A-58597, NOVEMBER 9, 1934, 14 COMP. GEN. 370

A-58597: Nov 9, 1934

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SETS FORTH THAT THE PURPOSE OF SAID AGREEMENT IS THE REMOVAL OF THE SURPLUS WHEAT FROM THE DOMESTIC MARKET. THERE IS NO AUTHORITY IN THE SECRETARY OF AGRICULTURE OR HIS DESIGNATED AGENT TO DIRECT OR AUTHORIZE THE PURCHASE OF SALVAGED FIRE DAMAGED. SUCH DAMAGED WHEAT DOES NOT AFFORD COMPETITION TO GRADED WHEAT ON THE DOMESTIC MARKET AND ITS EXPORTATION INSTEAD OF GRADED WHEAT IS CONTRARY TO THE PURPOSE OF THE AGREEMENT. WITH ENCLOSURES AS FOLLOWS: THERE IS SUBMITTED HEREWITH FOR YOUR CONSIDERATION. COPY OF WHICH IS ATTACHED. WHICH WAS IN TURN ACTING UNDER THE INSTRUCTIONS OF THE AGENT OF THE SECRETARY OF AGRICULTURE. A COPY OF WHICH IS ENCLOSED. THE TRANSACTION WAS CARRIED OUT UNDER THE AUTHORITY OF THE MARKETING AGREEMENT.

A-58597, NOVEMBER 9, 1934, 14 COMP. GEN. 370

MARKETING AGREEMENTS - PURCHASE OF FIRE-DAMAGED WHEAT - AUTHORITY OF THE SECRETARY OF AGRICULTURE WHEN A MARKETING AGREEMENT OF THE SECRETARY OF AGRICULTURE WITH A WHEAT EXPORTING ASSOCIATION MADE PURSUANT TO THE AGRICULTURAL ADJUSTMENT ACT OF MAY 12, 1933, 48 STAT. 31, SETS FORTH THAT THE PURPOSE OF SAID AGREEMENT IS THE REMOVAL OF THE SURPLUS WHEAT FROM THE DOMESTIC MARKET, AND THE NAMES, KINDS, AND GRADES OF WHEAT TO BE PURCHASED, THERE IS NO AUTHORITY IN THE SECRETARY OF AGRICULTURE OR HIS DESIGNATED AGENT TO DIRECT OR AUTHORIZE THE PURCHASE OF SALVAGED FIRE DAMAGED, SMOKE-ODOR WHEAT FOR EXPORT. SUCH DAMAGED WHEAT DOES NOT AFFORD COMPETITION TO GRADED WHEAT ON THE DOMESTIC MARKET AND ITS EXPORTATION INSTEAD OF GRADED WHEAT IS CONTRARY TO THE PURPOSE OF THE AGREEMENT.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF AGRICULTURE, NOVEMBER 9, 1934:

THERE HAS BEEN RECEIVED YOUR LETTER OF OCTOBER 24, 1934, WITH ENCLOSURES AS FOLLOWS:

THERE IS SUBMITTED HEREWITH FOR YOUR CONSIDERATION, THE FOLLOWING FACTS ARISING OUT OF THE TRANSACTION WHICH THE NORTH PACIFIC EMERGENCY EXPORT ASSOCIATION HAD WITH ONE OF ITS MEMBERS UNDER THE TERMS OF MARKETING AGREEMENT NO. 14, COPY OF WHICH IS ATTACHED.

ON FEBRUARY 21, 1934, THE NORTH PACIFIC EMERGENCY EXPORT ASSOCIATION PURCHASED FROM LOUIS DREYFUS AND COMPANY, PORTLAND, OREGON, A MEMBER OF THE ASSOCIATION, 18,666-40 BUSHELS, LOT NO. 1025, OF SAMPLE GRADE WESTERN WHITE WHEAT (SMOKE ODOR), THE PURCHASE PRICE BEING 64 1/2 CENTS, F.O.B. STEAMER AT PORTLAND FOR MARCH SHIPMENT. ON THIS SAME DATE, FEBRUARY 21, 1934, THE ASSOCIATION SOLD TO LOUIS DREYFUS AND COMPANY 18,666-40 BUSHELS, LOT NO. 204W, SAMPLE GRADE WESTERN WHITE WHEAT (SMOKE ODOR), THE SALES PRICE BEING 38 1/2 CENTS F.O.B. STEAMER AT PORTLAND FOR MARCH SHIPMENT, FOR DESTINATION TO LIVERPOOL, ENGLAND, INVOLVING A DIFFERENTIAL PAYMENT OF 26 CENTS A BUSHEL.

