United States v. Pacific Fruit & Produce Co.

• Decision Date: 01 December 1943
• Docket Number: No. 10340.,10340.
• Citation: 138 F.2d 367
• Parties: UNITED STATES v. PACIFIC FRUIT & PRODUCE CO.
• Court: U.S. Court of Appeals — Ninth Circuit

138 F.2d 367 (1943)

UNITED STATES v. PACIFIC FRUIT & PRODUCE CO.

No. 10340.

Circuit Court of Appeals, Ninth Circuit.

October 18, 1943.

Rehearing Denied December 1, 1943.

Francis M. Shea, Asst. Atty. Gen., David L. Kreeger, Sp. Asst. to Atty. Gen., Irvin M. Gottlieb, of Washington, D. C., and Edward M. Connelly, U.S. Atty., of Spokane, Wash., for appellant.

Ryan, Askren & Mathewson and Howard W. Sanders, all of Seattle, Wash., for appellee.

Before GARRECHT, STEPHENS, and HEALY, Circuit Judges.

GARRECHT, Circuit Judge.

This court has been asked to determine whether or not there was an abuse of discretion when the court below dismissed with prejudice the appellant's action for an accounting, after the appellant had virtually admitted a failure of proof and had requested a voluntary nonsuit.

The appellant's complaint set up twenty separate causes of action against the appellee. Typical of these was the third cause of action, which involved the following undisputed facts:

In 1936 and 1937, the United States, through the Farm Security Administration (formerly the Resettlement Administration) lent money on promissory notes to George M. Brisky and Evelyn Brisky of Chelan County, Washington, taking as security a crop and chattel mortgage that gave the United States a first lien on all fruit crops produced by the Briskys during 1937 upon specified real property. The sum of $770.11 remains due on those notes.

The funds advanced to the Briskys by the United States were insufficient to finance the entire cost of producing and marketing their 1937 fruit crops, and the additional funds were obtained from the appellee on the security of a lien on those crops. To enable these additional advances to be made, the appellant agreed to subordinate its lien on the crop to the lien in favor of the appellee, but such subordination was expressly "limited to the extent of 60 cents per box on all fruit sold by the mortgagors." The subordination agreement gave the appellee "the right to deduct and receive from all sales made by the * * * mortgagors * * * the sum of 60 cents per box from each sale" until the loan made by the appellee shall have been paid in full. The agreement gave the appellant "a first lien on all proceeds from each * * * sale of any part of the mortgagors' 1937 fruit crops after the deduction of 60 cents per box from the proceeds of each sale has been made" by the appellee.

Thereafter, the appellee advanced funds and rendered services to the Briskys to aid them in financing the production, handling and marketing of their 1937 fruit crop, consisting of 1,137 boxes of apples, which the Briskys delivered in its entirety to the appellee.

Each of the twenty causes of action in the complaint related to a different borrower, set up the amount due the appellant from that borrower, and described the land upon which he was to raise the 1937 fruit crop mortgaged to the appellant. All the twenty causes of action were otherwise the same, containing the allegation that the appellant's mortgage had been subordinated in favor of the appellee to the extent of 60 cents per box, and that the entire 1937 crop of each borrower had been delivered to the appellee. The complaint prayed that the appellee be ordered to render a full accounting of the transactions between it and each of the borrowers, relating to the production, handling and sale of their fruit; the sums advanced and the services rendered or charges incurred in behalf of each borrower; the quantity and the quality of the 1937 fruit crops delivered by each borrower to the appellee; the proceeds of each sale of such crops; and the amount that the appellee was authorized to deduct therefrom as reimbursement for funds advanced and services rendered to the borrower. The complaint also prayed "that plaintiff have judgment against the defendant for any sums * * * found to be due to the plaintiff upon such accountings," and for other relief.

By the court's direction, only the third cause of action was tried, the judgment in that case to be "applicable to the other causes of action contained in the plaintiff's complaint."

