Cleveland v. McNabb

Dr. W. B. Cleveland and Katherine Cleveland (plaintiffs) leased their land in Tennessee to Jack McNabb (defendant), where McNabb grew cotton. McNabb delivered the cotton to a cotton gin, which issued tickets for the cotton that noted the cotton had been grown on the Clevelands’ land. After ginning, the cotton was taken directly to a warehouse, which issued negotiable warehouse receipts for each bale of cotton that the warehouse held. The receipts referred to certain cotton-gin tickets and listed McNabb as the producer. McNabb provided these warehouse receipts to a local United States Department of Agriculture (USDA) office in exchange for a loan. USDA regulations required that the cotton going into the loan program be lien-free. McNabb told the clerk at the local USDA office that there was no lien on the cotton, and the clerk did not ask where McNabb had grown the cotton or whether the cotton had been grown on leased land. The loan papers stated that there was no lien on the cotton. A copy of McNabb’s lease was on file in the local USDA office. Under the terms of the loan, when the loan was not repaid, the cotton became the property of the United States. The Clevelands sued McNabb for unpaid rent under the lease and also sued the Commodity Credit Corporation (CCC) (defendant), a branch of the USDA, to enforce the landlord’s lien held by the Clevelands against the cotton acquired by the CCC.