Guenther v. Morehead

• Decision Date: 28 August 1967
• Docket Number: Civ. No. 6-1734-C-2.
• Citation: 272 F. Supp. 721
• Parties: Howard W. GUENTHER, Plaintiff, v. Hugh MOREHEAD, Sr., Hugh Morehead, Jr., and Tom A. Morehead, d/b/a Milan Livestock Auction, Defendants.
• Court: U.S. District Court — Southern District of Iowa

272 F. Supp. 721

Howard W. GUENTHER, Plaintiff, v. Hugh MOREHEAD, Sr., Hugh Morehead, Jr., and Tom A. Morehead, d/b/a Milan Livestock Auction, Defendants.

Civ. No. 6-1734-C-2.

United States District Court S. D. Iowa, Central Division.

August 28, 1967.

COPYRIGHT MATERIAL OMITTED

Dennis Valentine and Meredith R. Griffing, Centerville, Iowa, for plaintiff.

James E. Bromwell, Cedar Rapids, Iowa, for defendants.

MEMORANDUM AND ORDER.

HANSON, District Judge.

This action was instituted by plaintiff under the Packers and Stockyards Act of 1921, as amended, 7 U.S.C., Section 210(f), to recover for the alleged wrongful negotiation of plaintiff's check.

Plaintiff is a resident of Centerville, Iowa. Defendants Hugh Morehead, Sr., Hugh Morehead, Jr., and Tom A. Morehead, as partners in the Milan Livestock Auction of Milan, Missouri, were registered under the Packers and Stockyards Act, hereinafter called the Act, as a market agency and dealer.

On June 10, 1964, plaintiff lodged a complaint for reparation with the Department of Agriculture. The matter was investigated and an investigative report was filed on August 31, 1964. A Judicial Officer for the Department rendered a "Decision and Order" on June 8, 1965, in which plaintiff recovered the sum of $6,392.17 with interest from defendants. This action was commenced upon nonpayment of the amount declared by the Department to be due and owing.

The findings of fact and conclusions made by the Judicial Officer in the "Decision and Order" need not be meticulously reviewed at this time. However, the Court will in general relate certain factual matters and reasoning set forth therein. On or about May 5, 1964, plaintiff asked one Harold Banks to purchase some calves for him at the Milan Livestock Auction. On or about May 7, 1964, Banks falsely represented to plaintiff that he had purchased 64 head of steers at the Milan Livestock Auction for a price of $6,392.17. Plaintiff gave Banks a check payable to the Milan Livestock Auction for the amount he allegedly owed. The check bore the notation "for 64 head of cattle." Instead of applying the check on any account of plaintiff's, Banks gave the draft to Hugh Morehead, Sr., in part payment for 275 head of hogs he had previously bought. A new check was later issued to Morehead when a mistake in the check was discovered by plaintiff's bank. Plaintiff and Hugh Morehead, Sr., were present at the bank when it was issued.

The "Decision and Order" was based upon two conclusions. The first was that it was felt Morehead was on notice and therefore he was not an innocent party. This was primarily because of the notation on the first check and because of certain statements made by Morehead when the second check was issued. The second conclusion drawn was that plaintiff paid the money under a mistake of fact that he owed it to Hugh Morehead, Sr., in payment for 275 hogs previously purchased by Banks.

Two central issues are presented for the Court's determination in the instant case: (1) Whether the Department of Agriculture and the Court have jurisdiction of the subject matter under the Packers and Stockyards Act, and if so (2) Whether the decision of the Department of Agriculture can be permitted to stand.

There is no genuine issue as to personal jurisdiction of the defendants herein. Any question in this regard has been waived under Rule 12(h) of the Federal Rules of Civil Procedure. Defendants, by motion, contested venue prior to answer. In addition, it would appear that Title 7 U.S.C., Section 210 (f) relates to both jurisdiction and venue.

The critical issue is whether or not the transaction complained of herein is within the purview of the Act. The plaintiff argues that this question was not presented at the administrative level and cannot now be asserted. The Administrative Procedure Act, 5 U.S.C., Section 1009(e) is cited as authority.

Section 1009(e) does not cope with the question of waiver of objections. Plaintiff probably meant to cite Section 1009 (a) as this problem is related to exhaustion of administrative remedies. Section 1009(e) provides:

"So far as necessary to decision and where presented the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of any agency action. It shall * * * hold unlawful and set aside agency action, findings, and conclusions found to be * * * in excess of statutory jurisdiction, authority, or limitations, or short of statutory right * * *."

