Opinion ID: 1493310
Heading Depth: 1
Heading Rank: 1

Heading: Issues to Be Submitted to Master.

Text: 1. With respect to each of the pay periods as defined in the applicable milk marketing order  (a) The amount due the market administrator from Green Valley Creamery, Inc., on its producer settlement account; (b) The amount due to the market administrator from Green Valley Creamery, Inc., for marketing service; (c) The amount due the market administrator from Green Valley Creamery, Inc., on account of administration expense. 2. The extent to which Green Valley Creamery, Inc., failed to comply with the following orders of the court: (a) The temporary injunction entered November 30, 1937; and (b) The final decree entered March 15, 1939. 3. The ability of Green Valley Creamery, Inc., to have complied with the injunction of November 30, 1937, and the final decree of March 15, 1939. 4. The extent to which the inability of Green Valley Creamery, Inc., to comply with said temporary injunction and decree was caused by acts of any person or corporation, the particular acts or conduct of each such person or corporation which caused such inability and the extent to which the acts and conduct of each such persons or corporation caused all or any part of such inability. 5. The legal liability, if any, of Stuart Milk Company to Green Valley Creamery, Inc., arising out of the sale of milk by Green Valley Creamery, Inc., to Stuart Milk Company and the extent of such liability. 6. All of the acts and conduct of Howard B. Parker and Otis H. Parker or either of them which were in violation of the temporary injunction entered November 30, 1937, and the final decree of this court entered on March 15, 1939. 7. The prices and amounts paid by Stuart Milk Company to Green Valley Creamery, Inc., for milk purchased by Stuart Milk Company from Green Valley Creamery, Inc., and the fair market value of such milk so purchased. Thus, though the petition for attachment sought the commitment of the two Parkers to jail until payment to the market administrator of the amounts due through January 15, 1939, the order of reference directed the master to compute all the amounts due to the market administrator, which would carry the computation down through the period ending March 31, 1940, after which Green Valley ceased to be a handler of milk subject to Order No. 4 as amended. Also, though the petition referred only to the final decree, the master was directed to inquire into the extent to which the corporation had failed to comply with the interlocutory decree as well as with the final decree; and he was directed to report the acts and conduct of Howard B. Parker and Otis H. Parker which were in violation of the interlocutory decree and of the final decree. Particularly, he was to report on the extent to which the acts of any person or corporation disabled Green Valley from complying with the interlocutory and final decrees. He was also to inquire into the legal liability, if any, of Stuart Milk Company to Green Valley arising out of the sale of milk by the latter to the former. The Stuart Milk Company was not a party to the original injunction proceedings leading up to the final decree; nor was it made a party to the contempt proceedings. The master made a detailed report which was duly confirmed by the district court. Since the evidence before the master is not included in the present record, we accept as conclusive the findings of fact recited in the master's report. With respect to the extent of the default by Green Valley, the master found that the total amount due from the corporation to the market administrator on producer settlement account, on account of marketing services, and on account of administration expenses, from August 1, 1937, the effective date of Order No. 4 as amended, to March 31, 1940 (after which period the corporation ceased to be a handler), was the sum of $41,722.37. Green Valley failed to make any payments to the market administrator, or into the registry of the court, as required by the interlocutory and final decrees. Further, the master found that Green Valley has been made unable to comply with the said temporary injunction and decree by reason of acts of Howard B. Parker and Stuart Milk Company and by reason of the acceptance thereof by the other directors of Green Valley Creamery, Inc., and Stuart Milk Company. These acts of Parker and Stuart Milk Company, so disabling Green Valley, have been undertaken for the purpose of placing funds and assets beyond the reach of the market administrator, and    these acts were