Savage v. Salem Mills Co.

Mr. Chief Justice Bean delivered the opinion. 1. The defendant contends that the complaint states a cause of action for breach of the contract under which the wheat was delivered by plaintiff and his assignors and received by it, and also for a conversion of such wheat; hence the demurrer to the complaint, or the motion made at the trial to require the plaintiff to elect upon which cause of action he would proceed, should have been sustained. But, as we read the complaint, it states but 'one cause of action, and that on. contract. It sets out in detail the terms of the agreement under which the wheat was delivered and received, and alleges a breach thereof. There is no charge that the wheat was wrongfully or unlawfully converted by the defendant to its own use, but, on the contrary, the allegation is that under the contract the defendant was entitled to use the wheat as part of its consumable stock and to sell or manufacture it into flour at its pleasure,, discharging its liability — 11 — to the plaintiff and his assignors by either delivering to them other wheat of the same grade and quality, or by paying the market price of such wheat when demanded. A demand and refusal were necessary under the contract in order to fix the defendant’s liability, for it was not required to pay for the wheat delivered, either in kind or in money, until requested to do so. 2. It is also urged that all the testimony tending to show the custom, usage and regular course of business of the defendant and persons dealing with it in regard to receiving, handling, disposing of and paying for wheat delivered, was incompetent, because the contract under which the wheat was delivered and received was embodied in a wheat receipt and could not be contradicted or varied by parol. When a receipt is issued by a warehouseman and accepted by the owner of goods stored as containing the terms and conditions upon which the commodity was delivered and received, it becomes the contract between the parties, and cannot be contradicted or varied by parol testimony; but when the receipt is silent as to the terms of the contract, they may be shown by parol, or, when the language of the receipt is ambiguous or uncertain, it must, like any other contract, be interpreted in the light of the surrounding circumstances: Hirsch v. Salem Mills Co. 40 Or. 601 (67 Pac. 940, 68 Pac. 733), and authorities cited. 3. And, in the absence of an agreement to the contrary, the usage or custom of a particular business will enter into and form a part of a contract made by a person engaged in such business and those dealing with him with knowledge of such custom and usage (Morning Star v. Cunningham, 110 Ind. 328, 11 N. E. 593, 59 Am. Rep. 211), although proof of custom or usage is never admissible to give interpretation to a contract inconsistent with its language: McCulsky v. Klosterman, 20 Or. 108 (25 Pac. 366, 10 L. R. A. 785); Holmes v. Whitaker, 23 Or. 319 (31 Pac. 705). 4. The receipt which defendant was accustomed to issue to persons delivering wheat to it is ambiguous, uncertain and indefinite on its face. It does not contain the name of the person from whom the wheat was received, nor truly state the quality — 12 — of such wheat, nor all terms and conditions upon which it was received. It recites that the wheat was received in store “for the account” of a named person, but not “from” such person as the statute requires: B. & C. Comp. § 4602. It merely relates that the wheat received was merchantable, while the pleadings and evidence show that defendant had received and had on storage at the time of the fire five different kinds and grades of wheat of different values, and that two different grades were received from plaintiff. It does not state that the wheat would be returned or redelivered, but that it would be subject to the order of the person for whose account it was received on or before a certain date upon the payment of charges, and is silent as to the terms of the contract under which it was to be held and disposed of after the time stated. Moreover, the right of the person for whose account it was received is limited and restricted by the provision that the defendant “is to have the first refusal of such wheat.” The meaning of this latter clause is doubtful, but was probably intended to give the defendant a preferred right to purchase at all times, and to limit the right of the holder of the receipt to receive grain in return therefor to cases in which the defendant did not care to purchase. It is manifest, therefore, that the load checks and receipts do not alone express the contract. They are but part of the transaction. Their importance is only made apparent upon proof of the custom and usual course of business of the defendant, known