Birmingham v. Rice Bros. , 238 Iowa 410 ( 1947 )

Being unable to agree with the conclusion reached in Division II of the majority opinion I shall state as briefly as may be the ground of my dissent. The question becomes more important as the business of packing and stockyards and allied industries becomes more and more complex and vital to the life and welfare of society.

The common-law rule of agents' and factors' liability (discussed in Division I of the majority opinion) has become a harsh one as the relationship has of necessity become more impersonal. So long, however, as the agent is free to determine whom he will represent and what means he will employ to reach such determination the rule is not unjust that makes him liable for the consequences in case he assists, even unknowingly, in the perpetration of a wrong by his principal upon a third person.

The so-called Packers and Stockyards Act has, I believe, changed the character of the relationship between those stockyards and market agencies that come within its provisions and their patrons or customers.

The act makes it the "duty" of every "stockyard owner" and "market agency" "to furnish upon reasonable request, without discrimination, reasonable stockyard services * * *." 7 U.S.C. chapter 9, section 205, August 15, 1921, chapter 64, section 304, 42 Stat. at L. 164. They are required to register with the secretary of agriculture, who may require reasonable bonds from every "market agency" "to secure the performance of their obligations." It is required that their rates or charges shall "be just, reasonable and nondiscriminatory" and schedules of such rates must be filed with the secretary, printed and kept open to public inspection at the stockyards, and the secretary may hold hearings thereon. 7 U.S.C. chapter 9, sections 204, 206, 207.

The act also provides: "It shall be the duty of every stockyard owner and market agency to establish, observe, and enforce just, reasonable, and nondiscriminatory regulations and practices in respect to the furnishing of stockyard services, and every unjust, unreasonable, or discriminatory regulation or practice is prohibited and declared to be unlawful." 7 U.S.C. chapter 9, section 208. (The term "stockyard services" includes "buying, or selling on a commission basis." Id. section 201.) And:

"It shall be unlawful for any stockyard owner, market agency, or dealer to engage in or use any unfair, unjustly discriminatory, or deceptive practice or device in connection with * * * buying, or selling on a commission basis * * *." Id. section 213.

There are also provisions for punishing violations of the act and orders of the secretary of agriculture thereunder.

What are the purposes of the act? In Stafford v. Wallace,258 U.S. 495, 513, 514, 42 S. Ct. 397, 401, 66 L. Ed. 735, 23 A.L.R. 229, it is said the purpose of the act is:

"* * * to regulate the business of the packers done in interstate commerce * * * and forbids them to engage in unfair, discriminatory or deceptive practices * * * or to subject any person to unreasonable prejudice therein, or to do any of a number of acts to control prices or establish a monopoly in the business."

But it is also said in that case:

"The object to be secured * * * is the free and unburdened flow of live stock * * * through the great stockyards and slaughtering centers * * * in the form of meat products to the consuming cities of the country * * * or, still as live stock to the feeding places and fattening farms * * * for further preparation for the market."

So much for the purposes of the act. How does it propose to accomplish such purpose? The opinion proceeds:

"The act, therefore, treats the various stockyards of the country as great national public utilities to promote the flow of commerce from the ranges and farms of the West to the consumers in the East. It assumes that they conduct a business affected bya public use of a national character and subject to national regulation." (Italics supplied.)

And what is the effect upon the relationship of these agencies to those they serve? The supreme court in effect says the act requires the adoption of the "conduit" theory:

"The stockyards are but a throat through which the currentflows, and the transactions which occur therein are only incidentto this current * * * The commission men are essential in makingthe sales without which the flow of the current would beobstructed * * *." (Italics supplied.)

This conclusion is reached and announced as justification for government regulation in the interest of the consuming public which is dependent upon the industry. But if sound, its implications should not be rejected when invoked by the utility that is made subject to the regulation. The act should not be interpreted in one way for one purpose and in a different way for another. The agencies should not be held to be converted by the act into public utilities, required to serve without discrimination and still held to personal responsibility for the honesty and good faith of the customers they are required to serve.

Other cases recognizing that the act does change the status of these agencies from that of ordinary factors to that of public utilities are not wanting: Tagg Bros. Moorhead v. United States, D.C., Neb., 29 F.2d 750, affirmed 280 U.S. 420, 50 S. Ct. 220, 74 L. Ed. 524; Farmers Livestock Comm. Co. v. United States, D.C., Ill., 54 F.2d 375; Nashville Union Stockyards, Inc. v. Grissim, 153 Tenn. 225, 280 S.W. 1015; Blackwell v. Laird, 236 Mo. App. 1217, 163 S.W.2d 91.

It is true the primary purpose of the act is to prevent conspiracies to obstruct commerce that would tend to the formation of monopolies. It attempts to do this by making of the instrumentalities public utilities and enacting rules for their regulation. They are required, in accepting requests for service, "to establish, observe, and enforce just, reasonable, and nondiscriminatory regulations and practices," applicable to all alike. These practices must be followed even though their nonobservance in an individual case may constitute no threat of monopoly.

What reasonable regulation or practice would enable the utility to protect itself in a case of this kind? It may not exact from one customer a showing as to title or right that it does not exact from all others. Otherwise, it would risk incurring liability to the prospective customer against whom it thus discriminated.

It is obvious any general rule or practice of requiring everyone to show title or right of disposition of property offered for sale would impede and obstruct the flow which the act seeks to make free and unburdened. Of course, if there were suspicious circumstances in a given case sufficient to put the agency on inquiry, a different situation would be presented. But in the absence (as here) of any ground for suspicion it is difficult to see how any general rule of practice could enable the agency to protect itself or the real owner of the property without slowing down and obstructing the very processes the act is designed to make free and unobstructed.

