Summary
In Lineburger Bros. v. Hodge, 212 Miss. 204, 54 So.2d 268 (1951), in which case the appellants were the growers of cotton, one Carr at times would haul appellants' cotton for them from the gin to the compress and store it.
Summary of this case from St. Paul Fire Marine v. Leflore BankOpinion
No. 37945.
October 8, 1951.
1. Warehousemen — customs and usages — negligence.
In a suit against a warehouse company by the purchasers of its warehouse receipts for cotton grounded upon its negligence in issuing the receipts to a thief, evidence of the custom and usage of the warehouse for many years in issuing such receipts and that in the particular case such usage had been followed was competent as a defense when it was shown that the warehouse had handled 450,000 bales of cotton, and during the ginning season from 1,000 to 1200 bales a day, with deliveries from about forty different gins.
2. Warehousemen — warehouse receipts issued for stolen cotton not in anywise entrusted to the thief by the owners — purchasers of receipts.
Where cotton has been stolen by a thief to whom the owners had not in anywise entrusted it, and the thief has procured warehouse receipts therefor which he sold to purchasers for value without knowledge of the fraud, the owners will be entitled to recover their cotton from the warehouse as against the claims of the purchasers of the warehouse receipts.
Headnotes as approved by Alexander, J.
APPEAL from the chancery court of Sunflower County; FRANK E. EVERETT, Chancellor.
Henry Barbour and Herman B. DeCell, for appellants, the growers.
I. The simple device of warehousing stolen cotton and selling the negotiable receipts therefor to a bona fide purchaser does not pass title to the cotton to such purchaser, unless the original owner is estopped from asserting his title.
The general rule is well stated in 56 Am. Jur., "Warehouses", pp. 350-351:
"Sec. 62. — Interest acquired prior to storage. — The rights of an owner of personal property are not necessarily diverted because another having the possession thereof wrongfully deposits it in a warehouse and transfers the receipts to a bona fide purchaser for value. Even under warehouse acts, where one has fraudulently deposited the goods of another, the true owner does not generally lose his property by the negotiation of the warehouse receipt. The fact that the receipt is made negotiable by statute does not affect the rule." This rule has been followed by our Court on numerous occasions and is now well established in this jurisdiction. See, for example, Marine Bank Trust Co. v. Greenville Savings Bank Trust Co., 133 Miss. 91, 97 So. 526; and Tennessee Joint Stock Land Bank v. Bank of Greenwood, 179 Miss. 534, 172 So. 323.
The rule is qualified by the provision that where the owner has clothed the wrongdoer with the indicia of ownership or power of disposition, then the owner may be estopped to assert his title as against a bona fide purchaser. Marine Bank Trust Co. v. Greenville Savings Bank Trust Co., supra; Tennessee Joint Stock Land Bank v. Bank of Greenwood, supra. See also discussions in 19 Am. Jur., Estoppel, Sec. 68, and 31 C.J.S., Estoppel, Sec. 106.
We submit that the learned chancellor erred in holding in effect that the wrongdoer here, James Vernon Carr, had been clothed with the indicia of ownership or power of disposition of the cotton in question. Whether Carr had been so clothed is the principal issue raised by this appeal. There is very little dispute over the facts on this point, and the question involves merely an application of law to those facts.
Our position is that there clearly was no such clothing with indicia of ownership or power of disposition because (a) neither the cotton nor the receipts were entrusted to Carr's possession by the owners and Carr's possession was thus that of a mere trespasser; and (b) neither the compress employees nor the buyers knew that the cotton belonged to the planters, and hence there was obviously no reliance by either compress employees or the buyers on any conduct by the planters.
Although Carr as an independent contractor had on prior occasions hauled cotton for the planters, he clearly had no authority to haul the cotton on the particular occasion in question. Indeed, the uncontradicted testimony of Judge Wynn (colored) and Mrs. Adene Carr for the buyers was to the effect that under cover of darkness and by stealth Carr with two Negro helpers took the cotton from the gin platform to the compress without the knowledge or consent of the owners or their manager. The record contains no evidence that there was any authorization for this hauling.
Even if the cotton had been entrusted to Carr's possession, still mere possession alone is not sufficient indicia of ownership to give rise to an estoppel. There must be possession coupled with some other indicia. See discussions in 19 Am. Jur., Estoppel, Sec. 68 and 6 Am. Jur. (revised), Bailments, Sec. 129. In the case at bar, however, there was not even entrusting of possession.
