United States v. Donahue Bros.
| Decision Date | 22 July 1932 |
| Docket Number | No. 9363.,9363. |
| Citation | 59 F.2d 1019 |
| Parties | UNITED STATES v. DONAHUE BROS., Inc. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Wendell Berge, Sp. Asst. to Atty. Gen. (Charles E. Sandall, U. S. Atty., of Omaha, Neb., and John Lord O'Brian, Asst. to Atty. Gen., on the brief), for the United States.
James H. Hanley, of Omaha, Neb., for appellee.
Before GARDNER and SANBORN, Circuit Judges, and NORDBYE, District Judge.
This is an action brought against appellee to recover statutory penalties for the disobedience of an order of the Secretary of Agriculture purporting to have been entered under authority of the Packers and Stockyards Act 1921 (42 Stat. 159 7 USCA §§ 181-229). On stipulation of the parties it was tried to the court without a jury. The parties will be referred to as they appeared in the lower court.
The order of the Secretary of Agriculture was entered November 21, 1924, and directed the defendants to cease and desist from violating the Packers and Stockyards Act "(1) by disposing of funds in its possession or control so as to endanger the prompt accounting for payment of the proceeds due owners of live stock, and intermingling its personal accounts with those belonging to shippers and consignors of live stock consigned to it in its capacity as a market agency; (2) by crediting the net proceeds of the sale of live stock to its estray account or other personal account, instead of remitting such proceeds promptly to the shippers; (3) by rendering incorrect account sales to owners and consignors; and (4) in any other manner disclosed by the facts found by the Secretary of Agriculture."
The petition of the plaintiff, all the allegations of which material to this appeal were found by the lower court to be true, alleged the corporate existence of the defendant; that it maintained a place of business at the Union Stockyards, South Omaha, Neb., where it engaged in the business of selling and buying live stock on a commission basis for the account of others, and is a market agency within the meaning and subject to the provisions of the Packers and Stockyards Act of 1921; that as a market agency, it receives from time to time shipments of live stock for sale, and for the purpose of remitting the proceeds thereof to the persons entitled thereto; that on or about April 23, 1924, the Secretary of Agriculture ordered the institution of an inquiry and investigation for the purpose of determining whether or not the defendant had engaged in unfair practices in violation of the Packers and Stockyards Act and the rules and regulations thereunder, and the defendant had due notice of the issuance of such order. On hearing held pursuant thereto, defendant was found to have violated the act by disposing of shippers' funds so as to endanger prompt accounting for payment due the owners of live stock, and by intermingling its personal accounts with those belonging to shippers of live stock. An order was thereupon entered by the Secretary directing defendant to cease and desist from such practices. It is alleged that the defendant violated this order by converting the proceeds of sales of such stock to its own use, thereby endangering the payment of proceeds due the owners of live stock and by intermingling its personal accounts with those belonging to shippers and consignors. Six specific instances of the violation of the cease and desist order are alleged, and for these violations and failures to obey the order of the Secretary, plaintiff seeks to recover penalty in the sum of $3,000.
The answer is not material because the court found all the allegations of plaintiff's petition to be true, but concluded that a regulation of the Secretary dated June 14, 1923, was legislative in its nature and without authority of law, and that the Secretary exceeded his power and authority in promulgating such regulation, and hence the proceedings before the Secretary were insufficient as a basis for recovery in this action. The court therefore dismissed the action, and the government has appealed.
Section 314 of the same act (7 USCA § 215) provides a penalty in the sum of $500 for each violation of a cease and desist order made under the provisions of sections 310, 311, or 312 (7 USCA §§ 211, 212 or 213), and provides that such forfeiture shall be recoverable in a civil suit in the name of the United States.
By section 310 of the act (7 USCA § 211) it is provided, among other things, that if, after hearing, the Secretary is of the opinion that any practice of a stockyard owner or market agency, for or in connection with the furnishing of stockyard services; is or will be unjust, unreasonable, or discriminatory, he may prescribe and determine what regulation or practice is or will be just and reasonable to be followed, and may make an order that the owner or operator shall cease and desist from such violation to the extent to which the Secretary finds that it does or will exist.
Acting under these statutory provisions, the Secretary entered the cease and desist order, for the violation of which this action is brought.
In disposing of the issue, the lower court expressed the view that the action of the Secretary in entering the cease and desist order was bottomed on a regulation promulgated on or about June 14, 1923, which, so far as here pertinent, reads as follows: "No market agency shall make such use or disposition of funds in its possession or control as will endanger or impair the faithful and prompt accounting for and payment of such portion thereof as may be due the owner or consignor of livestock or other person having an interest therein and to this end shall so handle all such funds as to prevent their being intermingled or confused with other accounts or funds of the market agency kept or used for other purposes."
This action, however, is for a violation of the cease and desist order entered upon hearing after proper notice to the defendant, and is not dependent for its validity upon the regulation referred to. The regulation promulgated by the Secretary condemned the practice later covered by the cease and desist order as unfair and unjust within the meaning of the act. Of course, if these practices are not violative of the provisions of the act, then the Secretary had no authority to enter the cease and desist order; but we are of the view that the regulation promulgated June 14, 1923, was in the nature of an administrative measure designed to...
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