Department of Agriculture, Labor & Industry v. Devore

6 P.2d 125, 91 Mont. 47, 1931 Mont. LEXIS 70

• Court: Montana Supreme Court
• Decided: November 21, 1931
• Docket: No. 6,814.
• Status: Published

Opinions

MR. JUSTICE' ANGSTMAN

delivered the opinion of the court.

This is an action in conversion. Defendant's general and special demurrer to the complaint was sustained. Plaintiff elected to stand on the complaint and judgment for defendant was entered. The appeal brings up for determination the sufficiency, of the complaint to withstand the attacks made upon it.

The complaint alleges, in substance, that the Department of Agriculture through the division of grain standards on the fourth day of December, 1929, with the consent and by the express authorization of the Walsh Grain Company, a copartnership, intervened in the affairs of that company and took possession of certain described personal property belonging to it, of the value of $2,281.87 (none of which was stored grain against which storage tickets had been issued), for the purpose of paying a part of the claims of the holders of warehouse receipts for grain stored with it, which warehouse receipts the Walsh Grain Company was unable to redeem; that the taking possession by the Department of Agriculture was needful for the protection of the interests of holders of warehouse receipts and other evidences of the delivery of grain to .the Walsh Grain Company, for which payment had not been made; that there were warehouse receipts then outstanding amounting to $16,920, which were in excess of the assets of the Grain Company, and of bonds applicable to the payment of claims for stored grain; that on the sixth day of December, 1929, while the property was in the possession of the Department of Agriculture, defendant, as sheriff of Gallatin county, wrongfully levied upon and seized the property and converted it to his own use and thereafter sold it without the permission or consent of the department, to the damage of plaintiff in the sum of $2,281.87, for which it asks' judgment. The complaint alleges that plaintiff, on and after December 4, 1929, was the owner of, and had a special property interest and ownership in, the described property and was entitled to the immediate possession thereof.

As above stated, the demurrer was both general and special. The special grounds need not be considered, for the general demurrer reaches the question involved.

In determining the sufficiency of the complaint we are required to interpret Chapter 42, Laws of 1925, which provides: “Whenever any warehouseman, grain dealer, track buyer, broker, agent or commission man is found to be in a position where he cannot, or where there is a probability that he will not meet in full all storage obligations or other obligations resulting from the delivery of grain, it shall be the duty of the Department of Agriculture, through the Division of Grain Standards, to intervene in the interests of the holders of warehouse receipts or other evidences of delivery of grain for which payment has not been made, and the Department of Agriculture shall have authority to do any and all things lawful and needful for the protection of the interests of the holders of warehouse receipts or other evidences of the delivery of grain for which payment has not been made, and when examination by the Department of Agriculture shall disclose that for any reason it is impossible for any warehouseman, grain dealer, track buyer, broker, agent or commission man to settle in full for all outstanding warehouse receipts or other evidences of delivery of grain for which payment has not been made, without having recourse upon the bond filed by said warehouseman, grain dealer, track buyer, broker, agent or commission man, it shall then be the duty of the Department of Agriculture for the use and benefit of holders of such.unpaid warehouse receipts or other evidences of the delivery of grain for which payment has not been made, to demand payment of its undertaking by the surety upon the bond in such amount as may be necessary for full settlement of warehouse receipts or other evidences of delivery of grain for which payment has not been made.”

The question is: Were the acts which the Department of Agriculture did, as alleged in the complaint, “lawful and needful for the protection of the interests of the holders of warehouse receipts?”

In order to ascertain the legislative intent in passing Chapter 42, it is helpful to make reference to other statutory provisions regulating public warehousemen.

Whenever grain is delivered to a warehouseman for storage the transaction constitutes a bailment and not a sale, and “such grain shall at all times in the event of failure or insolvency of such bailee be first applied exclusively to the redemption of outstanding storage warehouse receipts for grain so stored with such bailee, and in such event grain on hand in any particular warehouse or elevator shall first be applied to the redemption and satisfaction of receipts issued by such warehouse.” (Sec. 4, Chap. 41, Laws of 1923.)

Warehousemen are required to “give a bond with good and sufficient sureties to be approved by the commissioner of agriculture to the state of Montana, in such sum as the commissioner may require, conditioned upon the faithful performance of the acts and duties enjoined upon them by law.” (Sec. 5, Chap. 41, Laws of 1923.) And no warehouseman shall sell or dispose of or deliver out of store except to the owner any stored grain except upon notice, in advance, to the Department of Agriculture and after complying in full with the laws of the state and the regulations of the Department of Agriculture relating to the handling of stored grain. (Sec. 4, Chap. 41, Laws of 1923.)

