LEAHY, Chief Judge.
This is a petition for review of a judgment entered by the. referee in bankruptcy against James A. Vaughan on a set-off and counterclaim asserted by the trustee. On July 19, 1948, Petroleum Conversion Corporation — the debtor — filed a voluntary petition in bankruptcy. The proceeding was referred to Stewart Lynch, Esq., referee and William M. Duffy, Jr., Esq., was elected trustee. On November 19, 1948, Vaughan, petitioner here, filed two claims against debtor with the trustee: (1) a claim for a promissory note of debtor held by Vaughan
in
the sum of $318; (2) a claim for the unpaid balance of a legal retainer allegedly owed Vaughan by Debtor for $2,000. The creditors’ first meeting was held in August, 1948; and, at a subsequent adjourned first meeting on January 19, 1949, Vaughan appeared and testified.
*On August 26, 1949, the trustee filed objections to each of petitioner’s asserted claims. Debtor asserted a counterclaim or set-off against Vaughan in an amount at leást equal to the amount of each of his claims would be made. In addition to the claim by Vaughan for an unpaid legal retainer, the trustee made further objection Vaughan was “disqualified from receiving compensation for legal services in that he had and served conflicting interests”; and, finally, payments by debtor in the past to Vaughan had been far in excess of the value "of his alleged services rendered.
On October 3,
1949, the trustee filed his formal set-off and counterclaim in which he claimed Vaughan while serving as a paid officer and attorney for debtor actively participated in litigation adversely to the interest of debtor. The trustee set forth sums Vaughan actually received as vice president of debtor and as retainer for his alleged legal services. The trustee stated Vaughan had such intimate knowledge of debtor’s affairs as to charge him with knowledge the salary and fees being paid him were unjustifiable so as to make it inequitable for him to accept and retain the amounts he received.
On November 1, 1949, Vaughan filed an “Answer to the ‘Set-off and Counterclaim [etc.]’”. No objection to the referee’s jurisdiction or to a summary proceeding was made. During February-March, 1950, both the trustee and petitioner filed proposed findings of fact and conclusions of law with the referee. Petitioner did not propose a conclusion the referee lacked jurisdiction to determine the set-off and counterclaim. Then on July 6, 1950, the referee filed his findings of fact, conclusions of law, and opinion. On July 7, 1950, certain corrections were made and the whole was refiled. The referee concluded he had jurisdiction to enter judgment against Vaughan for the amount determined to be due and owing by Vaughan under the set-off and counterclaim asserted by the trustee.
In his opinion, the referee noted the petitioner had not made any objection to the summary jurisdiction of the referee.
.
The referee determined: (1) Vaughan was not entitled to the $300 per month retainer from debtor for legal services from April 14, 1942 to July, 1948;
(2) the $3,-500 paid Vaughan by debtor in 1946 for his alleged services
to
debtor in the DickinsonRinke litigation was not a legally authorized expenditure by debtor;
(3) Vaughan’s claim for the $318 on the note should be allowed with interest of 6% from September 1, 1942 to July 19, 1948, but his claim for $2,000 as an unpaid retainer fee for legal services to debtor should be disallowed; (4) the set-off and counterclaim to Vaughan’s claims should be allowed in part, and the trustee should recover from Vaughan $20,350 paid to Vaughan from April, 1942, to December 15, 1947, as retainer for legal services
and $3,500 paid to Vaughan as his fee in the ¡Dickinson casa.
The referee decided against the trustee’s set-off and counterclaim for salary received by Vaughan as vice president of debtor and this claim against Vaughan was disallowed as not being mutual within the Bankruptcy Act.
On July 13, 1950, Vaughan for the first time filed written objection to the referee’s exercising summary jurisdiction to determine the merits of the trustee’s set-off and counterclaim. The next day, the referee filed an opinion on the protest in which he held it was not a “timely objection” because petitioner had “submitted himself to the full jurisdiction of this court.” On September
7,
1950, the referee entered final judgment for the trustee against Vaughan in the amount of $30,841.59.
This is the judgment of which review is sought.
In this petition for review, various alleged errors of the referee are assigned. I do not pause to examine each of the assigned errors at length, since in the briefs and oral argument before me, petitioner relies solely on the contention the referee’s assumption of summary jurisdiction to determine the merits of the set-off and counterclaim filed by the trustee was contrary to law, and, in fact, petitioner alleges the referee was without jurisdiction to hear the .merits of the claim, counterclaim and set-off., It is important to note, however, in three of the assigned errors it is alleged the referee’s conclusion is “against the evidence and the law”,
which indicates, as the record shows, petitioner met the evidence offered by the trustee and joined issue and grappled with him on the merits. Thus, the question
which this petition for review poses is, “Did the referee have jurisdiction to determine the merits of the trustee’s counterclaim and set-off to petitioner’s claim by way of a summary procedure?”