carried on for the purpose of hindering and delaying the market administrator. Stuart Milk Company is a corporation duly organized since 1921 under the laws of Massachusetts. It has a usual place of business in Somerville, Massachusetts, and has been engaged in the business of selling milk to consumers within the Greater Boston Marketing Area. Howard B. Parker is the treasurer, general manager, and a director of Stuart Milk Company and owns 200 shares of its capital stock. The remaining 300 shares are owned by his father, Arthur B. Parker, who is also a director. The third director is Alfred E. Collinson. The business of Stuart Milk Company was dominated by Howard B. Parker; the company, by vote of its stockholders, approved, ratified and confirmed the acts and proceedings of the directors and officers. Originally, the Stuart Milk Company owned a country plant or receiving station at Passumpsic, Vermont, where it made purchases of milk directly from producers. Had this remained the situation, Stuart would have come under obligation to make payments to the market administrator under the provisions of Order No. 4 as amended. On March 15, 1934, federal regulation of the marketing of milk in the Greater Boston Area was begun by the issuance of License No. 38 by the Secretary of Agriculture under authority conferred on him by § 8(3) of the Agricultural Adjustment Act, 48 Stat. 35. See United States v. Seven Oaks Dairy Co., D.C.Mass.1935, 10 F.Supp. 995. Thereafter, in October, 1934, Green Valley was organized under the laws of Massachusetts with a usual place of business in Somerville, Massachusetts. Within a few weeks thereafter Green Valley purchased the plant at Passumpsic, Vermont, from Stuart for an unknown amount of cash and a $9,000 mortgage. This mortgage was foreclosed early in 1938, after which the said plant, though back in the ownership of Stuart, continued to be operated by Green Valley. [1] All the capital stock of Green Valley was owned by Howard B. Parker, who was its treasurer and general manager, in addition to being a director, and he dominated its business during the entire period in question. Parker's method of operation is fully set forth in the master's report. Green Valley bought the milk from producers. Its entire product was then sold to Stuart. Parker, as the dominating man in both corporations, dictated the prices at which Green Valley should sell and Stuart should buy. Under the direction and management of Parker the bills from the market administrator to Green Valley were not carried as accounts payable by Green Valley, whose operating accounts were balanced without including therein the bills of the market administrator. By Parker's dictation, the prices for milk sold to Stuart by Green Valley were established and adjusted after disregarding the sums due to the market administrator and the amounts of the bills received by Green Valley Creamery, Inc., from the market administrator. These prices were so nicely set by Parker in 1938 that the total receipts of Green Valley Creamery, Inc., were maintained at a level substantially sufficient to balance the books of Green Valley Creamery, Inc., without consideration of the sums due from Green Valley Creamery, Inc., to the market administrator. If, however, the amounts due the market administrator are included (as of course they should be) as part of the cost of the milk to Green Valley, it is found by the master that as a result of Parker's domination Stuart Milk Company was enabled to purchase the entire products of Green Valley Creamery, Inc., for the period between August 1, 1937, to December 31, 1939, at $47,072.65 less than the total costs of such products to Green Valley Creamery, Inc. The payments by Stuart to Green Valley were so regulated under the management and direction of Howard B. Parker that Green Valley Creamery, Inc., on December 31, 1939, was insolvent. Further, the master recites: Upon all the evidence I find that the policies, acts and dominations of Howard B. Parker have caused the assets and the income of Green Valley Creamery, Inc., to be so held, that Green Valley Creamery, Inc., has been made incapable of paying from the sums or assets now in the possession of Green Valley Creamery, Inc., the amounts due the market administrator. I find that the domination and management of Howard B. Parker and the acceptance thereof by Green Valley Creamery, Inc., and Stuart Milk Company, and by the officers and directors of both companies, have made Green Valley Creamery, Inc., immediately and directly unable, from assets now in the