Farmers Elevator Mutual Insurance Co. v. Stanford

• Decision Date: 07 December 1967
• Docket Number: Civ. A. No. 4-432.
• Citation: 280 F. Supp. 523
• Parties: FARMERS ELEVATOR MUTUAL INSURANCE COMPANY, Plaintiff, v. Pat H. STANFORD, dba Bardwell Grain Company, and Millers Mutual Fire Insurance Company of Texas, Defendants.
• Court: U.S. District Court — Northern District of Texas

280 F. Supp. 523

FARMERS ELEVATOR MUTUAL INSURANCE COMPANY, Plaintiff, v. Pat H. STANFORD, dba Bardwell Grain Company, and Millers Mutual Fire Insurance Company of Texas, Defendants.

Civ. A. No. 4-432.

United States District Court N. D. Texas, Fort Worth Division.

December 7, 1967.

COPYRIGHT MATERIAL OMITTED

J. Edward Barth, of Barefoot, Moler, Bohanon & Barth, Oklahoma City, Okl., for plaintiff.

David M. Kendall, Jr., of Woodruff, Hill, Bader & Kendall, Dallas, Tex., for defendants.

OPINION

WILLIAM M. TAYLOR, Jr., District Judge.

Plaintiff Farmers Elevator Mutual Insurance Company, claiming as subrogee of Commodity Credit Corporation (hereinafter referred to as "CCC") brought this suit against Defendant Pat H. Stanford, dba Bardwell Grain Company, and Defendant Millers Mutual Fire Insurance Company of Texas to recover the sum of $23,342.88 (reduced by trial amendment to $22,964.24), being the amount plaintiff had paid to CCC under its blanket insurance policy FE-475. The case was tried before a jury, but at the conclusion of the evidence plaintiff moved for an instructed verdict and the court, being of the opinion that the established and uncontroverted facts as hereinafter set forth determined the rights of the parties, withdrew the case from the jury and has concluded that judgment should be rendered for the plaintiff.

Defendant Pat H. Stanford, operating warehouses located at Bardwell and Morgan, Texas, entered into a Uniform Grain Storage Agreement (hereinafter referred to as "UGSA"), with CCC on June 30, 1960, agreeing to accept grain and other commodities for storage, issuing warehouse receipts and certificates and loading out such stored grain and other commodities in accordance with the terms and provisions thereof.

On June 5, 1962, Defendant Stanford, as Principal, and Defendant Millers, as Surety, executed Standard Warehouseman's Bond No. 18-18-84, binding themselves "unto Commodity Credit Corporation and to any agency or person who may be injured by a breach of the Agreement(s) thereinafter described" (emphasis added), in the principal sum of $130,000.00. It was further provided that "This bond shall be effective from the effective date of such Agreement(s) * * *." By rider, the date of the bond was made August 8, 1962 and by another rider the penal sum of the bond was increased from $130,000.00 to $185,000.00, it being provided in said rider that such change should be effective on and after August 8, 1962 and should not affect the rights and obligations of the parties under the bond prior to the change, except as to limit of liability.

Defendant Stanford had applied for and secured a license from the State of Texas under the provisions of Article 5577a, Revised Civil Statutes of Texas, being the Texas Grain Warehouse Act. Pursuant to Section 3 thereof, and to obtain such license for the Bardwell facility, Defendant Stanford and Defendant Millers executed bond in the penal sum of $50,000.00 and a like bond in the amount of $30,000.00 for the Morgan facility, which said bonds were conditioned upon the faithful performance of all of Bardwell's duties as public warehouseman.

CCC deposited grain in these warehouses for commingled storage under the UGSA. Stanford accepted the grain for storage and duly issued warehouse receipts, as provided by Section 9(a) (1) of the Agreement, and CCC paid the warehouse charges to Defendant Stanford on the basis of the quantity of grain delivered for commingled storage thereunder.

On June 17, 1963, plaintiff executed and delivered to CCC its blanket Insurance Policy FE-475, agreeing to pay CCC any and all amounts which CCC should be entitled to recover from any warehouseman because of any failure of the warehouseman to perform fully its obligations under the UGSA during the term from July 1, 1963 to July 1, 1964. Paragraph 10 of this insurance policy provided that in the event of any payment under the policy the insurer should "to the full extent permitted by law, be subrogated to all of CCC's right of recovery therefor against the warehouseman and any other person or other legal entity to the extent of such Agreement."

