Guckeen Farmers Elevator Co. v. Cargill, Inc.

• Decision Date: 14 August 1964
• Docket Number: No. 39148,39148
• Parties: GUCKEEN FARMERS ELEVATOR CO., Respondent, v. CARGILL, INC., Defendant and Third-Party Plaintiff, Appellant, v. Harold W. STRIEMER, dba Striemer Grain Co., Third-Party Defendant.
• Court: Minnesota Supreme Court

Page 69

130 N.W.2d 69

269 Minn. 127

GUCKEEN FARMERS ELEVATOR CO., Respondent, v. CARGILL, INC., Defendant and Third-Party Plaintiff, Appellant, v. Harold W. STRIEMER, dba Striemer Grain Co., Third-Party Defendant.

No. 39148.

Supreme Court of Minnesota.

Aug. 14, 1964.

Syllabus by the Court

1. Where sale of goods is intended to be for cash and check in payment thereof is accepted, there is implied representation that check will be paid upon presentation at bank upon which it is drawn; and if not so paid, title to the goods remains in seller who may recover them or their value from third party who has purchased them from seller's vendee.

2. Above rule would have no application where the original seller has not only delivered possession of goods but also indicia of title thereto to his vendee; or where seller intended to extend credit to such vendee.

3. A majority of decisions from foreigh jurisdictions are in accord with doctrine above set forth known as 'cash sale' doctrine. A few jurisdictions have adopted 'voidable title' theory under which original seller is held to have given title to his vendee by delivery of his possession of goods sold to him but which title he may avoid if check delivered for such goods is dishonored. Under this theory third-party purchaser of goods from vendee is protected if original seller does not act to avoid sale before his vendee has sold goods. Merits of either 'cash sale' doctrine or 'voidable title' theory are dependent almost entirely upon concepts of policy and business convenience rather than self-evident principles of justice or moral concepts.

Because 'cash sale' doctrine appears more equitable for protection of those who by toil, effort, skill, and risk have produced marketable commodities, it should be adhered to.

Edward J. Schwartzbauer and Dorsey, Owen, Marquart, Windhorst & West, Minneapolis, for appellant, Frundt & Hibbs, Blue Earth, of counsel.

Putnam & Spencer, Blue Earth, for respondent.

THOMAS GALLAGHER, Justice.

Action in conversion by plaintiff, Guckeen Farmers Elevator Company, referred to herein as the Guckeen Company, to recover from defendant Cargill, Inc., the reasonable value of two loads of shelled corn purchased from the Guckeen Company by Harold W. Striemer on May 28, 1958, and resold by him on that date to Cargill, Inc. At the close of the trial the court made findings and ordered judgment for plaintiff in the amount of $1,244.10, and this appeal is taken from the judgment subsequently entered pursuant thereto. Judgment was also ordered against Striemer as third-party defendant, but he does not appeal.

At the time of the sale plaintiff was aware that Striemer was a licensed grain dealer and was purchasing the corn for resale. Plaintiff then made inquiry of another elevator company from whom Striemer had been purchasing corn at the same time and through it became aware that in making the purchases Striemer was acting as agent of Humphrey Grain Company of Carroll, Iowa, referred to herein as Humphrey. As Striemer made various corn purchases for Humphrey, he would draw drafts on the latter for the amounts thereof which he would deposit to his account in the First National Bank of Fairmont. He would then issue his checks from such account in payment of the corn purchased, relying upon payment of the drafts by Humphrey to cover such checks.

The purchases made by Striemer under this arrangement involved substantial amounts. After each purchase the corn would be picked up in his truck and simultaneously paid for with his check as described. The corn would then be hauled and delivered by Striemer to such purchasers as Humphrey would designate. In the instant case it had instructed Striemer to deliver the corn purchased from plaintiff to Cargill, Inc., at Savage, Minnesota, and this was done. Other loads of corn purchased were delivered upon Humphrey's orders by Striemer to other dealers in Minnesota and to dealers in Iowa and Nebraska. All of it was hauled in trucks owned by Striemer for which he had been licensed to operate in hauling grain by the Minnesota Railroad and Warehouse Commission.

