Dixey v. Federal Compress & Warehouse Co.

• Decision Date: 11 December 1942
• Docket Number: No. 12301.,12301.
• Citation: 132 F.2d 275
• Parties: DIXEY et al. v. FEDERAL COMPRESS & WAREHOUSE CO.
• Court: U.S. Court of Appeals — Eighth Circuit

132 F.2d 275 (1942)

DIXEY et al. v. FEDERAL COMPRESS & WAREHOUSE CO.

No. 12301.

Circuit Court of Appeals, Eighth Circuit.

December 11, 1942.

Verne McMillen, of Little Rock, Ark. (St. Clair Adams, of New Orleans, La., on the brief), for appellants.

A. L. Barber, of Little Rock, Ark. (Barber, Henry & Thurman, of Little Rock, Ark., and Sam P. Walker and Waring, Walker & Cox, all of Memphis, Tenn., on the brief), for appellee.

Before GARDNER, WOODROUGH, and THOMAS, Circuit Judges.

GARDNER, Chief Judge.

This is an appeal from a judgment dismissing an action brought by appellants against appellee seeking damages for appellee's failure to collect insurance on goods of plaintiffs which were destroyed by fire while stored in appellee's warehouse. The parties will be referred to as they were designated in the trial court.

The complaint was twice amended. The motion to dismiss was based upon the ground that the amended complaint did not state "a claim upon which the relief sought could be granted".

The complaint as amended contained the requisite jurisdictional averments and for cause of action alleged that during the period from October 11 to October 22, inclusive, 1940, plaintiffs stored in a warehouse licensed and operated by defendant at Blytheville, Arkansas, under the United States Warehouse Act, 7 U.S.C.A. § 241 et seq., 73 bales of cotton of the value of $4,667.98, for which defendant issued and delivered to plaintiffs warehouse receipts as required by the regulations promulgated under the Act by the Secretary of Agriculture. That all of the cotton was destroyed by fire while in the warehouse on the night of October 22, 1940. That each of the warehouse receipts issued to plaintiffs provided that "this receipt is issued subject to the United States Warehouse Act, the regulations for cotton warehouses thereunder, and the terms of this contract. Said cotton is fully insured by the undersigned warehouseman against loss or damage by fire or lightning". That the defendant fully insured the cotton covered by their warehouse receipts but "that defendant wholly failed and refused to promptly take such steps as were necessary to collect the money due under the insurance policy issued to defendant covering loss or damage to said cotton and promptly paying over to plaintiffs the money collected by it for the loss of said cotton, although demand had been made for payment". That prior to the fire which destroyed the cotton so stored in defendant's warehouse and covered by their warehouse receipts, the Pennsylvania Fire Insurance Company issued to plaintiffs its policy of insurance covering loss or damage by fire to all cotton in bales owned by plaintiffs and located within the United States; and when defendant refused to pay plaintiffs for their loss the Pennsylvania Fire Insurance Company loaned plaintiffs the sum of $4,667.98, the value of the cotton destroyed, under an agreement reading as follows:

"November 28, 1940. "Loan Receipt "$4,667.98

"Received from Pennsylvania Fire Insurance Company the sum of $4667.98 Dollars as a loan, without interest, under Policy 187901 repayable only in the event and to the extent that any net recovery is made by us from any person or persons, corporation or corporations or other parties, on account of loss by fire, sprinkler leakage, or other casualty for which this company may be liable, occasioned to our property on or about 22 day of Oct. 1940.

"As security for such payment, we hereby pledge to said Penn. Fire Insurance Company whatever recovery we may make, and deliver to it herewith all documents necessary to show our interest in said property and we hereby agree to promptly present claim and, if necessary, to commence, enter into and prosecute suit against such person or persons, corporation or corporations, through whose negligence the aforesaid loss was caused, or who may otherwise be responsible therefor, with all due diligence, in our own name, but at the expense of/and under the exclusive direction and control of the said Penn. Fire Insurance Company.

"In presence of "E. B. DIXEY & CO. "DOUGLASS G. DRENNAN. "Joseph A. Airey Jr., (Partner)"

It was alleged that the action was brought for the use and benefit of the Pennsylvania Fire Insurance Company. The policy issued by the Pennsylvania Company to plaintiffs, a copy of which was attached to the amended complaint, provided that "this company shall not be liable under this policy for a greater proportion of any loss on the described property, or for loss by and expense of removal from the premises endangered by fire than the amount hereby insured shall bear to the whole insurance, whether valid or not, or by solvent or insolvent insurers covering such property".

The judgment of dismissal reserved to plaintiffs the right to amend by making defendant's insurance carrier, which insured the cotton for defendant, a party defendant. Plaintiffs elected not to join the insurance company and thereupon the court dismissed the action on its merits.

Plaintiffs, in asking reversal of the judgment, contend that the defendant as a warehouseman was under the duty to insure the cotton and to collect and pay over the insurance money to plaintiffs; that the sum advanced by the Pennsylvania Fire Insurance Company was a loan and not payment, and defendant's insurance was primary insurance, the right of action on which was in it.

Section 268, 7 U.S.C.A. (Section 28, Warehouse Act), provides that the Secretary of Agriculture shall make such rules and regulations as he may deem necessary for the efficient execution of the provisions of the Act. Regulation 5, of the regulations for cotton warehouses originally approved August 27, 1931, and amended August 13, 1938, provides as follows:

"When requested in writing by the depositor of cotton in a licensed warehouse, or by the holder of the receipt covering such cotton, to insure such cotton against loss or damage by fire, lightning, and/or flood, each licensed warehouseman shall secure in his own name such insurance under reporting forms of policies which automatically attach for the full value of such cotton, including daily changes of value through market fluctuations and changes in the quantity of such product from day to day, as soon as such cotton is placed in his legal custody, and he shall continue such insurance in effect so long as the cotton remains in his legal custody. Such insurance shall be covered by lawful policies issued by one or more insurance companies. * * * Nothing in this section shall be construed to prevent a licensed warehouseman from adopting a rule that he will insure all cotton stored in his warehouse, but if he elects to insure he shall accomplish such insurance through policies as above specified."

Section 3. "Each warehouseman shall promptly take such steps as may be necessary and proper to collect any moneys which may become due under contracts of insurance entered into by him for the purpose of meeting the requirements of these regulations, and shall, as soon as collected, promptly pay over to the persons concerned any portion of such moneys which they may be entitled to receive from him."

These regulations had the effect of law and became a part of the contract between the owners of the receipts and the warehouseman. Canada Southern Ry....