3 F.(2d) 57

times declined to recognize a preferential right in either the government or the plaintiff. Hence the suit.

Plaintiff's claim of preference is predicated upon section 3466, Rev. Stat. U. S. (Comp. St. § 6372), which provides that: "Whenever any person indebted to the United States is insolvent, or whenever the estate of any deceased debtor, in the hands of the executors or administrators, is insufficient to pay all the debts due from the deceased, the debts due to the United States shall be first satisfied; and the priority hereby established shall extend as well to cases in which a debtor, not having sufficient property to pay all his debts, makes a voluntary assignment thereof, or in which the estate and effects of an absconding, concealed, or absent debtor are attached by process of law, as to cases in which an act of bankruptcy is committed."

And upon section 3468 (section 6374), which passes to the surety paying the obligation all rights conferred upon the United States by the section quoted.

Upon two of the defenses argued by the defendants, namely, that a state bank is not a "person" within the meaning of the statute, and that the deposit of the Indian moneys did not create or constitute an "indebtedness" from the bank to the United States, I have heretofore held adversely to defendants; and I need not discuss them here for the added reason that a like view has more recently been taken by the appellate court in the Bramwell Case, supra. See, also, Beaston v. Farmers' Bank of Delaware, 12 Pet. 102, 9 L. Ed. 1017, and United States v. Oklahoma, supra.

A third defense, that of res adjudicata, or judicial estoppel, is predicated upon the following state of facts: On December 18, 1922, the plaintiff commenced an action in this court to establish identically the same claim, against J. G. Fralick, predecessor in office of defendant here. A motion to dismiss on the ground that upon the facts as pleaded plaintiff was not entitled to a preference, having been sustained, and plaintiff having failed to plead further, a final decree of dismissal was entered on July 10, 1923, and from this decree no appeal was taken. Conceding identity of parties and the relief prayed for in the two suits, plaintiff seeks to escape the defense upon ground, as contended, that the complaint here exhibits material facts which were not alleged in the earlier suit. In language substantially identical with a corresponding paragraph in the former complaint, plain

the

tiff still alleges that "on or about Novem-
ber 9, 1921," the defendant commissioner's
predecessor in office "took charge of and
closed the doors of the said Union State
by reason of the fact that
Bank
said bank on or about November 9, 1921,
was and became insolvent," etc. But while
retaining this allegation, plaintiff sets up in
a later paragraph of the amended complaint
the inconsistent claim or theory that the de-
fendant commissioner took possession, not
under his official authority "by reason of
became in-
the fact that said bank
solvent," but by virtue of "a voluntary as-
signment" made by the bank "of all its
property to J. G. Fralick, as the then com-
Plaintiff con-
missioner of finance," etc.
cedes that were it not for this new aver-
ment and the proofs supporting it, the de-
cree of dismissal in the other case would
constitute a bar.

But

[1, 2] The decided cases involving the doctrine of judicial estoppel are numerous, and in some respects are difficult to reconcile. Generally speaking, the scope of the estoppel is broader in a case where the former judgment was upon the same cause of action than where the causes of action are different; in the former, the judgment is conclusive, not only of the questions actually adjudicated, but also of those which might properly have been submitted, while in the latter the estoppel extends only to such issues as were actually determined. where, as here, the former judgment pleaded in estoppel was one of dismissal following an order sustaining a demurrer, or motion challenging the sufficiency of the complaint, some of the cases apparently recognize an exception and hold such judgment not a bar to a second suit upon the same causes of action more fully pleaded. Such, for example, seems to have been the holding in Miller v. Margerie (9th C. C. A.) 170 F. 713, 96 C. C. A. 30, and the view apparently has support in the decisions therein cited from the Supreme Court. But in the comparatively recent case of Northern Pacific Ry. Co. v. Slaght, 205 U. S. 122, 27 S. Ct. 442, 51 L. Ed. 738, the Supreme Court considering at some length the effect of such a judgment of dismissal, expressly holds that: "It is well established that a judgment on demurrer is as conclusive as one rendered upon proof. The question as to such judgment when pleaded in bar of another action will be necessarily its legal identity with such action. The general rule of the extent of the bar is not only what was pleaded or litigated, but what could have

