142 Minn. 132 | Minn. | 1919
Appellant, as surety on the bond of a public warehouseman given pursuant to the statutes of North Dakota, having paid the amount of the bond for the benefit of the owners of grain stored with such warehouseman, brought this action against respondent for the alleged conversion of such grain.
Respondent interposed a counterclaim for the amount it had been required to pay for the benefit of such owners. The warehouseman had become insolvent and failed to redeem the storage receipts it had issued for the grain. A jury trial was waived. The court denied relief to appellant and awarded $905.68 to respondent upon its counterclaim. This appeal is from an order denying a motion for a new trial.
There are numerous assignments of error, but all that we deem material rest on one or the other of the foregoing grounds.
These are the salient facts in the case: During the years 1915 and 1916 the North Dakota Grain Company, hereafter designated as “the grain company,” was a licensed warehouseman at Walum and Dazey, North Dakota. The law of that state required it to give a bond to protect the holders of receipts for grain delivered for storage. Appellant was its surety on such bond, which ran to the state, was for $10,000, and covered the period of two years from August 1, 1915.
On March 4, 1916, the grain company became insolvent. Between September 1, 1915, and that date it had received grain for storage at Walum and Dazey of the value of $23,137.78 and issued storage receipts therefor. In March, 1916, they were delivered by the holders to W. H. Stutsman, the president of the board of railway commissioners of North Dakota, for collection. He took possession of all the grain then in the company’s elevators and sold it for $6,018.45.
Under the North Dakota law, the delivery of grain to a public warehouseman for storage is a bailment and not a sale of such grain. It is made the duty of the warehouseman to deliver to the holder of a storage receipt, bn presentation thereof, an equal amount of the same grade of grain as is specified in the receipt, or, in lieu thereof, a receipt issued by any bonded terminal warehouse or elevator for an equal amount of grain of the same grade. Failure of a warehouseman to deliver the grain covered by a storage receipt or pay the market value thereof is larceny. Comp. Laws N. D. 1913, §§ 3113, 3114 and -3115.
It having developed that respondent had bought nearly all the wheat the grain company had received for storage, Mr. Stutsman on April 20, 1916, made demand upon it for payment for such wheat and received respondent’s check for $8,000. The proceeds of the check were to be used
The grain company was licensed in Minnesota as a grain commission merchant. It was a member of the Duluth board of trade and the Minneapolis chamber of commerce. It dealt in grain on exchange at both places. It commingled the wheat it received at Walum and Dazey in bins in its elevators, and from time to time carload shipments were made from the common mass, consigned to it at Duluth where it was sold to respondent. The latter is a Minnesota corporation operating four terminal elevators at Duluth. It dealt with the grain company from 1912 until it became insolvent, and purchased from it annually from 175 to 375 carloads of wheat.
Respondent did not actually know that any of the wheat it purchased was stored with the grain company, and would not have purchased it had it known that fact. No investigation was made before it was purchased to ascertain whether it was in fact owned by the grain company.
The company had borrowed $20,000 from respondent. The loan was secured by chattel mortgages on its elevators and by pledge of its membership in the board of trade, and was made to enable it to buy grain in the country. Respondent was to have “first call” on the wheat as it came to market.
On May 24, 1916, appellant received $905.68 from certain elevator companies as the result of demands made upon them for stored oats, barley and rye purchased from the grain company. Later on it recovered judgment against the company and its officers for $9,558.67. An execution issued thereon was returned unsatisfied.
The briefs and oral arguments have taken a wide range, but, as we view it, the decisive questions lie within a narrow compass. In consid
1. The vital finding of fact is the one which sustains respondent’s contention that in purchasing the wheat it acted in good faith and without notice of the fact that the grain company was selling stored grain. All the evidence lying behind this finding has been weighed, and the arguments of counsel attacking and defending the finding have been given due consideration. Our conclusion is that the evidence is not so clear and convincing as to have required the court to find in appellant’s favor on this issue. There was no proof that respondent had actual notice of the fact that the wheat was not owned by the grain company. Appellant’s contention is that the evidence discloses a situation which charged respondent with constructive notice of that fact. Among the circumstances relied on by appellant are the following: Respondent was a creditor of the grain company and held chattel mortgages on all of its property. It had the “first call” on all wheat it shipped to Duluth. It knew that country elevators received grain for storage. The offices of both companies were on the same floor of the board of trade. It advanced money to the grain company on its bills of lading before the grain was offered for sale on the board of trade and was repaid when it was sold.