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LEAHY, Chief Judge.
This is a petition for review of a judgment entered by the. referee in bankruptcy against James A. Vaughan on a set-off and counterclaim asserted by the trustee. On July 19, 1948, Petroleum Conversion Corporation — the debtor — filed a voluntary petition in bankruptcy. The proceeding was referred to Stewart Lynch, Esq., referee and William M. Duffy, Jr., Esq., was elected trustee. On November 19, 1948, Vaughan, petitioner here, filed two claims against debtor with the trustee: (1) a claim for a promissory note of debtor held by Vaughan
in
the sum of $318; (2) a claim for the unpaid balance of a legal retainer allegedly owed Vaughan by Debtor for $2,000. The creditors’ first meeting was held in August, 1948; and, at a subsequent adjourned first meeting on January 19, 1949, Vaughan appeared and testified.
*On August 26, 1949, the trustee filed objections to each of petitioner’s asserted claims. Debtor asserted a counterclaim or set-off against Vaughan in an amount at leást equal to the amount of each of his claims would be made. In addition to the claim by Vaughan for an unpaid legal retainer, the trustee made further objection Vaughan was “disqualified from receiving compensation for legal services in that he had and served conflicting interests”; and, finally, payments by debtor in the past to Vaughan had been far in excess of the value "of his alleged services rendered.
On October 3,
1949, the trustee filed his formal set-off and counterclaim in which he claimed Vaughan while serving as a paid officer and attorney for debtor actively participated in litigation adversely to the interest of debtor. The trustee set forth sums Vaughan actually received as vice president of debtor and as retainer for his alleged legal services. The trustee stated Vaughan had such intimate knowledge of debtor’s affairs as to charge him with knowledge the salary and fees being paid him were unjustifiable so as to make it inequitable for him to accept and retain the amounts he received.
On November 1, 1949, Vaughan filed an “Answer to the ‘Set-off and Counterclaim [etc.]’”. No objection to the referee’s jurisdiction or to a summary proceeding was made. During February-March, 1950, both the trustee and petitioner filed proposed findings of fact and conclusions of law with the referee. Petitioner did not propose a conclusion the referee lacked jurisdiction to determine the set-off and counterclaim. Then on July 6, 1950, the referee filed his findings of fact, conclusions of law, and opinion. On July 7, 1950, certain corrections were made and the whole was refiled. The referee concluded he had jurisdiction to enter judgment against Vaughan for the amount determined to be due and owing by Vaughan under the set-off and counterclaim asserted by the trustee.
In his opinion, the referee noted the petitioner had not made any objection to the summary jurisdiction of the referee.
.
The referee determined: (1) Vaughan was not entitled to the $300 per month retainer from debtor for legal services from April 14, 1942 to July, 1948;
(2) the $3,-500 paid Vaughan by debtor in 1946 for his alleged services
to
debtor in the DickinsonRinke litigation was not a legally authorized expenditure by debtor;
(3) Vaughan’s claim for the $318 on the note should be allowed with interest of 6% from September 1, 1942 to July 19, 1948, but his claim for $2,000 as an unpaid retainer fee for legal services to debtor should be disallowed; (4) the set-off and counterclaim to Vaughan’s claims should be allowed in part, and the trustee should recover from Vaughan $20,350 paid to Vaughan from April, 1942, to December 15, 1947, as retainer for legal services
and $3,500 paid to Vaughan as his fee in the ¡Dickinson casa.
The referee decided against the trustee’s set-off and counterclaim for salary received by Vaughan as vice president of debtor and this claim against Vaughan was disallowed as not being mutual within the Bankruptcy Act.
On July 13, 1950, Vaughan for the first time filed written objection to the referee’s exercising summary jurisdiction to determine the merits of the trustee’s set-off and counterclaim. The next day, the referee filed an opinion on the protest in which he held it was not a “timely objection” because petitioner had “submitted himself to the full jurisdiction of this court.” On September
7,
1950, the referee entered final judgment for the trustee against Vaughan in the amount of $30,841.59.
This is the judgment of which review is sought.
