Land O'Lakes Creameries, Inc. v. Commodity Credit Corp.
| Decision Date | 18 July 1960 |
| Docket Number | 4-58-Civ.-450. |
| Citation | 185 F. Supp. 412 |
| Parties | LAND O'LAKES CREAMERIES, INC., Plaintiff, v. COMMODITY CREDIT CORPORATION, Defendant. |
| Court | U.S. District Court — District of Minnesota |
COPYRIGHT MATERIAL OMITTED
Doherty, Rumble & Butler, by Harold Jordan, St. Paul, Minn., for plaintiff.
John J. Connelly, Asst. U. S. Atty., St. Paul, Minn., for defendant.
Plaintiff sues for $30,834.57, the unpaid balance on the price of dried milk sold to defendant. Defendant counterclaims for the same amount on the basis of an administrative board determination that some of the dried milk was infested with insects and that the defendant had properly rescinded part of the sales. The issue is whether to uphold the decision of the Board and thus to allow the defendant's setoff.
The contracts of sale between Land O'Lakes and Commodity Credit Corporation (hereinafter called "C.C. C."), provided for the submission of disputes to the contracting officer of the C.C.C. and appeals to the Contract Disputes Board of the C.C.C. Resulting decisions are binding subject to these limitations:
The parties agree that the issues are whether there is substantial evidence to support the Board's finding of insect infestation at the time of delivery and whether the Board made any errors of law in finding that C.C.C. was entitled to the $30,834.57.
The facts in this case are somewhat difficult to assimilate because they involve 25 carlots of dried milk purchased under 22 contracts over a period of 4 years from five of the plaintiff's plants, and shipped to various warehouses where inspections were made at varying times. The Court has prepared a chart summarizing the shipments, dates, contract numbers, etc., and has appended it to this memorandum in order to summarize the essential items in following statement of facts.
Originally in dispute were 25 carlots of dried milk. The Contracts Disputes Board determined that insect infestation was present at time of delivery in 22 of them, but that as to 7 cars there had been no timely notice of rescission by C.C.C., and as to 1 car a prior inspection should have revealed infestation, so that the C.C.C. was entitled to recovery only on the remaining 14. These 14 are the only ones we are concerned with here, but it is still necessary to occasionally discuss the other carlots for a complete understanding of the facts.
In a several-week period during the spring of 1953, the defendant purchased 7 allegedly infested carlots from the plaintiff's Dresser, Wisconsin plant, and in the spring of 1955, 13 carlots from the plaintiff's Lake Crystal plant; 5 other allegedly infested carlots were purchased from other plants of the plaintiff, but are not now pertinent.
Since the carlots were shipped to various warehouses, infestation was discovered at different times. The Board found that as to 4 of the 7 Dresser cars, no timely notice of rescission had been given, that 1 Lake Crystal car was not infested at time of delivery, and that C.C.C. had waived recovery by not discovering infestation earlier in another. Liability thus was attached on only 3 Dresser cars, and on 11 Lake Crystal cars, which are the 14 cars in dispute here.
The first issue is whether the findings of insect infestation at the time of delivery is supported by substantial evidence. We must review the record as a whole in determining this question. It is necessary to consider a brief synopsis of the essential facts and inferences relied upon by the Board. These are that (1) subsequent to the time of delivery at the plaintiff's plants, inspections of the product at various government warehouses revealed insect infestation; (2) the plaintiff's plants were then inspected and found to contain evidence of insects; (3) the inference was drawn on the basis of the government expert's opinion, that the milk was infested at the time of delivery. The plaintiff attacks the Board's right to draw such an inference on multiple grounds.