Chapter 42 is an amendment of section 6 of Chapter 41, Laws of 1923. The amendment made by Chapter 42 did not change the original purpose of that section. It was evidently designed originally to authorize the department, in the event of the existence of the conditions named therein, to take proper steps to see that the proceeds from the sale of all grain held for storage be first applied exclusively to the redemption of outstanding storage warehouse receipts for grain stored, as commanded by section 4 of the same Act. The amendments 'made by Chapter 42 simply extended the right of the department to intervene, not only for the protection of the interests of holders of warehouse receipts, but also for the protection of the interests of those holding evidences of the delivery of grain for which payment had not been made. That the right of the department merely goes to the enforcement of section 4, either under the original Act or under the amendment, is apparent. After applying the proceeds of the stored grain to the redemption and satisfaction of warehouse receipts, if there still remains unpaid any balance due on storage tickets or evidences of delivery of grain for which payment has not been made, then the department is obligated to resort to the bond filed by the warehouseman.

The legislature did not attempt to give to the Department of Agriculture any more authority than to do whatever was needful and lawful to have the proceeds of the stored grain applied to the redemption of storage tickets and then to demand payment of the bond. That this is so is manifest from Chapter 42, Laws of 1925, wherein the department is authorized to require the surety to pay “such amount as may be necessary for full settlement of warehouse receipts or other evidences of delivery of grain for which payment has not been made.” The legislature never contemplated that there should arise a situation, as here, where the liability of the warehouseman to ticket holders shall exceed the amount of stored grain on hand and the liability of the surety on the bond. That being so, how can it be said that the statute confers authority on the department to go further?

If, after applying the stored grain to the payment of the claims of those entitled thereto under section 4 of Chapter 41, and after resorting to the bond given for their protection, there still remains an unpaid balance due to the ticket holders and those holding evidences of unpaid claims for grain delivered, they stand as to the balance due on an equal footing with other creditors of the warehouseman.

But the plaintiff contends that, since the warehouseman consented that the department take possession of the property, the transaction amounts to a voluntary transfer of the property to plaintiff as agent for the ticket holders, and simply amounts to a preference to these creditors which must stand, in the absence of proceedings in bankruptcy to set aside the transfer. If the transaction can be thus viewed the contention is sound. A debtor may prefer one creditor to another, or may give security to one in preference to another. (Sec. 8601, Bev. Codes 1921.) The general rule is stated in 27 C. J. 618, as follows: “The right of the creditor to accept a conveyance -of property from his debtor in payment of his debt follows as a necessary consequence from the right of the debtor to make such conveyance. Unless restrained by statute a creditor may in good faith take property of his debtor in payment of a bona fide debt, and it is not evidence of bad faith on his part or a circumstance which will taint the transaction with fraud that nothing is left out of which other creditors may satisfy their claims. Similarly a creditor may accept security for his claim, and in the absence of statute his right to do so is not affected by the debtor’s insolvency or his knowledge of it, or the fact that by securing himself he defeats another. If the creditor obtains only what is due him, there cannot be said to be fraud in the transaction. One creditor of a failing debtor is not bound to take care of another, or to abate any degree of vigilance in looking after his own rights in order to give some other creditor a chance equal or superior to his own. He may even use influence to induce his debtor to give a preference.”

This rule applies in this state to an insolvent debtor. (Hale v. Belgrade Co., 75 Mont. 99, 242 Pac. 425.) And such a transaction is expressly excluded by statute from the operation of the statutory provisions relating to assignments for the benefit of creditors. (Sec. 8614, Rev. Codes 1921; and see Heath v. Wilson, 139 Cal. 362, 73 Pac. 182.) And the preference may be made by conveyance of real or personal property, either directly to a creditor in satisfaction of his claim, or to a third person for the creditor’s benefit (27 C. J. 620, and cases there cited), and when this is done the property is not subject to attachment against the grantor. (Greer v. Traders Bank of Canada, 132 Mich. 215, 93 N. W. 437.)

The difficulty here is to determine whether the transaction pleaded amounts to a transfer of the property. The allegation here is that the department, with the consent and by the express authorization of the Grain Company, intervened and for the purpose of paying a part of the claims of the ticket holders the Grain Company delivered into the possession of the department, and it took actual possession of, the property in question.