It will no doubt be contended by the appellees that Carr had previously hauled cotton for the planters and had been authorized to deposit the cotton in exchange for warehouse receipts; and that this course of dealing therefore clothed Carr with the indicia of ownership or power of disposition. Apart from the fact that the compress employees testified that on the occasion in question they did not know Carr was handling the planters' cotton, still the above course of dealing was not a sufficient clothing to pass title. Under that course of dealing Carr was always a mere bailee with the very limited authority of hauling the cotton to the compress and taking warehouse receipts in the planters' names. There was never any authority for him to deal with the cotton as his own, or to take a warehouse receipt in his own name, or to dispose of the cotton in any way whatever. This mere bailment for carriage falls far short of the tests set out in 6 Am. Jur. (revised), Bailments, Sec. 129, and 31 C.J.S., Estoppel, Sec. 106b. Hence there was no such clothing with indicia of ownership or power of disposition as would create an estoppel.
Furthermore, it is clear from the record that Carr was a public drayman hauling cotton from at least two gins for various owners. Hence his appearance at the compress with cotton did not indicate that he was hauling for the planters or acting as their agent, and there was thus no clothing with apparent ownership or power to dispose. Indeed, the uncontradicted testimony of the compress employees was that they did not know the cotton in question belonged to the planters, and had it been known, they (employees) would have dealt with the cotton in a different manner. It is obvious then that the compress employees were not relying on any conduct of the planters or on any appearance of authority from the planters to Carr. On the contrary, the compress employees thought Carr was hauling cotton for "Ray Allen", "John R. Woods", and "L.S. Gilbert". Reliance by the opposite party is an essential element in estoppel, and there was clearly no such reliance here. This Court has said: ". . . estoppel must contain the following essential elements: Conduct and acts, language or silence, all amounting to representation or concealment of material facts. Furthermore, the facts must be known to the party estopped at the time of his conduct, or the circumstances must be such that knowledge of them is necessarily imputed to him, and their truth then unknown to the other party. The acts must be done with the intention or the expectation that the other party would act upon it, or under such circumstances that it would be both natural and probable that he would do so; and reliance and action must be had upon it by the opposite party to his hurt." Peeler, et al. v. Hutson, 202 Miss. 837, 846, 32 So.2d 785, 787.
A case closely analogous to that at bar is Tennessee Joint Stock Land Bank v. Bank of Greenwood, 179 Miss. 534, 172 So. 323. See also Schmitt v. Federal Compress Warehouse Co., 169 Miss. 589, 153 So. 815.
There was some suggestion in the Court below that there might have been a ratification of Carr's action through the conduct of F.A. Little acting in his own behalf and on behalf of the other planters. Apparently the basis for this suggestion is certain testimony by Little as to his conduct on the day the cotton was put in the compress by Carr and on the days following.
We submit that there clearly could not have been a ratification for the following very cogent reasons: (a) the evidence does not show that there was any affirmance of Carr's conduct and furthermore Little's conduct was actually inconsistent with an affirmance; (b) the only conduct of Little that could be relied on to establish a ratification took place at a time when he did not have knowledge of all material facts; and (c) Carr purported to be acting for "Allen", "Woods", and "Gilbert" and did not intend to be acting for the planters; hence there could be no ratification by the planters.
As for (a), the record clearly shows that Little never affirmed Carr's conduct. Upon learning that Carr had moved the cotton, Little immediately began an investigation and search. He went to the gin, then to the compress, and then in search of the receipts. He made frequent inquiries at the compress despite assurances from the compress superintendent and from Carr that everything was all right. Of special significance is the fact that on the very next day (Wednesday) after the cotton was put in the compress or at least on Thursday, Little notified the State Highway Patrol to look for Carr and hold him when found. Such conduct in seeking police assistance is far from affirming Carr's conduct and is indeed inconsistent with any affirmance.
Little's conduct was that of any normal, reasonable person in his position. He merely did what would be expected of a man in such a situation. The sheer audacity of Carr's scheme was the only thing that made possible its success, and in the cool light of retrospect it is unfair to say that Little should have acted differently.
