M. H. Thomas Co. v. Hawthorne ( 1922 )

HAMILTON, J.

Appellees and their assignors owned, severally, different individual lots of cotton in the fall of 1918. All of them (nine in number) were farmers who resided in the vicinity of Seagoville, a village in Dallas county, Tex. The aggregate number of bales of cotton owned by them -was 169. The highest number of bales owned by any one of them was 68; the lowest number of bales in any of the lots was 6. This cotton was all lying in the cotton yard at Seagoville, except 11 bales at Forney and 16 bales at Kleburg. Forney and Kleburg are villages near Seago-ville. All the cotton stored in the cotton yards was exposed to the weather and was deteriorating and being damaged, while the appellees, its several owners, held it for an advance in price.

W. O. Cardwell was engaged in the mercantile business and in the business of buying and selling .cotton at Seagoville. Card-well had lived in Seagoville many years and had been engaged in the same business there during a period, of about 10 years prior to the happening of the event out of which this .litigation arose. His father had been a business man in Seagoville many years before he himself had entered business. Apparently his conduct and dealings had always been characterized by honesty, integrity, and uprightness. Appellees themselves had transacted business with him, and he had the confidence of them all. Upon his career he had been adjudged by them to be an honest man, and, so far as this record discloses, no circumstance had existed to impeach that judgment or render it equivocal. In his cotton transactions it seems that he bought various small lots of cotton from local owners and farmers and shipped it away in large volumes to cotton factors and dealers.

Some time prior to November 20, 1918, Cardwell? in what appeared to be a spirit of friendly concern and solicitation for the protection of appiellees’ cotton against deterioration in quality and value through exposure to inclement weather, began, and for some time persisted in, importuning them to deliver to him possession of their cotton in order that he might ship it to Dallas, there to be stored in a warehouse. He represented to them that he had under lease expansive floor space at the Shippers’ Compress & Warehouse Company in Dallas. He stated, in substance, to each of them that his space at the warehouse was unoccupied, and that there would be no added cost to him to store their cotton there for them, and that if they would deliver possession of it to him for the purpose he would ship it to Dallas, store it in the warehouse and protect it while it remained there with blanket insurance which he already had. This representation as to insurance was made only to some of the owners. By this means, under the representations he made to them, they would be enabled to protect their cotton against injury from exposure while they awaited a better market upon which to sell. Finally each of them acceded to the suggestion and request thus made by him, and each of them delivered his cotton to Cardwell for shipment to Dallas.

Some of the owners themselves surrendered their yard tickets at the cotton yard •and had delivery of the cotton made to the freight depot at Seagoville. Others delivered their tickets to Cardwell and he, by presenting them at the yard, there acquired possession of the cotton and had it delivered at the depot for shipment.

The cotton, possession of which was thus acquired by Cardwell from each of the owners, was shipped by Cardwell to M. H. Thomas & Co. at Dallas. The first lot of cotton thus acquired was shipped on October 17, 1918, and the other various lots so acquired by him he shipped on different dates thereafter, the last shipment being made about January 15, 1919. In the instance of each shipment a draft was drawn on M. H. Thomas & Co. and the bill of lading was attached to the draft. In the case of each shipment the cotton seems to have been consigned to “Shipper’s order, notify M. H. Thomas & Co.” Cardwell made the shipments pursuant to an understanding with M. H. Thomas & Co., by the terms of which Cardwell was to deliver to and M. H. Thomas & Co. was to accept from him 300 bales of cotton upon stipulated terms, and one of the provisions of the arrangement was that M. H. Thomas & Co. was to advance to Cardwell upon cotton actually shipped and delivered under the agreement money to within $10 per bale of its market value, Cardwell agreeing to protect M. H. Thomas & Co. with margins in case of market decline. As the drafts were drawn and presented they were promptly paid by appellant. In due course each of the shipments arrived in Dallas, was delivered, and passed under the dominion of appellant.

The following letter of confirmation to Cardwell from appellant reflects the agreement subsisting between these parties at the time the respective shipments were made, and under which the drafts with bills of lading attached were paid by appellant:

“Oct. 17, 1918.

“W. O. Cardwell, Seagoville, Texas. — Dear Sir: We confirm arrangement by which we accept from you 300 bales of cotton, on the following terms: 100 bales 50 on December, New York. 200 bales 25 on December, New Xork, basis Middling nothing below Middling. We advance market value within $10 per bale, you to protect us with margins if the market declines. Price to be fixed at your call at any time before November 25th within market hours. It is understood between us that we have the privilege of selling this cotton immediately upon your failure to respond to our calls for margins. Please confirm this by return mail. [Signed] M, H. Thomas & Company, By-.”

