Cargill, Incorporated v. Commodity Credit Corporation

• Decision Date: 23 February 1960
• Docket Number: No. 61,Docket 25523.,61
• Citation: 275 F.2d 745
• Parties: CARGILL, INCORPORATED, Plaintiff-Appellee, v. COMMODITY CREDIT CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

275 F.2d 745 (1960)

CARGILL, INCORPORATED, Plaintiff-Appellee, v. COMMODITY CREDIT CORPORATION, Defendant-Appellant.

No. 61, Docket 25523.

United States Court of Appeals Second Circuit.

Argued December 8, 1959.

Decided February 23, 1960.

Leonard Garment, New York City (Paul R. Shanahan, of R. J. & P. R. Shanahan, Syracuse, N. Y., Weston B. Grimes of Carey & Grimes, Washington, D. C., and Milton Black of Mudge, Stern, Baldwin & Todd, New York City, on the brief), for plaintiff-appellee.

Lionel Kestenbaum, Atty., Dept. of Justice, Washington, D. C. (George Cochran Doub, Asst. Atty. Gen., and Theodore F. Bowes, U. S. Atty., Syracuse, N. Y., and Morton Hollander, Washington, D. C., on the brief), for defendant-appellant.

Before LUMBARD, Chief Judge, and HAND and FRIENDLY, Circuit Judges.

FRIENDLY, Circuit Judge.

Commodity Credit Corporation, "an agency and instrumentality of the United States, within the Department of Agriculture" created by the Act of June 29, 1948, ch. 704, 62 Stat. 1070, 15 U.S. C.A. § 714, appeals from a judgment of the District Court for the Northern District of New York in an action brought against Commodity by Cargill, Inc., a warehouseman. The judgment upheld Cargill's claim for charges totalling $552,188.33 for storing Commodity's grain, and dismissed Commodity's counterclaim for $1,203,581.70 for damages to certain of the grain.¹ The judgment dismissing the counterclaim was entered pursuant to the verdict of a jury to which the District Judge had submitted it over Commodity's objection that § 4(c) of Commodity's Charter Act, 15 U.S. C.A. § 714b(c), required that the entire cause be tried by the judge alone. After the verdict against Commodity on its counterclaim for damages, Judge Brennan tried Cargill's claim for the storage charges and rendered judgment for the plaintiff. This totaled $739,142.65, including interest to September 15, 1958, plus costs.

The view which we take makes it unnecessary to deal with many of the issues argued before us. We hold that it was error for the District Judge to have ordered a jury trial on Commodity's counterclaim, that the error cannot be disregarded as harmless, and that the cause must therefore be remanded for findings and conclusions by the District Judge, independent of the jury's verdict, on the counterclaim as well as on the claim, pursuant to Fed.R.Civ.Proc. 52 (a), 28 U.S.C. Since the District Judge may have to consider the burden of proof and will have to determine the sufficiency of a notice by Cargill described below, we shall state our views on those issues.

The case arises from Cargill's storage, at Norris City, Illinois, and Albany, New York, of large amounts of corn for Commodity in implementation of the government's price support program. Cargill sued to collect charges with respect to this storage as well as for the storage of wheat and barley at Buffalo. Commodity counterclaimed for damages to the corn at Norris City and Albany. It denied liability for the charges at these two locations because of the negligent storage alleged in its counterclaim; it did not dispute liability for the charges at Buffalo except as recovery on the counterclaim might be set off against these. The grain was stored under a standard form known as the Uniform Grain Storage Agreement; this was negotiated periodically between Commodity and warehousemen whose facilities it used in its storage program.

Cargill's facility at Norris City was not a conventional grain elevator but consisted of 15 steel tanks formerly used for oil and gasoline. In the summer of 1949 Cargill agreed that it would adapt these tanks for the storage of 5,000,000 bushels of corn. The contract was the 1946 form of the Uniform Grain Storage Agreement. A further agreement was later executed in the 1950 form, but so far as Norris City is concerned, the differences between the forms are not material, since the Norris City grain was at all times stored "identity preserved," and Cargill's obligation admittedly did not go beyond that of due care. The delivery of the corn began September 29, 1949 and continued to June 28, 1950. As early as June 9, 1950, it was found that some of the corn had deteriorated; loading out began on that date and continued during the next two years. Commodity asserted that Cargill failed to supply adequate equipment and personnel, failed to correct or avoid machinery breakdowns, bad roads and leaky roofs, and gave tardy notices of spoilage. Damages were alleged to approximate $800,000.

