Rahilly v. Wilson

DILLON, Circuit Judge. The proofs satisfy me that the invariable and known course of business at the elevator warehouses in Lake City, was to mingle together all grain of the same grade, whether purchased outright and paid for at the time, or received on tickets specifying the grade and quantity and which contemplated the future delivery of the like amount of the same grade of wheat to the holders of such receipts when they should call for it. or the payment in money of the value of that amount and quality of grain. Those who deposited wheat must be taken to know, and in fact did know, that it would be thus mingled with other grain; that it would be shipped and sold by the ware-housemen, when the latter should deem it to be for their interests (for such was the uniform practice), and consequently if the depositor should demand wheat instead of the value of the wheat, he would not receive, unless by accident, any of the identical wheat [181] deposited, nor any of the immediate mass into which it went. As wheat was being daily received and constantly shipped, the amount on hand fluctuated from time to time. In July, 1870, there was not a bushel of wheat in the elevator building, although many receipts for the crop of the previous year, or years, were outstanding. The proofs show that it was very unusual to deliver wheat to the depositor, as he almost always chose to take the value of the amount and quality called for in the receipt at the date when he desired to surrender it and close the transaction. Under these circumstances the question is, what is the relation which exists between the grain depositor and the warehouseman? Is the depositor a bailor, simply, and the warehouseman a bailee, or is the former a seller, and the latter a purchaser, of the wheat? The district court held the former theory, and that the holders of outstanding receipts were entitled to the grain in the warehouse at the time of the failure of the bankrupts, and that as the amount therein did not equal the amount called for in the outstanding receipts, they must share pro rata.' This view proceeds upon the ground that the title in the grain deposited does not pass to the warehouseman, but remains in the depositor, and that the latter has the title at all times to an amount of wheat in The warehouse equal to that called for in his receipt; and it is contended that if sales are made by the warehouseman, this is a conversion of the depositor’s property, and if other like property is placed in the warehouse, the law will imply that it is placed there in substitution for that which was wrongfully removed, and hence that the grain at any time on hand belongs to the depositors to the extent of their receipts or tickets. It seems to me that this view cannot be maintained, and that it would lead to difficulties and confusion, and that it is against the established legal principles by which sales and bailments are discriminated. If this view is sound and the warehouse should burn without the fault of the owner, this would be a defence to any demand on the part of the ticket holder either for the wheat or its value — a proposition which cannot, I think, be maintained, and which is against the precise point adjtidged in several well-considered cases. Chase v. Washburn (1853) 1 Ohio St. 244; South Australian Ins. Co. v. Randell (1869) L. R. 3 P. C. 101. Viewed in the light-of the uniform course of business, the contract is not one of bailment proper, but one (mutuum) where the property passes to the mutuary or receiver, and is delivered to him for his own use or consumption, and where he is not bound to return the identical article in its original or altered shape, but property of the same kind and value; in which case it is a sale, and the title passes, and the receiver becomes a debtor for the stipulated return. Jones, Bailm. 64, 102; Story, Bailm. § 439; 2 Kent, Comm. 590. That this is a correct view of the relations between the wheat depositors and the bankrupts is expressly adjudged in the following cases, which, in their facts, are idenucal with the one under consideration. South Australian Ins. Co. v. Kandell, supra; Chase v. Washburn, supra; Lonergan v. Stewart (1870) 55 Ill. 44; Johnston v. Browne, infra. See Myers v. Adams [Case No. 62]; Stearns v. Raymond, 26 Wis. 74. Applying the principle above mentioned, the privy council in the Case of South Australian Insurance Company, in an elaborate judgment, decided, where corn was deposited by farmers with a miller to be “stored,” and used as part of the current or consumable stock or canital of the miller’s business, and was by him mixed with other corn deposited for a like purpose, subject to the right of the farmers to claim at any time, an equal quantity of corn of the like quality, without reference to any specific bulk from which it is to be taken, or in lieu thereof, the market price on any equal quantity, on the day on which he made his demand, with a small charge for general purposes, that the transaction was a sale by the farmer to the miller of the corn deposited, and not a bailment. In giving their lordships’ judgment, Sir Joseph Napier says: “It appears to their lordships that there is no sound distinction, in principle, between this, and the case of money deposited with a banker on a deposit receipt; * * * that it is not the case of a possession given (by the farmer) subject to a trust, but that it is the ease of property transferred for value, at the time of delivers-, upon special terms of settlement. L. R. 3 P. C. 109, 311. And so the supreme court of Iowa, in Johnston v. Browne (1873) 37 Iowa, 200, has also held. In the case just cited, wheat was left in an elevator with the understanding that when the depositor should be ready to sell it, the proprietor of the elevator would give the highest market price or the same amount of wheat of like grade and quality — the custom being to ship off grain, but to keep t u hand sufficient to fill outstanding storage receipts, but not the identical wheat received —and it was adjudged that the transaction was a sale and not a bailment. I regard the case at bar distinguishable from Young v. Miles, 20 Wis. 615, 23 Wis. 643. and Kimberly v. Patchin, 19 N. Y. 330, and like cases, where the bulk from which the mingled