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Eastern Produce Co. v. Benson

decided: May 12, 1960.

EASTERN PRODUCE CO., INC., AND CHARLES TAXIN, PETITIONERS,
v.
EZRA TAFT BENSON, SECRETARY OF AGRICULTURE OF THE UNITED STATES, RESPONDENT.



Author: Staley

Before GOODRICH, STALEY and FORMAN, Circuit Judges.

By STALEY, Circuit Judge.

This action was instituted to review and determine the validity of an order made by the Judicial Officer of the United States Department of Agriculture*fn1 issued under the Perishable Agricultural Commodities Act, 1930, as amended, ("Commodities Act"), 46 Stat. 531, 7 U.S.C.A. § 499a et seq. Two actions have been combined in this administrative proceeding: (1) an action initiated by a complaint against Eastern Produce Co., Inc. ("Eastern"), and (2) an action initiated by a Notice to Show Cause why a license under the Commodities Act should not be denied to Charles Taxin, the president, treasurer, and sole or principal stockholder of Eastern.

In view of the concession by the petitioners that they committed some of the violations of the Commodities Act with which they were charged, the only issue remaining on this appeal is whether the license suspensions ordered by the Secretary of Agriculture were warranted in law.

The facts found by the Judicial Officer, which are amply supported by the record, may be summarized as follows: On January 28, 1958, Taxin, who had held a license under the Commodities Act from December 13, 1950, until December 13, 1957, applied to the Regulatory Branch, Fruit and Vegetable Division, Agricultural Marketing Service, United States Department of Agriculture for a license. His previous license to act as a commission merchant, dealer, or broker to engage in the business of handling fresh and frozen fruits and vegetables in interstate and foreign commerce had lapsed because the annual fee had not been paid. Within a month, on February 25, 1958, the Chief, Regulatory Branch, Fruit and Vegetable Division, filed the Notice to Show Cause why a license should not be denied to Taxin because of past actions of the character prohibited by the Commodities Act while acting as an officer of Eastern. Three days thereafter a disciplinary proceeding was instituted against Eastern, alleging violations of Section 2 of the Commodities Act in that Eastern failed or refused truly and correctly to account and make full payment promptly for numerous shipments of perishable agricultural commodities received in interstate commerce on consignment or joint account. Eastern was the holder of license No. 136579, issued to it on October 24, 1951, and successively renewed on each anniversary date thereafter.

A hearing was held in June, 1958, before a hearing examiner of the Department of Agriculture, at which all parties were represented by counsel. Briefs were thereafter filed, and following issuance of the hearing examiner's report and recommendations on February 17, 1959, exceptions were taken. The hearing examiner found against both Eastern and Taxin and recommended a 75-day license suspension as to Eastern and denial of Taxin's application until the expiration of the same period. The Judicial Officer heard oral argument on May 6, 1959, and thereafter filed a detailed decision and an order which suspended Eastern's license for forty-five days and withheld issuance of Taxin's license until the expiration of this period of suspension.*fn2

The Judicial Officer found that from January through May, 1956, Eastern received 53 shipments of perishable agricultural commodities on joint account in interstate commerce and failed to account truly and correctly therefor, underpaying four joint account partners. He additionally found that during the same period Eastern received 20 shipments of perishable agricultural commodities on consignment for which it failed to account truly and correctly and underpaid the consignors. The false accountings and underpayments made by Eastern were found to have been caused by Taxin.

Although conceding that they committed some of the violations of the Commodities Act with which they are charged, petitioners vigorously contend that the sanctions imposed are unlawful inasmuch as the violations were not of such a nature as would warrant their imposition and that before the suspension was ordered full corrective measures had been instituted. In support of the first proposition, petitioners introduced evidence to show that the underpayments made in the 44 transactions with Peninsula Seafood and Produce Company, Inc., which underpayments were admitted, resulted from an attempt by Eastern to collect a claim of $4,000 it allegedly held against Jody Rhodes, president and part owner of Peninsula. The debt was asserted to have arisen as the result of his failure to pay his share of a loss sustained in a joint account transaction involving a tomato crop in Fort Pierce, Florida. To say the least, the evidence regarding this explanation and the entire series of transactions with Peninsula and Rhodes was highly conflicting and dependent upon the credibility of the witnesses. The Judicial Officer thoroughly considered each and every aspect of the evidence and chose, in the main, to disbelieve the petitioners' explanation.

With respect to the remaining transactions, petitioners contended that the false accountings and underpayments represented alleged anticipated clips*fn3 to be made by Eastern's customers from the purchase price of the produce sold by Eastern on behalf of the shippers. Once again the evidence presented was conflicting, and the Judicial Officer chose to disbelieve some of that proffered by petitioners.*fn4 In this regard, it is particularly significant that the accountings of the sales rendered to these consignors and joint venturers stated lower unit sales prices and gross proceeds than the actual sales prices and gross proceeds for which the produce was sold to Eastern's customers. The shippers were paid the lesser amounts shown on the accountings which never indicated that deductions had been made, either for anticipated clips or as recoupment for tomato transaction losses.

The Judicial Officer in considering the proper remedy for these violations recognized that, despite the broad authority seemingly granted to the Secretary in 7 U.S.C. § 499h(a), the standard to be applied with regard to suspension of licenses was that set forth in Section 9(b) of the Administrative Procedure Act, 5 U.S.C. § 1008(b). That section provides:

"* * * Except in cases of willfulness * * * no * * * suspension * * * of any license shall be lawful unless, prior to the institution of agency proceedings therefor, facts or conduct which may warrant such action shall have been called to the attention of the licensee by the agency in writing and the licensee shall have been accorded opportunity to demonstrate or achieve compliance with all lawful requirements. * * *"

The Judicial Officer made a specific finding of "willfulness" which if supported by the evidence would warrant imposition of the license suspension.

Petitioners, as we have heretofore noted, urge upon this court two grounds for voiding the orders of the Judicial Officer, namely, (1) that inasmuch as full corrective measures had been instituted prior to the time suspension was ordered and no willfulness was shown by the evidence, the orders were arbitrary, capricious and contrary to law, and (2) that the violations were not of such nature as would legally warrant punitive sanctions.

It is clear that where willfulness can be shown on the part of individuals violating valid regulations, license suspension is authorized without resort on the part of the agency to notice and opportunity for compliance. 5 U.S.C. § 1008(b). Petitioners assert that the record does not support a finding of willfulness and that the Judicial Officer's conclusion to this effect is inconsistent with his finding of neglect on the part of the petitioners. A fair reading of the Decision and Order rendered by the Judicial Officer indicates that this argument is in great measure semantical. The Decision states: "At the least, underpayment to the shippers involved herein, including Peninsula, in many transactions over a five-month period demonstrates such neglect of the requirements of the act as to constitute willful violations thereof. We conclude that Eastern's willful failures to account truly and correctly and to make full payment promptly to shippers in the many transactions involved herein constitute repeated and flagrant violations of Section 2 of the act." This is not equation of neglect and willfulness but, on the contrary, a finding, although perhaps unartfully phrased, that notorious neglect of explicit provisions of law may be evidence ...


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