If it be contended that Little's conduct was an affirmance, the question immediately arises: what should he have done then to disaffirm Carr's conduct? It certainly cannot be said that Little should have gone to the expense and inconvenience of going to the compress to demand a release of the cotton for hauling back to the gin platform. Clearly the only reasonable thing for him to do was to investigate the situation and attempt to find out what had happened. And that was exactly what he did. Just as soon as he learned of the very material fact that the receipts had been issued in fictitious names, he immediately and wisely sought legal counsel, who immediately wrote to the compress to advise it of the planters' claim to the cotton. This letter, which was clearly a repudiation of Carr's actions, is dated October 24, 1949, which would be the Monday immediately following the Tuesday on which the cotton was warehoused. Certainly neither the compress nor the buyers should be heard to complain that the planters were not diligent in disaffirming Carr's conduct since the compress through indifference or lack of diligence failed to notify Little how the cotton had been entered until that Monday, October 24, 1949.
Thus, if Little's conduct is examined in its entirety, it can clearly be seen that there was not an affirmance of Carr's actions but rather an unequivocal disaffirmance and repudiation.
As for (b), one of the fundamental requisites for ratification is that the principal have knowledge of all material facts at the time of the affirmance of the unauthorized conduct. See, for example, R.T. Polk Cotton Co. v. Bethel, 136 Miss. 154, 96 So. 305; 2 C.J.S., Agency, Sec. 42; Restatement of Agency Sec. 91. Hence, any affirmance by Little prior to October 24, 1949, the date on which he learned of the material fact that the cotton had not been entered in the compress in the owners' names, was voidable, and there clearly was no affirmance after Little had notice of the names on the receipts.
As for (c), the general rule is well stated in the Restatement of Agency as follows: "Sec. 87. Who Can Affirm. To become effective as ratification, the affirmance must be by the person identified as the principal at the time of the original act or, if no person was then identified, by the one for whom the agent intended to act."
Since the record here clearly shows that Carr purported to act for "Allen", "Woods", and "Gilbert" at the time the cotton was deposited in the compress and further impersonated "Allen", "Woods" and "Gilbert" at the time the buyers bought the cotton; and since Carr clearly did not intend to act for the planters (or Little as agents for the other planters), it follows that there could be no affirmance by the planters (or by Little as agent). See also 2 C.J.S., Agency, Sec. 41.
II. Appellee Federal Compress Warehouse Company was negligent in the manner in which it received the cotton in question, issued negotiable warehouse receipts therefor, and delivered said receipts to an unauthorized person. See discussion in 56 Am. Jur., Warehouses, Sec. 126 et seq., and Sec. 5032 Code 1942.
III. Appellee Federal Compress Warehouse Company is not entitled to storage charges or other warehousing or compressing charges, or lien therefor, or against appellants. The applicable statute which gives the warehouseman a lien is Sec. 5039 Code 1942.
It is obvious from the record that the planters never made any contract with the compress for storage and hence are not personally liable for any storage or compressing charges arising out of this deposit. Carr of course made the contract and is the debtor referred to in Sec. 5039, supra.
Carr had no actual or apparent authority and no estoppel was created; he had only the naked possession of a mere trespasser.
There seem to be no Mississippi cases actually construing Sec. 5039, supra, but the language is clear and unambiguous. Furthermore, the warehouseman's lien is purely statutory and must be strictly construed. Roehl Storage Co. v. Wilson, 268 Mich. 691, 256 N.W. 598, 95 A.L.R. 1525.
Forrest G. Cooper and Edward M. Lowrance, for appellee, the Warehouse Company.
1. The chancellor's findings of fact and conclusions upon conflicting evidence are binding upon the appellant Court in the absence of a finding that he was manifestly wrong.
The foregoing statement is so elementary that we will not presume to cite authority. It was first announced in our State in the case of Interstate Cattle Company v. Lapsley, 24 So. 532, and has been cited scores and scores of times. The last appeal announcing this truth known to the writer is Homrick v. Cook, 40 So.2d 267.
