United States v. Gallatin Livestock Auction, Inc., 76 CV 60-SJ.
| Decision Date | 24 March 1978 |
| Docket Number | No. 76 CV 60-SJ.,76 CV 60-SJ. |
| Citation | 448 F. Supp. 616 |
| Parties | UNITED STATES of America, Plaintiff, v. GALLATIN LIVESTOCK AUCTION, INC., Defendant. |
| Court | U.S. District Court — Western District of Missouri |
Kenneth Josephson, Asst. U. S. Atty., Kansas City, Mo., Robert L. Purcell, Dept. of Agriculture, Shawnee Mission, Kan., for plaintiff.
Richard A. Koehler, Donald U. Austin, Kansas City, Mo., for defendant.
In this case the United States seeks to recover from defendant for an alleged conversion. Jurisdiction is based on 28 U.S.C. § 1345 (1970). The action is before the Court for final judgment upon stipulated facts. For the reasons we shall state, we have concluded that the government is entitled to recover the damages it seeks.
The parties have stipulated the following facts, although they reserve all objections as to materiality and relevancy:
1. The parties admit to the jurisdiction of this Court.
2. The plaintiff, acting through the Farmers Home Administration, made a loan in the amount of $11,410.00 to Albert and Elsie Millsap, evidenced by a promissory note dated April 2, 1974.
2. (a) The loan referenced just above in No. 2 was designated as an Operating Loan by the Farmers Home Administration.
3. To secure the loan from the United States, Albert and Elsie Millsap executed a security agreement dated January 23, 1975, and executed a financing statement filed on October 17, 1973, in the office of the Recorder, Sullivan County, Missouri.
4. During all times material to this lawsuit, Albert and Elsie Millsap resided in Sullivan County, Missouri.
5. The security agreement and financing statement executed by Albert and Elsie Millsap granted to the plaintiff a lien on all livestock then owned or thereafter acquired by the Millsaps.
6. During all times relevant to the facts and transactions of this lawsuit, the defendant Gallatin Livestock Auction, Inc., was conducting a livestock marketing business in Gallatin, Daviess County, Missouri, and was and is a registrant pursuant and subject to the Packers and Stockyards Act, 1921, as amended, 7 U.S.C. Sections 201, et seq., and the regulations relating to the Packers and Stockyards Act as found at 9 C.F.R. Chapter 2.
7. The loan referenced in No. 2 above was sought, approved and administered through the county level office of plaintiff's agency in Milan, Sullivan County, Missouri.
8. The loan referenced in No. 2 above was administered through the County Supervisor, Richard W. Lincoln, of plaintiff's agency in Milan, Missouri.
9. In conjunction with the loan of April 2, 1974, from plaintiff's agency to Albert and Elsie Millsap, the Millsaps in March, 1974, submitted a financial statement to plaintiff's agency through its county office in Milan, Sullivan County, Missouri.
10. On or about mid-September, 1974, Mr. Lincoln gained personal knowledge that Mr. Millsap was indebted to the Princeton State Bank, Princeton, Missouri, in an amount of approximately $8,000.00 for feed that had been purchased since January, 1974.
11. The indebtedness of Mr. Millsap to the Princeton State Bank referenced in No. 10 above was not shown on the financial statement supplied by Mr. and Mrs. Millsap to plaintiff's agency as referenced in No. 9 above.
11. (a) During September and October, 1974, Mr. Lincoln and Mr. Merrill W. Leutung, District Director, exchanged correspondence dealing with such aspects as Mr. Millsap's inability to account for funds related to the loan and the operation of his farm; the omission of other loans and debts from his financial statement; and the advisability of liquidating the Agency's chattel security in the hands of the Millsaps.
12. On or about October 31, 1974, Mr. Lincoln and Mr. Leutung visited with Mr. Millsap at his farm and advised Mr. Millsap to begin liquidating the Agency's security and paying the proceeds to the Agency.
13. Federal regulations found at 7 C.F.R. 1871, et seq., and specifically 7 C.F.R. 1871.7, 1871.8, and 1871.9, set forth the guidelines for the handling of, or dealing with, security pledged for loans from plaintiff's Agency, such as the loan involved in this lawsuit.
14. The livestock listed on the security agreement and/or financing statement of plaintiff's Agency with respect to its loan to the Millsaps are broken down into categories of basic security and normal security per 7 C.F.R. 1871.7 and 1871.8 as follows:
(a) 25 cows basic security
(b) 22 cows basic security
(c) 1 steer normal security
(d) 7 steers normal security
(e) 1 calf normal security
(f) 1 boar basic security
(g) 1 sow basic security
(h) 8 gilts basic security
(i) 54 shoats normal security
(j) 50 shoats normal security
15. The categories referenced above in No. 14 are not so specifically denoted on the security agreements or financing statement.
