State ex rel. and for Use and Benefit of Cawrse v. American Surety Co. of New York

• Decision Date: 31 July 1934
• Citation: 35 P.2d 487,148 Or. 1
• Parties: STATE ex rel. and for Use and Benefit of CAWRSE et al. v. AMERICAN SURETY CO. OF NEW YORK et al.
• Court: Oregon Supreme Court

35 P.2d 487

148 Or. 1

STATE ex rel. and for Use and Benefit of CAWRSE et al.

v.

AMERICAN SURETY CO. OF NEW YORK et al.

Supreme Court of Oregon

July 31, 1934

Department 1.

Appeal from Circuit Court, Marion County; L. G. Lewelling, Judge.

Action by the State of Oregon, on the relation and for the use and benefit of Charles Cawrse and another, partners as Cawrse Brothers, against the American Surety Company of New York, a corporation, and Fischer Warehouse Company, a corporation, in which the American Surety Company of New York filed a cross-complaint. From a decree of the circuit court which dismissed the equitable defense of the American Surety Company of New York, filed under Code 1930, § 6-102, after a demurrer filed by the plaintiffs to the cross-complaint of that defendant, based upon the contention that the cross-complaint did not state facts sufficient to constitute an equitable defense to the complaint, and that such separate answer did not state facts sufficient to require the interposition of a court of equity, had been sustained, the American Surety Company of New York, appeals.

Orders and decrees affirmed.

Edward J. Clark, of Portland, (Plowden Stott, of Portland, on the brief), for appellant.

John H Carson, of Salem (C. E. Ross, of Salem, on the brief), for respondents.

C. F Gillette, of Monmouth, for defendant Fischer Warehouse Co.

ROSSMAN Justice.

The complaint alleges separately four similar causes of action. The first of these avers that the relators, to whom we shall hereafter refer as the plaintiffs, are partners engaged in farming that the defendant Fischer Warehouse Company is a corporation engaged in the conduct of a licensed public warehouse; that the defendant American Surety Company of New York is engaged in the business of writing surety bonds; and that, October 5 1926, the warehouse company, as principal, and the surety company, as surety, executed and delivered to the state of Oregon a warehouse bond for the period commencing July 1, 1926, and ending July 1, 1927. The 1923 Session Laws, c. 78, p. 108, and Oregon Code 1930, § 61-635, require such bonds of public warehousemen, conditioned upon the latter's "faithful performance of the acts and duties enjoined upon them by law." The pleading further avers that the bond just mentioned was conditioned upon the warehouse company's faithful performance of the duties required of it by our laws; that in August of 1926 the plaintiffs deposited with the warehouse company, as a bailment, 852 bushels of wheat of the market value of $1,227.74; that August 1, 1932, they offered to pay all of the warehouse company's reasonable charges, accompanying their offer with a demand for the return of the wheat; that their demand was refused; that June 15, 1927, the warehouse company converted to its own use the aforementioned grain; that the plaintiffs have elected to secure redress for the resulting injury by enforcing liability upon the bond; that they filed with the surety company a verified claim and have demanded of both defendants payment of the sum of $1,227.74. The second cause of action is averred in language substantially similar to the first, with the exception that it alleges the execution of a warehouse bond by the same parties on August 3, 1927, for the period of July 1, 1927, to July 1, 1928; the deposit by the plaintiffs with the warehouse company of 3,130 bushels of wheat on August 17, 1927, as a bailment; that the market value of the grain was $4,382.22; that on June 15, 1932, the warehouse company converted the grain to its own use; "that from time to time relator plaintiffs herein have received from Fischer Flouring Mills, a corporation, certain wheat, mill feed and other articles kept by said Fischer Flouring Mills Company for sale, and at the time of so receiving same it was understood and agreed that the reasonable value of the articles so sold by defendant Fischer Flouring Mills to relator plaintiffs should be charged against the amounts owing by Fischer Warehouse Company to relator plaintiffs to said warehouse company as specified in this cause of action; that relator plaintiffs have been unable to secure from defendant Fischer Warehouse Company or from said Fischer Flouring Mills a statement of the amount of such credits; that relator plaintiffs do not know the exact amount of such credits but do know that the amount thereof is less than the sum of $1500.00; that full information in regard to such credits is in the possession of and available to defendant Fischer Warehouse Company; that on account of such credits relator plaintiffs are allowing to defendants on this cause of action, as credit, the sum of $1500.00." The third cause of action is substantially similar to the first, with the exception that it is predicated upon the warehouse bond signed by the defendants July 1, 1929, extending over the period July 1, 1929, to July 1, 1930. It avers the delivery to the warehouse company by the plaintiffs in August and September of 1929 of 1,060 bushels of wheat as a bailment, of the value of $1,028.56, and the conversion to its own use by the warehouse company of the grain on June 15, 1930. The fourth cause of action is likewise substantially similar to the first. It alleges a warehouse bond signed by the defendants July 1, 1930, for the term July 1, 1930, to July 1, 1931, the plaintiffs' delivery to the warehouse company of 1,826 bushels of wheat October 13, 1930, of the value of $1,059.34, and the warehouse's conversion of the wheat to its own use June 15, 1931. The second, third, and fourth causes of action aver that upon the receipt of the wheat the warehouse company delivered to the plaintiffs warehouse receipts requiring it to return the wheat upon demand "to the order of said Cawrse Bros."

