Court Opinion

ID: 8019421
Source: CourtListenerOpinion
Date Created: 2022-09-09 02:08:50.433543+00
Date Added: 2024-06-11T16:36:34.337712
License: Public Domain

GRAVES, J.
— This is an action upon the following bond:
“know all men by these presents,
‘ ‘ That we, the Flanagan Mills & Elevator' Company, as principal, and the United States Fidelity and *565Guaranty Company of Baltimore, Maryland, as surety, acknowledge ourselves to owe and stand indebted to the National Bank of Commerce of Kansas City, Missouri, its successors and assigns, in the sum of twenty-five thousand dollars for the payment of which we bind ourselves upon the following conditions:
“Whereas, the Flanagan Mills & Elevator Company is engaged in the management and operation of elevators and warehouse and cribs attached thereto, for the storage of grain, at Rich Hill, Missouri, which is known as the Flanagan Elevators, A and G, and proposes to issue warehouse receipts and other instruments evidencing that it is holding grain and other commodities, deliverable upon the request or order of another person or his assignee, or that it is under obligations concerning grain and other commodities in said elevator to such other person or his assignee, or by which it agrees to deliver grain and other commodities from said elevator to such other person or his assignee, or to hold it subject to the order of such other person or his assignee, which receipts and instruments are intended to be delivered either in the case of sale or pledge, or as evidence of a bailment; and,
“Whereas, it is contemplated by the parties hereto that warehouse receipts, to be issued by the Flanagan Mills & Elevator Company may be hypothecated with said National Bank of Commerce as collateral security.
“Now, Therefore, If the said Mills & Elevator-Company shall at all times and in all cases fully and faithfully redeem all such receipts and other instruments issued by it, and fully and faithfully comply with each and every provision thereof, or obligation incident thereto, or arising therefrom, and at all times deliver the grain demandable by any warehouse receipt or other instrument issued by it, in connection with the business of conducting said elevator, then *566this obligation to be void; otherwise to remain in full force and effect.
“Provided, However, that this bond is executed with the understanding and agreement and it is made a condition hereof, that said surety may cancel this obligation and its liabilities hereunder, by giving thirty days’ notice, in writing, to said The National Bank of Commerce, or its successors, of its intention to do so, and remaining liable only for such breaches of this bond as may have been committed to date 'of such termination, which shall be thirty days after service of said written notice.
“In Testimony Whereof, the said Flanagan Mills & Elevator Company has caused this instrument to be executed by its president, and attested by its corporate seal, and the. said United States Fidelity & Guaranty Company has caused this instrument to be signed by its attorney in fact, and its corporate seal affixed, by authority of its board of directors, this 18th day of October, 1905.
“(Seal) Flanagan Mills and Elevator Company,
By G. M. Flanagan, Pres.
“(Seal) The United States Fidelity and
Guaranty Company,
“By H. M. Coudrey,
“Attorney in Fact.”
Acknowledged in due form.
. The petition duly pleads the bond, and avers a breach thereof thus:
“That said Elevator Company did not, at all times and in all cases, fully and faithfully redeem warehouse receipts that had been issued by it and delivered to this plaintiff, and did not fully and faithfully comply with each and every provision of said warehouse receipts, and did not deliver, on demand, or at-any time, grain demandable by warehouse receipts which it had issued and delivered to this plaintiff.
*567‘ ‘ That on thé 31st day of October, 1905, said Elevator Company, for a valuable consideration, executed and delivered to this plaintiff its certain warehouse receipt, whereby it acknowledged to have received 25,000 bushels of grain and its product, and agreed to hold the same subject to the order of this plaintiff (which said grain and its product were represented to be, and were at all the dates herein mentioned, of the value of $20,000); that on the 17th day of November, 1905, said Elevator Company, for a valuable consideration, executed and delivered to this plaintiff its certain other warehouse receipt, whereby it acknowledged to have received 5000 bushels of grain and its product, and agreed to hold the same subject to the order of this plaintiff (which said grain- and its product were represented to he, and were at all the dates herein- mentioned, of the value of $4000); that on the 20th day of November, 1905, said Elevator Company, for a valuable consideration, executed and delivered to this plaintiff its certain other warehouse receipt, whereby it acknowledged to have received 2500 bushels of grain and its product, and agreed to hold the same subject to the order of this plaintiff (which said grain and its product were represented to he, and were at all the dates herein mentioned, of the value of $2000); that on the 2nd day of December, 1905, the said Elevator Company, for a valuable consideration, executed and delivered to this plaintiff its certain other warehouse receipt, whereby it acknowledged to have received 3750 bushels of grain and its product, and agreed to hold the same subject to the order of this plaintiff (which said grain and its product were represented to be, and were at all the dates herein mentioned, of the value 'Of $2000).
