Keifer & Keifer v. Reconstruction Finance Corp.

• Decision Date: 07 July 1938
• Docket Number: No. 11019.,11019.
• Citation: 97 F.2d 812
• Parties: KEIFER & KEIFER v. RECONSTRUCTION FINANCE CORPORATION et al.
• Court: U.S. Court of Appeals — Eighth Circuit

97 F.2d 812 (1938)

KEIFER & KEIFER v. RECONSTRUCTION FINANCE CORPORATION et al.^*

No. 11019.

Circuit Court of Appeals, Eighth Circuit.

July 7, 1938.

Arthur E. Perry and Robert Van Pelt, both of Lincoln, Neb. (Ernest B. Perry and Lloyd J. Marti, both of Lincoln, Neb., on the brief), for appellant.

Francis P. Matthews, of Omaha, Neb. (William P. Kelley, of Omaha, Neb., on the brief), for appellee Reconstruction Finance Corporation.

L. W. Powers, of Denison, Iowa (C. J. Thurston, of Omaha, Neb., on the brief), for appellee Regional Agricultural Credit Corporation of Sioux City, Iowa.

Before GARDNER, SANBORN, and THOMAS, Circuit Judges.

GARDNER, Circuit Judge.

This is an action at law for the recovery of damages for alleged acts of negligence. Appellant was plaintiff below, and appellees were defendants. Counsel for appellant in their brief, in referring to the parties, say: "The plaintiff and the plaintiff's four assignors will all be referred to herein by the use of the word `plaintiff.' The defendant, Reconstruction Finance Corporation, will be designated and referred to herein as `RFC' and the Regional Agricultural Credit Corporation will be designated herein as the `Regional.'" Counsel for the respective appellees have adopted this suggestion of appellant, and we shall accordingly so designate the parties in this opinion.

The petition sets forth, in separate counts, five alleged causes of action. Of these five causes of action, four are brought by plaintiff as assignee, while the other is brought by him in his own right. In all of the five causes of action, it is alleged that plaintiff delivered to the Regional Agricultural Credit Corporation certain cattle, which, in violation of its contract duty, it negligently kept, resulting in damage to plaintiff and his assignors. After the cattle were turned over to Regional a written contract was executed, which in terms purported to release Regional from liability in the care of the cattle. So far as the first four causes of action are concerned, it is alleged that this contract containing a release of liability was obtained by fraud and duress.

The defendants interposed demurrers to the petition, which, while separate, set up substantially the following grounds: (1) That the court had no jurisdiction of the defendants, nor of the subject matter, because the defendants were immune from suit without the permission of Congress; and (2) that the petition and supplemental petition did not state facts sufficient to constitute a cause of action against the defendants, or either of them.

The court sustained the demurrers, expressing the view that the defendants were instrumentalities of the United States, and hence, were immune from suit in an action sounding in tort, without the permission of Congress. The court thereupon dismissed the action, and this appeal is from the judgment of dismissal.

When this case was orally argued, we were of the view that the petition did not state facts sufficient to constitute a cause of action and therefore the dismissal was properly sustained, regardless of whether the defendants were subject to suit. We then thought that the clause in the contracts of bailment, which purported to release Regional from liability for loss on account of death, injury, or disappearance of the cattle which were the subject of the contract, was a valid limitation on the liability of the bailee, and as there was no statute in Nebraska rendering such a stipulation void, the question was one of general law on which the Federal Court would follow its own decisions. Since the argument of the case, however, the opinion in Erie Railroad Co. v. Tompkins, 58 S.Ct. 817, 82 L.Ed. ___, 114 A.L.R. 1487, has been handed down, and under the decision in that case, it is incumbent upon this court to follow the decisions of the highest court of the state in matters of substantive law. Under the decisions of the Supreme Court of Nebraska, a bailee may not, by contract, exempt himself from the consequences of his own negligence. School District v. Randall, 5 Neb. 408; Anderson v. Imhoff, 34 Neb. 335, 51 N.W. 854; Gesford v. Star Van & Storage Co., 104 Neb. 453, 177 N.W. 794. The contract was a Nebraska contract and the cause of action arose in that state. The question of the validity of the contract must therefore be decided by the law of Nebraska. It is necessary to consider the question whether the defendants as governmental agencies are immune from action.

So far as the defendant Reconstruction Finance Corporation is concerned, the demurrer was clearly properly sustained. On September 10, 1932, that corporation, pursuant to Act of Congress, created the defendant Regional Agricultural Credit Corporation, of Sioux City, Iowa. By Executive Order, the President transferred control of the defendant Regional Agricultural Credit Corporation from Reconstruction Finance Corporation to the Farm Credit Administration. This order became effective sixty days subsequent to its date. The transfer, however, was actually made approximately a year and a half prior to the time of the transactions and acts complained of by the plaintiff. The Reconstruction Finance Corporation could not, therefore, be held liable.

It remains to consider whether Regional Agricultural Credit Corporation is such a governmental agency as to be immune from suit. The Reconstruction Finance Corporation was authorized by Act of Congress, 15 U.S.C.A. § 605b (e), to create "in any of the twelve Federal land-bank districts where it may deem the same to be desirable a regional agricultural credit corporation with a paid-up capital of not less than $3,000,000, to be subscribed for by the Reconstruction Finance Corporation and paid for out of the unexpended balance of the amounts allocated and made available to the Secretary of Agriculture under section 602 of this title Title 15 U.S.C.A.. Such corporation shall be managed by officers and agents to be appointed by the Reconstruction Finance Corporation under such rules and regulations as its board of directors may prescribe." Following the enactment of this statute, the Reconstruction Finance Corporation issued a charter to Regional Agricultural Credit Corporation of Sioux City, Iowa, its paid up capital coming from public funds as directed by the Act of Congress. It selected the personnel to have charge of the funds and to loan them to farmers and stockmen, as provided in the Act. It issued detailed instructions for the guidance of those in charge relative to the method and manner of operation. The operations of Regional were placed on a government basis; its telegrams were given a government rate; its officers and employees were required to subscribe to the standard form of oath required of officers and employees of the United States; the making of any false statements in an application for a loan was made an offense against the Government of the United States. It was not required to pay postage, but was recognized as having the franking privilege; it was relieved of the obligation to pay a capital stock tax because it was an instrumentality of the United States; it was relieved from obligation to pay clerks' and marshals' fees in cases filed in the Federal Courts; it was not required to pay the Federal stamp tax. Regional was not permitted to deposit any of its funds in any bank other than the Federal Reserve Bank or one of its branches, and when the funds were so deposited, they were transmitted to the Treasurer of the United States, who held them, together with the capital funds, under a symbol account in the Treasury of the United States. Moneys loaned by Regional or expended by it were paid by checks and vouchers drawn on the Treasurer of the United States. Upon the reduction of its capital, the funds...