Petition — Brumley Estate v. Iowa Beef Processors, Inc.

Offic Supreme Court, U

ki LED

me

In The

Supreme Court

of the Muited States

October Term, 1983

BRUMLEY EsTATeE, et al.,

Petitioners,

Us.

Iowa Beer Processors, INC.,

Respondent.

On Petition For Writ of Certiorari

To The United States Court of Appeals

For The Fifth Circuit

Mike McKoot., JR.

CHARLES W. CUNNINGHAM,

Counsel for Petitioners,

Of Counsel:

JOHNSON & SWANSON

4700 InterFirst Two :

Dallas, Texas 75270

(214) 653-2031

SOUTHWESTERN | AW PRESS — DALILAS TFXAS 75208 — (214) 748-422

QUESTION PRESENTED FOR REVIEW

Whether the Fifth Circuit erred in determining that

Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979), gave

the District Court complete discretion to refuse to apply

offensively the doctrine of collateral estoppel to preclude

litigation of issues necessarily determined in a prior

action.

PARTIES BELOW

Petitioners. Petitioners, which were Plaintiffs and

Appellants below (hereinafter “Petitioners”), are: B & W

Cattle Company; Brumley Estate; Carter-Kirchoff Feed

Yard, Inc.; Cattle Town, Inc.; Excalibur Cattle Company,

Inc.; Josephine Freimel, Independent Executrix of the

Estate of Herbert Freimel; Ganado, Ltd.; Hereford Feed

Yards, Inc.; Charles R. Hoover; Kelton-Carter, Inc.; Pre

Feeders, Inc.; Proctor & Hays; Southwest Feed Yards,

Inc.; T4 Cattle Company, Inc.; M. D. Weber; and Merlin

Weber.

Respondent. Respondent, which was Defendant

and Appellee below, is lowa Beef Processors, Inc. (here

inafter “IBP”).

ll

TABLE OF CONTENTS

Pages

QUESTIONS PRESENTED FOR REVIEW .......... i

Teen lk a cccwtccccccces i

|. iv, Vv

PROCEEDING BELOW AND JURISDICTION ..... 1

STATEMENT OF THE CASE ........................ 2

REASONS FOR GRANTING THE WRIT............ 4

EE 4

ESS 1 13

CERTIFICATE OF SERVICE ........................ 14

APPENDIX

EEE A-l

APPENDIX 2......... eee was sseccces cc A-22

APPENDIX 3.............. DUMEUM Needs tsccscvcrescs A-27

iv

Table of Authorities

Cases: Page

Adams v. United States, 287 F.2d 701

et RR pe nin Go ea 7

Aerojet-General Corp. v. Askew, 511 F.2d 710,

(5th Cir 1975), cert. denied, 423 U.S. 908 (1975) ..... 7

Kelliher v. Stone & Webster, Inc., 75 F.2d 331

Pee I 0s cob Pies Suh acacduness dene ceckess> 7

Lubbock Feed Lots, Inc. v. lowa Beef Processors,

Inc., 630 F.2d 250 (5th Cir. 1980) .. ............ passim

Parklane Hosiery Co. v. Shore, 438 U.S. 322,

SP SIPUUIES » <0 6s 50s cae obakacenneeseetss passim

Peckham v. Family Loan Co., 196 F.2d 838,

Is 0.05500 shake cdupeees OeunGstcgseuets 6

Pye v. Department of Transportation, 513

GREE A BOE ot. duce davies ccdoccaevecacuseas 7

Rufenacht v. lowa Beef Processors, Inc., 656 F.2d

198 (5th Cir. 1981), cert. denied,

GE ae ee EE hs he ide iries cb hccdcncncdccenctescns 12

Sealfon v. United States, 332 U.S. 575,

ep I I a5 dco deco eoke bend Los cnsibecweven 6-7

Syms v. McRitchie, 187 F.2d 915 (5th Cir. 1951)....... 7

James Talcott, Inc. v. Allagabad Bank, Ltd.,

444 F.2d 451 (5th Cir. 1970), cert. denied,

SE CITED os ci dadovadarinnstidsyrin essa 4

Valley View Cattle Co. v. lowa Beef Processors, Inc.,

548 F.2d 1219 (5th Cir. 1976), cert. denied,

GE ie TEE a bn be Sac Cann Baek st hehe cans cakes 12

Wheat v. Texas Land & Mortgage Co., 153 F.2d

926, 928 (5th Cir. 1945),

cert. denied, 328 U.S. 837 (1946)..................... 6

,

v

Table of Authorities (Continued)

Cases: Page

Miscellaneous

Freeman on Judgments (5th ed. 1925) ............... 6,7

1B J. Moore & T. Currier, Moore’s Federal

Eg RR Slee er 6,7

ee Gal UNE, CRUDE snes ncvcescccatdcenced 6,7

No.

In The

Supreme Court

of the Muited Stites

October Term, 1983

BRUMLEY EsTATE, et al.,

Petitioners,

Us.

Iowa Beer Processors, INc.,

Respondent.

On Petition For Writ of Certiorari

To The United States Court of Appeals

For The Fifth Circuit

I. PROCEEDING BELOW AND JURISDICTION

Opinion Below. The opinion of the Court of Ap

peals for the Fifth Circuit is printed at 704 F.2d 1351 (5th

Cir. 1983). The opinion was later modified. A copy of the,

complete opinion is attached hereto as an appendix.

Date of Decision. Both the Order of the Court of

Appeals for the Fifth Circuit denying rehearing and its

judgment were entered on September 30, 1983.

2

Supreme Court Jurisdiction. The jurisdiction of

this Court is invoked pursuant to 28 U.S.C. §1254(1).

Federal Jurisdiction. IBP removed the present

action to the District Court for the Northern District of

Texas, Lubbock Division (hereinafter, the ‘District

Court”) on the basis of diversity of citizenship.

II. STATEMENT OF THE CASE

Background. The underlying facts of the case took

place nearly a decade ago. The precipitating event was

the declaration of bankruptcy in early 1974 of James

Louie Heller (“Heller”), a cattle buyer operating princi-

pally in the South Plains of Texas. At the time of his

bankruptcy, Heller owed more than $3,000,000 to the cat-

tle sellers from whom he had purchased cattle during the

last three weeks of his dealings.

In January 1975, two of Heller’s vendors brought an

action in Texas state court against IBP styled Lubbock

Feed Lots, Inc. and Lockney Cooperative Gin v. Iowa Beef

Processors, Inc. IEP removed the action to the District

Court for the Northern District of Texas, Lubbock Divi-

sion. The plaintiffs in that action contended that IBP was

liable for the damages they sustained because Heller was

the cattle-buying agent for IBP in the area. Specifically,

they alleged that IBP and Heller agreed sometime prior to

1974 that Heller would act as IBP’s agent in the South

Plains cattle feeding area. They based their allegations

exclusively on evidence concerning the general relation-

ship and course of conduct between IBP and Heller with

respect to Heller’s purchases of South Plain’ cattle

between 1966 and 1974; significantly, not one shred of

3

evidence concerning agency related to the specific trans-

actions at issue in the suit. On the basis of this general

evidence, the jury in Lubbock Feed Lots found in its spe-

cial verdict that Heller was acting as IBP’s agent at the

time of the cattle purchases in question, and the subse

quent judgment of the District Court in favor of the plain-

tiffs was affirmed by the Fifth Circuit. Lubbock Feed

Lots, Inc. v. Iowa Beef Processors, Inc., 630 F.2d 250 (5th

Cir. 1980).

Petitioners, also South Plains cattle sellers, similarly

were not paid for cattle they sold to Heller in transactions

occurring within days of the Lubbock Feed Lots transac-

tions; and, like the plaintiffs in Lubbock Feed Lots, they

contended that Heller was the cattle buying agent of IBP

in the South Plains during the period from 1966 until

Heller’s bankruptcy in 1974. Thus, the theory of recovery

advanced by the Petitioners in this action was identical to

that advanced by the plaintiffs in the prior suit. Some

time before 1974, Heller and IBP agreed that Heller would

purchase cattle in the South Plains for IBP, and the

course of dealings between IBP and Heller pursuant to

that agreement amounted to an agency relationship,

rendering IBP liable for the purchase price of cattle con-

tracted by its agent.

Petitioner filed the present action on January 16, 1976,

and tried unsuccessfully to consolidate the action with

Lubbock Feed Lots. After judgment was rendered against

IBP in the Lubbock Feed Lots case, Petitioners, because

of identical nature of the issues presented in the two

actions, moved for summary judgment on the question of

agency on the basis of the collateral estoppel effect of the

Lubbock Feed Lots judgment. Their motion was denied,

4

and the take-nothing judgment of the District Court ren-

dered after jury findings favorable to IBP was affirmed

by the Fifth Circuit. 630 F.2d 250.