Some time after the middle of January, 1919, the price of cotton having declined until the margins existing against it were insufficient, appellant, through its agents, attempted to communicate with Cardwell and obtain from him additional margin to protect the cotton against the declining prices. They were unable to effect communication with him and obtain funds from him for further margin. Whereupon, the margin being absorbed and Cardwell failing to respond to the calls for further margin, he was closed out by appellant.

About this time Cardwell’s whereabouts became unknown and he could not be located. This circumstance having become known to appellees, they began to make investigation with reference to the cotton which had been shipped to Dallas by Cardwell under the agreement had with each of them, and they discovered then, for the first time, the true facts as to the shipments having been made in Cardwell’s name, as to the drafts having been drawn by him and paid by appellant, and also the fact that all the identical bales of cotton delivered by Cardwell under the shipments made by him, except 7 bales, had been sold and exported by appellant. Cardwell at nó time gave any of the appellees any information that the shipments were being made in the manner they were made, that he was shipping under bills of lading made to himself, or that he was consigning the cotton “to shipper's order, notify M. H. Thomas & $!o.”

The uncontradicted testimony of both of the appellees and their witnesses was to the effect that when the cotton was delivered to Cardwell for shipment it was to be stored in the warehouse of the Shippers’ Compress & Warehouse Company, and in the names of the owners, and warehouse receipts issued in the names of such owners. In some instances representations were made by Cardwell to the owners of the cotton that he had blanket insurance which would protect it, as above stated. In other instances nothing was said between the owner and Cardwell at any time with reference to the matter of insurance. In each of the transactions the understanding with Cardwell was that when the owner decided to sell his cotton he himself was to make the sale; the only condition being that after obtaining the best offer he was to give Cardwell an opportunity to buy from him at the same price.

None of the owners ever obtained any receipt for the cotton after its shipment, and none of them made any inquiry with reference to it until after Cardwell had disappeared and the cotton, as above stated, had been sold by appellant and exported from Dallas. All of the owners, as we have already said, werq farmers, and none of them had ever had any experience in shipping cotton or in warehousing cotton. They each believed that the cotton was stored in Dallas at the compress in their respective names, and none of them had any intimation of the arrangement between Cardwell and appellant or of any of the transactions had thereunder between Cardwell and appellant.

After the cotton was shipped, and during the period it was at the compress in Dallas, some of the owners received advancements of money from Cardwell without executing any note or giving him any evidence of indebtedness. These transactions were had under different circumstances. In some instances those to whom the money was advanced merely indicated to Cardwell that they needed money for a particular purpose, whereupon he suggested that he would supply it and immediately did so. In other instances where he made such advancements, the owners to whom they were made went to him and stated that, in view of the fact they needed money they were inclined to sell the cotton which was stored in Dallas and, in response, he ..insisted that the price would go higher, that they should not sell but should hold their cotton for the benefit of the advance in price and in the meantime he would supply them with the needed funds.

The farmers, being unable to obtain either the cotton or the value thereof after discovering Cardwell’s default, entered into a transaction among themselves whereby seven^ of them assigned their respective claims and causes of action against Cardwell and all 'those claiming by or through him to the other two, R. C. Hawthorne and Luther Bowers, the appellees, and they brought this action against appellant for the value of the cotton received from Cardwell and sold by appellant, and also against appellant and the Shippers’ Compress & Warehouse Company for recovery of the 7 bales -of cotton still remaining in the warehouse of the Shippers’ Compress & Warehouse Company in the city of Dallas.

The case was tried before the court and a jury, and, at the conclusion of the introduction of evidence, a peremptory instruction was given the jury to return a verdict in favor of the appellees for the value of the cotton received and disposed of by appellant, less the aggregate of the respective amounts borrowed by different ones of the farmers from Cardwell after shipment of the cotton, and also against appellant and the Shippers’ Compress & Warehouse Company for the title to, and possession of, the 7 bales of cotton still remaining with the Shippers’ Compress & Warehouse Company at the time of the trial, subject to accrued storage charges thereon. A verdict was rendered and judgment entered in conformity with this instruction, and from that judgment the appeal is prosecuted to this court.

rpie appeal is rested primarily upon two general propositions. The first proposition is that the case should be reversed and rendered for the following reasons, to wit: Appellant, being a bona fide purchaser for valuable consideration without either actual or constructive notice of any claim on the part of appellees, and it being the policy of the law to protect innocent purchasers for value and to suppress hidden titles by favoring those who deal openly with a party and in good faith, asserts it ought to prevail.