‘ ‘ That by virtue of each and every one of said above mentioned warehouse receipts, this plaintiff became entitled to receive from said Elevator Company, *568on demand, the grain and product thereof therein mentioned, and that on the-day -of-- 1906, this plaintiff demanded of said Elevator Company the grain called for in each and every one of said above mentioned warehouse receipts, but that said Elevator Company then failed and refused to deliver to this plaintiff any and all of said grain called for in each and every one of the above mentioned warehouse receipts, and that upon the failure and refusal of said Elevator Company to deliver said grain to this plaintiff, it demanded of said defendant, Guaranty Company, to make good its promise in said bond contained, and to pay to this plaintiff the damage by it sustained by reason of said refusal, but that said Guaranty Company has failed and refused to do so.”
The record shows the execution and delivery to plaintiff of the several receipts described above, and shows the failure to pay the notes and the failure to deliver the grain mentioned in the receipts, as also the refusal of the surety company, the only appealing defendant, to make good its bond. All the notes and receipts are in the same form, and one of each is all that is necessary to show the contract between the parties. Below is one of each:
EXHIBIT NO. 2.
No. 189179
$2000.00 Kansas City, Mo., Nov. 18th, 1905.
v Due Demand. On demand, after date, for value received, we promise to pay to the order of the National Bank of Commerce, of Kansas City, Mo., two thousand dollars, at the National Bank of Commerce, Kansas City, Mo., with interest from date until paid, at the rate of eight per cent per annum. To secure the payment of this note and of any and all other indebtedness which we now owe to said Bank, or may owe it at any time before the payment of this note, we have hereto attached, as collateral security, the following Warehouse Receipt, No. 3, hereto attached.
“All dividends and maturing coupons pending life of this loan shall be paid to holder of this note,
Flanagan Mills & Elevatob Co.
Charles H. Flanagan, Seo’v.
*569EXHIBIT NO. 3.
WAREHOUSE RECEIPT
No. 3 FLANAGAN MILLS 1ND ELEVATOR
Kansas City, Mo , Nov. 17th, 1905. •
Received in Warehouse and Elevators A. B. at Rich Hill, Mo., five thousand bushels of grain and its product, subject only to the order hereon of National Bank of Commerce, Kansas City, Mo., and the surrender of this receipt and payment of charges.
It is hereby agreed by the holder of this receipt that the Grain and Product of Grain herein mentioned may be stored with other Grain and Product' of same quality.
Flanagan Mills & Elevator Co.
Charles H. Flanagan, Sec’y.
Counsel for the. surety company thus outlines the answer in the case:
“In addition to a general denial the separate answer of the United States Fidelity & Guaranty Company admits that as surety only, and not otherwise, it executed the contract sued on and that its provisions were as charged. It is then alleged that the warehouse receipts mentioned in the petition are not in fact warehouse receipts under the laws of this State and that as such they are illegal and void, and that the same recites the fact to be that the Elevator Company had received from the plaintiff certain commodities whereas in fact no commodities of any kind whatsoever had been actually received into store or upon the premises the property of the plaintiff. The answer then alleges that by the terms of the contract sued on the defendant became liable thereunder ‘only for the honesty and faithfulness of the said Flanagan Mills & Elevator Company in caring for, holding and keeping the said grain mentioned in said receipts in its said elevator or elevators as a warehouseman, and not otherwise, and that same should be forthcoming and deliverable upon such conditions and penalties as the laws of this State impose upon warehousemen only, and not otherwise. ’ That on the--day of--- 1906, and after the making of the contract or bond sued on the grain *570mentioned in the receipts made the basis of this suit were wholly destroyed by fire without fault or neglect on the part of the Flanagan Mills & Elevator Company, by reason of which fact as alleged, no liability existed from defendant to plaintiff.
“It is further alleged that if the contract or bond sued on is susceptible of any other construction than that the same was and is a contract or bond for the faithful honest keeping and caring for and delivery of the grain in question by the Elevator Company as a warehouseman that said contract is ambiguous in that such construction would convert the said contract into a policy of fire insurance and not a contract for the faithful delivery of the grain, which bind of contract the defendant had no power or authority in law to issue and that such contract ought not to be so construed. ’ ’
Reply placed in issue all new matters in the answer.
