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American Express Field Warehousing Corp. v. First Natl. Bank
Citations: 233 Ark. 666; 346 S.W.2d 518; 1961 Ark. LEXIS 466Docket: 5-2352
Court: Supreme Court of Arkansas; May 29, 1961; Arkansas; State Supreme Court
The appeal involves American Express Field Warehousing Corporation (referred to as "American") and Walter J. Garic, Inc. ("Garic"), challenging a Circuit Court judgment favoring Garic for $54,325.73. Garic, based in New Orleans and engaged in rice exporting, contracted with John Lammers, who operated a rice mill in McGehee, Arkansas. Lammers leased storage facilities to American, which included concrete silos and a wooden building with storage bins, enabling rice transfer between the mill and storage.
American issued nonnegotiable receipts for rice stored, but under their contract, Lammers could store rice free of charge without receipts, assuming all risks and indemnifying American against claims arising from such storage. In May 1959, Garic purchased rough rice from the Commodity Credit Corporation, which was stored in Dumas, Arkansas, and covered by warehouse receipts. Garic contracted with Lammers to mill and deliver 7,666 bags of milled rice, sending Lammers the warehouse receipts for the rough rice. However, Lammers stored this rice in American's facilities without obtaining warehouse receipts. Although Lammers delivered 670 bags of milled rice to Garic, he failed to deliver the remaining 6,996 bags, leading to the current litigation over the value of the undelivered rice.
Lammers delayed the milling of Garic rough rice for unknown reasons. At trial, he claimed the rice was moved from concrete silos to a wooden warehouse owned by American facilities. Elbert Ikard testified that he transferred all of the Garic rice to the wooden warehouse before a fire occurred on the night of July 18, 1959. He noted that two bins were full and one was partially full. Ikard left McGehee that Saturday afternoon and returned on July 21, discovering that the wooden warehouse had burned down.
Garic demanded compensation for the rice from American and its insurance company, but the demand was refused, leading to a lawsuit against both parties and Lammers. The insurance company argued the rice was not in the warehouse during the fire, and the jury sided with the insurance company, ruling that the rice was practically empty at the time of the fire.
Garic's claim against American was based on its alleged negligence in managing the rice, asserting that American knew the rice belonged to Garic and allowed it to go missing. The jury found in favor of Garic, awarding $54,325.73 against American. American appealed, arguing that Garic failed to prove negligence and that the evidence suggested Lammers had taken the rice from American, which would absolve them of liability.
However, substantial evidence indicated that American was aware that Garic owned the rice, as indicated by weight tickets from the Commodity Credit Corporation, which were provided to Ikard at the time of rice receipt. This knowledge by Ikard constituted notice to American, supporting Garic's claim of negligence.
American received rice from Garic in late May or early June 1959, thereby becoming the bailee with knowledge of the bailment. Although a contract between Lammers and American stated that American would not be liable for rice stored without warehouse receipts, this provision did not extend to Garic, who was unaware of it. The standard rules of bailment applied in the case between American and Garic.
In a conversion action, Garic was required to prove (1) delivery of the rice to American, (2) a demand for its return, and (3) American's refusal to return it. Garic successfully established these elements, shifting the burden to American to demonstrate that the rice was lost or destroyed without its negligence. American failed to present any evidence regarding the loss of the rice, while other witnesses confirmed that the rice was not destroyed in a fire that affected the warehouse. The jury concluded that the bins did not contain rice at the time of the fire, leading to a verdict against American for the value of the rice.
American also contended that the court erred in giving specific jury instructions. In Instruction No. 9, the jury was directed that if they found Garic owned the rice, demanded its return, and American refused, the verdict should favor Garic unless the rice was destroyed by fire or removed by Garic or Lammers. This instruction was deemed correct based on the established facts.
No evidence indicated that American redelivered the rice to Lammers or Garic involved in the litigation. Although Lammers milled and delivered a small portion of rice to Garic, this was not the rice pertinent to the case. Ikard acknowledged receiving rice from Dumas, Arkansas, which was stored in a wooden warehouse prior to a fire. The objections regarding Garic's right to sue American for conversion have been addressed in Topic I, and the value of the missing rice will be explored in Topic III. The court dismissed the appellant’s objections to Instructions 9 and 10, which were based on the theory of conversion.
American challenged the jury's verdict of $54,325.73 as excessive. However, the appellant failed to demonstrate that the verdict was excessive; ample evidence suggested it could have supported a larger amount. Garic purchased 1,064,850 pounds of rough rice for $66,068.19, equating to 6.2 cents per pound. After Lammers milled rice, Garic received 67,000 pounds of milled rice, equivalent to 97,150 pounds of rough rice. Thus, Garic had 967,700 pounds of rough rice left, valued at $59,997.40, indicating a loss. There was testimony regarding milling costs and Garic's profit, but no evidence showed a decrease in value by August 28, 1959. The court affirmed the verdict.
In trial proceedings, the plaintiffs included banks and Walter J. Garic, Inc., while the defendants were American Marine and General Insurance Company, John Lammers, and American Express Field Warehousing Corporation. The litigation concerned the defendants' liability for rice lost or destroyed in the American Express warehouse. All plaintiffs except Garic were satisfied with the trial's outcome. Lammers confessed judgment in favor of Garic, but the jury ruled in favor of the insurance company against Garic and in favor of Garic against the warehousing corporation. The warehousing corporation appealed to reverse the judgment in favor of Garic. The appellee argued that American was liable under the Uniform Warehouse Receipts Act, although the court concluded that common law principles were sufficient to reach its decision.
Item 1(b) of the complaint presents an alternative claim against John Lammers and American Express Field Warehousing Corporation, alleging that American Express received rough rice on behalf of Walter J. Garic, Inc., which was subsequently removed without Garic's authority. Garic asserts that he demanded the rice's return, but American Express wrongfully refused to deliver it, constituting conversion. American Express objects to the peremptory instruction on multiple grounds: it claims the instruction misstates the law, as evidence shows that rice delivered to Lammers was lawful; any remaining rice was destroyed in a fire while in the warehouse; the jury lacks a basis for finding liability; the instruction neglects the burden of proof; and it lacks competent evidence regarding the quantity of rice delivered to Lammers, necessitating speculation. Additionally, American Express contends that Garic lacks standing to sue for the rice's value instead of the contract price paid to the Commodity Credit Corporation (CCC) and that credit for rice delivered by Lammers to Garic was not accounted for. American Express argues that they were a gratuitous bailee of the rice, thus not liable in the absence of gross negligence, which was neither alleged nor proven. Testimony indicated not all purchased rice was received from the CCC, but records show Garic had 1,329,480 pounds of rough rice at American's warehouse. Using 1,064,850 pounds for calculations, Garic's loss would be $59,623.54, contradicting claims of an excessive jury verdict of $59,997.40.