and acquiesced in by the depositors, and the purpose for which they were issued. The entire contract between the defendant and the persons delivering wheat to it was hot embodied in the written memoranda, and it is not from a consideration of the writings alone that we are to determine the character of the transaction or the respective rights and obligations of the parties. The entire contract must be ascertained from the custom and usage of the business and the general understanding of the parties in connection with such load cheeks and receipts. The words “in store,” used in the receipt, are not controlling as to the nature of the transaction, as appears from the authorities referred to hereafter. — 13 — 5. A contention is made that some of the findings of fact are erroneous. The findings have the force and effect of a verdict of a jury, and cannot be disturbed if there is any evidence to support them. Without undertaking to refer to the evidence in particular or to recite it in detail, it is sufficient that the record discloses that there was much testimony given and received on the trial to support the findings as made, and they must, therefore, for the purposes of this appeal, be taken as true. Nor do we think the matters upon which additional findings were requested and refused material to the determination of any question arising on this appeal. 6. We come, then, to the merits of the controversy. The facts, as they appear from the pleadings and findings, are that on September 22, 1899, and for many years prior thereto, the defendant had owned and operated a flouring mill at Salem, in this State. Connected with the mill by means of mechanical wheat conveyors were storage houses or bins in which wheat purchased by the defendant to be manufactured into flour and such as it received from the neighboring farmers were mixed and commingled. According to the usual course of its business, when wheat was received from a farmer it was weighed by the defendant’s weigher and a load cheek therefor was delivered to the farmer, showing the date and quantity of wheat delivered, which check could, if desired by the holder, be exchanged for a receipt in the form heretofore alluded to. No such receipt, however, was ever issued to the plaintiff and to but two of his assignors. After the wheat was received and weighed, it was, with the knowledge and by the consent of the farmer, conveyed into the warehouse and mixed and commingled with wheat belonging to the defendant, and thus became a part of the consumable stock of the mill, and thereafter, at its own convenience and pleasure and without further authority from the farmer, the defendant sold and shipped the wheat or ground it into flour or other mill products and disposed of the same for its own account and benefit. The farmer had a right at any time to demand the return of an equal quantity of wheat of like kind with that delivered or the market price of such wheat at the — 14 — time of the demand, and the defendant had the right to and generally did settle the transaction by paying the market value of wheat of like quality as that delivered, but in some instances settlements were made by delivering to the holder of the receipt wheat, equal in quality and quantity with that delivered, on payment of a certain sum per bushel for storage and for sacks. On September 22, 1899, the mill and warehouse were, with their contents, either totally destroyed by fire or so damaged as to be worthless. At the time of the fire there was due from the defendant to the farmers, including the plaintiff and his assignors, 122,534 bushels and 54 pounds of wheat, but of this amount only 105,312 bushels and 32 pounds were in the warehouse. Upon this state of facts, the question for decision is whether the transaction between the plaintiff and his assignors and the defendant constituted a bailment or a sale. If the former, the title remained with the bailors and the loss must fall upon them, but if the latter, the title passed to the defendant at the time of the delivery, and thereafter the grain was held at its risk. It is often difficult to determine whether a particular transaction is a sale or a bailment, and especially so when it involves grain delivered to a person and by him mixed and mingled in a common mass with grain belonging to himself or other parties. If á specific amount of grain is delivered by the owner to be returned, either in its original or in an altered form, when called for, there is of course a plain case of bailment, but, when the grain of different owners is mixed and mingled in a common mass by their consent, a different and more difficult question arises. The original idea of a bailment contemplated the return of the identical article delivered as soon as the purpose of the