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The answer, which at once suggests itself to one familiar with the structure of our government, in which all power is delegated, and is defined by law, constitutional or statutory, is that to one or both of these sources we must resort in every instance. We have no officers in this government from the President down to the most subordinate agent, who does not hold office under the law, with prescribed duties and limited authority. And while same of these, as the President, the Legislature, and the Judiciary, exercise powers in some sense left to the more general definitions necessarily incident to fundamental law found in the Constitution, the larger portion of them are the creation of statutory law, with duties and powers prescribed and limited by that law. It would seem reasonable, then that on the question of the authority of the Secretary of War to accept bills of exchange, we must look mainly to the acts of Congress.

dese acceptances can be considered as payments, they wer
en rince of the service rendered and supplies furnished--p
axtore anything was due, They are in that view not only
mority of law, but are expressly forbidden by the act of
2013 (3 Stat. at Large 723) The first section of that s
a ter been repealed, enacts 'that, from after the passing a
dize of public money shall be made in any case whatever; t
x cf contracts for the performance of any service, or tie
datides of any description for the United States, pa-
exity value of the services rendered, or the articles delin
sud payment,

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fraction by which these drafts were accepted was in dire
this law, and of the limitations which it imposes like
the Government. Every citizen of the United States is s

, and when a purchaser of one of these drafts began t
wees necessary to ascertain the authority for their accert
or leamed at once that, if received by Russell, Majors &
z, they were in violation of law, and if received as acom
zvere evasions of this law, and without any shadow of aut

The authority to issue bills of exchange not being one expressly given by statute, can only arise as an incident to the exercise of some other power. When it becomes the duty of an officer to pay money at a distant point, he may do so by a bill of exchange, because that is the usual and appropriate mode of doing it. So, when an officer or agent of the government at a distance, is entitled' to money here, the person holding the fund may pay his drafts. And whenever, in conducting any of the fiscal affairs of the government, the drawing a bill of exchange is the appropriate means of doing that which the department or officer having the matter in charge, has right to do, then he can draw and bind the government in doing so. But the obligation resting on him to perform that duty, and his right and authority to effect such an object, is always open to inquiry, and if they be found wanting, of if they be forbidden by express statute, then the draft or acceptance is not binding on the government.

*** are of opinion that the judgments rendered by the Cour polist the plaintiffs, must be Affirmed.

FEDERAL CROP INSURANCE CORP. v. MI RRILL

It cannot be maintained that, because an officer can lawfully issue bills of exchange for some purposes, that no inquiry can be made in any case into the purpose for which a bill was issued. The government cannot be held to a more rigid rule, in this respect, than a private individual.

332 U.S. 380 (1947)

LEIE FRANKFURTER delivered the opinion of the Court.

seit this case here because it involves a question of in;

sein) is a wholly Government-owned .enterprise, created hy

It seems to us that such a transaction can be defended on no principle of law, and that in thus lending to Russell & Co. the name and credit of the United States, the Secretary was acting wholly beyond the scope of his authority. The paper was, in fact, accommodation paper, as it was found to be by the Court of Claims, by which the Secretary undertook to make the United States acceptor for the sole benefit of the drawers. It was a loan of the credit of the government volunteered by him, without consideration and without authority. That the transaction was not payment, for the supplies furnished, is clear, because the acceptances were not expected to be paid hy the government, nor payable at the treasury, but were to be met by the drawers at the bank with which they dealt. These drafts did not interrupt in the least the regular payments made to Russell & Co. by the Quartermaster's Department, according to their contracts. Nor do the drafts seem to have had any relation to their maturity. It was therefore, not payment, nor so considered by either party.

puistration of the Federal Crop Insurance Act, 331 V.S. arent facts may be briefly stated. Petitioner (hereinat insurance Act, as an "agency of and within the Departe " Sec. 503 of Chapter 30, Act of 16 February 1938, 525 1913, as amended. To carry out the purposes of the Act,

, "lamencing with the wheat. . .crops planted for harves en toe provisions of this title as it may determine, producer wered "to insure, upon such terms and conditions not i:

32 Stat. 74 $ 508 (a) as amended, 55 Stat. 255, in! The Mact of 23 December 1944, Chapter 713, 58 Stat. 918,

245), 11508 (a). In pursuance of its authority, the Cori

şeist lost in yields due to unavoidable causes, includi:

34

35

But if these acceptances can be considered as payments, they were payments in advance of the service rendered and supplies furnished--payments made before anything was due, They are in that view not only without authority of law, but are expressly forbidden by the act of 31 January 1823, (3 Stat. at Large 723) The first section of that statute, which has never been repealed, enacts "that, from after the passing of this act, no advance of public money shall be made in any case whatever; but in all cases of contracts for the performance of any seryice, or the delivery of articles of any description for the United States, payment shall not exceed the value of the services rendered, or the articles delivered previous to such payment. ."

