State ex rel. Milwaukee Grain Elevator Co. v. Robinson, 25899.

• Decision Date: 07 July 1936
• Docket Number: 25899.
• Citation: 186 Wash. 557,59 P.2d 365
• Parties: STATE ex rel. MILWAUKEE GRAIN ELEVATOR CO. v. ROBINSON, Director of Agriculture, et al.
• Court: Washington Supreme Court

59 P.2d 365

186 Wash. 557

STATE ex rel. MILWAUKEE GRAIN ELEVATOR CO. v. ROBINSON, Director of Agriculture, et al.

No. 25899.

Supreme Court of Washington, En Banc.

July 7, 1936

Appeal from Superior Court, Thurston County; John M. Wilson, Judge.

Mandamus proceeding by the State of Washington, on the relation of the Milwaukee Grain Elevator Company, against Walter J. Robinson as State Director of Agriculture, and another. From a judgment directing the issuance of a peremptory writ of mandate, defendants appeal.

Reversed and remanded, with a direction.

G. W Hamilton, George Downer, and George G. Hannan, all of Olympia, for appellants.

Venables Graham & Howe and Wilbur J. Lawrence, all of Seattle, for respondent.

GERAGHTY Justice.

This is an appeal from a judgment directing the issue of a peremptory writ of mandate requiring the appellants, Walter J. Robinson and G. W. Hamilton, Director of Agriculture and Attorney General, respectively, to approve a warehouseman's bond, tendered by the respondent in compliance with the provisions of Rem. Rev. Stat. § 6996, as amended by chapter 186, Laws 1933, p. 815, § 1.

The respondent Milwaukee Grain Elevator Company operates numerous warehouses in the wheat-growing areas of Washington for the storage of grain and issues warehouse receipts therefor, as provided in the warehousemen's act, Rem. Rev. Stat. §§ 6978 to 7015.

All of the capital stock of the Milwaukee Grain Elevator Company is owned by the Gallatin Valley Milling Company, organized under the laws of the state of Washington, but operating a system of warehouses in Montana. The Fisher Flouring Mills Company a Washington corporation, is organized to carry on the milling business. The intercorporate relation of the Milwaukee, Gallatin, and Fisher Companies, as set forth in the complaint, it:

'That the Fisher Flouring Mills Company does not own any stock in the Milwaukee Grain Elevator Company, nor does it own any stock in the Gallatin Valley Milling Company, but that all of the stock of the said Gallatin Valley Milling Company was subscribed for and issued to the shareholders of the Fisher Flouring Mills Company in direct proportion to the number of shares in Fisher Flouring Mills Company owned by each stockholder in that company. That a contract was executed by each stockholder in each company stating, in substance, that it is expendient and advisable that the business of the Fisher Flouring Mills Company, The White-Dulany Company and the Gallatin Valley Milling Company be carried on by having a unity of stock and interest in the said three corporations; that therefore there shall be a unity of ownership of the capital stock of the said three corporations by which the ownership of said stock shall be united so that one owner of each share of stock of the Fisher Flouring Mills Company shall also own one-twelfth of one share of stock of the White-Dulany Company and shall also own one-fourth of one share of stock of the Gallatin Valley Milling Company. That the stock certificate of the Fisher Flouring Mills Company contains an inscription on the back thereof, stating:

"The ownership of the shares of stock in the three respective corporations embraced in this certificate shall remain united and inseparable in the proportion of one share in the Fisher Flouring Mills Company to one-twelfth of one share in the White-Dulany Company and one-fourth of one share in the Gallatin Valley Milling Company,' and contains a condition:

"That no part of the stock interest, as evidenced by the within certificate, in any one of the three corporations shall be sold

or transferred otherwise than upon assignment and transfer of the same proportionate interest of the stock in each of the other two corporations as shown above; and that no transfer of any shares of stock in any of the said corporations shall be complete until the transfers are made upon the records of each of said corporations for the proportionate shares of stock in the three corporations as hereinabove specified, and shall be evidenced by inseparable certificates in like form as the within and executed by the officers of each corporation; and the foregoing agreement is binding upon the holders of the within instrument, his successors, executors and assigns, and shall be otherwise inalienable."

