Case Name: THE FARMERS' BANK OF WESTON v. W. H. ELLIS et al.
Court: Oregon Supreme Court
Jurisdiction: Oregon
Decision Date: 1927-07-14
Citations: 122 Or. 266
Docket Number: 
Parties: THE FARMERS’ BANK OF WESTON v. W. H. ELLIS et al.
Judges: Belt, J., took no part in the consideration of this case.
Reporter: Oregon Reports
Volume: 122
Pages: 266–284

Head Matter:
Argued at Pendleton May 7,
reversed July 14,
rehearing denied August 30, 1927.
THE FARMERS’ BANK OF WESTON v. W. H. ELLIS et al.
(258 Pac. 186.)
For appellant there was a brief over the names of Messrs, Fee & Fee and Mr. William Smith, with an oral argument by Mr. J. Alger Fee.
For respondent there was a brief over the name of Messrs. Nichols, Hallock & Donald, with an oral argument by Mr. James T. Donald.

Opinion:
McBRIDE, J.
The sections of the Code bearing upon this subject may be summarized as follows:
Section 8017, Or. L., in substance, provides:
"Where a •warehouseman delivers the goods to one who is not in fact lawfully entitled to the possession of them the warehouseman shall be liable as for conversion to all having a right of property or possession in the goods if he delivered the goods otherwise than as authorized by subdivisions (b) and (c) of the preceding section, and though he delivered the goods as authorized by said subdivisions he shall be so liable, if prior to such delivery he had either:
" (a) Been requested, by or on behalf of the person lawfully entitled to a right of property or possession in the goods, not to make such delivery; or
" (b) Had information that the delivery about to be made was to one not lawfully entitled to the possession of the goods."
Section 8018, Or. L., provides:
"Except as provided in section 8043, where a warehouseman delivers goods for which he had issued a negotiable receipt, the negotiation of which would transfer the right to the possession of the goods, and fails to take up and cancel the receipt, he shall be liable to anyone who purchases for value in good faith such receipt, for failure to deliver the goods to him, whether such purchaser acquired title to the receipt before or after the delivery of the goods by the warehouseman."
Section 8043, Or. L., among other things, provides: Liability of a warehouseman ceases after he makes lawful sale in satisfaction of his lien, or because of the perishable or hazardous nature of the goods.
Section 7997, Or. L., among other things, provides:
"No person operating any warehouse or other place of storage, shall sell, ship or in any manner remove or permit to be shipped beyond his custody or control, any grain or other produce or commodity for which a receipt has been given by him, as aforesaid, whether received for storing or other purposes, without the written assent of the holder of the receipt."
Section 8016, O'r. L., in substance, provides: Where a warehouseman delivers goods to the authorized agent who holds the warehouse receipts for the same, said delivery is justified and the holder of said receipts has no cause of action against the warehouseman.
The following facts may be taken as thoroughly established: First, that the warehouse receipts, "B" and "C," are negotiable; second, that the plaintiff was-the holder thereof when the goods were shipped; third, no one had the written assent of the plaintiff that the goods might be shipped to him; fourth, that the defendants did not take up or cancel said receipts; and fifth, the receipts provided in terms that, in order to justify defendants in shipping the goods, said receipts must be surrendered properly indorsed.
The form of warehouse receipt issued by defendants to Grafton is as follows:
"Ellis Transfer.
W. H. Ellis, Proprietor.
1927 Court St. Phone 456.
Baker, Ore., Oct. 28, 1925.
Received from Jack Grafton subject to his order hereon, on payment of all charges and the surrender of this receipt properly endorsed.
Lot Warehouse Section Articles
Lot 2 Main 2 545 Sks. Netted Jems (Gems)
It is agreed that all loss or damage to property occasioned by fire, water, leakage, vermin, ratage, breakage, frost, accidental or providential causes, riot or insurrection or to perisable property is at owner's risk, and any class of goods not properly packed at owner's risk. Not responsible for shrinkage in weights.
Warehouse Beceipts Must Accompany Delivery Orders.
Storage per contract .'.......
Net weight handed in 56,728 lbs.
Ellis Transfer.
By E. D. P."
