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UNITED STATES PLYWOOD CORP. v. HUDSON LUMBER CO.

December 22, 1954

UNITED STATES PLYWOOD CORPORATION, Plaintiff,
v.
HUDSON LUMBER COMPANY and Eagle Pencil Co., Defendants



The opinion of the court was delivered by: WEINFELD

The plaintiff moves for summary judgment in its favor pursuant to Rule 56 of the Federal Rules of Civil Procedure, 28 U.S.C.A., or in the alternative striking various defenses and counterclaims of the defendants on the ground that they are insufficient as a matter of law, or in the alternative to all the foregoing for an order (1) requiring a more definite statement of the defendants' first and second counterclaims on the ground that these counterclaims, as now pleaded, are argumentative and verbose; and (2) striking out as immaterial and scandalous designated paragraphs of the answer.

The plaintiff also moves to vacate notices to take the depositions of certain witnesses and to strike the answers to plaintiff's request for admissions on the ground that the denials contained therein do not fairly meet the substance of the requested admissions and that the admissions are so qualified and ambiguous that it is impossible to determine what the defendants are admitting and what they are denying.

The action arises out of a long-term contract dated December 9, 1947, between the plaintiff, United States Plywood Corporation (Plywood) and the defendant Hudson Lumber Company (Hudson), performance of which by Hudson was guaranteed by the other defendant, Eagle Pencil Co. (Eagle). In substance, under the basic contract, Plywood agreed to sell and deliver, and Hudson agreed to purchase, over a period of twenty-five years, all merchantable incense cedar logs derived by Plywood from a timber tract located in Shasta, California, termed the La Tour timber. Hudson agreed to pay a price equal to the plaintiff's cost of the logs as defined in the contract plus 10% of such cost. The parties have been carrying on operations under this contract uninterruptedly since 1948, though there has been since the early days of these operations acute controversy between them as to the correct method of computing the cost, which has resulted in extensive litigation both in this Court and in the Courts of California.

 The amended and supplemental complaint contains six causes of action, five against Hudson, and the sixth against Eagle. The first four causes of action against Hudson seek recovery of the purchase price, after credit for payments, of incense cedar logs delivered during the periods respectively (1) from July 1, 1948 to December 31, 1949, (2) from January 1, 1950 to December 31, 1951, (3) from January 1, 1952 to December 31, 1952, and (4) from January 1, 1953, to the service of the supplemental complaint. The fifth cause of action demands the stumpage price and carrying charges of cedar trees, the cutting of which is alleged to have been deferred at Hudson's request pursuant to a provision of the contract obligating Hudson to pay these items in such event. The remaining cause of action against Eagle is based upon its guaranty of Hudson's obligations under the terms of the major contract.

 The La Tour tract, from which the incense cedar logs were to be cut for Hudson, consisted of other species of lumber, pine and fir, which Plywood logged along with the cedar. The dispute between Plywood and Hudson has been over the correct method of determining the cost of logging the cedar. The critical clause around which this controversy has been waged reads:

 '3(a)(VI). With the exception of the stumpage charge payable pursuant to sub-division (i) hereof, logging costs, as hereinabove defined, shall be computed on a common cost per M ft. and for all species derived from the La Tour timber and this common cost will be the cost per M ft. of cedar logs delivered to Hudson hereunder.'

 In effect, the dispute centers about whether the charges to defendant under the foregoing clause should be computed as plaintiff contends -- on the common cost divided in proportion to the gross scale of, or total content of, all species of lumber logged, i.e., fir, pine and cedar -- or as defendant contends -- in proportion to the net scale or merchantable contents delivered of each species. The difference is substantial since incense cedar logs contain a much greater defective or unmerchantable content than pine or fir logs. If the costs were computed on a net basis of merchantable footage, the cedar would bear a much smaller, and, conversely, if based upon a gross scale computation it would bear a much higher, proportion of the total cost.

 To resolve the dispute Hudson in March 1951 instituted arbitration proceedings in California, pursuant to Article 10 of the agreement. After protracted hearings the majority of the arbitrators on November 5, 1951, made the following award:

 'We accordingly award as follows:

 '1. That the theory and basis of cost accounting as followed in the audits and reports of Arthur Andersen & Co. *fn1" for the years 1948 and 1949 are pursuant to the proper construction of the contract of December 9, 1947.

 '2. That Hudson is entitled to a credit for payment to Plywood under the contract for incense cedar logs delivered to October 31, 1950, which logs were not properly scaled as 'merchantable' under the contract, said credit being the sum of Thirty-four Thousand, Seven Hundred and Fifty-seven Dollars and Seventy Cents ($ 34,757.70).'

 Plywood's application to the Superior Court of California to confirm the award was granted and Hudson's motion to vacate denied. On January 17, 1953, judgment confirming the award was entered in the Superior Court and the judgment so entered has now become final through its affirmance by the District Court of Appeal of California, First Appellate Division, 124 Cal.App.2d 527, 269 P.2d 93, and successive denials by that Court and the Supreme Court of California of applications for rehearing and leave to appeal.

 This end of the arbitration has, however, not set the dispute at rest. The parties are in hopeless disagreement as to the effect to be given to the judgment confirming the award. Plywood contends, in substance, that the judgment concludes the parties upon all the issues in this action, while Hudson treats it almost as a nullity. These respective contentions have been argued at great length both orally and in comprehensive briefs. Hudson's position is that since the judgment is not a money judgment it is not entitled to full faith and credit, and, further, since it was entered summarily on motion, it has no effect under the doctrine of collateral estoppel by judgment, an aspect of res judicata. The contentions are not borne out by authority and I must reject them.

 The argument that only a money judgment is entitled to full faith and credit overlooks the distinction between the effect of a judgment as a determination of an issue and the right to bring suit on the judgment itself in another state. While the rule seems to be that suit in a sister state may be brought only upon a foreign judgment which establishes a definite, unconditional liability for the payment of money, *fn2" the judgment is, nevertheless, entitled to full faith and credit as an adjudication of determined issues. The rule finds its most common illustration in cases determining marital status, ...


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