There is abundant credible evidence, believed by the chancellor, to justify his conclusion that: (a) The cotton growers were very negligent; (b) The cotton growers by their own acts and negligence made it possible for the wrongdoer to perpetrate the fraud on the growers; (c) The warehouseman did not know, and was not negligent in not knowing, that the cotton it received belonged to Lineburger Brothers and other appellants; (d) The warehouseman was exercising due care in following the general custom in receiving this cotton and in not checking the gin tags for evidence of ownership rather than looking to the loan memo and the contract drayman for such evidence; (e) The warehouseman did not see the pencil notation on the gin tags and was not negligent in failing to see such pencil notations; (f) The negligence of the cotton growers was greater than the negligence, if any, of the warehouseman or the negligence, if any, of the cotton buyers; (g) If one or three innocent persons must lose by the acts of a wrongdoer, then the burden should be borne by the one of the three whose acts and conduct placed it in the power of the wrongdoer to perpetrate the fraud, and that, in this case, the negligence of the cotton growers placed in Carr the power to perpetrate the fraud.
2. It is not negligence to handle cotton in accordance with the generally prevailing customs known to all parties in the storing of millions of bales of cotton, especially where time and experience have demonstrated the general safety of following such routine. Mechanics' and Traders' Insurance Co. v. Kiger, 26 U.S. (L.Ed.) 435; Smith v. Farmers Ginning Ass'n., 29 So.2d 664; 25 C.J.S. 95, Customs and Usages.
3. Liability for negligence or due care as affected by custom and usage. Am. Jur. Vol. 55, Sec. 45, 307; 38 Am. Jur. Sec. 34, 679-682; see 137 A.L.R. 611, entitled "Admissibility," upon issue of negligence, of evidence of custom or practice of others.
4. A public bonded warehouse can not refuse to accept cotton for storage and is under no duty to demand evidence of title before issuing receipts, and must of necessity accept either the word of the agency offering to store the cotton or written instructions of the owner, in the absence of actually being put on notice that the storer is not to be trusted. 67 C.J., Sec. 15, p. 449.
5. If the master appoints an agent to handle or dispose of his cotton, and the agent fails to carry out the trust, the loss must fall on the master who clothed the agent with this apparent authority. Perera v. Panama-Pacific Exposition Co., 175 P. 454.
6. Did the compress fail to exercise due care and what is a reliable definition of neligence? Batesville Gin Co. v. Whitten, 96 Miss. 210, 50 So. 695; Judd v. Delta Grocery Cotton Co., 98 So. 244; Seavey Sons v. Godbold, 99 Miss. 113, 50 So. 838; Federal Land Bank of New Orleans v. Southern Credit Corp., 192 So. 827; Words and Phrases, Vol. 28, 381, on "Negligence"; Shuptrine v. Herron, 180 So. 620; Ill. Central Railroad Co. v. Bloodworth, 166 Miss. 602, 617, 145 So. 333, 336.
7. If the cotton was stolen, the loss would not fall on the compress. 38 A.L.R. 1206, 1207.
8. Where one of two or more innocent persons must suffer from the wrong of a third party, the burden should be borne by him who placed in the power of the wrongdoer to perpetrate the fraud. Weil Brothers v. Keenan, 178 So. 93; Unger Co. v. Abbott, 92 Miss. 563, 46 So. 68, 131 A.S.R. 545; 67 C.J., Sec. 60, 479, Rights and Remedies of Holder of Receipts.
9. Course of dealing with Carr constituted him an agent to handle cotton. Judd v. Delta Cotton Grocery Co., 98 So. 244; Federal Land Bank v. Southern Credit Corp., 192 So. 827.
Neil, Clark Townsend, for appellees and cross-appellants, the receipt buyers.
I. The purchaser of negotiable warehouse receipts, payable to bearer, from one to whom custody has been entrusted by owner acquires title to goods evidenced thereby; or owner is estopped to deny the authority of disposition of property in a person to whom he has entrusted said negotiable warehouse receipts.
American Law Institute, Restatement of Agency, Sec. 202. "* * * The rule is that where one of two innocent parties must suffer from the fraud of a third, he who reposes trust and confidence in the fraudulent agent must bear the loss." Weil Bros. Inc. v. Keenan, 180 Miss. 697, 178 So. 90; see also annotation in 151 A.L.R. p. 696.
II. Even if Carr had no power to convey title to the cotton in question by transfer of the warehouse receipts, and no estoppel exists as against planters, the Federal Compress and Warehouse Company is liable to buyers herein because the issuance of said receipts was obtained by false representations of the said Carr, or by reason of the negligence or mistake of the employees of said compress.
