Aetna Insurance Company v. JUNCTION WAREHOUSE COMPANY
| Decision Date | 06 February 1968 |
| Docket Number | No. 25011.,25011. |
| Citation | 389 F.2d 464 |
| Parties | AETNA INSURANCE COMPANY, Appellant, v. JUNCTION WAREHOUSE COMPANY et al., Appellees. |
| Court | U.S. Court of Appeals — Fifth Circuit |
William A. Griffis, Jr., Griffis, Smith, Davis, Rose & Finley, San Angelo, Tex., for appellant.
Pierce Hoggett, Jr., Stevenson & Hoggett, Junction, Tex., John H. Alvis, Wagstaff, Alvis, Charlton & Alvis, Abilene, Tex., for appellee.
Before HUTCHESON, TUTTLE and GEWIN, Circuit Judges.
Aetna instituted this action of interpleader for determination of its liability to several claimants upon a public grain warehouseman's bond issued for Big Spring Grain & Commission Company. Aetna appeals from a judgment favoring Junction Warehouse Company in the amount of $19,000.
On August 4, 1965, Big Spring's president orally offered to sell and Junction agreed to purchase one million pounds of "two Milo grain" at $1.90 per hundred pounds. Big Spring was to store the grain without additional charge until December 31, 1966, to ship it to Junction as requested, and to issue a negotiable warehouse receipt when payment was received. The oral agreement was confirmed by letter the same day. A draft for $19,000 was enclosed with the contract and paid by Junction. Big Spring returned its printed ticket acknowledging the sale. Junction's officers were unaware that Big Spring did not have the one million pounds of grain;1 they believed it to be owned by Big Spring and in storage at the time. Although Junction subsequently demanded delivery of the grain and issuance of negotiable warehouse receipts, Big Spring did not comply nor did it return any part of the $19,000.
Aetna's bond assured only the performance of Big Spring's duties as a public grain warehouseman. The issue is whether this transaction and Big Spring's failure to honor its commitment were within the scope of Aetna's liability on the bond — whether there was here a default in some duty as warehouseman. The lower court found that the agreement to store the non-existent grain created a "warehouseman-depositor relationship" and that the ticket issued by Big Spring was a "weight, or scale, ticket" of the type required to be issued on receipt of grain by a warehouseman.2 Violation of the statutory warehouseman's duties lay in Big Spring's issuance of this scale ticket without having the grain in storage, Art. 5577a, § 7, and in its failure to issue a warehouse receipt upon application by the owner of the grain, Art. 5577a, § 9.
Aetna's position is that the transaction was a sale by Big Spring on its own account to which the storage was only incidental. Aetna contends, in other words, that Big Spring was acting as a seller of grain — a practice common among warehousemen — and not as a public grain warehouseman. If this were true, the activity was not of the type covered by Aetna's bond. However, we find ourselves in agreement with Junction and affirm.
It is settled Texas law, and the general rule, that a warehouseman's bond is construed in light of the statute which requires it, and the surety's liability is limited to the duties specified by the statute itself. The leading Texas case is Republic Underwriters v. Tillamook, 133 Tex. 141, 126 S.W.2d 641, 121 A.L.R. 1152 (1937, judgm't adopted), where a warehouseman had agreed to sell and collect the price of goods stored with him. The amounts collected were never remitted to the owner. In a suit on the bond, the court held that conducting a sale as a factor was not among the statutory duties of a warehouseman. Because the statute defined a warehouseman as one in the business of "storing goods for profit," this was the only activity covered by the bond.3 The court in Tillamook distinguished an earlier Texas case, Indemnity Ins. Co. v. Archibald, 299 S.W. 340 (Tex.Civ.App. — El Paso 1927, writ dism'd), which involved a similar occurrence. The surety was there held liable for the warehouseman's failure to remit, for the reason that the statute did not "enumerate the duties to be performed by public warehousemen, for the breach of which it sic will be liable."
The statute under which Aetna's bond was issued defines a grain warehouseman as one who operates an establishment where grain is "received for storage for others in bulk." Art. 5577a, § 1(b). Given this, our decision would seem an easy one. It might be reasoned that Big Spring donned its warehouseman's hat when it purported to store the non-existent grain for others, namely Junction. The situation would be no different had the grain been supposedly sold to Junction and delivered to Big Spring by a collusive third party while Big Spring represented that it received the grain on Junction's behalf.
Our reluctance to abide by this analysis stems from the conviction that the transaction should not be labeled a public warehousing merely because Big Spring was a public warehouse. The question is not whether Big Spring pretended to store grain, but whether the pretended storage was undertaken as a public warehouseman. We deem it controlling that Big Spring issued a scale ticket4 and promised issuance of warehouse receipts. The statute under which grain warehousemen must operate in Texas, and which determines the scope of Aetna's bond, prescribes these as formalities incident to a public warehousing. Moreover, the Regulations of the Department of Agriculture specify that any facility which receives grain and "issues a scale ticket or warehouse receipt must be licensed under this Act." We interpret this to mean that, although a mere storage or promise to store might not be a warehousing, such a storage or promise when coupled with the issuance of a scale ticket and the promise of a receipt, is sufficiently formalized to come within the purview of the governing statute and, consequently, within the assurance of the bond. The formalities alone do not create a public warehousing5 — they only serve to characterize a storage agreement as one undertaken in the performance of Big Spring's function as a public warehouseman. Aetna must account for the default, and to this extent the judgment is affirmed.
Junction was awarded the full amount it had paid to Big Spring, with interest from the date of judgment. Junction contends on...
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