935 F2d 1288 United States v. Me Edwards & Son Inc
935 F.2d 1288
UNITED STATES of America, Plaintiff-Appellee,
M.E. EDWARDS & SON, INC., Defendant-Appellant.
United States Court of Appeals, Fourth Circuit.
Argued March 5, 1991.
Decided June 19, 1991.
NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit.
Appeals from the United States District Court, for the Eastern District of North Carolina, at Elizabeth City. Terrence W. Boyle, District Judge. (CA-88-33-2-CIV, CA-88-32-2-CIV)
John Joseph Butler, Adams, McCullough & Beard, Raleigh, N.C. (argued), for appellants; William H. McCullough, Adams, McCullough & Beard, Raleigh, N.C., on brief.
Stephen Aubrey West, Assistant United States Attorney, Raleigh, N.C. (argued), for appellee; Margaret Person Currin, United States Attorney, Raleigh, N.C., on brief.
Before WIDENER, Circuit Judge, CHAPMAN, Senior Circuit Judge, and MacKENZIE, Senior United States District Judge for the Eastern District of Virginia, Sitting By designation.
This consolidated appeal presents the question of whether the federal six-year statute of limitation for conversion should govern the United States' action for conversion against individuals who allegedly purchased crops in which the Farmers Home Administration (FmHA) had taken a secured interest or whether a North Carolina state statute should bar the suit. The court below applied the federal statute of limitation for conversion, 28 U.S.C. Sec. 2415(b), and granted the United States' motion for summary judgment.
We now affirm.
This appeal involves two cases with essentially the same facts, nearly all of which are uncontested. In February 1980 and July 1982, FmHA took a security interest, or "lien", on behalf of appellee United States ("government"), in specified crops grown on described real estate owned primarily by Lewis and Jennifer Davenport. FmHA perfected its lien by filing financing statements in Washington County, North Carolina, the situs of the real estate (North Carolina has no central filing system). The fact that FmHA filed continuation statements to keep its lien perfected up to the time of appellants' purchases has not been disputed on appeal. See Complaint at Exhibit B-3.
Between June 1985 and January 1986, appellant Suter purchased corn, wheat, and soybeans from the Davenports, without knowledge of the government's lien. The Davenports did not inform FmHA of this sale, nor did they turn over the proceeds to FmHA.
Similarly, appellant Edwards purchased corn and soybeans from the Davenports between October and January 1986, again, with no apparent knowledge of FmHA's secured interest. This sale was also effected without FmHA's knowledge or authorization.
Some time later, though the record does not indicate when, the Davenports defaulted on their FmHA loans, and filed a Chapter 7 petition in bankruptcy. In April 1988, the government demanded payment for the crops allegedly converted by Suter and Edwards, and when payment was not remitted, instituted suits for conversion against both Suter and Edwards in July 1988.
In their motions for dismissal, appellants argued below that North Carolina law, specifically N.C.Gen.Stat. Secs. 44-69.11 and 25-9-403(2)2, operated to bar the government's action for conversion. Specifically, appellants contended that the government's lien had been extinguished by its failure to file an action for conversion within 18 months of appellants' purchase of the crops (FmHA made demand for the proceeds in April 1988 and filed actions for conversion in July 1988). Citing the "relation back" provision of the N.C.Gen.Stat. Sec. 25-9-403(2), appellants averred that the government's interest, since it had become unperfected upon lapse, should be deemed unperfected as against appellants who had purchased the crops before the lapse. Thus, according to appellants, the government had no perfected interest in the crops when it brought causes for conversion in July 1988--approximately 30 months after the alleged conversion.
The district court rejected this argument and granted summary judgment for the government, relying primarily on an unpublished opinion from this court, United States v. Cotton Growers Warehouse, Inc., No. 86-1513 (4th Cir. Oct. 13, 1986), where we earlier applied the federal, six-year statute of limitation for conversion3 to a case nearly identical to the one at bar.
It is firmly established that federal law governs this suit because the rights of the United States, arising under the FmHA lending program, are at stake. Clearfield Trust Co. v. United States, 318 U.S. 363 (1943). The issue is whether the content of the federal law should be adopted state law or the nationwide federal rule. United States v. Kimbell Foods, Inc., 440 U.S. 715, 728 (1979). Appellants rely on Kimbell Foods for the proposition that North Carolina law should be adopted as federal law because it is nondiscriminatory to the government: i.e., it requires no more of the government than is required of local creditors.4 Appellants further contend that the government had no cause of action for conversion at the time of suit because the government's security interest in the crops, from 1980 up until the time of the sales, was never perfected, but rather its perfection was contingent on filing a claim within 18 months of the alleged conversion.
