Ontario Livestock Commission Co. v. Flynn

• Decision Date: 11 February 1964
• Docket Number: No. 51245,51245
• Citation: 256 Iowa 116,126 N.W.2d 362
• Parties: ONTARIO LIVESTOCK COMMISSION CO., Appellant, v. William D. FLYNN, d/b/a Flynn Commission Co., and Marvin Kastner, Appellees.
• Court: Iowa Supreme Court

Page 362

126 N.W.2d 362

256 Iowa 116

ONTARIO LIVESTOCK COMMISSION CO., Appellant, v. William D. FLYNN, d/b/a Flynn Commission Co., and Marvin Kastner, Appellees.

No. 51245.

Supreme Court of Iowa.

Feb. 11, 1964.

Pizey, Sears & DeWitt, Sioux City, for appellant.

Stilwill, Wilson & Rhinehart, Sioux City, for appellee William D. Flynn, d/b/a Flynn Commission Co.

Daniel C. Galvin and John T. O'Brien, Sioux City, for appellee Marvin Kastner.

GARFIELD, Chief Justice.

This is a law action in two counts by Ontario Livestock Commission Co. of Ontario, Oregon, against defendants Kastner and Flynn, who live in or near Sioux City, Iowa, for alleged conversion of two shipments, each of 65 cattle, from plaintiff to Kastner. Plaintiff claims the cattle were obtained by fraud upon worthless drafts and delivered by Kastner to Flynn, a livestock commission merchant, who sold them and paid Kastner the proceeds of the sale, less commission. At the close of the evidence a verdict was directed against plaintiff who has appealed from the adverse judgment thereon.

Grounds of the motion to direct which were sustained are that plaintiff knew of and consented to the sale, and 2) the cattle were commingled with others not obtained from plaintiff before delivery to Flynn.

I. Plaintiff is a partnership engaged in the livestock business. Defendant Flynn is an individual also so engaged. Each is a registered market agency under the federal Packers and Stockyards Act. At all material times defendant Kastner was an order buyer and speculator in livestock. Jerry Baker, a prominent figure in the controversy, was a livestock dealer at Caldwell, Idaho.

Kastner learned of Baker in April, 1961, and arranged with him by phone to purchase cattle for him and pay for them by drawing a draft on Kastner payable through a bank at Laurel, Nebraska. Kastner would receive and sell the cattle and 'pick up' the draft at the bank. In mid-June (1961) Baker told Kastner about 65 heifers plaintiff was about to sell. Kastner testifies he sold them to a man at Fort Collins, Colorado, and authorized Baker to buy the heifers for him (Kastner) and ship them to Fort Collins. Apparently all dealings between Kastner and Baker were by phone.

Baker caused the 65 heifers to be purchased for Kastner at plaintiff's auction sale at Ontario, Oregon, and gave plaintiff a draft on Kastner for $9720.87 for the purchase price. The heifers were shipped to Kastner, in care of a commission company, at Fort Collins on June 22. Kastner testifies he turned the cattle down because of excessive cost and shrink in weight and so advised Baker. Baker denies this and says the heifers complied with the instructions he received from Kastner.

Morgan Beck, a partner and business manager of plaintiff, testifies Baker told him Kastner turned the cattle down. 'I instructed Baker to have the cattle sold through the Fort Collins auction in our name and remit directly to (us).' It is admitted plaintiff never sent the draft for $9720.87 through for collection. It has never been paid. The managing officer of the bank at Laurel, Nebraska, testifies Kastner on June 22 or later never had sufficient funds in his account to pay the draft and the bank had no arrangement to honor drafts drawn on him. Kastner admits this. When such drafts were paid Kastner deposited the funds the day payment was made.

Baker's testimony is that Kastner kept telling him he had sold the heifers and promising to send plaintiff the amount of the draft and that Baker so informed Morgan Beck. 'That was all right with Mr. Beck.' Later. according to Baker, Kastner admitted he was lying when he said he had the heifers sold. They were not sold at Fort Collins but shipped by Kastner to Laurel, Nebraska, commingled with other livestock he had there and shipped to Flynn at Sioux City. Flynn in turn sold the cattle he received and paid Kastner the proceeds, less commission for selling.

Count I of plaintiff's petition asks judgment for the $9720.87 from both Kastner and Flynn on the theory the heifers were wrongfully converted when Kastner obtained possession of them through his agent Baker, both defendants contributed to the conversion and the draft represented the fair and reasonable market value of the animals.

Plaintiff's Count II claims it sold Baker for Kastner's account 65 mixed steers and heifers for $5513.44, their fair market value, on July 21, 1961; Baker paid for them with a draft on Kastner payable at the Laurel bank; the draft was presented and returned unpaid for insufficient funds; Kastner delivered the cattle to Flynn who sold them on commission and paid Kastner the net proceeds; both defendants wrongfully converted the cattle and are liable to plaintiff for their value.