Where a warehouse receipt is issued, or its issue is obtained through fraud and misrepresentation, this does not deprive an innocent purchaser of any right against the warehouseman. See Annotations, 38 A.L.R. 1207, citing cases, Farmer v. Ethridge, 24 Ky. L. Rep. 648, 69 S.W. 761; Sloane v. Johnson, 20 Pa. Sup. Ct. 643; Fletcher v. Great Western Elevator Co., 12 S.D. 643, 82 N.W. 184; Henderson v. Williams, 1 Qb. 521, 11 Eng. Rul. Cas. 104.
Nor does the fact that the receipt was issued by mistake deprive a bona fide purchaser of his right against the warehouseman. Star Compress and Warehouse Company v. Meridian Cotton Company, 87 Miss. 228, 39 So. 417.
The warehouse proffers much evidence in this record, to the effect that the method used by the compress is generally satisfactory in the past and such an occurrence as that about which this litigation arose has never before taken place. This argument, though persuasive at the first blush, is fallacious, for there is no reason why such a scheme should not be unfailingly successful unless the methods of the compress are changed. Nor is a lack of due care to be excused because the person charged therewith has become accustomed to carelessness in the performance of his duties, 45 C.J., Negligence, Sec. 87, and the courts have stated: "Custom never exonerates from the imputation of negligence", Surman v. Cruse, 57 Mont. 253, 262, 187 P. 890; "It is practically the universal rule that custom or usage will not justify a negligent act", Hamilton v. Chicago Railroad Co., 145 Iowa 431, 436, 124 N.W. 363.
We respectfully submit that the compress has offered no defense to the claim of buyers for the cotton, or its value, which is sufficient under the Uniform Warehouse Receipts Act, and the law of the State of Mississippi. The theory of the defense of the compress in the lower court is based upon agency as against the producers of the cotton. If such did not exist, we submit that under the theory expressed in Star Compress and Warehouse Co. v. Meridian Cotton Co., 87 Miss. 228, 39 So. 417, it is liable to buyers for the value of said cotton. The negligent action of the compress is fully set out in appellant's brief. Nor did the Company take timely action in reference to the several claimants to this cotton, as it is required to do under Sec. 5039 Code 1942. See 100 A.L.R. 429. The annotation clearly shows that only a reasonable time is allowed a person to avail himself of the privilege of interpleader, and even if this privilege is promptly exercised, which is not the case here, the warehouseman may nevertheless be liable to both parties.
Separate bills were filed against the Federal Compress Warehouse Company, a corporation, by E.S. Vancleve, J.R. Hodge, and E.A. Bates Company, a partnership, each praying for a mandatory injunction against the defendant to compel delivery of cotton held by the defendant to them as purchasers and holders of the warehouse receipts covering the number of bales of cotton held respectively by each of the complainants, or in the alternative for the value of the cotton thereby represented. The total number of bales is twenty-four, Vancleve claiming nine, Hodge six, and E.A. Bates Company nine.
It is adequately shown that all of the cotton was grown and ginned by Lineburger Brothers, B.C. Lineburger, J.G. Outlaw and F.A. Little, and stolen by one J.V. Carr from a gin where the cotton had been processed and tagged. This asportation occurred at night and was conducted with the aid of a truck driver who was not a regular employee of Carr. Early the next morning Carr carried the cotton to the defendant warehouse, and, after weighing, had the receipts issued in three fictitious names and delivered to him. Carr took the receipts to nearby towns and sold the cotton, so identified, to the three complainants in separate lots. The purchasers gave their separate checks to Carr who procured payment by endorsing them respectively in the names of the three fictitious persons. He then disappeared and has not since been located.
As stated, the three buyers filed their separate bills against the warehouse. The gin company was not made a party. Upon application of the planters or owners, they were allowed to intervene and claim the cotton. From a decree dismissing the petition of the intervenors, absolving the warehouse of negligence in the issuance of the receipts, and awarding title to the respective warehouse receipts to the purchasers with full rights to claim the cotton thereby represented, after paying storage charges to the warehouse, the planters, or owners, appeal. A cross-appeal is filed by the complainants which urges that in event of a reversal of the decree, they be awarded a decree against the warehouse for the value of the cotton.
We deal first with the cross-appeal. It is grounded chiefly upon the alleged negligence of the warehouse in issuing the receipts to Carr in the names given by him.
