Opinion
No. 32503.
February 8, 1937. Suggestion of Error Overruled November 22, 1937.
1. LANDLORD AND TENANT.
Evidence held to establish that landlord did not, by its conduct, impliedly permit tenant to store cotton in compress, take warehouse receipts therefor in tenant's name, and dispose of receipts, so as to waive landlord's lien on cotton (Code 1930, section 2186).
2. LANDLORD AND TENANT.
Removal of agricultural products from leased premises does not interfere with landlord's right to enforce his lien thereon (Code 1930, section 2186).
3. LANDLORD AND TENANT.
Any person, with or without notice, who purchases agricultural products on which lien exists in favor of landlord is liable to landlord for value thereof (Code 1930, section 2186).
4. LANDLORD AND TENANT.
To effect waiver of landlord's lien on agricultural products, evidence must preponderate that landlord either affirmatively agreed to permit, or by his conduct and course of dealings permitted, tenant to deal with agricultural products as though they had been freed from landlord's lien (Code 1930, section 2186).
5. WAREHOUSEMEN.
Bona fide purchaser for value of warehouse receipts does not acquire title, under warehouse receipts act, when he purchases from mere trespasser (Code 1930, section 3521, subd. (a)).
6. LANDLORD AND TENANT.
Evidence held not to warrant finding that landlord clothed tenant with indicia of ownership of cotton, or was negligent, or lacking in vigilance, so as to be estopped from asserting lien on cotton as against bona fide purchasers of negotiable warehouse receipts, issued in name of tenant, for cotton (Code 1930, sections 2186, 3521, subd. (a)).
APPEAL from chancery court of Leflore county. HON. R.E. JACKSON, Chancellor.
J.J. Breland, R.L. Cannon, and L.Q. Strong, all of Sumner, and Gardner, Denman Everett, of Greenwood, for appellant.
The landlord has a lien, for rent and supplies, on all agricultural products of the leased premises, which lien is paramount to all other liens, claims, or demands upon such products.
Section 2186, Code of 1930.
The right of the landlord to enforce such lien is not prejudiced nor diminished by the removal of the agricultural products from the leased premises, nor by any delay short of the statutory period of limitation.
Fitzgerald v. Fowlkes, 60 Miss. 270; Henry v. Davis, 60 Miss. 212.
Any one purchasing or otherwise converting any such products is liable to the holder of such lien for the value of such products at the time of conversion, with legal interest thereon from the time of conversion.
Schmitt v. Federal Compress Warehouse Co., 169 Miss. 589, 153 So. 815; Peets Norman Co. v. Baker, 95 Miss. 576, 48 So. 898; McGrath v. Barlow, 21 So. 237; Powell v. Smith, 74 Miss. 172, 20 So. 872; Warren v. Jones, 70 Miss. 202, 14 So. 25; Eason v. Johnson, 69 Miss. 371, 12 So. 446; Newman v. Bank of Greenville, 66 Miss. 323, 5 So. 753; Sumrall Motor Co. v. Creel, 158 Miss. 262, 130 So. 151; Jamison v. Moon, 43 Miss. 598; Briscoe v. McElween, 43 Miss. 556.
The storing by a tenant of cotton in a warehouse and the taking by him of negotiable warehouse receipts therefor does not supersede the landlord's lien.
Schmitt v. Federal Compress Warehouse Co., 169 Miss. 589, 153 So. 815; Marine Bank Trust Co. v. Greenville Savings Bank Trust Co., 133 Miss. 91, 97 So. 526.
For the landlord to be held to be estopped or to have waived his lien, it must be shown by a preponderance of the evidence that the landlord, by agreement or by conduct tantamount to agreement, permitted the tenant to deal with the agricultural products as if no such lien existed.
Schmitt v. Federal Compress Warehouse Co., 169 Miss. 589, 153 So. 815.
The overwhelming weight of the evidence shows that appellant did not agree to any disposition of the cotton inconsistent with the assertion of its lien.
Whatever claim might have been made that appellant agreed to any such disposition of the cotton was found adversely to such claim by the Chancellor in his written findings of fact.
The overwhelming weight of the evidence shows that appellant in no wise, either by active conduct or tacitly, permitted any disposition of the cotton inconsistent with the assertion of its lien.
Where a corporate principal is acting through agents with limited authority, facts coming to the notice or attention of the agent which are beyond the scope of the authority of the agents are not of themselves notice to the principal and do not bind the principal.
Mechem on "Agency" (2 Ed.) page 1415; 2 C.J. 863, sec. 544; 3 C.J.S. 197, sec. 264; Connelly v. Special Road Bridge District, 126 So. 794, 71 A.L.R. 923; Alabama Western R.R. Co. v. Bush, 62 So. 89; Florence v. Carr, 148 So. 149; Goodloe v. Godley, 13 S. M. 233; Cresap v. Furst Thomas, 141 Miss. 30, 105 So. 848.
