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Cargill, Inc. v. Commodity Credit Corp.

decided: February 23, 1960.


Author: Friendly

Before LUMBARD, Chief Judge, and HAND and FRIENDLY, Circuit Judges.

FRIENDLY, Circuit Judge.

Commodity Credit Corporation, "an agency and instrumentality of the United States, within the Department of Agriculture" created by the Act of June 29, 1948, ch. 704, 62 Stat. 1070, 15 U.S.C.A. § 714, appeals from a judgment of the District Court for the Northern District of New York in an action brought against Commodity by Cargill, Inc., a warehouseman. The judgment upheld Cargill's claim for charges totalling $552,188.33 for storing Commodity's grain, and dismissed Commodity's counterclaim for $1,203,581.70 for damages to certain of the grain.*fn1 The judgment dismissing the counterclaim was entered pursuant to the verdict of a jury to which the District Judge had submitted it over Commodity's objection that § 4(c) of Commodity's Charter Act, 15 U.S.C.A. § 714b(c), required that the entire cause be tried by the judge alone. After the verdict against Commodity on its counterclaim for damages, Judge Brennan tried Cargill's claim for the storage charges and rendered judgment for the plaintiff. This totaled $739,142.65, including interest to Septmber 15, 1958, plus costs.

The view which we take makes it unnecessary to deal with many of the issues argued before us.We hold that it was error for the District Judge to have ordered a jury trial on Commodity's counterclaim, that the error cannot be disregarded as harmless, and that the cause must therefore be remanded for findings and conclusions by the District Judge, independent of the jury's verdict, on the counterclaim as well as on the claim, pursuant to Fed.R.Civ.Proc. 52 (a), 28 U.S.C. Since the District Judge may have to consider the burden of proof and will have to determine the sufficiency of a notice by Cargill described below, we shall state our views on those issues.

The case arises from Cargill's storage, at Norris City, Illinois, and Albany, New York, of large amounts of corn for Commodity in implementation of the government's price support program. Cargill sued to collect charges with respect to this storage as well as for the storage of wheat and barley at Buffalo. Commodity counterclaimed for damages to the corn at Norris City and Albany. It denied liability for the charges at these two locations because of the negligent storage alleged in its counterclaim; it did not dispute liability for the charges at Buffalo except as recovery on the counterclaim might be set off against these. The grain was stored under a standard form known as the Uniform Grain Storage Agreement; this was negotiated periodically between Commodity and warehousemen whose facilities it used in its storage program.

Cargill's facility at Norris City was not a conventional grain elevator but consisted of 15 steel tanks formerly used for oil and gasoline. In the summer of 1949 Cargill agreed that it would adapt these tanks for the storage of 5,000,000 bushels of corn. The contract was the 1946 form of the Uniform Grain Storage Agreement. A further agreement was later executed in the 1950 form, but so far as Norris City is concerned, the differences between the forms are not material, since the Norris City grain was at all times stored "identity preserved," and Cargill's obligation admittedly did not go beyond that of due care. The delivery of the corn began September 29, 1949 and continued to June 28, 1950. As early as June 9, 1950, it was found that some of the corn had deteriorated; loading out began on that date and continued during the next two years. Commodity asserted that Cargill failed to supply adequate equipment and personnel, failed to correct or avoid machinery breakdowns, bad roads and leaky roofs, and gave tardy notices of spoilage. Damages were alleged to approximate $800,000.

Cargill's Albany facility was a large conventional grain elevator having a capacity of 13,000,000 bushels. All of Commodity's corn at Albany was stored under the 1950 Uniform Grain Storage Agreement. This contained provisions for the commingling of Commodity's corn with other corn being stored there. Cargill does not dispute that Cargill's liability for the condition of Commodity's corn at Albany, which was stored commingled, was initially that of an insurer; as Cargill's counsel stated at the trial, "under commingled storage the warehouseman must deliver out the grade that was received in." However, the Agreement contained a provision, as to which more must be said hereafter, whereby, on giving notice after inspection, the warehouseman reduces his responsibility from that time forward to one of due care. Some 3,000,000 bushels of Commodity's corn were stored in Albany, beginning in May, 1950. By the summer of 1951 signs of deterioration appeared; Cargill claims it gave the critical notice on August 17. When Commodity loaded out the corn in November, some of it had greatly deteriorated. Commodity denied that Cargill's notice complied with the Agreement and claimed that even if it did, the corn had already deteriorated and that Cargill did not exercise due care after the notice. Damages were claimed to be some $400,000.