(Hn 1) The superintendent of the warehouse testified that he had been in the business of a compressor and warehouseman of cotton for twenty-eight years, and that this cotton was handled as all cotton had been throughout the years; that the warehouse had and exercised no control as to who should haul cotton to its warehouse; that the gins were never instructed as to what data should be placed upon the gin tags; that his employees had no instructions or duty to read the gin tags to ascertain actual ownership; that the warehouse knew that Carr was a hauler and no ground for suspicion against him had arisen; and that the customary procedure for warehousing and issuance of receipts did not require an examination into the actual title to each bale so delivered to it, and it was impracticable and not expected that it undertake to adjudge actual title. It was further shown that sometimes cotton was sold after it had been ginned and before it reached the warehouse.
The employees who took in and weighed the cotton and issued receipts testified that Carr had for a period of about two years delivered cotton to the warehouse and taken receipts therefor; that if the names of the owners were on the gin tags they did not know it, and it was customary to do no more than identify each bale by its gin tag number, displayed in large red figures; and that no such device as perpetrated by Carr had ever occurred and there was no reason to suspect any irregularity. The custom and usage in these matters were relevant upon this issue. Smith v. Farmers Ginning Association, 201 Miss. 573, 29 So.2d 663.
It was further testified for the warehouse that it had in the past handled over 450,000 bales of cotton, and during the ginning seasons it handled from one thousand to twelve hundred bales a day, and had a capacity of 52,000 bales.
Other witnesses testified that the Lineburger cotton was ordinarily handled in a different manner from other cotton in that it was kept separate in the warehouse and no samples were taken since it was not to be sold but transported by the owners to another state.
The wife of Carr, and others, testified that, while Carr hauled considerable cotton for the Lineburger interests, he had no authority to haul any except upon specific occasions to be designated by such owners. The warehouse did not know of this arrangement and assumed that Carr was authorized to haul the cotton here involved.
In support of the contentions of the buyers, it was testified that there was sometimes a blank in which the name of the owner could write his name or initials, and in fact the name or initials of the intervenors was written — evidently in pencil — on these gin tags. It is further contended that, although the light was poor at the time the receipts were issued and the employee who took the numbers from the tags had defective vision, the warehouse should have completely identified the cotton as belonging to the owners. Furthermore, although Carr was known to the intervenors, and hauled cotton on other occasions for them, the names he supplied for the receipts were unfamiliar and should have aroused suspicion and suggested inquiry. However, the warehouse received cotton from about forty different gins.
Regardless of the plausibility of the contention of the appellees, there was an issue of fact in the matter of negligence of the warehouse, and we find no basis for overturning the finding of the chancellor, whose acquittance of the warehouse must of necessity have been upon such absence of negligence.
We approach, then, the rights of the appellants, the planters and owners. As heretofore stated, they had given Carr no authority to take and haul away any of this cotton. Specific instructions, including the time and identity of cotton to be so hauled, were always given, and Carr knew this. It is immaterial whether the warehouse knew of this limitation upon Carr's authority. It is sufficient that this limitation was understood between Carr and appellants. (Hn 2) Here there was no dispute, and it is without question that the taking by Carr, under all the circumstances, was larceny, and that the receipts were fraudulently obtained. The next morning Carr was seen and made two different and untrue statements as to where the receipts were. One of these reports was to one of the owners who had discovered that the cotton was missing and was seeking to locate the receipts. There was no one at the gin when the cotton was abstracted, except Carr, his driver, and Mrs. Carr and her small son. The manager of the gin was not present, and he later testified that he had instructions that Carr was not to haul the Lineburger cotton except upon specific instructions. We repeat that the gin is not a party here and the test of the right of the owners must depend on whether this cotton was under any circumstances entrusted to Carr by permission and knowledge of the owners.
We find that the cotton was not so entrusted to Carr, and since the cotton was in fact stolen and the receipts fraudulently obtained, the defense of apparent authority, although available to the warehouse, does not aid the claim of the purchasers of the receipts.
It was held in Unger v. Abbott, 92 Miss. 563, 46 So. 68, that the rule caveat emptor applies against the claim of an innocent purchaser of warehouse receipts who purchased them from the owner's servant who had been sent with cotton to a compress company with instructions to have it weighed and to bring the receipts back to the owner, but who, contrary to his authority and instructions, took the receipts in his own name and sold them.