LOUIS DREYFUS AND COMPANY IN SELLING THIS WHEAT TO THE ASSOCIATION ACTED PURSUANT TO THE DIRECTION OF THE ASSOCIATION, WHICH WAS IN TURN ACTING UNDER THE INSTRUCTIONS OF THE AGENT OF THE SECRETARY OF AGRICULTURE, DOUGLAS MCINTYRE. THE "DELEGATION OF AUTHORITY" FROM THE SECRETARY TO MCINTYRE, A COPY OF WHICH IS ENCLOSED, DEFINES THE EXTENT OF MCINTYRE'S POWERS. THE TRANSACTION WAS CARRIED OUT UNDER THE AUTHORITY OF THE MARKETING AGREEMENT.

SECTION 4 PROVIDES THAT THE SECRETARY OF AGRICULTURE MAY, FROM TIME TO TIME, GIVE WRITTEN INSTRUCTIONS TO THE ASSOCIATION DIRECTING THE ASSOCIATION TO CONTRACT FOR THE PURCHASE OF WHEAT PRODUCED IN THE PACIFIC NORTHWEST AREA FOR THE PURPOSES PROVIDED FOR IN THE MARKETING AGREEMENT. THIS SECTION PROVIDES THAT:

"SUCH WRITTEN INSTRUCTIONS MAY, IN THE DISCRETION OF THE SECRETARY INCLUDE ANY OR ALL OF THE FOLLOWING:

"/A) THE QUANTITY OF WHEAT TO BE SO PURCHASED, WHICH PURCHASES SHALL BE MADE ON THE BASIS SET FORTH IN EXHIBIT A ATTACHED HERETO AND BY THIS REFERENCE MADE A PART HEREOF;

"/B) THE PRICE TO BE PAID FOR THE SAME AND THE TERMS OF SAID PURCHASE; AND

"/C) THE PERSONS FROM WHOM SUCH PURCHASES ARE TO BE MADE, WHETHER FROM PRODUCERS, ASSOCIATIONS OF PRODUCERS, LOCAL OR TERMINAL WAREHOUSES, OR OTHERS.'

THE MARKETING AGREEMENT FURTHER PROVIDES IN SECTION 5 THEREOF THAT WITH RESPECT TO THE WHEAT PURCHASED UNDER SECTION 4, THE ASSOCIATION SHALL RECEIVE WRITTEN BIDS FROM ITS MEMBERS, EACH DAY, FOR THE PURCHASE FROM THE ASSOCIATION AND THE SALE IN THE EXPORT TRADE OF ANY PART OF SUCH WHEAT IN THE FORM OF WHEAT OR FLOUR. SUCH BIDS SHALL INCLUDE THE FOLLOWING:

"/A) THE AMOUNT OF WHEAT OFFERED TO BE SO PURCHASED AND SOLD IN THE EXPORT TRADE AS WHEAT OR FLOUR;

"/B) THE SALES PRICES AT WHICH SUCH WHEAT AND/OR FLOUR SHALL BE SOLD IN THE EXPORT TRADE AND THE TIME OF SHIPMENT. THE SALES OF THE WHEAT, IF ANY, SHALL BE MADE ON THE BASIS OF NO. 2 BULK, F.O.B. SHIP. THE SALES OF THE FLOUR, IF ANY, SHALL BE ON THE F.A.S. BASIS FOR STEAMER LOADING AT PORTLAND AND ASTORIA, OREGON, AND TACOMA AND SEATTLE, WASHINGTON;

"/C) THE TERMS OF SUCH PROPOSED SALE AND SHIPMENT, INCLUDING THE C.I.F. BID AND THE SPECIFIC DEDUCTIONS MADE IN ESTABLISHING THE F.O.B. OR F.A.S. PRICE; AND

"/D) THE PORT OR PORTS OF DESTINATION OF THE WHEAT OR FLOUR TO BE THUS SOLD.'