III. REASON FOR GRANTING THE WRIT

In affirming the District Court’s denial of the requested

summary judgment, the Fifth Circuit misapprehended

the import of this Court’s decision in Parklane Hosiery

and issued an opinion that will be regarded as affording

trial courts unbridled discretion to refuse the offensive

application of collateral estoppel. When viewed in the

context of the facts of this case, the Fifth Circuit’s opin-

ion, if left standing, will invite unprincipled application of

the doctrine of collateral estoppel without regard to the

clear legal standards enunciated in Parklane Hosiery.

IV. ARGUMENT

All Requirements for the Offensive Application

of Collateral Estoppel Were Satisfied.

Requirements of Collateral Estoppel. Historic

ally, there have been but three requisites to the applica-

tion of the doctrine of collateral estoppel: (1) an identical

issue in both suits; (2) actual litigation of the issue in the

first suit; and (3) determination of the issue in the first

suit under circumstances that rendered it necessary and

essential to the resulting judgment. James Talcott, Inc. v.

Allahabad Bank, Ltd., 444 F.2d 451, 458461 (5th Cir. 1970),

cert. denied, 404 U.S. 940 (1971).! When this Court in Park-

lane Hosiery sanctioned the “offensive” use of collateral

! Under the circumstances of this case, the latter two requirements

— actual litigation and necessity to the judgment — have clearly

been met. There can be no question here concerning the “actual

litigation” of the agency issue. Further, the record in Lubbock Feed

Lots revealed that IBP was fully aware of both the plurality of

potential ac verse parties as well as the magnitude of possible future

liability at the time of the trial.

5

estoppel, however, it imposed two additional require

ments: (4) the multiplicity of suits must not have been

caused by the plaintiff's unwillingness to join in the ear-

lier action, and (5) the offensive use of collateral estoppel

must not be unfair to the defendant (examples of unfair-

ness being that the defendant did not have a full and fair

opportunity or incentive to litigate the issue in the first

action or the inconsistency of the judgment relied upon

with another previous judgment). 439 U.S. at 651.

Because the first two requisites were unquestionably

satisfied,? the only conditions to the offensive application

of the doctrine of collateral estoppel that are even

remotely in issue are the “identity of issues” requirement

and the two additional requirements imposed by Park-

lane Hosiery. The record in this case reveals, however,

that these conditions were satisfied as well; consequently,

the Fifth Circuit’s opinion, if permitted to stand, errone-

ously applies Parklane Hosiery and will be deemed to

grant trial courts unfettered discretion to refuse to apply

collateral estoppel offensively. The likely effect of the

Fifth Circuit’s opinion on subsequent federal court in-

terpretations of Parklane Hosiery will be to ignore the

limits on trial court discretion imposed by that opinion

and to foster abdication of any meaningful judicial scrut-

iny of the refusal of trial courts to apply collateral estop-

pel offensively. Briefly discussed below are those

requirements for application of the doctrine that were

relied on by the District Court (with respect to the “iden-

tity of issues’. requirement) and by the Fifth Circuit (with

respect to the two Parklane Hosiery requirements) in

denying application of collateral estoppel. Such

2 See footnote 1 supra.

requirements were clearly satisfied, making the Fifth Cir-

cuit’s decision a clear departure from the Parklane Hosi-

ery standards.

Identity of Issues. The requirement that the issue

sought to be preclucled in the second case be “identical” to

an issue determined in prior litigation is satisfied in this

case for two independent reasons — the first emanates

from the “necessary inference rule,” the second from

IBP’s admission.

a. The necessary inference rule. The doctrine of col-

lateral estoppel, as now applied by the courts, dictates

that a party may not relitigate an issue determined

against him in prior litigation. The threshhold legal ques-

tion is: How does a court determine whether or not an

issue involved in a pending case has already been lit-

igated in a prior suit? The answer is that if an examina-

tion of the record in the first case reveals that the finding

was necessarily based upon an underlying conclusion

which itself is dispositive of some issue in the second case,

then the underlying conclusion has all the collateral

estoppel force of an expressed finding.’ Sealfon v. United

‘ Collateral estoppel has never been limited to issues expressly

decided in a case. Rather, estoppel effect must be given to every

“necessary inference” logically following from each expressed

finding. See FREEMAN ON J UDGMENTS §693 at 1465 (5th ed. 1925); 50

C.J.S. “Judgments” §723 at 209-10 (1947). As Professor Moore has

noted, the majority of courts have adopted the necessary inference

rule. lb J. Moore & T. Currier, Moore's Feperat Practice,

€ 0-443[5] at 3928 (2nd ed. 1980). See, e.g., James Talcott, Inc. v.

Allahabad Bank, Ltd., 444 F.2d 451, 458-59 (5th Cir. 1970), cert.

denied, 404 U.S. 940 (1971) (Collateral estoppel applies to issues

actually litigated and essential to the judgment.); Peckham v.

Family Loan Co., 196 F.2d 838, 841 (5th Cir. 1952) (A judgment acts

as an estoppel not only “as to particular rights or questions actually

litigated and determined in the former suit,” but also as to issues

that “were necessarily involved in the conclusions there reached.”);

Wheat v. Texas Land & Mortgage Co., 153 F.2d 926, 928 (5th Cir.

1945), cert. denied, 328 U.S 837 (1946).

7

States, 332 U.S. 575, 577-80 (1948). The courts have

adoped and applied this “necessary inference” rule for

good reason. When an ultimate conclusion of fact could

not logically have been reached without certain premises,

the premises have been just as surely and unmistakably

found to exist by the factfinder as the ultimate conclu-

sion. 1B J. Moore & T. Currier, Moore's FEDERAL

PRACTICE 90.443[4] at 3913 (2d ed. 1980) [quoting Burlen

v. Shannon, 99 Mass. 200, 203 (1868)].

To determine whether a given fact was a necessary

premise to an expressed finding, the court must examine

the evidence produced at the first trial to see if it yields

any alternative factual basis for the expressed finding; if

not, the premise is necessarily inferred from the verdict

and may not be relitigated. See Adams v. United States,

287 F.2d 701, 704 (5th Cir. 1961); 50 C.J.S. “.Tudgments”

§723 at 209-10 (1947). Additionaily, the court should scru-

tinize the trial evidence adduced in the two cases, for it

has long recognized that “[t]he test of identity usually

laid down is whether the same evidence would suffice to

sustain both.” Kelliher v. Stone & Webster, Inc., 75 F.2d

331, 343 (Sth Cir. 1955). See also Syms v. McKitchie, 187

F.2d 915, 918 (5th Cir. 1951); Pye v. Departmen: ./ Trans-

portation, 513 F.2d 290, 292 (5th Cir. 1975); Aerojet-

General Corp. v. Askew, 511 F.2d 710, 718 (5th Cir.), cert.

denied, 423 U.S. 908 (1975); 50 C.J.S. “Judgments” §719 at

201-02 (1947).

In this case, the necessary inference rule removes any

“identity of issues” obstacle to the offensive application of

collateral estoppel. The plaintiffs in Lubbock Feed Lots

sold cattle to Heller within days of the sales by Petition-

ers. None of the cattle sellers received payment for their

8

cattle, all of which were shipped to and slaughtered by

IBP. The theory of liability forwarded in both cases was

that Heller was IBP’s cattle buying agent in the South

Plains and that he purchased the cattle in question on

behalf of IBP. The jury in Lubbock Feed Lots affirm-

atively answered special interrogatories inquiring about

Heller’s agency in the series of transactions. Agency

issues for each plaintiff were worded as follows:

Do you find from a preponderance of the evi-

dence that James Louie Heller was acting as the

agent for lowa Beef Processors at the time of his

purchase of the cattle in question from [the

plaintiff]?

Thus, the jury’s expressed findings as to agency were

specific to the transactions there in question and do not

themselves resolve the central issue here: whether Heller

acted as IBP’s agent with respect to the purchase

involved in this case. As a result, application of the

“necessary inference rules” narrows the collateral estop-

pel question as to whether, under the evidence presented

in Lubbock Feed Lots, the verdict gave rise to a necessary

factual inference conclusive of the agency issue in this

case. The answer is that it does, the necessary infer-

ence being that Heller was IBP’s cattlebuying agent

pursuant to an arrangement governing all the cat-

tle Heller purchased and delivered to IBP. An exami-

nation of the evidence shows this inference to be utterly

inescapable.

