United States v. Tyler

• Citation: 220 F. Supp. 386
• Decision Date: 23 July 1963
• Docket Number: Civ. No. 874.
• Parties: UNITED STATES of America, Plaintiff v. Hubert A. TYLER, United Fire and Casualty Company of Cedar Rapids, Iowa, a corporation, the Home Indemnity Company of New York, a corporation, Defendants.
• Court: U.S. District Court — Northern District of Iowa

220 F. Supp. 386

UNITED STATES of America, Plaintiff v. Hubert A. TYLER, United Fire and Casualty Company of Cedar Rapids, Iowa, a corporation, the Home Indemnity Company of New York, a corporation, Defendants.

Civ. No. 874.

United States District Court N. D. Iowa, Central Division.

July 23, 1963.

Donald E. O'Brien, U. S. Atty., Sioux City, Iowa, A. J. Metcalf, U. S. Dept. of Agriculture, Chicago, Ill., for plaintiff.

D. R. Newbrough, Ames, Iowa, Haupert, Robertson & Johnson, Marshalltown, Iowa, John Paul Jones, W. C. Hoffman, Des Moines, Iowa, for defendants.

HANSON, District Judge.

This Memorandum and Order has been precipitated by a Motion to Dismiss or for Judgment on the Pleadings by The Home Indemnity Company of New York, one of the defendants in the above entitled cause.

The United States of America, plaintiff in this cause, complains against the warehouseman and sureties on their bonds for damages sustained by reason of the warehouseman's failure to deliver to the Commodity Credit Corporation grain pursuant to warehouse receipts. One of the defendants in said cause is the warehouseman himself and another defendant is a surety known as the United Fire and Casualty Company of Cedar Rapids, Iowa.

By reason of the nature of the submission, the allegations of the Complaint and the admissions of Home Indemnity Company's Answer become highly material in the ultimate disposition of the submission at hand. It is the affirmative disclosures of plaintiff's Complaint that brings about the possible solution under Rule 12(b) or alternatively under Rule 12(c) of the Federal Rules of Civil Procedure.

Both the plaintiff and the defendants substantially say that the action is brought by the United States of America as the real party in interest based on a claim of Commodity Credit Corporation, its wholly owned corporate agency and instrumentality. Jurisdiction over this matter is conferred on this Court by 15 U.S.C. § 714b(c).

It appears without question that on or about the 18th day of June, 1955, Hubert A. Tyler, doing business as Tyler Elevator, Ellsworth, Iowa, entered into a written Uniform Grain Storage Agreement with Commodity Credit Corporation.

It is admitted by the defendant that The Home Indemnity Company of New York, as surety for the defendant, Hubert A. Tyler, made, executed and delivered a penal bond to the State of Iowa conditioned upon the principal's faithful performance of the duties of a warehouseman licensed under the provisions of Chapter 543 of the Code of Iowa, I.C.A., and that they also executed a rider to said bond on or about September 12, 1959.

The plaintiff in its Complaint in substance indicates as follows:

Pursuant to the aforesaid Uniform Grain Storage Agreements, Commodity delivered or caused to be delivered to the warehouseman 322,464.01 bushels of corn which the warehouseman received and accepted for storage and for which the warehouseman issued to Commodity warehouse receipts.

Thereafter, beginning about September 4, 1958, and continuing to about December 4, 1959, Commodity surrendered to the warehouseman the above described warehouse receipts and directed the warehouseman to load out and redeliver for its account the corn represented by said warehouse receipts, the same being all of Commodity's corn in store with the warehouseman.

Notwithstanding the foregoing, the warehouseman loaded out and redelivered to Commodity only 280,104.27 bushels of corn, leaving a shortage of 42,359.74 bushels of corn, which quantity of corn the warehouseman had wrongfully converted to its own use. In addition to such quantity shortage, the corn loaded out and redelivered by the warehouseman was of a lower grade in quality than that specified in the applicable warehouse receipts surrendered by Commodity.

Commodity, from time to time during the period herein involved, caused to be disbursed to the warehouseman certain payments for warehousing services performed in and about the aforesaid corn. During the period herein involved, the warehouseman failed to keep in store at all times in his warehouse facility described in the aforesaid Uniform Grain Storage Agreements a quantity and quality of corn equal to all outstanding corn storage obligations. Moreover, during the period herein involved, the warehouseman converted, as hereinbefore alleged, 42,359.74 bushels of Commodity's corn to his own use. By reason of the aforesaid breaches by the warehouseman of said Uniform Grain Storage Agreements, Commodity overdisbursed to the warehouseman payments for warehousing services performed in and about said corn in the sum of $30,047.11.

