Sexton v. Graham

4 N.W. 1090, 53 Iowa 181

• Court: Supreme Court of Iowa
• Decided: March 19, 1880
• Status: Published

Opinions

Adams, Ch. J.

The defendants Chandler, Brown & Co., Isaac M. Hill and "W. IT. Hubbard, who were, by the court below, denied any participation in the proceeds of the grain, do not complain of the decree. They are, 'therefore, practically out of the case, and their rights need not be considered.

The plaintiffs, Sexton & Abbott, and the defendants Baker and Sears & Sons have, as their counsel expresses it, waived minor differences-among themselves and made common cause against tliéir common enemy.

We will proceed, in tlie first place, to determine the right? of Sexton & Abbott as against the. appellant, and in so doing we shall dispose, for the most part, of the questions which arise between the-appellant and the other appellees.

Sexton & Abbott claim that - the appellant acquired no right in the grain, either by the issue to it of the receipts by Graham, or afterward by the delivery to it of the grain.

The appellant claims that, while Sexton & Abbott may at one time have owned the grain described in their receipts,.. they sold the same to Graham at .the time of tlie issuance of the receipts, or, if not, that their title to the grain became extinguished by reason of what afterward transpired.

i. w.vjuj«i-orago ¿f ‘ grain: coniract. 2. —,-his mass.™”1011 The first question to be determined is as to whether the transaction, in pursuance of which the receipts were issued to plaintiffs by Graham, was a sale by them to him. Of course, if the grain had been specially . ° " deposited, that is, with the agreement or understanding that it should be kept separate from all other grain, no question could have arisen. It would be conceded by the appellant that the transaction would have been a bailment and not a sale. But the receipt expressly provided that the grain might be stored with other grain of the same kind and grade, the conceded meaning of which is that the grain might be mixed with other grain of the same kind and grade in a common mass. Now, while the appellant contends that ■; this is a.most important fact, it does not contend that tliisij tact alone would necessarily make the transaction a sale.1 Where a warehouseman merely receives grain from several V depositors, with tlie understanding that it may he mixed in a I common mass, and it is so mixed, the transaction is a hail- [ ment, and the depositors are tenants in common. Cushing v. Breed, 14 Allen, 380. But it is said that where the warehouseman is himself a depositor, and it is understood by the other depositors, that their grain is to he mixed with his, with the right, on his part, to draw from the mass to the amount oí his deposit, then the depositors do not become tenants in common, but the title to all the grain passes at once, upon deposit, to the warehouseman. In support of this view, the appellant cites South Australian Ins. Co. v. Randall, Law Rep., 3 Privy Council Appeals, 101; Chase v. Washburne, 1 Ohio St., 244; Norton v. Woodruff, 2 Conns., 155; Carlisle v. Wallace, 12 Ind., 252; Smith v. Clarke, 21 Wend., 84; Hurd v. West, 7 Cow., 752; Lornegan v. Stewart, 55 Ill., 45; Wilson v. Cooper, 10 Iowa, 565; Johnston v. Browne, 37 Iowa, 200. It is claimed by appellant, and we think the evidence so shows, that at the time of the transaction in question Graham was depositing, upon his own account, grain in his warehouse or elevator in common mass, and shipping therefrom, and that the plaintiffs knew it. We have then the question whether, such being- the fact, the title to plaintiff’s grain under their receipts passed to Graham.

Upon this point one other fact ought to be mentioned. The evidence shows that the grain described in the plaintiffs’ receipt was already in the elevator, having been originally deposited by Graham as the owner. The receipts were issued in pursuance merely of what the parties claimed to be a sale from Graham to plaintiffs. How the same transaction could be a sale from plaintiffs to Graham is, to say the least, a little difficult to understand.

