Bradley v. St. Louis Terminal Warehouse Co.

• Decision Date: 29 May 1951
• Docket Number: No. 14231.,14231.
• Citation: 189 F.2d 818
• Parties: BRADLEY v. ST. LOUIS TERMINAL WAREHOUSE CO.
• Court: U.S. Court of Appeals — Eighth Circuit

189 F.2d 818 (1951)

BRADLEY v. ST. LOUIS TERMINAL WAREHOUSE CO.

No. 14231.

United States Court of Appeals Eighth Circuit.

May 29, 1951.

D. D. Panich, Little Rock, Ark. (H. M. Cooley, Jonesboro, Ark., on the brief), for appellant.

John C. Vogel, St. Louis, Mo. (Charles Frierson, Jr., Jonesboro, Ark., on the brief), for appellee.

Before GARDNER, Chief Judge, and THOMAS and RIDDICK, Circuit Judges.

RIDDICK, Circuit Judge.

On December 7, 1946, Bruce W. Holt, then engaged in business as the Banner Wholesale Grocery Company, Jonesboro, Arkansas, employed the St. Louis Terminal Warehouse Co., a Missouri corporation engaged in business as a public warehouseman and authorized to do business in Arkansas, to furnish Holt with field warehousing service. Pursuant to this contract Holt leased to the warehouse company all the premises occupied by him in his grocery business except the office space preserved by Holt for the conduct of his business. The leases were in writing and were recorded. Following these transactions the warehouse company established its field warehouse in the leased premises and placed its own locks on the doors leading to the warehouse space. The keys to the locks were at all times in the possession of the bonded agent of the warehouse company. Signs were posted and maintained on the outside and inside of the leased premises in an adequate number of places to warn all persons coming to the bankrupt's place of business of the existence of the warehouse.

On December 18, 1946, the warehouse company, the Citizens Bank of Jonesboro, and Holt entered into a contract called "Agreement of Bailment" under which Holt agreed to store merchandise in the warehouse company's warehouse to be pledged to the Citizens Bank. Merchandise of the wholesale grocery business was stored by Holt in the warehouse and the warehouse company issued to the bank its non-negotiable warehouse receipts therefor. This arrangement was made for the purpose of enabling Bruce W. Holt to borrow money from the bank upon the security of the merchandise deposited in the warehouse and to enable Holt to finance his business operations.

The Agreement of Bailment contained the following provisions with reference to the duties of the warehouse company as bailee:

"3. Bailee shall receive, hold and possess any and all said commodities so delivered to it by Company solely as the agent and for the account and for the sole use and benefit of Bank, and subject to the full order and control of Bank, and that possession of Bailee hereunder shall be deemed and construed to be possession of Bank * * *.

"4. Bailee agrees that during the period of this agreement it will have and maintain open, notorious, continuous, active, and exclusive possession, dominion and control over said demised premises, and of all said commodities delivered by Company to Bailee, subject only to the right, title and interest of Bank hereunder and under said pledge agreement, that Bailee will not permit or suffer Company, or any of its agents, officers or employees, to have access to or ingress or egress to and from the demised premises, except as hereinafter provided, and that Bailee will not permit or suffer Company, or any of its agents, officers, or employees, to have possession of, either actual or constructive, or to exercise any dominion or control over said commodities, or any of them, without the written consent and permission of Bank; and that Bailee will not permit or suffer said commodities, or any thereof, to be removed from the demised premises except as hereinafter provided.

* * * * * *

"8. The Bank authorizes the Bailee to release and deliver to Company, and Bailee is hereby authorized, until notice in writing from the bank revoking or cancelling this authority, to release and deliver to Company upon written request, any inventories of said commodities in the possession of Bailee, in excess of the amount of inventory which Bank shall or may have previously certified to Bailee as the minimum amount of inventory of said commodities required to be on deposit with Bailee, such release to be effective only upon actual delivery of such commodities; Provided, However, that there shall remain at all times in the possession of Bailee not less than the required amount of inventory of said commodities as instructed by Bank in writing; provided, in the event the Bank shall notify Bailee of any change, either increase or decrease, in the amount of inventory of commodities required by the Bank of Company to be kept on deposit with the Bailee as herein provided, (such notice to be in writing from the Bank to Bailee specifying the minimum amount of inventory of commodities which at such time Company is required to deposit and maintain on deposit with the Bailee hereunder; then and in such event Bailee shall not permit withdrawals of any inventory which would reduce the remaining inventory then on deposit below the amount of inventory so required to be on deposit with the Bank * * *."