At the trial, the appellant contended that its first lien on the Briskys' 1937 fruit crop, as modified by the subordination agreement, required that all proceeds received by the appellee from each separate sale of the fruit in excess of the 60 cents per box must be paid over to the appellant before the deduction of any charges such as warehousing, freight, storage, and the like. The appellant further contended that although its agents had examined the appellee's books, they could not ascertain to whom or at what price the appellee had sold the Briskys' fruit, and that the appellee had never furnished any additional information on this score. The appellee maintained, on the other hand, that it had purchased the fruit from the Briskys' outright and was required to apply against their debt to the appellee only the sale price as between them, so that the price that the appellee received from subsequent purchasers was legally immaterial. The court ruled that, for the purposes of the trial, the subordination agreement contemplated sales to third persons, and not sales by the Briskys to the appellee.

The appellee's ledger sheets were introduced in evidence, showing the sums advanced and the services rendered to the Briskys, and the amounts credited to them for sales of fruit to the appellee, but giving no indication of what disposition the appellee had made of the fruit. The appellant adduced evidence that the appellee as a rule had commingled the Briskys' fruit with that of other growers and had shipped the commingled fruit to the appellee's various branches throughout the country, although in a few instances the appellee sold the fruit to outsiders. The appellee's accountant testified that it was virtually impossible to trace the ultimate sales of the Briskys' fruit made by the appellee's branches.

The court ruled that since the appellee had received mortgaged property with knowledge of the appellant's lien, it was under an obligation to show its disposition and the amount received therefor; and that if by mixing the Briskys' fruit with other fruit and shipping the combined fruit to branch houses the appellee rendered it impossible to trace the Briskys' fruit or ascertain its selling price, the appellant might prove its fair market value at the date of such shipment. The court further ruled that unless adequate evidence was adduced by the appellee as to when those shipments were made, the market value of the fruit as of one week after the appellee had received it might be proved, but that the appellee might negative such evidence by other factors.

Records brought to court by the appellee's officers were then introduced, showing shipments and sales of Briskys' fruit made by the appellee. These accounted for 298 boxes out of a total of 1,137 boxes of the Brisky apples delivered to the appellee.

Counsel for the appellant demanded that the appellee produce records to account for the disposition of the remaining apples. Counsel and the court then engaged in a colloquy that we quote below in full, since it indicates "the state of the case" at that point and consequently has bearing on the question of whether or not the court's exercise of discretion was sound:

"Mr. Erickson: At this time I would like to make a demand those records be produced in Court.

"Mr. Sanders: In that connection I better be sworn in regard to that demand. If the court will take my oral statement without oath. That subpoena was served on us Saturday evening. I, personally, and the manager went up there Sunday hunting records — piles and piles of boxes there. There were records of some 2500 cars since this business, and how many before I don't know. We spent that much time in endeavoring to do it, and these are all the files we could find. I was back up there again Monday and hunting records, and this is all we were able to get in the limited time. And I submit for counsel at this stage of the proceedings to come in and make a demand is absolutely unreasonable. This case has been set for months. He had all the opportunity in the world to do it, and he can't come in at this late date and serve a subpoena that is humanly and physically impossible to comply with.

"Mr. Erickson: I wish to make this statement. I talked to Mr. Sanders on the 15th of April and told him exactly what we wanted to have for this case and that a subpoena would be prepared and served —

"The Court: You can't make a demand like this binding on anybody. You can't issue a subpoena saying `Bring in all your records.' There is some responsibility on people starting lawsuits to know what they want. I will refuse this demand on the ground it wasn't made timely."

The appellant then attempted to qualify a Government agent as an expert on the market value of the fruit during the period in question, but was unsuccessful because the court ruled that the witness could not base his reply solely on reports issued by the Bureau of Agricultural Economy, Department of Agriculture, as to sales of fruit in the vicinity during that time. With commendable candor, counsel for the appellant conceded that the court's ruling was correct: "I submit the witness doesn't seem to be qualified. I am frank in stating to the Court I don't believe from his answer he is qualified to state the extent of the use of that report in the community of Wenatchee, therefore I take it he should not be permitted to answer any further questions to do with the market price."

Apparently realizing that the appellant's case was about to collapse, as a last resort counsel called to the stand the manager of the appellee, who testified that the Bureau's reports "have no value", and who was thereupon quickly dismissed from the witness chair. The appellant's attorney then called another witness, who stated that he had not used the reports during the years in question...