But suppose that the plaintiffs had bought the grain of a third person and brought it to the elevator and deposited it, would the title have passed to Graham? It is a common thing, we believe, for proprietors of elevators to employ them for the deposit of their own grain, if they have any, in common mass with others’ grain. Depositors, we think, generally know this, and consent that their grain may be mixed not only with grain belonging to third persons, but with grain belonging to the proprietor, if he should have any. This mode of doing business seems to be demanded by considera tions of economy. Now we are asked to liold that such depositors lose title to their grain immediately upon its being-deposited, and that the receipts issued to them, though expressly calling for grain, are no evidence of a claim for grain, but at best are merely evidence of a claim for money, and are good or otherwise, according as the maker is or is not responsible. It is contended that such deposits of grain are like general bank deposits of money. In our opinion, however, there is a very important difference. In case of a general bank deposit it is understood that the bank will use it in its own way. It is from the use of deposits that the bank is to receive its compensation for receiving the deposits and accounting for the same. It is true that as grain has a definite and well recognized market value it would not, ordinarily, make much difference to the receipt holder whether he received the grain which his receipt called for, or was paid its market value in cash. But the rule contended for would make a great difference in the safety of the receipt. holder. In our opinion it cannot be sustained either upon principle or authority. The cases above cited as relied upon by appellant’s counsel are none of them in, point. In all of them there was enough in the receipts, or' in the circumstances, or both, to evince an understanding upon the part of the depositor that the warehouseman should have a right to sell the thing deposited upon his own account, or otherwise appropriate it to his own use. Such an understanding does not exist upon the part of grain receipt holders by reason of a mere agreement that the warehouseman may mix his own grain with theirs and draw out and sell the same amount. In such case the warehouseman becomes a tenant in common like any other depositor, and may be permitted to enjoy the same right of severance without affecting the title of his co-tenants.

Again, upon looking into the plaintiffs’ receipts, we find that they are something more than mere receipts. They contain what appears to us to be an express contract of bailment. If so, it is not competent to show that there existed a different contemporaneous parol undei’standing. Marks v. Cass County Elevator Co., 43 Iowa, 146.

The transaction, then, being ji bailment in the outset, we come to inquire whether the relation of the parties became changed by reason of what afterwards transpired. The appellant contends that it did. It is insisted that the evidence shows that the grain in controversy is entirely different grain from that in store when the plaintiff’s receipts were issued.

The business which Graham was doing was an ordinary grain warehouse or elevator business. Grain received from different depositors was put in at the top of the elevator and delivered to them at the bottom. Grain of like kind and grade was mixed in a common mass. Delivery was made to each depositor without the slightest reference to identity of grain deposited. It was not only useless but impracticable to respect the identity of the deposit. The plaintiff’s wheat receipt was held about six months. There were in store at the time of its issuance about 55,000 bushels. Afterwards there passed through the elevator about 150,000 bushels. This fact alone, it is said, is sufficient to render it improbable that any considerable part of the wheat in controversy is identical with that originally covered by the plaintiff’s receipt; besides, it is said that the evidence shows that the elevator was cleaned out two or three times. It appears that a mode of receiving and delivering grain was employed two or three times which resulted in substantially effecting a change in the mass; it was done to prevent heating; it was accomplished by preventing grain received after a certain date from mingling with that received before. This was'easily practicable by reason of the different floors and compartments of the elevator. The amount of grain in store, however, at any given time was neither greater nor less by reason of the cleaning out process. The different floors or compartments were emptied successively and successively refilled, but the change of mass was effected as substantially as if all had been emptied at once. The appellant insists that the change of mass destroyed all identity between the wheat in controversy and that originally covered by the plaintiff’s receipts, and, if so, that the receipt cannot be upheld.

In the ordinary conduct of the business of an elevator a partial change of mass is effected by every receipt and shipment. Such partial change, however, does not impair the value of the outstanding receipts. As each receipt-holder withdraws his grain, the remaining receipt-holders become each the owner of a larger fraction in a smaller mass. Upon each new deposit being made, the receipt-holders become each the owner of a smaller fraction in a larger mass. So far, we presume that there is no controversy. The process may be continued from day to day, and so long as the change of mass is a partial one, though approximating day by day to completeness, the value of the outstanding receipts remains unchanged. Possibly it would be admitted by appellant that the value of a receipt would remain unchanged when next to the last kernel originally covered by it was withdrawn. Possibly somewhat more than that amount might be deemed necessary to uphold the receipt. But according to the appellant’s theory, as we understand it, whatever the amount may be, whether one kernel or one bushel, its withdrawal, although in the ordinary and necessary conduct of business, renders the receipt worthless as evidence of a claim to grain, and what a moment before was a valid title in the receipt-holder to all the grain called for by his receipt becomes transferred from the receipt-holder to the warehouseman, and that, too, in the absence of any agreement or understanding of that kind between the parties. It will be seen at once that the rule contended for would result in the most painful uncertainty and interminable confusion. No receipt-holder who had held his receipt even for a short time during a period of active business would know, or could i possibly ascertain, what his rights are. This result, so undesirable in every respect, is reached by appellant upon the purely technical view that unless a portion of the original grain, at least a kernel or two, remains, the receipt must, in the nature of things, fail. In our opinion, a complete answer is that as the receipt attaches upon each new deposit the receipt-holder becomes and remains a tenant in common at all times of the mass which is being added to and sxrbtracted from.

