Appellee Goggin is the trustee in bankruptcy for four bankrupt corporations, Trans-Pacific Corporation, Columbia Stamping and Manufacturing Corporation, New-Bart Stamping and Manufacturing Company, and Communications Equipment Corporation. These bankruptcies have been pending since 1946. The record indicates that appellant, who will be referred to for convenience as "Heath" owned or controlled all of them, Trans-Pacific being a holding company for the others.

In or before 1959, a controversy existed as to whether Heath or the trustee was entitled to the stock of another corporation, American Pumice Company. The trustee claimed that Trans-Pacific owned it. The principal asset of American Pumice was property which the Government was then seeking to acquire through condemnation proceedings. The controversy as to the ownership in the stock in American Pumice, as well as certain others not here material, was settled by a compromise which was approved by the referee in bankruptcy, in all four estates, by an order dated October 20, 1959. The material parts of this order are set out in the margin.1 The present controversy arises from this order, which, of course, is long since final.

So far as appears, all parties fully performed, at least until 1966. Heath designated attorney Hugh L. Dolle to handle the trial of the condemnation cases for American Pumice; later, with Heath's consent, attorney Victor R. Hansen was also retained. The cases were tried and a judgment was entered on March 8, 1965 in favor of American Pumice for $167,250. Of this amount, $26,000 had been deposited in court when the condemnation actions were begun. Both the United States and American Pumice, through attorneys Dolle and Hansen, filed notices of appeal.

On July 26, 1965, a conference was held in the chambers of the referee, at which the trustee, his counsel, attorneys Dolle and Hansen, and Heath, were present. On July 30, 1965, an order was made as follows:

"1. That special counsel proposed [by Heath] to be employed in said condemnation action in substitution of Judge Victor R. Hansen and Hodge L. Dolle be denied;

2. That there be no appeal upon behalf of the trustee in said action;

3. If the Government appealed, Judge Victor R. Hansen and Hodge L. Dolle as special counsel to prosecute the defense thereof and represent the trustee therein;

4. If P. S. Seymour-Heath desires to proceed with an appeal from the award of the U. S. District Court, he may do so at his own expense and upon the posting of an acceptable surety bond in the amount of $225,000 with this court to protect these estates from any diminution from the award as it presently stands."

That order has also long since become final. Heath did not post the bond or provide funds for an appeal, and the appeal of American Pumice has lapsed. The order contains findings that Dolle and Hansen recommended against an appeal, giving their opinion that it would not be successful, that the trustee relied on their views, and that his counsel agreed. It was also found that the combined assets of the estates were less than $2500. The order is entitled in only two of the bankruptcies, those of Trans-Pacific and of Communications Equipment Corporation.

On July 18, 1966, the trustee filed in each proceeding, except that of New-Bart Stamping and Manufacturing Company, an application to enter into a compromise of the two condemnation cases. It recites that attorneys Dolle and Hansen are of the opinion that an appeal by American Pumice would be unsuccessful, a view in which counsel for the trustee concur. Dolle and Hansen also are of the opinion that there is danger that the United States may be successful in its appeal, that the award may be diminished or even lost.2

The compromise proposed is as follows: The United States will pay to the trustee the principal of the judgments. The trustee is to waive interest at 6% as follows:

1.) on $48,500 from October 19 to November 6, 1945 — 18 days;

3.) on $110,000 from March 30, 1945.

(A rough calculation indicates that the interest to be waived is in excess of $180,000.) The United States will waive any claim for any taxes on the award, including capital gains tax, and will pay the principal amount to the trustee, thus waiving its right, if such right exists, to offset against the judgment certain large tax and renegotiation claims that it has against various of the bankrupt corporations.3 The moneys are to be used to pay costs of administration in the bankruptcy proceedings, amount not stated, and the residue is to be applied upon the claims of the United States. We express no opinion as to whether the government has any right of set-off.

It is apparent that the principal item of costs of administration will be the fees of Dolle and Hansen for defending the condemnation cases, and that, if the compromise is carried out, there will be no money for Heath and none for general creditors.4 Heath asserts that the award is far too low,5 that some or all of the tax and renegotiation claims of the United States can be defeated, and that the compromise will make the obtaining of any money, over and above expenses of administration and claims of creditors, impossible.

The referee, over the objections of Heath, approved the compromise by an order entered on September 23, 1966. Heath sought review by the District Court. By an order entered March 16, 1967, the court denied the petition for review. It adopted the findings and conclusions of the referee. It is from this order that Heath appeals.

Appellees seek to support the order on two grounds. First, they say that the order of October 20, 1959 cannot limit the general power of the trustee, with the approval of the court, to compromise. (See section 27 of the Bankruptcy Act, 11 U.S.C. § 50.) Much authority as to the power to compromise is cited. See, e. g., In re California Associated Prods. Co., 9 Cir., 1950, 183 F.2d 946, 949. But the question here is limited. Here, under an order approving a compromise made in the same bankruptcy proceedings, an order long since final, the trustee is bound by the following language:

"* * * and no compromise of said action[s] shall be entered into unless the terms of said compromise have been approved in writing by * * * HEATH." (See note 1, supra.)