Section 4(c) of the Commodity Credit Corporation Charter Act, 15 U.S.C.A. § 714b(c), provides that "All suits against the Corporation shall be tried by the court without a jury." Nevertheless Cargill demanded and the District Judge, over Commodity's objection, granted a jury trial on Commodity's counterclaim. He directed also that the counterclaim be first tried and that the evidence taken upon the jury trial of the counterclaim be considered upon the subsequent trial of Cargill's claim by the judge.

Judge Brennan submitted to the jury two questions as to Norris City and four as to Albany. The first question as to Norris City was whether Commodity had "established that the shrinkage in quantity or the deficiency in quality of Commodity Credit Corp. corn stored at Norris City resulted from the failure of Cargill to exercise due care in connection with the storage thereof?" The jury answered this in the negative; accordingly it did not answer the second question relating to damages. With respect to Albany the jury answered in the affirmative a question whether Cargill gave "notice to Commodity Credit Corp. according to the terms of the Uniform Grain Storage Agreement that the corn stored for the account of Commodity Credit Corp. at Albany was in danger of going out of condition," and in the negative a question whether Commodity had "established that the shrinkage in quantity or the deficiency in quality of Commodity Credit Corp. corn stored at Albany resulted from the failure of Cargill to exercise due care in connection with the storage thereof"; the jury found it unnecessary to answer the other questions, namely, as to waiver of any deficiency in the notice and as to the amount of damages. After the jury's verdict Judge Brennan proceeded to try Cargill's claim for storage charges; this, of course, involved broadly the same issues as Commodity's counterclaim. In a Memorandum-Decision the judge found "that the evidence showed the performance of the contract by Cargill as to the unpaid storage charges at Norris City." As to Albany he stated that "The jury found in the trial of the counter-claim that such a notice was given by Cargill as to the Albany corn" and "The court would agree and makes a similar finding." He noted that Cargill had "offered evidence that at the time of the notice, it had the ability to load out the required grade and quality called for by the storage documents" and said "This evidence is not disputed except by inference." As to the post-notice period he said that "No specific evidence of negligence in the performance or non-performance of the warehousing services was offered," and that "the finding that Cargill has established its cause of action for the Albany storage charges is justified if not required by the evidence." He directed the entry of judgment granting Cargill's claim against Commodity for the storage charges, with interest at the respective legal rates of Illinois and New York, and dismissing Commodity's counterclaim. From that judgment Commodity has appealed.

(1) It was error to grant a jury trial on Commodity's counterclaim. There was no dispute that § 4(c) of the Charter Act ruled out a jury trial on Cargill's claim against Commodity for storage charges. We hold it also ruled out a jury trial on Commodity's counterclaim. The question is solely one of statutory interpretation, not of constitutionality. McElrath v. United States, 1880, 102 U.S. 426, 440, 26 L. Ed. 189, established that suits against the government, "whether reference be had to the claimant's demand or to the defense, or to any set-off, or counterclaim which the government may assert, are not controlled by the Seventh Amendment"; and we do not understand appellee to claim there is any constitutional barrier to Congress' conditioning its waiver of immunity as to Commodity, "an agency or instrumentality of the United States," on requiring both claim and counterclaim to be tried to a judge. In any event we find there is none. See Maricopa County, Arizona v. Valley National Bank, 1943, 318 U.S. 357, 362, 63 S. Ct. 587, 87 L. Ed. 834; Rainwater v. United States, 1958, 356 U.S. 590, 78 S. Ct. 946, 2 L. Ed. 2d 996.

We find no support in the language of the Charter Act for the view, urged by Cargill and upheld by the District Court, that, in a suit against Commodity, although the claim must be tried to the judge, a counterclaim may be tried to a jury. The statute speaks in terms of "suits," not of claims. Commodity's counterclaim was part of the "suit" - indeed Fed.R.Civ.Proc. 13(a) required that it be asserted therein. That Cargill would have been entitled to a jury trial if Commodity had sued it affords no basis for contrary inference; for Congress lacked constitutional power to provide otherwise. And when we look to the reason of the statute, the conclusion is the same. For Congress could well have foreseen that often claim and counterclaim would present the same issues as was the case here, and that a jury verdict on the counterclaim, if that were first tried, would impair the judge's ability to act independently on the claim as Congress intended him to do.