articles were to be taken was specific and not subject to constant fluctuations. I am of opinion, therefore, that the court erred in holding that the receipt owners had the right to the wheat in the warehouse as against the assignee, and its decree in this respect is reversed, and a decree will be entered here dismissing the bill. I may add, thaL I am entirely satisfied, in [182] the light of the mode of conducting business at the grain elevators, as shown in the testimony. Iliat the foregoing is a sound view of the relation between the grain depositor and the proprietor of the elevator, and that legislation to protect the - former against the insolvency of the latter would appear to be called for. [NOTE. In Chase v. Washburn, 1 Ohio St. 2-⅛ the receipt of the warehouseman, was: “Milan. O. Nov. 5th, 1847. Received in store from J. C. W. thirty bushels of wheat. H. Chase & Co.” The evidence aliunde showing that the wheat was received with an understanding that 1 '-<■ warehouseman might dispose of it, and that, upon demand, he would return other grain, or nay for that deposited, the transaction was adjudged a sale and not a bailment, and therefore it was no defense to the warehouseman that his warehouse was destroyed by fire at a time when it contained wheat enough to answer all his outstanding receipts. So. in the case of South Australian Ins. Co. v. Randell, L. R. 3 P. C. 101, 6 Moore. P. C. (N. S.) 341, as in the case to which this note is subjoined, the receipts issued to the farmers by the miller were “to store,” and, under the circumstances stated in the foregoing opinion, the transaction was considered to be a sale. In 6 Am. Law Rev. 430 [Chase v. Washburn, 1 Ohio St. 244], the reader will find a valuable article entitled "Grain Elevators; the Title to Grain in Public Warehouses.” The ease Chase v. Washburn is selected “as presenting the eldest exnosition of the opposite opinion” to that which the annotator there maintains to be the true doctrine. In that note is cited, perhaps, every reported case on the subject of the title to grain in elevators which had been decided down to April, 1872. The substance of that note will be found condensed in Holmes’ edition of Kent’s Commentaries. 2 Kent, Comm. (12th Ed.) 590. The case of Rahilly is one where there was an understanding implied from the known and invariable course of business, that the warehouseman might mingle the specific wheat deposited with other wheat of like quality, and dispose of it at his pleasure, with the further understanding that on demand, he would pay the depositor the highest market price, or deliver the same amount of grain of a like quality, but not the identical grain deposited, nor grain from any specific mass. We have found no adjudged case which holds such a transaction to be a bailment, but there are several directly to the point that it is a sale. Such a case is obviously distinguishable from that of a specific deposit which is not to be changed by the warehouseman, hut retained by him until called for by the depositor. This is a bailment. And the case is distinguishable, also, from those where specified amounts of grain of different owners is mixed by consent in specific mass, without any understanding that the warehouseman might dispose of the grain so deposited and mingled. And it may be different from the case where the proprietor of the elevator is a mere warehouseman and where his course of business is, and his duty is, always to keep on hand in the elevator sufficient grain to meet all outstanding receipts, though not the particular grain received. We say it may be different from such a case, but it is doubtful whether it is so. See Johnston v. Browne (1873) 37 Iowa, 200. But where it is known by the depositor that the warehouseman is himself buying and selling grain on his own account, and also receiving grain “in store,” and that he intermingles all that is so obtained, and is constantly buying, receiving and selling, so that the mass, is continually fluctuating, and there is no fixed time when the receipts are to be presented, it seems impossible to consider the holders of the outstanding receipts as tenants in common of the whole mass of wheat in the elevator in proportion to the amount of their receipts. And such a case seems to be the same in principle as an ordinary general deposit of money in a bank; it creates simply the relation of debtor and creditor; and so the privy council in the Case of Australian Insurance Company, above cited, considered it. The very recent case of Butterfield v. La-throp, 71 Pa. St. 225, goes upon the same principle. Here, Baxter and numerous other farmers delivered milk to a cheese factory; each was credited with the amount of his milk, and all was manufactured together; the company sold all the cheese; each farmer was charged with the expense, and received his share of the proceeds in proportion to the milk furnished; Baxter’s interest in the cheese, etc. was sold under an execution against him: .Held, that the sale by the factory converted his interest into a money demand, and this interest was, therefore, not the subject of a levy.' The arrangement at the factory did not constitute the farmers partners nor tenants in common jn the cheese; nor was there an agency or bailment as to the particular milk delivered. It was a sale of milk to be paid for in a certain time and manner. On the general subject see and compare Cush-ing v. Breed, 14 Allen, 376; Warren v. Milli-t-en. 57 Me. 97; Dole v. Olmstead, 36 Ill. 150; 2 Kent, Comm. (12th Ed.) 590, and cases cited in Mr. Holmes’ note. The decision in Rahilly’s case was acquiesced in. See Hamilton v. National Loan Bank [Case No. 5,987). In respect to the claim of the- bank upon the two wheat receipts for 12,000 bushels, made by the bankrupts after their failure, to secure $10.000 to their local bankers, I concur so fully in the views of Judge Nelson that I do not deem it essential to do more than refer to his opinion. The decree of the district court, dismissing the cross-bill of the bank is affirmed. The cause will be remanded to the district court with directions to tax the costs in that court equitably as between the receipt holders and the bank. The costs on this appeal will be borne equally between the same parties. Decree accordingly.