Kirkland Distributing Co. of Columbia, SC v. United States

• Decision Date: 14 March 1960
• Docket Number: No. 8024.,8024.
• Citation: 276 F.2d 138
• Parties: KIRKLAND DISTRIBUTING COMPANY OF COLUMBIA, SOUTH CAROLINA, Appellant and Cross-Appellee, v. UNITED STATES of America, Appellee and Cross-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

276 F.2d 138 (1960)

KIRKLAND DISTRIBUTING COMPANY OF COLUMBIA, SOUTH CAROLINA, Appellant and Cross-Appellee, v. UNITED STATES of America, Appellee and Cross-Appellant.

No. 8024.

United States Court of Appeals Fourth Circuit.

Argued January 21, 1960.

Decided March 14, 1960.

COPYRIGHT MATERIAL OMITTED

George E. Lewis, Asst. U. S. Atty., Columbia, S. C. (N. Welch Morrisette, Jr., U. S. Atty., Columbia, S. C., on brief), for appellee and cross-appellant.

Frank K. Sloan and Jack F. McGuinn, Columbia, S. C. for appellant and cross-appellee.

Before SOPER and BOREMAN, Circuit Judges, and PAUL, District Judge.

PAUL, District Judge.

The subject matter of this litigation is a contract between the Commodity Credit Corporation, an agency of the United States, and Kirkland Distributing Company, a South Carolina Corporation. It was initiated by an action brought by the United States in the District Court seeking to recover from Kirkland Distributing Company the sum of $27,907.51. On March 23, 1959, the court entered an order giving judgment in favor of the United States for the full amount sued for. Thereafter, upon a petition for rehearing filed by the defendant the judgment of March 23, 1959, was vacated and on July 20, 1959, judgment was entered in favor of the plaintiff in the lesser amount of $12,939.75. From this latter judgment both parties have appealed. In the discussion hereinafter the parties, as a matter of convenience and brevity, will be referred to as CCC and Kirkland, or as plaintiff and defendant respectively.

In April, 1954, the Commodity Credit Corporation, having on hand large quantities of nonfat dry milk solids, offered it for sale at a price of 3.5 cents per pound to be used as an ingredient of animal and poultry mixed feeds. The offer was made in the form of a circular or publication referred to as Announcement LD-6, which was distributed among producers of such feeds. This Announcement LD-6 set out in great detail the conditions under which the milk was to be sold and to be used by those who might purchase it. While LD-6 is too lengthy to be quoted in full herein, certain provisions pertinent to this case must be noted.

Among other conditions embodied in the offer of sale (Announcement LD-6) were the following:

"1. General. In submitting an order to purchase, the terms and conditions of this Announcement LD-6 shall become a part of the order to purchase and upon acceptance by CCC the order and acceptance shall constitute a valid and binding contract. * * *"

Another provision was that "All orders to purchase milk and all confirmations of telephone orders must state: a. That the order is made subject to the terms of this Announcement LD-6."

Another provision (par. 3) was to the effect that the milk sold by CCC would be U. S. Standard Grade or better. And that while CCC did not warrant the fitness of the milk for any particular use, nevertheless the purchaser might, within 10 days after delivery, reject any of the milk for failure to meet the quality specifications.

Paragraph 5 provided in part, and so far as is pertinent, as follows:

"5. Use Warranty: In submitting an order subject to the terms of this announcement, the purchaser warrants that the milk purchased as a result of the order will not be sold except in the form of animal or poultry mixed feeds which must be mixed before November 1, 1954. The purchaser further warrants that such mixed feeds will contain at least five per cent each of three commonly used feed ingredients other than dairy products, will contain not more than 7.5 per cent of milk purchased under this announcement, and will be mixed in the Continental United States. * * *."

Paragraph 6, entitled Proof of Use, provided that:

"On or before November 30, 1954, the purchaser shall forward to the CSS Commodity Office from which he purchased the milk a certificate in a form acceptable to CCC in which he: (Specimen copy of such form was attached)

"a. Certifies as to the quantity of milk he has purchased through such office under this announcement.

"b. Certifies as to the quantity of such milk he has mixed as a component of animal or poultry mixed feed in accordance with the Use Warranty provided in paragraph 5 above."

