United States v. Squires

• Decision Date: 06 June 1974
• Docket Number: Civ. No. 73-212-2.
• Parties: UNITED STATES of America, Plaintiff, v. Loren R. SQUIRES, d/b/a Stuart Sales Company, Defendant.
• Court: U.S. District Court — Southern District of Iowa

378 F. Supp. 798

UNITED STATES of America, Plaintiff, v. Loren R. SQUIRES, d/b/a Stuart Sales Company, Defendant.

Civ. No. 73-212-2.

United States District Court, S. D. Iowa, C. D.

June 6, 1974.

Allen L. Donielson, U. S. Atty., James R. Rosenbaum, Asst. U. S. Atty., Des Moines, Iowa, for plaintiff.

Richard Santi, Daniel Cutler, William J. Koehn, Des Moines, Iowa, for defendant.

MEMORANDUM AND ORDER RE CROSS-MOTIONS FOR SUMMARY JUDGMENT

HANSON, Chief Judge.

The Court issues this order pursuant to cross-motions for summary judgment filed by the plaintiff and the defendant in this cause of action. The plaintiff's motion is for partial summary judgment and was filed on January 17, 1974. The plaintiff seeks summary judgment in its favor as it relates to two affirmative defenses which were set forth in the defendant's answer to the complaint, the statute of limitations and laches. The defendant's motion for summary judgment is based upon a failure to state a claim upon which relief can be granted and the statute of limitations. This Court has jurisdiction by virtue of Title 28, United States Code, Section 1345.

The United States of America alleges in its complaint that on or about March 28, 1966, December 4, 1967 and December 9, 1968 the United States of America, acting by and through the Farmers Home Administration, United States Department of Agriculture, made operating loans pursuant to the provisions of the Consolidated Farmers Home Administration Act of 1961, Title 7, United States Code, Section 1921 et seq., as amended, to Richard D. Varney and Irene H. Varney in the amounts of $29,620, $5,600 and $4,540. Attached to the complaint were copies of these notes marked as Exhibits A, B and C. The plaintiff alleges that the sums due and owing on these notes have not been paid and that there is a total indebtedness in a principal sum of $29,944.53. The plaintiff alleges that as security for these loans there was executed a security agreement on April 23, 1969 in favor of the plaintiff which was perfected by a Financing Statement filed on December 4, 1967 in the State of South Dakota. The plaintiff claims that the security agreement covered property which was sold and converted to its own use by the defendant in this cause of action. The plaintiff demands judgment against the defendant for the value of the secured property which was sold to and sold by the defendant.

The defendant sets out six affirmative defenses in its answer to the complaint. Several of these affirmative defenses are the subject of the two motions for summary judgment.

I.

The Court first addresses itself to the plaintiff's motion for partial summary judgment filed January 17, 1974. This motion for summary judgment seeks summary judgment on the third and fourth defenses in the defendant's answer to the complaint. The third affirmative defense states that the right of action set forth in the complaint did not accrue within the applicable statutory limitation period of three years next before the commencement of this action. The alleged conversions occurred in December of 1969 and the complaint was filed by the plaintiff on September 27, 1973. There is no question but that the complaint was filed over three years past the date of the alleged conversion. The question, however, is whether the period of three years is the applicable period for measuring the statutory period of limitations.

Both parties agree that there is no genuine issue as to any material fact as it relates to that portion of the motion for summary judgment that deals with the statute of limitations. The defendant bases his statute of limitations defense upon Title 28, U.S.C., Section 2415(b) which provides a limitation period of three years for torts. This section of the United States Code, however, contains a six-year limitation period for an action for conversion of property of the United States. If the instant litigation involved a conversion, the six-year statute of limitation would apply; but if the action involved a tort and was not a conversion, the three-year statute of limitations would apply. The whole question of the statute of limitations turns upon whether the complaint states a cause of action for conversion of property of the United States.

The Court finds the defendant's arguments that the complaint does not allege any conversion of property of the United States to be without merit. The defendant is apparently arguing that conversion of a lien interest in property is not a conversion of property under Title 28, U.S.C. Section 2415(b). To support its argument that the Government had no property interest in the collateral, this portion of the security agreement is cited by the defendant:

DEBTOR WARRANTS, COVENANTS, AND AGREES THAT . . . Debtor is the absolute and exclusive owner of the above-described collateral and any mark or brands used to describe livestock are the holding brand and carry the title. . . .

