United States v. Merchants Mutual Bonding Company

• Decision Date: 23 July 1963
• Docket Number: Civ. No. 1201.
• Parties: UNITED STATES of America, Plaintiff, v. MERCHANTS MUTUAL BONDING COMPANY, A Corporation, Defendant, v. R. L. MADISON and Helen M. Vust, Third-Party Defendants, and Benson-Quinn Company, Lee Smith, et al., Interpleaded Defendants.
• Court: U.S. District Court — Northern District of Iowa

220 F. Supp. 163

UNITED STATES of America, Plaintiff, v. MERCHANTS MUTUAL BONDING COMPANY, A Corporation, Defendant, v. R. L. MADISON and Helen M. Vust, Third-Party Defendants, and Benson-Quinn Company, Lee Smith, et al., Interpleaded Defendants.

Civ. No. 1201.

United States District Court N. D. Iowa, W. D.

July 23, 1963.

COPYRIGHT MATERIAL OMITTED

Donald E. O'Brien, U. S. Atty., Sioux City, Iowa, for plaintiff.

Marvin J. Klass, Sioux City, Iowa, for defendant.

Nelson & Stienstra, Sioux City, Iowa, for third-party defendants.

Paul A. Mahr, Paul J. Yaneff, U. A. Morgan, Charles M. Gasser, Sioux City, Iowa, Creasy & Metcalf, Moville, Iowa, for interpleaded defendants.

HANSON, District Judge.

This is an action brought by the United States of America based upon the claim of Commodity Credit Corporation. Jurisdiction is conferred by 15 U.S.C. § 714b(c). The United States alleges that Commodity entered into a grain storage agreement with Martin Vust doing business as Correctionville Elevator and Mill. The United States alleges that the warehousemen and warehouse were licensed under the Iowa Bonded Warehouse Law, Chapter 543, Code of Iowa, I.C.A.

The United States alleges that Merchants Mutual Bonding Company is a surety on a certain bond in which Martin Vust doing business as Correctionville Elevator and Mill is the principal and Commodity Credit Corporation, a wholly owned corporate agency and instrumentality of the United States of America, was a beneficiary. The United States alleges that the bond was dated August 6, 1958, and a rider was attached dated September 17, 1958. The United States alleges the sum of the bond to be $58,000.00.

The United States further alleges the following:

1. That the obligee under the bond is the State of Iowa for the use and benefit of any person lawfully entitled to receive the same in compensation for damages growing out of the principal's operation of warehouse under the provision of Chapter 543, Code of Iowa, I.C.A., and licensed under said Act, License No. W-2315; and that the bond is conditioned upon said principal's faithful performance of the duties of a licensed warehouseman in conformity with the provision of Chapter 543, Code of Iowa, I.C. A.

2. That under the aforesaid Uniform Grain Storage Agreement, Commodity deposited or caused to be deposited in the warehouseman's warehouse licensed under the provision of Chapter 543, Code of Iowa, I.C.A., 213,616.36 bushels of corn for storage, for which corn the warehouseman issued warehouse receipts. Between April 4, and May 11, 1960, Commodity surrendered the aforesaid warehouse receipts to the warehouseman and directed him to load out and redeliver to Commodity all of the corn thereby represented. Notwithstanding the foregoing, the warehouseman loaded out and redelivered to Commodity only 137,509.57 bushels of corn, leaving a shortage of 72,654.51 bushels, which quantity of corn the warehouseman had wrongfully converted to his own use. In addition, the corn loaded out and redelivered to Commodity by the warehouseman was of a lower grade and quality than that specified in the applicable warehouse receipts surrendered by Commodity. Moreover, the warehouseman claimed and was paid for warehousing services in and about the 72,654.51 bushels of corn which he had converted to his own use, to which he was not entitled under the terms of the aforesaid Uniform Grain Storage Agreement. As a result of the warehouseman's aforesaid breaches of the aforesaid Uniform Grain Storage Agreement, plaintiff has been damaged in the net sum of $89,724.86.

3. That under the aforesaid Uniform Grain Storage Agreement, Commodity deposited or caused to be deposited in the warehouseman's warehouse, licensed under the provisions of Chapter 543, Code of Iowa, I.C.A., 2,699.72 bushels of soybeans for storage, for which the warehouseman issued warehouse receipts. About May 6, 1960, Commodity surrendered all of the aforesaid warehouse receipts to the warehouseman and directed him to load out and redeliver to Commodity all the soybeans thereby represented. Notwithstanding the foregoing, the warehouseman failed, neglected and refused to redeliver to Commodity said 2,699.72 bushels of soybeans, which he had converted to his own use. Moreover, the warehouseman claimed and was paid for warehousing services in and about said soybeans which he had converted to his own use, to which he was not entitled under the terms of the aforesaid Uniform Grain Storage Agreement. As a result of the warehouseman's aforesaid breaches of the aforesaid Uniform Grain Storage Agreement, plaintiff has been damaged in the net amount of $5,352.16.

