DOUGLAS-GUARDIAN WAREHOUSE CORPORATION v. Nickell
| Decision Date | 22 December 1964 |
| Docket Number | Civ. A. No. 1739. |
| Citation | 236 F. Supp. 842 |
| Parties | DOUGLAS-GUARDIAN WAREHOUSE CORPORATION, Plaintiff, v. Archie T. NICKELL, Defendant. |
| Court | U.S. District Court — Western District of Arkansas |
Bethell & Pearce, Fort Smith, Ark., Hemry & Hemry, Oklahoma City, Okl., for plaintiff.
Harper, Harper, Young & Durden, Fort Smith, Ark., for defendant.
In this action commenced August 22, 1963, the plaintiff, Douglas-Guardian Warehouse Corporation, a Louisiana corporation, with its principal place of business at New Orleans, hereinafter referred to as plaintiff, seeks to recover $19,611.87 from the defendant, its bonded warehouseman, Archie T. Nickell, a citizen of the State of Arkansas. Jurisdiction exists by reason of diversity of citizenship of the parties and the amount involved. 28 U.S.C. § 1332(a), (1963 Supp.).
It is alleged in the plaintiff's complaint that the defendant, Archie T. Nickell, was the bonded warehouse representative and employee of the plaintiff at the time of the alleged loss and that by virtue of the articles of agreement executed by the parties, defendant agreed to be responsible to the plaintiff for any loss which might be sustained by reason of any misconduct in the operation of a field warehouse at the Ozark Canning Company, at Ozark, Arkansas. It is further alleged that a loss occurred in August 1960, and by reason of the acts of the bonded representative, plaintiff suffered a loss because of improper release of merchandise under warehouse receipts stored in the plaintiff's field warehouse at Ozark Canning Company; that by reason of said shortage plaintiff became liable and paid City National Bank the sum of $27,526.10, and, after allowing just credits, the defendant is indebted to the plaintiff in the above mentioned sum. (The amount now claimed is $19,511.09.)
The defendant in his answer of September 30, 1963, admitted the jurisdictional allegations in the plaintiff's complaint, but denied that the bond referred to in the complaint was in full force and effect August 30, 1960, and further denied any other substantive allegations with respect to any claim against him. He further asserted that any releases of goods stored in the warehouse were with the full knowledge and consent of the plaintiff and that the plaintiff is estopped to assert any claim against defendant growing out of such conduct. The defendant in his answer also pleaded that a promissory note in writing executed by Ozark Canning Company payable to plaintiff in the face amount of $20,450.41 was full and complete settlement and discharge of any liability of this defendant. This promissory note is pleaded as a complete bar to plaintiff's claim and the defendant in his answer prayed that the complaint be dismissed.
On November 23, 1964, the case was tried to the court, at which time both parties introduced oral and documentary evidence. At the conclusion of the trial the case was submitted and taken under advisement by the court. The parties were directed to submit briefs in support of their contentions, which have been received and the case is now ready for disposition.
In October 1958 the Ozark Canning Company, an Arkansas corporation at Ozark, Arkansas, engaged in the canning of fresh fruits and vegetables, hereinafter referred to as Ozark, approached the plaintiff with the view of establishing a field warehouse at Ozark's plant at Ozark, Arkansas. On October 2, 1958, plaintiff executed an agreement with the defendant, Archie T. Nickell, who was the plant manager of Ozark, whereby plaintiff would establish a field warehouse at the Ozark plant and employ Archie T. Nickell as its bonded representative and field warehouseman. Under the warehouse arrangement a field warehouse was established at the Ozark plant, whereby goods were placed in the warehouse under the custody and care of the bonded representative, Nickell. Non-negotiable warehouse receipts were issued upon the goods placed in the Ozark warehouse and pledged to the City National Bank of Fort Smith, Arkansas, which advanced up to 75 percent of the retail value of the goods warehoused. After a sale of the goods warehoused, a release would be given by the City National Bank upon the payment of the advance on merchandise sold which was covered by the warehouse receipt.
The field warehouse was audited by representatives of plaintiff on a monthly basis, Ozark, under the warehouse arrangement, had a releasing privilege of $15,000. The releasing privilege allowed Ozark to release goods from the warehouse without warehouse receipts up to a maximum amount of $15,000 retail value. At various times between 1958 and August 29, 1960, the warehouse audits were made by Mr. Earnest G. Logan, a field representative of Douglas-Guardian, and by Mr. Don Steketee.