Paragraph 7, here quoted in full, is as follows:

"7. Price Adjustment: Disposition of the nonfat dry milk solids for the restricted use contemplated by this announcement has been authorized as a part of the program to support prices to producers of milk and butterfat. The sales prices for such uses are below the CCC published domestic sales price for unrestricted use of such milk and are in consideration of the restricted use to which the milk will be put and are contingent upon the milk being so used within the period provided herein. Regardless of the grade or quality of the milk delivered by CCC, the sales price for the milk delivered and not used in accordance herewith will be adjusted by adding to the sales price for restricted use a sum equal to the difference between such sales price and the CCC domestic sales price for unrestricted use for U. S. Extra Grade spray process nonfat dry milk solids current on the date of delivery by CCC for the State in which delivery is made, and the purchaser will promptly pay to CCC upon demand the balance due on the adjusted purchase price. With respect to any milk not put to the restricted use, as warranted in accordance with paragraph 5, prior to November 1, 1954, as evidenced by the certificate required by paragraph 6, or otherwise, and with respect to any milk with respect to which the purchaser fails to supply the certificate as required, it is agreed that it shall be conclusively presumed that such milk has been used or is to be used for other than the permitted restricted use and the purchase price shall be adjusted accordingly. Notwithstanding the conclusive presumption CCC may, in its absolute discretion, for good cause shown, grant an extension of time for the filing of the certificate as provided in paragraph 6."

On four different dates during the month of August, 1954, Kirkland placed orders for milk, each of which orders stated that it was subject to the provisions of Announcement LD-6. The milk shipped under these orders aggregated 205,789 pounds and was received by Kirkland during August, September and October. Kirkland paid for the milk comprised in these four orders the amount of $7,076.62.

On October 12, 1954, CCC issued a notice to all purchasers of milk under Announcement LD-6 calling attention to the necessity of filing "Proof of Use" as required by Paragraph 6 of the Announcement and enclosing a form for such certificate. The notice of October 12th further stated that purchasers of milk under Announcement LD-6 were permitted to sell it to other persons for use in animal and poultry mixed feed before November 1, 1954; provided, that CCC be furnished with a Use Warranty and Proof of Use Certificate and provided further that sales to such other purchasers be at a price not in excess of that paid to CCC for the milk and that CCC be advised of all such sales with the names and addresses of all such third-party purchasers.¹

The evidence is clear that almost at once after receiving the first shipment of milk Kirkland proceeded in flagrant disregard of the agreement under which he had purchased and in violation of its most important provisions. Of the milk purchased he used approximately 100,000 pounds as an ingredient of mixed feeds prepared by himself. In doing so he used approximately 400 pounds of milk to one ton of feed, thus making the milk content about 20 per cent of the mixed feed as against the limit of 7.5 per cent fixed by the Announcement LD-6, and thereby displacing other commonly used ingredients contrary to the terms of the agreement.

As early as the latter part of August, shortly after receiving the first shipment of milk, Kirkland began selling some of the milk to other persons. This was long before permission to make such sales was granted by the notice of October 12. These sales to third persons continued throughout September, October and into November. The sales by Kirkland to other persons aggregated 105,975 pounds and were at prices ranging from 6.5 cents to 7.5 cents a pound. Kirkland received more for the milk he sold than he had paid for the entire 205,000 pounds purchased by him.

It is not clear how much of the milk sold by Kirkland to others was for mixing in feeds. It appears, however, that 61,600 pounds of it was sold to a concern known as Dreher Packing Company for use in the preparation of sausage for human consumption and that Kirkland offered it for sale for this particular use. Kirkland also sold 4200 pounds of the milk to Edens Food Stores for use in a bakery conducted by that concern and which presumably became an ingredient of the bakery products. Some sales were made which were not disclosed by any records kept by Kirkland.

Kirkland never made any report to CCC of the sales made by him to other persons as directed by the notice of October 12, 1954. In fact he never made any report to CCC of his disposition of any part of the milk he received, whether used in his own business or sold to others. He ignored entirely the provision of paragraph 6 of the contract requiring the filing of a Proof of Use and continued to do so even though the notice of October 12 again reminded all purchasers of this requirement and of the date for its fulfillment. The record shows that as late as March 11, 1955, CCC was still trying to procure from Kirkland Certificates of Use as to the milk purchased by him, as shown by a letter of that date reminding him that no such certificates had been filed and enclosing certificate forms for each of his four contracts.

After Kirkland continued in his failure to file any Certificate of Use, CCC in May 1955, sent one of its agents to make an investigation as to the disposition of the milk purchased by him. It was this investigation which...