Benson-Stabeck Co. v. Reservation Farmers' Grain Co.
| Citation | 62 Mont. 254 |
| Decision Date | 05 April 1922 |
| Docket Number | No. 4576.,4576. |
| Parties | BENSON-STABECK CO. v. RESERVATION FARMERS' GRAIN CO. ET AL. |
| Court | United States State Supreme Court of Montana |
OPINION TEXT STARTS HERE
Commissioners' Opinion.
Appeal from District Court, Missoula County; Theodore Lentz, Judge.
Action by the Benson-Stabeck Company against the Reservation Farmers' Grain Company and others. From a judgment for defendant, and an order denying a new trial, plaintiff appeals. Affirmed.
A. N. Whitlock, of Missoula, O. W. Belden, of Lewistown, and Mulroney & Mulroney, of Missoula, for appellant.
Russell & Madeen and William Wayne, all of Missoula, for respondents.
This is an action on a promissory note. The plaintiff is a corporation organized under the laws of the state of Minnesota, transacting business as a grain commission merchant at Minneapolis and Duluth, under a license issued by the State Railroad and Warehouse Commission of that state, and duly bonded as such. It is a member of the Chamber of Commerce of Minneapolis and also of the Chamber of Commerce Clearing Association of said city, both of which organizations are corporations under the laws of the state of Minnesota.
The defendant Reservation Farmers' Grain Company (hereafter referred to as the “grain company”) is a corporation under the laws of the state of Montana, with its principal place of business at Ravalli in Missoula county, organized for the purpose of buying, selling, and dealing in grain and farm products of all kinds at wholesale or retail, with authority to own and manage grain elevators and generally to transact any business incident and necessary to carrying out the purposes of its organization. The defendants Deardorf, Elliott, Grant, and Price were members of its board of directors.
The complaint is in the usual form, and alleges that at Missoula county, on October 30, 1916, the defendant grain company made, executed, and delivered to plaintiff its promissory note for the sum of $10,000, payable on demand at Minneapolis, Minn., bearing interest at 6 per cent. per annum from date; that prior to its delivery the defendants Deardorf, Elliott, Grant, and Price “indorsed the said note for the purpose of securing credit of the said maker with the plaintiff;” that demand for payment had been made upon and refused by all of the defendants, and prays for judgment against the defendants for the amount of the note and interest.
The defendants separately filed general demurrers to the complaint, which were overruled, and thereupon they filed separate answers, each of which raises the same issues. These answers admit the execution and delivery of the note in suit; that the same has not been paid; that the plaintiff is the owner and holder thereof, but deny that the same was executed for a valuable consideration, or that it is a valid obligation against the defendants, or either of them.
For a separate and affirmative defense to the action, it is alleged that at all the times mentioned the defendant grain company was engaged in the business of buying and selling grain as a warehouseman, and in contractingfor the purchase of the same from farmers, and had, prior to the execution of the note in suit, shipped grain to the plaintiff, and desired to continue to do so, but was unable to do this unless the plaintiff would extend credit to it; that plaintiff refused to extend such credit, except upon the condition that the defendants would give to it the note in question as security therefor; that thereupon and in compliance with such demand the note was executed and delivered to the plaintiff.
It is then alleged that the indebtedness, if any, existing in favor of the plaintiff and against the grain company, to secure which said note was furnished as collateral, was created through persons acting wholly without authority of the grain company, or its board of directors, but who pretended to act in its behalf in the buying and selling of what are commonly called “options” or “futures” on the Minneapolis Board of Trade, which were purchased and sold by and through the plaintiff that in such transactions no grain was actually handled, but that--
“It was contemplated and intended that such transactions between the plaintiff and the defendant grain company would be adjusted, settled, and closed according to and upon the basis of the public market quotations of prices on the Board of Trade or Exchanges upon which said grain was dealt in.”
