Unpublished Disposition, 899 F.2d 1224 (9th Cir. 1986)

MEMORANDUM^* 

This is a diversity action for rescission. Rainier National Bank (Rainier) appeals from an order entering judgment in favor of BBC Brown Boveri (BBC) in the amount of $66,000 plus prejudgment interest. The district court found that there was no contract between Rainier and BBC and ordered Rainier to return $66,000 that BBC had transmitted to Rainier. We affirm.

Rainier raises five issues on appeal. Rainier first claims that, because Waeco Power, Inc. (Waeco) was an indispensable party under Rule 19 of the Federal Rules of Civil Procedure, BBC's suit should have been dismissed. A district court's decision concerning joinder is generally reviewed for abuse of discretion. Northern Alaska Envtl. Center v. Hodel, 803 F.2d 466, 468 (9th Cir. 1986); Aguilar v. Los Angeles County, 751 F.2d 1089, 1092 (9th Cir.), cert. denied, 471 U.S. 1125 (1985).

Joinder under Rule 19 entails a practical two-step inquiry. First, a court must determine whether the party in question should be joined as a "necessary party" under section (a). Second, if the court concludes that the nonparty is necessary and cannot be joined for practical or jurisdictional reasons, it must then determine under section (b) whether the action should be dismissed because the nonparty is "indispensable." Northrop Corp. v. McDonnell Douglas Corp., 705 F.2d 1030, 1042 (9th Cir.), cert. denied, 464 U.S. 849 (1983).

Rule 19(b) is not applicable to this case. Section (b) is triggered by a finding that the absent party is both necessary under Rule 19(a) and "cannot be made a party" to the action. Waeco was not a necessary party under Rule 19(a). Rule 19(a) states that a nonparty shall be joined if "(1) in the person's absence complete relief cannot be accorded among those already parties, or (2) the person claims an interest relating to the subject of the action...." Fed. R. Civ. P. 19(a). Here, complete relief was accorded to BBC and Rainier by the district court's decision that no contract existed and its order that Rainier return the $66,000 payment to BBC. Although Waeco's chief executive officer, James W. McFall, knew of the case and testified at trial, Waeco did not assert an interest relating to the action or seek to intervene. Waeco was both subject to the district court's jurisdiction and capable of being joined without defeating diversity. Because Waeco was neither a necessary party under Rule 19(a) nor incapable of being joined, Rule 19(b) does not apply.

Rainier also alleges that the district court erred in denying Rainier's pretrial motion to stay the proceedings pending the resolution of Waeco's litigation against BBC in the Eastern District of California. In that action, Waeco seeks to recover payments it was promised by BBC for its services on various construction projects.

Rainier asserts that, if BBC owes money to Waeco, BBC's payment to Rainier of money owed by Waeco resulted in no actual loss to BBC. Therefore, Rainier contends, the rescission action would be affected by the outcome of Waeco's action against BBC. This theory suffers from two flaws. First, Rainier was not entitled to an offset in this rescission action based on whatever amount of money that BBC may have owed Waeco. Rainier did not file a counterclaim, and there is no evidence that Rainier would have been able to recover any damages from BBC in a direct action. Occidental Chem. Co. v. Connor, 124 Ariz. 341, 604 P.2d 605, 607 (1979) (en banc) (if one is not entitled to relief in a direct action, he may not assert a setoff or counterclaim); Sparkman & McLean Income Fund v. Wald, 10 Wash. App. 765, 520 P.2d 173, 178 (validity of a counterclaim is determined by whether it would constitute an independent cause of action), review denied, 84 Wash. 2d 1006 (1974). Second, because the district court found in favor of BBC on a rescission claim, only evidence of damages related to restoring the parties to their original positions was relevant. Willener v. Sweeting, 107 Wash. 2d 388, 730 P.2d 45, 51 (1986) (en banc) (rescission attempts to restore parties to the positions they would have occupied had no contract been made).

The question whether a stay of proceedings should be granted is reviewed for an abuse of discretion. Knaefler v. Mack, 680 F.2d 671, 676-77 (9th Cir. 1982). The key determination is whether a stay order will avoid duplicative litigation. Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976) (citing Kerotest Mfg. Co. v. C-O-Two Fire Equip. Co., 342 U.S. 180, 183 (1952)). The rescission action did not present any of the issues presented in Waeco's action against BBC. The litigation pending in the Eastern District of California will not resolve the question whether a contract existed between Rainier and BBC. The district court did not abuse its discretion in declining to stay the proceedings.