THIS SECTION ALSO PROVIDES THAT THE SECRETARY MAY, FROM TIME TO TIME, GIVE WRITTEN INSTRUCTIONS TO THE EXECUTIVE COMMITTEE, OR ITS DULY APPOINTED MANAGING AGENT, TO SELL IN THE EXPORT TRADE OR TO ANY PUBLIC UNEMPLOYMENT RELIEF AGENCY ANY PART OF THE WHEAT SO PURCHASED PURSUANT TO SECTION 4 HEREOF, IN THE FORM OF WHEAT OR FLOUR. SUCH WRITTEN INSTRUCTIONS MAY, IN THE DISCRETION OF THE SECRETARY, INCLUDE ANY OR ALL OF THE FOLLOWING:

"/A) THE AMOUNT OF WHEAT AND/OR FLOUR TO BE SOLD;

"/B)THE SALES PRICES AT WHICH SUCH WHEAT AND/OR FLOUR SHALL BE SOLD. THE SALES OF THE WHEAT, IF ANY, SHALL BE MADE ON THE BASIS OF NO. 2 BULK, F.O.B. SHIP. THE SALES OF THE FLOUR, IF ANY, SHALL BE MADE ON F.A.S., BASIS FOR STEAMER LOADING AT PORTLAND AND ASTORIA, OREGON, AND TACOMA AND SEATTLE, WASHINGTON;

"/C) THE TERMS OF SUCH PROPOSED SALE AND SHIPMENT INCLUDING THE C.I.F. BIDS AND THE SPECIFIC DEDUCTIONS MADE IN ESTABLISHING THE F.O.B. OR F.A.S. PRICE;

"/D) THE PORT OR PORTS OF DESTINATION OF THE WHEAT AND/OR FLOUR TO BE THUS SOLD; AND

"/E) THE PURCHASER TO WHOM THE WHEAT AND/OR FLOUR SHALL BE THUS SOLD.'

FURTHER, UNDER THE MARKETING AGREEMENT THE ASSOCIATION AGREES TO TRANSFER CONTRACTS FOR A SUFFICIENT AMOUNT OF WHEAT PURCHASED PURSUANT TO SECTION 4 TO PERMIT THE INDIVIDUAL MEMBERS TO CARRY OUT THEIR BIDS WHICH HAVE BEEN ACCEPTED BY THE ASSOCIATION, AND THE MEMBERS AGREE TO PAY THE PURCHASE PRICE FOR THE CONTRACT SO TRANSFERRED PURSUANT TO THE TERMS OF SUCH CONTRACT. SECTIONS 8 AND 9 OF THE MARKETING AGREEMENT PROVIDE THAT THE SECRETARY OF AGRICULTURE SHALL PAY TO THE ASSOCIATION FOR THE WHEAT BOUGHT AND SOLD, PURSUANT TO SECTIONS 4 AND 5 OF THE MARKETING AGREEMENT, AN AMOUNT EQUAL TO THE DIFFERENCE BETWEEN THE PURCHASE PRICE AND THE NET SALES PRICE, WHICH MONEY IS TO BE PAID BY THE ASSOCIATION TO THE MEMBERS TO WHOM THE CONTRACTED WHEAT HAS BEEN TRANSFERRED BY THE ASSOCIATION. THE TERMS "PURCHASE PRICE" AND "NET SALES PRICE," AS USED IN THE MARKETING AGREEMENT, ARE DEFINED IN SECTION 7 THEREOF.

PRESUMABLY, ACTING UNDER SECTION 4, THE ASSOCIATION, ON THE INSTRUCTION OF DOUGLAS MCINTYRE, PURCHASED FROM LOUIS DREYFUS AND COMPANY THIS 18,666- 40 BUSHELS OF SAMPLE GRADE SMOKE ODOR WHEAT AND DREYFUS HOLDS A CONTRACT FROM THE ASSOCIATION SIGNED BY THE MANAGING AGENT AND THE OFFICIAL REPRESENTATIVE OF THE SECRETARY, BLANK COPY OF WHICH "CONTRACT FOR PURCHASE OF WHEAT" IS ATTACHED.

