St. Paul Fire & Marine Insurance v. Fort Vancouver Plywood Co. (In re Brazier Forest Products, Inc.)

Brazier Forest Products, Inc. and Brazier Forest Industries, Inc. (“Brazier”) are lumber manufacturers. To finance its operations, Brazier obtained loans from appellee Rainier National Bank (“Rainier”), and gave Rainier security interests in its accounts receivable.

The United States Forest Service (“USFS”) owned the land on which Brazier acquired timber cutting rights. Brazier paid the USFS a set amount for the timber it cut on Forest Service land. The contracts between Brazier and the USFS permitted the posting of payment bonds to qualify as payment for the logs. Appellant St. Paul Fire and Marine Insurance Company (“St. Paul”) provided such bonds with Brazier as the principal and the USFS as the obligee.

On May 17, 1984, Fort Vancouver Plywood Company (“Fort Vancouver”) entered into a log sales agreement with Brazier for a specified quantity of logs. Brazier harvested these logs from a particular USFS timber sale known as the “Dry Johnson” sale. The logs were delivered to Fort Vancouver in installments between May and August 1984.

In August 1984, Brazier filed petitions under Chapter 11 of the Bankruptcy Code. Fred B. Moe Logging Company (“Moe”) and Cowlitz Loggers…