The key fact is that the only evidence of agency pre

sented at the Lubbock Feed Lots trial concerned the fixed

course of conduct between IBP and Heller in their busi-

ness dealings. It was undisputed at the trial that every

9

transaction between IBP and Heller, including the Lub-

bock Feed Lots transactions, was accomplished in the

same manner. The unchanging nature of the relationship

and its existence at the time of all the transactions

involved in the three cases was noted by the Fifth Circuit

in its opinion affirming the Lubbock Feed Lot judgment:

The evidence shows a long and well-

established relationship between Heller and

IBP. They had been treating with each other for

some eight years prior to the sales in Question

here. Heller was in daily contact with IBP,

obtaining such information as the number and

quality of the cattle desired by IBP, the price IBP

would pay therefor, and the price Heller himself

should pay. As between IBP and Heller, Heller

had a fixed, exclusive territory to which he was

restricted and within which he suffered no com-

petition for the favor of IBP. The great bulk of

the total number of cattle purchased by Heller

found their way to IBP. Heller’s buying practices

fluctuated according to the expressed needs of

IBP and not according to the fluctuation of

market price. Although his operations were not

free from risk, the risk was not that normally

associated with the independent speculator who

buys low in the hope of later selling high —

Heller knew what he would get before he bought.

Heller received large advances from IBP, an

unusual practice between packers and inde

pendent cattle buyers. Heller had railroad cars

on lease for the purpose of shipping cattle to

IBP’s Emporia, Kansas, plant — again an

unusual practice for an independent dealer. Dur-

ing the 1973 price freeze, Heller appears to have

sold his cattle directly to IBP’s customers at

IBP’s request or direction. Also during that price

freeze, an IBP employee, Pat Henry, appears to

have “loaned” to Louie Heller. Heller had left

instructions with some feedyards to call IBP

with information concerning each day’s pur-

chases. 630 F.2d at 270-71.

10

There was nothing about the specific transactions that

tended to prove agency because IBP and Heller did not

strike a new deal with respect to each load of cattle sup-

plied by Heller; when IBP needed cattle, it told Heller how

many he could ship and both parties proceeded with the

transaction in accordance with their eight-year-old agree-

ment. Of the several evidentiary facts listed by the Fifth

Circuit's Lubbock Feed Lots opinion as comprising the

evidence of Heller’s agency, none had anything to do with

the Lubbock Feed Lots transactions or any other specific

transaction. Thus, in the Lubbock Feed Lots trial, the jury

knew that IBP and Heller always dealt with each other in

the same way pursuant to a single arrangement, and the

only evidence of agency which they heard involved a de-

scription of that arrangement. Under the evidence, then,

the jury in Lubbock Feed Lots could not have based its

agency findings on anything peculiar to the transactions

in that case; there simply was no such evidence.

Since the only evidence of agency concerned the single

arrangement between IBP and Heller which applied to

every transaction, the ultimate decision of the jury on

the agency issue narrowed to a single underlying choice:

either the business arrangement between IBP and Heller

amounted to an agency relationship as defined in the trial

court’s instructions or it did not. If it did, then the pur-

chase in question, as one of hundreds accomplished pur-

suant to the fixed IBP-Heller scheme, was necessarily an

agency purchase and the special issue must be answered

in the affirmative; if it did not, then Heller was an inde-

pendent dealer, the purchase in question was not an

agency purchase, and the special issue must be answered

in the negative. By its affirmative answers, the jury in-

11

dicated that it necessarily concluded in favor of the

underlying premise that the eight-year arrangement

between IBP and Heller amounted to an agency relation-

ship. Since it is undisputed that the cattle belonging to the

Plaintiffs in the instant case were purchased pursuant to

that arrangement, it cannot be denied that they were pur-

chased by Heller as IBP’s agent.

The only basis on which IBP could deny that the spe-

cific findings in Lubbock Feed Lots necessarily gave rise

to a binding inference of ongoing agency is to assert that

Heller might have acted as IBP’s agent in some of the

transactions in which he delivered cattle to IBP but not in

others. That position is utterly inconsistent with the

records in this case. Both Heller and IBP’s own head cat-

tle buyer testified in their depositions and at trial that all

of the hundreds of transactions between Heller and IBP

were accomplished in the same manner pursuant to the

single 1966 agreement which defined their relationship.

Significantly, the purchases involved in this case took

place within days of the purchases involved in Lubbock

Feed Lots — all purchases took place between January 14

and February 3, 1974. Clearly, then, the IBP-Heller

agency arrangement, found to exist by the jury in the

prior case, was in effect during the purchases involved in

this case, and the agency finding in Lubbock Feed Lots

should have precluded relitigation of that issue in the

present action.

IBP’s Admission. There exists an independent and

equally persuasive reason why the “identity of issues”

requirement was met. In the present action, IBP admitted

in a corporate deposition taken pursuant to Rule 30(bX6)

of the Federal Rules of Civil Procedure that the rela-

12

tionship that existed between it and Heller during the

time of the Lubbock Feed Lots purchases and the pur-

chases giving rise to Petitioner’s claims did not change.

Consequently, the agency finding in Lubbock Feed Lots

is dispositive of the issue in the present case unless one of

the two additional requirements imposed by Parklane

Hosiery were not met.

b. ThetwoParklane requirements. In Parklane

Hosiery, this Court ruled that the offensive use of collat-

eral estoppel has two additional requirements: (a) the

plaintiff must not have been unwilling to join in the ear-

lier action, and (b) estoppel would not be unfair, with

examples of such unfairness being the defendant’s lack of

a full and fair opportunity to litigate in the first action or

that the judgment relied on is in itself inconsistent with

another previous judgment. 439 U.S. at 651. This case

clearly meets the Parklane test. First, Petitioners

requested consolidation of this case with Lubbock Feed

Lots, but IBP’s dogged opposition to that request led to its

denial. It was IBP, not the Petitioners, who chose to

fragment the litigation. Second, IBP’s incentive and

opportunity to litigate the issue in the prior suit fully can-

not be questioned; IBP’s able counsel tenaciously de

fended the prior suit at every level of the federal judiciary.

Further, the decision in Lubbock Feed Lots is not incon-

sistent with any other case. Indeed, it is consistent with

another case brought against IBP by South Plains cattle

seller, Valley View Cattle Co. v. Iowa Beef Processors,

Inc., 548 F.2d 1219 (5th Cir. 1976), cert. denied, 434 US.

855 (1977). In the only case even arguably inconsistent,

Rufenacht v. Iowa Beef Processors, Inc., 656 F.2d 198 (5th

Cir. 1981), cert. denied, 455 U.S. 921 (1982), the jury find-

Ze

13

ing was only that the plaintiffs in that action failed to

prove agency. Because there was no finding in Rufenacht

that Heller was not IBP’s agent, the case is not inconsist-

ent with Lubbock Feed Lots. In sum, Parkilane confirms

Petitioner’s right to a judgment based upon collateral

estoppel.

Vv. CONCLUSION

Every requirement for the offensive application of col-

lateral estoppel was satisfied in this case, yet the Fifth

Circuit, because of its misinterpretation of Parklane Hos-

iery, improperly deferred to the District Court’s refusal to

bar relitigation of the question of Heller’s agency. If not

corrected, the Fifth Circuit’s opinion will be regarded as

precluding meaningful appellate scrutiny of trial court

denials of offensive issue preclusion. For the foregoing

reasons, Petitioners pray that this Petition be granted.

Respectfully submitted,

Yl Ub

MIKE McKbot, JR.

CHARLES W. teh Sia

Counsel for Petitioners

Of Counsel:

JOHNSON & SWANSON

4700 Interfirst Two

Dallas, Texas 75270

(214) 653-2000

14

CERTIFICATE OF SERVICE

I hereby certify that three true and correct copies of the

foregoing instrument were mailed by first-class mail this

28th day of December, 1983, to Mr. James T. Malysiak of

Freeman, Rothe, Freeman & Salzman, P.C., 401 North

Michigan Avenue, Suite 2700, Chicago, Illinois 60611,

attorney for lowa Beef Processors, Inc.

Li Me Hoek fl.

MIKE McKoo., JR.

2” oa ST ae

A-l

APPENDIX 1

United States Court of Appeals

Fifth Circuit

BRUMLEY ESTATE, et al.,

Plaintiffs-Appellants,

v.

IOWA BEEF PROCESSORS, INC.,

Defendant-Appellee.

No. 81-1600

United States Court of Appeals

Fifth Circuit

May 19, 1983

MEMORANDUM OPINION

Before WISDOM, RUBIN, and TATE, Circuit Judges.

TATE, Circuit Judge.