Cargill's Albany facility was a large conventional grain elevator having a capacity of 13,000,000 bushels. All of Commodity's corn at Albany was stored under the 1950 Uniform Grain Storage Agreement. This contained provisions for the commingling of Commodity's corn with other corn being stored there. Cargill does not dispute that Cargill's liability for the condition of Commodity's corn at Albany, which was stored commingled, was initially that of an insurer; as Cargill's counsel stated at the trial, "under commingled storage the warehouseman must deliver out the grade that was received in." However, the Agreement contained a provision, as to which more must be said hereafter, whereby, on giving notice after inspection, the warehouseman reduces his responsibility from that time forward to one of due care. Some 3,000,000 bushels of Commodity's corn were stored in Albany, beginning in May, 1950. By the summer of 1951 signs of deterioration appeared; Cargill claims it gave the critical notice on August 17. When Commodity loaded out the corn in November, some of it had greatly deteriorated. Commodity denied that Cargill's notice complied with the Agreement and claimed that even if it did, the corn had already deteriorated and that Cargill did not exercise due care after the notice. Damages were claimed to be some $400,000.

Section 4(c) of the Commodity Credit Corporation Charter Act, 15 U.S.C.A. § 714b(c), provides that "All suits against the Corporation shall be tried by the court without a jury." Nevertheless Cargill demanded and the District Judge, over Commodity's objection, granted a jury trial on Commodity's counterclaim. He directed also that the counterclaim be first tried and that the evidence taken upon the jury trial of the counterclaim be considered upon the subsequent trial of Cargill's claim by the judge.

Judge Brennan submitted to the jury two questions as to Norris City and four as to Albany. The first question as to Norris City was whether Commodity had "established that the shrinkage in quantity or the deficiency in quality of Commodity Credit Corp. corn stored at Norris City resulted from the failure of Cargill to exercise due care in connection with the storage thereof ?" The jury answered this in the negative; accordingly it did not answer the second question relating to damages. With respect to Albany the jury answered in the affirmative a question whether Cargill gave "notice to Commodity Credit Corp. according to the terms of the Uniform Grain Storage Agreement that the corn stored for the account of Commodity Credit Corp. at Albany was in danger of going out of condition," and in the negative a question whether Commodity had "established that the shrinkage in quantity or the deficiency in quality of Commodity Credit Corp. corn stored at Albany resulted from the failure of Cargill to exercise due care in connection with the storage thereof"; the jury found it unnecessary to answer the other questions, namely, as to waiver of any deficiency in the notice and as to the amount of damages. After the jury's verdict Judge Brennan proceeded to try Cargill's claim for storage charges; this, of course, involved broadly the same issues as Commodity's counterclaim. In a Memorandum-Decision the judge found "that the evidence showed the performance of the contract by Cargill as to the unpaid storage charges at Norris City." As to Albany he stated that "The jury found in the trial of the counter-claim that such a notice was given by Cargill as to the Albany corn" and "The court would agree and makes a similar finding." He noted that Cargill had "offered evidence that at the time of the notice, it had the ability to load out the required grade and quality called for by the storage documents" and said "This evidence is not disputed except by inference." As to the post-notice period he said that "No specific evidence of negligence in the performance or non-performance of the warehousing services was offered," and that "the finding that Cargill has established its cause of action for the Albany storage charges is justified if not required by the evidence." He directed the entry of judgment granting Cargill's claim against Commodity for the storage charges, with interest at the respective legal rates of Illinois and New York, and dismissing Commodity's counterclaim. From that judgment Commodity has appealed.

(1) It was error to grant a jury trial on Commodity's counterclaim. There was no dispute that § 4(c) of the Charter Act ruled out a jury trial on Cargill's claim against Commodity for storage charges. We hold it also ruled out a jury trial on Commodity's counterclaim. The question is solely one of statutory interpretation, not of constitutionality. McElrath v. United States, 1880, 102 U.S. 426, 440, 26 L.Ed. 189, established that suits against the government, "whether reference be had to the claimant's demand or to the defense, or to any set-off, or counterclaim which the government may assert, are not controlled by the Seventh Amendment"; and we do not understand appellee to claim there is any constitutional barrier to Congress' conditioning its waiver of immunity as to Commodity, "an agency or instrumentality of the United States," on requiring both claim and counterclaim to be tried to a judge. In any event we find there is none. See Maricopa County, Arizona v. Valley National Bank, 1943, 318 U.S. 357, 362, 63 S.Ct. 587, 87 L.Ed. 834; Rainwater v. United States, 1...