Topco Associates, Inc. v. First National Bank

273 P.2d 420, 202 Or. 32, 1954 Ore. LEXIS 324
CourtOregon Supreme Court
DecidedAugust 5, 1954
StatusPublished
Cited by6 cases

This text of 273 P.2d 420 (Topco Associates, Inc. v. First National Bank) is published on Counsel Stack Legal Research, covering Oregon Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Topco Associates, Inc. v. First National Bank, 273 P.2d 420, 202 Or. 32, 1954 Ore. LEXIS 324 (Or. 1954).

Opinion

PERRY, J.

This is an action at law by the plaintiff, Topeo Associates, Inc. (formerly known as Pood Coopera *34 tives, Inc.) a Wisconsin corporation, against the defendant, The First National Bank of Portland, a national banking corporation, to recover the sum of $10,984.80. After a verdict had been returned by the jury in favor of the plaintiff, the defendant filed its motion for a judgment notwithstanding the verdict of the jury, or in the alternative for a new trial. The trial court having sustained the motion of the defendant for a judgment notwithstanding the verdict, the plaintiff has appealed.

The plaintiff suffered its loss in the sum of $10,-984.80 by reason of the fact that on January 31, 1949, the Starr Fruit Products Company, a canning concern operating several canneries, with its principal place of business in Portland, Oregon, drew a draft against Food Cooperative, Inc. (now Topeo Associates, Inc.) in the amount above-mentioned,- payable to the East Portland Branch of the defendant bank 20 days from date, and attached thereto its warehouse receipt in negotiable form, the warehouse receipt being in words and figures as follows:

“NEGOTIABLE WAREHOUSE RECEIPT ISSUED BY
STARR FRUIT PRODUCTS COMPANY
Office 105 S.E. Yamhill Street
PORTLAND, OREGON
No. 203 Portland, Oregon. January 31,1949
Received from Starr Fruit Products Co., Sunnyside, Wn. for storage the following described goods to be delivered to Fred Meyer, Inc., or order, on surrender of this receipt properly endorsed and on payment of storage advances and all other charges.
*35 STARR FRUIT PRODUCTS COMPANY,
By ..........................................................................
Marks or No.
No. of Pkgs.
2000
24/2 Vz Standard in L.S. Pears “TRIUMPH”
The above described goods are received subject to the following conditions: Loss or damage by riot, fire, flood, rottage, moth, leakage or from inherent quality of the property at owners risk. In case of threatened inundation, the Starr Fruit Products Company will remove goods at the expense of the owners.”

The defendant bank purchased the draft, depositing the purchase moneys for the draft to the account of the Starr Fruit Products Company. Thereupon, the draft with the negotiable warehouse receipt attached was forwarded for collection, and was duly presented to and accepted by the plaintiff on February 3,1949. On February 21, 1949, the plaintiff, upon delivery to it of the warehouse receipt and invoice, paid the face amount of the draft to the Harris Trust & Savings Bank, Chicago, Illinois, and the latter bank remitted said funds to the Continental-Illinois National Bank & Trust Company of Chicago, the last-named bank crediting the account of the defendant bank with the sum of $10,984.80.

The plaintiff, Topeo Associates, Inc., in attempting a purchase of the goods set out in the warehouse receipt, was purchasing for Fred Meyer, Inc., Portland, Oregon, a member of the association. Fred Meyer, Inc., did not receive the goods listed in the warehouse receipt, and subsequently Starr Fruit Products Company became insolvent.

The draft purchased by the defendant was in itself regular, and the warehouse receipt accompanying the draft was regular upon its face; it was only later, after *36 the plaintiff had unconditionally accepted and paid the draft, that it was learned that the receipt was “spurious”, there being no goods of the description named therein warehoused and set aside by the Starr Fruit Products Company at its cannery in Sunnyside, "Washington.

The draft purchased by the defendant and the warehouse receipt accompanying the draft are two separate and distinct instruments. The negotiable warehouse receipt is governed by the Uniform Warehouse Beceipts Act, § 60-246, OCLA, now OBS 74.460, of that Act providing as follows:

“A mortgagee, pledgee, or holder for security of a receipt who in good faith demands or receives payment of the debt for which such receipt is security, whether from a party to a draft drawn for such debt or from any other person, shall not by so doing be deemed to represent or to warrant the genuineness of such receipt or the quantity or quality of the goods therein described. ’ ’

And the draft, or bill of exchange, is governed by our Negotiable Instruments Act.

That the defendant in this case was a holder for value is not challenged, but it is charged that by reason of the circumstances involving the warehouse receipt, which was spurious, the defendant was not a holder in due course of the draft. The Negotiable Instruments Act in § 69-402, OCLA, now OBS 71.052 defines a “holder in due course” as follows:

“A holder in due course is a holder who has taken the instrument under the following conditions: (1) that it is complete and regular upon its face; (2) that he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact; (3) that he took it in good faith and for value; (4) that *37 at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.”

It is to be noted that under the Uniform Warehouse Receipts Act no warranty is made by the holder thereof as to the genuineness of the receipt, or the quality or quantity of the goods therein described. Nevertheless, whenever the warehouse receipt is attached to or does accompany a bill of exchange, the statute only resolves itself in favor of one who has received payment of the draft or bill of exchange in “good faith”.

Regarding the bill of exchange, § 69-406, OCLA, now ORS 71.056, provides as follows:

“To constitute notice of an infirmity in the instrument or defect im the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith.” (Italics ours.)

While this statute concerns itself directly with an infirmity in a bill of exchange, nevertheless, we are of the opinion that the infirmity of the warehouse receipt must constitute the infirmity in the bill of exchange if the plaintiff is to recover; therefore, the bad faith of a holder of a negotiable instrument with security attached is to be governed by the notice and knowledge as defined in this statute.

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Bluebook (online)
273 P.2d 420, 202 Or. 32, 1954 Ore. LEXIS 324, Counsel Stack Legal Research, https://law.counselstack.com/opinion/topco-associates-inc-v-first-national-bank-or-1954.