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January 13, 1941


The opinion of the court was delivered by: BARD

This matter arises upon the defendant's motions (1) to set aside the jury's verdict and the judgment entered thereon in favor of the plaintiff and to enter judgment for the defendant in accordance with its motion for a directed verdict, or (2) in the alternative, to grant a new trial.

 On July 29, 1936, when the beans were still in the warehouse, Bailey issued, in the standard form provided by the Uniform Warehouse Receipts Act, non-negotiable warehouse receipt No. 41662 for these beans. The receipt was issued in the name of plaintiff bank and was delivered to the bank by Limbert as collateral security for a loan of $3,500 made by the bank to Limbert that day and evidenced by a promissory note which contained a clause that the property was also to stand as collateral security for all other past and future indebtedness of Limbert to the bank.

 On the day the loan was made, Limbert was indebted to the bank in the amount of $29,400, in addition to the loan of $3,500 made that day, and the total indebtedness has never since then fallen below $20,000. The note of July 29, 1936, was renewed several times, the last renewal note, dated May 2, 1938, being in the reduced amount of $2,750. Each renewal note has again recited that receipt No. 41662 was held as collateral security for all of the indebtedness of Limbert to plaintiff bank, and plaintiff has continuously held that receipt as security for such indebtedness from July 29, 1936, to date.

 On August 4, 1936, Limbert removed, sold and shipped to defendant from Bailey Warehouses 1,579 pounds, 13 ounces of the above mentioned vanilla beans for which receipt No. 41662 had been issued. Plaintiff neither knew of, nor consented to this removal and sale. Defendant paid Limbert for the beans it purchased and consumed them without the knowledge or consent of plaintiff, to whom the beans had been pledged by the delivery of the receipt.

 On April 29, 1937, plaintiff, as a result of Limbert's fraudulent misrepresentations, and in the belief that all of the beans which had been pledged to it were still in the warehouse, signed a withdrawal slip, submitted by Limbert, permitting Limbert to withdraw five cases from the warehouse upon the payment by Limbert of $750. Actually the cases had been removed from the warehouse on August 4, 1936, more than seven months earlier, when they were delivered to defendant by Limbert.

 Limbert discontinued its business on May 20, 1938, with no assets with which to pay its indebtedness to plaintiff. The indebtedness to plaintiff bank then totalled $36,700. Plaintiff then learned for the first time of the removal from Bailey Warehouses and the sale to defendant, by Limbert on Sugust 4, 1936, of the beans pledged to plaintiff on July 29, 1936, under warehouse receipt No. 41662. Plaintiff promptly made demand upon defendant for the beans, or the fair value thereof. The demand was refused and this suit was instituted. The jury returned a verdict for plaintiff for $3,768.14.

 The two principal reasons assigned by defendant in support of its motions are (1) That the vanilla beans in controversy were never legally in the warehouse's possession and that the warehouse receipt issued therefor was a nullity and gave no valid pledge to plaintiff; (2) That defendant should have been credited with the $750 paid by Limbert to the plaintiff bank in April, 1937, when five cases of beans were released by the plaintiff upon misrepresentations of Limbert.

 Testimony on the issue of possession was given by Thomas J. Bradley, who was a shipping clerk employee of Limbert's, and by Walter A. Bailey, the proprietor of Bailey Warehouses, and Edward R. Sweeney, his office manager. From this, it appears that Bailey Warehouses consisted of a group of sixteen separate buildings, all located within two city blocks. Limbert paid for the use of the ninth floor of building No. 11 for storage purposes and also had an office in building No. 15, some distance away. The storeroom was divided into two sections, free and U.S. Customs bonded, the latter being in the center of the floor, surrounded on three sides by the free section, and enclosed by a brick wall and a refrigerator door with a government lock thereon.

 Bailey, the warehouse proprietor, and Sweeney, his office manager, were called by the defendant. They testified that 24 cases of vanilla beans marked with the even numbers from 2 to 48 were received by Bailey Warehouses and receipted for by the warehouse platform-man and were taken to the ninth floor of Bailey Warehouses upon the warehouse elevator operated by a warehouse employee, this being the only way that access to the ninth floor could be obtained. The beans were then stored on this ninth floor which had been rented for storage by Limbert. Eight days later, on July 29, 1936, Limbert came to Sweeney for a warehouse receipt. Sweeney checked his records, found that the goods had actually been received on the ninth floor, and, upon Limbert's assurance that the goods were still there, issued the warehouse receipt which was delivered to the bank by Limbert.

 Bradley testified that on August 4, 1936, six days after the warehouse receipt was issued, seventeen of these identical twentyfour cases were shipped out to the defendant without the knowledge of either the plaintiff or Bailey, the warehouseman. This was made possible due to the laxity of the supervision exercised by the Government inspector and the warehouse employees. Bailey, the warehouseman, testified that he knew it was his duty to prevent unauthorized shipments of vanilla beans covered by the warehouse receipt and declared that "We were to supervise them, but we did not supervise them." He said his employees did enter when it was necessary to deliver goods into the bonded section or to make receipts, and that his employees did go "from floor to floor" to look around.

 It seems to me the testimony established that non-negotiable warehouse receipt No. 41662 was issued in standard form by a bonded public warehouseman to the plaintiff for 24 cases of vanilla beans and was accepted in good faith by the plaintiff on July 29, 1936, the date of its issuance, as security for loans. The vanilla beans for which the receipt was issued had been received eight days before by the warehouse, placed by employees of the warehouse on the ninth floor thereof and remained there on the day the receipt was issued and delivered to plaintiff. Access to the ninth floor was possible only by an elevator owned by the warehouse and operated by one of its employees, and the employees of the warehouse at all times had the right of access to the ninth floor, the right to supervise and control goods there stored, and they did, in fact, from time to time go to the floor. ...

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