In this connection appellant asserts that appellees, by their own acts, clothed Card-well with the indicia of ownership of their cotton, giving him possession of it and thus enabling him to impose upon appellant by inducing appellant to believe that he possessed authority to pledge the cotton to secure advancements or that he was the owner of it and endowed with all the authority of an owner tOk sell it. •

Proceeding in the same connection, appellant asserts its dealings with Cardwell were in accordance with established customs of trade and that it relied upon the same evi-" dence of ownership which all cotton merchants and cotton factors rely upon in purchasing cotton, and that, accordingly, not only was Cardwell invested with the indicia of ownership of the cotton, but that, in addition to this circumstance, Cardwell’s apparent relation to the cotton with reference to ownership was all that was ever considered by, the usages and customs of the cotton trade in making suck transactions, and that since appellees, through their own voluntary acts, gave Cardwell the evidences of his right to sell the cotton or obtain advances against it in accordance with the customs of trade and the common understanding of merchants in the cotton business, they cannot now be heard to dispute Cardwell’s authority to pledge or sell the cotton so as to impose any legal liability upon appellant And, upon the phase of the case embodied in this proposition, appellant' advances the further contention that, when an owner of cotton in a cotton yard under the control of a public weigh-er surrenders the yard tickets covering it to a third party and negligently permits him to obtain the cotton through surrender of the tickets, ship it in his own name, taking bill of lading to his own order, and paying the freight charges, and permits him to ship it to a public warehouse where cotton is being assembled for the purpose of classification and grading prior to shipment to different world markets, the owner thereby proclaims such third party to be vested with both title and possession of the cotton.

The contention is made in this same connection that as between two innocent parties imposed upon through the fraud of a third person the loss should fall upon that one who by his own act created the circumstance which permitted the fraud to be perpetrated. Lastly, it is contended upon this point that appellant was a .cotton factor in the transaction and, as such, took the cotton in good faith from Cardwell who had every iiidicia of ownership, sold it and accounted to Cardwell for the proceeds of the sale before any demand was made and that, therefore. being a cotton factor, it is not guilty of conversion since it had neither the cotton nor the proceeds of its sale at the time appel-lees’ claim was made.

The sum total of all the propositions set forth in support of the theory, that the judgment should be reversed and rendered, stated and summarized in general form, is that the acts and conduct of appellees and the other farmers whose cotton was shipped to Dallas by Cardwell under the circumstances above stated constituted estoppel, which was fully pleaded by appellant.

Under the alternative contention it is insisted that the trial court erred in giving a peremptory instruction to the jury, and that the case should be reversed and remanded.

Upon this feature of the appeal the following propositions are advanced: The trial court was not justified in instructing a «verdict, because the proof was conflicting, upon the material issues and was such that reasonable minds might reach different conclusions from the evidence even though there was no conflict in the testimony of the witnesses, an estoppel being pleaded and the issues being raised both in the pleadings and the evidence.

Additional reasons why the judgment should be reversed are embodied in complaints agaiñst leading questions propounded in depositions and also against the manner in which certain of the witnesses rendered their answers to the depositions, it being contended that the answers were not responsive and were expressions of mere opinions and conclusions, and also in their natures were argumentative.

The material facts are wholly undisputed. All the parties to the transactions with Card-well seemed to be equally innocent, and his perfidy and deceit seem to have been practiced upon them all without discrimination. Appellant recognizes the general elementary rule that the owner of property, cannot be deprived of it without his consent unless by operation of law, but insists that the facts of this ease bring it within that class of cases which form an exception to this general rule, which is that if an owner by his own voluntary conduct and consent gives to another such evidence of the right to sell or otherwise dispose of his property, as, according to the customs of trade or universal understanding, usually accompany the authority to make sale or other disposition, then he who is intrusted with possession and with the indicia of ownership or with the authority to sell or make other disposition of the goods, in violation of his duty to the owner, sells them to an innocent purchaser, the rightful owner under such circumstances will be estopped from asserting his title against such purchaser, since it is proper that he, rather than the bona fide purchaser relying upon the evidence of ownership and authority in the person making the sale, should suffer the loss flowing from the owner’s misplaced confidence. Numerous authorities are cited in support of this position, but we think the facts of this case are insufficient to sustain appellant’s position under such authorities.