*

The transaction by which these drafts were accepted was in direct violation of this law, and of the limitations which it imposes upon all officers of the Government. Every citizen of the United States is supposed to know the law, and when a purchaser of one of these drafts began to make inquiries necessary to ascertain the authority for their acceptance, he must have learned at once that, if received by Russell, Majors & Waddell, as payment, they were in violation of law, and if received as accommodation paper, they were evasions of this law, and without any shadow of authority.

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* * * We are of opinion that the judgments rendered by the Court of Claims against the plaintiffs, must be Affirmed.

FEDERAL CROP INSURANCE CORP. V. MERRILL

332 U.S. 380 (1947)

MR. JUSTICE FRANKFURTER delivered the opinion of the Court.

We brought this case here because it involves a question of importance in the administration of the Federal Crop Insurance Act, 331 U.S. 798.

The relevant facts may be briefly stated. Petitioner (hereinafter called the Corporation) is a wholly Government-owned enterprise, created by the Federal Crop Insurance Act, as an "agency of and within the Department of Agriculture.' Sec. 503 of Chapter 30, Act of 16 February 1938, 52 Stat. 72, 7 U.S.C. § 1503, as amended, To carry out the purposes of the Act, the Corporation, "Commencing with the wheat. ..crops planted for harvest in 1945" is empowered "to insure, upon such terms and conditions not inconsistent with the provisions of this title as it may determine, producers of wheat.

.against lost in yields due to unavoidable causes, including drought.

52 Stat. 74 § 508(a) as amended, 55 Stat. 255, in turn amended by the Act of 23 December 1944, Chapter 713, 58 Stat. 918, 7 U.S.C. (Supp. V, 1946), § 1508 (a). In pursuance of its authority, the Corporation

on 5 February 1945, promulgated its Wheat Crop Insurance Regulations, which were duly published in the Federal Register on 7 February 1945. 1Q Fed. Reg. 1586.

On 26 March 1945, respondents applied locally for insurance under the Federal Crop Insurance Act to cover wheat farming operations in Bonneville County, Idaho. Respondents informed the Bonneville County Agricultural Conservation Committee, acting as agent for the Corporation, that they were planting 460 acres of spring wheat and that on 400 of these acres they were reseeding on winter wheat acreage. The Committee advised respondents that the entire crop was insurable, and recommended to the Corporation's Denver Branch office acceptance of the application. (The formal application itself did not disclose that any part of the insured crop was reseeded.) On 28 May 1945, the Corporation accepted the application.

In July, 1945, most of the respondents' crop was destroyed by drought. Upon being notified, the Corporation, after discovering that the destroyed acreage had been reseeded, refused to pay the loss, and this litigation was appropriately begun in one of the lower courts of Idaho. The trial court rejected the Corporation's contention, presented by a demurrer to the complaint, that the Wheat Crop Insurance Regulations barred recovery as a matter of law. Evidence was thereupon permitted to go to the jury to the effect that the respondents had no actual knowledge of the Regulations, insofar as they precluded insurance for reseeded wheat, and that they had in fact been misled by petitioner's agent into believing that spring wheat reseeded on winter wheat acreage was insurable by the Corporation. The jury returned a verdict for the loss on all the 460 acres and the Supreme Court of Idaho affirmed the resulting judgment. 67 Idaho 196, 174 P. 2d 834.

. That court in effect adopted the theory of the trial judge, that since the knowledge of the agent of a private insurance company, under the circumstances of this case, would be attributed to, and thereby bind, a private insurance company, the Corporation is equally bound.

The case no doubt presents phases of hardship. We take for granted that, on the basis of what they were told by Corporation's local agent, the respondents reasonably believed that their entire crop was covered by petitioner's insurance. And so we assume that recovery could be had against a private insurance company. But the Corporation is not a private insurance company. It is too late in the day to urge that the Government is just another private litigant, for purposes of charging it with liability, whenever it takes over a business theretofore conducted by private enterprise or engages in competition with private ventures. Government is not partly public and partly private, depending upon the governmental pedigree of the type of a particular activity or the manner in which the Government conducts it. The Government may carry on its operations through conventional executive agencies or through corporate firms especially created for defined ends. See Kiefer & Keifer v. Reconstruction Finance Corp., 306 U.S. 381, 390. Whatever the form in which the Government functions, anyone entering into an arrangement with the Government takes the risk of having accurately ascertained that he who purports to act for the Government stays within the bounds of his authority. The scope of this authority may be explicitly defined by Congress or be limited by delegated legislation, properly exercised through the rule-making power. And this is so even though, as here, the agent himself may have been unaware of the limitations upon his authority. See,

e.g., Utah Power & Light Co. v. United States, 243 U.S. 389, 409; United States v. Stewart, 311 U.S. 60, 70 and see, generally, The Floyd Acceptances, 7 Wall. 666.

