NYTCO Services, Inc. v. Wilson

• Decision Date: 30 September 1977
• Citation: 351 So.2d 875
• Parties: 23 UCC Rep.Serv. 25 NYTCO SERVICES, INC. v. Porter WILSON et al. SC 2232, 2241.
• Court: Alabama Supreme Court

Page 875

351 So.2d 875

23 UCC Rep.Serv. 25

NYTCO SERVICES, INC. v. Porter WILSON et al.

SC 2232, 2241.

Supreme Court of Alabama.

Sept. 30, 1977.

Rehearing Denied Dec. 2, 1977.

John R. Matthews, of Ball, Ball, Duke & Matthews, Montgomery, for appellant NYTCO Services, Inc.

Maury D. Smith, Charles M. Crook and Charles S. Coody, Montgomery, for J. E. McDonald.

A. R. Powell and Griffin Sikes, Andalusia, for appellees.

BEATTY, Justice.

This is a consolidated appeal by NYTCO Services, Inc. (NYTCO) and J. E. McDonald from judgments rendered by a jury in favor of eighty-two plaintiffs joined under Rule 20, ARCP.

In 1972 NYTCO, formerly New York Terminal Warehouse Company, Inc., entered into a field warehousing lease agreement with Covington Grain Company, Inc. (Covington Grain) in Andalusia, Alabama under which NYTCO leased a bagged goods warehouse and five outside storage bins (silos). The bagged goods warehouse, a portion of which was used as Covington Grain's office, had a storage capacity of 15,000 bushels of grain and the five storage bins had a capacity of 110,000 bushels. These represented all of Covington Grain's storage facilities at this location.

The plaintiffs were farmers in Covington and surrounding counties, and during the 1974 soybean harvesting season they delivered soybeans to Covington Grain under three different kinds of agreements. Some farmers delivered soybeans according to previously made contracts for sale at a specified price, some delivered soybeans for sale at the market price and some delivered soybeans for a price to be agreed upon later. This third type of agreement is the subject of this action. The record discloses that under this third type of agreement the customer, after delivering his soybeans to Covington Grain, could purchase an equivalent quantity of soybeans with a five cents per bushel handling charge plus a one and a half cent per bushel per month storage charge. The receipts most farmers received for their deliveries were various Covington Grain weight tickets; however, some received Covington Grain statement sheets. The weight tickets had the words "Bought of" printed on them together with the name of the farmer and some had the word "Hold" written on them. A number of the statement sheets had the words "Store," "Stored," or "On Storage" written on them together with the name of the farmer.

Most of the soybean agreements were made with Morris Rabren but some were made with Mary Wishum, who was employed by Covington Grain as a bookkeeper for whom she did general office work. She was also employed by NYTCO to prepare certain reports which were sent from the Covington Grain facility to NYTCO's Atlanta office. NYTCO required her to prepare a receiving report and a daily report of the grain held for the purpose of issuing warehouse receipts. These reports together with a warehouse receipt application would be the basis for the issuance of warehouse receipts by NYTCO. Although Ms. Wishum's written instructions required that she prepare and send a daily report each day, she prepared one only when goods were actually stored under warehouse receipts in accordance with her oral instructions from NYTCO supervisor, Mr. Obie Jones. According to Ms. Wishum's testimony, she did not make up any daily reports for a period of time during the 1974 crop growing season. Ms. Wishum's salary was determined and paid by Covington Grain but her check was issued and deductions were made by NYTCO.

When NYTCO leased the Covington Grain facilities, it required that J. E. McDonald, the third party defendant, and Morris Rabren, execute a personal indemnity agreement for certain losses. J. E. McDonald was a stockholder, a member of the Board of Directors and the Secretary-Treasurer of Covington Grain. In addition to attending stockholders' meetings regularly and visiting the facility once a week, he dealt with Covington Grain as a customer in 1974. Morris Rabren, who was also a stockholder, was the President and General Manager of Covington Grain during the 1974 crop-growing season.

On October 21, 1974 following an application to the State of Alabama Department of Agriculture and Industries, NYTCO received a Public Warehousemen's Permit for its facility at Covington Grain. In addition, NYTCO had placed about twelve signs at various places on the premises which stated:

PUBLIC NOTICE

THIS IS A PUBLIC WAREHOUSE

PROPERTY IN THIS WAREHOUSE IS COVERED BY WAREHOUSE RECEIPTS

ISSUED IN ACCORDANCE WITH THE LAWS OF THIS STATE.

NEW YORK TERMINAL WAREHOUSE CO. INC.