Section 1009(e) gives courts the power to review Administrative Agency findings and conclusions at variance with its statutory jurisdiction. The general rule is that courts will not disturb administrative orders unless an error has been made in the face of an objection made at an appropriate time. United States v. L. A. Tucker Truck Lines, 344 U.S. 33, 73 S.Ct. 67, 97 L.Ed. 54 (1952). However, if the defect is one "which deprives the Commission of power or jurisdiction * * * even in absence of timely objection its order should be set aside as a nullity." Id. at p. 38, 73 S.Ct. at p. 69. See also 3 Davis, Administrative Law Treatise, Section 20.06 (1958 ed.). In Manual Enterprises v. Day, 370 U.S. 478, 499, 82 S.Ct. 1432, 1443, 8 L. Ed.2d 639 (1962), the Court stated:

"The Government does not suggest that the challenge to the Post Office's power to act at all had to be made before the administrative body. That challenge presents a jurisdictional question and is open to the petitioners even if not asserted in the agency proceeding."

Thus, the fact that defendants did not raise the jurisdictional dispute at the administrative level is immaterial.

Plaintiff points to three Sections of the Act for jurisdictional support. Title 7 U.S.C., Section 206, reads as follows:

"All rates or charges made for any stockyard services furnished at a stockyard by a stockyard owner or market agency shall be just, reasonable, and nondiscriminatory, and any unjust, unreasonable, or discriminatory rate or charge is prohibited and declared to be unlawful."

Title 7 U.S.C., Section 208, prescribes that:

"It shall be the duty of every stockyard owner and market agency to establish, observe, and enforce just, reasonable, and nondiscriminatory regulations and practices in respect to the furnishing of stockyard services, and every unjust, unreasonable, or discriminatory regulation or practice is prohibited and declared to be unlawful."

Title 7 U.S.C., Section 213, declares that:

"(a) It shall be unlawful for any stockyard owner, market agency, or dealer to engage in or use any unfair, unjustly discriminatory, or deceptive practice or device in connection with receiving, marketing, buying, or selling on a commission basis or otherwise, feeding, watering, holding, delivery, shipment, weighing, or handling, in commerce, of livestock.

(b) Whenever complaint is made to the Secretary by any person, or whenever the Secretary has reason to believe, that any stockyard owner, market agency, or dealer is violating the provisions of subsection (a) of this section, the Secretary after notice and full hearing may make an order that he shall cease and desist from continuing such violation to the extent that the Secretary finds that it does or will exist."

The Supreme Court thoroughly analyzed the Congressional motives behind the Act in Stafford v. Wallace, 258 U.S. 495, 514, 42 S.Ct. 397, 401, 66 L.Ed. 735 (1922):

"The object to be secured by the act is the free and unburdened flow of live stock from the ranges and farms of the West and the Southwest through the great stockyards and slaughtering centers on the borders of that region, and thence in the form of meat products to the consuming cities of the country in the Middle West and East, or, still as live stock, to the feeding and fattening farms in the Middle West or East for further preparation for the market.

The chief evil feared is the monopoly of the packers, enabling them unduly and arbitrarily to lower prices to the shipper who sells, and unduly and arbitrarily to increase the price to the consumer, who buys. Congress thought that the power to maintain this monopoly was aided by control of the stockyards. Another evil, which it sought to provide against by the act, was exorbitant charges, duplication of commissions, deceptive practices in respect of prices, in the passage of the live stock through the stockyards, all made possible by collusion between the stockyards management and the commission men, on the one hand, and the packers and dealers, on the other. Expenses incurred in the passage through the stockyards necessarily reduce the price received by the shipper, and increase the price to be paid by the consumer. If they be exorbitant or unreasonable, they are an undue burden on the commerce which the stockyards are intended to facilitate. Any unjust or deceptive practice or combination that unduly and directly enhances them is an unjust obstruction to that commerce. The shipper, whose live stock are being cared for and sold in the stockyards market, is ordinarily not present at the sale, but is far away in the West. He is wholly dependent on the commission men. The packers and their agents and the dealers, who are the buyers, are at the elbow of the commission men, and their relations are constant and close. The control that the packers have had in the stockyards by reason of ownership and constant use, the relation of landlord and tenant between the stockyards owner, on the one hand, and the commission men and the dealers, on the other, the power of assignment of pens and other facilities by that owner to commission men and dealers, all create a situation full of opportunity and temptation to the prejudice of the absent shipper and owner in the neglect of the live stock, in the mala fides of the sale, in the exorbitant prices obtained, in the unreasonableness of the charges for services rendered."

See also De...