Before FINNEGAN and SCHNACKENBERG, Circuit Judges, and PLATT, District Judge.
PLATT, D.J.: Appellee, Scott Cuthill, on December 21, 1953 obtained a judgment against the appellee, Ortman-Miller Machine Company, a corporation, for $4,100.00 for overtime compensation in a suit based upon the Fair Labor Standards Act. 29 U.S.C.A. § 201 et seq. On the next day the appellant, J. Carter Miller, a minority stockholder in Ortman-Miller filed a petition to intervene, vacate the judgment and defend upon behalf of Ortman-Miller alleging that the judgment was a fraud upon the court in that Cuthill did not have a valid claim for overtime, and that Ortman-Miller's counsel was aware of this. The district court allowed a motion to dismiss the intervening petition. Miller appealed and the order of dismissal was reversed and remanded in Cuthill v. Ortman-Miller Machine Company, 216 F.2d 336 (C.A.7, 1954). Since the allegations of the petition to intervene are set forth in that opinion it is not necessary to repeat them here.
Evidence was heard by the trial court upon the allegations in the intervening petition, and the court made findings of fact, conclusions of law and ordered the prayer of the petition denied. Miller has again appealed and maintains:
1. That the prior decision of this Court entitled him to defend for the Company and have the judgment vacated as a matter of right.
2.That in the event the district court had discretion to determine whether the judgment should be vacated, the district court abused such disccretion because the evidence offered substantiated the allegations of the petition.
The opinion of this Court on the prior appeal explicitly held that Miller was entitled to a hearing on his petition to intervene, but it did not thereby order the judgment vacated and a defense to be made. Judge Lindley, speaking for this Court, said, 216 F.2d at p. 339:
"Inasmuch as Rule 60(b) endows the court with power to vacate any fraudulent judgment, plaintiff was entitled to be heard upon his averments. Obviously the District Court has inherent power to investigate such averments of fraud."
In the concluding paragraph of the opinion it was stated:
"We know not what proof appellant may be able to produce, but we are of the opinion that he should be permitted to intervene and have his day in court. The order is reversed with directions to proceed accordingly."
Counsel for Miller, in spite of their contention, must have understood that they were required to prove the allegations of their since the following statement was made to the trial court:
"the Circuit Court of Appeals in determining the law of this case, on the very facts that are the subject of inquiry here, has held that if the matters in the intervening petition are true, and if the intervenor can prove those things, a fraud has been perpetrated on the United States District Court of Indiana of a rather vicious nature."
This brings forward the real issue. Appellant contends that the trial court abused its discretion in denying him relief, because the evidence substantiated the allegations of fraud. The obvious question on appeal is whether there was substantial evidence presented on the hearing of the petition to intervene upon which the trial court's findings of fact can be sustained. Findings of fact by the district court will not be set aside on appeal unless clearly erroneous. Fed.Rules Civ.Proc. rule 52(a), 28 U.S.C.A. Koehler v. Ellison, 226 F.2d 682 (C.A.7, 1955).
The undisputed evidence discloses that Miller, at the time the judgment in question was entered, owned 20% of the stock of Ortman-Miller Machine Company. The remaining stock was owned by Carl Speichert, Alva Ortman, Nelson Ortman, and Harold Ortman. The Company was originally organized in 1945 and manufactured machine tools. About 1948 Ortman-Miller started manufacturing hydraulic cylinders and its business became very prosperous through the efforts of the sales agency operated by Miller, under the name of Midwest Supply Company. He and his sales organization sold a large amount of products of Ortman-Miller. Miller was president of Ortman-Miller and on November 1, 1950 employed the appellee, Cuthill as a bookkeeper for Ortman-Miller and Midwest. In March, 1952, Miller was removed as president of Ortman-Miller by the other directors who were stockholders, and Ortman-Miller started selling its products direct to its customers and bypassed Midwest. Miller filed suit in Lake Circuit Court of Indiana in March, 1952 against the other stockholders and Straley Thorpe who was employed as counsel for Ortman-Miller. This suit was based on malicious destruction and appropriation of Miller's Midwest Supply Company. The case was venued to Jasper Circuit Court for trial and judgment was entered against Miller. The Appellate Court of Indiana affirmed the trial court in Miller v. Ortman, Ind.App. (February, 1955), 124 N.E.2d 390, rehearing denied, 125 N.E.2d 257. The Supreme Court of Indiana reversed the Appellate Court and remanded the case for trial. Ind. (July, 1956), 136 N.E.2d 17.
Miller's counsel devoted a great deal of their printed argument to the reversal of this case by the Supreme Court of Indiana, and the acts and doings of the other stockholders and Thorpe in usurping the business of Midwest. The Indiana case is not vital to the question here involved as to whether Cuthill had a valid claim for overtime. Appellant's contention that the district court relied upon the Indiana Appellate Court's ...