AGAIN, PRESUMABLY ACTING UNDER SECTION 5, THE ASSOCIATION, ON THE INSTRUCTION OF DOUGLAS MCINTYRE, ACCEPTED THE BID OF LOUIS DREYFUS AND COMPANY FOR THE PURCHASE FROM THE ASSOCIATION OF 18,666-40 BUSHELS OF SMOKE ODOR WHEAT FOR SALE IN THE EXPORT TRADE. THE SALES PRICE SPECIFIED IN THE BID WAS 38 1/2 CENTS. THE ASSOCIATION THEN ASSIGNED TO LOUIS DREYFUS AND COMPANY THE PURCHASE CONTRACT THE 18,666-40 BUSHELS OF SMOKE ODOR WHEAT AND THE AMOUNT DUE THEREUNDER HAS BEEN PAID BY THE COMPANY. ALSO, EVIDENCE OF EXPORTATION HAS BEEN FURNISHED TO THE ASSOCIATION.

UPON INVESTIGATION IT HAS BEEN DETERMINED THAT BEFORE THE WHEAT HAD BEEN PURCHASED BY THE ASSOCIATION IT HAD BEEN STORED IN A WAREHOUSE AT SAPOLIL, WASHINGTON, WHICH WAREHOUSE WAS DESTROYED BY FIRE AND THIS LOT OF WHEAT WAS SALVAGED WHEAT, WHICH HAD BEEN SHIPPED INTO PORTLAND, OREGON, AND HAD BEEN INSPECTED BY FEDERAL INSPECTORS AND SEGREGATED IN THE ELEVATOR AT PORTLAND AS NOT FIT FOR MIXING IN WHEAT OF OTHER GRADES. INDICATIVE OF THE LOW QUALITY IS THE FACT THAT THE OUTGOING INSPECTION CERTIFICATE ATTACHED TO THE VOUCHER READ: "SAMPLE GRADE WESTERN WHITE, DISTINCTLY LOW QUALITY.'

THERE IS NOW BEFORE THE DEPARTMENT A CLAIM OF LOUIS DREYFUS AND COMPANY FOR $5,014.32 TO COVER THE DIFFERENTIAL BETWEEN THE PURCHASE PRICE WHICH IT PAID FOR THE CONTRACTED WHEAT (THIS BEING THE PAYMENT MADE UNDER THE ASSIGNED CONTRACT) AND THE NET SALES PRICE RECEIVED IN CONNECTION WITH THE SALE OF THE WHEAT (THIS BEING THE PRICE SPECIFIED IN THE BID LESS COSTS INCURRED IN THE HANDLING OF THE WHEAT). IT ALSO APPEARS THAT WHEN THE WHEAT WAS ACTUALLY SHIPPED THAT THE TOTAL AMOUNT WAS 18,572-35 BUSHELS.

UPON PRESENTATION TO THE AUDITOR'S OFFICE OF THE DOCUMENTS IN CONNECTION WITH THE HANDLING OF THIS TRANSACTION AND REQUEST FOR PAYMENT OF THE $5,014.32, THE AUDITOR'S OFFICE RAISED THE QUESTION AS TO WHETHER OR NOT, UNDER THE MARKETING AGREEMENT, DOUGLAS MCINTYRE, ACTING AS AGENT OF THE SECRETARY, AND THE ASSOCIATION, UNDER THE AUTHORITY DIRECTED TO IT UNDER THE MARKETING AGREEMENT, WERE WITHIN THE TERMS OF THE MARKETING AGREEMENT IN THE PURCHASE AND SALE OF SMOKE ODOR WHEAT OF THIS LOW QUALITY, IN VIEW OF THE FACT THAT IT COULD NOT BE MIXED WITH OTHER WHEAT SO AS TO PRODUCE A GRADE NO. 2 OR BETTER QUALITY. THEY FURTHER CONTEND THAT EXHIBIT A OF THE MARKETING AGREEMENT DID NOT SPECIFICALLY PROVIDE FOR THE PURCHASE OF SMOKE -ODOR WHEAT AND THERE IS NO GENERAL PROVISION RELATING TO WHEAT NOT SPECIFICALLY PROVIDED FOR IN THE EXHIBIT.

