Lubbock Feed Lots, Inc. v. Iowa Beef Processors, Inc.

Citation630 F.2d 250
Decision Date10 November 1980
Docket NumberNo. 78-2271,78-2271
Parties7 Fed. R. Evid. Serv. 725 LUBBOCK FEED LOTS, INC., and Lockney Cooperative Gin, Plaintiffs-Appellees, v. IOWA BEEF PROCESSORS, INC., Defendant-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Edward W. Rothe, James T. Malysiak, Chicago, Ill., Roy Bass, Lubbock, Tex., Robert L. Templeton, Amarillo, Tex., for defendant-appellant.

Hewett, Johnson, Swanson & Barbee, Mike McKool, Jr., Charles W. Cunningham, Moore & Peterson, Don Campbell, Dallas, Tex., for plaintiffs-appellees.

Appeal from the United States District Court for the Northern District of Texas.

Before MORGAN, CHARLES CLARK and TATE, Circuit Judges.

TATE, Circuit Judge:

The defendant packer appeals from judgment holding it liable to the plaintiffs, feedlot operators, for the unpaid price of cattle purchased by a buyer found to be its agent. The present appeal concerns some of the substantive issues decided adversely to the same defendant by another panel of this circuit in Valley View Cattle Co. v. Iowa Beef Processors, Inc., 548 F.2d 1219 (5th Cir. 1977).

The plaintiffs, two Texas feedlot operators, sold their customers' cattle to one Louie Heller. Heller, in his turn, passed the cattle on to the defendant out-of-state meat packer in purportedly a sales transaction. The packer paid Heller in full, but Heller's checks to the feedlot operators were dishonored because of his insolvency. Able to recover only a portion of the purchase price from the insolvent Heller, the feedlot operators filed this action in Texas state court to recover the balance from the packer. The case was removed by the packer to the United States District Court for the Northern District of Texas on grounds of diversity of citizenship. It was there tried to a jury. In response to special verdict instructions, the jury found that the relationship between Heller and the meat packer was one of agency and not of dealer-purchaser. On that basis the feedlot operators were awarded some $512,000 plus six percent prejudgment interest. From that judgment the packer appeals, urging numerous bases for reversal. For the reasons set forth below, the judgment of the district court is affirmed.

Factual Context

The plaintiff-appellees in this action, Lubbock Feed Lots, Inc. (Lubbock) and Lockney Cooperative Gin, Inc. (Lockney), are custom feedlots. Their function in the cattle industry is dual. They serve both a "hotel" and sales function: There, cattle are fed and cared for to fatten them and render them suitable for slaughter; there also prospective buyers visit to inspect the cattle and to negotiate terms of sale with the feedlot operators. When a prospective buyer makes an offer for the cattle, the feedlot operator-depending upon his agreement with the cattle owners-either communicates the offer to the owner and obtains the owner's response or counter-offer, or exercises his authority to accept or reject the offer himself. The sales price is on a "live-weight" basis--the total weight of the animals sold multiplied by the negotiated price per pound. When the terms of the sale are agreed upon, the cattle are weighed; as they cross the scales, delivery is effected and the cattle become the property of the buyer. The feedlots send an invoice along with the cattle, and it is usual that the buyer mails his check in payment to the feedlots upon receipt of that invoice. The manner in which remittance of the purchase price is made by the feedlots to the cattle owners is not entirely clear from the record--Lockney, it appears, would deduct any unpaid balance due on the owner's feed bill or other charges and then forward the proceeds to the owners.

The defendant-appellant in this action, Iowa Beef Processors, Inc. (IBP), is a large meat packer that purchases cattle for slaughter, processing, and packaging. Its purchases, generally conducted through an intermediary, are on a "dressed-weight" basis--the weight of the dressed carcasses of the purchased cattle multiplied by the agreed upon price per pound. Thus, the packer does not know the exact price he will pay for a given shipment of cattle until he has received delivery and slaughtered, dressed, and weighed the cold carcasses. At that point, the packer is obliged to remit payment to his seller.

Louie Heller, the bankrupt whose insolvency has precipitated this action, was IBP's intermediary in the sales/purchases that are the focus of this case. The cattle industry recognizes three basic categories of cattle buyers who act as intermediaries between the selling feedlots and the purchasing meat packers:

(1) Packer buyers, who are salaried employees of the packer;

(2) Order buyers, who buy for various packers either on a commission basis or for a fixed price from the packers, and who may purchase cattle (a) in their own name, (b) for the packer, or (c) both; and

(3) Dealers, who are independent purchasers buying in their own name in the hope of reselling at a profit, and who bear the risk of market price fluctuations.