If the Federal Crop Insurance Act had by explicit language prohibited the insurance of spring wheat which is reseeded on winter wheat acreage, the ignorance of such a restriction, either by the respondents or the Corporation's agent, would be immaterial and recovery could not be had against the Corporation for loss of such reseeded wheat. Congress could hardly define the multitudinous details appropriate for the business of crop insurance when the Government entered it. Inevitably "the terms and conditions" upon which valid governmental insurance can be had must be

" defined by the agency acting for the Government. And so Congress has legislated in this instance, as in modern regulatory enactments it so often does, by conferring the rule-making power upon the agency created for carrying out its policy. See § 516 (b), 52 Stat. 72, 77, 7 U.S.C. § 1516 (b). Just as everyone is charged with knowledge of the United States Statutes at Large, Congress has provided that the appearance of rules and regulations in the Federal Register gives legal notice of their contents. 49 Stat. 502, 44 U.S.C. § 307.

Accordingly, the Wheat Crop Insurance Regulations were binding on all who sought to come within the Federal Crop Insurance Act, regardless of actual knowledge of what is in the Regulations or of the hardship resulting from innocent ignorance. The oft-quoted observation in Rock Island, Arkansas & Louisiana Railroad Co. v. United States, 254 U.S. 141, 143, that "Men must turn square corners when they deal with the Government, does not reflect a callous outlook. It merely expresses the duty of all courts to observe the conditions defined by Congress for charging the public treasury. The "terms and conditions" defined by the Corporation, under the authority of Congress, for creating liability on the part of the Government preclude recovery for the loss of the reseeded wheat no matter with what good reason the respondents thought they had obtained insurance from the Government. Indeed, not only do the Wheat Regulations limit the liability of the Government as if they had been enacted by Congress directly, but they were in fact incorporated by reference in the application, as specifically required by the Regulations.

,

We have thus far assumed, as did the parties here and the courts below, that the controlling regulation in fact precluded insurance coverage for spring wheat reseeded on winter wheat acreage. It explicitly states that the term 'wheat crop shall not include .. winter wheat in the 1945 crop year, and spring wheat which has been reseeded on winter wheat acreage in the 1945 crop year. [Sec. 414.37 (V) of Wheat Crop Insurance Regulations, 10 Fed. Reg. 1591.) The circumstances of this case tempt one to read the regulation, since it is for us to read it, with charitable laxity. But not even the temptations of a hard case can elude the clear meaning of the regulation. It precludes recovery for "spring wheat which has been reseeded on winter wheat acreage in the 1945 crop year." Concerning the validity of the regulation, as "not inconsistent with the provisions" of the Federal Crop Insurance Act, no question has been raised.

The judgment is reversed and the cause remanded for further proceedings not inconsistent with this opinion.

Reversed.

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I would affirm the decision of the court below. If crop insurance contracts made by agencies of the United States Government are to be judged by the law of the State in which they are written, I find no error in the court below. If, however, we are to hold them subject only to federal law and to declare what that law is, I can see no reason why we should not adopt a rule which recognizes the practicalities of the business.

It was early discovered that fair dealing in the insurance business required that the entire contract between the policyholder and the insurance company be embodied in the writings which passed between the parties, namely, the written application, if any, and the policy issued. It may be well enough to make some types of contracts with the Government subject to long and involved regulations published in the Federal Register. To my mind, it is an absurdity to hold that every farmer who insures his crop knows what the Federal Register contains or even knows that there is such a publication. If he were to peruse this voluminous and dull publication as it is issued from time to time in order to make sure whether anything has been promulgated that affects his rights, he would never need crop insurance, for he would never get time to plant any crops. Nor am I convinced that a reading of technically-worded regulations would enlighten him much in any event.

In this case, the Government entered a field which required the issuance of large numbers of insurance policies to people engaged in agriculture. It could not expect them to be lawyers, except in rare instances, and one should not be expected to have to employ a lawyer to see whether his own Government is issuing him a policy which in case of loss would turn out to be no policy at all. There was no fraud or concealment, and those who represented the Government in taking on the risk apparently no more suspected the existence of a hidden regulation that would render the contract void than did the policyholder. It is very well to say that those who deal with the Government should turn square corners. But there is no reason why the square corners should constitute a one-way street.

The Government asks us to lift its policies out of the control of the States and to find or fashion a federal rule to govern them, I should respond to that request by laying down a federal rule that would hold these agencies to the same fundamental principles of fair dealing that have been found essential in progressive states to prevent insurance from being an investment in disappointment.

MR. JUSTICE DOUGLAS joins in this opinion.

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