In this Texas diversity case, the plaintiffs, a group of

cattle sellers and feedlot operators, appeal from a take

nothing judgment entered on jury verdicts against them.

The basis for their original suit was their contention that

the defendant, Iowa Beef Processors (“Iowa Beef’— a

slaughterhouse and meat packing plant), through its

alleged agent, Heller, purchased cattle that were not

properly paid for, and for which Iowa Beef is liable.

Essentially, they contest three rulings of the district

court. First, relying on two prior jury determinations of

Heller’s status as agent of Iowa Beef in similar cases,

A-2

they question the district court’s refusal to apply collat-

eral estoppel as a bar to relitigation of Heller’s agency

status here. Second, in the alternative, they contest the

court’s exclusion of evidence of these prior agency deter-

minations as relevant evidence tending to prove that

because Heller contemporaneously acted as an agent of

Iowa Beef in other cases involving similar facts, he acted

as agent in this particular case. Finally, they contest the

district court’s granting, without written reasons, a par-

tial summary judgment holding article 6903 of the Texas

Revised Civil Statutes (currently codified at Tex.Agric.

Code §146.001 (1981)), to be applicable to the transactions

at issue. The plaintiffs argue, under this article, that the

transfer of the cattle to Heller was accomplished without

the formality required by Texas law, so that, under the

circumstances here presented, they are entitled to an

interest in the cattle superior to lowa Beef’s.

We find no reversible error in the evidentiary and col-

lateral estoppel rulings of the district court. Accordingly,

we affirm the judgment dismissing the plaintiffs’ claim

insofar as based upon the jury finding that Heller was not

an agent of Iowa Beef. We also affirm the district court’s

refusal, by its partial summary judgment ruling, to admit

evidence on the article 6903 claim asserted by the plain-

tiffs; as we interpret it, under diversity principles, follow-

ing the most recent state court decision on the subject,

Texas jurisprudence is to the effect that article 6903 is not

applicable to the factual situation here presented.

The Factual and Procedural Context of the Issues

The details of the relationship between Iowa Beef and

its alleged agent, Heller, have been thoroughly explicated

A-3

in three prior opinions by this court involving similar

transactions with different plaintiffs (other Texas cattle

raisers and feedlot operators who sold cattle to or through

Heller): Rufenacht v. Iowa Beef Processors, Inc., 656 F.2d

198 (5th Cir. 1981), cert. denied, 455 U.S. 921, 102 S.Ct.

1279, 71 L.Ed.2d 462 (1982); Lubbock Feed Lots, Inc. v.

Iowa Beef Processors, Inc., 630 F.2d 250 (5th Cir.1980);

Valley View Cattle Co. v. Iowa Beef Processors, Inc., 548

F.2d 1219 (5th Cir.), cert. denied, 434 U.S. 855, 98 S.Ct. 174,

54 L.Ed.2d, 126 (1977). Briefly, Heller carried on a regu-

lar course of business in which he would telephone lowa

Beef daily, and Iowa Beef would offer to purchase speci-

fied quantities of cattle from him at specified prices. He

would then purchase the cattle from the plaintiffs (for

which he paid with his personal check) and resell them to

Iowa Beef. Although he sold cattle to other purchasers as

well, most of his sales were to Iowa Beef.

In early 1974, due to Heller’s insolvency, his personal

checks to plaintiffs, given in payment for cattle pur-

chased were dishonored. After collecting what they were

able to from Heller’s bankruptcy proceedings and surety,

the plaintiffs filed this suit against Iowa Beef.

The plaintiffs contend that throughout his course of

dealings with them, Heller acted as an agent of Iowa

Beef. Therefore, under agency principles, they argue that

Iowa Beef is liable to them for the acts of Heller and thus

for the unpaid purchase price of their cattle. lowa Beef, on

the other hand, maintains that Heller was not an agent

but an independent dealer and speculator, seeking to

profit from the purchase and resale of cattle, and that in

no way did Iowa Beef become liable for Heller’s

transactions.

A4

The jury found, on the basis of extensive evidence pre-

sented by both sides, that Heller was not an agent of lowa

Beef. Although the evidence was subject to conflicting

factual inferences, we are unable to say that the jury’s

determination was not supported by substantial evidence,

nor do the plaintiffs so argue on their appeal.

I.

However, based on jury determinations on similar facts

and cattle transactions in other litigation between Iowa

Beef and other parties, in which Heller was indeed found

to have been the agent of lowa Beef, the plaintiffs do raise

two contentions of error in urging that the take-nothing

judgment against them, founded on the jury verdicts,

should be reversed: A. that the district court erred in its

pretrial ruling rejecting the plaintiffs’ contention that

Iowa Beef was collaterally estopped from denying

Heller’s agency relationship with it, because of adverse

determinations of the issue against it under virtually

identical facts in similar litigation brought by other par-

ties; and B. that, in any event, the district court erred in

ruling to be inadmissible the judgments in these prior

adjudications as evidence that Heller had acted as Iowa

Beefs ageni in contemporaneous and virtually identical

cattle purchases from other cattle sellers of the area.

We will discuss these contentions in this Part I of the

opinion. (In Part II, we will discuss the plaintiffs’ remain-

ing contention on appeal — that the district court erred in

granting summary judgment, prior to trial, that dis-

missed the plaintiffs’ claim against lowa Beef founded

on Texas article 6903, supra cit.)

A. Collateral Estoppel — ;

No Abuse of Discretion in Failing to Apply Here

This appeal marks the fourth time that this court has

AS

considered the substantially similar question of the liabil-

ity of lowa Beef to various Texas cattle folk arising from

the transactions of Heller. In the first two cases before

this court, we reviewed and affirmed jury determinations

that Heller had acted as lowa Beef’s agent. Valley View,

supra; Lubbock Feed Lots, supra. In the third case, on the

other hand, we affirmed a district court’s finding, after a

non-jury trial, that Heller had not so acted. Rufenacht,

supra. In that third case, we also upheld the district

court’s exercise of discretion in failing to give collateral

estoppel effect to the two earlier contrary judgments. Id.

at 204.

{1] Now, the plaintiffs contend that the district court

erred in this case by failing to apply collateral estoppel to

preclude a relitigation of the agency issue. However, we

again find that the district court did not abuse its

discretion.

[2] The use of offensive collateral estoppel, in which a

defendant is prohibited from relitigating an issue pre

viously decided adversely to him with a different plaintiff,

Parklane Hosiery Company v. Shore, 439 U.S. 322, 99

S.Ct. 645, 58 L.Ed.2d 552 (1979), is permitted in the discre-

tion of the district court. Rufenacht, supra, 656 F.2d at

202. However, as noted in Rufenacht,

[a]pplicability of collateral estoppel is con-

ditioned upon three requirements: (1) that the

issue to be concluded be identical to that

involved in the prior action; . . .

656 F.2d at 202. In rejecting the application of the doctrine

in Rufenacht, this court affirmed the district court’s find-

ing that there was no true identity of issues: “There is no

doubt that the [cattle] transactions . . . were similar in

As

nature and close in time. But they were not identical.” Id.

at 203. This court there compared other cases in which the

doctrine had been applied and generally concluded that,

[iJn each instance [where] estoppel applies there

is an actual identity of issues — the legality of

one proxy statement, the negligence arising

from one incident, the execution of one guaran-

tee — as opposed to the cases at bar which

involve separate albeit similar sales of cattle.

Id. Similarly in this case, a series of transactions similar

but not identical to the ones at issue in the other cases

were before the district court. The district court therefore

concluded that the lack of identity of issues, properly

found controlling in Rufenacht, foreclosed the application

of the doctrine in the present case also.

The plaintiffs contend, however, that the situation here

is different from that in Rufenacht, and therefore more

strongly warrants application of the doctrine. They point

to testimony of various witnesses, Heller included, to the

effect that Heller’s relationship with Iowa Beef during the

period of the transactions at issue in this case is exactly

the same as it was in all of the other transactions occur-

ring during this time period. The plaintiffs contend that

this establishes the necessary identity of issues (i.e., the

one agency relationship) and requires the application of

collateral estoppel.

This argument overlooks, inter alia, another factor here

present: The testimony referred to above also establishes

that Heller acted identically in the transactions that led

to the Rufenacht decision itself, in which Heller was

determined not to have acted as an agent. We can see no

justification for granting collateral estoppel effect to two

A-7

judgments and ignoring a third contrary judgment. The

presence of the Rufenacht decision militates against

application of the collateral estoppel doctrine here, and, if

only for this reason, we can see no abuse of discretion by

the district court in failing to apply it.