4. That under the aforesaid Uniform Grain Storage Agreement, Commodity deposited or caused to be deposited in the warehouseman's warehouse, licensed under the provisions of Chapter 543, Code of Iowa, I.C.A., 6,336.29 cwt. of grain sorghums for storage for which the warehouseman issued warehouse receipts. On or about April 11, 1960, Commodity surrendered the aforesaid warehouse receipts to the warehouseman and directed him to load out and redeliver all of the grain sorghums thereby represented. Notwithstanding the foregoing, the warehouseman loaded out and redelivered to Commodity only 6,015.40 cwt. of grain sorghums, leaving a shortage of 320.89 cwt. of grain sorghums, which the warehouseman had converted to his own use. In addition, the grain sorghums redelivered by the warehouseman to Commodity were of a lower grade and quality than that represented by the warehouse receipts surrendered by Commodity. As a result of the warehouseman's aforesaid breaches of the aforesaid Uniform Grain Storage Agreement, plaintiff has been damaged in the sum of $809.66.

5. That by reason of the foregoing, the conditions of said warehouseman's bond have been breached by defendant's principal to plaintiff's damage in the sum of $58,000.00, and there is now due and payable to plaintiff from defendant the aforesaid sum of $58,000.00, no part of which sum having been paid.

Merchants Mutual Bonding Company answered the Complaint by the United States and admitted paragraph 4 of the Complaint which reads as follows, to-wit:

"Defendant, Merchants Mutual Bonding Company, is surety on a certain bond dated August 6, 1958, a rider thereto dated September 17, 1958, and a rider thereto dated August 21, 1959, in the principal sum of $58,000.00, naming Martin Vust, doing business as Correctionville Elevator and Mill, Correctionville, Iowa, principal; the State of Iowa for the use and benefit of any person lawfully entitled to receive the same in compensation for damages growing out of the principal's operation of warehouse under the provision of Chapter 543, Code of Iowa, and licensed under said Act, License No. W-2315, as obligee; and conditioned upon said principal's faithful performance of the duties of a licensed warehouseman in conformity with the provision of Chapter 543, Code of Iowa,"

and admits that no part of the sum allegedly due to plaintiff from defendant has been paid.

Merchants Mutual Bonding Company amended its Answer to the Complaint of the United States and alleged that the action is based solely upon rights under the provisions of Chapter 543 of the 1958 Code of Iowa, I.C.A. and that the plaintiff cannot maintain this action under the provisions of said Chapter 543.

The United States replied to this defense or answer of Merchants Mutual Bonding Company as follows, to-wit:

"1. On or about September 17, 1958, the defendant Merchants Mutual Bonding Company made and executed a rider to the bond sued upon in this action wherein said Bonding Company agreed to give Commodity Credit Corporation (hereinafter designated as CCC) 90 days notice in the event of cancellation of said bond.

"2. That said rider is and has been a standard requirement on all bonds posted by bonded warehousemen within the State of Iowa and the defendant Merchants Mutual Bonding Company has executed similar riders in numerous instances on bonds on which it is surety for bonded warehousemen in the State of Iowa.

"3. That said defendant was at all times aware that C.C.C. was relying on said bond for protection.

"4. At no time did the defendant Bonding Company, directly or indirectly, ever state or indicate to C.C. C. that it disclaimed liability to C.C. C. on the bond sued upon in this action or other similar bonds furnished by it in the State of Iowa.

"5. The defendant Merchants Mutual Bonding Company has waived the legal defenses relative to nonliability to the plaintiff as asserted in its Second Defense and is estopped to deny liability on the bond sued on in this action."

Merchants Mutual Bonding Company then filed a counterclaim for interpleader. In this counterclaim, Merchants Mutual Bonding Company alleges that there are a number of other claims against the same bond which the United States is claiming against and that the total of these claims is in excess of the principal sum of the bond. Merchants Mutual Bonding Company amended this claim for interpleader to list additional parties who may have claims against the bond.

The United States replied to the counterclaim for interpleader and admits that its claim alone is in excess of the limits of Merchants Mutual Bonding Company's liability on the bond. The Court ordered that the following parties identified in the counterclaim for interpleader and amendment thereto be joined: Benson-Quinn Company, Lee Smith, Dale Powell, John Moon, Al Henrichsen, Max Flathers, Maurice Shever, Lloyd Stines, Wayne Smith, Dick Deeds, Eugene Baker, Lester Wright, Stanley Fitch, Roy Walker, Tom Cobb, Gilbert Baker, and Roy Stines. The Court later ordered that Ronald Randolph be joined as a party defendant and that his pleadings be permitted to stand.

R. L. Madison and Helen Vust were impleaded by Merchants Mutual Bonding Company. The allegations of Merchants Mutual Bonding Company against these third-party defendants are as follows:

"Defendant

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