possession of Green Valley Creamery, Inc., and noted upon its books of account, to comply with either the temporary injunction or the said decree. On June 29, 1939, the board of directors of Stuart voted to pay Howard B. Parker a bonus of $10,000 at the rate of $100 per month, and to secure the bonus authorized and directed the execution of a mortgage to Parker upon the real estate and personal property of the corporation exclusive of accounts receivable. Whether the bonus was paid in whole or in part did not appear in evidence. Also, by vote of its directors, Stuart authorized the execution and delivery of an assignment of its accounts receivable (its only remaining unencumbered assets) to Dairy Realty Company, Inc., in order to secure payments under a lease of property from Dairy Realty Company, Inc., to Stuart Milk Company at 40 Lake Street, Somerville, Massachusetts. The offices of Green Valley, Stuart and Dairy Realty Company, Inc., all were located at 40 Lake Street, Somerville, Massachusetts. Dairy Realty Company, Inc., was organized under the laws of Massachusetts on November 7, 1935, and its total issued capital stock was 80 shares, of which 40 shares were owned by Howard B. Parker, and the remaining 40 shares were owned by Otis H. Parker, his brother. On June 29, 1939, by another vote of its board of directors, Stuart authorized and directed the execution of an option to Howard B. Parker to purchase all of its assets at any time within three years from July 1, 1939, for a net sum of $3,600. The balance sheet shows the total assets of Stuart to be $58,148.98, after deducting a questionable depreciation reserve, and shows total liabilities apart from the reserve for repairs and capital stock, of $19,644.78. The master found upon all the evidence that unless due regard is given to the legal liability of Stuart Milk Company to Green Valley Creamery, Inc., as stated in this report, the price stated in the said option to Howard B. Parker is inadequate. The master noted that the aforesaid votes of the board of directors of Stuart on June 29, 1939, came shortly after the decision of the Supreme Court in H. P. Hood & Sons, Inc., v. United States, 1939, 307 U.S. 588, 59 S.Ct. 1019, 83 L.Ed. 1478, upholding the Agricultural Marketing Agreement Act and most of the terms of Order No. 4 as amended. As a legal conclusion from the foregoing facts the master found that there was a legal liability from Stuart to Green Valley at least to the amount of the total costs of the products handled by Green Valley Creamery, Inc., and purchased by Stuart Milk Company between August 1, 1937, and December 31, 1939, and that the difference between said total costs of Green Valley Creamery, Inc., and the amounts heretofore paid by Stuart Milk Company during said period, is the total sum of $47,072.65. Pursuant to a request for findings made by the defendants the master made an additional finding as follows: There was no evidence that the relationships between Stuart Milk Company and Green Valley Creamery, Inc., or their business methods with each other, prior to August 1, 1937, or prior to November 30, 1937, were different from the relationships or methods after either of said dates. Whether these same business methods had resulted in non-compliance with the original Order No. 4, which was effective from February 9, 1936, to August 1, 1936, does not appear. See United States v. David Buttrick Co., 1 Cir., 1937, 91 F.2d 66. The district court on January 27, 1941, overruled objections by the defendants to the master's report and ordered that the report be confirmed. In a memorandum opinion the court summarized the master's findings, and on the basis of the report concluded that Green Valley and the individuals Howard B. Parker and Otis H. Parker were in civil contempt of this court. The court's order of commitment dated January 27, 1941, from which order the appeal is taken in No. 3695, is in part as follows: Ordered, adjudged and decreed that Green Valley Creamery, Inc., Howard B. Parker and Otis H. Parker be, and they hereby are, adjudged to be in contempt of court by reason of acts alleged in said petition, and it is further Ordered that Howard B. Parker be committed to jail until compliance by the defendant Green Valley Creamery, Inc., with the Marketing Agreement Act of 1937 and the mandatory injunction of this court is effected, or until further order of this court, and it is further Ordered that the case of Otis H. Parker be continued for disposition until further order of this court. On March 19, 1941, Howard B. Parker filed