In conjunction with Kimbell Foods, appellants have cited our decision in United States v. Tugwell, 779 F.2d 5 (4th Cir.1985), as authority for an adoption of N.C.Gen.Stat. Sec. 44-69.1. At first glance, Tugwell appears to support appellants' position, even though it involved the conversion of farm equipment as opposed to crops. More importantly, we deem the case inapposite because there we considered only whether state law made conversion an available remedy to the FmHA as holder of a security interest. Id. at 7. In applying North Carolina law, we allowed the conversion action to proceed. Nowhere in that case, however, did we address N.C.Gen.Stat. Sec. 44-69.1 and its effect on the government's time for filing a conversion claim. Nor did we face the problem of choosing between the federal statute of limitation and the relevant state law provision.
Appellants' reliance on Kimbell Foods and Tugwell assumes that N.C.Gen.Stat. Sec. 44-69.1, as applied to this case, is a substantive law rather than a statute of limitation. We addressed this very issue in Cotton Growers, an unpublished per curiam opinion from this court,5 which involved the interaction between N.C.Gen.Stat. Sec. 44-69.1 and 28 U.S.C. Sec. 2415(b). In that case, the FmHA brought its action for conversion approximately 4 1/2 years after the alleged conversion had occurred. The purchaser of the crops in Cotton Growers averred that North Carolina's "eighteen month rule," barred the government's action as untimely. We rejected that argument and applied instead the federal, six-year statute of limitation. See Slip Op. at 2.
Critical to our holding in that case was our conclusion that N.C.Gen.Stat. Sec. 44-69.1 was, in effect, a statute of limitation, rather than a substantive state law.6 Therefore, the question boiled down to choosing between application of the North Carolina statute of limitation or the more generous federal statute of limitation. To this question the answer was simple: "state statutes of limitations are not binding on the United States where a federal statute mandates a different limitation period." See Slip Op. at 5 (citing United States v. Summerlin, 310 U.S. 414, 416 (1940)).
In Cotton Growers, we also focused on when the government's cause for conversion accrued, holding that the government's "right of action accrued at the date of sale in 1980 because the conversion, if any, of the United States' interest in the cotton happened at the point of sale." Id. at 4. Thus, FmHA's "right to recover became fixed at the point of sale and could not be affected by substantive changes in the lien at a later date." Id. at 6.
Appellants have argued, as did the purchasers of the crops in Cotton Growers, that N.C.Gen.Stat. Sec. 44-69.1 is a substantive law governing the duration of agricultural liens, not a statute of limitation, and, therefore, the state law should be adopted if the Kimbell Foods concerns are absent. See United States v. Bailey Feed Mill, Inc., 592 F.Supp. 844, 846 (E.D.N.C.1984). Appellants have pointed to North Carolina's statute of limitation for conversion, N.C.Gen.Stat. Sec. 1-52(4) as evidence that Sec. 44.69.1 is not a statute of limitation.
We are in accord with appellants' contention that Sec. 44-69.1 is not, at least in name, a statute of limitation. The provision, by its terms, designates the duration of a lien on certain crops, i.e., 18 months from the "date of sale or the date of delivery to the purchaser." The interpretation urged on this court by appellants, however, would have the statutory language "sale" denote "transfer," thereby requiring the lien-holder to file a cause of action for conversion within 18 months of transfer of the collateral.
We do not accept appellants' construction of Sec. 44-69.1 because it ignores the effect that such an application would have for the secured party. The net result of applying the state statute in the manner urged by appellants would be to transform this provision into a statute of limitation. The government would be required, despite its financing statements and continuation statements filed in an attempt to maintain its interest, to discover any conversion and bring a cause of action within 18 months of the transfer. Otherwise the government's lien would be of no value.
This application of North Carolina law, in our view, transgresses the limits of state power by directly conflicting with the federal statute's goal of granting the government "a longer period of time to determine whether the government has been damaged and whether it has the right to bring suit." See S.Rep. No. 1328, 89th Cong., 2d Sess. 2, reprinted in 1966 U.S. Code Cong. & Admin.News 2502, 2510; United States v. Summerlin, 310 U.S. 414, 417 (1940).