The facts without any contradiction whatever .seem to us completely to establish the conclusion that Cardwell’s conduct in his dealing with and representations to appellees constituted, in effect, theft by fraud. Measured in terms of stealth, deception, and general turpitude, his acts and conduct place him virtually in the same attitude, so far as the farmers from whom he obtained the cotton are concerned, as his position would have been had he stolen it. There is nothing in the. testimony to indicate that the farmers from whom he obtained the cotton clothed him with any indicia of ownership whatever beyond mere naked possession of the cotton. They gave him no other evidence of ownership in making delivery of the cotton to him or intrusting it to him for shipment, and they made no character of representations to appellant nor did they withhold any knowledge from appellant which, under the circumstances, it was their duty to reveal to it. They were not informed and they were not required to expect that possession of the cotton would pass from Cardwell to appellant. There was no act either of commission or omission on the part of any of them which, properly can be said to have been relied upon by appellant to believe that Cardwell owned the cotton when it paid his drafts, beyond the mere conferring of possession upon Cardwell by them. Whatever the evidence discloses that any of them did or neglected to do after the cotton was shipped to appellant, we think, is altogether1 unavailable to appellant as a defense against their claim. In the instance of each shipment, Cardwell’s draft was paid by appellant before the cotton arrived and was delivered in Dallas. Accordingly, upon delivery of the cotton, appellant had already paid Cardwell for it. It is therefore perfectly plain that nothing any of the farmers did or failed to do in the interim which intervened between the respective shipments of cotton and the discovery of Cardwell’s bad faith several weeks thereafter had any bearing upon the transactions between appellant and Card-well, or tended to cause appellant to change its position in regard to the subject-matter of any of the transactions, or caused it to act in any manner different from the course it chose to pursue. Had the appellees and other farmers in the case of each shipment followed it up for the purpose of seeing that Cardwell performed his gratuitous undertaking in conformity with his pledge to them in each instance, the rights and relations of the parties would have been the same in the transactions as they now stand under ^ the facts reflecting the owners’ conduct subsequent to the shipments and payments of drafts.

The owners of the cotton were not under any duty to follow diligently the conduct and steps of Cardwell to see that he wduld 'perform and faithfully carry out the terms of the understanding had in every instance. They were justified in placing their trust in him to do what he had promised to do. His upright conduct and life of rectitude revealed before them and all men throughout the past justified this confidence. Therefore the owners, we think, did not act negligently and suffer the .loss through their own negligence in resting their reliance upon Cardwell’s word and failing to investigate at any time before the cotton was exported to see if he had kept it. They acted in this respect as ordinarily prudent men act in their relations with other men whose conduct through the years they know to have been consistently honest and true to the principles of fair dealing. It is the rare exception rather than the rule that such men ever cease to bear in mind that ^ “a good name is rather to be chosen than great riches” and transform a life of rectitude into a cataclysm of knavery. And since, by the same test, they could not be expected to suspect that Cardwell would suddenly pervert his life to deceive or defraud' appellant, it cannot be contended that they committed any negligence contributing to Cardwell’s effecting his fraudulent purpose against appellant. They were therefore free from culpable negligence in failing to take steps to prevent a fraud upon appellant, as they were equally free from negligence in failing to safeguard themselves against it. To hold otherwise, in the light of the undisputed facts, it seems to ús would be to discount esteem and confidence openly achieved through the practice of integrity, probity, and upright dealing, and to ]out approval upon suspicion and distruet in business relations, in the absence of conduct and circumstances to justify it.

And here we think it well to be reminded that the owners of the cotton were farmers whose business dealings in cotton never went beyond the confines of the simple transactions of making sales to local buyers. None of them had had any experience with or knowledge of the intricacies and burdens of commercial transactions which pertain only to the more expansive and complicated affairs of commerce among men. Not one of them had even dealt with a warehouse or compress. The record discloses without any contradiction all these facts and circumstances, and they have a potent bearing upon the right of estoppel in equity by reason of these farmers’ acts and conduct toward Cardwell.

But, as the owners’ confidence in Cardwell rested upon their knowledge of his apparently consistent honesty and good reputation, so, too, it may be contended that appellant trusted him with equal confidence resting upon the same foundation, since he was known to it and had had business relations with it during a period of five years and as completely had its confidence; and, as appellant, acting as a bona fide purchaser for value and without notice of any kind, paid Cardwell for the cotton, appellees rather than appellant should suffer the loss because they and the other owners, through their indulgent confidence, put Cardwell in a position to perpetrate the fraud.