8 F.(2d) 57

whole case at one time. He cannot even split up his claim, ⚫ and, a fortiori, he cannot divide the grounds of recovery." In respect to the inconsistency between the averment now made that the commissioner took possession under an assignment, and that of the former complaint that he took possession by virtue of his official authority by reason of the bank's insolvency, Old Dominion Copper M. & S. Co. v. Lewisohn, 202 F. 178, 120 C. C. A. 392, is very apposite. "But," says the court; "the decree in the demurrer suit is res judicata of the present controversy. The bill stated the facts as the appellant understood them, the defendant admitted the statement to be correct; on this statement the court rendered its decree and on these facts this court and the Supreme Court rendered their judgments. Even if there were important differences on the facts, it is too late to assert them now." Certiorari denied; 229 U. S. 613, 33 S. Ct. 772, 57 L. Ed. 1352.

Upon the whole it is concluded that the judgment in the former case constitutes a bar.

While this conclusion necessitates a dismissal, I have also considered the record upon the merits:

In the Bramwell Case, after referring to some of the decisions of the Supreme Court construing section 3466, R. S. U. S., supra, Judge Gilbert, speaking for the Circuit Court of Appeals of this circuit, said: "In brief, the statute, as construed by the decisions of the Supreme Court, means this: That debts due the United States shall be

first satisfied in cases where the debtor is insolvent and has not sufficient property to pay all his debts and in addition thereto either makes a voluntary assignment of his property or commits an act of bankruptcy, or his property is attached as that of an absconding or concealing debtor." This construction plaintiff accepts; and it argues, first, that upon November 8, 1921, the bank was insolvent, and, second, that the action of the board of directors on that day constituted a voluntary assignment of its property; admittedly attachment is not involved.

[3] As to insolvency: Conceding that the term "insolvency," as used in this section, is to be understood substantially in the sense defined in the National Bankruptcy Act (Comp. St. §§ 9585-9656), that is, a case where the debtor owes debts in excess of his assets at a fair valuation, plaintiff attempted to show that on November 8th and 9th when the bank's doors were closed

there was such a condition of insolvency; but it is not thought its proofs are sufficient to support this contention. It exhibited a sheet in the nature of a daily statement made up by one of the defendant's assistants from the books of the bank as of November 8th, and conceiving the idea that it was necessary only to overthrow the balance disclosed in the footings, it offered evidence tending to show that a few bills receivable were either without value or were worth less than their face. This was the extent of its proofs. The method is obviously simple, and the result would be satisfactory, if the "liability" items all constituted indebtedness; but such is not the case. The sheet is an accountant's statement, about which there is always a measure of artificiality. It must be analyzed. The total footings are $359,225.99, but among the "liabilities" are capital stock $50,000, surplus $10,000, and other items that in no real sense represent actual indebtedness. From an analysis of the statement, most favorable to plaintiff, it would appear that on November 8th the bank had an excess of resources over indebtedness amounting to more than $51,000.

[4] As already suggested, plaintiff sought to show that certain bills receivable were worthless. As to some of these the testimony was insufficient to support such a finding, but a detailed discussion is unnecessary, for admittedly the items assailed do not aggregate $51,000, and indeed counsel for plaintiff concedes that insolvency is not shown unless we take the view that capital stock and surplus constitute indebtedness of a banking corporation. But such a position. is untenable. Capital is not indebtedness, but a fund out of which debts may be paid. In no real sense is the obligation of a corter's right is not to recover a debt, but to reporation to a stockholder a debt.

The lat

ceive a ratable share of the assets of the corporation after all its debts are fully paid. Under plaintiff's theory the least impairment of capital would necessarily effect insolvency, and a corporation with only $2,000 of indebtedness and $99,000 in its treasury is to be deemed insolvent if it has outstanding $100,000 of capital stock.

