Salt River Valley Water Users' Ass'n v. Peoria Ginning Co.

• Decision Date: 23 December 1924
• Docket Number: Civil 2170
• Citation: 27 Ariz. 145,231 P. 415
• Parties: SALT RIVER VALLEY WATER USERS' ASSOCIATION, a Corporation, Appellant, v. PEORIA GINNING COMPANY, a Corporation, and HOWARD M. PEEK and J. R. FLEMING, Doing Business Under the Firm Name and Style of PEEK & FLEMING, a Copartnership, Appellees
• Court: Arizona Supreme Court

231 P. 415

27 Ariz. 145

SALT RIVER VALLEY WATER USERS' ASSOCIATION, a Corporation, Appellant, v. PEORIA GINNING COMPANY, a Corporation, and HOWARD M. PEEK and J. R. FLEMING, Doing Business Under the Firm Name and Style of PEEK & FLEMING, a Copartnership, Appellees

Civil No. 2170

Supreme Court of Arizona

December 23, 1924

APPEAL from a judgment of the Superior Court of the County of Maricopa. F. H. Lyman, Judge. Judgment modified and as modified affirmed.

Messrs Kibbey, Bennett, Gust & Smith, for Appellant.

Mr Charles Woolf, for Appellees, Peek & Fleming.

OPINION

STRUCKMEYER, Superior Judge.

On March 1, 1921, H. W. Strangman leased to F. J. Strawn certain premises for the raising of a crop of cotton, the term of the lease beginning March 1, 1921, and ending February 1, 1922. Strawn agreed to pay as rent to Strangman the cost of the electric power furnished by the appellant for the pumping of water upon the premises demised. Strangman was under contract with the appellant to pay for the power, and the amount thereof was made a lien upon the premises. Pursuant to the lease, Strawn entered into possession, commenced the raising of a crop of cotton, and the appellant furnished the electric power for the pumping of water, the cost of which, however was not paid by Strawn, either to Strangman, the lessor, or to the appellant.

The Exchange Bank of Peoria, having taken a crop mortgage from Strawn to secure a debt due it from Strawn, advanced the money for the picking and for the ginning of the cotton. The cotton was ginned at the Peoria Ginning Company which issued its fifteen negotiable warehouse receipts to the bank. The appellees, Peek & Fleming, purchased the negotiable warehouse receipts from the bank on the tenth day of February, 1922. The picking and the ginning of the cotton and issuance of the warehouse receipts was during the term of the lease; the purchase of the warehouse receipts by Peek &amp Fleming from the bank, subsequent. Peek & Fleming, however, were purchasers in good faith and without notice of the claim of Strangman, the lessor.

Strangman assigned his claim to the appellant, and the appellant brought this action, seeking herein to pursue the cotton and to have therein declared to it, as such assignee, a landlord's lien superior to the rights of Peek & Fleming. Peek & Fleming answered, alleging themselves to be purchasers of the warehouse receipts in good faith and without notice, upon which answer (and cross-complaint) the court rendered judgment in favor of Peek & Fleming and against the appellant, decreeing Peek & Fleming to be the owners of the fifteen bales of cotton, free and clear of any claim of the appellant, and awarding costs and damages in the amount of storage charges against the appellant.

Two assignments of error are presented. The first questions the correctness of the holding of the court denying a landlord's lien upon the facts. The second relates to the item of storage charges.

May a landlord pursue the landlord's lien, given by Civil Code of 1913, paragraph 3671, into the negotiable warehouse receipts issued by a warehouseman, and against the innocent purchaser thereof? Paragraph 3671 in part reads:

"Every landlord shall have a lien upon the crops grown or growing upon the leased premises for rent thereof, . . . and also for the faithful performance of the terms of the lease, and such lien shall continue for a period of six months after the expiration of the term for which the premises were leased, and, in all cases where the demised premises shall be let or lease assigned, the landlord shall have the same right to enforce his lien against the sublessee or assignee as he has against the tenant to whom the premises were leased."

The section is set out in full in Scottsdale Ginning Co. v. Longan, 24 Ariz. 356, 209 P. 876.

Who of the two parties shall suffer in this action, the landlord to whom the statute declares a continuing lien, or the purchaser of negotiable warehouse receipts, who has purchased the same for value and without notice? The importance of a correct determination thereof is obvious.

Strangman had a landlord's lien upon the crop; the Peoria Exchange Bank had a lien thereon by its chattel mortgage, the latter subject to the former. The primary right of possession was in Strawn, the lessee and grower. Strangman had the right to reduce his lien to a physical possession; likewise the bank had the right to reduce its lien to possession, and by the terms of the mortgage, "hold or sell and dispose of the same at public or private sale." Strangman did not exercise his right; the bank did. It placed its agent in charge of the crop. It caused the crop to be picked and ginned and had the negotiable warehouse receipts issued in its name, thereby clothing itself with the document of title. Its acts as against Strangman and Strawn were not tortious. True, its possession of the crop could have been disturbed and taken away by Strangman exercising his statutory superior right. On the contrary, however, having knowledge of the fact that the bank had taken possession of the crop, and that it was picking and ginning the cotton, he stood by and made no effort to interfere with the bank's possession, though, as to the bank, he did assert the existence of his lien, resting upon the bare assertion thereof only.

The Uniform Warehouse Receipts Act was adopted in the state of Arizona in 1921 (chapter 47, Sess. Laws 1921). To unify the commercial law of the country was the object of the Uniform Warehouse Receipts Act. The industrial and economic necessity of such unification was pressing. To fully accomplish the purposes of the act, courts must be mindful in their interpretation that the receipts to be issued under the act were to pass current in the commercial world as negotiable documents of title. Local laws must be interpreted in the light of the desire to make the Uniform Warehouse Receipts Act universal in its application throughout the commercial world. Commercial Bank v. Canal Bank, 239 U.S. 520, Ann. Cas. 1917E, 25, 60 L.Ed. 417, 36 S.Ct. 194 (see, also, Rose's U.S. Notes).

The appellant's argument in support of the landlord's lien is based wholly upon the proposition stated by Professor Williston:

"The bailor, having no title to the goods, cannot, by depositing them with the warehouseman or carrier, and receiving a document of title in return, whatever its form, give a good title to a purchaser of the document, however innocent the purchaser may be." Williston on Sales, 2d ed., §421.

Upon this proposition the argument is built that the bank could not, by depositing the crop with the warehouse and receiving the negotiable warehouse receipts, and by the negotiation of the receipts to the appellees, though innocent purchasers for value, cut off the superior lien of Strangman, the landlord. Section 41 of the Warehouse Receipts Act provides:

"Section 41. (Rights of Person to Whom a Receipt has been Negotiated.) A person to whom a negotiable receipt has been duly negotiated acquires thereby:

"(a) Such title to the goods as the person negotiating the receipt to him had or had ability to convey to a purchaser in good faith for value, and also such title to the goods as the depositor or person to whose order the goods were to be delivered by the terms of the receipt had or had ability to convey to a purchaser in good faith for value, and

"(b) The direct obligation of the warehouseman to hold possession of the goods for him according to the terms of the receipt as fully as if the warehouseman had contracted directly with him."

It is asserted by the appellant that the decision of this court in Scottsdale Ginning Co. v. Longan, 24 Ariz 356, 209 P. 876, is decisive of the question here involved. In the latter case this court stated that the purpose of paragraph 5190, Revised Statutes of 1913 (Civil Code, now...