in the district court a petition reciting that Green Valley had on the preceding March 15 been adjudged a bankrupt upon its voluntary petition; that by reason of said adjudication Parker was no longer competent as an officer or director of Green Valley to cause the said corporation to comply with the court's decree; that Your petitioner is not himself indebted in any fashion under said final decree of March 15, 1939, and he is in no wise able to cause or attempt to cause compliance therewith by the defendant Green Valley Creamery, Inc. The prayer of the petition was that the district court enter a further order discharging the commitment of your petitioner to jail. This petition was denied by the district court on May 19, 1941, without opinion. Appeal is taken in No. 3706 from this order of denial. We are not clear as to the legal theory upon which the Government would have us affirm the action of the district court. In its brief it asserts that Green Valley, Stuart and Howard B. Parker were but one entity, and it argues at some length in favor of disregarding the corporate fiction. The Government in its original bill in equity, seeking a decree enforcing Order No. 4 as amended, might perhaps have proceeded on the theory that Green Valley was but the alter ego of its sole stockholder Howard B. Parker, and that looking behind the corporate facade Parker should be held personally liable as the handler obligated to make payments to the market administrator. Or, perhaps the Government might have taken the line that Green Valley was merely a purchasing agent, an instrumentality used by Stuart; and hence that Stuart was the handler subject to the Order. But the Government at this time chose to respect the corporate entity of Green Valley, and sought and obtained both an interlocutory and a final decree adjudging Green Valley to be the handler whose primary duty it was to make the payments to the market administrator. It is now too late for the Government to go back of the adjudications of the interlocutory and final decrees. Nor can Parker's commitment be upheld on the argument that Stuart is in contempt of the court's decree and that Parker, as the dominant officer of Stuart, can be put in jail until he causes Stuart to make amends for the consequences of its civil contempt. The reason is that Stuart was not a party to the contempt proceedings and has not been adjudged in contempt. Further the Government contends that at the time of the decree there was a debt due Green Valley which was more than sufficient to pay the market administrator; that as Green Valley was operated and controlled for the profit of Stuart, the latter, in the eye of equity, became properly indebted to Green Valley for the difference between the total cost of the milk to Green Valley and the amount paid by Stuart to Green Valley, viz., the sum of $47,072.65. On this premise it is argued that it is proper to commit Parker to jail until he, as dominant officer of Stuart, causes Stuart to pay this indebtedness to Green Valley and then until Parker, as dominant officer of Green Valley, causes the latter corporation to apply the assets so derived to satisfy its obligations to the market administrator in accordance with the decree. We find many difficulties with this line of argument. In the first place, Stuart has not been a party to any proceeding establishing such a liability. In the second place, Stuart does not seem to have committed any legal wrong to Green Valley as a legal entity, because the prices for the milk sold to Stuart were fixed by Parker, the sole stockholder and dominant officer of Green Valley; the corporate forms were solemnly observed, and, as found by the master, Green Valley Creamery, Inc., by votes of its stockholder, approved, ratified and confirmed the acts of its officers and directors. While creditors of Green Valley might have a claim against Stuart on some theory of fraudulent conveyances, Green Valley itself has no enforceable claim against Stuart. Furthermore, even if a liability of Stuart to Green Valley did exist, Stuart would have to pay the debt now to Green Valley's trustee in bankruptcy and Parker would no longer have authority to take the funds so derived from Stuart and pay them to the market administrator in satisfaction of Green Valley's obligations. Therefore, as far as this particular argument goes, whether or not the original commitment of Parker was proper, he would at all events have been entitled to release from commitment upon the supervening event of Green Valley's adjudication in bankruptcy. There is, we