On July 1, 1963, CCC and Defendant Stanford amended the UGSA by executing Bond Amendment to UGSA which provides, inter alia, (1) that acquisition of the blanket insurance policy by CCC does not relieve the warehouseman of any obligations under the Agreement; (2) that the insurance does not inure to the benefit of the warehouseman; and (3) that by payment to CCC under the policy plaintiff-insurer is subrogated to CCC's right to recover against warehouseman and any other person or legal entity to the extent of such payment. The Bond Amendment also provided that the warehouseman should pay CCC a charge as specified in a Schedule for Rates for all warehouses covered by the UGSA for which CCC was protected by a blanket insurance policy, such charge to be paid upon the receipt of invoice from CCC showing the amount due and further providing that CCC might collect such amount by setoff against the charges due and unpaid the warehouseman under the UGSA.

Commencing in February of 1963 and continuing through September 1963, CCC surrendered warehouse receipts and issued loading orders to Defendant Stanford to load out and ship all of the grain remaining in storage in Stanford's warehouses. Defendant Stanford failed and refused to redeliver all of the grain stored by CCC in the quantity and quality shown on the warehouse receipts. CCC made demand upon Defendant Stanford for payment of the full amount owing, $23,324.88. On September 25, 1964, pursuant to the terms of its blanket insurance policy, plaintiff was compelled to and did pay CCC the sum of $23,324.88. On December 29, 1964, interest was paid by plaintiff to CCC in the amount of $1,412.08. Plaintiff, as subrogee of CCC, under its blanket insurance policy and the Bond Amendment to the UGSA, made demand for payment from both defendants. Upon their refusal, this action resulted.

The evidence shows that prior to July 1, 1963, CCC, as part of its routine movement of grain and under the UGSA, issued three loading orders to Stanford. Stanford failed to deliver grain of the quantity and quality called for by the warehouse receipts surrendered by CCC with demand for delivery of the grain described on such receipts. Settlement for the value of the grain shipped was calculated in accordance with Section 13 of the UGSA and is $1,536.20. These loading shortages were considered by CCC as usual and ordinary for warehouses without weighing and grading facilities.

The record discloses that prior to July 1, 1963 Stanford earned $2,961.87 in unpaid warehouse charges pursuant to Section 18 of the UGSA. CCC set off the shortage from the routinely issued loading orders described above by the accrued warehouse charges in the claim in accordance with Section 23(b) of the UGSA. This resulted in a net credit to Stanford of $1,425.67, which is properly applied against the ultimate claim.

On April 25, 1963, CCC removed Stanford's warehouses from the List of Approved Warehouses because of his failure to furnish a financial statement. CCC did not terminate the agreement at that time in accordance with its rights under Section 22(b) of the UGSA. This action was merely notice to Stanford that CCC would not deposit additional grain in his warehouses.

On July 23, 1963, CCC decided to issue loading orders to ship the entire quantity of government owned grain in store at Stanford's warehouses, presumably because he had failed to submit a financial statement.

Stanford failed to deliver the quantities of grain called for by the warehouse receipts surrendered by CCC with demand for delivery of the grain described on such receipts. The last date on which storage charges were to end was September 25, 1963. Settlement was made pursuant to Section 13 of the UGSA with the total net value of the underdeliveries and overdeliveries in the quantity and quality of the grain shipped, resulting in a shortage of $34,339.74.

The last shipment of the government owned grain stored in Stanford's warehouses was made on December 6, 1963.

The official weights and grades of all grain loaded out by Stanford and shipped to CCC was determined at the destination in accordance with Section 12 of the UGSA.

The accrued but unpaid warehouse charges on the final shipments total $10,886.24. This amount is properly included as a credit in the claim.

The total claim as computed by CCC was $23,342.88. Due demand for payment of this amount was made by CCC upon Stanford and Defendant Millers. When Stanford and Defendant Millers refused to make payment, demand was made upon plaintiff under its blanket insurance policy.

Pursuant to the terms of its blanket insurance policy, plaintiff was compelled to pay CCC $23,342.88, plus interest thereon. From the records of CCC produced upon the trial, including the warehouse receipts, load out orders, weight certificates, and bills of lading, it appeared that the provable shortage amounted to $22,964.24 and the claim of Plaintiff Farmers was reduced to this amount by trial amendment.

Section 21 of the UGSA specifically provides that its terms "* * * shall prevail over the written or printed terms of the warehouse receipts representing the grain, * * * and over state and local regulatory laws and rules to the extent that such laws or rules may be inconsistent herewith." It is, therefore, unquestionable that the rights and duties of the parties in respect to the grain involved in this controversy are governed by the terms of the UGSA. See, Tulsa Grain Storage Co. v. Commodity Credit Corporation, 231 F.Supp. 432, 433 (N.D.Okl.1964); Farmers Grain, Livestock and Cooperative Mercantile Association v. Commodity Credit Corporation, 145 F.Supp. 788, 795 (D. Kan.1956).

Throughout the UGSA significant distinction is made between grain stored "commingled" and "identity preserved". Recognition of this distinction is...