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United States v. White

decided: March 10, 1966.

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
L. N. WHITE AND COMPANY, INC., DEFENDANT-APPELLANT



Kaufman and Hays, Circuit Judges, and Timbers, District Judge.*fn*

Author: Timbers

TIMBERS, District Judge.

L. N. White and Company, Inc., a New York corporation engaged in the export and import business and specializing in beans, appeals from a judgment entered against it in amount of $9,481.41, including interest and costs, in the United States District Court for the Southern District of New York, after a two day trial without a jury before Edward C. McLean, District Judge, in an action pursuant to 15 U.S.C. ยง 714b(c) brought by the United States on behalf of the Commodity Credit Corporation for breach of those provisions of a sales contract relating to payment of charges for warehouse storage of pea beans purchased by White from the CCC on May 11, 1956. On this appeal White raises these issues: (1) whether it is liable under the contract to pay "commingled" storage charges and, if so, whether 15 cents per cwt. per month was the rate in effect at the place of delivery; (2) assuming White's liability, whether the parties agreed upon an accord and satisfaction which bars appellee's recovery; and (3) whether interest was properly awarded to appellee from the date of its demand. We hold that the district court correctly decided each of these issues in favor of appellee. Accordingly, we affirm.

FACTS

A brief summary of the controlling facts as found by the district court is necessary to an analysis of the contract upon which turn the legal issues raised on this appeal.

CCC's Role in the Pea Bean Commodity Market

Over 80% of the world's supply of dry edible pea beans are grown in Eastern Michigan. As part of the federal farm price support program, the CCC indirectly purchases or takes over a substantial portion of the nation's pea bean crop in the following manner.*fn1 After the farmer grows the beans, harvests them and in the fall of the year stores them in a warehouse, he receives a negotiable warehouse receipt which he takes to the CCC and pledges as security for a loan. When the loan falls due, the farmer defaults. The CCC then takes over the warehouse receipt and the beans it represents in satisfaction of the loan, but continues to store the beans in the warehouse where the farmer originally stored them. The CCC does not sell the beans in the United States, for this would depress the market and defeat the price support program. In order to minimize its losses, however, the CCC sells the beans to exporters on the condition that they not be resold in the United States. The terms and conditions of such offers to sell are announced through bulletins issued by the CCC in advance. All contracts are expressly made subject to the provisions of such bulletins. One provision incorporated in all contracts of sale is that warehouse charges accrued after a certain date will be for the account of the buyer; specifically, if the buyer does not take delivery of his entire purchase within the month of sale, he must pay the additional storage charges thus incurred. The bulletins refer to this cost allocated to the buyer as "warehouse charges."

" Identity Preserved Storage" and "Commingled Storage "

There are two types of storage of edible pea beans which are well recognized among those who deal in this commodity: "identity preserved" (IP) and "commingled." IP storage means that the identical beans placed in storage by the farmer are kept segregated from those of other farmers and, upon presentation of the warehouse receipt, the farmer gets back the same beans that he put in; any change or deterioration in weight or grade*fn2 of the beans, under IP storage, is the responsibility of the farmer, not the warehouseman. Commingled storage, on the other hand, means that a farmer's beans are mingled with those of other farmers and, upon presentation of the warehouse receipt specifying the net weight and grade of the beans originally placed in storage, the farmer is entitled to get back the equivalent weight and grade of beans; any change or deterioration in weight or grade, under commingled storage, is the responsibility of the warehouseman who must incur whatever expense is required to treat the beans in order to restore them to the weight and grade specified; in effect, under commingled storage, the warehouseman guarantees the return of the same quantity and quality of beans as were placed in storage. Understandably, the rates for commingled storage are substantially greater than for IP storage. And, since pea beans in storage are affected adversely by warm weather, the rates for commingled storage increase as the season progresses, for example, from early spring, to late spring, to early summer, to late summer, thus reflecting the increased risk of deterioration and the increased cost of treating deteriorated beans so as to restore their weight and grade.*fn3

During 1956, over 80% of the pea beans stored by farmers in Michigan warehouses were stored on a commingled basis.

When the CCC takes over the warehouse receipt upon the farmer's default in payment of his loan, the CCC steps into the farmer's shoes; it has the same rights and is under the same duties as the farmer. Most Michigan warehousemen are willing to continue storing on a commingled basis for the account of the CCC; and since most beans originally are stored by the farmer on a commingled basis, it is the practice of the CCC to leave them on that basis when it takes over the warehouse receipt unless the warehouseman declines to agree to it. The CCC, upon taking over the beans when the farmer defaults, enters into a written "Bean Storage Agreement" with the warehouseman setting forth the terms upon which the beans henceforth will be held for the account of the CCC. This contract, on printed Form 28, first prepared in 1951, is the standard one entered into between the CCC and all warehouses.

The storage contracts between the CCC and the four Michigan warehouses here involved were on this standard form, each containing the following provision:

"Beans stored in sacks shall be deemed to be stored commingled with other beans, and the responsibility of the warehouseman with respect thereto shall be as if stored commingled unless the warehouse receipt or accompanying certificates is plainly marked in a manner satisfactory to Commodity that such beans are stored identity preserved. * * *"

The names of the four warehouses which stored the beans involved in the instant case, the dates of their basic storage contracts with the CCC and the dates of the schedules of storage rates effective in 1956 attached to the respective contracts, are set forth in the margin.*fn4 The monthly rates per cwt. for commingled storage specified in the Runciman, Harper and Cooperative contracts for the months of March through August of 1956*fn5 under the heading "Storage" were as follows:

March 6 cents

April 7 cents

May 11 cents

June 15 ...


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