IN EXPLANATION AS TO WHY THE PURCHASE AND SALE OF THIS PARTICULAR WHEAT WAS AUTHORIZED BY THE SECRETARY'S REPRESENTATIVE, MR. MCINTYRE EXPLAINED THAT UNDER THE DELEGATION OF AUTHORITY, DATED OCTOBER 10, 1933, PARAGRAPHS 6 AND 7, HE WAS GRANTED THE AUTHORITY TO GIVE INSTRUCTIONS FOR THE PURCHASE OF WHEAT UNDER SECTION 4 AND THE SALE OF THE WHEAT UNDER SECTION 5, AND THAT HIS INTERPRETATION OF SECTION 4 GAVE HIM DISCRETIONARY POWERS TO MAKE THIS PURCHASE IN THE WORDING ,SUCH WRITTEN INSTRUCTIONS MAY, IN THE DISCRETION OF THE SECRETARY, INCLUDE ANY OR ALL OF THE FOLLOWING; ," AND AS TO THE SALE, SECTION 5 PROVIDING,"SUCH WRITTEN INSTRUCTIONS MAY, IN THE DISCRETION OF THE SECRETARY, INCLUDE ANY OR ALL OF THE FOLLOWING: .'

MR. MCINTYRE FURTHER STATES THAT HE INTERPRETED SECTION 5, WHICH PROVIDES FOR SALES TO BE MADE ON THE BASIS OF NO. 2 BULK, F.O.B., THAT THE WORD "BASIS" PRESUMABLY WAS USED IN ORDER THAT OTHER GRADES MAY BE EXPORTED EITHER AT A PREMIUM OR DISCOUNT, ACCORDING TO THE OFFICIAL GRADING OF THE FEDERAL INSPECTORS. HIS LETTER OF EXPLANATION FURTHER READS:

"ALL THESE CONDITIONS, AS STATED ABOVE, WERE COMPLIED WITH, AND AS THE MARKETING AGREEMENT WAS ENTERED INTO FOR THE DISPOSAL OF NORTH PACIFIC WHEAT SURPLUS, OF WHICH THE SHIPMENT UNDER QUESTION CONSTITUTED A PART, I CAN SEE NO REASON FOR WITHHOLDING PAYMENT OF THE VOUCHER SUBMITTED BY MESSRS. LOUIS DREYFUS AND COMPANY.'

IN VIEW OF THE FOREGOING STATEMENT OF FACTS, THE FOLLOWING QUESTIONS ARE PRESENTED FOR YOUR DECISION:

1. IS THE SECRETARY OF AGRICULTURE, UNDER THE TERMS OF THE MARKETING AGREEMENT, OBLIGED TO PAY THE CLAIM OF LOUIS DREYFUS AND COMPANY, FOR $5,014.32, THE DIFFERENTIAL ON THE PURCHASE AND SALE OF THE SMOKE-ODOR WHEAT?

2. IF THE SECRETARY IS NOT OBLIGATED TO PAY THE CLAIM, MAY HE RATIFY THE APPROVAL OF THE SECRETARY'S REPRESENTATIVE, MR. MCINTYRE, WHO HAS AUTHORIZED THE PURCHASE AND SALE OF THIS WHEAT AND MAKE PAYMENT ON THE BASIS OF THIS RATIFICATION?

FOR YOUR INFORMATION IN CONNECTION WITH THE QUESTIONS PRESENTED FOR YOUR CONSIDERATION, I AM ENCLOSING COPY OF THE AGRICULTURAL ADJUSTMENT ACT, THE MARKETING AGREEMENT FOR THE DISPOSAL OF NORTH PACIFIC WHEAT SURPLUS, THE CONTRACT FORMS FOR THE PURCHASE AND SALE OF WHEAT PURSUANT TO THE MARKETING AGREEMENT AND THE "DELEGATION OF AUTHORITY" FROM THE SECRETARY OF AGRICULTURE TO DOUGLAS MCINTYRE.

