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of them, as intending to assert that an adverse claim which is not colorable can be summarily settled in the bankruptcy court against the consent of the claimant, provided it raises an issue of law and not of fact. We find no support for that view in the decisions of the Supreme Court, or in those of any of the Circuit Courts of Appeals or in any of the District Courts, except in the Southern district of New York.

[2] The question raised by the adverse claimant clearly involves a substantial question of law, and therefore it cannot be determined in a summary proceeding, except with the claimant's consent.

The order of the District Judge is reversed, and the motion of the trustee is denied.

HOUGH, Circuit Judge (dissenting). This petition to revise should be dismissed; it was prematurely or improperly taken. The referee refused jurisdiction upon inspection of pleadings. The court reversed his order, and instructed him to proceed with an ascertainment of facts. This was in accordance with the ruling in Re Goldstein, 216 Fed. 888, 133 C. C. A. 91 (C. C. A. 7th), to the effect that the District Court may pursue the summary method to the point of ascertaining that the alleged adverse claim is substantial and not merely colorable. No trial was ever had, and the order directing it is the subject for review. As we have no means of knowing whether the claim is either adverse or colorable, except an ex parte statement, there is nothing to review. For this reason I dissent from the judgment given.

But the opinion of this court, dealing with what I consider a moot point, asks and answers the question: What is a colorable adverse claim? In so doing the prior decisions of this court have been disapproved; therefore I dissent from the opinion. It seems to be admitted (and is undeniable) that under Babbitt v. Dutcher and Mueller v. Nugent, supra, the bankruptcy court may not proceed summarily to adjudicate upon the rights of an adverse claimant whose claim is more than colorable and based upon a transfer antedating the bankruptcy. Whether in this case there ever was a transfer antedating bankruptcy is the question of fact, as to which no evidence has been taken. This renders inquiry into the meaning of the words "colorable" and "adverse" necessarily in vacuo.

The proposition laid down for law is that of In re Luken, 216 Fed. 890, 133 C. C. A. 94, and is equivalent to saying that, assuming no disputed question of fact, any debatable proposition of law constitutes its maker an adverse claimant. This in turn identifies "arguable" or "debatable” with “colorable”; the latter being the word of controlling and numerous decisions. A colorable question of law is a meaningless phrase. As a modifier in legal parlance, "color" means appearance, as distinct from reality. Colorable law is certainly no more than "color of law," which "does not mean actual law.” McCain v. Des Moines, 174 U. S. 175, 19 Sup. Ct. 644, 43 L. Ed. 936. Both "color" and "colorable" always connote pretense, sham, or falsity. Chicago, etc., Co. v. Allfree, 64 Iowa, 500, 20 N. W. 779; Virginia v. De Hart (C. C.) 119 Fed. 628.

243 F.-5

In a case earlier than the Luken and Goldstein decisions the same court declared the true rule to be that, "where the party in possession sets out in his answer facts which, if true, would constitute an adverse title,”, a summary proceeding is not proper. In re Blum, 202 Fed. 887, 121 C. C. A. 241. This must be construed with the Goldstein ruling, supra. In re Yorkville Coal Co., 211 Fed. 621, 128 C. C. A. 570, this court held that an adverse claim was disclosed by testimony which, "if submitted in a court and no evidence offered in contradiction, would be sufficient to support a judgment in favor of the claimant. These words mean the same thing as those quoted in the opinion of the majority from In re R. & W. Skirt Co., 222 Fed. 256, 138 C. C. A. 67, where it was further and truly said that "the purpose of the act will be largely defeated if, each time a question of law arises over the title to property, an action at law or a suit in equity must be commenced.”

To say that the adverse position must rest upon testimony which, if uncontradicted, would support it, and then add to that the doctrine that an arguable or debatable proposition of law is enough to put the trustee to the delay and expense of a suit, leaves summary jurisdiction resting on nothing but agreement. Nor can our prior decisions be explained away by now calling the claims merely colorable; in the Skirt Company Case the report contains no statement of what the point of law was; but it was plainly debatable, as counsel differed about it and the claimant prevailed in the lower court.

In Alco Film Corporation v. Alco Film Service, 234 Fed. 55, 148 C. C. A. 71, the report shows on its face that the question of adverse claim was specifically raised. Objection to service of the order outside the district was waived, but nothing else; and it was impossible to decide that case as it was decided without holding that a claimant who raised merely propositions of law was not entitled to require a plenary suit to test his rights.

The doctrine enunciated in the case from this court was substantially adhered to in Courtney v. Shea, 225 Fed. 358, 140 C. C. A. 382 (C. C. A. 6th), where it was held that summary proceedings should be dismissed when it appeared that the claim set up existed when petition filed, and “if supported by uncontradicted testimony would sustain a judgment in favor of the claimant." No amount of uncontradicted testimony can sustain a judgment unless the law awards it.