On the other hand, respondent points to the fact that the grain company was a licensed commission merchant in Minnesota, and asserts that it had a right to assume that in selling grain the company was acting as such commission merchant. It appears that the building in which the offices of the two companies were located is the building where practically all grain dealers in Duluth have their offices. None of the stockholders or officers of the one company were stockholders or officers of the other. The .wheat was purchased on the floor of the board of trade in the usual and ordinary manner at its fair market price. There had been similar transactions between the parties for several years and no one had previously questioned them.
Under the law of North Dakota, a public warehouseman does not become a wrongdoer by shipping stored grain to a terminal elevator. Marshall v. Andrews, 8 N. D. 364, 79 N. W. 851; State v. Daniels, 35
The doctrine of constructive notice has been stated in numerous decisions of this court. The tendency is not to extend but rather to restrict the doctrine. Jewell v. Truhn, 38 Minn. 433, 38 N. W. 106; Kettle River R. Co. v. Eastern Ry. Co. 41 Minn. 461, 476, 43 N. W. 469, 6 L.R.A. 111. Respondent cannot be charged with constructive notice that the grain company did not own the wheat it sold, unless it had knowledge of facts which would naturally lead an honest and prudent person to make inquiry concerning its right to sell it, and such inquiry, pursued in good faith, would have disclosed that its vendor did not own it. Twichell v. Glenwood-Inglewood Co. 131 Minn. 375, 155 N. W. 621; Brockman v. Brockman, 133 Minn. 148, 157 N. W. 1086. The rule fairly applicable to the facts in the case at bar is stated in United States v. Detroit Lumber Co. 200 U. S. 321, 26 Sup. Ct. 282, 50 L. ed. 499, as follows:
“No one is bound to assume that the party with whom he deals is a wrongdoer, and if he presents property, the title to which is apparently valid, and there are no circumstances disclosed which cast suspicion upon the title, he may rightfully deal with him, and, paying the full value for the same, acquire the rights of a purchaser in good faith. * * * When a person has not actual notice, he ought not to be treated as if he had notice unless the circumstances are such as enable the court to say, not only that he might have acquired but also that he ought to have acquired it but for his gross negligence in the conduct of the business in question. * * * What makes inquiry a duty is such a visible state of things as is inconsistent with a perfect right in him who proposes to sell.’
2. Appellant contends that the original holders of the storage receipts had a right of action against respondent for the conversion of their grain and that it has become subrogated thereto. We are not here concerned with the rights of appellant as against the grain company. Those rights have been asserted in the action which resulted in the recovery of a judgment against it. If respondent is liable to appellant at all, liability must arise through some application of the rule whereby a surety who
These principles find support in the following cases: Ahern v. Freeman, 46 Minn. 156, 48 N. W. 677, 24 Am. St. 206; Emmert v. Thompson, 49 Minn. 386, 52 N. W. 31, 32 Am. St. 566; Cooper, Myers & Co. v. Smith, 139 Minn. 382, 166 N. W. 504; National Surety Co. v. Arosin, 198 Fed. 605, 117 C. C. A. 313; U. S. Fidelity & G. Co. v. Title G. & S. Co. 200 Fed. 443; First National Bank v. City Trust, etc., Co. 114 Fed. 529, 533, 52 C. C. A. 313; Baker v. American Surety Co. 159 N. W. 1044; American Bonding Co. v. State Savings Bank, 47 Mont. 332, 133 Pac. 367, 46 L.R.A.(N.S.) 557; Grand Council v. Cornelius, 198 Pa. St. 46, 47 Atl. 1124; American Bonding Co. v. National Mechanics Bank, 97 Md. 598, 55 Atl. 395, 99 Am. St. 474, with note; Stewart v. Commonwealth, 104 Ky. 489, 47 S. W. 332; Bowles v. Gantenbein, 83 Ore. 510, 163 Pac. 308, 1163; Liles v. Rogers, 113 N. C. 197, 18 S. E. 104, 31 Am. St. 627.