It follows that the proof fails to show the bank insolvent at the time its doors were closed. It may be added that insolvency was not in issue in the Bramwell Case, for there it was expressly stipulated that on the date it closed "the total value of the assets of the bank was less than the amount of its indebtedness."

tions could be made upon the Oklahoma and Bramwell Cases. In each the doors of a state bank closed for business, and in each the property of the bank passed into possession of the state official to be liquidated by him for the benefit primarily of its creditors. Not only the results in the two cases, but in most respects the mode of procedure and the objects to be attained, were identical. Yet in one case a preference is denied, and in the other granted. It is to be borne in mind that the right asserted by plaintiff is strictly legal; it does not rest upon broad principles of equity, but runs counter thereto. In equity all depositors are on the same footing, and whether strong or weak, rich or poor, each is entitled to a ratable distribution of the assets of the bank without preference of any kind to any one. Plaintiff's right, if one it has, is a creature of statutory law, and as I read the decisions of the Supreme Court it exists only in a case where the facts fall strictly within the provisions of the statute from which it springs. Enter judgment of dismissal.

[5] Turning now to the other factor, it is thought the record fails to show assignment. Clearly in itself the resolution of November 8th by the board of directors does not purport to be and does not constitute an assignment. As hereinbefore explained, it is simply an expression of the view of the board that the bank should discontinue business. There are no words expressing or implying assignment. True, the state bank commissioner was to be notified, but, as in the Oklahoma case, the bank commissioner had the power to act in the premises without assignment. The resolution is very different from that considered in the Bramwell Case, which provided "that the superintendent of banks for Oregon, or his assistants under his direction, be given full control of the affairs of the First State Bank of Klamath Falls, Oregon," etc. The board of directors here might have made a similar order, but they chose only to close the bank and leave it to the discretion of the commissioner whether he would or would not exercise the power conferred upon him by law to take possession of and liquidate the affairs of a banking institution. As herein before pointed out, while in paragraph IV of the amended complaint the plaintiff seeks to construe the resolution under consideration as an assignment, it is alleged in paragraph II that "the commis- (District Court, E. D. Pennsylvania. Decem

sioner took charge of and closed the doors of said Union State Bank

by reason of the fact that said bank on or about November 9, 1921, was and became insolvent." This latter view, it is to be noted, was the one plaintiff took of the facts, the construction it placed upon them, prior to the exigency created by the Oklahoma decision (complaint filed in former case, December 18, 1922, and Oklahoma decision February 19, 1923). That apparently was the natural construction, and in the absence of the Oklahoma decision we may assume plaintiff would have continued to urge it. If it were to its interest now to rely upon this theory, could it not urge with great cogency that there was no assignment, and that the commissioner being advised of the desire of the board of directors to close up the business of the bank, took possession, not under an assignment, but by virtue of his official authority?

[6] It is argued that mere distinctions of form should be disregarded, and generally speaking that is true. It is also to be conceded that in substantial results the case does not differ from the Bramwell Case. But with equal propriety the same observa

In re EHRLICH.

ber 8, 1924.)
No. 8429.

1. Bankruptcy 475-Funds of estate not subject to appropriation as indemnity for expenses of officers.

General Order X (89 F. vi), providing that, before incurring any expense, the clerk, marshal, or referee may require "from the bankrupt or other person in whose behalf the duty is to be performed" indemnity for such expense, and that money advanced for that purpose shall be repaid as a part of the cost of administration, does not contemplate the appropriation of funds of the estate as a deposit or indemnity.

2. Bankruptcy 347-Where funds insufficient to pay expenses of clerk, marshal, and referee in full, they should be applied pro rata.

Bankruptcy Act, § 64b, subd. 3 (Comp. St. for expenses incurred in administration, over § 9648), does not give priority to the referee other claimants classed under section 64b, subd. 3, and where he has not required indemnity in advance, as permitted by General Order X (89 F. vi), and the funds of the estate are insufficient to pay such claims in full, they should be applied pro rata.

In Bankruptcy. In the Matter of Morris Ehrlich, bankrupt. On review of order of referee. Reversed.

3 F.(2d) 62

Bertram K. Wolfe, of Philadelphia, Pa., ruptcy Act. It is apparent that the thought for trustee. in the mind of the referee was that the provision for indemnity under General Order X is to be construed as designating an order of priority of distribution which is to be read into section 64b (3) covering the cost of administration.