MONOLITH PORTLAND M. CO. v. Reconstruction Finance Corp.

• Decision Date: 30 August 1960
• Docket Number: No. 16535.,16535.
• Citation: 282 F.2d 439
• Parties: MONOLITH PORTLAND MIDWEST COMPANY, a corporation, Appellant, v. RECONSTRUCTION FINANCE CORPORATION, a corporation, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

282 F.2d 439 (1960)

MONOLITH PORTLAND MIDWEST COMPANY, a corporation, Appellant, v. RECONSTRUCTION FINANCE CORPORATION, a corporation, Appellee.

No. 16535.

United States Court of Appeals Ninth Circuit.

July 27, 1960.

Rehearing Denied August 30, 1960.

COPYRIGHT MATERIAL OMITTED

Enright, Elliott & Betz, Joseph T. Enright, Norman Elliott, Los Angeles, Cal., for appellant.

Lillick, Geary, Wheat, Adams & Charles, Allan E. Charles, Frank L. Adamson, San Francisco, Cal., J. H. Macomber, Jr., Gen. Counsel, Max Hersh, Gen. Service Administration, Washington, D. C., for Franklin G. Floete, as Administrator of General Services.

Before STEPHENS, HAMLEY and HAMLIN, Circuit Judges.

HAMLEY, Circuit Judge.

Monolith Portland Midwest Company instituted this suit against Reconstruction Finance Corporation on June 16, 1950. The purpose of the suit is to recover damages because of the termination by R.F.C. of a war contract which had been entered into by Monolith and Defense Plant Corporation, then a subsidiary of R.F.C.¹ On a previous appeal we vacated a judgment entered in favor of R.F.C. and remanded with instructions to grant a jury trial.²

The mandate of this court following the previous appeal was filed in the district court on November 18, 1957. On January 19, 1959, before the case had come on for a jury trial, the Administrator of General Services moved to dismiss the action. This motion was made on the ground that the action had abated by reason of the failure to substitute the Administrator of General Services in place of R.F.C. within one year following the effective date of Reorganization Plan No. 1 of 1957.³ On March 2, 1959, Monolith countered with a motion to substitute the Administrator as defendant in place of R.F.C.

The district court granted R.F.C.'s motion and denied that of Monolith. Findings of fact, conclusions of law and a judgment dismissing the action were thereupon entered.⁴ Monolith appeals.

The single question presented here is whether the action abated by reason of the failure to substitute the Administrator in place of R.F.C. within one year following the effective date of Reorganization Plan No. 1 of 1957.

R.F.C. came into existence in 1932 with the enactment of the Reconstruction Finance Corporation Act, approved January 22, 1932. Public Law 2 — 72d Cong., 47 Stat. 5-12, 15 U.S.C.A. § 601 et seq. Succession of the corporation was originally established at ten years, but the act was amended from time to time to extend its succession. Beginning in the late 1940's the act was also amended several times to make provision for the liquidation of the corporation's assets and the winding up of its affairs.⁵

The original act as thus amended to June 29, 1954, contained certain provisions pertinent to our present inquiry, as set out in the margin.⁶ In addition the Reconstruction Finance Corporation Liquidation Act, as amended to June 29, 1954, contained certain provisions relative to the abatement of actions by or against R.F.C. and the making of a report to Congress, as also quoted in the margin.⁷

Three years later, on June 30, 1957, Reorganization Plan No. 1 of 1957 relating to R.F.C. became effective. Under section 6 of this plan, quoted below, R. F.C. was "abolished."⁸ Neither this plan nor any legislation made any express amendment of sections 105 and 106 of the Reconstruction Finance Corporation Liquidation Act as it existed on June 29, 1954, and as quoted in footnote 7.

The judgment dismissing the action as abated is based on the view that the abolishment of R.F.C. on June 30, 1957, as accomplished by section 6 of Reorganization Plan No. 1 of 1957, amounted to a "dissolution" of R.F.C. within the meaning of section 105 of the Reconstruction Finance Corporation Liquidation Act as amended to June 29, 1954. If this is true, then under the terms of section 105 this action would be abated unless Monolith moved to substitute the Administrator in place of R. F.C. within twelve months of June 30, 1957. The motion was not made within this twelve-month period, but was made on March 2, 1959, after the motion to dismiss this action had been filed.