16. A County Supervisor for Farmers Home Administration is authorized to release the lien of the plaintiff on security, whether basic or normal, if (a) the debtor reports the disposition of such property, and (b) the debtor can satisfactorily account for the use of the proceeds of such a disposition as in accordance with the guidelines of 7 C.F.R. 1871.8 and 1871.9.
17. After October 31, 1974, Mr. Millsap did liquidate some of his security property and report the disposition of such property to Mr. Lincoln and satisfactorily account for the use of the proceeds of such disposition to Mr. Lincoln.
17. (a) The sales referenced above in No. 17 involved chattel security/livestock and were accomplished by Mr. Millsap without the prior written consent of the FmHA.
18. On February 5 and February 19, 1975, Mr. Millsap consigned livestock for sale through the facilities and with the assistance of the defendant Gallatin Livestock Auction, Inc.
19. On February 5, 1975, the defendant issued its check to E. G. Millsap in the amount of $2,411.22 which represented the net sale proceeds for 53 mixed shoats.
20. On February 5, 1975, the defendant issued its check to A. E. Millsap in the amount of $978.01 which represented the net sale proceeds for 10 sows and one boar.
21. On February 19, 1975, the defendant issued its check to A. E. Millsap in the amount of $1,476.10 which represented the net sale proceeds for 3 sows, 24 pigs, 1 bull, 5 steers, and 9 cows.
22. The defendant Gallatin Livestock Auction, Inc., sold the livestock in issue for Albert and Elsie Millsap on a commission basis.
23. The relationship of the defendant to A. E. and E. G. Millsap in the transactions of February 5 and 19, 1975, as referenced above in Nos. 18, 19, 20, and 21 was that of agent and principal.
23. (a) The livestock referenced in Nos. 19, 20, and 21 above were brought to the defendant's facilities at the request and/or under the direction and control of A. E. Millsap and/or E. G. Millsap.
23. (b) The livestock referenced in Nos. 19, 20, and 21 above were sold by the defendant at the direction and/or request of A. E. Millsap and/or E. G. Millsap.
23. (c) Prior to the actual appearance of the livestock referenced in Nos. 19, 20 and 21 above at the facilities of defendant Gallatin Livestock Auction, Inc., the defendant had no knowledge, actual or constructive, through either its officers or employees, that A. E. Millsap or E. G. Millsap desired to have the referenced livestock sold.
24. Defendant did not have actual knowledge of the security agreement and financing statement between plaintiff's Agency and the Millsaps as referenced in No. 3 above.
25. The plaintiff United States of America received none of the proceeds from the sale of livestock of February 5 or February 19, 1975.
26. The plaintiff did not, in writing, release its lien on the livestock sold by the defendant for Albert and Elsie Millsap on February 5, 1975, and February 19, 1975.
26. (a) Sometime in the latter part of February, 1975, or early March, 1975, Mr. Lincoln discovered that the Millsaps were no longer operating their farm.
26. (b) On March 25, 1975, the FmHA completed a liquidation of its chattel security remaining in the possession of the Millsaps by way of a public sale held at the site of the Millsaps' farm and properly accounted to the Millsaps for the funds from such disposition.
27. As of September 1, 1976, a balance of principal and interest of $5,635.45 remained unpaid on the promissory note referred to in paragraph 2 above.
28. Albert and Elsie Millsap were engaged in farming operations and the livestock sold for them by the defendant were farm products at the time of their sale on February 5 and 19, 1975.
29. On June 13, 1975, Albert E. and Elsie G. Millsap filed petitions in bankruptcy in the Western District of Missouri, Nos. 75-B-1225-W-2 and 75-B-1226-W-3.
30. The debt referenced in plaintiff's complaint at paragraphs 3, 4, and 5 from the Millsaps to plaintiff's Agency was listed by the Millsaps in their respective bankruptcy proceedings.
31. Plaintiff's Agency had actual knowledge of the bankruptcy proceedings of its borrowers/debtors Albert E. and Elsie G. Millsap.
32. Albert E. and Elsie G. Millsap received their respective discharges in bankruptcy as of August 8, 1975.
33. The debt referenced in plaintiff's complaint at paragraphs 3, 4, and 5 from the Millsaps to plaintiff's Agency was among those debts of the Millsaps from which they were discharged in bankruptcy.
34. Plaintiff's Agency made no application to have its debt from the Millsaps declared nondischargeable per the provisions of Sections 17 and 14 of the Bankruptcy Act, 11 U.S.C. Sections 35 and 32.
35. The 106 head of livestock referenced in Nos. 18, 19, 20 and 21 above were owned by the Millsaps and such livestock were subject to the security instruments of the plaintiff, as referenced in No. 3 above.
35. (a) On July 14, 1975, at the first meeting of creditors in the bankruptcy of Albert E....
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