In this petition for review, various alleged errors of the referee are assigned. I do not pause to examine each of the assigned errors at length, since in the briefs and oral argument before me, petitioner relies solely on the contention the referee’s assumption of summary jurisdiction to determine the merits of the set-off and counterclaim filed by the trustee was contrary to law, and, in fact, petitioner alleges the referee was without jurisdiction to hear the .merits of the claim, counterclaim and set-off., It is important to note, however, in three of the assigned errors it is alleged the referee’s conclusion is “against the evidence and the law”,
which indicates, as the record shows, petitioner met the evidence offered by the trustee and joined issue and grappled with him on the merits. Thus, the question
which this petition for review poses is, “Did the referee have jurisdiction to determine the merits of the trustee’s counterclaim and set-off to petitioner’s claim by way of a summary procedure?”
Petitioner makes several arguments to support his position the referee improperly exercised jurisdiction. He asserts the adverse claims of himself and the trustee are substantial and not colorable or frivolous and the bankruptcy court is without jurisdiction to determine them in a summary proceeding. He also argues the referee “has both the power and the duty to examine a claim adverse to the bankrupt estate to the extent of ascertaining whether the claim is ingenuous and substantial * * *. Once it is established that the claim is not colorable nor frivolous, the claimant has the right to have the merits of his claim passed on in a plenary suit and not summarily.”
In short, petitioner claims his claim is a substantial adverse claim and the trustee should have been forced to resort to plenary action and independent suit. Petitioner also asserts the bankruptcy court “does not have jurisdiction to determine an adverse claim to property in possession of the claimant based on a transaction prior to the bankruptcy”. Petitioner argues further timely objection was made to the exercise of summary jurisdiction by the referee and the facts here fall within the situation in Cline v. Kaplan.
Finally, petitioner urges the claims alleged by the trustee against petitioner are not proper claims to be asserted as a set-off or counterclaim in that the claims asserted by the trustee are not “mutual” in the sense required by Sec. 68, sub. a of the Bankruptcy Act, 11 U.S.C.A. § 108, sub. a.
1. Petitioner’s first argument rests upon the assumption the referee in the first instance had the duty to examine petitioner’s claims adverse to the bankrupt estate to ascertain whether or not he had jurisdiction. None of the authorities and cases relied upon by petitioner, lend support to the petitioner’s situation here. The facts of this case are petitioner himself entered the bankruptcy court and filed two claims against debtor.
After-the trustee asserted his set-off and counterclaim, petitioner answered on the merits. The record
shows no objection by petitioner to the summary power of the bankruptcy court until after the referee filed his findings of fact and conclusions of law. Only then was the referee’s exercise of summary power disputed by petitioner. The authorities are clear a preliminary inquiry is necessary “where the summary power of the bankruptcy court is disputed,”
but petitioner .cites no case holding a bankruptcy court erred in not conducting a preliminary hearing where it was the adverse claimant, not the trustee, who first invoked the court’s jurisdiction and the adverse claimant proceeded to answer and argue the trustee’s set-off and counterclaim on the merits to a final determination by the referee before objecting to jurisdiction. More than that, no authority has been found for the proposition a plenary proceeding must be forced upon a petitioner in bankruptcy where the petitioner manifests all the indicia of consent to a summary proceeding and, in truth, invites himself into the 'bankruptcy proceedings. The authorities, in fact, are agreed the privilege of trial by plenary suit may be waived by a defendant even where the trustee has initiated the summary proceeding.
Where claimant himself invokes the court’s jurisdiction by filing proof of claim, there seems to be no question he consents to the jurisdiction of the bankruptcy court “to render an affirmative judgment against the creditor on the trustee’s counterclaim arising out of the same transaction”.
I am in complete agreement with Professor Moore “this view has considerable merit in the light of expeditious administration of bankrupt estates and the avoidance of multiplicity of litigation”.
2. One of the petitioner’s other points is bankruptcy courts do not have jurisdiction to determine an adverse claim to property in possession of the claimant based on a transaction prior to the bankruptcy. Here again, as in his first argument, petitioner apparently brushes aside as if it were of no consequence the fact the trustee in the matter at bar did not initiate these proceedings. All the cases on which petitioner relies are ones in which the trustee initiated the summary proceeding.
In addition, in all the cited cases the adverse claimant did not consent to the exercise of summary jurisdiction. I may be monotonous in repeating petitioner came into the bankruptcy court, here, voluntarily and thus initiated the litigious issue for decision on the merits — in fact, he underscored his consent to the exercise of summary jurisdiction by the referee. As Duda v. Sterling Mfg. Co., 8 Cir., 178 F.2d 428, 14 A.L.R.2d 899 plainly implies, if the adverse claimant consents, the bankruptcy court has summary jurisdiction to determine title to property held adversely to the bankrupt estate where the property in question came into the possession of the adverse claimant prior to the filing of the petition in bankruptcy.
