the sum of $15,675.28 from April 30, 1951, for- ward; that your Honor has no jurisdiction to make any such order, and that this Honorable Court has no jurisdiction to make any such order; that such an order or judgment could be made only if a trial before a court of competent juris- diction, and after a verdict of a jury duly em- paneled and sworn to try the cause, or upon findings made by the court in such cause, if trial by jury were waived; and in this behalf the said Morris Trieber further represents and shows to your Honor that this Honorable Court would in any event have no jurisdiction of any action brought by the said Trustee in bankruptcy to recover said sum or any other sum of money claimed to be due from said Morris Trieber to said bankrupt, by reason of any alleged fraud, or otherwise, for the reason that there is no diver- sity of citizenship between the parties, and the jurisdiction of any such action is in the Court of the State of California whose jurisdiction 15 cannot be ousted by any order that your Honor might make. ‘‘And for Further Answer and Return to the Said Order to Show Cause and as Further Ground for the Dismissal and Discharge of the Same and for Further Ground of Objection to to the Jurisdiction of this Court to Hear and Determine Any of the Matters and Things Set Forth in the aforesaid Petition of the Said Trustee in Bankruptcy, the said Morris Trieber Alleged and Shows: “That all and singular the matters and things set forth by the said trustee in bankruptcy as grounds for the order and relief sought herein by the said trustee, and all and singular the claims of the said trustee therein set forth cannot be maintained by said trustee in this proceeding for the reason that the said trustee is barred and precluded from maintaining the same by virtue of a said judgment and order heretofore, to wit, on the 3rd day of August, 1954, duly given, made and entered in and by the Superior Court of the State of California in and for the City and County of San Francisco, and numbered therein 431,888 in which Gayne Sales Co., Inc., a cor- poration, the bankrupt in this proceeding, was plaintiff and the said Morris Trieber was de- fendant in which a certain second amended com- plaint for damages for fraud, breach of contract and money had and received was sustained by said Superior Court without leave to amend ; that the said second amended complaint was based upon the same purported cause of action and involved in all respects the said matters and things and all and singular the same claims as 16 are set forth in the present proceeding by the said Referee in bankruptcy, all of which form the said second amended complaint in the action last aforesaid, a copy of which is hereunto an- nexed as Exhibit ‘A’ and made a part hereof, fully and at large appears. “‘That a copy of the Minute Order sustaining the said demurrer of the said Morris Trieber to the said complaint of the said Gayne Sales Co, Inc., a corporation, without leave to amend is hereunto annexed and made a part hereof in like manner and with like effect as if heretofore set forth in its entirety. “And in this behalf the said Morris Trieber further shows to your Honor that thereafter and on the 11th day of August, 1954, the said Gayne Sales Co., Inc., appealed from the order of said Superior Court to the Supreme Court of the State of California from the order of the said Superior Court sustaining the demurrer of the said Morris Trieber to the second amended com- plaint of Gayne Sales Co., a corporation, the bankrupt therein, without leave to amend; and the said Morris Trieber further shows that there- after, and prior to the first day of December, 1954, the said Supreme Court of the State of California, in the exercise of the jurisdiction conferred upon it by the Constitution of the State of California, duly transferred the said appeal to the District Court of Appeal of the State of California in and for the First Appel- late District, Division Two, and that on the first day of December, 1954, the said Gayne Sales Co., Ine., a corporation, filed in said District Court of Appeal a certain brief, in which the said SRP DPR IR AM LIE IRL MN LOIN RR I REE Tic EF 17 corporation sets forth in substance and effect all of the matters and things now set forth in the present proceedings by the said Referee in bank- ruptey; that thereafter and on the 20th day of December, 1954, the said Morris Trieber filed in the said District Court of Appeal, a notice of motion to dismiss the said appeal of the said Gayne Sales Co., Inc., from the said order sus- taining the said demurrer to the second amended complaint without leave to amend, and filed therewith a Memorandum of Points and Author- ities in support of the said motion; “That thereafter and on the 10th day of Jan- uary, 1955, the said motion to dismiss the said appeal from the said order of said Superior Court, came on regularly to be heard before the said District Court of Appeal and was argued by counsel; in consideration whereof it was by the said District Court of Appeal, ordered, adjudged and decreed that the said motion be granted and that the said appeal of the said Gayne Sales Co., Inc., be dismissed; and that by reason of all and singular the premises, the said judgment in the aforesaid action of Gayne Sales Co., Inc. v. Morris Trieber, is res judicata as to all and singular the matters before your Honor and before this Honorable Court in the instant cause, and the said Gayne Sales Co., Inc., and its said trustee in bankruptcy are, and each of them is, estopped and concluded from seeking the order prayed for herein and from obtaining any of the relief sought by them or by either of them; and your Honor and this Honorable Court are likewise estopped and precluded from grant- ing any relief in the premises to the said bank- rupt or to the said trustee in bankruptcy. 18 “‘And for Further Answer and Return to the Said Order to Show Cause Said Morris Trieber Respectfully Shows to Your Honor: “That the purported cause of action and each and every of the said purported causes of action and any and all matters and things whatsoever set forth herein by the said Trustee in bank- ruptcy are barred by the Statute of Limitations as set forth in Subdivision 4 in Section 338 of the Code of Civil Procedure of the State of Cali- fornia.”’ The prayer of the answer and return is that the order to show cause be dismissed and discharged, that the trustee take nothing thereby, and that it be held and considered that the Court has no jurisdiction of the proceeding. (TR 26.) Annexed to the answer is a copy of a second amended complaint filed in the Superior Court of the State of California, in and for the City and County of San Francisco, and numbered therein 431,888 and entitled Gayne Sales Co., Inc., a corpora- tion, v. Morris Trieber. (TR 26 et seq.) On January 10, 1956, the referee made an order which, after certain preliminary recitals, reads as follows: “Tt hereby is ordered, adjudged and decreed: ‘1. That this bankruptcy court has jurisdic- tion over said Morris Trieber and said subject matter; “9. That the objection to jurisdiction of said Morris Trieber be, and said objection is, over- ruled; 19 “3. That January 30, 1956, be, and said last mentioned date is, hereby fixed for the hearing on the merits of the trustee’s said objection and/or the trustee’s said petition for turn-over order, and that said hearing, on the merits, be held on said last mentioned date, commencing at the hour of 10:00 o’clock a.m. of said last mentioned day, at Room 609 Grant Building, 1095 Market Street, San Francisco, California, to be postponed and/or continued from time to time thereafter as the circumstances shall war- rant.’’ (TR 43, 44.) On January 13, 1956, the petitioner filed in the District Court a petition for review of the said order of the referee by a judge. (TR 44-45 et seq.) This petition, after setting forth the order of the referee in haec verba, assigns seven errors in respect thereto. The first of these is that neither the Court nor the referee had any jurisdiction to determine the petition of the trustee in bankruptcy, for the reason that the order sought to be reviewed was made in a case of a contest between the trustee in bankruptcy and Trieber, who was not a party to the bankruptcy proceedings, and whose rights, claims and defenses could not be summarily adjudicated by the referee or by the Court. The second error assigned is that the petition of the referee in bankruptcy sets forth a purported claim for both compensatory and exemplary damages against Trieber, and prays for an order that Trieber pay and turn over to the trustee the sum of $40,675.28, 20 together with interest at the legal rate in the sum of $15,675.28 from April 30, 1951 forward. The third error assigned is that neither the Court nor the referee has any jurisdiction to make any such order; ‘‘that such an order or judgment could be made only upon a trial before a court of competent jurisdiction, and after verdict of a jury duly impan- eled and sworn to try the cause, or upon findings made by the court in such eause, if trial by jury were waived.”’ The fourth error assigned is that neither the Court nor the referee would have any jurisdiction over such an action, for the reason that there is no diversity of citizenship between the parties, and the jurisdic- tion of any such action is in the Courts of the State of California. The fifth and sixth grounds set forth the judgment of the state Court in Gayne Sales Co., Inc. v. Trieber, which Trieber’s return describes in detail, and the dismissal of the bankrupt corporation’s appeal by the District Court of Appeal of the State of California, as res judicata. The seventh ground sets forth that the purported cause of action set forth in the petition of the trustee in bankruptcy against Trieber is barred by the Stat- ute of Limitations of the State of California, as set forth in Subdivision 4 of Section 338 of the Cali- fornia Code of Civil Procedure. The prayer of the petition is that the order of the referee be reviewed by one of the judges of the Dis- SE ANY LE SPR LON LONER DAI RRS 5 IRE REIN T LHOEPIO Mi ryMytnee _— 21 trict Court, and that the petition of the trustee be dismissed and the order to show cause discharged. (TR 46-52.) On April 11, 1956, the District Court made an order, which, after certain preliminary recitals, con- cludes as follows: ‘It appears that the order of the Referee involved here was interlocutory and not final, and that therefore this Court should not review the order. See Collier on Bankruptcy, $3921. Accord- ingly, the petition for review is hereby dismissed and the cause is remanded to the Referee for a hearing on the merits, reserving to the peti- tioner all his objections to the jurisdiction of the Referee.’’ (TR 53.) On April 16, 1956, Trieber appealed to the United States Court of Appeals for the Ninth Circuit from the said order of the District Judge. (TR 54.) Thereafter, on September 5, 1956, the Court of Appeals granted a motion of respondent to dismiss the said appeal. Petitioner prays certiorari to review the said dismissal. (f) THE FEDERAL JURISDICTION IN THE COURT OF FIRST INSTANCE. “The District Courts shall have original juris- diction, exclusive of the courts of the states, of all matters and proceeds in bankruptcy.”’ U. S. Code, Title 28, Section 1334. ee higei : 22 (g) ARGUMENT OF THE CASE. The Court of Appeals has rendered a decision in conflict with the decisions of other Courts of appeals on the same matter; and has decided an important question of federal law which has not been, but should be, settled by this Court; and has decided a federal question in a way in conflict with applicable decisions of this Court; and has so far departed from the ac- cepted and usual course of judicial proceedings, and has so far sanctioned such a departure by a lower Court, as to call for an exercise of this Court’s power of supervision. (Rule 19, Subdivision 1(b).) SUMMARY OF THE ARGUMENT. The jurisdiction of the Court of Appeals in bank- ruptecy matters extends to interlocutory as well as to final orders, and a review should be had in all eases where a substantial right is involved. The petitioner should not be compelled to undergo the delay and expense of a long hearing before the referee, if the bankruptcy Court lacks jurisdiction to grant the de- mand of the trustee for damages, both compensatory and punitive, in a summary proceeding, thus denying petitioner the constitutional right to a trial by jury. The return of the petitioner to the order to show cause, which is not controverted, shows that the claim of fraud has already been adjudicated by the state Court in a controversy between petitioner and the bankrupt corporation; and shows, moreover, that since the trustee stands in the position of the bank- rupt, he is barred by the applicable statute of limita- tions of the State of California. I. THE APPELLATE JURISDICTION OF THE COURT OF APPEALS IN BANKRUPTCY PROCEEDINGS INCLUDES INTERLOCU- TORY AS WELL AS FINAL ORDERS. We discuss this subject at the vutset because we anticipate a motion by the respondent to dismiss this appeal upon the ground that the order appealed from is an interlocutory and not a final order. We shall proceed to show that, under the plain provisions of the statute, the jurisdiction of the Court of Appeals includes interlocutory orders in bankruptcy: Section 47, Title 11, U.S.C.A. reads as follows: “Jurisdiction of appellate courts. ‘““(a) The United States courts of appeals, in vacation, in chambers, and during their respective terms, as now or as they may be hereafter held, are invested with appellate jurisdiction from the several courts of bankruptcy, either interlocutory or final, and in controversies arising in proceed- ings in bankruptcy, to review, affirm, revise, or reverse, both in matters of law and in matters of fact; Provided, however, that the jurisdiction upon appeal from a judgment on a verdict rendered by a jury shall extend to matters of law only: And provided further, That when any order, decree, or judgment involves less than $500, an appeal therefrom may be taken only upon al- lowance of the appellate court. i RE RY TPN LRP ELS WEY TES ESE ATPL NES Be Ye LOIN LOS pr SLIT LLIN TEFEN AOR BORE IN TEATS SAIN 24 ‘‘(b) Such appellate jurisdiction shall be ex- ercised by appeal and in the form and manner of an appeal. ‘‘(e) The Supreme Court of the United States is vested with jurisdiction to review judgments, decrees and orders of the United States courts of appeals in proceedings under this title in accord- ance with the provisions of the laws of the United States now in force or such as may hereafter be enacted.”’ It would seem that this language is so clear that he who runs may read; yet its force and effect seems to have been lost sight of in decisions handed down since the amendment of 1938, which ignore that the distinction in the former statute between ‘‘proceed- ings”’ and “‘controversies’’ no longer exists, and that interlocutory as well as final orders are appealable, subject only to the rule that the order must not be of a purely formal or trivial character; in other words, the order must be one which affects substantial rights of the appellant. Remington (Vol. 8, p. 323), under the heading, ‘‘Appealable Orders; in General,’’ thus states the situation as it now exists with respect to appeals from orders in bankruptcy: ‘“‘The original provisions of Sections 24-25 of the 1898 bankruptcy act were quite at variance from the present form. It contemplated possible use of a writ of error or of certiorari, as well as appeals in equity; were so phrased as to indicate a distinction between; ‘controversies arising in bankruptcy’ and ‘bankruptcy proceedings’; and 25 the only expressly appealable orders were (1) a judgment adjudging bankruptcy, (2) a judg- ment granting or giving a discharge, and (3) a judgment allowing or rejecting a claim of $500 or more. To state that this left things in consider- able doubt and uncertainty reflects polite restraint in the use of stronger terms. In certain respects, some of the older decisions still have value, but the majority of them, since the 1926 and 1938 amendment of the sections herein involved, are worthless. It can be said now that appeal lies from any order, either interlocutory or final, whether entred in a ‘controversy arising in bank- ruptcy,’ or in a ‘bankruptcy proceeding,’ by which the appellant is aggrieved. There is no longer any doubt about the appealability of the various and sundry intermediate or interlocutory orders in the course of bankruptcy administration, provided they have actual signtficance.’’ The provisions of Section 24 of the Bankruptcy Act, as amended in 1938, 11 U.S.C. Sec. 47, in respect of the review by appeal of interlocutory orders in pro- ceedings in bankruptcy, have been applied or invoked in the instances hereinafter noted in which the order in question was expressly characterized by the Court as such an order or has been deemed to be such al- though not expressly so characterized, with the results stated. In the following instances, in addition to the others subsequently noted, the order in question has been held or declared appealable, or an appeal therefrom has been entertained : beasts iets ‘ 26 —An order denying a motion by the debtor to dis- miss an involuntary petition in bankruptcy. (Harris v. Mills Novelty Co., 106 Fed. 2d 976; Theard v. Fi- delity & Deposit Co., 202 Fed. 2d 880), or for the re- organization of a corporate debtor. —An order in a reorganization proceeding appoint- ing a person other than a referee as a special master to take testimony and report as to the fairness and reasonableness of a proposed compromise offer, the Court having intimated that if such offer should be accepted and approved the debtor corporation would be returned to the stockholders and the proceeding would be dismissed. —An order of contempt for failure to produce books of account relating to the business of the bankrupt. (Robertson v. Berger, 102 Fed. 2d 530.) —An order denying the petition of the trustee for an order directing a witness to answer certain ques- tions and produce certain memoranda in an examina- tion under Sec. 21(a) of the Bankruptcy Act, 11 U.S.C. Sec. 44(a) (Re Bush Terminal Co., 105 Fed. 2d 150.) —An order denying a motion of tax authorities for the dismissal of a petition of the debtor’s trustee al- leging that taxes assessed against the debtor were ex- cessive and praying that the Court hear and determine the amount and legality of the taxes in question. (Arkansas Corp. Commission v. Thompson, 116 Fed. 2d 179, reversed on other grounds, 313 U.S. 132, 85 L.Ed. 1244, 61 S.Ct. 888.) eC meee ae 27 —An order denying the motion of a creditor to withdraw a claim previously filed by it in the bank- ruptcy proceeding. (Kelso v. Maclaren, 122 Fed. 2d | 867.) —An order denying the motion of a creditor, -, against whom a counter claim had been filed by the trustee, for the dismissal of the counter claim, insofar as it exceeded the amount of the creditor’s claim, on the ground that the Court was without jurisdiction of the creditor by reason of his nonresidence and the lack of service of process. (Columbia Foundry Co. v. Lochner, 179 Fed. 2d 630, 14 A.L.R. 2d 1349.) —An order in a reorganization proceeding refusing to recognize a state Court judgment obtained against the debtor on a claim for damages for a personal in- jury sustained after the institution of the proceeding as proof of such claim and remanding the claim to the master for hearing on the merits. (In re Chicago & E.I.R. Co., 121 Fed. 2d 785, certiorari denied, 314 U.S. 653, 86 L.Ed. 523, 62 S.Ct. 102.) —An order requiring the referee to furnish to a creditor a transcript of testimony taken in an ex- amination under Section 2la of the Bankruptcy Act. (In re Winton Shirt Corp., 104 Fed. 2d 777.) —An order in a reorganization proceeding impound- ing the list of the debtor’s creditors and stockhold- ers and providing that use of the list for the purpose of sending communications to security holders should be permitted only separate applications to the Court to authorize specific communications. (Delatour v. Meredit, 144 Fed. 2d 594.) nina 28 —An order approving an order of the referee in- structing the trustee not to pay a sum required to extend the bankrupt’s leasehold interest in property occupied by it. (R. J. Rosen & Sons, Inc., 130 Fed. 2d 81.) —An order in a reorganization proceeding author- izing the sale by the trustee of certain real property alleged to belong to the debtor. (Hoehn v. McIntosh, 110 Fed. 2d 199.) —An order in a proceeding under Section 75 of the Bankruptcy Act, 11 U.S.C. Sec. 203, denying a motion of creditors of the debtor for leave to forclose their mortgages. (Federal Land Bank v. Hansen, 113 Fed. 2d 82.) —An order denying the bankrupt’s motion to com- plete the record upon the referee’s refusal to trans- mit to the Court, on review of his order denying a discharge, copies of motion before referee to vacate his findings and documents attached thereto as ex- hibits. (In re Leigh, 139 Fed. 2d 386.) —An order affirming the action of the referee in sustaining the exceptions of the bankrupt to a portion of a creditor’s specifications of objections to her dis- charge and overruling others. (Morris Plan Indus- trial Bank v. Schorn, 135 Fed. 2d 538.) In the case of In re Leigh, 139 Fed. 2d 386, the referee in bankruptey made findings indicating that he would deny the discharge of the bankrupt on the ground that he had failed to keep proper financial records. The bankrupt moved to vacate these findings, SEIS ee SER PEG AORN Ba 14a ? ERE RON — 29 which motion was denied by the referee. The bankrupt then filed a timely petition for review of the order, and the