Between January 14, 1974, and February 4, 1974, Heller made six purchases from Lubbock and four purchases from Lockney--transactions involving some 1700 head of cattle. All the cattle purchased in these transactions ultimately found their way to IBP. Upon receipt of the cattle from Heller, IBP advanced money to him against the ultimate price. These advances never exceeded the final price to be paid. Upon dressing and weighing the carcasses, either the same day or the day following delivery, IBP paid over to Heller the difference between the advances and the exact purchase price. It is undisputed that IBP paid Heller in full for all of the purchases in question. Heller's payment to the feedlots, however, was not so promptly made--as a rule, seven to ten days elapsed between Heller's receipt of delivery and the issuance of his checks--and in the interim between IBP's payment to Heller and the feedlots' attempts to cash Heller's checks, Heller became insolvent and his checks were ultimately dishonored.

At the trial below, the jury responded to sixteen special interrogatories to find: (1) that Heller was acting as IBP's agent in the purchases from both Lubbock and Lockney; (2) that Heller represented to Lubbock and Lockney that he was acting for IBP; (3) that IBP conducted its activities so as to lead a reasonably prudent person to believe that Heller was its agent; (4) that Lubbock and Lockney were led to reasonably believe by Heller and IBP that Heller was IBP's agent; (5) that although both Lubbock and Lockney failed to require Heller to pay promptly, that failure was neither negligent nor the proximate cause of the feedlots' losses; and (6) that although both Lubbock and Lockney continued to deliver cattle to Heller when Heller was delinquent in payments for previous cattle purchases, such delivery was neither negligent nor the proximate cause of the feedlots' losses. On the basis of those findings, the district court entered its judgment in favor of Lubbock and Lockney.

From that judgment IBP appeals, urging the following bases for reversal:

(1) That the feedlot operators are not the real parties in interest as is required by the Federal Rules of Civil Procedure, and thus lack standing to sue;

(2) That the trial below was unduly influenced by an earlier decision of this court (Valley View, cited supra) that misapplied Texas agency law in a case also involving the nature of the relationship between Heller and IBP;

(3) That the district court erroneously admitted hearsay evidence on the issue of Heller's status as agent for IBP;

(4) That without the erroneously admitted evidence there is insufficient evidence to support the jury's findings of agency and apparent agency; and that the feedlot operators failed to exercise due diligence to determine whether Heller was acting on his own behalf, or on behalf of IBP, in purchasing the cattle in question;

(5) That the feedlot operators are equitably estopped from pursuing this remedy against IBP because they extended unusually liberal payment terms to Heller despite their knowledge of his financial difficulties and of IBP's full payment for the cattle;

(6) That by suing Heller the feedlot operators elected their remedy under Texas law and cannot now pursue this inconsistent remedy against IBP; and

(7) That the district court erred in awarding prejudgment interest.

For the reasons delineated below, we reject the arguments of IBP and affirm the judgment of the district court.

1. Real Parties in Interest

Arguing that the law of Texas affords the feedlots no right of action for the relief sought in this case, IBP challenges their status as real parties in interest within the meaning of Rule 17(a) of the Federal Rules of Civil Procedure. 1

IBP is correct in its assertion that we must look to the governing substantive law--here, the law of Texas--to determine whether the plaintiffs in this action are indeed the real parties in interest-i. e., the party who, by the substantive law, has the right sought to be enforced--as is required by Rule 17(a). United States v. 536.71 Acres of Land, 418 F.2d 551, 556 (5th Cir. 1969); see Galarza v. United Bus Lines, Inc., 38 F.R.D. 401, 404-05 (S.D.Tex.1965); 3A Moore & Lucas, Moore's Federal Practice p 17.07, 17.12 (2d ed. 1979); 6 Wright & Miller, Federal Practice & Procedure: Civil §§ 1543, 1544, 1548 (1971); see also 2 Barron & Holtzoff, Federal Practice and Procedure § 482 at 7-8 (Wright ed. 1961). Thus, the mere fact that a plaintiff falls within one of the classes of persons enumerated in Rule 17(a) is not dispositive of the real party in interest question, for that rule assumes that the enumerated persons are granted the right to sue by the applicable substantive law. Wright & Miller, supra, § 1543, at 645.

The plaintiff feedlots do not dispute this reading of Rule 17(a), but without conceding it 2 argue that their...

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