THE DECLARED POLICY OF CONGRESS IN THE PASSAGE OF THE AGRICULTURAL ADJUSTMENT ACT OF MAY 12, 1933, 48 STAT. 31, ET SEQ., AS STATED THEREIN, MAY BE SUMMARIZED AS A PURPOSE TO AFFORD THE FARMER A BETTER RETURN FOR HIS PRODUCTS WITHOUT UNDULY BURDENING THE CONSUMER. THE MARKETING AGREEMENT WITH THE NORTHERN PACIFIC EMERGENCY EXPORT ASSOCIATION (HEREINAFTER CALLED THE "ASSOCIATION"), MADE BY THE SECRETARY OF AGRICULTURE, OCTOBER 11, 1933, WAS AUTHORIZED BY THE ACT, AND STATED ITS PURPOSES IN CONSONANCE WITH THE PROVISIONS OF THE STATUTE. IT SET FORTH THAT THERE WAS A SURPLUS OF WHEAT IN THE PACIFIC NORTHWEST, ESTIMATED AT 25,000,000 BUSHELS OF THE 1932 CROP, AND THAT PRODUCERS COULD NOT OBTAIN A FAIR PRICE FOR THAT WHEAT OR FOR THE 1933 CROP THEN IN PROCESS OF HARVESTING AND MARKETING, AND THAT THE SECRETARY HAD DETERMINED IT WAS NECESSARY TO REMOVE THE SURPLUS FROM THE DEPRESSED DOMESTIC MARKET BY DISPOSAL IN FOREIGN MARKETS AND/OR TO OR THROUGH PUBLIC UNEMPLOYMENT RELIEF AGENCIES; THAT THE CONDITION CREATED AN EMERGENCY AND THAT THE AGREEMENT WAS ENTERED INTO FOR THE PURPOSE OF CORRECTING THE EXISTING CONDITIONS AND EFFECTUATING THE DECLARED POLICY OF THE ACT.

THE MARKETING AGREEMENT WHEN EXECUTED BECAME A CONTRACT BINDING UPON THE SECRETARY AND THE ASSOCIATION, AND ITS PROVISIONS MEASURE THE AUTHORITY OF THE SECRETARY OF AGRICULTURE THEREUNDER. UNDER DATE OF OCTOBER 13, 1933, THE SECRETARY OF AGRICULTURE DELEGATED TO DOUGLAS MCINTYRE ALL THE POWERS AND FUNCTIONS GRANTED OR RESERVED TO, OR VESTED IN THE SECRETARY BY THE MARKETING AGREEMENT. AN EXAMINATION OF THIS DELEGATION DISCLOSES THAT THE POWERS DELEGATED WERE COEXTENSIVE WITH THOSE OF THE SECRETARY OF AGRICULTURE. THEY COULD BE NO GREATER. THE QUESTION FOR DETERMINATION, THEREFORE, IS THE AUTHORITY OF THE SECRETARY OF AGRICULTURE, AND SUCH AUTHORITY IS FOR CONSIDERATION IN THE LIGHT OF THE CONDITIONS INTENDED TO BE MET, AND THE PROVISIONS OF THE AGREEMENT.