referee refused to transmit to the District Court either a copy of the motion or copies of certain Court records which were attached to them. The bank- rupt moved for a completion of the record in the Dis- trict Court. This motion was denied and an appeal was taken to the United States Court of Appeals for the District of Columbia. At page 387, that Court, reversing the District Court, uses the following lan- guage: ‘‘Courts have refused appeals from interlocu- tory orders in bankruptcy which are trivial in their effect on the proceedings, but this is not the ease here. A bankrupt who seeks a review of an order on a motion is entitled to have the court consider the motion papers and all the exhibits as they were presented to the referee, and this is a substantial right.” The Court, while holding that the petitioner had misconceived his remedy in seeking a special appeal and that it must look to the bankruptcy act for its jurisdiction, states: “That act authorized an appeal of right from all bankruptcy orders, interlocutory as well as final, except where money alone is involved and the amount is less than $500.” The Court proceeds to state, however, that it would not be in the interest of justice to dismiss a special appeal merely to have it presented again in different form, and that it would ‘‘take jurisdiction of this case on the papers before us as an appeal of right.” 30 The limitation on the right to appeal from inter- locutory orders is thus stated in Federal Land Bank v. Hansen, 113 Fed. 2d 82, by the Circuit Court of Appeals of the Second Circuit: ‘‘Appeals should be dismissed only when the court has no jurisdiction to review any aspect of the action taken below. When the order below is re-examined, even to the limited extent of de- termining whether or not the discretion of the District Court has been abused, the appellate court exercises its appellate jurisdiction, and affirmance or reversal would appear to be re- quired. The present order was an interlocutory one. Even in bankruptcy, various interlocutory orders which determine nothing, such as orders merely of reference for report, are not review- able and appeals will be accordingly dismissed. Other interlocutory orders are reviewable for abuse of discretion alone. Appeals from such 4 orders have occasionally been dismissed, but we believe it is better practice to affirm if no abuse of discretion is shown (citing cases).”’ We have emphasized the phrase ‘‘even in bank- ruptey”’ in the foregoing quotation because it is ob- vious that the Court recognizes that, in contract with appeals generally, in which review is limited to final judgments or decrees, appeals in bankruptcy run from interlocutory orders. This, of course, is in con- formity with the plain provisions of the statute as it now stands. In the case of Pearson v. Higgins, 34 Fed. 2d 27, in which the Circuit Court of Appeals of the Ninth Cireuit held that an order of the District Court % Se AE SELIM ze ceieiinmeaieiiiessaann — ; 31 denying review of a referee’s determination that the bankruptcy Court had jurisdiction in a summary proceeding, was not an appealable order, is no longer the law, in view of the amendments to the sections of the act relating to appeals. It is remarkable that, on the Ninth Circuit as late as 1949, it was held that an interlocutory order in a ‘‘controversy”’ in bankruptcy, as distinguished from a ‘“‘proceeding’”’ in bankruptcy was not appealable, despite the fact that subdivision (a) of Section 47 specifically authorizes appeals both in ‘‘controversies”’ and in ‘‘proceedings.’’ It is quite obvious that the Court relied upon decisions prior to the amendment of 1938 and that the drastic and sweeping changes in the law were not called to the attention of the Court. In Goldie v. Carr, 116 Fed. 2d 325, the Court of Appeals of the Ninth Circuit dismissed an appeal from an order overruling defendant’s objection to the jurisdiction of the bankruptcy Court to compel the appellant to turn over certain corporate shares and moneys alieged to be held in trust for the debtor’s estate. The Court says that the order was plainly interlocutory in character and that no turnover order had been made. In regard to the amendment of June 22, 1938, embodied in the Chandler Act, the Court says that Act—the controlling law here—does not mate an interlocutory order in a controversy in bank- ruptey appealable. This language directly contradicts the plain provisions of Section 47(a) itself, which makes interlocutory orders appealable whether made Ee ne ee Te —s 32 in a controversy in bankruptcy or in a proceeding in bankruptcy. It is submitted that this language must have been inadvertently used, and that the Court, in spite of its reference to the amendment, relied upon decisions prior to its adoption. This is clear from the fact that in support of the statement it cites Pearson v. Higgins, supra; In re Federal Photo Engraving Corp., 54 Fed. 2d 628, and Lieber- man v. Bankcroft, 59 Fed, 2d 202, all of which were decided prior to the effective date of the 1938 amend- ment. In Arkansas Corporation Commission v. Thompson, 116 Fed. 2d 179, in which the Commission appealed from an interlocutory order denying its motion to dismiss a proceeding brought by the trustee, which alleged that the property of the railroad had been assessed in excess of its fair market value, the Circuit Court of Appeals of the Eighth Circuit says: ‘In limine the trustee has presented that this court should decline to maintain this appeal be- cause the order appealed from is a proceeding in bankruptcy and is manifestly interlocutory and is not conclusive of the merits of the con- troversy between the trustee and the Arkansas tax authorities. But we conclude that the appeal is authorized by the provisions of Section 24, subdivisions a, b of the Bankruptcy Act as amended June 22, 1938, 52 Stat. 854, 855, 11 U.S.C.A. See. 47, Subs. a, b, and decline to dis- miss it.’’ In Cohen v. Eleven West 42d Street, Inc., 115 Fed. 2d 531, the Cireuit Court of Appeals of the Second PEDRO LO LYS SEER ah ALE DOLLY GME ALON ERDAS IIE II STEED LEO MERBE NS AL ORIN — wi Circuit, reversing an order denying a motion for a summary judgment, says at page 533: “‘The appellee suggests that the order, being : interlocutory, is not appealable. In an action that would of course be true, for it merely refuses to dispose of the case without a trial (In re Fink- elstein, 102 Fed. 2d 688; Jonse v. St. Paul F. & Ins. Co., 108 Fed. 2d 123, 125). But in bank- ruptcy, interlocutory orders are in general ap- pealable. (Robertson v. Berger, 102 Fed. 2d 530; j In re Winton Shirt Corp., 104 Fed. 2d 777.) And this was not an example of that class of orders which are merely incidents in an inquiry pending in the District Court (In re Hotel Governor Clin- ton, 107 Fed. 2d 398, 399).”’ In Columbia Foundry Co. v. Lochner, 179 Fed. 2d 630, 14 A.L.R. 2d 1349, the law of appeals from in- terlocutory orders in bankruptcy is very aptly sum- marized by Judge Soper of the Fourth Cireuit in the following language: “Tt is urged upon us that this appeal should be dismissed as premature since it relates only to the jurisdiction of the court to render an affirm- ative judgment against the creditor and does not represent a final judgment in which the rights of the parties are determined. Section 24, sub. a, 11 USCA Sec. 47, sub a, of the Bankruptey Act provides that the Circuit Courts of Appeals are invested with appellate jurisdiction from the sev- eral courts of bankruptcy in their respective jurisdiction in proceedings in bankruptcy, either interlocutory or final, and in controversies arising in proceedings in bankruptcy. Since the appeal in the instant case is from an interlocutory order, ‘ St oD i 34 it is premature unless it was entered in a pro- ceeding in bankruptey. Although the line of demarcation between proceedings and contro- versies is uncertain, it is generally accepted that questions between bankrupt and his creditors, such as is presented in the instant case, fall into the category of proceedings in bankruptcy. Mat- ter of National Finance & Mortgage Corp., 9 Cir. 96 F 2d 74; Broders v. Lage, 8 Cir. 25 F 2d 299; Morehouse v. Pacific Hardware & Steel Co., 9 Cir. 177 F 337; Collier on Bankruptcy, 14th Ed., Vol. 2, Sec. 24.12. ‘*The appeal under Section 24, sub a, from an interlocutory order involving $500 or more in a proceeding in bankruptcy is generally one of right; but the decision limit the appeal to in- terlocutory orders which have the character of a formal exercise of judicial power affecting the asserted rights of a party and an appeal from an interlocutory order involving the exercise of the trial court’s discretion is allowed only upon a showing of an abuse of discretion. See Collier on Bankruptcy, supra, Sees. 24.11, 24.39. Clearly due regard for the efficiency and dispatch of bank- ruptey proceedings requires that the right of ap- peal from interlocutory orders under Section 24, sub a, be kept within reasonable bounds. ‘*However, even prior to the enactment of Sec- tion 24, sub a, an interlocutory order overruling an objection to jurisdiction had been held ap- pealable. In re Margolies, 2 Cir. 266 F 203; see In re Hotel Governor Clinton, Inc., 2 Cir. 107 F 2d 398, 399. It is our view that in consideration of the importance of the question involved, the appeal in this case should be entertained, and the motion to dismiss is therefore denied.”’ 35 II. NEITHER THE REFEREE NOR THE DISTRICT COURT IN BANK- RUPTCY HAS ANY JURISDICTION TO MAKE THE ORDER SOUGHT BY THE TRUSTEE, OR TO HEAR OR DETERMINE HIS CLAIM FOR DAMAGES OR, MORE PARTICULARLY, TO MAKE THE ‘‘TURNOVER’’ ORDER PRAYED FOR. A Court of Bankruptcy Has No Jurisdiction to Try a Contro- versy Between the Trustee and One Not a Party to the Pro- ceeding; and Even the District Court May Not, in the Exer- cise of Its Law or Equity Jurisdiction, Hear and Determine Such a Suit in the Absence of Diversity of Citizenship. The law has been well settled for many years by well-considered decisions of the Supreme Court of the United States that a referee in bankruptcy, and the District Court sitting in bankruptcy proceedings, have no jurisdiction to try title to property claimed adversely by one not a party to the bankruptcy pro- ceedings. In other words, such a question of title can- not summarily tried in the absence of the consent of the defendant, unless he appears in the Bankruptcy Court and consents to have his title tried in that man- ner. Weidhorn v. Levy, 253 U.S. 268; 40 S.Ct. 534; Harris v. First National Bank, 216 U.S. 382, 30 S.Ct. 296, 54 L.Ed 528. The jurisdictional point that we make is not merely that the referee in bankruptcy has no jurisdiction to try and determine adverse claims in the bankruptcy proceeding; But The Federal Court itself would have no jurisdiction over a suit (which formerly would have been on the equity side) brought by the trustee to recover prop- erty claimed to belong to the bankrupt or over any suit to recover damages ex contractu or ex delicto against a third party who denied the claim, in the absence of a showing of diversity of citizenship. We may add that the language used in some of the decisions as to consent is seriously questionable, be- cause of the universal rule that the party cannot, by consent, give a Court, as such, jurisdiction in a matter which is excluded by the laws of the land. Thus in Kaigler v. Gibson, 264 Fed. 240, it is said that ‘‘a trustee cannot sue in a Federal Court where there is no diversity of citizenship and no Federal question, unless he brings the case within one of the exceptions.”’ It is also added: ‘*It may be doubted whether the consent of the defendant mentioned above (referring to a sec- tion of the Bankruptcy Act) extends further than to a question of venue, which may be waived. As a general rule, Federal jurisdiction, properly so- called, cannot be so conferred. Minnesota v. North- ern Securities Co., 194 U.S. 43.” And the Supreme Court in Lovell v. Newman, 227 U.S. 412, 33 S.Ct. 375, says that the consent provided for in the act ‘‘certainly was not intended to enlarge the jurisdiction of the Cireuit Court of the United States so as to give them a jurisdiction which they would not have because of diverse citizenship and a requisite amount in controversy, or by reason of a cause of action arising under the constitutional laws of the United States.”’ BRATS ES LOT LIOR SSO LEIA LOG AM RONDA TERN TT — 37 In any event, the entire question of jurisdiction was set at rest as long ago as January 14, 1929, in a brief per curiam decision by the Supreme Court of the United States in State Trust & Savings Bank v. Dunne, 278 U.S. 582, 73 L.Ed. 518, 49 S.Ct. 184. To understand that decision it is necessary to examine the opinion of the Cireuit Court of Appeals in the same case (24 Fed. 2d 477). A trustee in bank- ruptey, to use the language of the Cireuit Court of Appeals for the Fifth Circuit, ‘‘brought suit to re- cover certain collaterals, alleged title to same to be in him as trustee, and also avering that they had been transferred by the bankrupt within four months prior to the filing of the petition with intent and purpose on its part to hinder, delay and defraud its creditors in violation of the provisions of Section 67e of the Bankrupt Act. In the alternative the bill prayed for an accounting and for recovery of the value of the collaterals, less any amount found to be due appel- lant.”’ The District Court rendered a decree or judgment in favor of the plaintiff, and this was affirmed by the Circuit Court of Appeais, which said in part: “Tt is contended by appellant that the District Court was without jurisdiction. The allegations of the bill were sufficient to show a cause of ac- tion arising under section 67e of the Bankruptcy Act. We must put aside consideration of the merits as to that part of the bill, not as being without substance, but as unnecessary to be de- cided. The asserted ground of jurisdiction re- quired the District Court to take jurisdiction 38 initially and have done so, to decide the equities of the case.”’ A petition for a writ of certiorari was filed with the Supreme Court of the United States, and on Jan- uary 14, 1929, the Court said: “‘Per curiam: Reversed, for the reason that there is no Federal jurisdiction over the cause. (Wood v. A. Wilbert’s Shingle & Lumber Co., 226 U.S. 384, 57 L.Ed. 264, 33 S.Ct. Rep. 125; Weidhorn v. Levy, 253 U.S. 268, 64 L.Ed. 898, 40 S.Ct. Rep. 534; Taubel-Scott-Kitzmiller Co. v. Foz, 264 U.S. 426, 68 L.Ed. 770, 44 S.Ct. Rep. 396.) ”’ ITI. NEITHER THE REFEREE NOR THE DISTRICT COURT HAD ANY JURISDICTION TO MAKE THE ‘‘TURN-OVER’’ ORDER SOUGHT BY THE TRUSTEE. The effect of this order would not merely mean that a summary judgment would be rendered against -'Trieber without a trial, by jury or otherwise, but also that he would be ordered to pay the entire amount claimed as damages by the trustee, and that if he re- fused to do so he could be attached and punished for contempt of Court, and ordered to stand committed until he paid to the trustee the entire amount claimed, both as compensatory and as punitive damages. This, as we heretofore stated, is indeed something novel in the law. It harks back to the horrors of the debtors’ prison and the infamies of the Wardens of the Fleet, described so vividly by the Ear] of Birken- head in his work on ‘‘Celebrated Criminal Trials.”’ 39 The vice of the preceding attempt in the case at bar is clearly pointed out by Justice McReynolds in Daniel v. Guaranty Trust Co. of New York, 285 U.S. 154, 52 S.Ct. 326, 78 L.Ed. 675: “In the circumstances, would the referee have jurisdiction to enter the turnover order against the Trust Company? The answer must be ‘No’ unless that company, by filing its petition for reclamation entered its general appearance and in effect consented to submit itself to summary proceedings before that officer in respect of mat- ters having no immediate relationship to the claim which it had presented. ‘In practice, such a rule might lead to unfor- tunate complications and deprive owners of prop- erty of fair opportunity to recover. The risk in- cident to a general appearance and consent to adjudication of claims of all kinds might easily enter where the right to recover is clear. More- over, the choice would not be between tribunals merely but between the ordinary process in a plenary suit and a summary hearing. We are not cited to any opinion by an appellate court which definitely approves the view advanced by the peti- tioner. We cannot conclude that the demand for speedy administration of the bankrupt estates is enough to justify such a radical departure from ordinary procedure. And the suggestion that it is possible to impose equitable terms as a con- dition to an order of reclamation is not helpful.”’ It is, indeed, something new to ask a Court to order a litigant, under the pains and penalties of contempt, to pay both compensatory and punitive damages to his adversary. 40 We again submit that neither the Referee nor the District Court could make any such order. ‘Jurisdiction in summary proceedings, being of statutory authority, and based upon necessity to prevent threatened loss to the rightful owners of property, or defiant disobedience to the orders and decrees of courts, should not be enlarged by construction or implication.”’ In re Cox-Rackley Co., 245 Fed. 376. We shall proceed to show that the order sought by the trustee will issue only in cases in which the ad- verse party is actually in the possession of property belonging to the bankrupt estate, or where the sum- mary process is used ‘‘to recover possession of prop- erty which has been in the Court’s possession and has i been wrongfully taken away.”’ Chandler v. Perry, 74 Fed. 2d 371. In Maggio v. Zeitz, 333 U.S. 56, 68 S.Ct. 401, 82 L.Ed. 476, the Supreme Court unanimously reversed a commitment for contempt of Court for failure to comply with a ‘‘turnover’’ order which had been af- firmed by the Circuit Court of Appeals (157 Fed. 2d 951). At 68 S.Ct. 405, Mr. Justice Jackson, who delivered the opinion of the majority of the Court, says of a “‘turnover’’ order: ‘‘But this procedure is one primarily to get a property rather than to get at a debtor. Without pushing the analogy too far, it may he said that the theoretical basis for this remedy is found in the common law actions to recover possession— SETA ORI ERE EPL PT TOY 41 detinue for the unlawful detention of chattels and replevin for their unlawful taking—as dis- tinguished from actions in trespass or trover to recover damages for the withholding or for the value of the property. Of course the modern remedy does not follow any of these ancient and often overlapping procedures, but the object— possession of specific property—is the same. The order for possession may extend to proceeds of property that has been disposed of, if they are sufficiently identified as such. But it is essentially a proceeding for restitution rather than indemni- fication, with some characteristics of a proceed- ing in rem; the primary condition of relief is possession of existing chattels or their proceeds capable of being surrendered by the person ordered to do so. It is in no sense based on a eause of action for damages for tortious conduct such as embezzlement, misappropriations, or im- provident dissipation of assets.”’ In no other case is the injustice and absurdity of such proceedings as the one at bar stated more forcibly than by the Cireuit Court of Appeals of the Second Circuit in the case of In re Luma Camera Service, 157 Fed. 2d 951: “We would hold that a turn over proceeding may not, via a fiction be substituted for a criminal prosecution so as to deprive a man of a basic con- stitutional right, the right of trial by jury. We would note, too, that one consequence of the fiction is that the respondent may be twice punished for the same offense, since, if he later is indicted for violation of 11 U.S.C.A. Section 52, sub b, his imprisonment for contempt will not serve as a 42 defense. We would add that nowhere in the Bank- ruptey Act has Congress even intimated an in- tention to authorize such results, and that they stem solely from a judge-made gloss on the statute.’’ (Emphasis by the Court.) In Cline v. Kaplan, 323 U.S. 97, 65 S.Ct. 155, 89 L.Ed. 97, it is said at page 155 of 65 S.Ct.: “If the property is not in the court’s posses- sion and a third party asserts a bona fide claim adverse to the receiver or trustee in bankruptcy, he has the right to have the merits of his claim adjudicated ‘in suits of the ordinary character, with the rights and remedies incident thereto.’ ” In support of this statement, Justice Frankfurter cites Galbraith v. Vallely, 256 U.S. 46, 41 S.Ct. 415, 65 L.Ed. 823 and Taubel-Scott-Kitzmiller Co. v. Fos, supra. | It is further held that: ‘‘Consent (te proceed summarily) is wanting where the claimant has throughout resisted the petition for a turn over order and where he has made formal protest against the exercise of sum- mary jurisdiction by the bankruptcy court be- fore that court has made a formal order. We further call the attention of the Court to the | very learned and exhaustive opinion of Judge San- born of the Eighth Circuit in the case of In re Rath man, 183 Fed. 913, which has often been cited with approval, it having been said in a later decision that ‘‘Judge Sanborn reviews all of the decisions and dis- cusses exhaustively the cases in which a summary 43 proceeding may be resorted to.’’ (In re Cox-Rackley Co., 245 Fed. 367.) Space forbids lengthy quotation from the Rathman ease. It is sufficient to say that he prefaces his dis- cussion with the statement that the trustee may not escape ‘‘from the declarations of the Supreme Court that the jurisdiction of the Bankruptcy Court sum- marily to determine claims to lien upon and title to property claimed as that of the bankrupt arises out of its actual possession of the property (citing cases) and is exclusive of all other grounds because the actual possession draws to it the legal custody of the property (etc.).”’ An outstanding decision which specifically holds that money or the property of the bankrupt estate, not in the actual or constructive possession or control of the trustee, are not subject to the summary juris- diction of the Bankruptcy Court, and cannot be re- covered by a “‘turn over’’ order, is In re Joslyn’s Estate, 168 Fed. 2d 803, in which the Circuit Court of Appeals for the Seventh Circuit says, at page 806: ‘The law is well established that a Bankruptcy Court does not have summary jurisdiction over a turnover proceeding to recover an alleged in- debtedness due from a third party to the bank- rupt estate, or on property rights claimed by an adverse party who is in possession and makes timely objections to the summary jurisdiction.’’ In Dwyer v. Franklin, 227 Fed. 2d 152, decided Jan- uary 2, 1956, the Court of Appeals of the Seventh Circuit, holds (we quote the syllabi in the Pacific 44 Reporter in lieu of quotation from the decision itself) : “1. Though filing a claim in Bankruptey Court is an implied consent to summary adjudi- cation by that court of any counter-claims based upon the subject matter of that claim, it is not an implied consent to summary adjudication in Bankruptcy Court of a counterclaim arising out of subject matter which has no relation to that claim. Bankr. Act, Paras. 2, sub. a(7), 23, subs. a, b, 60, 67, 70 and sub. e, 11 U.S.C.A., Paras, 11, sub. a(7) 46, subs. a, b, 96, 107, 110 and sub. e. “2. Where former director of bankrupt cor- poration filed claim for goods sold bankrupt, and trustees asserted counterclaim based on breach of claimant’s fiduciary duty as director, bank- ruptey court did not have jurisdiction to deter- mine counterclaim in absence of consent of claimant which could not be implied from filing of claim. Bankr. Act, Paras. 2, sub. a(7) 23, subs. a, b, 60, 67, 70 and sub. e, 101-267, 301-399, 11 U.S.C.A. Paras. 11, sub. a(7), 46, subs. a, b, 96, 107, 110 and sub. e, 501-676, 701-799. **3. Trustees’ unliquidated claim for damages against creditor, and creditor’s claim against bankrupt for goods sold were not ‘mutual debts,’ within provision of Bankruptcy Act authorizing the setoff of mutual debts. Bankr. Act, Para. 68, sub. a, 11 U.S.C.A. Para. 108, sub. a. ‘“‘4. The phrase ‘account stated’ in provision of Bankruptcy Act authorizing the setoff of mutual debts between a creditor and a bankrupt means an agreement between the parties to an account based upon prior transactions between claienlctltdcgedeel 45 them, and does not authorize trustee to setoff or counterclaim an unrelated, unliquidated claim for damages against creditor’s claim for goods sold and delivered to bankrupt. Bankr. Act, Sec. 68, sub. a, 11 U.S.C.A. Sec. 108, sub. a.”’ IV. THE PURPORTED CLAIM FOR AFFIRMATIVE RELIEF BY THE TRUSTEE IS BARRED BY THE STATUTE OF LIMITATIONS. The separate defense of the trustee, shows upon its face that the alleged fraudulent representations al- leged to have been made by Morris Trieber to the offi- cers and directors of the bankrupt corporation were made on April 30, 1951, and that the stock certificates alleged to have been issued to Trieber and others were issued on the same day. The trustee’s so-called ‘‘Sep- arate and Distinct Defense’’, which is in reality in the nature of a cross-complaint, was not filed until June 20, 1955, or more than four years after the date on which the fraud was alleged to have been committed and consummated. Thus, the claim of the referee for affirmative relief is clearly barred by the statute of limitations unless the party who alleges the fraud has pleaded himself out of the statute by a proper allegation of nondiscov- ery. The only attempt made by the referee in that behalf is in paragraph IX of the Separate Defense and is as follows: “That thereafter and within three years last past, the officers and directors of said corpora- tion, other than the said Trieber, for the first time 46 discovered that the representations of the said Trieber, made to the said corporate officers and directors as above alleged on or about the 8th day of March, 1951, were false and untrue and were untrue, etc.’’ There is no allegation anywhere in this pleading of the facts and circumstances which led to the discovery, or why the discovery was not made sooner, or that the discovery could not have been made within the statutory period by the exercise of reasonable dili- gence on the part of the corporation or its officers. The naked allegation that fraud was not discovered until within three years prior to the filing of the suit has been held utterly insufficient in a long line of California cases. Watkins v. Bryant, 91 Cal. 492, 27 Pac. 775; Lake Washington Consolidated Co. v. Wood, 113 Cal. 482, 45 Pac. 809; Wilmans v. Weissman, 38 C.A. 693, 102 Pace. 2d 382 ; Vertex Investment Company v. Schwabacher, 57 C.A. 2d 406, 134 Pac. 2d 891; West v. Great Western Power Co., 36 C.A. % 403, 97 Pac. 2d 1014. A complaint alleging only that the falsity of repre sentations was not discovered until a certain date was insufficient. Sacramento Suburban Fruit Lands Co. v. Lind quist, 39 Fed. 2d 900. (Certiorari denied by the Supreme Court of the United States, 282 U.S. 853, 51 S.Ct. 31, 75 L.Ed. 756.) known by the said Morris Trieber to be false and 47 See to the same effect: Sides v. Sides, 119 C.A. 2d 349, 259 Pac. 2d 708; Cragge v. White, 113 C.A. 2d 356, 248 Pac. 2d 193 ; Lewis v. Security-First National Bank of Los Angeles, 58 C.A. 2d 827, 137 Pac. 2d 864; Seeger v. Odeli, 18 Cal. 2d 409, 115 Pac. 2d 977, 136 A.L.R. 1291; Jackson v. Master Holding Corp., 16 Cal. 2d 824, 108 Pac. 2d 673; Gibson v. Rath, 13 C.A. 2d 40, 55 Pac. 2d 1219. It would be like carrying coals to Newcastle to cite further decisions in support of a rule so long and so well settled. The allegation of the trustee’s claim here- tofore quoted is wholly insufficient to avoid the bar of the statute of limitations and, accordingly, the referee obviously had no jurisdiction to proceed to hear and determine a claim outlawed upon its face. V. THE PROCEEDINGS BY THE TRUSTEE ARE BARRED BY THE FINAL JUDGMENT OF THE STATE COURT IN AN ACTION BETWEEN THE BANKRUPT AND TRIEBER WHICH WAS AN ACTION BETWEEN THE SAME PARTIES FOR THE SAME CAUSE. The complaint filed in the action in the state Court is set forth in haec verba as an exhibit to the return of Trieber to the order to show cause. (T.R. 26-41.) The separate defense of the trustee, claiming dam- ages and demanding the turnover of $40,675.28 to the trustee appears at pages 9 to 18 of the Transcript. 