bailment was accomplished: 2 Kent, Lect. 40; Story, Bailment, §§ 1, 2. But the business of storing, transporting and handling-grain has grown to such proportions in recent years as necessarily to have wrought a change or modification in the doctrine requiring the subject of bailment to be returned to the bailor. The delivery to public warehouses or elevators of thousands of bushels of grain for storage and safe-keeping by hundreds of — 15 — owners, renders it impracticable, if not impossible, to keep that of the several owners separate so as to return the identical grain delivered, and this is no longer expected or required. The only separation now called for by law is to keep grain of the same class in bins by itself so the owner may have returned to him grain of the kind and quality delivered, and therefore upon the deposit of grain with a warehouseman to be mixed with the grain of other persons, the depositor becomes the owner of his pro rata share of the entire mass, and the transaction is a bailment, and not a sale: Brown v. Northcutt, 14 Or. 529 (13 Pac. 485); McBee v. Caesar, 15 Or. 62 (13 Pac. 652); Hamilton v. Blair, 23 Or. 64 (31 Pac. 197). But the warehouseman is not authorized to use, sell or dispose of the grain stored with him, or any part thereof, without the consent of the owners. He may, from time to time, take from the common mass, upon the order or at the request of an owner, grain in amount equal to that stored for or by such owner, but he is required always to retain of the grain so stored sufficient to supply the other storers, and cannot use or dispose of any part thereof for his own benefit. He is a mere custodian of the grain, with no right to use it in any way, and herein lies the essential difference between a bailment and a sale. In the one case the title to the property remains in the depositor and the bailee is but a mere custodian, while in the other he may use and treat the grain as his own, the depositor relying upon his personal credit for the value thereof either in kind or in money.- Where one delivers grain to another under an agreement that the identical grain or grain of similar kind and quality from the common mass into which it was placed shall be returned, there is a bailment, and the right of property remains in the bailor, but when, either front the express agreement of the parties or from the general course of business, the party receiving the grain has a right to use it in his business and as a part of his consumable stock and is not obliged to return the identical grain nor grain of similar grade and quality from the common mass, but may discharge his obligation to the storer by paying the market price — 16 — when demanded, or by returning other grain of the same kind and quality, there is no bailment, but a sale or exchange, and the title of the property and the risk are transferred to him. To determine who shall bear the risk and enjoy dominion over grain which has been by common consent mixed and mingled with that belonging to other parties, we must therefore have recourse to the nature of the transaction; for the rights and liabilities go according to the legal title. "If the nature of the bargain be such,” says Mr. Schouler, "as to make the several proprietors owners in common of the mass, any loss should be borne by them in proportion to their several interests; and such an ownership, we have said, is usually presumed. But if one throws his goods into the common mass, on the understanding that the party receiving them may take from the mass at pleasure and appropriate to himself on the condition that he shall restore other goods of the same sort in their stead — and so, too, in stipulations for pecuniary compensation- — the dominion over the property passes to the receiver; and on this principle are some of our grain cases decided; the party owning the elevator or warehouse being treated as a purchaser, and not as a depositary” ; 2 Schouler, Pers. Prop. § 46. This is the doctrine applied by this court in State v. Stockman, 30 Or. 36 (46 Pac. 851), and finds support in the authorities generally: 3 Am. Law Reg. (N. S.) 321; 6 Am. Law Reg. 455; Richardson v. Olmstead, 74 Ill. 213; Lyon v. Lenon, 106 Ind. 567 (7 N. E. 311); Barnes v. McCrea, 75 Iowa, 267 (39 N. W. 392, 9 Am. St. Rep. 473); Weiland v. Sunwall, 63 Minn. 320 (65 N W. 628); O’Neal v. Stone, 79 Mo. App. 279; Andrews v. Richmond, 34 Hun, 20; Chase v. Washburn, 1 Ohio St. 244 (59 Am. Dec. 623) ; Rahilly v. Wilson, 3 Dillon, 420 (Fed. Cas. No. 11,532); Insurance Co. v. Randall, L. R. 3 P. C. 101. In Chase v. Washburn, 1 Ohio St. 244 (59 Am. Dec. 623), which is probably the earliest leading case on the subject, the warehouse receipts were in the following form: “Milan, Ohio, Nov. 5, 1847. Received in store from