At this point a qixestion arises 'as to what is to be deemed a common mass. The elevator, as we have seen, was constructed with different" floors and compartments. Grain was pxxt in at the top of the elevator and delivered at the bottom. If a receipt holder called for his grain immediately it seems probable that he would not only receive no part of the grain deposited, but would receive grain from' some floor or compartment which would contain no part of the grain deposited. He would, therefore, receive grain with which the grain deposited by him had not been actually mixed. But the delivery to him would not for that reason, we think, be wrongfml. When grain is deposited in an elevator with the xxnderstanding that it may be mixed with all grain of that kind and grade in the elevator, and the grain of that kind and grade is distributed upon different floors or in different compartments merely becaxxse the weight of the grain, or prevention from heating, or convenience in handling, or some other reason of that kind requires it, and not at all for the presei’vation of identity, all the grain of that kind and grade is to be deemed a common mass within the view of the law as applicable to such a case. This must be so, because the grain is practically treated as a common mass. When grain passes into the elevator with the understanding that it may be mixed with other grain of the same kind and grade it passes beyond the control of the depositor, so far as identity is concerned. What the parties have agx'eed to treat as a common mass is such for the purpose of determining the rights of the parties. We think, then, that a depositor becomes a tenant in common of all the grain in the elevator with which his grain may properly be mixed, and he may demand the satisfaction of his receipt oxit of any or all such grain. Of course • if grain is wrongfully abstracted there would not be enough to meet all the receipts. In such case the loss should be borne pro rata. I

3. —:-: shipment. In this case grain was wrongfully abstracted. Graham after exhausting his own deposits drew largely in excess] The amount wrongfully taken by him exceeded the amount left on hand when lie absconded. It is contended by the appellant that the amount thus left belonged to Graham. The appellant’s theory is, as we understand it, that the amount on hand must be solely the result of Graham’s deposits. The assumption that this grain belonged to Graham at the time lie absconded involves the assumption that when grain was wrongfully abstracted by Graham, and after-wards a deposit was made by him, the law would not, in the absence of an agreement to that effect, apply the subsequent deposit toward making good the previous wrongful abstraction.

Whether, if Graham’s deposits had all been made subsequent to his wrongful taking, he could in a controversy between the receipt-holders and himself, in respect to the grain left on hand, be heard to say that they had no interest in it, because he had before the deposit of this grain wrongfully taken all their grain, is a question perhaps not fjilly settled by adjudication. As tending to support the rule that he would be estopped in such case, see Gardiner v. Suydam, 3 Selden, 363. But we need not go into this question. There is nothing to show that Graham’s wrongful shipments were all made prior to his deposits. To the extent of his deposits. at the time of liis shipments they were not wrongful. And his shipments altogether never equalled the amount of his deposits, and the amount called for by the outstanding receipts. They lacked precisely the amount left on hand. That, we think, must be deemed to belong to the receipt-holders.

But it is said that subsequent to the issuance to the plaintiffs of their wheat receipts they gave their consent to Graham that he might sell their wheat upon his account. If they did give such consent, and the deficiency resulted from the sales of their wheat in pursuance of such consent, perhaps as ' between them and other receipt-holders they should sustain the loss.

There is some evidence showing a consent by plaintiffs to certain sales. One of the plaintiffs testified that Graham sometimes asked for permission to sell wheat, and that he gave permission on condition of his replacing it, which he generally did in a few days. Now while it is certain that lie sold a largo amount which he did not replace, it is not shown that that grain was sold by plaintiffs’ permission.