think, another avenue of approach. Under the terms of the interlocutory and final decrees Green Valley is the primary obligor commanded to comply with the provisions of Order No. 4 as amended. A command to the corporation is in effect a command to those who are officially responsible for the conduct of its affairs. If they, apprised of the writ directed to the corporation, prevent compliance or fail to take appropriate action within their power for the performance of the corporate duty, they, no less than the corporation itself, are guilty of disobedience, and may be punished for contempt. Wilson v. United States, 1911, 221 U.S. 361, 376, 31 S.Ct. 538, 543, 55 L.Ed. 771, Ann.Cas.1912D, 558. This applies to a civil as well as a criminal contempt. See Alemite Mfg. Corp. v. Staff, 2 Cir., 1930, 42 F.2d 832. Where the responsible officers of the corporation, after notice of the decree, merely fail to take action within their power to cause the corporation to comply with the decree, the officers are in civil contempt, but the obligations of the corporation under the decree do not thereby become the personal obligations of the delinquent officers. United States v. Adler's Creamery, Inc., 2 Cir., 1940, 110 F.2d 482. See Alemite Mfg. Corp. v. Staff, 2 Cir., 1930, 42 F.2d 832; Harvey v. Bettis, 9 Cir., 1929, 35 F.2d 349. The officers may be committed to jail upon civil contempt merely as a means of forcing them to effect compliance by the corporation; and if they can show that the corporation is no longer able to comply with the decree and that its inability is not due to any contumacious acts of theirs, they will be entitled to discharge from commitment. Such is the ordinary situation where corporate officers are committed for civil contempt upon non-compliance by the corporation with a court decree. But the situation in the case at bar is quite a different one. Howard B. Parker has done more than merely fail to cause compliance by Green Valley with the interlocutory and final decrees. By a studied course of conduct over a long period of time he has deliberately rendered Green Valley incapable of complying with the said decrees, as indicated in the master's report. From this it does not follow that the obligations of Green Valley to the market administrator become as such the personal obligations of Parker. But to the extent that Parker's contumacious acts have had the intended effect of causing loss to the market administrator by depriving him irretrievably of the fruits of the decrees against Green Valley, the district court has power, in a civil contempt proceeding, to impose a monetary fine upon Parker, payable to the market administrator. The petition for attachment for contempt did not specifically ask for this relief, but it would be appropriate under the terms of the general prayer in the petition That the plaintiff be given such other and different relief as this court deems just and proper. Gompers v. Buck's Stove & Range Co., 1911, 221 U.S. 418, 448, 449, 31 S.Ct. 492, 55 L.Ed. 797, 34 L.R.A.,N.S. 874. In the circumstances disclosed, unless such a fine could be imposed, punishment for civil contempt would be ridiculously ineffective as a remedial process, for it is idle to put Parker in jail to make him cause Green Valley to do something it is no longer capable of doing. The very completeness of Parker's success in bringing about the corporation's incapacity could then be urged by Parker as a reason for relieving him of all civil consequences of his contempt. It is well settled, however, that the court may, in a proceeding for civil contempt, impose the remedial punishment of a fine payable to an aggrieved litigant as compensation for the special damages he may have sustained by reason of the contumacious conduct of the offender. Gompers v. Buck's Stove & Range Co., 1911 221 U.S. 418, 448, 449, 31 S.Ct. 492, 55 L. Ed. 797, 34 L.R.A.,N.S., 874; Lamb v. Cramer, 1932, 285 U.S. 217, 220, 221, 52 S. Ct. 315, 76 L.Ed. 715; Merchants' Stock & Grain Co. v. Board of Trade, 8 Cir., 1912, 201 F. 20, 30; Delaware, L. & W. R. Co. v. Frank, 2 Cir., 1916, 230 F. 988; American Graphophone Co. v. Walcutt, C.C.S.D.N.Y.1898, 86 F. 468; Kreplik v. Couch Patents Co., 1 Cir., 1911, 190 F. 565, 569; Raymor Ballroom Co. v. Buck, 1 Cir., 1940, 110 F.2d 207, 211; Aerovox Corp. v. Concourse Electric Co., 2 Cir., 1937, 90 F.2d 615, 617; Lineker v. Dillon, D.C.N.D.Cal.1921, 275 F. 460, 470, 476. If the district court should impose such a compensatory fine upon Parker and he should fail to pay it within the time specified in the contempt