Court Opinion

ID: 9450786
Source: CourtListenerOpinion
Date Created: 2023-08-04 16:57:36.380703+00
Date Added: 2024-06-11T17:32:26.909158
License: Public Domain

RIDGE, Circuit Judge,
(concurring):
I think it is important in the case at bar to point out that by its memorandum opinion the District Court found appellant’s cause of action was dually premised: (1) for “negligence and mismanagement (by appellee, the) managing officer” of Commodities, Inc., a bankrupt Arkansas corporation; and (2) that because of his “wrongful, unlawful * * * conduct” appellee “obtain(ed) money and credit from suppliers with the intent * * * to avoid payment therefor.” (224 F.Supp. 1. c. 486.)
Also, appellee by brief and at oral argument before us concedes:
“Appellant sought relief from Appellee on two theories; first, that Appellant was guilty of negligence in his management of the corporation (ante); second, that Appellee defrauded the Plaintiffs.
“It must be admitted that, in Arkansas, creditors have a direct claim or cause of action against an officer or director of an insolvent corporation for fraud, Henderson v. Rounds & Porter Lumber Co., 99 F.Supp. 376 (W.D. Ark., 1951).” (Appellee’s Brief, p. 9.)
Further, appellee “testified that he was well versed on (sic) the maintenance of the records of Commodities” and “was informed in June 1959 of the many unpaid accounts” of Commodities, Inc. The “balance sheet reflected that Commodities was insolvent * * * as of March 31, 1959.” “All of the debts (here) sued on * * * were incurred on or after June 27, 1959.”
There was:
“* * * corroborating evidence * * * as to the constant bank overdrafts, the inadequately kept records, the many unknown and unpaid accounts * * * (and) the instructions given (by appellee) to buy on credit so that the corporation *500could pay other debts, (etc.) * * * which ultimately resulted in the insolvency of the corporation.” (224 F.Supp. 1. c. 489, supra.)
It was in the face of the above facts, and those which Judge Hanson points up, that the Court below ruled appellee was merely negligent in the “mismanagement of Commodities, Inc.” and that appellant, as a creditor of that corporation, could not maintain the instant action under § 70, sub. a(5) and (6) of the National Bankruptcy Act, as amended, 11 U.S.C.A. § 110, sub. a(5), (6), because the Trustee in Bankruptcy “is the only proper party to sue on any such right of action.”
Appellee now says, since “the trial court found that Appellant’s proof fell short of fraud * * * (this appeal) must be considered only on the theory of negligence and mismanagement.” Such contention is wholly without merit.
“An appellate court reviews judgment (based on factual proof), not the reasons which may be given in their support. It is only common sense that if, on the record before us, we determine that the judgment is (incorrect, it should not) be affirmed, regardless of the * * * reasons which may be given to support it.” (Pars, added.) Continental Ore Co. v. Union Carbide and Carbon Corp., 289 F.2d 86, 89 (9 Cir., 1961), rev. on other grounds, 370 U.S. 690, 82 S.Ct. 1404, 8 L.Ed. 2d 777 (1961).
In light of the foregoing, remand of this case should be made, with direction to the District Court to make findings of fact in respect to amounts due on each of the “accounts” at issue in this action, and enter judgment for the total amount thereof, with interest allowable according to law, together with costs.