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Commodity Futures Trading Commission 

CEA CASES 

NAME: GARNAC GRAIN COMPANY, INC. 

CITATION: 8 Agric. Dec. 514 

DOCKET NUMBER: 45 

DATE: MAY 20, 1949 

DOCUMENT TYPE: DISMISSAL OF PETITION FOR INTERVENTION, REOPENING, ETC. 

(A. D. 2086) 

 

In re Garnac Grain Company, Inc., et al. CEA Doc. No. 45. Decided May 20, 1949. 

Dismissal of Petition for Intervention and Reopening

Petition for intervention, reopening, etc., dismissed, where grounds for 

petition are based on matter wholly extraneous to this proceeding, and where the 

petitioner has no justiciable interest in the outcome of the proceeding, but 

certain language in the prior decision is amended to indicate that the decision 

did not intend to convey the impression that the respondents' allegations with 

reference to the petitioner's negligence were correct. * 

* Reference to other points involved in this case will be found in 

Index-Digest and Subject-Index in this issue of Agriculture Decisions. -- 

Ed. 

 

Messrs. Maurice J. Smith and Richard T. Graham, of New York City, for 

petitioner. Mr. Benj. M. Holstein for complainant. Mr. Robert Perret, of New 

York City, for respondent. 

 

Decision by Thomas J. Flavin, Judicial Officer

DISMISSAL OF PETITION FOR INTERVENTION, REOPENING, ETC.

I

On March 24, 1949, a decision and order were entered in this proceeding under 

the Commodity Exchange Act finding, among other things, that respondent Garnac 

Grain Company, Inc., failed to register with the Secretary of Agriculture as a 

futures commission merchant in 1946 and 1947 in violation of the act. 

The answer filed by the respondents in the proceeding contains the following 

statements with respect to the allegations of the complaint dealing with failure 

to register: 

"That the corporate respondent had not again registered as a futures 

commission merchant under Section 4-d of the Commodity Exchange Act for the 

reason that the then President of the company, Paul Schupbach, was the office 

manager and the person entrusted with the handling of such matters. That the 

 

 

said Paul Schupbach had opened the mail, received the blanks and placed them in 

his drawer without taking the necessary steps to register as required by the 

regulations. That for other acts of negligence arrangements were made to have 

him leave the employ of the company in the Fall of 1947. * * * 

"That the failure of the corporate respondent and the three individual 

respondents Fred Hediger, H. R. Schmid and George Lulie, to renew the 

registration of the company as a futures commission merchant be condoned for the 
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reason that such failure was due to the neglect of a former officer of the 

company and that their failure to register and to file reports was not willful, 

and actually harmed no one." 

The decision entered March 24, 1949, says the following in the second 

paragraph under the heading "Conclusions." 

"Although Garnac may have had only a few customers in 1946 and 1947, it 

concededly failed to comply with the statutory requirement that it register 

pursuant to section 4d of the act. The initial failure to apply for 

registration may well have been due to the carelessness of an officer who was 

later discharged for inefficiency, as claimed. The continuance in a regulated 

business without complying with valid requirements, however, is not to be 

lightly dismissed as a mere technical violation. The remaining officers were 

more than merely negligent in failing to correct the discharged officer's 

failure for so long." 

II

On April 12, 1949, Paul Schupbach filed an application to intervene in the 

proceeding and to reopen the hearing. The petition relates that Mr. Schupbach 

was in the active employment of the Garnac Grain Company, Inc., from 1938 until 

the latter part of 1947; that after 1945 he had no supervision, control, or 

direction over Garnac's trading; that he did not take part directly or 

indirectly in any trading transaction by Garnac; that he was never president of 

the company; that he commenced his employment in 1938 as an assistant treasurer 

and was made treasurer in 1941; that Mr. Fred Hediger, president of Garnac, was 

in full supervision and control over all futures transactions by Garnac during 

the period involved in the proceeding; that although petitioner was treasurer of 

Garnac in name, he acted in a ministerial capacity under specific direction from 

the president; that Garnac's failure to register as a futures commission 

merchant was not due to petitioner's oversight; that his services with the firm 

were entirely satisfactory and that he was not discharged for inefficiency or 

any other cause. Attached to the petition are exhibits consisting of letters 

from the Garnac Grain Company indicating Garnac's satisfaction with and 

appreciation for Schupbach's services to the company. The petition relates that 

Mr. Schupbach has been in the grain business for a number of years, that he 

expects to remain in the business, and that the wide distribution of the 

decision of March 24, 1949, with its 

 

 

implication of negligence on the part of petitioner, has caused or may cause 

irreparable damage to his reputation. The petition asks that the proceeding be 

reopened so that petitioner may prove in evidence the facts alleged in his 

petition. 

Answers to the petition for intervention were filed by the respondent Garnac 

Grain Company, Inc., and by complainant. Garnac's answer admits that the 

company appreciated Schupbach's honesty, loyalty and efforts, but contends that 

there was a difference of opinion between Mr. Schupbach and the company as to 

whether the treasurer should undertake activities other than those of a 

ministerial nature. Both Garnac's answer and the answer filed by complainant 

point out that the issues sought to be raised by the petition for intervention 

are not material or relevant to the proceeding. 

Schupbach filed an affidavit on May 9, 1949, reiterating that he had been 

specifically instructed by Fred Hediger, Garnac's president, to follow orders 

and that trading was Hediger's business. Petitioner states in the affidavit, 

"The fair statement in the Answer to my petition controverting the original 

contention of a discharge for acts of negligence is the following on page 3 of 

Garnac's answer: 

" 'The Company had determined to effect certain changes in its management in 

view of the resumption of more normal business after the war years and Mr. 
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Schupbach left its employ by mutual consent. As already stated, the Company had 

employed Mr. Schupbach and appreciated his honesty, loyalty and efforts.' " 

III

The question as to who had the responsibility in the Garnac organization of 

filing the registration papers is not one that must be answered in this 

proceeding. The fact is that Garnac was not registered and, as far as this 

proceeding is concerned, the act was breached, regardless of what may have been 

the distribution of duties among the officials of the company. Therefore, we 

see no reason for reopening the proceeding on this score. Necessarily, 

therefore, we would not reopen the proceeding to adjudicate the question as to 

why Mr. Schupbach left the company. This is a matter wholly extraneous to our 

proceeding. Mr. Schupbach has no justiciable interest in the outcome of the 

proceeding, that is a decision as to whether or not respondents violated the act 

and if so, what the sanctions should be. Accordingly, the petition for 

intervention, reopening, etc., is dismissed. 

However, the language in our decision, quoted above, may not be happily 

worded as far as Mr. Schupbach is concerned, although we did not intend to 

convey the impression that we had found Garnac's allegation in this connection 

to be correct. Consequently, the decision 

 

 

is amended by substituting for the paragraph in question the following: 

"Although Garnac may have had only a few customers in 1946 and 1947, it 

concededly failed to comply with the statutory requirement that it register 

pursuant to section 4d of the act. The continuance in a regulated business 

without complying with valid requirements is not to be lightly dismissed as a 

mere technical violation. The remaining officers were more than merely 

negligent in failing to correct the discharged officer's failure for so long." 

Copies of this decision and order shall be served upon the parties and also 

upon the contract markets so that publicity may be given to this decision and 

order explaining Mr. Schupbach's position equal to that of original decision and 

order. 

 

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