415 F.2d 584 (6th Cir. 1969), 18782, United States v. Haddix & Sons, Inc.

Docket Nº:18782.
Citation:415 F.2d 584
Party Name:UNITED STATES of America, Plaintiff-Appellant, George S. McIntyre, State Director, Department of Agriculture, Plaintiff, National Bank of Detroit, Plaintiff-Appellee, v. HADDIX & SONS, INC., and Haddix & Sons Elevators, Inc., Defendants.
Case Date:August 14, 1969
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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Page 584

415 F.2d 584 (6th Cir. 1969)

UNITED STATES of America, Plaintiff-Appellant, George S. McIntyre, State Director, Department of Agriculture, Plaintiff, National Bank of Detroit, Plaintiff-Appellee,

v.

HADDIX & SONS, INC., and Haddix & Sons Elevators, Inc., Defendants.

No. 18782.

United States Court of Appeals, Sixth Circuit.

Aug. 14, 1969

Page 585

Stephen R. Felson, Atty., Dept. of Justice, Washington, D.C., for appellant; Edwin L. Weisl, Jr., Asst. Atty. Gen., John C. Eldridge, Atty., Dept. of Justice, Washington, D.C., Lawrence Gubow, U.S. Atty., Detroit, Mich., on brief.

Patrick J. Ledwidge, Detroit, Mich., for appellee; George B. Martin, Jr., Detroit, Mich., on brief; Dickinson, Wright, McKean & Cudlip, Detroit, Mich., of counsel.

Before O'SULLIVAN, EDWARDS and PECK, Circuit Judges.

O'SULLIVAN, Circuit Judge.

The United States appeals from judgment entered in the United States District Court for the Eastern District of Michigan at Detroit which directed that Commodity Credit Corporation (referred to herein as Commodity), an agency of the United States, pay to the National Bank of Detroit $96,117.01 to satisfy the unpaid balance of a chattel mortgage purporting to cover grain that had been stored in a warehouse of a mortgagor, Haddix & Sons Elevators, Inc. 1 Upon discovery of defalcations and the insolvency of Haddix, the receivership proceedings in which the appealed judgment was entered were instituted.

Haddix owned several grain elevators in Michigan, devoted chiefly to storage of grain acquired by Commodity as part of the national government's program of price support for agricultural products. During this program, Commodity had acquired a large amount of corn stored in elevators around the country and, in 1961, the government decided to reduce the very large amount so held in storage. This operation moved swiftly, with the government issuing to warehouse operators what were called 'load-out' orders directing them to ship to Commodity a specified number of bushels of corn or, in the alternative, to purchase such corn from Commodity at offered prices. In most instances, the warehousemen bought the corn and sold it on the open market. The fast moving program resulted in a very great reduction in the amount of corn theretofore held in storage. It is a fair inference that there were not a few warehousemen who were found to be short of the amount of corn called for by outstanding warehouse receipts. This was true of the Haddix elevator at Monroe, Michigan. It was stipulated that neither the Bank nor Commodity were aware of the Haddix shortages at the time of the transaction here involved.

Sometime prior to May, 1962, Haddix had received a 'load-out' order from Commodity directing Haddix to ship to it 102,000 bushels of corn or purchase that amount from Commodity at a quoted price. Thereafter Haddix obtained an order from Ralston Purina Company to purchase 102,000 bushels at a profitable price. Haddix did not have enough money to purchase the corn needed to fill the Ralston order. On May 14, 1962, it borrowed $100,000 from appellee National Bank of Detroit for that purpose. Haddix gave the Bank its promissory note in that amount, secured by a chattel mortgage purporting to encumber 102,000 bushels of the corn then in the Monroe elevator. The Bank also obtained an assignment of whatever accounts receivable would accrue to Haddix from deliveries to the Purina Company.

The loan proceeds were deposited in the Haddix bank account and two checks on this account totalling $102,879.28 were drawn to the order of, and were delivered to, Commodity in payment for 102,000 bushels of corn. Warehouse receipts representing 102,000 bushels of the corn which had been stored in the Monroe warehouse by Commodity were surrendered to Haddix. No question is involved as to the proper execution and recording of the involved chattel mortgage. A small amount of the corn contracted

Page 586

to be sold to Purina was delivered and paid for prior to the institution of the receivership, leaving $96,177.01 unpaid on the bank's note and chattel mortgage when the receivership proceeding was commenced in the District Court on July 16, 1962.

Since most of the...

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