Rowse v. Platte Valley Livestock, Inc.

• Citation: 604 F. Supp. 1463
• Decision Date: 14 March 1985
• Docket Number: No. CV84-L-227.,CV84-L-227.
• Parties: Dean ROWSE and Helen Rowse, Plaintiffs, v. PLATTE VALLEY LIVESTOCK, INC., a Nebraska corporation, Defendant.
• Court: U.S. District Court — District of Nebraska

604 F. Supp. 1463

Dean ROWSE and Helen Rowse, Plaintiffs, v. PLATTE VALLEY LIVESTOCK, INC., a Nebraska corporation, Defendant.

No. CV84-L-227.

United States District Court, D. Nebraska.

March 14, 1985.

COPYRIGHT MATERIAL OMITTED

Richard A. Koehler, Geneva, Neb., D.L. Pelton, Papillion, Neb., for plaintiffs.

Robert M. Cook, Norfolk, Neb., for defendant.

Sally Johnson, Asst. U.S. Atty., Lincoln, Neb., for intervenor United States of America.

MEMORANDUM OF DECISION

URBOM, Chief Judge.

Trial was had December 11, 1984, on the plaintiffs' complaint to enforce a reparations order issued in their behalf by the Secretary of Agriculture under § 309 of the Packers and Stockyards Act of 1921, as amended (codified as 7 U.S.C. § 210). Evidence was taken on both the count seeking enforcement of the order and on a second count seeking damages for interest paid by the plaintiffs on a loan they procured to replace the capital lost in the bad-check transaction underlying the reparations count.

The basic facts and history of the case have been stated previously, see Memorandum and Order on Motion for Summary Judgment and Motion to Dismiss (Nov. 2, 1984), 597 F.Supp. 1055, filing 23, and need not be repeated. In that memorandum I found that the Secretary and this court had subject matter jurisdiction because the alleged activity of the defendant constituted a "practice" under 7 U.S.C. § 208(a). Now the legal issue in the first count concerns whether the defendant's "practice" was "unjust, unreasonable, or discriminatory" under § 208(a).

The preliminary question is whether there is substantial evidence on the administrative record to support the Secretary's findings. Rice v. Wilcox, 630 F.2d 586, 591 (8th Cir.1980); 5 U.S.C. § 706(2)(E). If so, then "the findings and orders of the Secretary shall be prima facie evidence of the facts therein stated." 7 U.S.C. § 210(f). If not, then the Secretary's order is inadmissible. Mid-South Order Buyers, Inc. v. Platte Valley Livestock, Inc., 210 Neb. 382, 396, 315 N.W.2d 229, 236 (1982). Under the prima facie evidence standard, the defendant may introduce evidence to rebut the prima facie effect of the order. Id.; cf. ICC v. Atlantic Coast Line Railroad Co., 383 U.S. 576, 594, 86 S.Ct. 1000, 1011, 16 L.Ed.2d 109 (1966) (interpreting similar provision of Interstate Commerce Act, § 16(2)).

Having examined the administrative record, including the hearing transcript, I find there to be substantial evidence to support at least those of the Secretary's findings of fact that establish a violation of § 208. Therefore, pursuant to § 210(f), the plaintiffs have sustained their burden of going forward with the evidence, assuming the correctness of the Secretary's interpretation of the law, the second question in the present inquiry.

While the Secretary's findings of law must be reviewed de novo, Rice, 630 F.2d at 589; 5 U.S.C. § 706, it is a tenet of judicial review of administrative decisions that "when faced with a problem of statutory construction" courts are bound to give "great deference to the interpretation given the statute by the officers or agency charged with its administration." Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1964). This principle applies to the problem of fleshing out the meaning of the § 208 prohibition of "every unjust, unreasonable, or discriminatory regulation or practice" with respect to the furnishing of stockyard services. Hays Livestock Commission Co. v. Maly Livestock Commission Co., 498 F.2d 925, 930 (10th Cir.1974); United States v. Donahue Brothers, 59 F.2d 1019 (8th Cir.1932). The Secretary's interpretation of the facts, to the effect that the defendant engaged in an unjust and unreasonable practice violative of § 208, is to be accorded great deference if the factual findings are supported by substantial evidence. Id. at 931; Van Wyk v. Bergland, 570 F.2d 701, 705 (8th Cir. 1978). As the court noted in Hays Livestock, this level of deference arises because the statute fails to define the critical phrase, leaving its meaning to "`be determined by the facts of each case within the purposes of the Packers and Stockyards Act,'" and because "`the responsibility for efficient regulation of market agencies and packers lies with the Secretary of Agriculture....'" 498 F.2d at 930 (quoting Capitol Packing Co. v. United States, 350 F.2d 67, 72, 76 (10th Cir.1965)).