The elevator of the milling company was destroyed by fire January 29, 1906, and the evidence tends to show that the grain and its products mentioned in the receipts were in the elevator at the time.
Upon trial before the court plaintiff had judgment against both defendants in the sum of $21,578.40, and the surety company alone appealed. Other matters, if material, will be noted in the course of the opinion.
Bond: Construction: Extrinsic Evidence. I. This case turns upon the construction to be given the several written instruments set out in the statement of facts. If the language of either is ambiguous or doubtful, extrinsic evidence may be considered to determine the meaning of the language used. This general rule of construction is too well established to require citations. In ^ this case much depends upon the nature , Gf the written instruments, sometimes *571designated as warehouse receipts. Whether they are such is largely determinable by the facts, rather than the words. In none of the written instruments is it declared that the Flanagan Mills & Elevator Company was a warehouseman. The bond in suit mentions both notes and other instruments, including receipts. In other words, it states that the Flanagan Mills & Elevator Company was going to borrow money from the plaintiff’s bank, and give as -collateral security receipts or other instruments issued by the said milling company. To determine the meaning of the written instruments called receipts, we think that in view of the uncertainty of the language used in the several instruments involved, we can go not only to the three instruments themselves, but to the extrinsic proof. We can go to all the written instruments, because they pertain to the same subject matter, and we can go to the extrinsic evidence, because the language used is ambiguous.
The question is, did the parties understand the written instruments put up as collateral security to be in fact real and true warehouse receipts, or the ‘ ‘ other instruments” mentioned in the- bond.
The contention of- the defendant is that the relation between plaintiff and the Milling Co.' was that of a bailor and bailee, and that the bailee is not responsible for the destruction of the property by fire, unless such fire was the result of negligence. The situation of the parties being considered, it cannot be said that this relationship existed, and hence a discussion of the liability or nonliability on the idea of such a relationship need not be made.
That the milling company was not doing a warehouse business is clearly indicated by the bond. There is no suggestion therein that it was so engaged. On the contrary, it is clearly indicated that the grain and grain products which were to be in its mill and elevator *572were its own property and were to so continue. All through the record evidence it appears that this fore-east in the bond is borne out by the facts. In some three places in the record evidence it clearly appears that the grain bought and stored by the milling com-, pany was for its own use in mills at Rich Hill, Missouri. It was used in the ordinary course of a milling business, and of course would be changed from time to time by the purchase of new material, and the distribution of mill products. Neither the bond declares that the milling company was in the warehouse business, nor .does the proof show it. On the contrary the proof shows that such company was in the usual milling business, buying large stocks of grain at advantageous times and intervals, and getting its money through the banks for the purpose of these purchases. If the milling company was not in fact a warehouseman, this goes far in assisting us in determining the construction to be given the written instruments involved in this record. All the evidence tends to show that it stored and kept no grain or grain products, except such grain as it purchased, and purchased at least partially with money borrowed from the plaintiff. When purchased the title of the grain was in the milling company, and when the grain was ground in the mill the products were likewise the property of the milling company. This title was never changed, unless by this written instrument. The possession, in fact, was never changed. The instrument itself does not undertake to segregate any particular property or designate any custodian except the milling company, so as to even make the written instrument a symbolical delivery of the property to the plaintiff. But we are going adrift, from the thought with which we started in this paragraph, i. e., that the milling company was not in fact a warehouseman, and was never so understood to be by any of the parties interested. *573Nothing in the written, instruments show the milling company to he a warehouseman, and the proof shows that such company was not a warehouseman. It is evident that the parties at the execution of the receipts, and at the previous giving of the bond in suit, fully understood that the milling company was not a warehouseman. With this conclusion, drawn from the surrounding facts, there remains the question of determining the character of these so called receipts.
Security"1 intention, II. When we consider the note, and the reference therein to the so called warehouse receipt, and the receipt itself, together, as we must do, it is clear that what the milling company really did, was, that it agreed to hold in its possession of its own grains and grain products the amount named in the reÍP^ which grain and grain product it agreed to deliver to plaintiff upon its demand in the event the milling company failed to pay the note on demand made by the bank.
The alleged warehouse receipt does not say from whom the grain and grain product was received by the milling company, but the extrinsic evidence shows that it did not receive it from the bank, but received it from itself. It held it not for the bank, but held it “subject only to the order hereon of National Bank of Commerce. 1 ’ It did not segregate and set aside such grain and grain products, so the same could be identified, but on the contrary provided that it should be stored with other like grain and grain products. So we reiterate, that when we take the peculiar wording of this instrument, and consider it alone with the note, and other evidence, we are forced to the conclusion that it is an agreement by the milling company to deliver from its store the amount of grain and grain product in the event the bank demanded its delivery, which demand it could not make until there was default *574ill the payment of the note after legal demand for its payment.