Finally, the answers set out the provisions of sections 8991 and 8992 of the General Statutes of Minnesota of 1913, which make the maintenance of a bucket shop unlawful and impose a penalty upon the keeper or proprietor thereof. The term “bucket shop,” as used in these sections, is defined as follows:
“A bucket shop, within the meaning of this act, is defined to be an office, store or other place wherein the proprietor * * * conducts the business of making, or offering to make, contracts, agreements, trades or transactions respecting the purchase or sale, or purchase and sale, of any stocks, grain, provisions, or other commodity, or personal property, wherein both parties thereto, or said proprietor or keeper, contemplates or intends that such contracts, agreements, trades or transactions, shall be, or may be, closed, adjusted or settled, according to, or upon the basis of the public market quotations, of prices made on any board of trade or exchange, upon which the commodities or securities referred to in said contracts, agreements, trades or transactions are dealt in, and without a bona fide transaction on such board of trade or exchange. * * *”
The plaintiff filed motions to strike the affirmative defenses from said answers on the ground that they were immaterial, irrelevant, and redundant, and also filed general demurrers to the same, all of which motions and demurrers were overruled. Thereafter replies were filed, denying the affirmative allegations of the answers, and upon the issues so framed the case was tried to a jury, and resulted in a verdict in favor of the defendants, upon which judgment was entered against the plaintiff. The plaintiff moved for a new trial, which was overruled, and the case, is now before this court upon an appeal from such judgment and order.
The testimony discloses that, during a period of time extending from the fall of 1913 to the spring of 1917, the grain company actually bought from the producers of grain in the country contiguous to its elevators approximately a quarter of a million bushels of wheat, which was shipped to the markets at Duluth and Minneapolis, for sale, and in the sale of 117,000 bushels of this wheat upon the market, the plaintiff acted as its agent in actually transacting the business. Upon the arrival of a car of wheat at Minneapolis, or Duluth, the plaintiff would see that it was correctly weighed and graded by the state authorities, pay the freight and inspection charges, sell the wheat, and from the proceeds deduct the charges against the same, including a commission of one cent per bushel as its compensation, and then render a statement designated an “account sales,” and remit to the grain company the net proceeds or pass the same to its credit.
In each instance the grain company, when it consigned a car of wheat to the plaintiff for sale upon the market, would make a draft on the plaintiff for a major portion of the value of the wheat consigned, which draft would be honored by the plaintiff prior to the arrival of the shipment. Upon the money so advanced, the plaintiff charged the grain company interest for the time elapsing between the date of the payment of the draft and the date of the receipt of the proceeds of the car of wheat. These were known as “cash grain” transactions, and there were 92 of them between the plaintiff and the grain company during the period covered by the record.
In buying wheat the grain company was obliged in many instances to make advances to the producers prior to the actual delivery of the wheat at its elevators, and after delivery of the wheat at the elevators there were frequently considerable delays before it was actually shipped to the market. To guard against losses incident to the fluctuations of the market, the grain company followed the practice known as “hedging.” Under this practice, in theory, when it bought wheat at its elevators, it would also sell, on the Minneapolis market for future delivery, a sufficient quantity to cover such purchase, so that, whether the price went up or went down, its gain on one transaction would offset its loss on the other. Upon the arrival of a car of wheat at the Minneapolis market, against which a “hedge” had been bought, it would sell the wheat and close its previous sale for future delivery by buying back an equal quantity on the Minneapolis market. One “future” transaction thus canceled the other, and the gain or loss would approximately balance the loss or gain on the actual wheat bought, shipped, and sold, leaving the grain company its regular profit. All the purchases and sales of these “hedging” “options” or “futures” were negotiated for the grain company on the Minneapolis Chamber of Commerce by the plaintiff as its agent or broker.
Another class of transactions between the plaintiff and the grain company is illustrated by Defendants' Exhibit No. 208, which, omitting the formal parts, is an “account sales” rendered by plaintiff to the grain company, and the telegrams connected with the transaction. This exhibit is as follows:
E. & O. E. Benson-Newhouse-Stabeck Co.
Benson Stabeck Co. Minneapolis, Minn. Buy to close twenty May wheat Reservation Fars. Gr. Co. 1135 A.
Benson S. Co. Minneapolis, Minn. Sell ten May at market. Reservation Fars. Gr. Co. 1131 AM.
Benson S. Co. Minneapolis, Minn. Sell two May wheat at market. Reservation Fars. Gr. Co. 12 KN.
Benson S. Co. Minneapolis, Minn. Sell eight May wheat at market. Reservation Fars. Gr. Co....
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