The appellant further insists that the evidence shows that Graham not only sold a portion of plaintiffs’ grain by their permission, but purchased of them all the balance. In the evidence upon this point there is a very decided conflict. Graham testifies that he not only purchased the plaintiffs’ grain but jiaid them for it. But Graham’s relation to the case is not such as to commend his testimony to us as entitled to the fullest credit. Besides there is an undisputed fact that prevents us from believing that Graham made such purchase and payment. The plaintiffs’ receipt was held by the Citizens’ National Bank of Davenport as collateral to a loan of $10,000, which wasl7well known to Graham. It was not within Sexton & Abbott’s power to give Graham a good title while the bank held the receipt. Possibly title was of no consequence to Graham. He may have contemplated selling and shipping the grain without title, as he in fact did do to a considerable extent. But that is no reason why he should buy the grain of the plaintiffs, who he knew could not sell it, and pay them for it!

But it is said that Graham’s testimony is corroborated, hour witnesses do indeed testify to hearing one of the plaintiffs say that they had sold their grain to Graham. It seems improbable that these witnesses were all mistaken. There were negotiations for a sale, as aj>pears from the evidence; and we are inclined to think that plaintiffs, for reasons known to themselves, spoke of the sale to others as having been consummated. But this is not, in our opinion, sufficient to overcome the testimony of the plaintiffs that such sale was not in fact, made, corroborated as they are by the undisputed fact to which we have referred.

The appellant further insists that the evidence shows that the plaintiffs were partners with Graham, and that Graham had a right as partner to sell the grain. Graham testifies that such was the fact. But the,right on the part of Graham to sell the grain as partner would not include the right to sell it upon his own account, and there is no pretense that he sold it upon any other. That circumstance alone would discredit him. But further than that the undisputed fact is that the title to the grain was not only solely in the plaintiffs, but they had transferred their receipt to the Citizens’ National Bank as security, which bank still held it. If anything more were necessary to show that Graham did not consider the shipment and disposal of the grain by him as a partnership transaction, it may be found in the fact that no specific shipment and disposal of the grain appears to have been made. The shipment and disposal appear to have been an undistinguishable part of a criminal raid.

boipt issued security. Having reached the conclusion that the plaintiffs and Graham in the outset sustained to each other the relation of bailors and bailee, and that nothing añerward transpired which changed the relation, wo proceed to consider the relation of the plaintiffs to the appellant.

Both plaintiffs and appellant are receipt-holders. • In our opinion, however, they do not stand in the same relation to the grain. The appellant’s receipts were not issued to it upon deposits made by it, nor because it had acquired the title to any grain in the ■ elevator. The understanding between Graham, the maker of the receipts, and the appellant was, that the receipts were issued upon grain owned by him, and to which he still retained the title. They were issued merely as security. The appellant, insists that as such they are valid, being evidence of a pledge of tbe quantity of grain therein described.

Section 2172 of the Code provides that “no warehouseman * * * shall issue any receipt * * * for any personal property to any person unless such property ¡is in store,” and section 2171 provides that “ all warehouse receipts, or other evidences of the deposit of property * * * shall be, in the hands of the holder thereof, presumptive evidence of title to said property.”

It is evident that the property contemplated by the statute, for which a warehouse receipt may be issued, must be the property of the receipt holder. This is so because the statute provides that the receipt shall be presumptive evidence of title in the holder. If it is issued in a case where the holder has no title, and where the receipt was not designed by either party to be evidence of title, it appears to us that it is issued in contravention of the statute and cannot be sustained.

Under the rule contended for by the appellant we should have two distinct kinds of receipts, although of the same import upon their face; the one kind issued as evidence of title, and .the other merely as a mode of effecting a lien. The allowance of two distinct kinds of receipts of the same import upon their face would have a tendency to introduce uncertainty and confusion, for which no advantage, so far as we can discover, would be a sufficient compensation. We should hesitate, therefore, about sanctioning the rule ’ contended for even if the provisions of the statute were less explicit than they are. The appellant, however, cites and relies upon Cochran v. Rippey, 13 Bush. (Ky.), 495. In that case a warehouse receipt issued by a person upon his own property, and designed as security to the holder, was held valid. The appellant claims that the statute under which the decision was made is in its essential provisions similar to our own.' But it appears to be contemplated by the fifth section of the statute that such receipts may be issued.