Appellant contends, however, that the abolition of R.F.C. by virtue of section 6 of Reorganization Plan No. 1 of 1957 was not the "dissolution" referred to in section 105 of the Reconstruction Finance Corporation Liquidation Act as amended to June 29, 1954. Hence, it is argued, such abolishment did not bring into play the requirement of section 105 that in order to avoid abatement of a pending action against R.F.C. a motion to substitute parties must be made within twelve months after dissolution of R.F.C. It is further urged that until there has been a dissolution of the kind referred to in section 105 there is no possibility of abatement and therefore no occasion to utilize the procedure prescribed in that section for avoiding abatement.

In evaluating these conflicting points of view we start with the basic premise that in the absence of statute an action by or against a corporation abates when the corporation goes out of existence.⁹ It follows that if R.F.C. had gone out of existence between June 16, 1950, when this action was begun, and July 30, 1953, when the Reconstruction Finance Corporation Liquidation Act of that year was passed, the action would have immediately abated. This is true because until this 1953 statute was enacted there was no statutory procedure whereby abatement could have been avoided.¹⁰ But R.F.C. did not go out of existence during this period.

If the succession of R.F.C. had been terminated between July 30, 1953, when the Reconstruction Finance Corporation Liquidation Act of that year was passed, and June 29, 1954, when the similar act of 1954 was passed, a procedure for avoiding abatement would have been available. The procedure there provided for is the same as that provided for in section 105 of the 1954 act, quoted in footnote 7, except that the 1953 procedure refers to "termination of succession" instead of "dissolution." But the succession of R.F.C. was not terminated during that period.

If R.F.C. had been dissolved between June 29, 1954, when the Reconstruction Finance Corporation Liquidation Act of that year was passed, and June 30, 1957, when Reorganization Plan No. 1 of 1957 became effective, abatement of this action could have been avoided by following the procedure set out in section 105 of the 1954 act, quoted above. But R.F.C. was not dissolved during that period.

On June 30, 1957, R.F.C. was "abolished" by operation of section 6 of Reorganization Plan No. 1 of 1957, which became effective on that day. The corporation therefore went out of existence on that day unless in addition to being "abolished" R.F.C. had to be, but was not, "dissolved" as that term is used in section 3(a) of the R.F.C. Act, as amended to June 29, 1954, before it could go out of existence.

Under section 3(a) of the R.F.C. Act, as amended to June 29, 1954, the corporation had "succession until it is dissolved pursuant to the provisions of section 10 of this Act." Under section 10, quoted in footnote 6, R.F.C. would not be dissolved until the Secretary of the Treasury had done five things: (1) Found that liquidation would no longer be advantageous to the United States; (2) found that all of the corporation's legal obligations had been provided for; (3) retired any capital stock then outstanding; (4) paid into the Treasury as miscellaneous receipts the unused balance of the moneys belonging to the corporation; and (5) made a final report to the Congress.

In the 1957 Reorganization Plan each of these five steps was provided for. Instead of requiring that the Secretary of the Treasury find that liquidation would no longer be advantageous to the United States, the President and Congress in effect made that finding themselves by transferring all of R.F.C.'s functions, assets and liabilities elsewhere, and abolishing the corporation. Instead of requiring that the Secretary of the Treasury find that all of the corporation's legal obligations had been provided for, the President and Congress expressly provided for such obligations in the 1957 Plan.

Under section 6(b) of the 1957 Plan the Secretary of the Treasury was expressly given the same duties as specified in steps (3) and (4) of the section 10 dissolution procedure referred to above. Fulfillment of these duties, however, was not made a condition of dissolution, termination of succession, or abolition of R.F.C. Abolishment of the corporation, provided for in section 6(a) of the 1957 Plan, was not made subject to any conditions whatsoever.

Under section 6(c) of that plan, the Secretary of the Treasury was given the duty of making a report to Congress "not later than June 30, 1959." Section 6(c) of the 1957 Plan further provides that the "function of making the final report provided for in the said section 10 is hereby abolished."

It follows from what has just been said that the provisions for dissolution of R.F.C., as set out in section 10 of the R.F.C. Act, were completely superseded by the provisions of Reorganization Plan No. 1 of 1957. From that time on R.F. C. in order to become nonexistent did not have to be "dissolved" under section 10 in addition to being "abolished" under the 1957 Plan.

We therefore conclude that R.F.C. went out of existence on June 30, 1957, on which date the provisions of section 10 of the R.F.C. Act, relating to dissolution of the corporation, were no longer effective. Under the common-law rule to which reference has been made this action abated on that day unless there was then in effect a statute providing procedure for avoiding abatement of the action, and such procedure was followed.

In our opinion such procedure was provided by section 105 of the Reconstruction Finance Corporation Liquidation Act, as amended to June 29, 1954. It is true that the procedure set out in that section, which is quoted earlier in this opinion, refers to abatement "by...