If it be observed that this case was decided prior to our statutes upon Warehouse Receipts, Chap. 16, Vol. 4, Code 1942, attention is directed to Section 5051, which is as follows: "A negotiable receipt may be negotiated: * * *
"(b) By any person to whom the possession or custody of the receipt has been entrusted by the owner, if, by the terms of the receipt, the warehouseman undertakes to deliver the goods to the order of the person to whom the possession or custody of the receipt has been entrusted, or if at the time of such entrusting the receipt is in such form that it may be negotiated by delivery."
We look next at Section 5052: "A person to whom a negotiable receipt has been duly negotiated acquires thereby:
"(a) Such title to the goods as the person negotiating the receipt to him had or had ability to convey to a purchaser in good faith for value, and also such title to the goods as the depositor or person to whose order the goods were to be delivered by the terms of the receipt had or had ability to convey to a purchaser in good faith for value, and * * *."
Section 5058 is also in point. It is as follows: "The validity of the negotiation of a receipt is not impaired by the fact that such negotiation was a breach of duty on the part of the person making the negotiation, or by the fact that the owner of the receipt was induced by fraud, mistake, or duress to entrust the possession or custody of the receipt to such person, if the person to whom the receipt was negotiated, paid or a person to whom the receipt was subsequently negotiated, paid value therefor, without notice of the breach of duty, or fraud, or mistake or duress."
Appellees cite for support Weil Bros., Inc. v. Keenan, 180 Miss. 697, 178 So. 90. Here there was an interpleader suit filed by the warehouse. The testimony disclosed that the receipts had been entrusted to one Spencer by the owner, and were misappropriated by the former. After recognizing that one, especially a trespasser, can not convey a better title than he has, the Court found that the receipts had been entrusted to the thief and an innocent purchaser was protected. To the same effect is Lundy v. Greenville Bank Tr. Co., 179 Miss. 282, 174 So. 802, and other cases cited by appellees. See also 56 Am. Jur., Warehouses, Sec. 62.
Our statutes do not go so far as those of some other states in protecting a bona fide purchaser of negotiable receipts in cases where the receipts had been stolen. See 56 Am. Jur., Warehouses, Sec. 53. Since such receipts were not negotiable at common law, their negotiability is to be measured by our statutes.
We hold, therefore, that neither the cotton nor the receipts had been entrusted to Carr by the owners and that the latter are not estopped to set up their claim to the cotton as against the several appellees who purchased the receipts.
The analogy to those cases where the lien of a landlord is protected against a bona fide purchaser is not without point. See Campbell v. Farmers Bank, 127 Miss. 668, 90 So. 436; Marine Bank, etc. v. Greenville, etc., Bank, 133 Miss. 91, 97 So. 526; Tennessee, etc. Bank v. Bank of Greenwood, 179 Miss. 534, 172 So. 323; Schmitt v. Fed. Compress Warehouse Co., 169 Miss. 589, 153 So. 815.
The assertion wants no support that the statutes referred to were designed to insure the negotiability of warehouse receipts and to facilitate commerce in the market places where cotton is brought and sold. The innocent purchaser of a negotiable receipt is guaranteed an assurance without which the traffic could not be conducted. Yet, such assurance must take into account the older principle that an owner of cotton may not be divested of title by a trespasser or a thief. In order to strike a just balance between these two concepts the statutes were enacted. The buyer must still beware lest he is buying receipts which have been fraudulently obtained or cotton which has been stolen. We need not analyze the statutes to divine whether the owner, who has voluntarily clothed another with indicia of ownership or entrusted him with possession of receipts, is barred of recovery from an innocent purchaser by principles of estoppel or pursuant to the rule that where two innocent persons must suffer from a fraud, he who reposes confidence in the fraudulent agent must suffer. It is enough that the statute recognizes title in the innocent purchaser who has bought receipts from one to whom they have been entrusted by the owner.
Here, as in all such cases, one of two innocent persons must suffer the loss. The thief has stolen or fraudulently obtained property from someone. We hold that the unlawful act was committed against the owners and that the title to the cotton remains in them. As stated in Unger v. Abbott, supra, "(The appellees) are to be condoled with for their loss by this swindle; but their misfortune can not affect the right of (the appellants) to have (their) cotton. * * * `Caveat emptor' applies." [ 92 Miss. 563, 46 So. 68.]
The cause will be reversed and decree awarded to the appellants for the cotton, and the Federal Compress Warehouse Company is directed to hold the same to the order of appellants, but without storage charges thereon. The cross-appeal is thereby decided adversely.
Reversed and decree here for appellants.