The audits on three occasions during this two-year period reflected shortages in excess of the $15,000 releasing privilege. The audits of March and July 1960 revealed a small excess above the releasing privilege, and the audit of November 1959 disclosed a substantial shortage in excess of the releasing privilege. The audits in this period reflected that the defendant bonded representative was cautioned with respect to the shortages and the auditor's reports transmitted to the plaintiff recited statements of complaints reported to the storer, Ozark, as to the shortages.
After the discovery of the August 1960 shortage, representatives of plaintiff contacted Mr. George Jones of Spiro, Oklahoma, the President of Ozark, and had a conference at his office at Spiro, Oklahoma, and obtained from Mr. Jones promissory notes and warehouse receipts on free goods1 to cover the shortages of the field warehouse at the Ozark Canning Company and also the Fresh Canning Company at Spiro, Oklahoma, of which Mr. Jones was also President. Subsequently it was determined that the amount of shortages as reflected by the first set of promissory notes were not properly calculated, and a second set of notes were prepared and eventually signed by Mr. Jones and placed with a Vice President of the City National Bank at Fort Smith, Arkansas. Thereafter, protracted litigation developed between Ozark, Fresh Canning Company of Spiro, Oklahoma, George W. Jones, Douglas-Guardian, and the Fresh Canning Company's bonded warehouse representative, Bennie Cox, in the federal courts of Oklahoma, and those suits are presently pending.
The plaintiff contends that the defendant is personally liable for the warehouse shortages because of the agreement executed by defendant and plaintiff on October 2, 1958, referred to above, which plaintiff contends imposes liability upon the defendant for any loss sustained by reason of any acts on his part contrary to the warehousing agreement.
The defendant contends that the loss, if any, suffered by the plaintiff is satisfied by a novation resulting from the execution of promissory notes by Ozark and Fresh Canning Companies, and further that any conduct on the part of the defendant which resulted in a shortage was with the knowledge and consent of the plaintiff, and the plaintiff is therefore estopped to assert any claim against the defendant by reason of such alleged conduct.
The articles of agreement between the plaintiff and the defendant with respect to the defendant's obligation as a bonded representative provides that plaintiff would employ defendant at a salary of $500 a month commencing October 7, 1958, and that the defendant, Archie T. Nickell, "shall be on duty as required each week in accordance with instructions received from time to time from Douglas-Guardian Warehouse Corporation." This agreement further provides:
"SECOND: Archie T. Nickell hereby accepts said appointment under the conditions herein recited, and in consideration of the compensation agreed upon does hold himself bound by any and all instructions that shall from time to time be furnished to him by the Corporation, and does hold himself, his heirs, executors, administrators and assigns responsible to the Corporation for any loss which the Corporation may sustain by reason of any and all unlawful acts on his part or by or through his carelessness, negligence, breach of trust, or by reason of his failure fully to comply with such instructions."
In addition to the portion quoted above, the agreement provides that it may be terminated by either party on ten days' notice in writing, and further that plaintiff may terminate it at any time without prior notice for cause. In the "Bonded Representative's Statement and Receipts", portion of the agreement, it states that Archie T. Nickell received possession of the keys to the field warehouse and that no one else has or holds keys to the premises and that also in Nickell's possession are keys to the building through which the entrance to the field warehouse is obtained.
At the trial it was not developed how a shortage occurred in the field warehouse as the plaintiff takes the position that under the bonded representative's agreement the defendant is liable for any loss without regard to how the loss may have arisen. It asserts that the defendant, having possession and custody of the warehouse and goods included therein, is thus absolutely liable for the shortage whether through negligence or intentional misconduct. The defendant, as heretofore stated, asserts that all releases and movement of goods from the field warehouse were at the direction of his other employer, Ozark, but with the knowledge and consent of the plaintiff.
In Heekin Can Company v. Kimbrough, (W.D.Ark.1961) 196 F.Supp. 912, the Lawrence Warehouse Company sought to recover for a shortage in a field warehouse of the Heekin Can Company at Ozark which was supervised by a bonded representative who was also employed by the corporation on whose premises the field warehouse was maintained. In that action no recovery was sought against the bonded representative, but the President of the corporation on...
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