I do not think the District Judge misapprehended the decisions of this court; on the contrary, this judgment overrules them.


(Circuit Court of Appeals, Ninth Circuit. May 28, 1917.)

No. 2854.



The pendency in a state court of a suit to have a declaration of trust declared a mortgage, to redeem thereunder, and to restrain the trustee from selling, was no ground for dismissing a suit in the federal court, by persons claiming under a sale by the trustee, to quiet title as against the claim of the plaintiff in the state court suit, as the pendency of an action in a state court is mo bar to proceedings concerning the same matter in the federal court having jurisdiction.

[Ed. Note.-For other cases, see Abatement and Revival, Cent. Dig. $$ 87-91, 94, 95, 98.] 2. COURTS Om312(8)— FEDERAL COURTS-JURISDICTION-CONVEYANCES TO GIVEN JURISDICTION.

Where the incorporation of a company to take title to land was bona fide and for the purpose of affording a means of handling and selling the land expeditiously and without the inconvenience incident to an ownership and control by numerous owners, and the conveyance to the corporation was bona fide and without reservation of any right in the trustee, the fact that it was also sought by such incorporation to secure the necessary diversity of citizenship to enable the jurisdiction of the federal court to be invoked in any litigation did not deprive such court of jurisdiction of an action to quiet title to the land.

[Ed. Note.--For other cases, see Courts, Cent. Dig. & 865–867.] 3. MORTGAGES & CHARACTER OF INSTRUMENT-DECLARATION OF TRUST


Owners of land, who had contracted to sell it to defendant, conveyed it to a bank by an absolute deed, and subsequently, by agreement of all parties, the bank executed a declaration of trust stating that the conveyance to it was for the benefit of persons named, and that the bank had paid no consideration and had no interest therein other than as trustee. It then provided that the bank should hold the property to secure to the vendors the payment by defendant of an amount specified in installments; that on payment of the first two installments defendant should receive possession; that thereafter the land in half sections might be released to defendant on payment of a specified amount to be applied on the next installment; that the trustee should apply moneys realized to the payment of its expenses and taxes and then to the payment of the purchase price, the balance to be held subject to defendant's orders; that the trustee should be paid by defendant for extraordinary services and have a lien therefor subject to the lien of the vendors for the purchase price; that defendant should pay all taxes, etc., indemnify the trustee from all liabilities, and defend all suits; and that in case of default by defendant the property should be sold by the trustee and the proceeds applied on the purchase price. A certificate thereto subscribed by all parties stated that the trusts were accurately stated therein. Held, that though the vendors' interest was spoken of as a lien, and though it was claimed de fendant was treated as the owner, the transaction was not a mortgage, in view of Civ. Code Cal. § 2872, defining a "lien" as a charge imposed in some mode other than by a transfer in trust upon specific property by which it is made security for the performance of an act, and section 2924, providing that every transfer of an interest in property other than For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & ladexua

in trust made only as security for the performance of another act is to be deemed a “mortgage."

(Ed. Note.-For other cases, see Mortgages, Cent. Dig. $87, 8.

For other definitions, see Words and Phrases, First and Second Series,


After a sale of the land by the trustee in accordance with the terms of the declaration of trust, no right of redemption remained in defendant.

[Ed. Note.-For other cases, see Mortgages, Cent. Dig. 88 1693–1698,


Assuming that notice by defendant to the grantors and the trustee that he thereby revoked the power of sale granted to the trustee operated to revoke such power, the power was revived where defendant subsequently, in obtaining additional time within which to make certain payments, signed an agreement that each and every one of the conditions or agreements of the declaration of trust should remain in full force and effect except as expressly modified thereby.

[Ed. Note.-For other cases, see Mortgages, Cent. Dig. $$ 1017, 1018.) Appeal from the District Court of the United States for the Northern Division of the Southern District of California; Oscar A. Trippet, Judge.

Suit to quiet title by the California Land Company against F. F: Doane. From a decree for plaintiff, defendant appeals. Affirmed.

This is a suit brought by the appellee to quiet its title to certain lands in Fresno county, Cal., which had, on February 25, 1913, been conveyed to the Los Angeles Trust & Savings Bank by H. N. Coffin, John McMillan, and F. H. Parsons, appellee's predecessors in interest, under a contract for the sale thereof to appellant. The contract of sale was merged in a declaration of trust executed by the Los Angeles Trust & Savings Bank on August 14, 1914, under an agreement of all parties to that effect.