order, the court might, still as part of the remedial process, commit Parker to jail until he pays the fine or until further order of the court. Raymor Ballroom Co. v. Buck, 1 Cir., 1940, 110 F.2d 207, 211, 212. Since the purpose of the commitment would be remedial merely, not punitive, the court would no doubt on application make an appropriate modification of its order if Parker were able to show his utter inability to pay the fine in whole or in part. See In re Byrd Coal Co., Inc., 2 Cir., 1936, 83 F.2d 256. The books of Stuart Milk Company showed small net losses for the years 1937, 1938 and 1939, and the master found that there was no evidence that Howard B. Parker actually received any money from Stuart Milk Company excepting salary, and the amount of salary did not appear. Whether these apparent losses were genuine or resulted from excessive deductions for depreciation, the master did not determine. Whether Howard B. Parker received the $10,000 bonus previously mentioned also does not appear. Nor do we know how much of the assets drained off from Green Valley flowed through Stuart to the Dairy Realty Company, Inc., and thence to Parker personally. But we need not grope our way through this corporate maze. Parker's obligation to make reparation for the consequences of his civil contempt is measured not by the amount to which he can be shown to have thereby profited personally, but rather by the amount which, as the result of his contumacious acts, he made it impossible for Green Valley to pay the market administrator as directed in the interlocutory and final decrees. The master found that the total amount due from Green Valley to the market administrator for the period from August 1, 1937, to March 30, 1940, was $41,722.37. He also found that due to the pricing policy enforced by Parker, Stuart purchased the milk from Green Valley from August 1, 1937, to December 31, 1939, at $47,072.65 less than its actual cost to Green Valley. But the latter sum includes losses incurred by Green Valley by reason of prices fixed prior to the interlocutory decree of November 30, 1937. The acts of Parker prior to November 30, 1937, however much they may have contributed to Green Valley's insolvency, are necessarily not in contempt of the interlocutory or final decree. See Ex parte Buskirk, 4 Cir., 1896, 72 F. 14; Berry v. Midtown Service Corp., 2 Cir., 1939, 104 F.2d 107, 122 A.L.R. 1341. In determining the extent of the compensatory fine to be imposed upon Parker, the district court should consider only losses resulting from prices established by Parker after the rendition of the interlocutory decree. On the other hand, the court will be entitled to take into account the further losses resulting from Parker's pricing policy for the period from January 1, 1940, to March 30, 1940, as to which no figures appear in the record before us. Since the fine is compensatory it should as a maximum be no larger than the aggregate amount due the market administrator from Green Valley, with interest. The order of the district court committing Howard B. Parker for contempt should be amended so as to adjudge specifically that Howard B. Parker is in contempt not only of the final decree, but also of the interlocutory decree, by reason of the acts set forth in the master's report as confirmed by the court. Further, the order should be amended so as to strike out the reference to compliance by Green Valley Creamery, Inc., which has become impossible. As reparation for the contempt, the order should impose upon Parker a compensatory fine, the amount of which will be determined by the court, with due regard to the guides laid down in this opinion. The order will further state that unless the fine is paid to the market administrator within the time specified in the order, Howard B. Parker is to be committed to jail until the fine is paid or until further order of the court. Since it will be made clear in the amended order that Parker is not being committed to jail to compel compliance by Green Valley Creamery, Inc., with the court decrees, the adjudication of that corporation in bankruptcy becomes of no significance. In No. 3695 the order of the District Court dated January 27, 1941, is vacated and the case is remanded to that court for further proceedings not inconsistent with this opinion. In No. 3706 the order of the District Court dated May 19, 1941, denying the petition of Howard B. Parker for discharge from commitment, is likewise vacated, and the case is remanded to that court for further proceedings not inconsistent with this opinion.