First, the plaintiff urges that as to 9 of the carlots out of the 14 involved herein, there is no substantial evidence of insect infestation even at the government warehouses, because as to these 9 carlots, each involving about 200 barrels of dried milk, the inspectors found only 1 infested barrel of dried milk in each carlot.1 The plaintiff then concludes that this is insubstantial evidence to support a breach of warranty by relying on the C.C.C.'s own letter2 from the Pure Food & Drug Administration, to the effect that such evidence alone would not be enough to condemn the entire carlot as unfit for human use:
But the plaintiff's contention fails to recognize that the other factors mentioned in the letter were present and considered by the Board. The isolated fact that only 1 barrel per 200 was found in 9 carlots, is misleading. As shown by the charts, the discovery of 1 barrel in each of 9 cars resulted from carlot samplings of from 1 to 41 barrels. In other carlots, shipped at about the same time, the sampling revealed higher ratios of the number of infested barrels to the number sampled. The Board was entitled to treat the individual carlots as part of two manufacturing outputs, one from Dresser and one from Lake Crystal, in finding as they did that:
"In each case where insect infestation was detected, the extent of samples examined was sufficient to determine that the entire carlot involved was infested."
To breach the warranty in a case such as this, it is not necessary that each and every barrel be found infested, but only that enough infestation be found throughout the shipments to conclude as a practical matter that the totality of the goods was unfit for human consumption.
The plaintiff contends that regardless of the sufficiency of evidence showing infestation at the government warehouses, there is insufficient evidence in general for the Board to conclude it was present at the time of delivery because: (1) a government inspection was made at time of delivery, which revealed no infestation of the plant or product; (2) the warehouse inspections were not made until several months later at widely scattered warehouses after the carlots had been subjected to possible infestation from railroad boxcars; (3) the nature of the insects, which were beetles, precludes them from having been present at time of delivery because of (a) their inability to survive the heat at which the milk is produced; (b) their limited life cycle and inability to reproduce on a subsistence of dried milk; and (c) their penetration capacities in relation to the time element and the various positions at which they were discovered between the polyethylene liners, Kraft liners, and wooden barrels in which the milk was packaged.
The main source of knowledge about the beetles arises from an extensive six-month experiment conducted by government entomologists at Madison, Wisconsin to determine how the beetles get into dried milk, and how it could be packaged to prevent it. The written report of these experts and the oral testimony of the supervisor of these experiments was presented before the Board. It is unnecessary to summarize this evidence, except by way of showing that for every fact which tends to show the bugs could not have been present, the government points to an equally convincing fact tending to prove the opposite.
Although the plaintiff's expert was of the opinion that the infestation must have come from some place other than the plants, the government's expert was of the opposite view. Either view was supported by substantial evidence.
It is true that the C.C.C. inspected the milk at the plant prior to delivery. But the Board concluded from the testimony that this inspection was made for the purpose of determining grade and not for the purpose of discovering infestation, and that it is a practical impossibility to ascertain the presence of beetles in the larvae stage, and that they therefore could be present despite the inspection.
To the testimony that larvae could not survive the heat at which the milk was produced and packaged, the government replied with credible testimony that they could survive in the packaging despite the initial heat of the milk itself.
There was some testimony showing on one hand that the life cycle and reproduction capacity of the beetles on a diet of dried milk would extinct them in a period of two...
To continue reading
Request your trial
-
U.S. v. Crown Equipment Corp.
...at 404. The Northern Pacific Railway approach was later rejected by the same district court in Land O'Lakes Creameries, Inc. v. Commodity Credit Corp., 185 F.Supp. 412, 422 (D.Minn.1960) (awarding damages to the CCC "based on the market price at which the government was purchasing [price-su......
-
Gen. Mills Operations, LLC v. Five Star Custom Foods, Ltd.
...press release was hearsay without discussing its contents). 3. This case is distinguishable from Land O'Lakes Creameries, Inc. v. Commodity Credit Corp., 185 F.Supp. 412 (D.Minn.1960), where the issue was how much insect infestation in barrels of dried milk was required to prove that the wh......
- Land O'Lakes Creameries, Inc. v. Commodity Credit Corp.