This declaration of trust recites that the conveyance to the Los Angeles Trust & Savings Bank, although absolute in form and purporting to convey the absolute legal and equitable title to the bank, was nevertheless intended to convey said property for the benefit of certain persons named and designated beneficiaries, subject to certain trusts provided therein, and that the bank paid no consideration for the property and had no interest therein other than as trustee. The declaration of trust then provided as follows: That the bank, as trustee, should hold the property to secure to H. N. Coflin, John McMillan, and F. H. Parsons (the vendors) the payment by appellant (the vendee) of $379,000 in various installments with interest thereon; that upon the payment of the first two installments of $20,000 and $55,000, respectively, the vendee should be given possession of the property, and thereafter any of the lands, in half sections, might be released to him from under the lien of the purchase price upon the payment by him of $10,000 for each half section so released, which payments were to apply on the next regular installment of principal and interest; that the personal property located on and used in connection with the property should be turned over to the vendee at the time of his taking possession of the property, to be used by him and his assigns during the life of the trust, and, in the event the conditions and provisions of the trust should be complied with, the title to the personal property should rest in the vendee and his assigns; that the trustee should apply the moners realized from the sale of the property, first to reimburse itself for its expenses, fees, and commissions under the trust, as provided for therein, next to pay any taxes accrued, next to the payment of the purchase price and interest, and the balance to be held subject to the order of the vendee; that the trustee should be paid by the vendee for all extraordinary services rendered in the

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

erecution of the trust, in addition to the compensation theretofore provided, and should have a lien on all of the trust property to secure the same, subject to the lien of the vendors for the purchase price and interest; that the rendors should not be liable for any of such expenses, fees, and commissions of the trustee, except in the case of foreclosure sale, in which event they should pay a sum not exceeding $1,000 for such expenses, fees, and commissions, and trustee should not be entitled to any lien upon the lands, or any part thereof, superior to the lien of the vendors for the balance of the purchase price and interest; that it should be the duty of the vendee to pay all taxes, assessments, mortgages, liens, and incumbrances then on the property, or that might thereafter be assessed or levied, or placed thereon by the vendee or by any other person at his request; that the vendors and vendee should indemnify the trustee from any and all liabilities, claims, demands, injuries, or damages which it might suffer or sustain by reason of the acceptance of the trust or its position as trustee thereunder, and the vendee, and not the trustee, should defend any suit brought with reference to the property or growing out of the trust; that in case of the default of the vendee in the payment of any of the installments or interest, upon demand by the vendors (which demand constituted conclusive notice of an election to declare the whole amount of the purchase price and interest immediately payable), tbe property should be sold by the trustee at public auction and the proceeds applied to defra y the expense of such sale, to the payment of the balance of the purchase price and interest, and the balance to the order of the vendee.

On February 24, 1915, the vendee mailed to the vendors a notice to the effect that he had revoked the power granted to the trustee to sell the property upon his failure to pay any installment of the purchase money or interest, as provided in the declaration of trust, which notice was received by them on the 27th of the same month. The same notice was served upon the trustee on February 26, 1915.

Various installments of principal and interest were paid by the vendee : but in 1915, being unable to meet the installment of interest falling due on September 1st, the vendee obtained a 30-day extension of time, at the end of which this installment was still unpaid, and has not since been paid. The vendors then elected to declare the whole remaining sum of the principal indebtedness and interest thereon immediately due and payable, under the terms of the declaration of trust, and ordered the trustee to sell the property. The trustee accordingly published a notice of such sale, on November 3, 1915, giving notice that the property would be sold at public auction on the 13th of the following month.

On November 20, 1915, the appellant brought an action in the superior court of the state of California in and for the county of Fresno, against the trustee, vendors, and others, praying judgment that the deed from the vendors to the trustee be declared a mortgage; and that appellant should have the right to redeem the property in the manner and time as provided by the laws of California for the redemption of property under foreclosure sale; and that the defendants be restrained from selling and conveying the absolute title to the property other than by foreclosure and sale as provided by section 726 of the California Code of Civil Procedure. Summons in this action was served upon the Los Angeles Trust & Savings Bank on the 30th of the same month, together with a copy of the complaint. On December 29, 1915, a lis pendens was filed.

The property having been sold under the trust deed to H. N. Coffin, John MeMillan, and F. H. Parsons at public auction, the Los Angeles Trust & Sarings Bank, on December 23, 1915, executed a deed in their favor as trustees.

Thereafter, Messrs. Coffin, McMillan, and Parsons and others, each owning an undivided one-tenth interest in the lands in suit, and being desirous of organizing as a corporation so that their business could be transacted through a board of directors, and thus expedite the handling and sale of the property, incorporated the appellee company under the laws of the state of Idaho; and on February 12, 1916, the parties named conveyed to it the lands in suit. It is stipulated that a further reason for the incorporation of appellee company was that by so doing an opportunity was afforded to invoke the jurisdiction

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