J. C. Washburn (by son) the following articles, to wit: Thirty bushels of wheat. H. Chase & Co.” — 17 — In an action of assumpsit to recover the value of the wheat, Chase offered to show that his warehouse and sufficient wheat therein to cover all the outstanding receipts had been consumed by fire; that the custom of the warehouse was to store the wheat in a common mass and ship the same as occasion required, and, on presentation of a receipt, to pay either the highest market price of grain of like grade and quality or .deliver other wheat. The court held that if, when .Washburn’s wheat was delivered to Chase, it became subject to his disposal either to retain or ship on his own account, the property passed and the risk of loss by accident followed dominion over it; that the transaction would not be a bailment, but the legal effect would be to create a debt which could be discharged by the warehouseman paying in wheat of like grade and amount or in money at the market price at the time of the presentation of the receipt; and that in either ease the title to the wheat passed to the warehouseman, and he must bear the loss. In O’Neal v. Stone, 79 Mo. App. 279, Stone owned and operated a flouring mill having in connection therewith an elevator. All wheat purchased to be ground and such as was received by him on deposit was mixed and commingled in the elevator, and the general bulk was drawn upon to supply the mill when in operation. The elevator and contents were destroyed by fire, after which Stone denied all liability under any of the receipts issued by him and outstanding. The wheat receipt stated that the party to whom it was issued had deposited with Stone a certain quantity of wheat of a certain grade and quality, for which he agreed to pay a certain rate per bushel for storage, and to assume all damage by fire, etc. The wheat was to be delivered to the party at the warehouse on demand, less a certain amount for shrinkage, and should Stone at the time of such demand not have the amount of wheat called for of equal grade and amount as that received, then he was to have the privilege of substituting an amount equal in value of a grade next above or below that received, and he was also to have the privilege of buying the wheat at the market price at the time of the demand. The court held the transaction to be a sale and not a bailment — 18 — and that the loss must be borne by the warehouseman, adopting the distinction between a sale and a bailment as pointed out by Sir William Jones in his Law of Bailment, in this wise: “If the goods delivered are to be returned, although in a changed form, it is a bailment, but if the intention is that either money or goods are to be received in exchange for them, there is a transmutation of property, and the obligation created is a debt and not a bailment”: Jones, Bailments, § 105. And, in discussing the question, Bland, P. J., said: “The term 'bailment’ implies that the owner of property has placed it in the hands of another who is at some time to redeliver it to the owner in its integrity or in an altered form agreed upon. If, therefore, the persoñ to whom the property is delivered has the option to pay for it in money or in some other property or to restore it, such option is inconsistent with the character of bailment and the transaction is, in law, a sale, regardless of what the parties to the transaction may have called it or thought it to be.” In Rahilly v. Wilson, 3 Dillon (Fed. Cas. No. 11,532), a warehouseman issued a receipt in the following form: “Received in store of P. H. Rahilly,-bushels of No.wheat. Geo. Atkinson & Co.” The litigation was between depositors of wheat receiving such 'receipts and the trustee in bankruptcy of the insolvent firm, and the court, Dillon, C. J., held that “where grain is stored in an elevator warehouse with the understanding, implied from the known and invariable course of business, that it may be sold by the warehouseman, and that when the depositor shall be ready to surrender the receipt of the warehouseman therefor, the latter will give the highest market price or the same amount of grain of like quality, but not the identical grain deposited, nor grain from any specific mass, the transaction is a sale, and not a bailment.” In Andrews v. Richmond, 34 Hun, 20, the plaintiff delivered to the defendants, who were millers, wheat and took back a receipt as follows: “Canandaigua, November 14, 1878. Received of Harris Andrews 490 bushels of wheat in store. — 19 — Tbe same is subject to him or option to take price on or before the first of May next.' Richmond & Smith.” The wheat was placed by Richmond & Smith in a bin containing some two or three hundred bushels of the same kind and quality of which they were the owners and from which they were