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UNITED STATES v. CARROLL

December 14, 1962

UNITED STATES OF AMERICA, PLAINTIFF,
v.
ROBERT B. CARROLL, JR., DEFENDANT.



The opinion of the court was delivered by: John E. Miller, Chief Justice.

On July 17, 1961, the United States filed its complaint containing four counts. In Count I plaintiff alleged that during the years 1956 through 1959 it conducted a program of soil conservation known as the Agricultural Conservation Program, pursuant to which payments and grants of aid were made to farmers carrying out certain prescribed soil conservation practices; that the program was conducted by the Department of Agriculture pursuant to the Soil Conservation and Domestic Allotment Act, as amended, and the regulations promulgated in connection therewith, which provides for payments or grants of other aid to farmers to assist them in carrying out on their farms prescribed soil conservation practices; empowers the Secretary of Agriculture to make available conservation materials consisting of seed, fertilizer, etc., to agricultural producers and to make payment therefor to persons (hereinafter referred to as vendors) who fill purchase orders for approved conservation materials in accordance with the provisions of the regulations.

Plaintiff further alleged that the defendant, Robert B. Carroll, Jr., was at all times pertinent to this action the owner of a business in Murfreesboro, Arkansas, operated under the firm name of Carroll Building and Appliance Company; that the defendant entered into written agreements with the plaintiff on Forms ACP-230, by the terms of which said defendant, as a vendor, agreed to furnish and to be paid for approved conservation materials and/or services to farmers to be utilized under the Agricultural Conservation Program in Pike and Howard Counties, Arkansas; that the defendant made claims upon and received payment from the plaintiff for the alleged delivery on purchase orders of substantial quantities of approved conservation materials to farmers during the years in question; that such payments made by plaintiff to defendant included $8,138.61, which defendant was not entitled to receive from plaintiff in that approved conservation materials in such amount had not in fact been delivered by defendant to said farmers in accordance with the requirements of the program; that said amount was erroneously paid to defendant by plaintiff on the basis of plaintiff's reliance upon material false representations made by defendant to plaintiff as to quality and quantity of approved conservation materials delivered by defendant to said farmers for use under the said program.

In Count II the plaintiff alleged as an alternative to the recovery sought under Count I that the defendant breached the terms of his contract with the plaintiff in that under the terms of said agreement the defendant was entitled to payment from the plaintiff only for approved materials and services actually furnished by him to farmers for use in the said program; and that he breached the contract by claiming from the plaintiff and receiving payment in the amount of $8,138.61, representing the Government's cost-share of quantities of seed and other conservation materials which did not conform to the requirements of the regulations for which seed or other materials were not in fact delivered by the defendant to the said farmers for use under the programs.

In Count III the plaintiff alleged in addition to the first two counts that the agreements provided that where a vendor willfully misuses a purchase order and it is so determined after a hearing by the State Committee, such vendor will be liable for liquidated damages in addition to other remedies available to the plaintiff, which liquidated damages under the terms of the agreement consist of the going commercial prices of the total quantity of all materials or services authorized to be furnished upon each purchase order so determined to have been misused; that the State Committee determined that a number of purchase orders submitted by the defendant to the plaintiff for payment under the Agricultural Conservation Programs for the years in question were willfully misused by the defendant as vendor in that the seed or other conservation materials represented as having been furnished by the vendor to farmers had not, in fact, been so furnished, or that the quality of such materials furnished did not conform to the requirements of the program or the regulations; and that the defendant was given an opportunity to appear and did appear and testify before the State Committee, at which hearing such determination was made, and that the going commercial price of the total quantity of the material or service authorized to be furnished on the purchase orders so misused by the defendant as vendor amounted to $7,295.37.

In Count IV the plaintiff sued the defendant as a farmer for an additional sum of $3,941.48, which count was disposed of by summary judgment entered in favor of the plaintiff on April 9, 1962. See, United States v. Robert B. Carroll, Jr., (1962) W.D.Ark., 203 F. Supp. 423.

On August 2, 1961, the defendant filed his answer and counterclaim which was amended on May 17, 1962. In his answer the defendant admitted making the claims in question upon and receiving payments from the plaintiff in the amount of $8,138.61, but he denied failing to deliver on purchase orders the quantities in question of approved conservation materials to the farmers. He alleged, to the contrary, that he did deliver the approved materials in accordance with the requirements of the program and was entitled to the sum in question. He denied making material false representations as alleged by the plaintiff, and that if there were substitutions of seed and/or fertilizers in the filling of the purchase orders, that in no case did such substitution, if any, result in the delivery of material, service or conservation materials of an inferior quality, nor did such substitutions, if any, at any time result in delivery of less than the quantity authorized by the respective purchase orders, and that substitutions of such materials, if any, made in the filling of such purchase orders as contemplated by Count I of the complaint were made with the full prior knowledge, consent and acquiescence of the ASC Agent for Howard and Pike Counties, Arkansas.

In answer to Count II of the complaint, the defendant denied that he in anywise breached the terms of the agreement between him and the plaintiff, and realleged and reaffirmed his amended answer to Count I of the complaint.

In his answer to Count III the defendant denied that he willfully misused any purchase orders; that the State Committee had basis for any such conclusions; that he made claim or received payment for any materials not furnished; that the quality of the materials furnished did not conform to the requirements of the program or regulations; and realleged and reaffirmed the facts set forth in his amended answer to Count I of the complaint.