Appellants have attempted to distinguish Cotton Growers on the ground that we did not confront there the state's lapse statute, N.C.Gen.Stat. Sec. 25-9-403(2). This is a difference without distinction, however, because it in no way bears on our determination that Sec. 44-69.1, as applied by appellants, is a statute of limitation.
We are in accord with the district court's analysis of the relevant North Carolina law of conversion, and its application to the present case.
Under North Carolina law, the tort of conversion is defined as
an unauthorized assumption of the right to ownership over goods or personal chattels belonging to another, to the alteration of their condition or the exclusion of an owner's rights.
Peed v. Burleson's, Inc., 244 N.C. 437, 94 S.E.2d 351 (1956).
At the time appellants purchased the crops from the Davenports, the government's security interest was perfected by its filing of financing statements; the government had also filed continuation statements to maintain its interest.7 As in Cotton Growers, the government's right to recover became fixed at the point of sale and "could not be affected by substantive changes in the lien at a later date." See Slip Op. at 6.
Finally, appellants have argued that summary judgment was improper based on the government's failure to file supporting affidavits. This contention is belied both by the wording of Rule 56 of the Federal Rules of Civil Procedure and by Celotex Corp. v. Catrett, 477 U.S. 317 (1986).
Federal Rule 56, subsection (c), provides, in pertinent part, that:
[t]he judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law.
Any doubt about the requirement of affidavits is removed by Rules 56(a) and (c) which indicate that claimants may move for summary judgment "with or without supporting affidavits." Celotex, 477 U.S. at 323. We likewise have found no support in Celotex for appellants' contention that summary judgment is improper in the absence of supporting affidavits. To the contrary, the Celotex court plainly held that "regardless of whether the moving party accompanies its summary judgment motion with affidavits, the motion may, and should, be granted" if the standard set forth in Rule 56 is satisfied. Id.
Accordingly, we find no error in the district court's grant of summary judgment on the government's conversion claims.
N.C.Gen.Stat. 44-69.1 provides, in pertinent part, that:
No chattel mortgage, agricultural lien or other lien of any nature upon peanuts, cotton, soybeans, corn, wheat or other grains shall be effective for any purpose for a longer period than 18 months from the date of sale or the date of delivery to the purchaser, whichever date shall fall last....
N.C.Gen.Stat. Sec. 25-9-403(2) provides, in pertinent part, that:
Upon lapse the security interest becomes unperfected, unless it is perfected without filing. If the security interest becomes unperfected upon lapse, it is deemed to have been unperfected as against a person who became a purchaser or lien creditor before lapse.
28 U.S.C. Sec. 2415(b) provides, in pertinent part, that
an action for conversion of property of the United States may be brought within six years after the right of action accrues....
In Kimbell Foods, 440 U.S. at 728-29, the Court set forth the factors to be considered when determining whether the content of federal law should be adopted state law or a uniform federal rule. Those factors include: (1) whether there is need for a nationally uniform body of law; (2) whether application of state law would frustrate the objectives of the federal program; and, (3) the extent to which application of a federal rule would disrupt local practice. See also United States v. Tugwell, 779 F.2d 5 (4th Cir.1985) (citing the Kimbell Foods factors in applying North Carolina law to FmHA action for conversion)
While mindful of the notion that unpublished opinions are not binding precedent on this panel of the court, see Fourth Circuit Internal Operating Procedure 36.5, we need not abandon the rationale of that decision as we deem it applicable to the present case
This holding recognized the incorrect characterization of Sec. 44.69-1 as a "state substantive law" dealing with the duration of agricultural liens, rather than as a statute of limitation. See United States v. Bailey Feed Mill, 592 F.Supp. 844, 846 (E.D.N.C.1984). Appellants' reliance on Bailey Feed Mill is, therefore, of no moment. See Slip Op. at 5
It is this fact, that the government filed its continuation statements in accordance with state law, that distinguishes this case from United States v. Central Livestock Corp., 616 F.Supp. 629 (D.Kan.1985), a case relied upon by appellants. In Central Livestock, the government's interest was not perfected at the time of conversion because they had failed to file any continuation statements from the time of the original financing statement in May 1978 up through the time of sale "sometime in 1981." Id. at 631