However appealing this statement of appellant’s position may be when presented abstractly, yet it is stripped of its force and rendered innocuous in the light of an examination of all the facts which reflect the conduct of the owners of the cotton. Those facts conclusively reveal that the owners did nothing more to confer upon Cardwell dominion over the cotton than to invest him with the mere possession of it. Since they had a right to trust Cardwell with such possession under lis agreement with them and, under-all the circumstances and facts which imputed to him a reputation and character free from turpitude, and since the record fails to show that they, for any reason, owed appellant any duty to advise it of their ownership of the cotton, the mere delivery of it to Cardwell for the specific and express purpose of shipping it to Hallas for storage in their respective names precisely constituted the transaction a bailment and Cardwell a bailee. He violated the trust imposed upon him un-def the terms of the bailment which had been created solely through his fraud and deceit. Immediately upon acquiring possession of the property, he carried into execution his fraudulent and deceitful design, obtaining the fruits of it through payment of the drafts which he drew. Under the light of these facts we think his position toward the parties is in effect the same as it would have been had he stolen the cotton outright. Accordingly, the rule that the owner of personal property cannot be deprived of it without his consent applies, and the owners, having been guilty of no acts inducing the purchase beyond the mere act of delivery of possession to Ca'rdweli, cannot be estopped in equity from asserting their title and ownership. The transactions between the owners and Cardwell constituting nothing less or more than a mere bailment, the act of the latter in breaching the trust in the manda-tories conferred upon him in the various deliveries could not divest them of or impair their title. The doctrine of caveat emptor therefore rules this feature of the case and precludes appellant from asserting title because its vendor (Cardwell) had none. Stillman & Bros. v. Hurd, 10 Tex. 110; Case v. Jennings, 17 Tex. 662; Dodd & Co. v. Arnold, 28 Tex. 97; 3 R. C. L. 142; 5 Cyc. 188;, Sandford v. Wilson, 2 Willson Civ. Cas. Ct. App. § 248; G. C. & S. F. Ry. Co. v. Taylor, 18 Tex. Civ. App. 571, 45 S. W. 749; Bullard v. Southwestern (Tex. Civ. App.) 172 S. W. 174.

Although the fact that appellant acted in the usual and customary way in dealing with Cardwell and parted with its money under such circumstances without any notice of his lack of ownership or authority to convey title may challenge as quite harsh a view contrary to its contention, it nevertheless remains that unimpaired title continued in the farmers. Appellant, having obtained the cotton as a result of Cardwell’s violation of his bailments, cannot rely upon the maxim that he who trusts most must suffer most. 3 R. C. H.'§ 66.

The force of the facts constituting the relation of bailee and bailor between Card-well and the different owners of the various Iocs of cotton bought from him by appellant’ cannot be escaped upon the theory that appellant was a factor in the transaction and that, since it was dealing only as a factor, it is not liable because, under the law applicable to a factor, demand must be made while the property or its proceeds are in its hands or notice of the true owner’s title or the lack of title In the party who placed the property in its hands is brought home to it, thereby, and only thereby, fixing upon it a wrongful assertion of dominion over the true owner’s property in contravention of his rights. Accepting this as a true statement of the law of liability as against a factor who derives possession of property from one who is not the true owner, still it can have no application here because the testimony does not support the conclusion that appellant was a factor in the transaction. A factor is an agent who pursues the business of selling for a commission goods or merchandise consigned or intrusted to his possession by the owner for the purpose of sale for the owner. 256 C. J. 340. He is nothing more nor less than a commission merchant. The facts do not even tend to show that the cotton sold by appellant was placed in its hands for the purpose of sale on commission for Cardwell. Under appellant’s own testimony the cotton was margined with it by Cardwell under his agreement to keep it protected with further margins in event of market declines. The understanding was that the price was to be quoted as “fixed at Cardwell’s call at any time before November 25th within market hours”; it being provided and agreed that appellant was to have the privilege of selling the cotton upon Cardwell’s failure to respond to call for margins.

S. F. Cade, appellant’s agent, testified as follows:

“Our contract with him was that he could bull that cotton on any market that he desired to sell it so long as the market was open. The market is open from 9 until 2; that is, he could sell it at any time on the market during market hours. In other words, if he would tell us any day at 9 o’clock in the morning ‘to close me out’ we would pay him for it on that day’s market; that is, we would immediately wire to New York, and he would fix the New York market of that date. Then the advances if he had drawn any, would be deducted from what he received out of the cotton, and he would be paid the balance or credited with it. We handled that cotton in that way.”

We find nothing in the evidence to indicate that appellant was handling the cotton on a commission basis.

We have carefully examined all of the assignments of error and propositions thereunder complaining of the admissibility of evidence. In our view, all the assignments of error pertaining to this feature of the procedure below are without merit and, as we do not think any üseful purpose could be subserved by a discussion of them, we overrule them,without further comment.

We think that the trial court did not err in instructing a verdict for appellees, and accordingly the judgment is affirmed.