The evidence is these July 21st cattle were shipped from Ontario to Laurel, Nebraska, there mixed with other cattle of Kastner and the commingled lot was delivered to Flynn. Between June 22 and July 21 plaintiff sold about 200 other cattle to Kastner and the drafts give in payment of them were paid by the Laurel bank. We understand Baker made all these purchases for Kastner and had general authority to buy cattle for him and draw drafts on Kastner in payment.

II. Plaintiff contends title to the cattle did not pass to Kastner by reason of nonpayment of the drafts given for their purchase, Kastner obtained possession by fraud which amounted to conversion, Flynn--as Kastner's agent--aided and assisted his codefendant in the conversion and is equally liable with him.

Plaintiff relies upon Birmingham v. Rice Bros., 238 Iowa 410, 26 N.W.2d 39, 2 A.L.R.2d 1108, and like decisions in other jurisdictions. There an impostor fraudulently obtained cattle from plaintiff by issuing to him a worthless check in payment, the impostor delivered the cattle to defendant commission firm which sold them to a third party and paid the impostor the net proceeds of the sale. Both plaintiff and defendant acted in good faith without knowledge of the fraud. We held, by reason of the fraud practiced on plaintiff, title to the cattle did not pass to the impostor and defendant commission firm was liable to plaintiff, the true owner, for the value of the cattle even though it acted in good faith and in ignorance of its fraudulent principal's want of title.

Although there is authority contrary to the cited decision most decisions are in accord. See 35 C.J.S. Factors § 57b, pages 578-579 (1960); United States v. Union Livestock Sales Co., 4 Cir., W.Va., 298 F.2d 755, 760; Restatement Agency, Second, section 349 and appendix, pages 574-8. However, Birmingham v. Rice Bros. does not involve or consider either of the grounds on which this verdict was directed against plaintiff. We now consider whether the ruling, as to Count I, should be upheld on the ground plaintiff consented to sale of the cattle by Kastner.

III. The C.J.S. citation, supra, states (35 C.J.S. Factors § 57b, page 579), 'The factor is not liable for conversion where he has been misled through the act of the owner * * * or where he obtains possession, and sells the goods, with the consent of the owner.'

89 C.J.S. Trover and Conversion § 5, says, 'Nonconsent to the possession and disposition of the property by the defendant is indispensable to a conversion.'

53 Am.Jur., Trover and Conversion, section 30, contains this: '* * * a conversion generally consists of a wrongful, tortious, or unlawful taking of property from the possession of another by fraud, * * * and without his consent or approbation, either express or implied.'

Numerous precedents which support one or more of these statements include Doyle v. Burns, 123 Iowa 488, 514, 99 N.W. 195; French v. Smith Booth Usher Co., 56 Cal.App.2d 23, 131 P.2d 863, 865-866; McInerney v. Nachman, 286 Ill.App. 477, 3 N.E.2d 105, 108; Edinburg v. Allen Squire Co., 299 Mass. 206, 12 N.E.2d 718, 721; Burchmore v. H. M. Byllesby & Co., 140 Neb. 603, 1 N.W.2d 327, 332; Biesmann v. Black Hills United Mining Co., 64 S.D. 82, 264 N.W. 518, 520; Staats v. Miller, Tex.Civ.App., 240 S.W.2d 342, 344-345. See also Sergeant v. Watson Bros. Transp. Co., 244 Iowa 185, 199, 52 N.W.2d 86, 94.

We have repeatedly held express or implied consent by the holder of a chattel mortgage or landlord's lien to sale of the property subject thereto is a waiver of the lien and precludes an action for conversion. Producers Livestock Marketing Ass'n v. John Morrell & Co., 220 Iowa 948, 952-954, 263 N.W. 242, and citations. 'It is elementary that there is no conversion of property where it has been acquired and used with the consent of the owner or pledgee.' Burroughs v. Butler-Ryan Co., 121 Iowa 215, 217, 96 N.W. 750; Producers Livestock Marketing Ass'n case, supra.

IV. We will set out the evidence bearing on the question of plaintiff's express and implied consent to sale of the heifers Count I alleges were converted.

Morgan Beck, a partner and business manager of plaintiff, was the only witness connected with plaintiff other than as a customer. He testifies the 65 heifers were consigned to Kastner at Fort Collins, Colorado, in care of a commission company with a sales pavilion. 'My understanding was * * * they were to be yarded and sold to someone else. * * * the buyer * * * was going to sell them at Fort Collins. We did not object, it was none of our business if the draft went through. We were selling to Mr. Kastner.'

Mr. Beck also says, 'Before the draft was deposited Mr. Baker told me Kastner had turned the cattle down; therefore there was no reason to deposit it. I instructed Baker to have the cattle sold through the Fort Collins Auction in our name and remit directly to our company.'

Jerry Baker testifies, 'I told Morgan Beck that Kastner was going to take them; that he had them sold. Then the cattle were shipped. * * * Later I * * * told Beck I had talked to Kastner and he said the heifers were sold and he'd send them the money. That was all right with Mr. Beck. * * * Both Ontario and...