In numbered paragraphs III to VI in answer to Count III the defendant also alleged:

"III.

    "Defendant further alleges that the only evidence
  before the State Committee at any hearing or hearings
  to which your defendant was invited and in which he
  participated, and the only legal evidence said
  Committee had before it as a basis of its
  determination and decision, if any, was:
      "(a) Copies of the purchase orders filled by
          defendants as vendor.
      "(b) An audit by plaintiff summarizing the data
          shown by the purchase orders referred to in
          Subdivision (a) of this numbered paragraph
          next above.
      "(c) Invoices issued by this defendant's
          suppliers to defendant which reflected
          acquisition by defendant of some of the seeds
          and fertilizers used by defendant, as a
          vendor, to fill the purchase orders in
          question.
      "(e) The testimony of the defendant that he did
          not have and could not produce written
          invoices issued to him by his suppliers
          evidencing the acquisition by defendant of
          quantities of seed and fertilizers equal to
          the total quantity there reflected by the
          purchase orders in question.
    "That if any further evidence than that set forth
  in subdivisions (a) to (e) inclusive of this numbered
  paragraph was presented to the said State Committee
  in connection with the allegations found in Count
  Three of Plaintiff's Complaint on file herein, then
  such evidence was adduced and/or produced without the
  knowledge of defendant, outside the scope of the
  hearing to which defendant was invited, and thus in
  violation of defendant's right to be confronted by
  his accusers, which right is guaranteed this
  defendant by Amendment Number Six of the United
  States Constitution, and his further right to cross
  examine those witnesses from which such evidence may
  have been adduced, or those by whom such evidence may
  have been produced, whichever the case may have been.

"IV.

    "The contract and agreement between plaintiff and
  defendant to participate in the furnishing of
  conservations materials and services under the
  Purchase Order Plan (attached as exhibits to
  Plaintiff's Complaint) did not and do not obligate
  nor require this defendant to maintain adequate
  records to permit verification of purchases and
  acquisitions by this defendant from his suppliers of
  the seeds, fertilizers and conservation materials
  used and to be used by defendant in filling the
  purchase orders and providing the services in
  question. On the contrary, such contracts and
  agreements required this defendant to `maintain
  adequate records to permit verification of purchase
  order transactions' only with the farmers holding
  such purchase orders.

"V.

    "The determination by the State Committee, if any,
  of the matters upon which plaintiff's claim asserted
  in Count Three of its complaint is based, was made
  solely upon the fact that defendant could not make
  available invoices or other records showing that he
  owned or acquired fertilizers, seeds and conservation
  materials in quantities respectively equal to the
  total quantities thereof delivered by defendant to
  the farmers shown on the purchase orders in question,
  unless the State Committee in fact considered
  evidence and testimony offered at the hearing by said
  State Committee outside the presence and hearing of
  this defendant, the possibility of which has been
  heretofore pointed out, in which event such evidence
  and/or testimony was not legally before said State
  Committee, and therefore could not be considered as
  legal testimony upon which such State Committee could
  make its determination and decision.

"VI.

    "Plaintiff's causes of action asserted in Counts
  One, Two and Three of its complaint are disputes
  involving questions arising under contracts entered
  into by the United States and the defendant, and the
  decision and determination referred to in Count Three
  of Plaintiff's Complaint, and upon which plaintiff's
  cause of action asserted in such Count Three was
  based, was a decision and determination of the State

  Committee of the State of Arkansas (under the ASC
  program), which Committee was a duly authorized Board
  of plaintiff; and such decision and determination of
  said State Committee was not supported by substantial
  evidence, within the meaning and intendment of
  41 U.S.C. § 321."

In his amended counterclaim the defendant alleged that he was entitled to payment by the plaintiff of the sum of $1,069.00 for the amount of approved soil conservation materials delivered to farmers upon proper and lawful purchase orders filled during the year 1959, for which the plaintiff has refused to grant payment.

However, when the present case was tried before the court, the defendant did not introduce evidence in order to sustain his burden of proof of the counterclaim, and therefore the court deems the counterclaim as having been abandoned by him.

On April 17, 1962, the plaintiff filed its motion for summary judgment on Count III of its complaint. On June 19, 1962, the plaintiff's motion was overruled by order of this court for the reason that the court found that there existed a genuine issue as to material facts.

On October 24 and 25, 1962, the case was tried to the court on the merits as to Counts I, II and III of the complaint. At the conclusion of the presentation of the testimony, the case was taken under advisement by the court, subject to submission by the parties of briefs in support of their respective contentions. The briefs have been received, and the court, having considered the pleadings, the testimony adduced at the trial, the exhibits and briefs of counsel, now makes and files herein its findings of fact and conclusions of law, separately stated.

FINDINGS OF FACT

1.

The defendant, Robert B. Carroll, Jr., d/b/a Carroll Building and Appliance Company, is and has been an adult resident of Murfreesboro, Pike County, Arkansas, at all times pertinent to the present action.

The defendant has been the sole owner of his business for a number of years, and he has engaged in the sale of building materials, hardware, gas and electrical appliances, butane, and small farm supplies, such as seeds and fertilizers. Besides carrying on a business in which merchandise is sold on a cash or credit basis, the defendant, following the universal custom of general mercantile stores in Pike and Howard Counties, has also engaged in trading and swapping one material for another or accepting labor or equipment for material, and on these ...


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