Rem.1935 Supp. § 6996 provides: 'Each person, firm, corporation or association of persons operating any public warehouse subject to the provisions of this act shall, on or Before the first day of July of each year, give a bond to the state of Washington, with surety to be approved by the director of agriculture in a sum equal to five cents per bushel of the grain capacity of any such warehouse, as may be determined by the director of agriculture, but in no case less than the sum of five thousand dollars ($5,000.00), to be approved by the director of agriculture and the attorney general,' conditioned as surther in the section provided. The act provides that any person or corporation conducting two or more warehouses may give a single bond meeting its requirements, and a formula is provided for determining the amount of the bond.

The Milwaukee Grain Elevator Company tendered to the appellants, Director of Agriculture and Attorney General, a bond in the penal sum of $50,000, executed by itself as principal and the Gallatin and Fisher Companies as sureties. The named state officers, questioning the legal capacity of the sureties, refused to accept the bond as in compliance with the requirements of section 6996.

The complaint set forth the corporate organization of the sureties, their financial solvency, and their business and corporate interrelationship. It is alleged that the Fisher Company owns and operates a large flouring mill in Seattle with a daily capacity of 6,000 barrels of flour and cereals and 1,500 tons of feed. It sells its flour and grain products in many parts of the United States and foreign countries. Different types of flour are made, requiring different types of wheat and other grains. As a consequence, the mill must have available to it, at its source of supply, a sufficient quantity of the quality, classes, and types required to supply current orders, and it is, therefore, essential for the mill to be able, from time to time, to purchase, at the sources of production, sufficient wheat of the various kinds to supply its needs; that an available supply of grain can be satisfactorily obtained by a flouring mill only through the operation of a chain of grain warehouses in wheat areas, either by itself or affiliated organizations; that while the other large flouring mills operated in the Pacific northwest have their own warehouse systems, the Fisher Company purchases its supplies from farmers storing wheat in the warehouses of the Milwaukee Company. These sales are negotiated by the agents of the Milwaukee Company through Mr. S. C. Armstrong, president of the company, who is also head of the grain department of the Fisher Flouring Mills Company and buys all the wheat required by it. The Milwaukee Company is able to furnish other additional services not procurable through any other means or agency. The purpose of these allegations was to establish such an interest in the operations of the Milwaukee Company as would furnish a legal basis for the signing of its bond by the Fisher and Gallatin Companies.

The respondent attached to its complaint, as an exhibit, a letter from the Department of Agriculture, signed by J. D. Fink, assistant director, and reading as follows:

'With reference to the question of this Department accepting grain warehousemen's bonds, written by corporations other than surety companies authorized to do such business in this State, we are today in receipt of a communication from the Attorney General, dated June 10th, 1935, which reads in part as follows:

"* * * we have not withdrawn our opinion to you under date of December 28, 1934, in substance holding that ordinary corporations should not be accepted and approved as surety on grain warehousemans' bonds.

"We do not regard the recent opinion of the superior court of Thurston County in the case of Milwaukee Grain Elevator Co. v. Robinson, as overruling or setting aside the above mentioned opinion.' 'In compliance with this opinion of the Attorney General we now formerly notify you that grain warehouse licenses will not be issued by this Department for the year beginning July 1st next unless and until surety bonds are submitted which conform to this opinion.'

A demurrer interposed by the appellants having been overruled an answer was filed in which they alleged that when the bond was first tendered to the director of agriculture, it was disproved for the reason that, in the opinion of the Attorney General, corporations such as the sureties here were not eligible to act as surety on warehousemen's bonds, since they are not admitted and qualified to do fidelity and surety business, as required by the laws of the state of Washington; that in disproving the bond, the defendants considered only lack of eligibility and did not exercise their discretionary power to pass upon such matters as financial responsibility or the power of the corporations to enter into the surety contract involved in the bond; that since the overruling of the demurrer, defendants had considered the qualifications of the corporate sureties and the question whether or not they had power to execute a bond as surety, and had determined that the contract of surety in controversy was not necessary to enable either of the corporate sureties to accomplish the objects for which they were created, nor reasonable necessary or proper to the conduct of their business, and therefore that neither of them is authorized to act as...