National Bank of Commerce of Kansas City v. Flanagan Mills & Elevator Co.
| Decision Date | 18 July 1916 |
| Parties | NATIONAL BANK OF COMMERCE OF KANSAS CITY v. FLANAGAN MILLS AND ELEVATOR COMPANY and UNITED STATES FIDELITY & GUARANTY COMPANY; UNITED STATES FIDELITY & GUARANTY COMPANY, Appellant |
| Court | Missouri Supreme Court |
Appeal from Jackson Circuit Court. -- Hon. J. H. Slover, Judge.
Affirmed.
Yates & Mastin and Perry S. Rader for appellant.
(1) By the terms of the so-called warehouse receipts the grain mentioned therein was held by the Flanagan Company subject to the order of the National Bank of Commerce upon "surrender of this receipt and payment of the charges." There was therefore a pledge of the grain mentioned in each receipt to the bank and the receipts merely evidenced the symbolical delivery of the grain owned by the Flanagan Company to the bank. 31 Cyc. 806; 30 Ency. Law (2 Ed.), p. 69, sec. 4; Conrad v. Fisher, 37 Mo.App 366; Bank v. Ross, 9 Mo.App. 411; Bank v. Cotton Compress Co., 11 Mo.App. 341. "A pledge is defined to be a bailment of personal property as security for some debt or engagement." Evans v. Darlington, 5 Blackf. (Ind.) 322; Story on Bailments, old sec. 197, new sec 286; Stearns v. March, 4 Denio (N. Y.), 227; Brewster v. Harrity, 37 Cal. 25. A pledge is a bailment. 3 Ency. Law, p. 742, sec. 4. A collateral pledge is a bailment of personal property. Moffat v. Williams, 36 P. 915. To make it valid, delivery, of course must accompany a pledge, but this may be either actual or constructive. Jacksonville v. Flowers, 42 S. E. (Ga.) 475. In such a bailment (that is, a bailment of personal property by way of pledge), being for the benefit on both parties, a bailee is required to exercise only ordinary diligence in the care of the property. 3 Am. & Eng. Ency. Law, p. 746. The same rule applies to our situation. The obligation created by the contract, i. e., the warehouse receipts and the bonds in evidence, being for the delivery of the grain upon the order of the bank, its loss by fire is not within the terms of the contract because it is not so expressly stipulated. McEvars v. Steamboat Sangamon, 22 Mo. 190; Link v. Hathaway, 143 Mo.App. 514; 3 Am. & Eng. Ency. Law (2 Ed.), p. 751. (2) If the grain in question was symbolically delivered by the elevator company to the bank under these warehouse receipts the same became a bailment for the mutual benefit of both parties to the transaction, the grain secured to the bank the money advanced by it to the elevator company which was a benefit to the bank and the elevator company on the other hand obtained the loan in evidence, which was to its advantage. The petition is for damages for the failure of the elevator company to deliver the grain upon demand. The relation of the elevator company to the grain is fixed by the terms of the warehouse receipts in evidence and under the authorities cited the transaction is one of bailment only. The custodian of the property the subject of the bailment is liable for failure to deliver the same on demand only in case of his negligence in caring for same. Gashweiler v. Railroad, 83 Mo. 112; Holtzclaw v. Duff, 27 Mo. 392; Story on Bailments (9 Ed.), sec. 444; Angell on Carriers, sec. 415; 31 Cyc. 827; Preston v. Prather, 137 U.S. 604; Milling Co. v Transit Co., 122 Mo. 247; 30 Ency. Law, 48; 31 Cyc. 827. (3) The contract sued on made by Flanagan Mills & Elevator Company as principal, and appellant as surety, after reciting the fact that the elevator company proposes to issue warehouse receipts "evidencing that it is holding grain" deliverable upon the request or order of another person refers to such receipts in the following significant language which we think decisive of the relation sustained by the elevator company to the grain involved in this suit "Which receipts and instruments are intended to be delivered either in case of sale or pledge or as evidence of a bailment." The property therefore could have been and was held only as a pledge and as a bailment and the laws affecting such a situation necessarily fixes the appellant's status. (4) The appellant company was not sued in this action nor could it have been because of the failure of the elevator company to pay its indebtedness to the bank, but to the contrary as stated in the petition because of the failure of the elevator company to deliver to the bank on demand the grain mentioned in the warehouse receipts since the warehouseman could not be held on the warehouse receipts for failure to deliver without showing that the warehouseman had been guilty of negligence in caring for the grain. The only duty imposed upon the elevator company by the warehouse receipts was the delivery of the grain which failure to deliver was excused by the loss of the property by fire. Frost on Guaranty Insurance (2 Ed.), p. 42. To hold that the Guaranty Company assumed any greater responsibility than that for the fidelity of the warehouseman in caring for the grain and that its loss or destruction by fire was within the contemplation of the contract is to convert the contract into a policy of fire insurance and the making of such a contract as shown by the charter of the company in evidence is not within the powers of the company. Morgan v. Railroad, 40 S.W. 985.
Robinson & Goodrich for respondent.