The defendant misinterprets the meaning of this clause in the security agreement. This clause merely means that prior to the execution of the security agreement there were no other outstanding interests in the collateral. It does not mean that the Government did not acquire an interest in the collateral and that the debtor was a sole and absolute owner of the collateral after the execution of the security agreement. The Government clearly has an interest in the property by the execution of the security agreement. It is equally clear that there can be a conversion of the Government's lien interest in the collateral. This Court holds that a lien interest in property is a property interest and a sale of the property disregarding that lien interest is a conversion of property of the lienholder.

A similar result was reached by Judge Scott in the case of United States v. Southland Provision Company, 320 F. Supp. 1089 (M.D.Fla.1970). In the Southland case Judge Scott held that within the meaning of Title 28, U.S.C. Section 2415(b) a sale of hogs which had been mortgaged to the United States was a conversion of property of the United States and subjected that conversion to a six-year statute of limitation. This Court would reach the same result as reached by Judge Scott in the Southland case. This Court holds that under the undisputed facts of this case the six-year statute of limitations applies pursuant to Title 28, U.S.C., Section 2415(b), and that this cause of action is not barred by the statute of limitations. There is no dispute of material fact as to the period of time that has run on the statute of limitations, and thus this particular aspect of this cause of action is ripe for summary judgment.

Accordingly, it is ordered that that portion of the plaintiff's motion for partial summary judgment relating to the third affirmative defense of the defendant's answer is sustained. This cause of action is not barred by the statute of limitations.

The second portion of the plaintiff's motion for partial summary judgment pertains to the fourth affirmative defense of the defendant's answer which raises the defense that the plaintiff's cause of action is barred by the equitable doctrine of laches. The plaintiff claims that the defense of laches is not available against the United States. In support of this contention the United States cites the Court to United States v. Summerlin, 310 U.S. 414, 416, 60 S.Ct. 1019, 84 L.Ed. 1283 (1939); American Surety Co. of New York v. United States, 112 F.2d 903, 906 (10th Cir. 1940); and United States v. First National Bank of Prague, Oklahoma, 124 F.2d 484, 488 (10th Cir. 1941). The Summerlin case states as follows:

"It is well settled that the United States is not bound by state statutes of limitation or subject to the defense of laches in enforcing its rights. United States v. Thompson, 98 U.S. 486 25 L.Ed. 194; United States v. Nashville, C. & St. L. Ry. Co., 118 U. S. 120, 125, 126 6 S.Ct. 1006, 30 L. Ed. 81; Stanley v. Schwalby, 147 U. S. 508, 514, 515 13 S.Ct. 418, 37 L. Ed. 259; Guaranty Trust Co. v. United States, 304 U.S. 126, 132 58 S.Ct. 785, 82 L.Ed. 1224; Board of Commissioners v. United States, 308 U.S. 343, 351 60 S.Ct. 285, 84 L.Ed. 313. The same rule applies whether the United States brings its suit in its own courts or in a state court. Davis v. Corona Coal Co., 265 U.S. 219, 222, 223 44 S.Ct. 552, 68 L.Ed. 987." 310 U.S. at 416, 60 S.Ct. at 1020.

The defendant claims the general rule, that the United States is not subject to a defense of laches, is subject to exception which may be applicable to this litigation. The defendant contends that when the United States engaged in a proprietary function, the defense of laches is available against a claim of the United States. The theory is that when the Government enters into ordinary business outside of strictly Government matters, it must be held to the same rules that govern other parties in these transactions. The defendant has cited to the Court numerous and persuasive authorities for this exception to the rule that laches cannot be asserted against the United States. The Supreme Court stated in Cooke v. United States, 91 U.S. 389, 398, 23 L.Ed. 237:

Laches is not imputable to the Government, in its character as sovereign, by those subject to its dominion. * * * Still a Government may suffer loss through the negligence of its officers. If it comes down from its position of sovereignty, and enters the domain of commerce, it permits itself to the same laws that govern individuals there . . . Generally, in respect to all the commercial business of the Government, if an officer specially charged with the performance of any duty, and authorized to represent the Government in that behalf, neglects that duty, and loss ensues, the Government must bear the consequences of his neglect.

The Court cannot determine at this time whether the defense of laches is available to the defendant under the facts of this case. This determination must be made at a later...