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People v. Farmers Elevator Mut. Ins. Co.

JULY 7, 1966.




Appeal from the Circuit Court of Macon County; the Hon. FRANK J. GOLLINGS, Judge, presiding. Affirmed.


Defendant appeals from a judgment entered in the amount of $10,196.65.

This action was brought in the name of The People of the State of Illinois for the use of the plaintiff, Tabor & Company, to recover damages against the defendant, Farmers Elevator Mutual Insurance Company (hereinafter referred to as defendant), under the provisions of a Grain Warehouse Bond, wherein Loda Farmers Grain Company (hereinafter referred to as Loda) of Loda, Illinois, was the principal, Farmers Elevator was the surety, and The People of the State of Illinois were the obligees. In its complaint, the plaintiff alleges that it purchased from Loda 16,000 bushels of yellow corn, evidenced by its warehouse receipt number 677; that Loda failed to deliver grain valued at $10,191.65 on demand, and that because of said failure, the defendant is obligated, under the bond, to make restitution.

Defendant's pleading denies that there was any obligation to deliver grain; denies that plaintiff purchased 16,000 bushels of corn and admits a warehouse receipt No. 677 (hereinafter referred to as "receipt") was delivered to plaintiff; but denies that such "receipt" was "effectively made" and denies any rights in the plaintiff by reason of such "receipt"; defendant admits that a written demand for the delivery of grain was made by plaintiff but denies that there was any duty upon the part of Loda to deliver such grain. As a special affirmative defense made in the alternative, defendant contends that plaintiff sold the corn to Loda for an agreed value of $8,000 and that the "receipt" was returned to Loda, cancelled, and the obligations of Loda thereunder satisfied and discharged in full, so that defendant has no duty or liability by reason of the obligation of its bond.

The trial court made an express finding that Loda had purchased the corn for which the "receipt" was issued, and that such "receipt" was issued by Loda "in due course of business."

In support of its contention that the "receipt" was a nullity, defendant, in oral argument, urges that plaintiff participated in a fraud in procuring the issuance of the "receipt" and should be estopped from making a claim.

The transaction arises under the following facts:

Plaintiff engages in the buying and selling of grain in vast amounts. In the early part of 1963 it had, upon several occasions, purchased grain for immediate delivery from Loda. In these transactions Loda drew drafts upon bills of lading. About the first of May, one Ronna, the manager of Loda, engaged in a telephone conversation with one Wells, a representative of plaintiff. Wells asked to buy corn from Loda, to which Ronna responded that Loda did not have the money to buy corn. Wells then said that if Loda "wanted to buy it" to make out a warehouse receipt. Plaintiff's Exhibit B is a "purchase contract" sent by plaintiff to Loda authorizing the purchase of 16,000 bushels of corn, affirming a purchase of May 1st at $1.14 1/2 per bushel for shipment "equal 1st half June and last half June." This instrument contained instructions that drafts should be drawn on plaintiff through the Milliken Bank in Decatur.

Ronna, manager for Loda, was called by defendant as its witness. He testified that at the time of the conversation with Wells, although Loda did not own corn in the elevator, there was stored corn belonging to the Commodity Credit Corporation, for which warehouse receipts had been issued in an amount equal to or greater than the amount of plaintiff's proposed purchase. Ronna testified further to the practice of Commodity Credit Corporation whereby Loda could buy corn from Commodity Credit Corporation by calling it and asking for the price, and the latter would thereupon draw a draft for the amount of the corn, and it would be considered sold to Loda, which was then free to sell it. He further testified that Loda did get the corn from the Commodity Credit Corporation and that, in this case, he issued the "receipt" to plaintiff for corn which was there.

The "receipt" in negotiable form, in issue, bears date May 1, 1963, and stated that the corn was "received for the account of" plaintiff. Data inserted in the "receipt" in handwriting, indicates that the corn was deposited on August 10, 1962. So far as the Abstract discloses, the "receipt," with a draft in the sum of $18,000 drawn upon the plaintiff, was deposited in the Bank of Paxton about May 3, 1963. The proceeds of the draft were deposited to the account of Loda.

There is no contention that the "receipt" in issue was illegal upon its face.

Defendant contends, however, that the "receipt" is a nullity or a false "receipt" because no corn was, in fact, delivered by the plaintiff, and that plaintiff did not own grain for which the "receipt" was issued, and that Loda did not own the grain in the amount called for in the "receipt" when said "receipt" was issued, all of which were facts then known to plaintiff through its representative. It is further contended that the transaction only created a relationship wherein plaintiff was creditor and Loda was a debtor for the purpose of buying corn for the several reasons stated.

It is urged that the "receipt" was issued in violation of chap 114, § 214.21 (Ill Rev Stats, 1963), which provides, among other things, that:

". . . no warehouse receipt shall be issued except upon the actual delivery of grain into store in the warehouse from which it purports to be issued, and which is ...

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