Merchandise deposited by Holt in the warehouse was delivered to the warehouse company's bonded agent who made a record of the quantity and description of the merchandise valued at the cost to Holt as shown by his invoices. When merchandise was withdrawn from the warehouse by Holt his sales invoices were delivered to the warehouse bonded agent who made a record of the merchandise withdrawn and authorized its removal. Warehouse receipts were issued at the end of each week covering merchandise received. Every 90 days a physical inventory was made of all merchandise in the warehouse, and new warehouse receipts were then issued to the bank covering the merchandise shown by the physical inventory and all outstanding warehouse receipts were recalled and cancelled. Each week the warehouse company furnished to the bank a statement showing the amount of inventory as reported the previous week and the merchandise received and withdrawn during the week. Holt had no access to the warehouse nor could he withdraw goods except with permission of the warehouse company.

On July 25, 1949, while the warehouse and bailment agreements were still in effect and operation Bruce W. Holt was adjudicated a bankrupt on an involuntary petition filed on July 2. At the time of the adjudication non-negotiable warehouse receipts issued by the warehouse company were outstanding and held by the bank covering the merchandise then in the warehouse.

On August 10, 1949, the first meeting of creditors of the bankrupt was held and certain witnesses, among them the vice president of the warehouse company, were examined in proceedings under section 21(a) of the Bankruptcy Act, 11 U.S.C.A. § 44 (a). At this meeting there was an effort among the interested parties and attorneys to agree on the sale of the merchandise in the warehouse. No agreement was reached. The referee, without further proceedings, dictated an order of sale, the proceeds to be held subject to the same liens as existed against the merchandise prior to the bankruptcy. Counsel for the warehouse company announced that it would not voluntarily surrender the merchandise in the warehouse to the trustee, and insisted that any order of sale provide that the proceeds of the sale should be held subject to disposition by a court of competent jurisdiction. The referee agreed to this condition in the order, but so far as the record shows the proposed order was never made.

On August 25, 1949, the trustee on an ex parte petition filed with the referee secured an order of delivery directed to one Herbert A. Benjamin, as agent and employee of Bruce W. Holt, directing him forthwith to deliver to the trustee in bankruptcy "any and all keys to the premises used and occupied by Bruce W. Holt, Bankrupt, located in the City of Jonesboro, Arkansas" and "any and all goods, wares, merchandise and other properties of whatever kind and character now in his possession and housed in said leased premises so used, occupied and belonging to said Bruce W. Holt, Bankrupt, and that said delivery be forthwith upon service of this order by a duly authorized officer of the United States District Court for the Eastern District of Arkansas." On the same day the United States Marshal served the order of delivery upon Benjamin who was an employee of Bruce W. Holt and was also the bonded agent of the warehouse company in charge of the keys to the warehouse and in possession of the merchandise stored in it. On demand of the marshal, Benjamin surrendered the keys to the premises and possession was delivered to the trustee in bankruptcy. The order shows on its face that it was made upon the verified petition of the trustee and that no adverse party was represented.

On September 6, 1949, in further proceedings before the referee the trustee presented a petition for an order of sale of the bankrupt assets including the warehouse merchandise. No notice of the filing or hearing of this petition was given to the warehouse company. Counsel for the warehouse company, however, was present, having learned indirectly that the warehouse company's bonded agent, Benjamin, was under subpoena for examination under section 21(a) of the Bankruptcy Act. He declined to enter the warehouse company's appearance in response to the petition for an order of sale, but stated to the referee that the warehouse company was not formally objecting to the sale because it was of the opinion...