By reason of the warehouseman's aforesaid breaches of said Uniform Grain Storage Agreements, Commodity Credit Corporation has been damaged in the sum of $82,194.37. The warehouseman is entitled to an offsetting credit against said sum of $82,194.37 in the amount of $14,997.31. Accordingly, plaintiff has been damaged by the aforesaid breaches of said Uniform Grain Storage Agreements by defendant Hubert A. Tyler in the sum of $67,197.06.

Defendant, The Home Indemnity Company, is a New York corporation, doing business in the State of Iowa, and within the jurisdiction of this Court.

In compliance with conditions precedent imposed upon defendant Hubert A. Tyler, doing business as Tyler Elevator, Ellsworth, Iowa, to obtain a license under the provisions of Chapter 543, Code of Iowa, I.C.A., defendant Hubert A. Tyler as principal and The Home Indemnity Company of New York, as surety, made, executed and delivered a certain bond, in the penal sum of $87,000.00, to 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 operation by the principal of said licensed warehouse under the provisions of Chapter 543, Code of Iowa, I.C.A., and conditioned upon the principal's faithful performance of the duties of a warehouseman licensed under said statute, including all additional obligations as a warehouseman which the principal may assume under contracts with depositors of agricultural products in his said licensed warehouse. On September 12, 1959, said defendants as principal and surety executed a rider to said bond increasing the penal sum thereof to $137,000.00.

By reason of the principal's aforesaid breaches of his contractual obligations assumed by him with Commodity Credit Corporation, a depositor of agricultural products in his warehouse licensed under the provisions of Chapter 543, Code of Iowa, I.C.A., the conditions of the aforesaid bond and riders have been breached by said principal to plaintiff's damage, in the amount of $67,197.06, and there is now due and payable to plaintiff from defendant, The Home Indemnity Company of New York, the aforesaid sum of $67,197.06.

Plaintiff, in its sovereign capacity, and under the provisions of Article 6, Clause 2, of the Constitution of the United States, is authorized to sue defendant surety on the aforesaid bond and riders to protect and enforce its contractual and property rights.

On or about May 20, 1958, defendant The Home Indemnity Company of New York executed and delivered to Commodity Credit Corporation a certain rider to the aforesaid bond. Defendant The Home Indemnity Company of New York, because of execution and delivery of said rider to Commodity Credit Corporation, is now estopped to deny plaintiff its rights to enforce the terms of said bond and riders to recover for the principal's breaches of the Uniform Grain Storage Agreements hereinbefore alleged.

The United States alleges that Commodity Credit Corporation entered into an agreement with Tyler to store grain. Commodity is required by federal statute to store grain only with a warehouseman who has posted a sufficient bond.

A warehouseman in Iowa must also meet certain statutory requirements relating to posting a bond to insure the faithful operation on the part of the warehouseman. Home Indemnity was a surety on the bond posted by Tyler. This bond evidently met the requirements of the Iowa statute requiring the warehouseman to post bond.

The United States alleges that Home Indemnity assented to act as surety on the contract between Commodity and Tyler to store grain belonging to Commodity. For purposes of this motion to dismiss, the allegations of the United States must be taken as true and capable of being proven at the trial of this cause. Before the Commodity Credit Corporation would accept the surety, the limits of possible liability on the bond had to be raised. This was done by certain riders to the bond.

The defendant, Home Indemnity Company of New York, by way of Paragraph 11 of its Answer, and in further Answer to plaintiff's complaint, state as follows, to-wit:

"Further and by way of affirmative defense, this defendant states that the Complaint of the Plaintiff, United States of America, fails to state a claim upon which relief can be granted in that said Complaint shows upon its face and in conjunction with Exhibits "H", "I", and "J" therein referred to, that the plaintiff is not one of those persons or classes of persons lawfully entitled to receive of this defendant compensation for damages growing out of the operation of the Tyler Elevator under the provisions of Chapter 543, Code of Iowa."

The issues here raised on the Motion are in substance:

(1) Is there some type of contractual liability which has been incurred by the defendant that can properly be submitted for final disposition based upon the pleadings of the plaintiff;

(2) Whether or not there is in substance a submissible question on the principle of estoppel; and,

(3) May the plaintiff maintain this action against the Indemnity Company, defendant, predicated and based upon the provisions of the state of Iowa as disclosed in Chapter 543, Code of Iowa, I.C.A.

These problems are not completely new in this area. The problem of grain conversion and liability of bonded warehousemen has been a...