If language and reason left any basis for doubt, history would remove it. The Committee reports on the Charter Act of 1948 state that "the provision requiring all suits against the Corporation to be tried by the Court without a jury is similar to the procedure followed in the Court of Claims and in the Federal District Courts in claims against the United States authorized by the Tucker Act and the Federal Tort Claims Act which are the statutes giving general jurisdiction to the Federal courts in claims against the United States." 80th Cong., 2d Sess., S.Rep. No. 1022, p. 11, H.R.Rep. No. 1790, p. 10. The Act of March 3, 1863, ch. 92, § 3, 12 Stat. 765, 28 U.S.C. § 2508, provided that the Court of Claims "in addition to the jurisdiction now conferred by law, shall also have jurisdiction of all set-offs, counterclaims, claims for damages, whether liquidated or unliquidated, or other demands whatsoever, on the part of the Government against any person making any claim against the Government in said court; and upon the trial of any such cause it shall hear and determine such claim or demand both for and against the Government and claimant." In 1880, as we have seen, McElrath settled that this denial of jury trial on counterclaims as well as claims did not offend the Seventh Amendment. Section 1 of the Tucker Act of 1887, ch. 359, 24 Stat. 505, continued the jurisdiction of the Court of Claims provided in the 1863 Act, although omitting the clause after the semi-colon; Section 2 gave the District Courts concurrent jurisdiction "as to all matters named in the preceding section" up to specified amounts, and provided: "All causes brought and tried under the provisions of this act shall be tried by the court without a jury." 28 U.S.C. §§ 1346, 2401, 2402. In the light of this language and the Supreme Court's teaching that "The substantial rights of claimants are to be governed alike whether suit is brought in the Court of Claims or the District Court," Bates Manufacturing Co. v. United States, 1938, 303 U.S. 567, 570, 58 S. Ct. 694, 695, 82 L. Ed. 1020, see United States v. Sherwood, 1941, 312 U.S. 584, 591, 61 S. Ct. 767, 85 L. Ed. 1058, we think that when the Charter Act was passed in 1948, it was plain that a counterclaim in a suit in the District Court under the Tucker Act must be tried to the judge, as was later held in Terminal Warehouse of New Jersey v. United States, D.C.D.N.J.1950, 91 F.Supp. 327; and the reports show that Congress must have intended this also in suits against Commodity.

We see no force in Cargill's attempt to minimize this history on the ground that the Committee reports antedated by a few months the recodification of the provisions against jury trial of the Tucker Act and the Federal Tort Claims Act, 60 Stat. 843, into 28 U.S.C. § 2402 by the Act of June 25, 1948, ch. 646, 62 Stat. 869, 971. For, apart from Commodity's answer that "the Judicial Code did not spring full-blown in June, 1948," the inference as to Congressional purpose is the same whether the reference in the Committee reports was to the provisions on jury trial before or after the recodification. Neither does Cargill obtain the support that it seeks from the Committee references to the Federal Tort Claims Act. For neither of the cases cited by Cargill, United States v. Yellow Cab Co., 1951, 340 U.S. 543, 71 S. Ct. 399, 95 L. Ed. 523, and United States v. Rosati, D.C.D.N.J.1951, 97 F.Supp. 747, decided or even suggested that the Tort Claims Act permits jury trial of a counterclaim by the United States, and Professor Moore has written persuasively to the contrary, 5 Federal Practice PP. 38.31(2), at 235-236.

The District Judge's conclusion that Cargill was entitled to a jury trial on Commodity's counterclaim was founded primarily on United States v. Pfitsch, 1921, 256 U.S. 547, 41 S. Ct. 569, 65 L. Ed. 1084. There the question was not, as here, whether a statute prohibiting a jury trial in a suit against the United States comprehended a counterclaim by the United States, but whether a plaintiff might have a jury trial against the United States under a section of a statute that was silent on the subject. The Court held he could because the section in question conferred jurisdiction on the District Court alone, whereas other sections conferred jurisdiction on the Court of Claims and concurrently on the District Court under the Tucker Act and the legislative history ...

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