North Dakota-Montana WG Ass'n v. United States

• Citation: 66 F.2d 573
• Decision Date: 28 August 1933
• Docket Number: No. 9679.,9679.
• Parties: NORTH DAKOTA-MONTANA WHEAT GROWERS' ASS'N v. UNITED STATES.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

66 F.2d 573 (1933)

NORTH DAKOTA-MONTANA WHEAT GROWERS' ASS'N v. UNITED STATES.

No. 9679.

Circuit Court of Appeals, Eighth Circuit.

July 14, 1933.

Rehearing Denied August 28, 1933.

Arthur Le Sueur, of Minneapolis, Minn. (C. J. Murphy, of Grand Forks, N. D., on the brief), for appellant.

O. A. Blanchard, Asst. U. S. Atty., of St. Paul, Minn. (Lewis L. Drill, U. S. Atty., of St. Paul, Minn., on the brief), for the United States.

Before KENYON and GARDNER, Circuit Judges, and DEWEY, District Judge.

KENYON, Circuit Judge.

This is a suit in equity brought by the United States to foreclose a real estate mortgage upon certain property in Hennepin county, Minn., given by appellant to secure the payment of a $25,000 loan made to appellant by the Federal Farm Board (herein termed the Farm Board) from the revolving fund provided by the Agricultural Marketing Act (7 USCA §§ 521-535). Appellant is a co-operative association, organized under the laws of the state of North Dakota. For convenience the parties will be designated as in the trial court.

There is no dispute as to the loan being made and the money advanced to defendant. A note for the $25,000, and a mortgage to secure the same, was given to plaintiff on certain lots of defendant in Hennepin county, Minn. The note was payable on demand. It is not necessary to go into the matters concerning default in interest and tax payments, as it is conceded that the amount of the note and interest is due. In the amended answer defendant denies that plaintiff has authority to take, hold, or own notes under the Constitution of the United States and the laws thereof, and asserts that the Farm Board is the real owner of the note and a necessary party to the action; that the $25,000 loan was furnished by the Farm Board from a revolving fund provided by an Act of Congress known as the Agricultural Marketing Act which confers no power upon the government to maintain this action; that the Farm Board had in its possession sufficient money and property of defendant to pay the insurance premiums claimed to be in default, likewise the principal and interest of the mortgage; and that, applying the same, no default existed. Further, the amended answer states that 3,985,646.33 bushels of wheat were delivered on the order of the Farm Board to the Stabilization Corporation, or to the Farmers' National Grain Corporation, agencies of the Farm Board (hereinafter called the stabilization corporations), for which no consideration was received, and that certain sums of money were delivered to the Farm Board by defendant; that the amount owing by the Farm Board to defendant in the month of June, 1931, was more than $500,000 in excess of the sum necessary to pay the note and mortgage; that said delivery of wheat was in fact a sale to the Farm Board, and that at the time of foreclosure, if proper credit had been given, there was no indebtedness to the plaintiff from the defendant; that the Farm Board, the stabilization corporations, and defendant had an extensive course of dealings, and that, in order to determine the amount due from the Farm Board or from the stabilization corporations to defendant, an accounting would be necessary; that the claim could not be presented to the accounting officers of the Treasury because no accounting had been had.

Motions were made by plaintiff to strike the amended answer of the defendant on a number of grounds, viz. that the allegations were argumentative and stated legal conclusions; that they were sham and frivolous and failed to state any defenses to plaintiff's cause of action, in violation of equity rules 21 and 30 (28 USCA § 723); that the allegations claiming a set-off show on their face that the court was without jurisdiction to determine the same because in substance and effect they constituted an independent action against the United States and the United States had not consented to be sued nor waived its immunity from suit.

The court sustained the motion and entered a decree of foreclosure pro confess.

Defendant's theory is that the Farm Board furnished money to defendant to advance to its membership on the purchase price of wheat; that the members of defendant turned over the wheat to the stabilization corporations organized under state laws and which were agencies of the Farm Board; that the wheat was being maintained at a pegged price by said Board of $1.25 per bushel which was in advance of the market price, the entire arrangement being to hold up the price of wheat; that delivery of the documents of title to the Farm Board constituted a sale; and that the Farm Board could have applied the proceeds of the sale on indebtedness of defendant to the plaintiff. The purpose of the defense is not to defeat the government claim or to secure judgment against the government, but is to effect an offset arising out of the transactions concerning the alleged sale of the wheat.