____to delivery. But it is claimed by appellant that even if the receipts held by it are invalid, it acquired a lien upon the grain paramount any right or interest of the appellees. This claim is predicated upon the delivery of the grain made to the appellant after Graham absconded. ' The evidence shows that appellees purchased the grain described in their receipts of Graham, and allowed him to retain it without placing upon record any evidence of their purchase. The appellant, therefore, claims that its lien is valid as against the appellees even though it were held to date merely from the time of delivery. "We shall not consider all the questions discussed by counsel in this connection. No pledge was created by the delivery unless such was the understanding of the parties. - Now it appears to us that such was not the understanding of either. The evidence shows conclusively that the appellant obtained possession under a claim of a subsisting lien and not by reason of a new agreement designed to give a lien. Graham says in his testimony, in speaking of the dedelivery of the grain to appellant — “ I did not have any mind to give it to anybody particularly.” This shows that there was no understanding upon his pai’t that a lien would be created by the delivery which would supersede the rights of all other receipt holders. Nor do we see anything in what lie said or did, or authorized his son to say or do, 'which could properly be construed as evincing such understanding. The reasonable inference is that he understood that all the holders, of valid receipts would share in the grain according to theiri respective claims.

The understanding of the appellant is shown by what was done by its president at the time it took possession of the grain. The president testifies that he said to Graham’s son who was in charge that he wished to get possession of the grain for the bank, and at the same time presented the receipts held by the bank, and possession was delivered to him. The possession, then, was gained solely under an antecedent claim. The transfer thus made is not of itself evidence of a new and impendent agreement, such as would be necessary to create a pledge, and we see nothing else that is.

The views which we have expressed thus far have had reference more especially to the plaintiffs’ wheat receipt. The claims in respect to the oats are less complicated. No question is raised in respect to them not already disposed of.

Upon the receipts issued to Baker, an independent question is raised. It is claimed that Baker sold 10,000 bushels of his wheat through Graham, in Milwaukee. Baker, it appears, owned 11,200 bushels. A receipt for 5,000 bushels had been deposited by Baker in the appellant’s bank as collateral security, and another receipt for the same amount had been deposited in another bank for the same purpose. A receipt for 1,200 was still retained by him. While the three receipts were so held, it appears that Baker directed Graham to make a sale of 10,000 bushels. Graham claims that in accordance with such directions he did make such sale in Milwaukee in August, 1875. But his testimony shows that what he calls a sale of 10,000 bushels of Baker’s wheat was a mere contract to deliver that amount in September, and that he did not contemplate shipping from Baker’s wheat unless, to use his own words, “ wheat went against them.” The evidence tends to show that no shipment was made from Baker’s wheat in pursuance of any such contract, and that it was understood between Graham and Baker that none should be made, but that the contract was otherwise disjiosed of, and such, we ■ think, was the fact.

The amount found due Sears & Son as a basis of division of the common mass was 1,076 bushels. The appellant insists that there was not that amount due them, if anything.

The evidence shows that a part of the grain covered by the receipts held by Sears & Son had been drawn out by them. In the decree in their favor some deduction was made on this account. The appellant insists that the deduction was not large enough. ¥e have examined the evidence carefully upon this point, and are unable to determine with entire certainty what deduction should have been made. The receipts were evidence in their favor, and they were entitled to all that they were allowed unless there was affirmative evidence showing-otherwise. In the obscurity of the evidence we are not disposed to disturb the decree upon this point.

The appellant objects to the amount allowed the receiver for services, and also to the amount allowed for other expenses, all of which were made a charge upon the fund in the receiver’s hands. Of this the appellees, who are entitled to the principal part of the fund, do not complain. The appellant is interested only to the small extent to which it is allowed to share in the fund through one of the Baker receipts. In view of these facts, and the meager condition of the evidence upon this point, we do not think it would be proper for us to interfere.

"We think that the judgment of the Circuit Court must be

Affirmed.