Climber Motor Corp. v. Fore

The appellant moved for a judgment in its favor on the findings of the jury, and the court overruled the motion. The evidence in the case is practically undisputed, and the jury verdict merely reflects the admitted facts. The salient facts, admittedly shown, are here stated. The Climber Motor Company was the owner of the 15 automobiles in suit, and R. M. Fore was its special agent for the purpose only of effecting a sale thereof. The automobiles were placed in storage as the property of the Climber Motor Company, and were to remain there until sale could be made of them. Fore had authority to take them out of storage only for the purpose of making delivery to a purchaser or purchasers in case he effected a sale. Subsequent to the time of the storing of the automobiles, Fore, without authority or order from the Climber Motor Company, and without its knowledge, procured the Dallas Storage Warehouse Company, in whose warehouse the automobiles were stored, to issue warehouse receipts for the automobiles direct to the Security National Bank of Dallas or its order. There were no outstanding warehouse receipts for the property at the time, and the Climber Motor Company never directed or authorized the Dallas Storage Warehouse Company to issue warehouse receipts for the property. The purpose and intent of Fore, in the issuance and delivery of the warehouse receipts to the Security National Bank, was to secure the payment of certain promissory notes executed by him to his own order, and being his personal indebtedness. There was no sale of the warehouse receipts. The Security National Bank, through S. J. McFarland as vice president, indorsed in blank and delivered the warehouse receipts to the several note holders. Subsequently, upon failure of Fore to pay the notes, S. J. McFarland individually acquired the notes and the warehouse receipts given as security for the notes. He paid value for the notes with the security attached, and acquired them in good faith. The Dallas Storage Warehouse Company, and likewise the Security National Bank, S. J. McFarland, and the holders of the notes, had no notice at the time of the issuance and delivery of the warehouse receipts that the Climber Motor Company was the owner of the automobiles.

It is clear from the facts that Fore was, under his agreement with the Climber Motor Company, merely a special sales agent. As such, in the absence of a statute giving him authority so to do, he had no power to pledge for his own indebtedness the automobiles placed in his hands for sale and bind his principal. It is the established common-law rule that none can give a better title to personal property by sale or pledge than he has himself. Bank v. Bank Trust Co., 239 U.S. 520,36 S. Ct. 194, 60 L. Ed. 417, Ann.Cas. 1917E, 25: Murray v. Lardner, 2 Wall. 110, 17 L. Ed. 857; 31 Cyc. p. 794; Jones on Pledges and Collateral Securities (2d Ed.) § 53, p. 56; Pelosi v. Bugbee, 217 Mass. 579,105 N.E. 222. And it is the fundamental rule that an agent for one purpose only cannot lawfully do another act and bind his principal. Mechem, Agency, §§ 323, 361. Therefore, if the pledge in the present case was valid it must be upon the ground that it was made by a person having the indicia of title, the constructive possession and the right to make sale and delivery of the property.

This proposition is based upon either estoppel in pais or the protection afforded by the Uniform Warehouse Receipts Act as provided in the statute. Estoppel in pals, independent of the Warehouse Receipts Act, was not pleaded, and therefore the appellees cannot avail themselves of an equitable estoppel in order to defeat the appellant's claim. Scarbrough v. Alcorn, 74 Tex. 358, 12 S.W. 72; and many other cases. And the special facts do not bring the case within the terms of the Warehouse Receipts Act. The record admittedly shows that the transaction, as between Fore and the Climber Motor Company as well as all the other parties, was not in fact the pledge by Fore of a negotiable warehouse receipt issued in the name of the Climber Motor Company. Nor did the Climber Motor Company entrust Fore with the warehouse receipts issued without its authority to the Security National Bank. Fore himself, and without authority or order, procured the issuance of the warehouse receipts in the first instance direct to and in the name of the Security National Bank or its order. This expedient was adopted by Fore to permit the Security National Bank to have custody or possession of warehouse receipts running to the order of the latter. Consequently, it was through the action of Fore alone and the apparent title the warehouse receipts created in the Security National Bank that the holders of the notes were led to advance Fore the money upon the faith of the documents of title. Were the true owner's rights cut off or diminished by the form the transaction took in this particular instance, there being good faith on the part of the appellees in the transaction?

