Farmers' Bank of Weston v. Ellis
| Decision Date | 14 July 1927 |
| Citation | 258 P. 186,122 Or. 266 |
| Parties | FARMERS' BANK OF WESTON v. ELLIS ET AL. |
| Court | Oregon Supreme Court |
In Banc.
Appeal from Circuit Court, Baker County; C. H. McColloch, Judge.
Action by the Farmers' Bank of Weston against W. H. Ellis and another, doing business as Ellis Transfer. Judgment for defendants, and plaintiff appeals. Reversed, with direction.
This is an action by the plaintiff, an incorporated bank, against defendants W. H. Ellis and Harry C. Ellis, as partners, doing a general warehouse business in Baker, Or., to recover damages for failure to deliver to plaintiff certain potatoes deposited by plaintiff's assignor in the warehouse of defendants, and represented by receipts, being Exhibits B and C in the trial of this case.
There are two causes of action, one setting up the misapplication of the potatoes represented by Exhibit B, and the other of the potatoes represented by Exhibit C. Taking the complaint as a whole, and for the sake of brevity, we will consider the two causes of action together.
In the first cause, it is alleged that on the 28th day of October 1925, John H. Grafton deposited with the defendants for hire in their warehouse 545 sacks of netted gem potatoes which weighed 56,728 pounds, and that they delivered to Grafton their warehouse receipt therefor which was in the form known by the laws of this state as a negotiable receipt.
In the second cause, it is alleged that Grafton delivered 41,829 pounds of potatoes to the same defendants, for which the defendants issued a warehouse receipt. In December, 1925 Grafton indorsed and delivered said receipts to the plaintiff and the plaintiff has been and is now the holder thereof for value and in good faith.
It is also alleged that about the 11th of June, 1926, the plaintiff presented said receipts, with the indorsements thereon, to the defendants, and offered to satisfy the lien which defendants might have on the potatoes and to surrender the receipts, and demanded the defendants to deliver the potatoes to plaintiff, that thereupon the defendants stated to plaintiff that they had disposed of the said potatoes and no longer had them, or any part of them, in their possession and that they were unable to deliver, and did not deliver the said potatoes, or any part thereof, to plaintiff. In consequence of such refusal, the plaintiff claimed to have been damaged in the sum of $1,362.50 on one cause of action and the sum of $1,000 on the other cause of action.
The defendants answered, practically admitting the fact of the deposit by Grafton and the issuing of the receipts, and, by way of defense, alleged that Grafton entered into an agreement with the plaintiff, whereby it was understood and agreed by and between said plaintiff and Grafton that, in consideration of the delivery by Grafton to plaintiff of the warehouse receipts covering the potatoes stored in various warehouses, plaintiff would loan money to Grafton, and said warehouse receipts so delivered to plaintiff would be retained by said plaintiff as collateral security for said loan, and it was then and there further understood and agreed by and between plaintiff and Grafton that, in view of the fact that the potatoes covered by said warehouse receipts were perishable property, and that both Grafton and plaintiff were interested in protecting the same and securing the best price obtainable therefor, the sale of said potatoes should be negotiated and made by the said Grafton for and in behalf of plaintiff, and as its agent, with the understanding and agreement then and there had and made between the parties that he (the said Grafton) would deposit with plaintiff the proceeds from the sales of all potatoes covered by the warehouse receipts to be delivered to said bank, or account to plaintiff for said proceeds, and that said warehouse receipts would be returned by plaintiff to said Grafton upon demand at such times as sales of the potatoes covered thereby were being made; that, when demand for return of said receipts was made by the said Grafton on plaintiff, plaintiff would release all claim in and to the potatoes covered by the receipts demanded, and would return said receipts to the said Grafton; that at said time a large number of warehouse receipts, including the warehouse receipts referred to in paragraph IV of plaintiff's first cause of action herein and in paragraph I of plaintiff's second cause of action herein, were delivered to and pledged to said bank by Grafton; that said receipts were pledged by the said Grafton under said contract and not otherwise; and that said agreement so made between plaintiff and said Grafton was all in accordance with a general banking custom in such cases then well known to plaintiff, and under which custom, when warehouse receipts covering perishable property were pledged to a bank as security for a loan, the pledgor thereof would be permitted to dispose of said property as the agent of the bank, the proceeds of the sale to be accounted for and paid over to said bank.
Defendants allege that, under and pursuant to said custom and agreement, plaintiff loaned to said Grafton sums of money, the aggregate amount of said loans being to defendants unknown, and on or about the 8th day of February, 1926, and pursuant to said custom and agreement as set forth in the preceding paragraph hereof, said Grafton requested plaintiff to surrender certain warehouse receipts, including those two certain warehouse receipts hereinabove referred to. Plaintiff thereupon undertook to return and deliver to said Grafton said receipts, and pursuant to said agreement delivered unto said Grafton a number of warehouse receipts; that by inadvertence said warehouse receipts, being Exhibits B and C, were not returned to said Grafton, but, by Grafton's request for said receipts and plaintiff's agreement to return the same, all claims of plaintiff in and to said potatoes referred to in said receipts were released pursuant to said agreement, and said Grafton, pursuant to said agreement, and with the understanding that said receipts had been returned and not otherwise, sold and delivered said potatoes covered by said warehouse receipts, and that, under the terms of said agreement, plaintiff at the time of said sale had no right, title, claim, or interest in or to said potatoes covered by said warehouse receipts, or any part thereof; that thereafter said Grafton tendered unto the plaintiff the sum of $1,357.01, the proceeds derived from the sale of said potatoes, and that plaintiff failed and refused to accept the same; that said agreement, hereinabove referred to, was communicated to these defendants by the said Grafton; and that said potatoes were released from the warehouse belonging to these defendants pursuant to said agreement and not otherwise.
The allegations of new matter being controverted by a reply, the case went to trial upon the issues thus formed; and, under the instructions hereinafter referred to, the jury returned a verdict in favor of the defendants, from which plaintiff appeals.
J. Alger Fee, of Pendleton (Fee & Fee, of Fendleton, and William Smith, of Baker, on the brief), for appellant.
James T. Donald, of Baker (Nichols, Hallock & Donald, of Baker, on the brief), for respondents.
McBRIDE, J. (after stating the facts as above).
The sections of the Code bearing upon this subject may be summarized as follows:
Section 8017, Or. L., in substance, provides:
Section 8018, Or. L., provides:
"Except as provided in section 8043, where a warehouseman delivers goods for which he had issued a negotiable receipt, the negotiation of which would transfer the right to the possession of the goods, and fails to take up and cancel the receipt, he shall be liable to any one who purchases for value in good faith such receipt, for failure to deliver the goods to him, whether such purchaser acquired title to the receipt before or after the delivery of the goods by the warehouseman."
Section 8043, Or. L., among other things, provides: Liability of a warehouseman ceases after he makes lawful sale in satisfaction of his lien, or because of the perishable or hazardous nature of the goods.
Section 7997, Or. L., among other things, provides:
"No person operating any warehouse, * * * or other place of storage shall sell, * * * ship, * * * or in any manner remove or permit to be shipped, * * * beyond his custody and control, any grain, * * * or other produce or commodity for which a receipt has been given by him as aforesaid, whether received for storing, * * * or other purposes, without the written assent of the holder of the receipt."
Section 8016, Or. L., in substance, provides: Where a warehouseman delivers goods to the authorized agent who holds the warehouse receipts for the same, said delivery is justified and the holder of said receipts has no cause of action against the warehouseman.
The following facts may be taken as thoroughly established First, that the warehouse receipts, B and C, are negotiable;...
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