B. The Prior Judgments As Evidence —

Exclusion Was Not An Abuse of Discretion

The plaintiffs next contend that the prior judgments

finding agency, Valley View and Lubbock Feed Lots,

should have at least been admitted into evidence as prob-

ative of agency status in the present case. The district

court excluded the evidence upon finding that it was

“highly prejudicial”. The district judge focused on the

fact that, as with the collateral estoppel claim, the trans-

actions involved in the prior decisions were distinguish-

able from the transactions involved in this case. The

court therefore apparently found them to be unduly pre

judicial in light of their questionable probative value.

[3, 4] Assuming without deciding that the prior

agency determinations could have been admitted into

evidence in some form, we defer in this case to the discre-

tion of the district court. Under Rule 403 of the Federal

Rules of Evidence, a judge is permitted to exclude relevant

evidence if he finds that its probative value is substan-

tially outweighed by the danger of “unfair prejudice, con-

fusion of the issues, or misleading the jury”. Fed.R.Evid.

403. And in making this determination, a district judge is

given broad discretion:

This is a question of legal relevance, a matter on

which the trial judge has wide discretion, and

which the appellate court will not reverse unless

the trial judge has clearly abused his discretion.

A8

Wright v. Hartford Accident & Idemnity Company, 580

F.2d 809, 810 (5th Cir. 1978).

Several factors support the trial iudge’s determination

of inadmissibility. Initially, we would note that the prior

jury determinations are not highly probative in this case.

The jury here was presented with substantially the same

evidence as was presented in those cases, and as this

court there noted, “[t]he body of evidence gravitates in

two different directions.” Valley View, supra, 548 F.2d at

1224. See also Lubbock Feed Lots, supra, 630 F.2d at 271.

[5] Under certain circumstances, evidence of prior acts

may be introduced if they tend “reasonably to show the

purpose and character of the particular transactions

under scrutiny,” Federal Trade Commission v. Cement

Institute, 333 U.S. 683, 705, 68 S.Ct. 793, 805, 92 L.Ed. 1009

(1948). The decisions relied upon by the plaintiffs, how-

ever, do not support the plaintiffs’ position here. In both

Cement Institute, supra, and in Spartan Grain & Mill

Company v. Ayers, 517 F.2d 214, 218-19 (5th Cir. 1975)

(the only Fifth Circuit decision cited), for instance, evi-

dence of prior transactions was admitted to show a rou-

tine and continuous course of dealings. In the present

case, however, it is undisputed that Heller transacted all

of his business in a particular routine fashion, and,

moreover, that he transacted his business with these

plaintiffs in the same fashion. Evidence that he acted in

the same manner with other persons is not highly proba-

tive of the issues here tried, where it is so admitted, but

where the inference to be drawn from this course of deal-

ing is a factually disputed issue susceptible of opposing

inferences from the evidence actually before the present

trial jury. In our prior decisions, we ourselves noted the

A9

inconclusiveness of the evidence as establishing an

agency relationship, and we do not now find it to be

highly probative that two juries in other cases concluded

that agency status existed.

Substantially similar evidence was presented to this

jury for its own separate and independent analysis as

trier of fact. Undue prejudice may have been occasioned

the defendant by the high possibility that more probative

value than would have been warranted would have been

given to the prior jury determinations on similar conflict-

ing evidence had they been admitted.

Moreover, the possibility that the present jury would

have been misled or confused would have been presented

by admission of the two pnor jury determinations.

Neither party attempted to introduce the Rufenacht deci-

sion (the third case arising from these cattle transac-

tions), in which a district judge determined that Heller

had not acted as an agent of Iowa Beef. In the absence of

this contrary judicial determination, the Valley View and

Lubbock Feed Lot decisions, finding agency, appear con-

siderably more convincing than they in actuality are.

When the three decisions are viewed together, it becomes

apparent, not only that the two alone do not deserve col-

lateral estoppel effect, but also that admission into evi-

dence of the prior decisions creates a high possibility of

jury confusion. When viewed together — two determina-

tions in favor of agency status and one against — their

probative value is even less strong than it would be if two

of them were viewed separately (as was initially attemp-

ted by the plaintiffs), and could quite possibly have led to

confusing considerations essentially irrevelant to the

task of the present jury: to decide on the facts before it,

A-10

whether or not Heller was an agent of Iowa Beef.

Accordingly, we uphold the district court’s exercise of

discretion in refusing to admit evidence pertaining to the

prior determinations of agency (or lack thereof).

Il.

The plaintiffs’ final contention on appeal is that the

district court erred in granting what they characterize as

a summary judgment, without written reasons, that dis-

missed their cause of action insofar as founded upon arti-

cle 6903 of the Texas Revised Civil Statues (now codified

at Tex. Agric. Code §146.001 (1981)).

Article 6903 provides that “[u]pon the sale or transfer of

any [cattle, horses, mules, etc.] in this State, the actual

delivery of such animals shall be accompanied by a writ-

ten transfer to the purchaser from the vendor, or party

selling, giving the number, marks and brands of each

animal sold and delivered. Upon the trial of the right of

property in any such animal, the possession of such

animal without written transfer shall be prima facie

illegal.”

The plaintiffs’ complaint alleges that Heller did not

obtain from them any written transfer, bill of sale, or

other appropriate indicia of title for the cattle purchased;

and that he then likewise transferred the cattle to lowa

Beef without such written sale or indicia of title. The

complaint further alleges that the checks issued by Heller

in payment of the purchase price were dishonored, and

that he never acquired title to the cattle and was never

authorized to transfer them to Iowa Beef, and that Iowa

Beef knew or, in the exercise of ordinary care, should have

known that Heller did not own and could not trans-

A-11

transfer title of the cattle to lowa Beef.

The plaintiffs argue that since the requirements of arti-

cle 6903 (that a written transfer accompany the delivery

of the cattle and identify them by “number, marks and

brands”) were not satisfied in this case, they therefore

retain an interest in the cattle sold superior to that of

Iowa Beef. The only documents transferred with the sales

here were invoices and scale tickets that did not state the

marks and brands of the cattle.

Iowa Beef maintains, however, that article 6903 was

repealed by subsequent Texas legislation and in the

alternative, that the invoices in this case satisfy the

requirements of the article. lowa Beef also argues that the

Texas article does not apply to the cattle transactions

here because they in actuality took place in the state of

Kansas.

A. Procedural Posture of District Court’s Ruling

The trial court initially denied cross-motions for sum-

mary judgment on the 6903 arguments on November 17,

1977. However, four years later, in a pretrial conference

on the day of trial, November 19, 1981, the district judge

granted what the plaintiffs characterize as a partial

summary judgment on this claim in favor of Iowa Beef,

and ruled that no evidence would be admitted on this

issue. Neither the ruling itself, nor the reasons therefor,

however, appear in any form in the record.

In the initial denial in 1977, of cross motions for sum-

mary judgment on the issue, the district court had found

(1) that article 6903 was applicable to the case, (2) that it

was not superseded by the adoption in Texas of the Uni-

form Commercial Code, and (3) that compliance with

A-12

article 6903 was a question of fact remaining to be deter-

mined in the case. Subsequently, and in accord with this

ruling, the plaintiffs submitted requested jury interroga-

tories on the question whether the invoices were sufficient

to “identify and segregate” the cattle. Also in accord with

this ruling is the pre-trial order, signed by the district

judge and by attorneys for both parties indicating that

among the issues of fact and law to be determined at trial

was the question of the sufficiency of the documents to

satisfy the article.

However, on the day of the trial four years after the

defendant’s motion for summary judgment on the issue

had been denied, the district court ruled that evidence on

the article 6903 claim would not be admitted. Although

there is no minute entry or other notation of the district

court’s action, the reference to the ruling is contained in

an offer of proof by the plaintiffs of evidence that would

prove the plaintiffs’ article 6903 cause of action as

pleaded. The offer of proof was made during the trial, at

which time the Plaintiffs’ counsel stated:

This offer of proof is made by Plaintiffs with

respect to the following evidence, which the Dis-

trict Court ruled, in a pretrial conference, would

not be admissible in the trial of this action. The

evidence which Plaintiffs intended to offer was

relevant to their claim under Article 6903 of the

Texas Revised Civil Statutes.

(R. XXI, p. 1450) (emphasis added).