It is plain that it is the intention of the Warehouse Act to facilitate the use of warehouse receipts as documents of title, and to protect a bona fide purchaser for value to whom the receipts have been negotiated, despite breaches of trust or violations of agreement on the part of the person making the negotiation as the apparent owner. But it is equally as clear that it was not the intention and purpose of the act that the rights of the owner of the property should necessarily be divested or diminished because another wrongfully procures the issuance and negotiation of a warehouse receipt for the property in the name of a third person. The persons who may negotiate the receipt, according to the act, are "(a) the owner thereof" or "(b) person to whom the possession or custody of the receipt has been entrusted by the owner," if the receipt is in the form prescribed. Article 7827 1/2t, Vernon's Ann.Civ.St. Supp. 1922. As seen, only "the owner" or a "person to whom the possession or custody of the receipt has been entrusted by the owner" is included within the description of those who may "negotiate" a warehouse receipt. And a person to whom a warehouse receipt has been negotiated acquires thereby such title to the goods as "the person negotiating the receipt" or "the depositor" or the "person to whose order the goods were to be delivered by the terms of the receipt," according to the circumstances, "had ability to convey to a purchaser in good faith for value." Article 7827 1/2tt. The purchaser does not, as seen, take any greater or better title to the goods than the persons included within the description "had ability to convey."

Hence, regardless of the good faith on the part of the appellees in this transaction, the true owner's rights were not cut off or diminished by the form the transaction took, according to the provisions of the Warehouse Act. The transferee, in order to take advantage of the negotiability granted by the act, must show not only that the instrument is negotiable, but that it was negotiated according to the provisions of the statute; and if this is not done the rights of the transferee will be governed, as the case might be, by independent rules of law. The true owner may be estopped to set up his title to the property when he has permitted another to hold himself out as the owner, or clothed him with indicia of title to the prejudice of an innocent person. But equitable estoppel, to be available as a defense, must be specially pleaded. The distinction is substantial between the situation where the principal, as here, entrusts personal property to his agent for the purpose of storage and making the sale of the property itself, and the situation where the owner of goods entrusts a negotiable warehouse receipt to the agent, and he negotiates the same to an innocent purchaser.

While it is alleged that the indebtedness for which the notes were given was for storage, freight, and demurrage charges, the evidence does not so show, and the jury findings were that none of the loans made to Fore went to reimburse the Dallas Storage and Warehouse Company except "$217." The evidence is uncontradicted, however, that the Climber Motor Company itself "sent Mr. Fore the money to pay that bill" (the $217). Mr. McFarland stated, in his letter of January 28, 1921, to Climber Motor Company:

"While I do not know any of the particulars, my understanding is that the money advanced to Mr. Fore is for the purpose of paying freight, demurrage and storage charges in connection with the unloading of the cars and placing them in the warehouse. Whether or not I am correctly informed as to this I do not know, but that is my impression."

While a witness on the stand, though, Mr. McFarland gave no testimony along that line.

We conclude that the judgment should be reversed, and that judgment should be here rendered as follows: The Climber Motor Company to recover the possession of the 15 automobiles, represented by the proceeds of sale in the hands of the receiver, subject to the storage charges of the Dallas Storage Warehouse Company, to the extent of $1,994.50, less credits made of $1,119.50, being $10 per month for each automobile to March 31, 1922; the receiver is ordered to pay over to the Dallas Storage Warehouse Company out of the proceeds of the sale the sum of $1,994.50 less credits made of $1,119.50, and then to pay over to the Climber Motor Company through its receiver all the balance of the proceeds of sale, of $5,052; the Dallas Storage and Warehouse Company and S. J. McFarland each to recover on their cross-action against R. M. Fore the claims sued on, but without foreclosure of liens on the automobiles; the Security National Bank, S. J. McFarland, and R. M. Fore and the Dallas Storage Warehouse Company to pay the costs of the trial court; the Security National Bank and S. J. McFarland to pay the costs of appeal.