Some times the meaning of contracts can best be had by a process of elimination. First it is clear that the written instrument, whether it be an agreement to deliver grain upon demand, or a warehouse receipt, was clearly intended for collateral security. The bond was given to make this collateral security absolutely safe. It is presumed that the parties intended a contract that was valid and effective rather than one which was invalid and ineffective. With this in view let us begin the process of elimination, (a) There is no sale of the grain or grain products, and defendant does not so contend, (b) It is no mortgage, because it possesses none of the elements of a mortgage, and defendant does not content the said written instrument to be a mortgage, (c) Neither is it a pledge, because there was no delivery, either in fact or otherwise/- One can’t pledge his property to another by making delivery to himself, rather than to the pledgee. “To constitute a pledge, the pledgee must take possession; and to preserve it, he must retain possession.” [Jones on Pledges, (2 Ed.), sec. 23.]
To like effect are: Bank v. Frank, 12 Mo. App. l. c. 465; Conrad v. Fisher, 37 Mo. App. l. c. 368; Bank v. Trust Co., 135 Mo. App. l. c. 375. Of course a pledge may be completed by a delivery to a third person for the pledgee, but such is not the case here. Not only was there no delivery, but there was not even a segregation of the grain and grain products for identification.
As said in the first instance, the parties intended collateral security. This is clear. The law presumes that they intended to make an instrument that would legally effectuate their intents. If so there is but one other construction, and that is that it is an agreement to deliver the grain and grain products to the bank *575upon demand, provided the emergency for demand had arisen, and the bank was by such emergency empowered to make demand.
It is one of the well settled rules of construction that if a contract is fairly susceptible of two constructions, one making it legal and the other illegal, we should give it the construction which would make- it effective and legal, rather than .the other. [Lamar Water & E. L. Co. v. Lamar, 128 Mo. 188.]
Warehouseman Rece)pt!reh0lISe III. We need not go further than the receipt itself to find ambiguity of expression, such as to allow us to go to extrinsic proof to get a right construction. The receipt fails to state from whom the grain and grain products were received. It likewige fails to make clear the nature of the order which might be made by the bank.
Much is left vague, and remains vague, until the whole transaction is placed in evidence. When the whole transaction is placed in evidence, it appears that Flanagan Mills & Elevator Company was a milling concern, and only handling and storing grain and mill products to be used in the ordinary course of its business. It was not a warehouseman either at common law or under the statute, because not engaged in the business of receiving and storing goods, wares, and merchandise, for others.
In such case the mere form of the receipt is not sufficient to make it a warehouse receipt. Proof must be made that the party issuing the receipt was in fact a warehouseman. No such proof appears in this case, but in fact the proof is to the contrary. Dixon, C. J., in Shepardson v. Cary, Executor, 29 Wis. l. c. 42, says:
“The court could not take judicial notice that they were warehousemen,; nor presume it as a fact from the mere issuing of the receipt. Actual proof was necessary in order to make an effectual transfer *576of the property in that way; for otherwise it would be competent for every person, whether warehouseman or not, thus to dispose of personal property in his possession, to the great embarrassment and deception of subsequent purchasers, creditors and others.
“To uphold the receipt as a proper warehouse document, transferring the title to the property and operating as a good constructive delivery of it to the vendee, it must in all cases distinctly appear that it was executed by a warehouseman — one openly engaged in that business — and in the usual course of trade, without fraud or intention of fraud or bad faith on the part of the person receiving and seeking to enforce title under it. In the former case, therefore, if for no other reason, the plaintiff could not have maintained title against the defendant upon the instrument as a warehouse receipt, because there was no proof of the business character of the makers, or evidence that they were warehousemen.”
To like effect in Bank v. Whitehead, 149 Ind. l. c. 575:
“It follows that a public warehouseman would have no more power to issue a warehouse receipt upon his own property in his warehouse, as security for a debt unless there was a statute expressly authorizing it, than would a debtor who is not a warehouseman. Where a debtor who is not a warehouseman issues a receipt purporting to be a warehouse receipt, on property in his possession and owned by him, for the sole purpose of securing a creditor, the same is not in any sense a warehouse receipt. [Conrad v. Fisher, 37 Mo. App. 352, 8 L. R. A. 152, 153; Mechanics’ Trust Co. v. Dandridge, 37 S. W. (Ky.) 288; Sinsheimer v. Whitely, 111 Cal. 378; Geilfuss v. Corrigan, 95 Wis. 651; National Exchange Bank of Hartford v. Wilder, 34 Minn. 149; Steaubli v. Blaine Natl. Bank, 11 Wash. 426; Thorne v. First Natl. Bank, 37 Ohio St. *577254; Union Trust Co. v. Trumbull, 137 Ill. 146, 164; Jones on Pledges, secs. 325, 326.]”
