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AUTREY v. COMMODITY CREDIT CORPORATION

July 9, 1956

ERNEST R. AUTREY, PLAINTIFF,
v.
COMMODITY CREDIT CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Lemley, Chief Judge.

This cause having been tried to the Court, and the Court being well and fully advised, doth make and file herein the following Findings of Fact, Conclusions of Law, and Memorandum Opinion, to-wit:*fn1

Findings of Fact

2. On October 26, 1954, plaintiff borrowed from the defendant the sum of $8,611.44, which loan was evidenced by a "Producer's Note and Loan Agreement," executed on an official form prescribed by the defendant, and bore interest at the rate of 3 1/2% per annum, and was payable on or before February 22, 1955. As collateral security for this loan the plaintiff pledged to the defendant a quantity of rice produced by him during the crop year of 1954, and which was stored on a "modified commingled" basis in the warehouse of Farmers Grain & Elevator Company in Texarkana, Texas; at the time the loan was made the plaintiff endorsed and delivered to the defendant the warehouse receipt covering said rice.

3. Under the provisions of the note and loan agreement and of the applicable regulations the plaintiff remained responsible for the quality of his rice up until the time the loan was discharged; under his contract and the regulations the plaintiff had a right to discharge his loan either by paying it off in cash or by surrendering the rice in accordance with the terms and subject to the provisions of said contract and regulations, and when the note became due, plaintiff elected the latter method of settlement. In that connection the contract and regulations provided that if the settlement value of the rice at the time of delivery should exceed the amount of the loan, the excess would be paid over to the borrower, but further provided that if such settlement value should be less than the amount of the loan, then the borrower would be liable for the deficiency plus interest, and that such deficiency might be offset against any sums coming due the borrower from the defendant or the Government. The settlement value of the rice was to be computed on the basis of official lot inspection certificates, dated subsequent to February 15, 1955, and it was the primary duty of the borrower to furnish such certificates; the regulations provided, however, that should a borrower fail to furnish such a certificate, the defendant would have the right to have the rice inspected and graded and charge the cost of such inspection and grading to the borrower.

4. The loan to the plaintiff was based upon a sample inspection certificate showing that the rice was U.S. No. 2 Zenith rough rice, with a milling yield of 39%-64%, and with a moisture content of 12.2%; said certificate expressly recited that it applied only to the sample described. As indicated, the plaintiff elected to discharge his loan by surrendering his rice, but he failed to furnish the defendant with an official lot inspection certificate, and on March 1, 1955, when the defendant took the rice over, it caused a sample to be taken by a Mr. Hebert, a sampler for the Agricultural Marketing Service of the United States Department of Agriculture; when that sample was graded, it was found that the lot of rice was U.S. No. 2 Zenith rough rice, with a milling yield of 39%-61% on account of "seed and heat-damaged kernels," and with a moisture content of 12%. That grade produced the deficiency here in question; demand was made on the plaintiff to pay the deficiency, which he declined to do; and, as stated, when plaintiff borrowed from the defendant on his 1955 crop of rice, the amount of the deficiency was withheld from his loan. This suit followed.

5. In support of his action the plaintiff makes two contentions: First, that the rice was not fairly and properly sampled by Hebert, and that the grade obtained from that sample did not represent the true quality of the rice; and, second, that in any event no deficiency could be lawfully assessed against him in view of the provisions of 7 U.S.C.A. § 1425, which statute reads as follows:

    "No producer shall be personally liable for any
  deficiency arising from the sale of the collateral
  securing any loan made under authority of this Act
  unless such loan was obtained through fraudulent
  representations by the producer. This provision shall
  not, however, be construed to prevent the Commodity
  Credit Corporation or the Secretary from requiring
  producers to assume liability for deficiencies in the
  grade, quality, or quantity of commodities stored on
  the farm or delivered by them, for failure properly
  to care for and preserve commodities, or for failure
  or refusal to deliver commodities in accordance with
  the requirements of the program."

The defendant denies the validity of both contentions.

6. Without stopping to go into detail, the Court finds that the plaintiff's rice was "core sampled" by Mr. Hebert on March 1, 1955, and that this method did not produce a fair and representative sample of the rice; the Court further finds, however, that the plaintiff was not prejudiced by the method of sampling just mentioned, but was in fact benefited thereby since the grade and quality of the sample so obtained were higher than would have been the case had the rice been properly sampled. In making this finding the Court credits the testimony of Mr. Lee Regan, a qualified grader of the Agricultural Marketing Service, who testified as an expert, and whose qualifications were admitted by the plaintiff. No complaint is made by the plaintiff as to the grading of Mr. Hebert's sample.

Conclusions of Law

1. The Court has jurisdiction of this action and of the parties thereto.

2. Since the Court has found that the plaintiff was not prejudiced but was in fact benefitted by the method of sampling employed by Mr. Hebert, the former is not entitled to any relief upon the theory that his rice was unfairly or improperly sampled.

3. For the reasons stated in the following memorandum opinion the Court concludes that the assessment of the deficiency here involved was not precluded by 7 U.S.C.A. ยง 1425, and that the regulations requiring a producer to assume personal liability for deficiencies in quality of rice stored in a warehouse on a "modified ...


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