If the transaction can be upheld as giving the preferred creditors any rights, it must be on the theory that the transaction operated as a transfer of the title to the property to the department, in trust for the ticket holders. “If a preference is otherwise unobjectionable the particular form of the transaction by which it is made appears to be immaterial so far as the rights of other creditors are concerned, except where some positive statutory prohibition intervenes.” (27 C. J. 619.)

A transfer is an act of the parties, or of the law, by which the title to property is conveyed from one living person to another (sec. 6835, Rev. Codes 1921), and where not expressly required by statute to be in writing, it may be made orally. (Sec. 6841, Id.) But where there is a writing and it is delivered to a third person for the benefit of the grantee, his assent must either be shown or presumed. (Sec. 6848, subd. 2, Id.) "Where the transfer is accomplished orally, as here, it is equally apparent that assent on the part of the grantee must be shown. And the lien of a judgment procured by another creditor cannot be displaced by a presumed assent of the party invoking the presumption who knew nothing of the transaction until after the lien had attached. (Hibberd v. Smith, 67 Cal. 547, 56 Am. Rep. 726, 4 Pac. 473, 8 Pac. 46.) The department cannot act as agent for the ticket holders to accept a transfer of property for them unless they so agree, the statute not making the department their agent for such purpose.

If the department possesses such authority in any case it must be by virtue of an agreement with the ticket holders. There is no allegation in the complaint that the ticket holders, or any of them, consented that the department act as agent for them, or any of them, to accept a transfer of property from the debtor. The complaint does not proceed upon that theory but rather upon the theory that the department did what it conceived to be its duty under the statute.

From aught that appears from the complaint it may have been a ticket holder who obtained the writ under which the sheriff acted in making the levy and sale of the property involved. As above noted, the department had the right under the statute to intervene and take possession of stored grain and see that the proceeds thereof were properly applied, and this the ticket holders would be deemed to have assented to; but as to any other property or assets of the warehouseman a ticket holder might be unwilling to have the department act as agent for him. It cannot be said that he will be deemed to consent to the act because it purports to be for his benefit. Such acts may not be for his benefit. This is not a ease where the transfer is for the benefit of one creditor. It is for the benefit of a certain group of creditors. There may be conflicting interests among the ticket holders themselves. One ticket holder might prefer to proceed independently of the rest, and seek to establish his claim as one having priority over those of others by reason of, let us say, superior diligence in prosecuting his claim in court and obtaining a lien superior to those of others. The department has no author ity, independently of tbeir consent, to act for all of them, other than to take charge of stored grain and see that it is applied exclusively to the redemption of warehouse receipts and to demand payment on the bond filed for their benefit. The consent of the creditors after the transfer or assignment adds nothing to its legal operation (5 C. J. 1068, note 62), and the property attempted to be assigned or transferred for the benefit of a group of creditors, whose assent is not shown, is subject to seizure on legal process. (5 C. J. 1068, note 66.)

The suggestion has been made that the ticket holders are not creditors of the warehouseman, but bailors. That this is their status to the warehouseman is true, but when the department is authorized to, and does, intervene, they are treated as creditors holding liquidated claims. Were this not so, how could the department require the sureties on the bond to pay such an amount as will be necessary for the full settlement of the claims of those entitled to resort to the bond, as commanded by Chapter 42?

It has also been suggested that the transaction pleaded amounts to a trust declared by the warehouseman as trustor, to the department as trustee and for the benefit of the ticket holders. Conceding, without deciding, that this could have been done, the complaint does not allege that it was done. The requisites of a voluntary trust are that it must with reasonable certainty indicate (1) an intention on the part of the trustor to create a trust, and (2) the subject, purpose and beneficiary of the trust. (Secs. 7884, 7885, Rev. Codes 1921.)

There is nothing in the complaint to indicate an intention on the part of the warehouseman to create a trust. Neither does the complaint show that the trustor, if we assume the warehouseman was such, indicated with reasonable certainty, or at all, who were the beneficiaries of the trust. He might have desired to prefer one ticket holder to another. The fact is that the most that can be determined from the complaint, is that the department took possession of the property for the purpose of paying part of the claims of ticket holders, and that it did so with the consent and express authorization of the warehouseman. The complaint is not susceptible of any other interpretation than that the department, and not the warehouseman, was to determine to whom the proceeds of the property should be paid and how much to each one. It cannot be held that the complaint is sufficient to establish a voluntary trust.

The court properly sustained the demurrer to the complaint. The judgment is affirmed.

Mr. Justice Galen concurring.