Where a principal employs an agent with limited powers, the agent cannot bind his principal by agreements, acts, or conduct beyond the scope of his authority; and in the absence of ratification or of elements of estoppel, the principal is not bound by the unauthorized acts, conducts or agreements of his agent.
Aetna Ins. Co. v. Singleton, 174 Miss. 556, 164 So. 13; Hardie Ellis Realty Co. v. McDaris, 150 Miss. 646, 117 So. 254; Royal Feed Milling Co. v. Thorn, 142 Miss. 92, 107 So. 282; Philip Gruner Lbr. Co. v. Algonquin Lbr. Co., 123 Miss. 157, 85 So. 191; White v. Lee, 97 Miss. 493, 52 So. 206; Busby v. Y. M.V.R. Co., 90 Miss. 13, 43 So. 1.
Supreme Court, having all facts before it, should enter judgment the Chancellor should have entered.
Joe Duck Kwong v. Board of Miss. Levee Comrs., 164 Miss. 250, 144 So. 693. Bradford Lamb, of Greenwood, for appellee, W.G. Humphrey.
The question here presented as to the respective rights of the holder of a landlord's lien against cotton and of the purchaser of such cotton, or the negotiable warehouse receipts of such cotton, for value without notice of any defect in the title thereto, has been thrashed out in our courts so often and the decisions of this court are so numerous that almost every conceivable situation with reference to waiver of liens, etc., has been touched upon. We think it useless to burden this court with the entire line of these decisions and, so, will cite only three cases. These cases are: Schmitt v. Compress Warehouse Co., 169 Miss. 589, 153 So. 815; McGee v. Carver, 141 Miss. 463, 106 So. 760; Hawkins v. Nash, 163 Miss. 500.
When the landlord intrusts the tenant with indicia of ownership or when the landlord expects the tenant to sell the agricultural products and account to the landlord for the rent in money, the landlord's lien is waived in favor of a purchaser for value without notice.
McGee v. Carver, 141 Miss. 463, 106 So. 760; Schmitt v. Compress Warehouse Co., 169 Miss. 589.
The Chancellor was given the full benefit of the cases herein cited before he made his decision and findings. He had the benefit of the testimony first hand and the demeanor of the witnesses was of much benefit to him, but it can be readily seen from the cold pages of the record that he is eminently correct in his findings.
It is well to bear in mind that, although in the instant case the cotton was stored in a warehouse and negotiable receipts issued with the knowledge and consent of the landlord and that this constituted a waiver of the lien, that even if the cotton had never been placed in a warehouse and negotiable receipts had never been issued therefor, the landlord's lien on the cotton in this case would have been waived just as effectively, for the law is that a landlord who expects his tenant to sell the cotton raised by the tenant and deliver the proceeds of the sale to the landlord in payment of the rent, waives the landlord's lien just as effectively as if he had permitted the tenant to place the cotton in the warehouse and receive negotiable warehouse receipts in the name of the tenant.
Hawkins v. Nash, 163 Miss. 500; Tonnar v. Washington Issaquena Bank, 140 Miss. 875, 105 So. 750.
While we do not think that either Mr. Aldridge or Mr. Humphrey is in any way liable on account of the purchase of this cotton, it is evident that Mr. Aldridge would be primarily liable and Mr. Humphrey secondarily liable, and the Chancellor held that Mr. Aldridge was a purchaser of the cotton, and naturally, if he purchased it and sold it to Mr. Humphrey, he would stand between Mr. Humphrey and any liability.
James O. Eastland, of Ruleville, for appellee, C.H. Aldridge.
Appellee, C.H. Aldridge, did not purchase the cotton, did not receive same, did not exercise dominion or control over same, did not convert the cotton, and was not in any way connected with the five bales of cotton nor the warehouse receipts therefor.
Jones v. Stevens, 12 So. 446.
Appellee, C.H. Aldridge, merely took the proceeds from the sale of the cotton after the title to the cotton had passed and the sale consummated. Aldridge received the money, and the landlord's lien does not attach to the currency of the country.
Pascagoula Hardware Co. v. Chisholm, 144 So. 711; Jones v. Stevens, 12 So. 446.
Even if the court should hold that C.H. Aldridge converted said five bales of cotton, he took said cotton from a sub-tenant of appellant and appellant must exhaust all of Fryer Brothers' crops of every kind and character and apply the value of said crops on said indebtedness before resort can be had to the crop of W.V. Woods, a sub-tenant, or before resort can be had to C.H. Aldridge because Aldridge stands exactly in Woods' shoes and Woods is only a surety to appellant; the Fryer Brothers produced crops of sufficient value to pay all the rent and appellant did not attempt to subject same to the payment of the rent.