It will be-observed that the Indiana court cites with approval some of the opinions from our Courts of Appeals we have cited, supra. The Pennsylvania court in Bank v. Jagode, 186 Pa. St. l. c. 563, says:
“The Act of September 24, 1866,' P. L. (1867) 1363, makes a warehouse receipt negotiable to the extent that the person taking a transfer of it by indorsement and delivery is to be deemed the owner of the goods therein specified. By the general law governing such instruments this means that the transfer of th§ receipt is a constructive delivery of the goods. If therefore the receipt under which the plaintiff claims was a valid warehouse receipt within the statute the plaintiff’s title must prevail, notwithstanding the good faith and priority of the appellants’ actual possession.
“But in order to have this effect, the requisites of the statute must be complied with, and plainly the first of these is that there must be a receipt issued from a bona,-fide warehouse. The act does not prescribe any form of receipt, and it is conceded that the one in controversy is sufficient in that respect. It purports to be issued by a warehouseman, and to be for goods held on storage and deliverable on the order of the depositor and the return of the receipt.
“Nor does the act define a warehouse or a warehouseman, but uses the latter word in connection with ‘Wharfinger or other person’ (ejusdem generis, Bucher v. Comm., 103 Pa. St. 528) in its ordinary signification of one who carries on the business of receiving and keeping goods on storage for the owners, for compensation. The act prohibits the issue of a receipt unless the goods shall have been' actually received into store or upon the premises of the warehouseman; the issue of any second or duplicate receipt while the first is outstanding, without writing *578the word duplicate across the face of the second; the delivery of any goods receipted for except on surrender of the receipt; and the sale, incumbrance, etc., by the warehouseman of goods receipted for. These provisions plainly contemplate that the warehouseman shall be one engaged in the business, and also that he, shall be another than the owner of the -goods. A large part of the security of the holder of the receipt for the actual production of the goods when called for is the business interest and good faith of the warehouseman, and the penal consequences of any breach of duty by him. This security would be greatly diminished, if not rendered worthless, if any owner could' choose to say his goods were on storage with himself and issue receipts which should pass from hand to hand for value, while the goods remained under his own control, or subject to levy by his creditors.” [See also: Union Trust Co. v. Trumbull, 137 Ill. l. c. 164; Thorne v. Bank, 37 Ohio St. l. c. 258; Steaubli v. Bank, 11 Wash. 426.]
Nor do sections 11951 and 11952 of our statutes change the situation. These statutes refer to ware-housemen, and have no application whatever to persons not engaged in that business. The word “ other person” used in the latter section, must under the rule ejusdem generis, be held to mean warehouseman or wharfinger or a person engaged in a similar business.. [Bank v. Jagode, supra: Bucher v. Comm., 103 Pa. St. 528.] It does not refer to a mere merchant, or manufacturer. The proof in this case fails to show a warehouseman and therefore the written receipt can not be held to be a warehouse receipt.
IV. Nor will it do to say that the bond executed by this defendant appealing here was not one fully within the charter powers of said corporation. Section 8 of its charter reads:
*579Bond Authorized Charter. “Sec. 8. And be it further enacted, That said Company shall have power to guarantee, endorse and secure payment and punctual performance and collection of notes, debts, bill of exchange, contracts, bonds, accounts, claims, rents, annuities, mortgages, ehoses in action, evidence of debt, certificates of property of value, checks and title to property, indebtedness of individuals, of companies, partnerships, contracts, loans of states, cities, counties and municipalities, on such terms or commissions as may be agreed upon or established by said Company and the parties dealing therewith.”
This is as broad as language can make it. They were 'empowered to guarantee the faithful performance of contracts, among divers other things. If the contract is as we construe it, i. e., that the milling company agreed to turn over the amount of grain and grain products mentioned in the collateral instrument upon demand, after default in the note, then a failure to turn it over breached the bond. This was the theory of the trial court. The amount of the verdict is well within the evidence, and the judgment should be affirmed. It is so ordered.
All concur except Woodson, C. J., absent, and Bond and Bevelle, JJ., not sitting.