PUBLIC WAREHOUSEMEN

NEW YORK CHICAGO ATLANTA DALLAS MEMPHIS LOS ANGELES

Some of these signs were placed on the storage bins, one was placed on the bagged goods warehouse in which the business office was located, and NYTCO's Warehousemen's Permit was displayed on a bulletin board on the outside of Covington Grain's business office. The record shows that Mr. Obie Jones, a general supervisor of NYTCO, testified that the purpose of these signs about the premises was to protect the lender, such as the Commercial Bank of Andalusia.

The record also discloses that Covington Grain never had a Warehousemen's Permit. However, Covington Grain's domestic corporation franchise tax return for 1974 stated that it was in the business of "Grain-Storage, Sales & Service." Mary Wishum testified that she told some of the plaintiffs that they could store their beans at the facility. According to the record, Mary Wishum also stated that she never knew what was in the bins and that she always accepted Morris Rabren's word as to what was in the storage bins.

Morris Rabren, President of Covington Grain, testified that he had been "hedging" on board of trade contracts (i. e. dealing in the soybean futures market) and that most of the plaintiffs knew this. Although the record is not clear on this point, it appears that Rabren would sell soybeans which had been left on storage. When the market declined in 1974-75, apparently Rabren sustained losses through his hedging.

Franklin Tillman, a field representative of NYTCO, was responsible for inspecting the facility at Covington Grain which he did about once a month. Another NYTCO representative, Howell Cone, also visited the facilities periodically and prepared written auditor's reports of these visits. These reports indicate that Howell Cone visited the facility on June 25, 1974, October 1, 1974 and on January 15, 1975. On January 21, 1975 the storage bins were padlocked by NYTCO representative Franklin Tillman. The record shows that on this date there were 19,964 bushels of soybeans actually present in the bins but the Commercial Bank of Andalusia held warehouse receipts for 27,000 bushels. In addition, the plaintiffs allege that at this time they had receipts for 161,000 bushels of soybeans at the facility. On January 31, 1975 Covington Grain filed a bankruptcy petition and thereafter notice was given by the United States District Court of those proceedings. The plaintiffs have filed claims in the bankruptcy proceedings but they have not recovered either money or beans.

The plaintiffs then brought this action against NYTCO, Rabren and Ms. Wishum alleging breach of contract, conversion, fraud, negligence and wantonness for the losses of their soybean deliveries. NYTCO then filed a third-party complaint against J. E. McDonald, and a cross-claim against Rabren, on the indemnity agreement they both made. The case was removed to Federal District Court by a defendant but because that Court lacked jurisdiction it remanded the case back to the Circuit Court of Covington County. Prior to trial the defendants filed motions for change of venue but they were denied. The trial commenced on August 2, 1976 and the jury rendered verdicts for the plaintiffs for $1,184,509.71 which were reduced to $1,169,509.71 by an amended judgment because of an error. The jury also found McDonald liable for the total verdicts on the third-party complaint, and Morris Rabren liable for the total verdicts on NYTCO's cross-claim. NYTCO and J. E. McDonald have made a consolidated appeal.

The appellants argue that the trial court made numerous errors in denying their motions for directed verdict, motion for judgment N.O.V. and motion for new trial; however, these can be reduced to three basic contentions:

1) That the transactions in question were sales rather than bailments,

2) That Rabren and Ms. Wishum did not accept plaintiffs' soybeans for NYTCO under agency rules, and

3) That the trial court abused its discretion in denying defendants' motions for change of venue.

The first question presented is whether the transactions were sales or bailments because if they were sales, with passage of title, then there could be no recovery against NYTCO under the theories of negligence, conversion, fraud, and wantonness as alleged. The appellants argue that the transactions were present sales with a price to be fixed in the future under Ala.Code tit. 7A §§ 2-106(1), 2-204(3), and 2-305. The references cited by appellants in Ala.Code, tit. 7A apply to those transactions in which the parties agree to a present sale with the price to be fixed in the future; however, those sections do not contemplate the plaintiffs' right at their discretion to require a return of the same or equivalent fungible goods as we have here, and thus this renders those sections inapplicable to this controversy. Further, the fact that the Covington Grain weight tickets and statements had words representing that plaintiffs' soybeans were being stored refutes the argument that the transactions were sales.

In addition, the record discloses that the option to require a return of goods or to sell the soybeans at the market price belonged to the plaintiffs. Under the authority contained in decisions from the courts of several midwestern grain producing states, if the option is retained by the depositor the transaction will be construed as one of bailment. Arndt v. Crowell, 138 Okl....