drawing every day for the purpose of grinding, and when they received the wheat from the plaintiff they informed him that they intended to mix it with their own and manufacture it into flour. The mill was burned without the fault of the defendants. During all the time and up to the time of the fire there was more wheat ón storage in the bins than, was delivered by the plaintiff. After the fire plaintiff informed the defendants that lie had elected to sell the wheat to them at the then market price. In an action brought to recover such price, it was held that if the receipt alone was considered, the contract was one of bailment, but if it was agreed verbally, at the time the wheat was delivered, that it might be mixed by the defendants with their own wheat and be ground into flour at their pleasure, the transaction was, in law, a sale, and the title passed to defendants, who became liable to the plaintiff to pay him the market price of the wheat delivered or to return other wheat of the same grade and quality, as plaintiff might elect, and that plaintiff was entitled to recover. In the course of the opinion it is said: “The mere consent of the plaintiff that his wheat might be mixed with the wheat of the defendants of the same kind and quality was not inconsistent with a bailment simpliciter. Owners of-the same kind of property and of equal value, like cereal grains or wines, may consent that they be mixed together in mass,- and each, in law, will -retain title to his aliquot part, and may maintain replevin for his share as against a wrongdoer who acquires possession of the same. By force of this rule the owner of grain in store may sell a certain quantity of the same, less than the whole, and pass title thereto, without separating the part so sold from the whole.” But “an agreement that the particular article which the owner places in the hands of another may be by him consumed or sold in the course of trade is utterly inconsistent with the principles on which the law of bailment is — 20 — founded. The very term ‘bailment’ implies that the owner of an article has placed it in the hands of another, who is at some time to redeliver the same'to the owner. If the owner consents that the person to whom he delivers the thing may consume or destroy it, it is not a bailment, whatever else the transaction may be in the law.” A very interesting and apt ease, illustrative of the principles which should govern in the decision of the case at bar, is that of the Insurance Co. v. Randall, L. R. 3 P. C. 101. It was an action on a policy of insurance which stipulated that “goods held in trust or on commission must be insured as such, otherwise the policy will not extend to cover them.” The plaintiffs were millers in South Australia. According to their custom and course of business, wheat was received by them from farmers to whom such course of business and dealing was known, and, on receipt, shot out of bags, in the presence of the farmer who brought it, into large hutches, where it became mixed with other wheat which had been received in like manner and thus became the common stock of the mill, which, according to the custom of business known to the farmer, was either sold by the plaintiffs or ground in their mill and disposed of for their benefit. On the delivery of the wheat to the plaintiffs they gave the farmers receipts in this form: “Eeceived,” etc., “in store.” The farmer could at any time demand an equal quantity of grain of like quality and grade as that delivered by him to the plaintiffs, or the market price of an equal quantity, fixing the price as of the day on which he made his demand, and the plaintiffs had the option of delivering wheat of like quantity or paying the market price. The mill and its contents were -destroyed by fire, and a claim was made by the plaintiffs to the insurance company for the loss, but the amount being in dispute, an action was brought by them to recover the value of the stock consumed. The plaintiffs declared on the policy, and the defendant pleaded that the wheat taken in storage by the plaintiffs from the farmers was held by them upon trust and therefore not covered by the policy. Issue was joined on the plea and the action tried before the chief justice and a jury. No evidence was adduced — 21 — by tbe defendant, but its counsel applied for a nonsuit on tbe ground that the evidence showed that the wheat was held in trust and was not the property of the plaintiffs. The chief justice declined to grant a nonsuit, and by consent a verdict was rendered in favor of plaintiffs with leave to the defendant to move for a verdict for it if the court should be of the opinion that the wheat was taken on storage and was in fact held in trust by the plaintiffs. A rule nisi was granted, calling on the plaintiffs