The cross-complaint of the defendant surety company, which is denominated an "equitable answer," alleges that the Fischer Warehouse Company and Fischer Flouring Mills Company are corporations "closely related in management" that the one operated a warehouse and the other a flouring mill; that the four bonds mentioned in the complaint were executed as alleged in that pleading; that an agreement existed between the plaintiffs, the warehouse company and the flouring mills company whereby the plaintiffs delivered their grain to the warehouse company, subject to an agreement which authorized it to sell the grain for their account and deduct from the proceeds the price of any merchandise sold to the plaintiffs by the flouring mills company; that "pursuant to said understanding numerous transactions occurred during said time between plaintiffs and said Fischer Warehouse Company and Fischer Flouring Mills Company, being the same transactions, among others, referred to by the plaintiffs in their said four several pretended causes of action. The said account involved in said four several pretended causes of action, being the transactions aforesaid, is complicated, complex and long, consisting of many entries of mutual charges and credit and requiring a detailed account of the books of each of said three parties to said interwoven transactions. No settlement of said transactions, or striking of a balance therefrom, has ever been had between said parties and the amount of said balance is unknown and disputed. Each of the three parties has in their or its own possession its own books touching said numerous transactions and discovery is necessary. This answering defendant, as such surety, is liable only for such grain, if any, as the evidence may show was received and was thereafter held by Fischer Warehouse Company as a public warehouseman, under and pursuant to title 61, chapter 6, Oregon Code 1930 (section 61-601 et seq.), which has not been sold and/or accounted for, and/or paid for, and for which due demand with due tender of payment of all proper warehouse and cleaning charges has been made. The determination of these issues involves a complete audit or the books of each of said three parties, and the examination of long, complicated and complex mutual accounts of each of said parties involving numerous transactions, and requires the marshaling of any credit held by Fischer Flouring Mills and/or Fischer Warehouse Company to the exoneration of any liability of this answering defendant, on account of such grain, if any, as the evidence may show, its bond is liable for. This answering defendant is ready, willing and able to pay under the decree of this court such amount, if any, for which its bond is legally liable." The concluding paragraph of the cross-complaint referring to the three warehouse receipts mentioned in the complaint avers: "Said warehouse receipts in some instances are known to recite grain not actually received by Fischer Warehouse Company at or during the bond year of their issuance, and in all instances to have been either wholly or substantially discharged by payment, or by receiving credit for wheat, mill feed and other articles kept by said Fischer Flouring Mills Company for sale, and to have been subordinated and/or superseded by said selling agreement and transactions above alleged. On information and belief this answering defendant alleges all of said receipts to be wholly invalid. *** Plaintiffs threaten to, and unless the said warehouse receipts are impounded and cancelled in equity, will offer said receipts in evidence upon the trial of said law action, as valid and outstanding obligations of Fischer Warehouse Company." The pleading concludes with a prayer for (a) an order making the Fischer Flouring Mills Company a defendant; (b) for an accounting between the plaintiffs, the warehouse company, and the flouring mills company; (c) for cancellation of the warehouse receipts; and (d) for an injunction restraining the plaintiffs from...