48 Let us consider, at the outset, the allegations of the two pleadings as they stand side by side. Paragraphs I and II of each set forth the corporate capacity of the bankrupt corporation, Gayne Sales Co., Inc. and the fact that it was originally organized as Arian Gayne and Associates. Paragraph IIT sets forth the names of the incor- porators, to wit, I. E. Arian, Jerome R. Gayne and Samuel Gayne, and states that at all the times re- ferred to the incorporators were directors of the cor- poration and that Trieber was also a director. Paragraph IV of the Trustee’s defense is identical with Paragraph VI of the Second Amended Com- plaint. The only distinction between the two docu- ments at this juncture is in the order in which they are set forth. The resolution referred to in paragraph VI of the Second Amended Complaint is preceded by allegations as to certain representations alleged to have been made by Trieber at the meeting at which the resolu- tion was adopted; whereas, in the trustee’s defense, the alleged representations are set forth after the resolution. To state the matter otherwise—in one pleading it is set forth that the directors of the corporation adopted a resolution and that the resolution was adopted because of alleged representations made by Trieber; in the other, it is alleged that Trieber made the representations and that the resolution was adopted in reliance thereon. They certainly stand not upon the order of their going. bs SENG 2 are ai Naa a ors — 49 Paragraph VI of the trustee’s defense and para- graph VII of the complaint both recite the filing of an application for the issuance of 400 shares with the Commissioner of Corporations and paragraph VII of the trustee’s defense and paragraph VIII of the second amended complaint each recite the approval of the application by the Commissioner. We may add that paragraph VII of the defense and paragraph IX of the second amended complaint each contains allegations that Joseph A. Brown was ap- pointed escrow holder for all of the stock to be issued by the corporation and that this appointment was ap- proved by the Commissioner. In paragraph VIII of the first and paragraph X of the second pleading, there are recitals that on or about the 30th day of April Trieber represented to the directors and officers of the corporation that he had delivered to the said corporation merchandise of a reasonable value of $15,675.28, $6,708.18 against the stock to be issued to Samuel Gayne, and $8,967.10 in payment of the stock to be issued to Morris Trieber and that in reliance upon the said representations the corporation issued certain shares of stock to the per- sons therein named. The numbers of these certificates are set forth in each of the pleadings. In paragraph IX of the defense and paragraph XI of the complaint, there are allegations to the effect that the representations made by Trieber were false, fraudulent and untrue and there is in the trustee’s defense the naked allegations, repeatedly held to be insufficient (see Lady Washington Consolidated Gold a he 50 Mining Co. v. Wood, 113 Cal. 482; Galusha v. Fraser, 178 Cal. 653; Original Mining and Milling Co. », Casad, 210 Cal. 71; Mortimer v. Loynes, 74 C.A. 24 160, and other decisions heretofore cited), that the discovery of the falsity of the representations was made within three years prior to the commencement | of the action. Then in each case follow allegations of actual and punitive damages. How any factual distinction can be drawn between the allegations of the two pleadings beggars our com- prehension. The law is well settled in California that a judg. ment of dismissal on the sustaining of a demurrer is res judicata on the identical factual issues. This rule is stated in the quite recent case of Keidatz v. Albany, 39 Cal. 2d 826, 249 Pac. 2d 264. This has apparently been the law ever since Robinson v. Howard, 5 Cal. 429, decided in 1855, in which it is stated by Justice © Heydenfeldt that a judgment upon demurrer is a bar _ to subsequent action ‘‘when it determines the whole merit of the case,’’ and the opinion proceeds to say: ‘*Here the averment of the answer shows that the demurrer went to the validity of the contract which gave rise to the claim, and this averment is found to be true as alleged, by the judge at nisi prius, upon inspecting the record of the case.” The same rules are stated with extensive discussion | of authorities in Goodard v. Security Title Insurance and Guarantee Co., 14 Cal. 2d 47, commencing at page 51, in which it is stated that a judgment given after 51 the sustaining of a general demurrer on a ground of substance may be deemed a judgment on the merits and conclusive in a subsequent suit. In Erganian v. Brightman, 13 C.A.2d 696, 57 Pac. 2d 971, the Court says at page 700: ‘‘A judgment upon an order sustaining a de- murrer constitutes a trial on the merits when an issue of law raised by the demurrer is heard and ruled upon by the court. If leave to amend is granted, it must be taken advantage of, and if it is not, a plaintiff finds himself in the same position as if a demurrer were sustained with- out leave to amend.”’ In the paragraph preceding this language the Court says: ‘‘And a judgment upon the sustaining of a de- murrer to the complaint for failure to state a cause of action is a bar to a subsequent action setting up the same facts.’’ In Freeze v. Salot, 122 C.A. 2d. 561, 266 Pac. 2d 140 (hearing denied by the Supreme Court), affirm- ing a judgment entered on an order sustaining a de- murrer without leave to amend, the Court said that in determining the validity of a plea in res judicata the pertinent question is whether the issue decided in the prior adjudication was identical with the one presented in the action in question. In the recent case of Crowley v. Modern Faucet Manufacturing Co., 44 Cal. 2d 321, 282 Pac. 2d 52 33, the Supreme Court affirmed a judgment dismissing an action upon the ground that a prior judgment sustaining a demurrer without leave to amend was res judicata and that the plaintiff ‘‘was in fact seeking to relitigate the precise issue that was finally adjudicated against him in the former action,”’ and thus that ‘‘the trial Court properly exercised its power to stop vexatious litigation, clearly without merit, and burdensome to the Courts as well as to defend- ants.”’ Wherefore, your petitioner prays that a writ of certiorari issue out of and under the seal of this Honorable Court directed to the Honorable Judges of the United States Court of Appeals for the Ninth Circuit, commanding them to certify and send to this Court for its review and determination, on a day cer- tain to be therein named, a full and complete tran- script of the record of all proceedings in the cause § therein depending, entitled Morris Trieber, Appellant, v. John O. England, Trustee in Bankruptcy of the Estate of Gayne Sales Co., Inc., a corporation, Bank- rupt, Appellee, and numbered in said United States Court of Appeals 15,134, that the judgment of said Court of Appeals may be reviewed by Your Honor and the judgment aforesaid reversed; and that the cause aforesaid be remanded to the said Court of Appeals with direction to do and cause to be done what of right, and according to the laws and customs of the United States ought to be done; and that your petitioner have such other and further judgment, order or relief as to Your Honors shall seem meet, 53 just and proper in the premises; and thus your pe- titioner will ever pray. Dated, San Francisco, California, November 1, 1956. Morris TRIEBER, Petitioner in Propria Persona. JosEPH A. Brown, Of Counsel. (Appendix Follows.) --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386418_0968%3A1. Public record. Not legal advice.