(1) Properly construed, the written instruments executed and delivered by the mill company to the bank, as collateral to secure the payment of loans made by the bank to the mill company, were simply agreements on the part of the mill company to deliver to the bank, on demand, the quantities of grain therein specified. (a) The duty of the trial court was to ascertain what was the intention of the parties, and to give effect of such intention. That is the fundamental rule in the interpretation of all contracts. Koehring v Muemminghoff, 61 Mo. 403; Ellis v. Harrison, 104 Mo. 270; Griffin v. McIntosh, 176 Mo. 392; Donovan v. Boeck, 217 Mo. 87; Buxton v. Kroeger, 219 Mo. 224; Arnett v. Williams, 226 Mo. 109; St. Louis v. Railway Co., 228 Mo. 712; Mathews v. Modern Woodmen, 236 Mo. 326; Moran Mfg. Co. v. Caldwell, 240 Mo. 258. (b). In ascertaining the intention of the parties, the bond sued on, the notes and the receipts should all be construed together, they all relating to, and being parts of the same transaction. Insurance Co. v. St. Mary's Seminary, 52 Mo. 480; McGregor v. Con. Co., 188 Mo. 611; Nichols v. Kern, 32 Mo.App. 1; Reucking v. McMahon, 81 Mo.App. 422; Ramlose v. Dollman, 100 Mo.App. 347. (c) And said instruments, the bond, notes and receipts, must be read in the light of the facts and circumstances surrounding the parties at the time of the transaction. Gathwright v. Callaway, 10 Mo. 663; Price v. Evans, 26 Mo. 30; Crawford v. Elliott, 78 Mo. 497; Nordyke v. Keahler, 155 Mo. 643; Donovan v. Broeck, 217 Mo. 70; Moran Mfg. Co. v. Caldwell, 240 Mo. 358; Thompson v. Lindsay, 242 Mo. 53; Dobbing v. Edmonds, 18 Mo.App. 307; Kellerman v. Wrecking Co., 137 Mo.App. 392; St. Louis v. Railway Co., 228 Mo. 712; Kreitz v. Eglehoff, 231 Mo. 694; Kenyon Co. v. Cutlery Co., 143 Mo.App. 518; Weeks Co. v. Zinc Co., 153 Mo.App. 387; Bank v. Chick, 170 Mo.App. 347. (d) If a contract admits of more than one construction, one of which will render it inefficacious or nullify it, that construction should be adopted which will carry it into effect. Leiweke v. Jordan, 59 Mo.App. 624; Buck v. Harris, 125 Mo.App. 368; Kelerher v. Henderson, 203 Mo. 514; Peckham v. Haddock, 36 Ill. 38. (e) The law is well settled that where a contract is fairly and reasonably open to two constructions, one making it legal and the other illegal, the former must be adopted. Ferry Co. v. Railroad, 128 Mo. 224; Water Co. v. Lamar, 128 Mo. 245; Jones v. Williams, 139 Mo. 85; Boonville v. Stephens, 238 Mo. 354; Hobbs v. McLean, 117 U.S. 567; Gurnsey v. Cook, 120 Mass. 501; Lawson on Contracts, sec. 389. (f) All of the foregoing rules of interpretation apply to a contract of guaranty, as well as to any other written instrument. Kansas City v. Yeomans, 213 Mo. 165; Bohne v. Murphy, 46 Mo. 59; Allen v. Bank, 4 Mo.App. 71; London Bank v. Parrott, 125 Cal. 481; Bank v. Gay, 57 Conn. 224; Iron Co. v. Water Wks. Co., 83 Iowa 386; Cheever v. Schall, 87 Hun, 82; Morrow v. Brady, 12 R. I. 130; 20 Cyc. 1423. (g) Moreover, if a surety bond is fairly susceptible of two constructions, one favorable to the beneficiary and the other to the surety company, the former, if consistent with the purpose for which the bond was given, must be adopted. Hurley v. Fidelity & Deposit Co., 95 Mo.App. 93; Long v. Fidelity Co., 130 Mo.App. 428; Crayon Co. v. McNamara, 136 Mo.App. 463; Shine v. Bank, 70 Mo. 524; Surety Co. v. Pauley, 170 U.S. 133. Measured by these rules, the instruments executed by the mill company, and which are to be read into, and as a part of, the bond sued on in this case, must be construed as agreements on the part of the mill company to deliver to the bank the quantities of grain therein mentioned. (2) The receipts (instruments issued by the mill company and deposited with the bank as collateral security) were not warehouse receipts. (a) The mill company which issued these instruments was not engaged in the business of storing goods for others for compensation, and therefore not a warehouseman. Bank v. Frank, 12 Mo.App. 465; Conrad v. Fisher, 37 Mo.App. 368; Bank v. Trust Co., 135 Mo.App. 375; Sinsheimer v. Whitely, 111 Cal. 378; Hale v. Dock Co., 29 Wis. 488; Shepherdson v. Cary, 29 Wis. 42; Bucher v. Commonwealth, 103 Pa. St. 534; Bank v. Whitehead, 149 Ind. 560; Geifus v. Corrigan, 95 Wis. 561; Black's Law Dictionary (2 Ed.), p. 1218; Bouvier's Law Dictionary (New Ed.), p. 1211; Edwards on Bailments, sec. 332; 28 Am. & Eng. Ency. Law, 636; 40 Cyc. 460; 8 Words & Phrases, p. 7392. And the fact that the receipts were executed by warehouseman...
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