We think that that order, which was made under the very broad authority conferred by section 27, is binding, and that the trustee had no power to violate it, nor has the referee or the court power to authorize the trustee to violate it. No case has been cited to us dealing with this problem. But we think that general principles of res judicata and law of the case, as well as those dealing with finality of judgments, require the conclusion that we reach.

If Heath were willing now to compromise the rights secured to him by the 1959 order, we would have a case like the California Associated Products Co. case. But he is not, and the trustee cannot, by compromising with someone else, deprive him of rights secured by the 1959 order. In essence, the 1959 order is a judgment by consent of the compromising parties. It is now final and is no more subject to being disregarded than any other final judgment. See Swift & Co. v. United States, 1928, 276 U.S. 311, 48 S.Ct. 311, 72 L.Ed. 587; Woods Bros. Const. Co. v. Yankton County, S.D., 8 Cir., 1931, 54 F.2d 304, 308, 81 A.L.R. 300.

Second, appellees urge that the order appealed from does not violate, or is not inconsistent with, but carries out the terms of the 1959 order. This was the view of the referee, who construed the restriction upon compromises as relating only to a compromise occurring before trial of the condemnation cases. In so holding, he relied in part upon the language of that order dealing with appeals (see footnote 1) and also upon the order of July 30, 1965. We agree that the order of July 30, 1965, which is also final, governs the right of Heath to appeal, or to require American Pumice or the trustee to appeal. The requirements of that order not having been met, and the appeal having been dropped, the only pending appeal is that of the United States. But that does not necessarily mean that the trustee can compromise, while the appeal is pending, or after judgment, without Heath's written consent.

We think that the language of the 1959 order, which is quoted above, means the entire actions, including proceedings after judgment, if any, whether by appeal or otherwise. Unless the word "actions" is so construed, the protection afforded to Heath, as well as to the trustee, against unacceptable compromises, could well become illusory. A compromise after judgment and pending appeal could be just as damaging as one made before judgment. The facts in this case are illuminating. The proposal is to waive in excess of $180,000 in interest, and the only visible benefit to anyone from the compromise is that what is left of the judgment can be used to pay expenses of administration, including the fees of Messrs. Dolle and Hansen, the balance to be applied to the government's tax and renegotiation claims. We note that the trustee declined to seek review of the tax and renegotiation claims of the government, and that it is Heath who is bearing the burden of that review. Even if he were wholly successful, most of what would come in from the compromise here involved would still be used up in the bankruptcy. The total to be received is $167,500. The other claims total $61,353.16, plus attorneys fees for Dolle and Hansen, plus advances, if any, by the trustee in the condemnation cases, plus expenses of administration in an unknown (so far as the record shows) amount. We think that it was against just such a possibility that the requirement of Heath's consent was designed to protect him.

Nor do we find anything in the provisions of the 1959 order relating to appeals that is inconsistent with the foregoing. Those provisions merely recognize the fact that an appeal costs money and involves risks. They cut off the obligation of the trustee to advance moneys in support of an appeal by American Pumice or Heath, making it clear, however, that Heath can, upon giving security against loss, prosecute an appeal at his own expense.6 They do not deal at all with what is to be done about an appeal by the United States. This is taken care of by the July 30, 1965 order, which directs that, if the United States appeals, Dolle and Hansen are to defend the appeal and represent the trustee. In short, we think that, if Heath's or the trustee's right to prevent a compromise had been intended to be applicable only before judgment, and not when there was an appeal, the compromise order of 1959 would have said so. It does not.

The order is reversed with directions to enter an order disapproving of the compromise.

I dissent. The interpretation of the October 20, 1959 compromise, as made by the referee and followed by the district court, is reasonable in view of the various rights waived therein and the general tenor of the instrument.

The trustee thought it best there be no appeal. Seymour-Heath could have appealed, had he desired, and been able, to post a bond. This he did not do. The July 30, 1965 order is final. Any appeal by American Pumice has lapsed. Thus, the question here involves the compromise of a judgment, not a cause of action. The October 20, 1959 compromise refers, in paragraphs 1(g) to Heath's right to approve any compromise "of the condemnation action," not to approve any compromise, or the compromise of any judgment, after trial. It may be presumed that the parties anticipated an ultimate solution by some judgment in the condemnation proceedings.

The parties did not state that Seymour-Heath had a right to veto any compromise of a judgment. The parties anticipated that if Seymour-Heath was not satisfied with the judgment obtained, he could force an appeal, but required the posting of a bond. This he never accomplished.

While it is true that the proposed compromised judgment will insure that attorneys are paid and that the condemnee waives interest in a substantial sum due from the government, the government waives any claims for taxes on the award (including capital gains tax), and waives certain large tax renegotiations' claims against two of the corporations, which amount to almost half a million dollars (though the validity of such government claim is disputed). Each of these waivers can be of substantial value to the bankrupt estate.

I do not believe this appellate court has the omniscience to overrule the judgment of the trustee, the referee, the district court, and reputable counsel (particularly skilled in condemnation matters), on the assumption that an original "owner of the stock of the corporations" has better judgment as to the value of the properties condemned, after there has been a proper trial and judgment, and where the possible proceeds relate to a bankruptcy of some twenty-one years standing.