Several sections of the Nebraska Uniform Commercial Code clarify the legal rights of the parties: the Rowses; Ken Kaba, the buyer; and the defendant, Platte Valley, the consignment seller. "Where payment is due and demanded on the delivery to the buyer of goods or documents of title, his right as against the seller to retain or dispose of them is conditional upon his making the payment due." Neb.Rev.Stat. UCC § 2-507(2) (Reissue 1980). "Payment by check is conditional and is defeated as between the parties by dishonor of the check on due presentment." UCC § 2-511(3).

(1) ... A person with voidable title has power to transfer a good title to a good faith purchaser for value. When goods have been delivered under a transaction of purchase the purchaser has such power even though

. . . . .

(b) the delivery was in exchange for a check which is later dishonored, or

. . . . .

(d) the delivery was procured through fraud punishable as larcenous under the criminal law.

(2) Any entrusting of possession of goods to a merchant for purposes of sale who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in ordinary course of business.

UCC § 2-403.

Under these rules, the Rowses had the right to recover the cattle when they discovered that Kaba's check had been dishonored. Peck v. Augustin Brothers Co., 203 Neb. 574, 279 N.W.2d 397 (1979); see J. White & R. Summers, Handbook of the Law under the Uniform Commercial Code § 3-6, at 115 (2d ed. 1980). The fact that after their dishonor Dean Rowse allowed Kaba a short time to make good the checks did not change the rights between the Rowses and Kaba, retroactively alter the state of title, or turn the sale into a credit transaction. By the time the Rowses learned of the dishonor, the cattle had been sold on consignment by Platte Valley for Kaba's account, and the various purchasers obtained good title even though Kaba's title was only conditionally valid at the time of the auction sale and even though the condition failed. As an agent for Kaba, selling on commission, Platte Valley's rights could rise no higher than those of its principal. Mid-South Order Buyers, Inc. v. Platte Valley Livestock, Inc., 210 Neb. 382, 395, 315 N.W.2d 229, 236 (1982). As against the Rowses, neither Kaba nor his agent was entitled to the proceeds, because Kaba's rights were only conditional until the checks cleared. However, at the time of the sale and disposition of proceeds Kaba's checks had not yet been dishonored. Therefore, no conversion action would lie under state law, at least as to the portion of the proceeds sent to Dale Van Wyk, because the Rowses did not then have an immediate right to possession. Allen v. Dealer Assistance, Inc., 207 Neb. 455, 299 N.W.2d 744 (1980).

Whether Platte Valley's distribution of the sale proceeds to itself and Dale Van Wyk, a creditor of Kaba, or its retention of the portion of the proceeds it kept to offset Kaba's debt to it, after the Rowses' possessory interest was revived or after the Rowses demanded the money, would be actionable under state conversion law is relevant here only to the extent that the question casts light on what an unjust practice is under the federal law—the plaintiff's suit is based on the federal law rather than any state law.

Regardless of the legality of Platte Valley's original distribution of the proceeds, its retention of a portion after being informed of the Rowses' claim was unjustified. At that point Platte Valley's president, Gene Lenhart, knew that the Rowses had not been paid and that they were the true owners of the cattle, as between them and Kaba, rendering ineffective Kaba's oral approval of Platte Valley's distribution of the proceeds. Platte Valley should have paid to the Rowses the portion of the proceeds still in its hands once Lenhart learned the full facts, as it had done for the Rezac Brothers after the Rezacs complained that Kaba had not paid them for cattle he purchased from them and sold through Platte Valley.

The proceeds from the cattle sale were trust funds in Platte Valley's hands. 9 C.F.R. § 201.42. A trustee may not offset a debt owing to the trustee individually and not as trustee. Mid-South Order Buyers, Inc. v. Platte Valley Livestock, Inc., 210 Neb. 382, 394, 315 N.W.2d 229, 235 (1982). The conversion or commingling of trust funds is an unjust practice under the Packers and Stockyards Act. United States v. Donahue Brothers, 59 F.2d 1019 (8th Cir.1932).

The majority rule at common law is that an auctioneer who sells goods on behalf of a principal who lacks valid title, or who holds it subject to a mortgage or other lien, or who for other reasons has no right to dispose of it, is liable to the true owner, lien holder, or conditional vendor for conversion, despite the auctioneer's good faith and lack of knowledge of the competing interest. Annot., 96 A.L.R.2d 208, 210 (1964). The Nebraska Supreme Court adopted the majority rule in State Securities Co. v. Svoboda, 172 Neb. 526, 110 N.W.2d 109 (1961). The state legislature responded by enacting Neb.Rev.Stat. § 69-109.01, which exempts from liability an auctioneer who in good faith and without notice of a "security interest" sells personal property at auction for a principal whose identity has been disclosed, if the auctioneer has no interest and only acts as an intermediary of the owner. The statute did not abrogate the common law rule, but only provided an exemption if the statutory conditions are met. State Securities Co. v. Norfolk Livestock Sales Co., 187 Neb. 446, 449, ...