Stabilization corporations were created to carry out the purposes of the Agricultural Marketing Act. The voting stock and membership interests were to be owned only by co-operative associations handling the commodity. The stock is held by the members — not by the United States. Defendant was presumably a member of the corporations to which the wheat was delivered.

The difficulties in defendant's pathway in this particular proceeding to accomplish its purpose seem insurmountable. The chief ones are the questions of jurisdiction in the trial court to entertain the claimed offset of some $26,000 against the claim of the government, and the fact that defendant's claims were not presented to accounting officers of the government as provided by section 774, chapter 18, title 28 USCA before asserting them as an offset.

Defendant insists that the Farm Board should have brought the action, that the government has no authority to bring it, and that the Attorney General has no authority in the premises.

Is there any merit in these contentions?

The Farm Board was created by the Agricultural Marketing Act, sections 521-535 inclusive, chapter 22, title 7. The general powers given to it under sections 524 and 525 do not provide that it may sue or be sued. It had the right to recognize stabilization corporations if such corporations were duly organized under the laws of a state or territory. It evidently had recognized the stabilization corporations which dealt with defendant in relation to the wheat. These corporations acted as marketing agencies for their stockholders or members and for the purpose of controlling any surplus in a commodity in furtherance of the general policy of the Agricultural Marketing Act. They were distinct entities, duly incorporated, and undoubtedly entitle to sue and to be sued as other corporations. It is entirely different, we think, as to the Farm Board. It has no identity separate and distinct from the government — it is merely an unincorporated agency of the government to carry out the purposes of the Agricultural Marketing Act. The government has created at various times corporations for certain purposes and to act as instrumentalities in furtherance of governmental purposes, and provided as to some of them that they may sue and be sued. Such provisions exist as to Federal Reserve Banks, section 341, chapter 3, title 12 USCA; Federal Land Banks, section 676, chapter 7, title 12 USCA; Federal Intermediate Credit Banks, section 1023, chapter 8, title 12 USCA; Reconstruction Finance Corporation, section 604, chapter 14, title 15 USCA. Where the government has intended that one of its agencies shall be subject to suit it has provided therefor in the creative act. It is significant that no such power was bestowed on the Farm Board. Analogy can be drawn between the situation here and that as to the United States Shipping Board and the Shipping Board Emergency Fleet Corporation. The Emergency Fleet Corporation was formed by the Shipping Board under power conferred by Congress. It was an instrumentality of the government, organized as a private corporation, with the stock owned by the government. The courts have quite generally held that, although it was an instrumentality of the government, it could sue and be sued the same as any other private corporation.

In United States ex rel. Skinner & Eddy Corporation v. McCarl, Comptroller General, 275 U. S. 1, at page 11, 48 S. Ct. 12, 16, 72 L. Ed. 131, the court said, "For the Fleet Corporation is an entity distinct from the United States and from any of its departments or boards." The fact that all its stock is owned by the United States does not destroy its separate entity. United States v. Strang, 254 U. S. 491, 41 S. Ct. 165, 65 L. Ed. 368.

In Cohn et al. v. United States Shipping Board et al. (C. C. A. 6) 20 F.(2d) 56, distinction is drawn between the Shipping Board and the Emergency Fleet Corporation, and it is held that the Shipping Board is not subject to suit, but that the Fleet Corporation is and is liable for torts and breaches of contract the same as other private corporations, citing many cases on the subject. See, also, Sloan Shipyards Corp'n v. U. S. Shipping Board E. Fleet Corp., 258 U. S. 549, 42 S. Ct. 386, 66 L. Ed. 762; Fidelity Trust Co. of New York et al. v. U. S. Shipping Board Emergency Fleet Corp. (D. C., S. D. New York) 15 F.(2d) 600; Russell Wheel & Foundry Co. v. United States (C. C. A. 6) 31 F.(2d) 826, 828.

We find no cases holding that the Shipping Board can be sued as a distinct entity.

The question in these various cases in which the Fleet Corporation is concerned is not the immunity of the sovereign but whether the corporation partakes of that immunity.

The situation as to the Farm Board is we think analogous to that of the United States Shipping Board. Both are mere agencies of the United States with no such distinct entity as is possessed by the stabilization corporations and the Fleet Corporation. We are satisfied the Farm Board could not have brought suit to recover the...