In the present transaction with plaintiff Striemer delivered to it two checks--both were dated May 28, 1958, were drawn on the First National Bank of Fairmont, and were signed by Striemer. The names of the payees and the amounts thereof were left blank. Authority was given to plaintiff to fill in the blanks on completion of the sale, and plaintiff then caused its name to be inserted as payee and filled in the amounts due thereon for the corn totaling $1,484.60. It then deposited the checks for collection in the regular course of business. On June 6, 1958, they were returned to it unpaid because funds on deposit in Striemer's account were insufficient to cover them. Striemer testified that the reason for this was that the drafts which he had drawn upon Humphrey to cover them had not been honored by the latter.

In reselling the corn to Cargill, Inc., Striemer presented sales slips indicating that Humphrey was the actual seller, and on June 2, 1958, Cargill, Inc., forwarded its check in payment of the corn to Humphrey. Not until October 1959 did it receive notice that plaintiff claimed ownership of the corn and that the checks received by it in payment therefor had been dishonored.

Shortly after the checks were dishonored, plaintiff filed a claim with the Minnesota Railroad and Warehouse Commission for amounts covering them and others it had received from Striemer, all of which had been dishonored. Therein it sought recovery on a bond filed by Striemer pursuant to Minn.St. 27.04 ¹ at the time he was licensed by the commission. Ti recovered a sufficient amount to enable it to apply $240.50 on the two checks described. In the present action (commenced May 1960) for defendant's conversion of the corn, plaintiff fixed its value as equal to the remaining amount due on the checks.

The judgment is based upon findings that title to the corn never passed to Striemer; that although he was given possession and control of it, at no time did he possess the 'indicia of title' thereto; and that in the absence of a showing of prejudice, plaintiff's delay in seeking recourse from defendant did not constitute laches or grounds for estoppel. ² In a memorandum attached to the findings, the court stated:

'* * * Defendant's claim to being a bona fide purchaser would not be a defense since (neither) Striemer nor Humphrey Grain Co. had title to the corn. Section 512.23 * * * provides that the buyer acuqires no better title than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell. * * *

'* * * If there was a responsibility upon plaintiff to make inquiry as to the sufficiency of Mr. Striemer's bank account there was an equal responsibility upon the Defendant Cargill, Inc., to make inquiry as to the title of the one delivering the corn and his right to sell the same. Had the corn been stolen no title would have passed to defendant. * * *

'The record is free of any evidence * * * that Defendant was prejudiced * * * by delay on the part of the Plaintiff in making its demand upon the Defendant. * * * Defendant paid the purchase price to the Humphrey Grain Co. before the checks given by Mr. Striemer to Plaintiff had reached the bank. Defendant had a remedy * * * against the Humphrey Grain Co.'

It is defendant's contention that, when plaintiff accepted Striemer's checks in payment of the corn and delivered possession and control of it to him with knowledge that he was purchasing it for reasale, it manifested an intention to pass title to him at that time. It suggests that, if plaintiff had not intended to extend credit to Striemer in reliance upon the checks, it would have withheld delivery of the corn until it had investigated his financial standing at the bank upon which the checks were drawn; and would not have sought recovery on his bond before the Railroad and Warehouse Commission on the theory that the sale was complete on May 28, 1958. It advocates application of the 'voidable title' theory ³ as more equitable than the 'cash sale' doctrine ⁴ applied here by the court, since ordinarily a seller such as plaintiff is in a better position to prevent a loss due to a dishonored check by timely investigation of the worth of the check and the credit rating of his vendee than is a subsequent purchaser from such vendee who relies upon the latter's possession of the goods as evidence of ownership. It perceives a parallel situation in cases where credit has been extended to a vendee by the acceptance of his note or draft, and wherein it is generally held that title to the goods sold passes immediately to the vendee.

Plaintiff points out that the 'cash sale' doctrine has been followed by this court and by a majority of the courts of other jurisdictions. It argues that the ultimate purchaser may be readily protected by demanding evidence of vendor's title other than possession and by investigation of the credit of vendors with whom he customarily deals by means of credit rating facilities usually available to him. It directs attention to the limited facilities for such investigations available to farmers, livestock raisers, grain elevator operators, and other small producers who often are called upon to sell their products before or after banking hours to truckers who purchase and pick up such products with the intent of hauling and reselling them within a few hours to some well-established mill, stockyard, factory, or distributor usually located some distance away.

1. In this state it is well settled that, where a cash sale of goods is intended and a check in payment thereof is accepted, there is an implied representation that the check will be paid upon presentation at the bank upon which it is drawn; and that if not so paid title to the goods will remain in the seller who may recover the goods or their value...