Rogers v. Brix Bros. Logging Co.

RUDKIN, Circuit Judge (after stating the facts as above). The decision of the court below turned entirely upon the award of $60,000 made by the government by way of reimbursement for the can-' cellation of the contracts for the purchase of spruce lumber. On this’ question the court found that the contract of October 8, 1918, with the appellant was a mere substitution for or continuation of the original contract of December 22,1917, with the Oregon Pacific Mill & Lumber Company, and that the reimbursement was made on account of tlie earlier contract. This finding is supported by the testimony. The claim for reimbursement was made by the appellant in his own right, and as assignee of the Oregon Pacific Mill & Lumber Company. It was based largely upon the fact that the Oregon Pacific Mill & T,nmber Company hail purchased the mill and timber for the sole and only-purpose of supplying the government with aircraft spruce in a time of urgent need. The principal evidence submitted in support of the claim was a report of certified accountants taken from the books and' records of the Oregon Pacific Mill & Lumber Company. The basis: of the final allowance by the contract board was: Original investment, $278,000; improvements, $60,000 — making a total of $338,000, 56 per cent, of which should- have been written off because the contract should have been completed to that extent at the time of its cancellation, leaving a balance of $148,720. From this was deducted the salvage value of $100,000, leaving a net loss of $48,720. This amount was later increased to $60,000. It thus appears that the two contracts were treated as one, and that the allowance was based largely, if not entirely, upon the equities in favor of the Oregon Pacific Mill & Lum-, ber Company, as that company had made the original investment and the improvements referred to. Indeed, it is difficult to see.how the award could have been materially different if the second contract had not existed at all. It is no answer to this to say that no allowance was made on account of the canceled contract, because the record shows the contrary, and, as stated by the court below, the second contract re- *870 suited- from a' change in the ownership of the mill and timber and was a mere continuation of the first. But, conceding all this, the appellant earnestly insists that this is a, suit by. a creditor to recover funds misappropriated by a director or other officer of a corporation, or a suit .to set aside a fraudulent conveyance madé by a corporation, and that in either case the corporation is a necessary and indispensable party defendant. If the premise is sound, the conclusion might follow, but in its final analysis this suit does not belong to either class. While a fraudulent transfer is charged in the complaint, the facts disclosed at the hearing show that the appellant has received from the government the sum of $60,000, which he claims as an award to him individually on account of the cancellation of a personal contract with the government; whereas the' respondent claims that the award was made on account of the cancellation of a contract with the Oregon Pacific Mill & Lumber .Company.,- If' there were a controversy between the corporation and the appellant over the ownership or a division of this fund, it might well be- urged.that the corporation was a necessary party to a complete (Jeterminafion.of that issue; but the respondent has already recovered, a judgment against the corporation, and the appellant frankly concedes that .the corporation, now makes no claim to the fund or award.. . If the "corporation has no claims to assert and no rights to. defend, it would be sacrificing substance to mere form to hold that it is a necessary .or indispensable party to this suit. A proceeding of this kind is in, essence an equitable execution comparable to proceedings supplemental to. execution. Pierce v. United States, 255 U. S. 398 , 41 Sup. Ct. 365, 65 L. Ed. 697 . As a general rule, we perceive no reason why a fund thus held could not be reached by the ordinary process of execution or garnishment, and, if so, why should it be necessary to bring in-additional parties, where a suit in equity, as distinguished-from ordinary legal process, is resorted to. We are of opinion, therefore, that neither the corporation nor its creditors were necessary parties to the present suit, and that the decree of the court below should be in all things affirmed; and it is so ordered.