SECTION 4 OF THE MARKETING AGREEMENT MADE "EXHIBIT A" ATTACHED THERETO A PART THEREOF AND PROVIDED THAT PURCHASES OF WHEAT SHOULD BE MADE ON THE BASIS SET FORTH THEREIN. "EXHIBIT A" NAMES THE VARIOUS KINDS OF WHEAT TO BE PURCHASED, FIXES THE STANDARD OF QUALITY THEREFOR, AND STIPULATES THE DISCOUNTS TO BE ALLOWED FOR VARIOUS GRADES LESS THAN SUCH STANDARD. THE EXHIBIT IS COMPREHENSIVE IN ITS PROVISIONS AND WITHOUT RECITING ITS CONTENTS, IT IS SUFFICIENT TO SAY THAT THERE IS NOTHING IN "EXHIBIT A" OR IN THE MARKETING AGREEMENT CONTEMPLATING OR EMPOWERING THE SECRETARY OF AGRICULTURE EITHER IN SPECIFIC TERMS OR BY NECESSARY IMPLICATION TO AUTHORIZE OR DIRECT THE PURCHASE OF FIRE DAMAGED OR SMOKE-ODOR WHEAT. SECTION 4 OF THE AGREEMENT PROVIDES THAT THE SECRETARY SHALL HAVE AUTHORITY TO GIVE WRITTEN INSTRUCTIONS AS TO THE QUANTITY OF WHEAT TO BE PURCHASED, THE PRICE TO BE PAID THEREFOR, AND THE TERMS ON WHICH, AND PERSONS FROM WHOM SUCH PURCHASES MAY BE MADE. SUCH AUTHORITY MUST BE HELD TO BE LIMITED BY "EXHIBIT A" TO THE TYPES AND QUALITY OF WHEAT COVERED THEREBY. THE WORDS IN SECTIONS 4 AND 5 OF THE MARKETING AGREEMENT STIPULATING THAT "SUCH WRITTEN INSTRUCTIONS MAY, IN THE DISCRETION OF THE SECRETARY INCLUDE ANY OR ALL OF THE FOLLOWING," CONTENDED AS BEING AUTHORITY FOR THE PURCHASE HERE IN QUESTION MAY NOT BE SO CONSTRUED. THE CONTRARY THE PROVISION IN QUESTION OPERATES AS A LIMITATION UPON THE AUTHORITY OF THE SECRETARY IN THAT HE MAY INCLUDE IN WRITTEN INSTRUCTIONS ANY OF THE "FOLLOWING" STIPULATIONS AS SET OUT IN THE AGREEMENT BUT BEYOND THESE LIMITATIONS HE MAY NOT ISSUE INSTRUCTIONS OR AUTHORIZATIONS TO THE ASSOCIATION.

IT APPEARS FROM YOUR SUBMISSION THAT THE WHEAT HERE INVOLVED HAD BEEN DAMAGED BY FIRE, INSPECTED BY FEDERAL INSPECTOR AND SEGREGATED AS NOT FIT FOR MIXING WITH OTHER WHEAT, AND THAT OUTGOING INSPECTION CERTIFICATE FIXED IT AS "DISTINCTLY LOW QUALITY.' IT WAS DAMAGED AND SALVAGED WHEAT, KNOWN AS SUCH. MANIFESTLY IN ITS CONDITION IT WAS NOT WHAT MIGHT BE DESIGNATED AS ,COMPETITIVE" WHEAT, THAT IS, SUCH WHEAT AS WAS CONTEMPLATED AND COVERED BY THE MARKETING AGREEMENT. ITS PRESENCE IN THE DOMESTIC MARKET DID NOT AFFORD COMPETITION TO GRADED WHEAT. ITS REMOVAL FROM THE DOMESTIC MARKET DID NOT SERVE TO REDUCE THE SURPLUS OF COMPETITIVE WHEAT OR TO RELIEVE THE CONDITION OUTLINED IN THE AGREEMENT. ON THE OTHER HAND ITS EXPORTATION PRESUMABLY SERVED TO PREVENT THE EXPORTATION OF A SIMILAR QUANTITY OF THE QUALITY OF WHEAT COVERED IN THE AGREEMENT.

SUCH BEING THE CASE THE PURCHASE OF THE WHEAT HERE INVOLVED WAS NOT WITHIN EITHER THE LETTER OR THE SPIRIT OF THE MARKETING AGREEMENT. THERE WAS NO AUTHORITY IN THE SECRETARY OF AGRICULTURE TO DIRECT ITS PURCHASE, AND AS A MEMBER OF THE ASSOCIATION AND A SIGNER OF THE MARKETING AGREEMENT, DREYFUS AND CO. WAS CHARGED WITH KNOWLEDGE OF THAT FACT. SINCE THE SECRETARY OF AGRICULTURE WAS NOT AUTHORIZED UNDER THE LAW AND THE MARKETING AGREEMENT TO DIRECT THE PURCHASE, IT MUST FOLLOW THAT THERE CAN BE NO RATIFICATION OF THE ACT OF HIS REPRESENTATIVE IN MAKING THE PURCHASE.

ACCORDINGLY, YOUR QUESTIONS ARE ANSWERED IN THE NEGATIVE AND YOU ARE ADVISED THAT THERE IS NO LEGAL BASIS FOR THE USE OF APPROPRIATED MONEYS FOR THE PAYMENT OF THE CLAIM.