United States v. Central Livestock Association, Inc.
| Citation | 349 F. Supp. 1033 |
| Decision Date | 20 November 1972 |
| Docket Number | Civ. No. 4526. |
| Parties | UNITED STATES of America, Plaintiff, v. CENTRAL LIVESTOCK ASSOCIATION, INC., Defendant. |
| Court | U.S. District Court — District of South Dakota |
Gary Annear, Asst. U. S. Atty., Fargo, N. D., for plaintiff.
Timothy Q. Davies, Nilles, Hansen, Selbo, Magill & Davies, Ltd., Fargo, N. D., for defendant.
Jurisdiction in this case is premised on 28 U.S.C. § 1345. The United States has sued the defendant, Central Livestock Association, Inc., for proceeds arising out of the sale to the defendant of certain livestock which the plaintiff alleges was subject to the lien of a security agreement which it held, covered by a duly recorded financing statement. A jury was waived.
The Court finds the facts to be as follows:
I.
As security for a loan extended to them by the United States of America, acting through the Farmers Home Administration, Barrett L. Kroeplin and Mary J. Kroeplin, on the 22nd day of July, 1966, executed and delivered a security agreement and financing statement covering cattle and other chattel property described therein. The security agreement contained a provision prohibiting sale of the chattel without the prior written consent of the secured party. The financing statement was filed as provided by law, and contained the following provision:
"Disposition of such collateral is not hereby authorized".
II.
When the loan was being processed, the county supervisor of Farmers Home Administration advised Mr. and Mrs. Kroeplin they could sell security property, but that it would be necessary to have the check made out to them and the Farmers Home Administration as joint payees, and be brought in for proper disbursement. They were also advised in writing that, "when selling mortgaged property Farmers Home Administration must appear on the check".
III.
The Kroeplins made numerous sales of security property without prior specific approval, and accounted for the proceeds to the Farmers Home Administration. This was customary procedure. The Farmers Home Administration was not always named as a payee on the check representing the proceeds of a sale. There is no evidence that the purchasers of security property were ever informed of the requirement that the Farmers Home Administration be made a payee.
IV.
On the 4th day of October, 1966, one such sale was made to the defendant, Central Livestock Association, Inc. The Farmers Home Administration was not named as payee on the check, nor did the Kroeplins account to Farmers Home Administration for the proceeds, which amounted to $2,147.65, the sum sued for in this case.
From the foregoing facts, the Court concludes that the October 4, 1966, sale to the defendant was an authorized sale and the plaintiff's security interest was released. The plaintiff was relying on the integrity of its mortgagee to account for the proceeds.
State law is applicable to this case. See United States v. Kramel, 234...
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