We were initially given some concern by the informal

and unexplained basis for this ruling, as well as the

apparent lack of a procedural basis, given the circum-

stance that the allegations pleading the article 6903 cause

of action had not been subjected to attack for failure to

A-13

state a claim, Fed.R.Civ.P. 12(bX6), or by motion for

judgment on the pleadings, Jd., Rule 12(c), or by motion to

strike, Jd., Rule 12(f). We accept, however, the plaintiffs’

characterization of the ruling as a reconsideration by the

district court of its earlier denial of summary judgment

dismissing the Article 6903 claim, and a grant of the

defendant’s previously filed motion for summary judg-

ment. The district court’s reconsideration seems to have

resulted during chambers argument in a pretrial confer-

ence, and it presumably resulted from the district court’s

greater familiarity with the issue stemming from its con-

duct of related litigation (see note 1 infra) in the interval.

In their brief in this court, the plaintiffs state that the

basis for the district court’s ruling was the court’s accep-

tance of Iowa Beef’s argument that Article 6903’s written

formality requirement in the sale of cattle had been

impliedly superseded by Texas’ adoption of the Uniform

Commercial Code in 1967. Tex.Bus. & Com. Code §§ 1.01

et seq. (1967) (“Texas U.C.C.”) Brief for Appellants, pp. 9,

13.

[6] The plaintiffs assert that the failure of the district

court to provide written reasons for the granting of sum-

mary judgment in this case require that this court vacate

the judgment and remand to the district court for the

making of this determination. In doing so, they rely on

Hanson v. Aetna Life & Casualty, 625 F.2d 573, 575 (5th

Cir. 1980), wherein it is stated that since,

‘{flindings of fact and conclusions of law are

unnecessary on decisions of motions under

Rules 12 and 56,’ [citations omitted], their

absence here is not, of itself, fatal. Even so, ‘the

parties are entitled to know the reasons upon

which [summary] judgment(s] . . . are based.’

A-14

[citations omitted], if for no other purpose than

to secure meaningful appellate review, [citations

omitted]. Although our prior admonitions have

been precatory in character [citations omitted],

we have in practice insisted that district courts

record — however informally — their reasons for

entering summary judgment, at least where

their underlying holdings would otherwise be

ambiguous or inascertainable.

See also, Estate of Smith v. Tarrant County Hospital Dis-

trict, 691 F.2d 207, 209 (5th Cir. 1982)!

[7] Where, as here, however, the facts insofar as rele

vant to our affirmance of the ruling (see below) are undis-

puted, and the applicable law may be ascertained and

applied to these undisputed facts, we conclude that, as

stated in Hanson, supra, the absence of reasons is “not, of

itself, fatal.” 625 F.2d at 575. In the present instance, the

plaintiffs-appellants concede the reason for the district

court’s ruling (i.e., that because of the adoption of the

Texas U.C.C. in 1967, article 6903’s former requirement of

written formalities with regard to cattle sales is no longer

' The plaintiffs also contest the district court’s granting of summary

judgment on the ground that the 10-day notice and hearing provi-

sions of Rule 56, Fed.R.Civ.P. 56, were not followed. Capital Films

Corporation v. Charles Fries Productions, Inc., 628 F.2d 387, 391

(5th Cir. 1980). However, in that case, no motion for summary judg-

ment was made by either party on the issues decided sua sponte by

the district jndge, and no notice or hearing on those issues was pro-

vided. In this case, on the other hand, cross motions for summary

judgment were made by both parties, albeit four years before the

motion was granted, and a hearing was held on the 6903 claim. In

addition, the district court had, in the four year interval, tried the

related Lubbock Valley case and heard similar motions for sum-

mary judgment presented by some of the same attorneys for both

parties. No complaint is made that the plaintiffs’ counsel did not

receive some prior notice that the district court was reconsidering its

earlier ruling, and in fact did so, during the pretrial conference

attended by counsel for both parties. We are unable to say, therefore,

that the plaintiffs did not receive the requisite notice and an oppor-

tunity to be heard before summary judgment was rendered against

them. Cf., Barker v. Norman, 651 F.2d 1107, 118-19 (5th Cir. 1981).

A-15

applicable under the facts as presently pleaded and as

before the district court at the time the motions for sum-

mary judgment were initially decided in 1977), and we

have the full record upon which the ruling was based. A

demand for the district court to formally articulate the

reasons for its grant of summary judgment on the article

6903 claim would serve neither of the functional purposes

motivating our insistence upon the desireability of articu- -

lated reasons — to assure “meaningful appellate review”,

Hanson, supra, 625 F.2d at 575, and to “minimize duplica-

tion of judicial effort”, Melancon v. Insurance Company

of North America, 482 F.2d 1057, 1059 n. 4 (5th Cir. 1973)

— and we will therefore now review the district court’s

ruling on its merits.

B. The Article 6903 Claim:

Summary Judgment Proper?

[8] We ultimately conclude that the district court prop-

erly granted summary judgment. For reasons to be

shown, assuming at least for purposes of argument that

article 6903 was not impliedly repealed by the enactment

of the Texas U.C.C.?, we find that as most recently inter-

2 Section 2.102 of the Texas U.C.C. provides that,

Nor does this chapter impair or repeal any statute regulating

sales to consumers, farmers or other specified classes of buyers.

(emphasis added). This clause of the Utah U.C.C. has been inter-

preted by the Utah state cattle statute from supersession by the

U.C.C., Pugh v. Stratton, 22 Utah 2d 190,450 P.2d 463, 465 (Utah

1969). But see Wilson v. Burrows, 27 Utah 2d 436, 497 P.2d 240, 242

(Utah 1972).

The plaintiffs’ argument that article 6903 was not superseded in

part similarly depends upon Texas U.C.C. § 2.102 and upon the addi-

tional factor that article 6903 was recodified by the Texas legislature

in 1981 (without substantive change) in an attempt to eliminate

“repealed, duplicative, unconstitutional, expired, executed, and other

ineffective provisions. . . .” Tex.Agric.Code § 1.001 (1981). The re

enactment of the statute is argued to indicate that it was not one of

those considered by the legislature to have been “repealed” or

“expired.” Sayles v. Robison, 103 Tex. 430, 129 S.W. 346, 348 (Tex.

A-16

preted by the Texas supreme court the controlling issue is

not whether a formal bill of cattle sale has been executed

but rather what the intent of the parties was, and that

under the Texas U.C.C. the statutory intent (unless oth-

erwise explicitly agreed) is that title passes upon physical

delivery of the cattle.®

[9] In this case, the plaintiffs rely primarily on older

Texas jurisprudence to support their argument that with-

out the transfer of a written bill of sale with the cattle,

they retain a superior right in the transferred cattle, for

which they were not paid. than does Iowa Beef. See Black

v. Vaughan, 70 Tex. 47, 7 S.W. 604 (Tex. 1888); Wells v.

Littlefield, 59 Tex. 556 (1883); Goode v. Martinez, 237

S.W.2d 576 (Tex. Civ. App. 1922); Swan v. Larkin, 8 Tex.-

Civ.App. 421, 28 S.W. 217 (Tex.Civ.App. 1894). See also

John Clay & Co. Livestock Commission v. Clements, 214

F.2d. 803, 806 (5th Cir. 1954). However, the latest and

most authoritative expression of state law applicable to

the facts of a case is controlling. Delta Air Lines, Inc. v.

McDonnell Douglas Corp., 503 F.2d 239, 245 (5th Cir.

1974), cert. denied, 421 U.S. 965, 95 (S.Ct. 1953, 44 L.Ed.2d

451 (1975).

footnote 2 (Continued)

1910). And finally, the general repealing article of the Texas U.C.C.,

§ 10-103 (repealing all laws in conflict therewith), may not require a

different corc'usion; Texas courts do not favor genera! repealers in

the absence of strong repugnance between the new and existing

statutes and, if possible, the statutes are construed so as to give

effect to both. Gordon v. Lake, 163 Tex. 392, 356 S.W 2d 138, 139 (Tex.

1962), Stanaurd v. Sadler, 383 S.W.2d 391, 395 (Tex.Civ.App. 1964).

See also Pfluger v. Colquitt, 620 S.W 2d 739, 741 (Tex.Civ.App. 1981),

writ ref'd n.r.e. (reconciling Texas U.C.C. and requirement of Texas

Motor Vehicle Certificate of Title Act).

' Deciding as we do that article 6903 is not applicable to the factual

situation here presented, we express no opinion on the other conten-

tions of lowa Beef, e.g., that article 6903 does not apply to a sale of

cattle in Kansas.

A-17

In the most recent decision in Vailey Stockyards Com-

pany v. Kinsel, 69 S.W.2d 19 (Tex. 1963), the Supreme

Court of Texas was presented with facts basically indis-

tinguishable from those in the present case. In that case,

a cattle seller, Kinsel, sold cattle to a buyer without a bill

of sale, and received a worthless check in payment. The

buyer then sold the cattle to a stockyard. Kinsel subse-

quently sued the siockyard, contending that the latter

was liable to him for the amount of the original buyer’s

unpaid checks.

