Smeed v. Carpenter

• Decision Date: 12 January 1960
• Docket Number: No. 16441.,16441.
• Citation: 274 F.2d 414
• Parties: Ralph SMEED, Harold Doan, Albert Black, B. W. Avers and Charles Sewell, a Partnership Doing Business as the Boise Valley Livestock Commission Company, Appellant, v. George CARPENTER and National Surety Corporation, Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

274 F.2d 414 (1960)

Ralph SMEED, Harold Doan, Albert Black, B. W. Avers and Charles Sewell, a Partnership Doing Business as the Boise Valley Livestock Commission Company, Appellant, v. George CARPENTER and National Surety Corporation, Appellees.

No. 16441.

United States Court of Appeals Ninth Circuit.

January 12, 1960.

Smith & Miller, Lawrence N. Smith, Caldwell, Idaho, for appellant.

Clemons, Skiles & Green, C. Stanley Skiles, Boise, Idaho, for appellee.

Before ORR, POPE and MERRILL, Circuit Judges.

ORR, Circuit Judge.

This action is concerned with transactions arising out of the buying and selling of livestock. The livestock business reached such a magnitude that Congress, sensing its vital concern to the country, saw fit to enact regulatory legislation known as the Packers and Stockyards Act, 1921, 7 U.S.C.A. § 181, and placed in the hands of the Secretary of Agriculture the duty of carrying out the mandates of said act. "The object to be secured by the act is the free and unburdened flow of livestock 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 livestock, to the feeding places and fattening farms in the Middle West or East for further preparation for the market." Stafford v. Wallace, 1922, 258 U.S. 495, 514, 42 S.Ct. 397, 401, 66 L.Ed. 735.

In order to carry out the purposes of the act, the Secretary of Agriculture has promulgated regulations governing the operation of stockyards. To insure the free and unburdened flow of livestock through the nation's yards, operators thereof are required to set up a custodial fund into which the purchase price received from buyers is placed and from which sellers are paid. Reg. 201.42, 9 C.F.R. § 201.42. It is also required under the regulations that a dealer, as defined in the act, 7 U.S.C.A. § 201, post a bond with prescribed conditions. Reg. 201.29, 9 C.F.R. § 201.29. Appellee Carpenter was at all relevant times such a dealer and posted the required bond in the sum of $8,000 with appellee National Surety Company as surety. The relevant terms of said bond read as follows:

"Now, Therefore, the condition of this bond is such that * * *

"If the said Principal shall pay, when due, to the person or persons entitled thereto the purchase price for all livestock purchased by said Principal at a public stockyards, as defined in the Act of Congress known as the Packers and Stockyards Act, 1921, as amended;

"Then this bond shall be null and void, otherwise to remain in full force and virtue.

"Any person damaged by the breach of any condition hereof may maintain an action on this bond in his own name to recover his damages, after first giving written notice to the trustee herein * * *."

Alleging a breach of performance on the part of Carpenter, appellant Boise Valley Livestock Commission Company, operators of a licensed public stockyard as defined in the act, 7 U.S.C.A. § 202, instituted suit against Carpenter and his surety in the sum of $7,254.47. The trial court gave judgment against Carpenter but denied judgment against the surety on the ground that certain transactions between appellant and Carpenter hereafter described were loans prohibited by Regulation 201.61(a), 9 C.F.R. § 201.61 (a), and not within the terms of the obligation which the surety had assumed. It will be noted that the bond is conditioned that Carpenter "pay, when due, to the person or persons entitled thereto the purchase price for all livestock purchased * * * at a public stockyards, as defined in the Act of Congress known as the Packers and Stockyards Act, 1921, as amended." We find no contradiction of the fact that the stockyard operated by appellant came within the definition of the act (7 U.S.C.A. § 202).

As we understand the procedure followed at the yard, sales are made through a sales ring. Cattle are put up for sale in the ring and bids are taken. When a sale is made, the cattle so purchased are weighed and a ticket recording the sale is carried on a conveyor belt into the office. There a clerk makes out a purchase sheet in triplicate listing the names of the purchaser and consignor of the cattle which had been sold, the number of head, and the weight. A yellow copy of the purchase sheet is filed in the office, a pink one is given to the brand inspector, and a white one is given to the purchaser when he pays for the cattle he has purchased. When the purchase sheet is completed, it is passed on to another clerk who writes out a sales sheet to which she attaches a check for the purchase price of the cattle, less commission, brand inspection fee, and the cost of feed, if any. The consignors of the cattle which have been sold in the ring are entitled to receive this sales sheet and attached check immediately without waiting for the purchasers to make payment upon completing all their purchases through the ring. The checks the consignors receive are drawn upon the custodial account heretofore mentioned. Regulation 201.42 provides that this account is to be drawn upon only for payment to the market agency of the sums due it for its services and for other lawful charges made by it against the consignment of the cattle, and for the payment of the net proceeds to the consignors of the cattle sold. 9 C.F.R. § 201.42. Regulation 201.43 requires prompt payment of the proceeds received from the sale of the cattle to the consignors of the cattle, such payment to be "* * * before the close of the next business day following the sale * * *" 9 C.F.R. § 201.43. Since purchasers are required to pay within 24 hours, the fund is normally maintained at a sufficient level to cover all checks drawn against it. If the account became overdrawn, however, the custodian would be required to replenish it. This procedure is designed to and does facilitate the free and unburdened flow of livestock through the yards.

During the course of the afternoon of May 2, 1957, appellee Carpenter purchased 407 head of cattle through appellant's sales ring, the sales being handled in the usual manner. Upon completing all his purchases, and not before then, he notified appellant that until he could find a buyer to whom they could be resold, he would be unable to pay for the cattle. Pursuant to instructions received from Carpenter, the 407 head of cattle were placed in appellant's feed yard where they were to be given an agreed upon ration of feed and held until Carpenter could resell them. On May 14, 1957, 266 head of cattle were shipped to a buyer procured by Carpenter and appellant received $65,177.75 which was credited to Carpenter's account. Then on May 31, 1959, the remaining cattle were resold through the sales ring and the proceeds similarly credited to Carpenter's account. The market price of cattle declined continually following Carpenter's purchase so that they brought less on resale than Carpenter had paid for them. After crediting the resale proceeds to Carpenter's account, therefore, a balance of $7,254.47 remained due and payable to the custodial fund and appellant.

We think the facts above stated present a situation wherein the sale of the 407 head of cattle comes clearly within the terms of the bond. They were sold pursuant to customary business practices and regulations of the Secretary of Agriculture at a public stockyard as defined in the act, and appellant as custodian of the fund out of which the consignors of cattle were paid is the person entitled to payment. We are unable to see wherein the transaction could have in any sense been one of a loan. The consignors were paid out of the custodial account in the...