This whole case may be condensed in practically one proposition: Was Grafton the duly authorized agent of the plaintiff .bank to the extent of authorizing him to cause the goods to be shipped without presentation of the receipt to the warehouseman? It is an important.question largely depending for its solution upon the construction of the law as indicating the intent of the lawmaker in enacting it. We take it that the object of the law, as shown by its many provisions, was to see that each step taken, beginning with the deposit in the warehouse and the issuing of the receipt to the final delivery of the goods by the warehouseman to the holder of the receipt should be evidenced by some statement in writing so as to completely preclude any attempt by an unauthorized person to get possession of the property. The defendants in this cause contend for the somewhat singular theory, so far as business is concerned, that the owner of the warehouse receipt can pledge it as security for a loan, and sale by him be authorized by oral agreement, and at the same time enable him to dispose of the property and cause it to be delivered to a purchaser without having in his possession the warehouse receipt, or without being authorized by his pledge in writing so as to authorize the corpus of the property, indicated by the receipt, to be disposed of at his pleasure upon his mere promise to pay the debt out of the proceeds of the property so disposed of. It would be a unique and unusual method of doing business, to say the least, and we are of the opinion that the requirement, that the person demanding possession of the property or so disposing of it should have some written evidence of his authority as indicated in Section 7997, Or. L., should apply to any person presuming to exercise dominion over the property, and should be the sole evidence of his authority to demand a transfer of the possession of the property. Any other construction would leave a loophole in the law which would render it practically nugatory in many instances. As a matter of public policy, this construction should be given to the statute and no person, so far as this warehouse statute is concerned, should be construed to be an agent unless he either has possession of the receipts and offers to return them or cancel them upon delivery of the property, or has written authority from the person holding the receipts. A "duly authorized agent" is a person having the written authority referred to by Section 7997, Or. L.
In this case there is no evidence to show that the defendants had any knowledge of the alleged contract between Grafton and the plaintiff, or that they assumed to deliver the property to Grafton, or upon Grafton's order by reason of any knowledge of the alleged oral agreement which accompanied the pledge of the receipts in the first instance. In fact, the evidence is conclusive that they had no such knowledge nor even knowledge that the receipts had been assigned, but merely took Grafton's word as a sufficient voucher and as a justification for their act in delivering the goods to the purchaser, no doubt supposing him to be the owner of the property and without requiring a delivery of the warehouse receipts. In doing this they acted at their peril and the courts are not re quired, in this instance, to go into an investigation as to the private agreements between Grafton and the plaintiff. Defendants delivered the potatoes, which were for the purposes of this case the property of the plaintiff, upon the verbal order of the person who had pledged them to the bank and without requiring the receipt or any evidence of his authority from the plaintiff to dispose of the potatoes and in doing so they did so at their peril. Grafton was not such an agent in this matter to be within the terms of an "authorized agent" as used in the statute now being considered.
The defendants rely largely upon the case of Diamond Roller Mills v. Moody, 63 Or. 90 (125 Pac. 284, 126 Pac. 984). The facts in that case clearly distinguish it from the case at bar. In that case, the plaintiff had on deposit in defendant's warehouse a quantity of wheat which defendant, without order of the owner, shipped to it. The owner brought an action for damages being the cost of unloading the wheat at its mill. The court held that a shipment of the wheat to the owner of it, while it might have constituted a breach by defendant of his contract of bailment, did not constitute a tort and, substantially, that as the owner had received the wheat and still had possession of the receipt, it did not bring itself within the purview of Section 7997, Or. L., which was designed to protect the owner or holder of the receipts from delivery of the same to unauthorized persons. Here, the delivery was made upon the order of a person not legally authorized (i. e., in writing) to a party outside the state leaving plaintiff a doubtful and difficult remedy against Grafton or Balcom & Company for the price of the commodity. The situation here at once suggests the danger attendant upon a deviation from the strict though salutary rule prescribed in Section 7997 of the Code. To require the plaintiff to litigate with Grafton or Balcom & Company as to the charges, or to accept the check of a foreign firm in lieu of the commodity which was stored in defendants' warehouse, would be a perversion of the law and especially when none of these persons or firms are parties to the case.
The judgment is reversed and a new trial directed.
Reversed With Directions. Rehearing Denied.
Belt, J., took no part in the consideration of this case.