The Texas supreme court, although without specifically

addressing article 6903, held that the dispositive question

in that case was the factual determination of whether

Kinsel had intended to pass title to the buyer when he

delivered the cattle, or whether he had intended that the

passage of title be conditional on the subsequent honor-

ing of the check by the bank. Jd. at 20. The court indicated

that if Kinsel had intended to pass title to the cattle by

delivery, then title had thereby passed, and the stockyard

had obtained better title to the cattle than was retained by

Kinsel. As noted by the dissent in that case, article 6903

was applicable to the facts there presented. Jd. at 27.

The Texas Supreme Court, therefore, did not consider

the absence of a bill of sale, and the corresponding

applicability of article 6903, to be determinative of the

rights of the parties under those circumstances. Instead,

the court considered dispositive the application of the

facts to the then (and subsequently legislatively repealed,

see below) Texas general legal doctrine that where a seller

receives a check in payment, he is presumed to intend to

retain title to the goods sold until the check is honored by

the drawee bank. The court held that this presumption

A-18

could be rebutted by facts to the contrary, and that it was

for the trier of fact to determine the “controlling question”

of the intent of the parties to the transaction. By so hold-

ing what was the “controlling question” for review, the

court thus concluded that if Kinsel had intended to pass

title by delivery, his sale of cattle was valid as to him

despite the absence of a bill of sale, and the stockyard was

not liable to him for the unpaid purchase price of the

cattle.

It is true that the majority opinion did not mention arti-

cle 6903, nor did it address the statement made in the

dissenting opinion to the effect that article.6903 was

applicable to the cattle sales in the counties there &t issue.

The issue was, nevertheless, apparently presented to the

court and rejected by it.‘ No other Texas court has made

reference to article 6903 (now § 146.001 of the Texas Agri-

culture Code) since the Texas supreme court’s decision in

Kinsel.

[10] Thus, as most recently interpreted in 1963 by the

Texas supreme court, article 6903’s requirement — that a

written descriptive bill of sale accompany the delivery of

cattle sold — does not apply against third persons who

purchase from the buyer, where in fact there has been an

intended sale of the cattle by the seller; the dispositive

issue there being only whether the seller who accepted a

later dishonored check intended to retain title in the cattle

until the check was paid.

‘ The issue was apparently before the court inasmuch as article 6903

was addressed by the dissenting justices, and inasmuch as the

intermediate court opinion there reversed had relied heavily on John

Clay & Co. Livestock Commission v. Clements, 214 F 2d 803 (5th Cir.

1954), in which article 6903 was in part the basis of the opinion.

Valley Stockyards Company v. Kinsel, 360 S.W.2d 817, 819 (Tex.Civ.

App. 1962).

A-19

C. The Effect of the Texas U.C.C.

{11] Article 6903 does not itself purport to regulate this

dispositive issue, nor the effect of payment by a check

that is later dishonored. Subsequent to this 1963 Kinsel

decision, however, the Texas legislature enacted the

Texas U.C.C in 1967, prior to the 1974 cattle transactions

here in issue. This statutory enactment specifically pro-

vides statutory principles, to be cited, that are applicable

to whether Heller and lowa Beef acquired ownership of

the cattle, despite Heller’s subsequent dishonor of the

checks paid to the plaintiffs for their purchase price.

These Texas U.C.C. provisions, which are not in conflict

with article 6903, are applicable to the present cattle

sales and are dispositive in determining that Iowa Beef

obtained good title from Heller to the cattle he had pur-

chased from the plaintiffs, free of any claim hy them.

[12] Section 2.401(b) of the Texas U.C.C., as enacted

in 1967 and unchanged to date, provides that,

[u]nless otherwise explicitly agreed title passes

to the buyer at the time and place at which the

seller completes his performance with reference

to the physical delivery of the goods...

This Texas U.C.C. statutory provision has been applied

in Texas to a sale of cattle that is paid for by a check that

is later dishonored. In re Samuels & Co., Inc., 526 F.2d

1238, 1246-47 (5th Cir.) (en banc) (Texas law applied), cert.

denied sub nom. Stowers v. Mahon, 429 U.S. 834, 97 S.Ct.

98, 50 L.Ed.2d 99 (1976); Miles v. Starks, 590 S.W.2d 223,

225 (Tex.Civ.App. 1979 writ refd n.r.e.), cert. denied sub

nom. Hartford Accident & Indemnity Company v. Miles,

449 U.S. 875, 101 S.Ct. 217, 66 L.Ed.2d 96 (1980). And

while an unpaid seller arguably has the right to reclaim

A-20

his cattle, Sorrels v. Texas Bank and Trust Company of

Jacksonville, Texas, 597 F.2d 997, 1000 (5th Cir. 1979);

Ranchers and Farmers Livestock Auction Company of

Clovis, New Mexico v. First State Bank of Tulia, 531

S.W.2d 167, 169 (Tex.Civ.App. 1975 writ ref'd n.r.e.), that

right is limited to a 10-day period, see Texas U.C.C. §§

2.507, 2.702, and it cannot have any effect on the rights

acquired by subsequent bona fide purchasers. Sorrels,

supra, 597 F.2d at 1001; Samuels, supra, 526 F.2d at 1244.

See also Tex.Bus.& Com. Code § 2.403(a) (1967) (“A person

with voidable title has power to transfer a good title to a

good faith purchaser for value.”’).

[13] Texas U.C.C. § 2.511(c) provides that a payment

for goods by check is conditional and is defeated “as

between the parties” by dishonor of the check. Neverthe-

less, whatever right may be conferred to avoid the sale as

between the parties themselves, the seller unpaid by

virtue of the dishonored check cannot defeat the title of a

good-faith third-person purchaser from the buyer. Leif

Johnson Ford, Inc. v. Chase National Bank, 578 S.W.2d

792, 794 (Tex.Civ.App. 1978); Samuels, supra, 526 F.2d at

1242, 1246. This result obtains by virtue of Texas U.C.C. §

2.403, which provides that,

[a] person with voidable title has power to

transfer a good title to a good faith purchaser for

value. When goods have been delivered under a

transaction of purchase the purchaser has such

power even though

i « . * *

(2) the delivery was in exchange for a check

which is later dishonored. . . .

[14] As to Iowa Beef’s good faith in purchasing the

cattle from Heller, the most that the factual showing indi-

A-21

cates is that lowa Beef should have known at the time the

cattle were purchased by lowa Beef that Heller had not

yet paid his sellers for their cattle. Under the Texas

U.C.C., in sales transactions, “ “Good faith’ in the case of

a merchant means honesty in fact and the observance of

reasonable commercial standards of fair dealing in the

trade.” Texas U.C.C. § 2.103(a\2). For purposes of the

Texas U.C.C., the good faith of a purchase “does not

expressly or impliedly require lack of knowledge of third

party claims, ... depart[ing] from the common l!aw in this

regard.” Peerless Equipment Company v. Azle State

Bank, 559 S.W.2d 114, 116 (Tex.Civ.App. 1977); Samuels,

supra, 526 F.2d at 1243-44. Considering the undisputed

fact that Iowa Beef paid Heller the full value of the cattle

at the time of their delivery or shortly thereafter, see

Samuels, id.. summary judgment was not precluded by

any factual issue as to lowa Beef’s good faith as meas-

ured by these Texas U.C.C. provisions.

CONCLUSION

Accordingly, we AFFIRM the jury’s determination that

Heller was not lowa Beefs agent in this case, and we

likewise find that the district court’s grant of summary

judgment without written reasons was not reversible

error under the circumstances here presented.

AFFIRMED.

A-22

APPENDIX 2

United States Court of Appeals

Fifth Circuit

BRUMLEY ESTATE, et al.,

Plaintiffs-Appellants,

v.

IOWA BEEF PROCESSORS, INC.,

Defendant-Appellee.

No. 81-1600

United States Court of Appeals

Fifth Circuit

Sept. 30, 1983

ON PETITION FOR REHEARING AND

SUGGESTION FOR REHEARING EN BANC

(Opinion May 19, 1983, 5 Cir., 1983, 704 F.2d 1351)

Before WISDOM, RUBIN and TATE, Circuit Judges

PER CURIAM:

The application for rehearing has been carefully consid-

ered. The court has again reviewed the opinion of the

Texas Supreme Court in Valley Stockyards Company uv.