Rainier next argues that the district court erroneously concluded that no contract existed between BBC and Rainier. "In general, factual findings as to what the parties said or did are reviewed under the 'clearly erroneous' standard while principles of contract interpretation applied to the facts are reviewed de novo." L.K. Comstock & Co. v. United Eng'rs & Constructors Inc., 880 F.2d 219, 221 (9th Cir. 1989).

The district court based its finding that no contract existed on the testimony of BBC's division controller. Neil Abitabilo testified that in a telephone conversation that occurred on June 30, 1986, he insisted that the words " [a]cceptance of progress billings by BBC on work performed by Waeco Power will have to be acknowledged in writing before advances will be made on the $80,000 borrowing arrangement," contained in Rainier's June 27 commitment letter, be omitted from the agreement. He testified that Rainier had indicated that it would eliminate this language. Rainier produced testimony to the contrary. The district ocurt noted that Waeco's letter of July 8 that set forth the "final terms and conditions" of the proposed agreement did not contain the contested language. The district court concluded that there was no mutual assent as to the terms of the agreement.

Rainier contends that the June 27 and July 8 letters form a contract as a matter of law. Rainier insists that Neil Abitabilo's testimony should be discounted by this court, and that the objective manifestations of Neil Abitabilo's intent constituted assent under Washington law. See Alexander & Alexander, Inc. v. Wohlman, 19 Wash. App. 670, 680-81, 578 P.2d 530, 536 (the party seeking contract enforcement may rely upon words and acts objectively manifesting the other party's intentions), review denied, 91 Wash. 2d 1006 (1978).

The district court accepted Neil Abitabilo's testimony as true. Accordingly, it concluded that the parties did not agree concerning the terms of the agreement.

The district court's decision to accept Neil Abitabilo's testimony was not clearly erroneous. See Anderson v. City of Bessemer, 470 U.S. 564, 575 (1985) (" [W]hen a trial judge's finding is based on his decision to credit the testimony of one of two or more witnesses, each of whom has told a coherent and facially plausible story that is not contradicted by extrinsic evidence, that finding, if not internally inconsistent, can virtually never be clear error."). The district court did not err in concluding that no contract was formed.

Rainier further alleges that Neil Abitabilo's testimony concerning his phone conversation was inadmissible parol evidence because it was used to contradict the terms of a fully integrated agreement. Rainier argues that the telephone conversation of June 30, 1986 may not be offered to contradict the terms of a written agreement that became effective on July 8. The July 8 letter, however, was not a fully integrated agreement. It referred to a letter of commitment that was not attached.

Parol evidence was admissible to show whether the parties ever agreed to the terms set forth in the letters, of what the contract consisted, and whether the contract, if any, was modified. See Emrich v. Connell, 105 Wash. 2d 591, 716 P.2d 863, 866 (1986) (en banc); Simonson v. "U" Dist. Office Bldg. Corp., 70 Wash. 2d 35, 422 P.2d 1, 5 (1966). The district court did not err in admitting evidence of the June 30, 1986 of phone conversation.

Rainier finally argues that the district court erred by failing to permit Rainier to present evidence related to Waeco's claims against BBC. The district court concluded that such evidence was only relevant, if at all, if a valid contract existed. Evidentiary rulings are reviewed for an abuse of discretion and will not be reversed absent some prejudice. Roberts v. College of the Desert, 870 F.2d 1411, 1418 (9th Cir. 1988) (citing Kisor v. Johns-Manville Corp., 783 F.2d 1337, 1340 (9th Cir. 1986)); Jaurequi v. City of Glendale, 852 F.2d 1128, 1132 (9th Cir. 1988); see also United States v. Kessi, 868 F.2d 1097, 1107 (9th Cir. 1989) (" [W]e review decisions regarding the relevance of evidence for abuse of discretion.").

Rainier has failed to demonstrate that the evidence in question was relevant. As discussed above, Rainier was not entitled to an offset because it failed to file a counterclaim. BBC's liability, if any, under its agreement with Waeco does not affect the outcome of this rescission action against Rainier. The district court did not abuse its discretion in ruling that evidence of Waeco's claims against BBC was not relevant.

AFFIRMED.