Bank of California Nat. Ass'n v. Schmaltz

• Decision Date: 15 March 1932
• Citation: 9 P.2d 112,139 Or. 163
• Parties: BANK OF CALIFORNIA NAT. ASS'N v. SCHMALTZ et al.
• Court: Oregon Supreme Court

9 P.2d 112

139 Or. 163

BANK OF CALIFORNIA NAT. ASS'N v. SCHMALTZ et al.

Supreme Court of Oregon

March 15, 1932

Department 2.

Appeal from Circuit Court, Marion County; L. H. McMahan, Judge.

Action by the Bank of California National Association against N Schmaltz and others, partners in business as N. Schmaltz &amp Sons. From a judgment for defendants, plaintiff appeals.

Reversed and remanded, with directions.

Thos. G. Greene, of Portland (Carson & Carson, of Salem, on the brief), for appellant.

Custer E. Ross, of Salem, for respondents.

BELT J.

This is an action to recover damages for the conversion of 124 bales of hops stored with the defendants who were operating a warehouse at Mount Angel, Or., under the firm name of N Schmaltz & Sons. There is no question about the storage of the hops or the issuance of the three warehouse receipts upon which this action is predicated. Neither is there any question as to the indorsement of these receipts to the plaintiff bank by Frank S. Johnson, to secure loans made to him by the bank. The first receipt was issued on October 8, 1927, to Peter Olson, covering 25 bales of hops. Olson sold these hops to Frank S. Johnson and indorsed the receipt to him. The second receipt was issued on April 4, 1928, to Frank S. Johnson for 32 bales, and the third receipt on the following day to Johnson for 67 bales of hops. On April 7, 1928, the bank advised the defendants by letter that it held the receipts issued to Johnson as collateral security for loans, and that deliveries of hops should be made "only against surrender of receipts or on our written consent prior to delivery." The defendants returned this letter to the plaintiff with the following notation thereon: "We acknowledge receipt of the above instruction and will conform thereto." In April, 1929, the bank presented the warehouse receipts to defendants, offered to pay storage charges and made demand for delivery of the hops. The defendants were unable to comply with this demand for the reason that soon after the hops were stored they were delivered to Frank S. Johnson under the alleged belief that he was the owner of the same. At the time these hops were delivered to Johnson, he was not in possession of the warehouse receipts nor did he have any written authority from the bank to act as its agent. Defendants admit the delivery of the hops to Johnson, with the exception of two bales which they assert are now held in storage. They allege that the bank failed to make any offer to pay the storage on the two bales at the time of the presentation of the receipts. The bank denies that any mention was made of these two bales, and states that defendants advised that Johnson had paid the full storage charges on the hops. It is undisputed that Johnson owned the hops represented by the three receipts; that he transferred the receipts to the bank for value; that defendants delivered the hops to Johnson (or as defendants contend all except two bales) without taking up the receipts and without written authority from the bank; and that the storage charges thereon had been paid when the bank made demand for the hops. The cause was submitted to a jury and a verdict returned in favor of the defendants. From the judgment entered thereon the plaintiff appeals.

Aside from the question of the two bales of hops which defendants assert they now hold in storage, and the question of election of remedies which will be considered later, it is clear that plaintiff has, in the light of the undisputed evidence, established its cause in conversion ( Farmers' Bank of Weston v. Ellis, 126 Or. 602, 268 P. 1009; 27 R. C. L. 1000) and that there was only one issue to submit to the jury; namely, the reasonable market value of the hops at the time and place of the alleged conversion. Indeed, the trial court correctly instructed the jury that, "By delivering the hops to Johnson without requiring surrender of the receipts or a written authorization of plaintiff, defendants were guilty of conversion and thereby became and are now liable to plaintiff for the reasonable market value of said hops at Mount Angel at the time of said wrongful delivery to Johnson." Since there was some evidence tending to show the value of the hops converted, it logically follows that the verdict must necessarily have been in favor of the plaintiff in some amount. Even under the theory of the trial court there was no question about the conversion of 122 bales of hops.

In our opinion there was no issue to submit to the jury relative to the two bales of hops. When the negotiable warehouse receipts were indorsed to the bank for value it had a right to believe that the number of bales of hops as specified in the receipts were on storage with the defendants. If, in fact, the defendants had delivered only a part of the hops, it would have been incumbent upon them to make a statement upon the receipts showing the number of bales delivered. Upon their failure so to do, they would be liable for the entire number of bales stored, to one who, in good faith and for value, had acquired title to the receipts. Section 71-211, Oregon Code 1930. When the defendants exercised dominion and ownership over the hops inconsistent with the rights of the true owner, by delivering a portion of the hops to a person not entitled to the same, such act amounted to a conversion of the entire number of bales represented by the receipts. Upon presentation of these receipts to the warehouseman, the owner was entitled to the identical property stored, and the warehouseman cannot fulfill his obligation under the contract by partial performance.

It is clear that the warehouse receipts issued by the defendants were negotiable. They contained all of the statutory requirements with the exception that they were not consecutively numbered, and state that the hops will be delivered to the person named therein or his order. Section 71-204, Oregon Code 1930, provides that "a receipt in which it is stated that the goods received will be delivered to the bearer, or to the order of any person named in such receipt, is a negotiable receipt." The words, "non-negotiable" or "not negotiable" do not appear upon any of the receipts. See section 71-206, Oregon Code 1930. The provision that the defendants would not be responsible for their own negligence in the operation of the warehouse is void in that it is contrary to section 71-202, Oregon Code 1930, which prohibits a warehouseman from impairing his obligation "to exercise that degree of care in the safekeeping of the goods intrusted to him which a reasonably careful man would exercise in regard to similar goods of his own."

Assuming that plaintiff is not estopped from prosecuting this action it was error for the trial court to refuse to following...