Kinsel, 369 S.W.2d 19 (Tex. 1963), and the briefs in that

case. The court withdraws that part of the opinion begin-

ning at slip p. 4493, 704 F.2d at p. 1359, with the caption:

“B. The Article 6903 Claim: Summary Judgment

Proper?” and substitutes the following:

A-23

“B. The Article 6903 Claim: Summary Judgment Proper?”

[1] We ultimately conclude that the district court

properly granted summary judgment. For reasons to be

shown, assuming at least for purposes of argument that

article 6903 was not impliedly repealed by the enactment

of the Texas U.C.C,' we find that as most recently inter-

preted by the Texas Supreme Court the controlling issue

is whether the seller of the cattle knew that the buyer

would take them to a county to which article 6903 did not

apply and there resell them. If so, then that article does

not apply against the immediate buyer’s vendee.

[2] In this case, the plaintiffs rely primarily on older

Texas jurisprudence to support their argument that with-

out the transfer of a written bill of sale with the cattle,

they retain a superior right in the transferred cattle, for

' Section 2.102 of the Texas U.C.C. provides that,

Nor does this chapter impair or repeal any statute regulating

sales to consumers, farmers or other specified classes of buyers.

(emphasis added.) This clause of the Utah U.C.C. has been inter-

preted by the Utah Supreme Court as protecting a similar Utah

state cattle statute from supersession by the U.C.C., Pugh v. Strat-

ton, 22 Utah 2d 190, 450 P.2d 463, 465 (Utah 1969). But see Wilson

uv. Burrows, 27 Utah 2d 436, 497 P.2d 240,242 (Utah 1972). The

plaintiffs’ argument that article 6903 was not superseded in part

similarly depends upon Texas U.C.C. §2.102 and upon the addi-

tional factor that article 6903 was recodified by the Texas legisla-

ture in 1981 (without substantive change) in an attempt to elimi-

nate “repealed, duplicative, unconstitutional, expired, executed,

and other ineffective provisions. . . .”” Tex.Agric.Code §1.001 (1981).

The reenactment of the statute is argued to indicate that it was not

one of those considered by the legislature to have been “renealed”

or “expired.” Sayles v. Robison, 103 Tex. 430, 129 S.W. 346, 348

(Tex. 1910). And finally, the general repealing article of the Texas

U.C.C., §10-103 (repealing all laws in conflict therewith), may not

require a different conclusion; Texas courts do not favor general

repealers in the absence of strong repugnance between the new and

existing statutes and, if possible, the statutes are construed so as to

give effect to both. Gordon v. Lake, 163 Tex. 392, 356 S.W.2d

138, 139 (Tex. 1962); Standard v. Sadler, 383 S.W.2d 391, 395 (Tex.-

Civ. App. 1964). See also Pfluger v. Colquitt, 620 S.W.2d 739, 741

(Tex.Civ.App. 1981), writ ref'd n.r.e. (reconciling Texas U.C.C. and

requirement of Texas Motor Vehicle Certificate of Title Act).

A-24

which they were not paid, than does Iowa Beef. See

Black v. Vaughan, 70 Tex. 47, 7 S.W. 604 (Tex. 1888);

Wells v. Littlefield, 59 Tex. 556 (1883); Goode v. Mar-

tinez, 237 S.W. 576 (Tex.Civ.App. 1922); Swann v. Lar-

kin, 8 Tex.Civ.App. 421, 28 S.W. 217 (Tex.Civ.App. 1894).

See also John Clay & Co. Livestock Commission v. Cle-

ments, 214 F.2d 803, 806 (5th Cir. 1954). However, the

latest and most authoritative expression of state law

applicable to the facts of a case is controlling. Delta Air

Lines, Inc. v. McDonnell Douglas Corp., 503 F.2d 239,

245 (5th Cir. 1974), cert. denied, 421 U.S. 965, 95 S.Ct.

1953, 44 L.Ed.2d 451 (1975).

In the most recent decision in Valley Stockyards

Company uv. Kinsel, 369 S.W.2d 19 (Tex. 1963), the

Supreme Court of Texas was presented with facts basic-

ally indistinguishable from those in the present case,

construed most favorably to Brumley Estate’s conten-

tions. In that case, a cattle seller, Kinsel, sold cattle toa

buyer without a bill of sale, and received a worthless

check in payment. The buyer then sold the cattle to a

stockyard in a county to which 6903 does not apply.

Kinsel subsequently sued the stockyard, contending

that the latter was liable to him for conversion.

The Texas Supreme Court, although without specifi-

cally addressing article 6903, held that the dispositive

question in that case was the factual determination of

whether Kinsel had intended to pass title to the buyer

when he delivered the cattle, or whether he had intended

that the passage of title be conditional on the subsequent

honoring of the check by the bank. Jd. at 20. The court

indicated that, if Kinsel had intended to pass title to the

cattle by delivery, then title had thereby passed, and the

A-25

stockyard had obtained better title to the cattle than was

retained by Kinsel. The dissent contended that article

6903 was applicable to the facts there presented. Jd. at 27.

The Texas Supreme Court did not consider the absence

of a bill of sale, and the corresponding applicability of

article 6903, to be determinative of the rights of the par-

ties under those circumstances. Instead, the court consid-

ered dispositive the application of the facts to the then

(and subsequently legislatively repealed, see below),

Texas general legal doctrine that when a seller receives a

check in payment, he is presumed to intend to retain title

to the goods sold until the check is honored by the drawee

bank. The court held that this presumption could be

rebutted by facts to the contrary, and that it was for the

trier of fact to determine the “controlling question” of the

intent of the parties to the transaction. By so defining

what was the “controlling question” for review, the court

thus concluded that if Kinsel had intended to pass title by

delivery, his sale of cattle was valid as to him despite the

absence of a bill of sale, at least when the cattle seller

knew that the buyer contemplated resale in a place

exempt from the operation of article 6903, and the stock-

yard was not liable to him for the unpaid purchase price

of the cattle.

It is true that the majority opinion did not mention

article 6903, nor did it address the statement made in the

dissenting opinion to the effect that article 6903 was

applicable to cattle sales in the county where the initial

sale was made. The issue was, nevertheless, apparently

presented to the court and rejected by it.? No other Texas

2 The issue was before the court inasmuch as article 6903, was cited

in the briefs, both in Kinsel’s original brief, and in an amicus brief

filed on application for rehearing, was addressed by the dissenting

justices, and inasmuch as the intermediate court opinion there re

versed had relied heavily on John Clay & Co. Livestock Commis-

sion v. Clements, 214 F.2d 803 (5th Cir. 1954), in which article 6903

was in part the basis of the opinion. Valley Stockyards Company

v. Kinsel, 360 S.W.2d 817, ois (Tex.Civ.App. 1962).

A-26

court has made reference to article 6903 (now § 146.001

of the Texas Agriculture Code) since the Texas Supreme

Court’s decision in Kinsel.

[3] Thus, as most recently interpreted in 1963 by the

Texas Supreme Court, article 6903’s requirement — that

a written descriptive bill of sale accompany the delivery

of cattle sold — does not apply against third persons who

purchase from the buyer, when in fact there has been an

intended sale of the cattle by the seller and the seller knew

the buyer contemplated resale in a place exempt from

article 6903. Here the subsequent resale was in Kansas, to

which likewise the statute could not apply.

For this reason, we do not consider the effect of the

Texas U.C.C. on article 6903.

Conclusion

Accordingly, we AFFIRM the jury’s determination that

Heller was not Iowa Beef’s agent in this case, and we

likewise find that the district court’s grant of summary

judgment without written reasons was not reversible

error under the circumstances here presented.

The opinion having been thus changed to clarify our

view of the applicable Texas law, the Petition for Rehear-

ing is DENIED and no member of this panel or judge in

regular active service on the court having requested that

the court be polled on rehearing en banc (Federal Rules of

Appellate Procedure and Local Rule 35) the suggestion for

Rehearing En Banc is DENIED.

A-27

APPENDIX 3

United States Court of Appeals

Fifth Circuit

Office of the Clerk

September 30, 1983

TO ALL PARTIES LISTED BELOW:

No. 81-1600 — BRUMLEY ESTATE, et al.,

v

IOWA BEEF PROCESSORS, INC.,

Dear Counsel:

The enclosed order has this day been entered on peti-

tion( ) for rehearing.

See Rule 41, F.R.A.P. and Local Rule 41 for issuance and

stay of the mandate.

Very truly yours,

GILBERT F. GANUCHEAU, Clerk

By Clare F. Sachs

Deputy Clerk

ec and enclosure to:

Messrs. Mike McKool, Jr.

Thomas A. Graves

Charles W. Cunningham

Mr. Lucian Morehead

Messrs. James T. Malysiak

Edward W. Rothe