3. Petitioner comes to the argument timely objection was made by him to the exercise of summary jurisdiction by the referee, and the facts in the case at bar are within those of Cline v. Kaplan.
The Cline case, despite the expressed intention of the Supreme Court to remove the doubts about bankruptcy summary administration occasioned by “conflicting views * * * in different circuits”, sets forth a rule which has, as the legal literature has suggested, confused rather than clarified bankruptcy practice.
The rule of the Cline case is that participation in a summary action without preliminary jurisdictional objection does not constitute a waiver thereof if “formal” objection is made before the final order is entered.
Adopting this rule as a fair and I hope an accurate statement of the Cline decision, the question arises: “Do the facts of the matter at bar bring the petitioner within the Cline case?”
Putting aside for the moment the fact petitioner voluntarily came into the bankruptcy court and asserted a claim against debtor,
the basic question arises did petitioner consent to summary jurisdiction here. As the Cline case notes, consent is a “question depending on the facts of the particular case.”
In the Cline case the hearing in which the adverse claimant there participated before objecting formally to summary jurisdiction was, according to Mr. Justice Frankfurter, “ * * * held to determine whether the property was in the constructive possession of the bankrupt.”
Hence, the hearing was apparently confined to the jurisdictional- issue. Before the close of the hearing, the adverse claimant orally moved to dismiss the proceedings for want of summary jurisdiction.
Summary jurisdiction, therefore, was apparently • attacked in the Cline case before the adverse claimant had participated in any hearing on the merits. The plain fact evident from the record before me is petitioner objected to the referee’s jurisdiction for the first time
after
the referee had determined the issues on the merits and filed his opinion. Though the language of the Cline case is that objection to jurisdiction may be made any time before “final order”, I cannot read the Cline case to mean a litigant may wait on second base and see which way the ball will bounce in center field and then run accordingly for third. Here, petitioner learned from the referee’s opinion he had lost and then, before a. final order was entered, he made his objection. Even adopting the Cline case rule, which in passing I note does not even consider F.R. 12(h),
I hold the Cline case can afford the petitioner no consolation.
4. Petitioner’s final argument is the claims alleged by the trustee against petitioner are not proper claims to be asserted as a set-off or counterclaim since the claims asserted by the trustee are not “mutual” in the sense required by § 68, sub. a of the Bankruptcy Act.
The petitioner relies upon the case of United States v. Roth, 2 Cir., 164 F.2d 575 and urges in effect the trustee’s claim here is an equitable claim, existing only in the trustee for the benefit of creditors and does not exist in the debtor. Yet, petitioner asserts his claims are against the bankrupt for money owed and for compensation for professional services. In the Roth case the trustee there asserted a right to a refund of the bankrupt’s overpayment of his 1937 income tax against the claim of the Government for unpaid taxes for the years 1938, 1942 and 1943. The Court sustained the trustee’s right to set-off his claim for a refund. It is the sefcond claim of set-off in the Roth case pertaining to the fraudulent payment of $1,500 to the Government when the debtor was insolvent which the petitioner here seeks to analogize to the instant case. The analogy fails, "upon analysis because, unlike the instant facts, in the. Roth case, the bankrupt had no right to recover the $1,500 payment from the Government. The right there was only an equitable right in the trustee to recover for the benefit of'Roth’s creditors. Why the right represented in the counterclaim here never belonged to the debtor, petitioner never has made clear.
Clearly debtor, in the matter at bar, absent bankruptcy, could have sued petitioner to recover back the moneys paid him while he allegedly was acting adversely to debtor’s interest. I see no reason why the trustee cannot maintain the same equitable claim here. In the Roth case the bankrupt’s payment to the Government was in fraud of his creditors and the court properly held the voluntary payment was beyond recall by the transferor.
But the right in the instant case was a right in debtor to recover overpayments of attorney’s fees to the petitioner. The claim of petitioner against debtor for attorney’s fees and the counterclaim and set-, off it asserts against' him both existed before the adjudication of the debtor as bankrupt.
I agree with the referee’s conclusion debtor’s claims against petitioner’s compensation as corporate attorney for debtor and his fee for services in connection with the Dickinson-Rinke litigation are mutual, as they apply to petitioner in his capacity as corporate attorney for debtor.
The findings of fact, conclusions of law and opinion of the referee, as well as his order of September 7, 1950, are affirmed. The prayers of the petition for review are denied. An order may be submitted in accordance with this opinion.