Perfect analogies are never available, but common carriers and public warehousemen are fair examples of utilities that are not subject to the rule of liability imposed upon ordinary agents. The common carrier is uniformly held free from liability to the true owner of goods if without notice of such ownership it receives and delivers such goods upon request of an unauthorized consignor with apparent right of possession and control. 9 Am. Jur., Carriers, section 323; 10 C.J., Carriers, section 393; 13 C.J.S., Carriers, section 172e.

The same immunity is conceded to the public warehouseman who without notice of the rights of the true owner sells stored goods upon direction of an unauthorized bailor. 67 C.J., Warehousemen and Safe Depositaries, section 171; 27 R.C.L., Warehouses, section 61.

It is true the common carrier does not undertake to deal with or in any way affect the title of the property transported. But it may and frequently does make impossible the recapture by the rightful owner of the possession of which he has been wrongfully deprived.

The textual statement as to public warehousemen above credited to Corpus Juris and Ruling Case Law is based upon Abernathy Long v. Wheeler, Mills Co., 92 Ky. 320, 17 S.W. 858, 36 Am. St. Rep. 593. This case is sometimes assumed to represent a "minority view" as to the liability of factors and agents generally for conversion.

I do not so regard it. The case involved a public tobacco warehouse — not an ordinary agent or bailee but a public utility. 67 C.J., Warehousemen and Safe Depositaries, section 4B; Gray v. Central Warehouse Co., 181 N.C. 166, 106 S.E. 657; Nash v. Page, 80 Ky. 539, 44 Am. Rep. 490. The Abernathy case presents not a "minority view" of the liability of ordinary agents and factors but a well-reasoned statement of the exception to the general rule of liability in the case of a factor that has become a public utility.

Four state appellate courts have had occasion to consider cases similar in principle to the instant case arising under the Packers and Stockyards Act. The earliest, Mason City Production Credit Assn. v. Sig Ellingson Co., 1939, 205 Minn. 537, 544,286 N.W. 713, 717, involved the rights of a mortgagee under a recorded mortgage. While it is authority for the holding of the majority here it does attach importance to the fact that plaintiff's mortgage was recorded and that the fact of recording constituted constructive notice to defendant:

"The courts of the states of Iowa and Minnesota have for such a long time, on the principle of comity, enforced rights of holders of chattel mortgages validly made and filed in either state * * *."

The South Dakota and Washington cases (First Nat. Bk. v. Siman,67 S.D. 118, 289 N.W. 416, and Moderie v. Schmidt, 6 Wash. 2d 592,108 P.2d 331) were decided the following year and follow the decision in the Minnesota case without independent or original discussion. The Washington case mistakenly says that in the Minnesota case the solicitor general of the United States Supreme Court and opposed the granting of a writ of certiorari by that court. That this is not strictly accurate, see 308 U.S. 599, 60 S. Ct. 130, 84 L. Ed. 501. It is true his name appears in resistance to a petition for rehearing. 308 U.S. 637, 60 S. Ct. 178, 84 L. Ed. 529. Denial of a writ of certiorari by the supreme court imports no expression of opinion by that court as to the merits of the case. House v. Mayo, 324 U.S. 42, 65 S. Ct. 517, 89 L. Ed. 739; McCrea v. Jackson, 6 Cir., Mich., 148 F.2d 193, 197; 36 C.J.S., Federal Courts, section 277.

In Blackwell v. Laird, supra, 236 Mo. App. 1217, 1222, 163 S.W.2d 91, 94, decided in 1942, the Kansas City (Missouri) Court of Appeals held that a market agency under the Packers and Stockyards Act was not liable for accepting and selling stolen cattle on commission since it did not know they were stolen and was not negligent. The holding is based squarely on the proposition that the agency was bound as a public utility to render the service upon reasonable request.

I shall not quote at length from the opinion. It refers to the Sig Ellingson (Minnesota) case but declines to follow it:

"We prefer to follow the line of decisions which hold in effect that a public utility which is required by law to render specific services to the public without discrimination, should not be considered in the same category with those who may or may not transport, store, or sell property at the request of one in possession thereof."

And in this connection it is pertinent to requote language which the Blackwell v. Laird case, supra, 236 Mo. App. 1217, 1221, 163 S.W.2d 91, 93, quotes from Nanson v. Jacob, 93 Mo. 331, 6 S.W. 246, 3 Am. St. Rep. 531:

"`Common Carriers, by reason of the nature of their business, which imperatively requires them to receive and forward goods, when tendered in the usual course of their business, have long formed an exception to the stringency of general rules, in respect to what constitutes, in similar cases, a conversion.'"

The majority opinion here says:

"Certainly Congress did not adopt the Packers and Stockyards Act to encourage and protect the operation of fences for handling property stolen or procured by fraud."

Certainly not. Nor are railroads operated to enable dishonest persons to make way with stolen or fraudulently obtained goods. And if this were a case where the market agency had knowledge (or should in the exercise of reasonable care have obtained knowledge) that "Brainman" was not Brainman and that his check (given in payment for the cattle) would "bounce," I would agree that it would have been its duty to refuse his request for service.

The contrary is true. There was nothing to suggest that the request was not reasonable; no reason, so far as the record shows, to suggest that the request be denied. Had appellee refused to accept the goods it would have done so at the risk of liability for resultant damage.

Neither the majority opinion nor appellant's briefs have suggested what appellee should have done, or what practice it should follow in accepting or refusing employment, that would have protected both itself and appellant.

I would, for the reasons set out, affirm the decision of the trial court.

WENNERSTRUM, C.J., and HALE and MANTZ, JJ., join in this dissent.