We have examined the statutes of North Dakota and the cases in that
The equities in this case are with respondent. It paid full value for the grain in question. The grain company was worth as much after each transaction with defendant as it was before. There was no depletion of its resources. "While it could no longer return their grain to the rightful owners, it had obtained for it an equivalent in money. It is the only wrongdoer. If appellant’s contention were sustained, respondent would have to pay a second time for grain it had once bought and paid for in good faith, in order to protect from loss the surety on the bond of the warehouseman who wrongfully sold the grain. The surety on such a bond in effect guarantees that his principal will return stored grain to the owners or pay them for it. He ought to shoulder the loss if his principal fails to make good his undertaking. He cannot pass it on to an innocent third person by invoking the aid of the equitable doctrine of subrogation. Appellant occupies virtually the same position as the surety in Cooper, Myers & Co. v. Smith, 139 Minn. 382, 166 N. W. 504. The decision in that case practically controls the phase of the case at bar now under consideration.
3. The court awarded respondent upon its counterclaim $905.68 appellant had collected as heretofore stated, saying “plaintiff should, however, pay the full amount of the face of the bond for the benefit of the ticket holders. For the difference remaining between the amount which it paid, and the face of the bond in question, the defendant should be allowed a recovery.” As we view the evidence, it conclusively appears that the parties intended to pay to Stutsman, as the representative of the holders of the storage receipts, a sum sufficient to enable him to redeem all such receipts. Their acts indicate that it was understood that a settlement should be made with Stutsman, that appellant should pay
This was the situation when the grain company became insolvent: It was primarily liable for the payment of $23,137.78. Its liability was reduced to $17,119.33 by the sale of all the grain it had in its elevators. Appellant was next in the order of liability, to the maximum amount of $10,000, which it paid, thereby discharging all liability upon the bond. Eespondent was last in the order of liability, and $7,119.33 which it paid discharged its liability. The receipt holders, being paid in full out of these funds, no longer had an assignable cause of action, against anyone. After they dropped out, appellant had a valid claim against the grain company for $10,000, and respondent one for $7,119.33. Each became an independent creditor of' the company, entitled to pursue any remedieá which were available to it as such creditor. Appellant had no right of action against respondent for reasons already stated.
Bespondent’s theory was that it should have received part of the $10,000 appellant paid, because it obtained assignments of storage receipts amounting to $7,119.33. This theory was not adopted by the trial court and there has been no appeal from its decision of this issue. If respondent had received its pro rata share of the $10,000, there would not have been money enough left in Stutsman’s hands to pay the other receipt holders in full. The bond did not amount to more than approximately ten-seventeenths of the sum required to satisfy the receipt holders after he sold the grain that came into his possession. For the remaining seven-seventeenths, respondent was ultimately liable. .It rec-ognizd this liability when it gave its check to Stutsman. Both parties made statements in writing in connection with their several payments to Stutsman. Each appears to have been manoeuvering for position as against the other. Our conclusion is that each voluntarily paid only that which it was justly bound to pay, and that neither has any standing in equity to assert a claim against the other. It follows that after paying no more than each was bound to pay, both were free to recoup their losses independently. Thereafter, if the diligence of appellant bore fruit in a partial reimbursement of its loss, respondent could not demand that it share in its good fortune.
The order denying plaintiffs motion for a new trial is reversed, and a new trial of the issues arising on defendant’s counterclaim only is granted, unless, within 30 days after the filing of the mandate from this court to the district court, the defendant shall file in the latter court its consent to the entry of judgment for its costs and disbursements in that court only, without any recovery upon its counterclaim. If such consent he so filed, the order denying a new trial shall stand and be affirmed.