to show cause why the verdict entered should not be set aside and one rendered for the defendant on the following grounds: First, the grain stored had not been insured by the defendant; and second, the wheat taken on storage by the plaintiffs was held upon trust, and was not within the terms of the policy. Upon argument, the judges being equally divided in opinion, the rule was discharged. From this judgment an appeal was taken to the Privy Council, where the case was affirmed after an elaborate and extensive argument on both sides, on the ground that the transaction between the plaintiffs and the farmers who delivered wheat to them was, in law, a sale, and not a bailment, and that the property of the wheat was so vested in the plaintiffs that they would have been compelled to bear the loss by fire if not indemnified by insurance, and, therefore, could recover from the defendant company. From these decisions and the principles announced in them, it seems incontrovertible that, under the facts as disclosed by the record, the contract and agreement between the plaintiff and his assignors and the defendant, under which the wheat in question was delivered and received, cannot be construed to be a mere bailment, but it was, in law, a sale or exchange, and the liability for loss by fire was with the defendant. The wheat was not received by defendant to be stored for safe-keeping until called for by the owner, nor was it delivered with the understanding that it or other wheat of the same grade and quality from the common mass was to be returned. By consent of all parties it was mixed with and became a part of the consumable stock of the mill, and the defendant- had a right to and did make such use of it as it saw fit, being liable to pay therefor, — 22 — when demanded, either in money at the market price of grain of like grade and quality, or in other wheat of the same grade and quality. The effect of the transaction was, therefore, to create a debt from the defendant to the depositors, which it could pay either in money or in ldnd. The provisions in the wheat receipts as issued by the defendant, “damages by the elements excepted,” and for the payment of storage charges and sacks, did not vary the nature of the transaction or change what would otherwise be a'sale or exchange into a mere bailment. The contract must be ascertained from the general course of dealing and t*he entire transaction, and not from a single provision or provisions which' defendant has seen proper to include in its wheat receipts. It cannot, by inserting into its receipt some clause or clauses which, standing alone, are inconsistent with a sale, change the entire nature of the transaction, and make a bailment out of what, in law and in fact, was a sale or exchange. We are cited to a number of cases which are supposed to support the defendant’s argument that, although the identical wheat delivered was consumed by defendant, the ease is nevertheless one of bailment, as there was all the time wheat in the mill and warehouse or elsewhere in the state belonging to the defendant, equal in amount to that delivered and of the same grade and quality: Moses v. Teetors, 64 Kan. 149 (67 Pac. 526, 57 L. R. A. 267); National Bank v. Langan, 28 Ill. App. 401; McGrew v. Thayer, 24 Ind. App. 578 (57 N. E. 262); State v. Rieger, 59 Minn. 154 (60 N. W. 1087). State v. Rieger was under a special statute, and the other cases cited were those of warehouse-men who did not have the right to use the grain stored with them as a part of their consumable stocks and for their own use and benefit. We conclude, therefore, that, for the reasons given, the judgment of the lower court was right, and must be affirmed. There is, however, another view of the ease which is worthy of consideration, although pot specially relied upon by plaintiff. It appears from the answer of defendant, as we understand it, that prior to the fire it had used or shipped from the warehouse and mill a part of the wheat which it claims was stored with it, and, at the time, there was a shortage of about — 23 — 17,000 bushels. It, therefore, did not have on hand wheat sufficient to satisfy in full the claims of the parties who had deposited wheat with it. If the original contract was a mere bailment with the right in the defendant to ship or use the wheat deposited, there are authorities holding that the character of the transaction and the relation of the parties were changed when any part of the wheat was so used or shipped, and it could thereafter, at the election of the bailor, be treated as a completed sale: Cloke v. Shafroth, 137 Ill. 393 (27 N. E. 702); Nelson v. Brown, 44 Iowa, 455; Bucher v. Commonwealth, 103 Pa. 528. Decided 12 April, 1906. The judgment of the court below will be affirmed. Affirmed.