Applewhite v. Nelms, 14 So. 443; Dale v. Webb, 146 So. 875; Powell v. Tomlinson, 92 So. 226.
Appellant gave an additional waiver to its tenant for $280 without the knowledge or consent of the sub-tenant, did not subject any of the cottonseed on which it had a lien, the corn and hay on which it had a lien, produced by its tenants, Fryer Brothers, to the payment of the rent; and said items greatly exceed the value of the five bales of cotton sued on; and W.V. Woods and C.H. Aldridge are therefore released from liability for the value of said cotton.
Applewhite v. Nelms, 14 So. 443; Dale v. Webb, 146 So. 875; Powell v. Tomlinson, 92 So. 226; Scott and Garrett v. Greenriver Lbr. Co., 116 Miss. 524, 77 So. 309.
The contract between appellant and its tenants, Fryers, was materially altered without the knowledge or consent of the sub-tenant, W.V. Woods, and W.V. Woods, C.H. Aldridge, and all crops grown by W.V. Woods are, therefore, released from liability for the payment of the rent.
Powell v. Tomlinson, 92 So. 226; Scott and Garrett v. Greenriver Lbr. Co., 116 Miss. 524, 77 So. 309.
Appellant expressly waived its lien on the five bales of cotton grown by C.H. Aldridge and expressly authorized the sale of the cotton, and appellee, C.H. Aldridge, cannot be liable for its value even though the court should hold that appellee converted same.
Appellant, by its acts and conduct, impliedly waived its lien on the five bales of cotton in question, and appellee, C.H. Aldridge, is therefore not liable even if the court should find that he converted said cotton, because appellee acted in utmost good faith for a valuable consideration and had no notice of any infirmity in the title to the cotton.
Commercial National Bank v. Canal Land Bank Trust Co., 239 U.S. 520, 20 L.Ed. 417; Phillips v. Thomas, 128 Miss. 729, 91 So. 420; Seavey Sons v. Godbold, 99 Miss. 113, 54 So. 838; Tonner v. Washington Issaquena Bank, 105 So. 750; Hawkins v. Nash, 140 So. 522; Crutcher v. Commercial Bank, 146 Miss. 44, 111 So. 569; Magee v. Carter, 106 So. 760.
H.T. Odom, B.B. Provine, Jr., and Osborn Lott, all of Greenwood, for appellees, The Bank of Greenwood, Commodity Credit Corporation, and Reconstruction Finance Corporation.
Section 3517, Mississippi Code of 1930, provides that a negotiable warehouse receipt may be negotiated by delivery where, by the terms of the receipt, the warehouseman undertakes to deliver the goods to the bearer.
Section 3520, Mississippi Code of 1930, reads as follows: "Who may negotiate a receipt. — A negotiable receipt may be negotiated: (a) By the owner thereof, or, (b) By any person to whom the possession or custody of the receipt has been entrusted by the owner, if by the terms of the receipt, the warehouseman undertakes to deliver the goods to the order of the person to whom the possession or custody of the receipt has been entrusted, or if at the time of such entrusting the receipt is in such form that it may be negotiated by delivery."
Commercial National Bank v. Canal-Louisiana Bank Trust Co., 239 U.S. 520, 60 L.Ed. 417.
In Seavey Sons v. Godbold, 99 Miss. 113, 54 So. 838, wherein it appeared that the tenants sold the cotton with the consent of the landlord, the court held that such consent amounted to a "virtual appointment" of the tenants as agents of the landlord for the purpose of making the sale and that the landlord was estopped to deny the tenants' authority to sell insofar as innocent purchasers from the tenant were concerned.
Phillips v. Thomas, 128 Miss. 729, 91 So. 420; Judd v. Delta Grocery Cotton Co., 133 Miss. 866, 98 So. 243; Tonnar v. Washington Issaquena Bank, 140 Miss. 875, 105 So. 750; McGee v. Carver, 141 Miss. 463, 106 So. 760; Quiver Gin Co. v. Looney, 144 Miss. 709, 111 So. 107.
In the case at bar the appellant turned over to the Fryer Brothers Bankhead certificates in order to allow them to gin and sell the cotton in their own name and appellant knew that the Fryer Brothers were storing their cotton in a warehouse and taking receipts therefor and knew that in all probability the purchasers of said negotiable warehouse receipts thought that they were getting the cotton represented thereby free from any lien whatever.
Crutcher v. Commercial Bank, 146 Miss. 404, 111 So. 569.
Where a mortgagee does not expect the mortgagor to whom he has loaned money, secured by mortgage on cotton to be grown, to turn the cotton over to him, but expects the mortgagor to sell the cotton and account to him for the proceeds of the sale, the mortgagee cannot recover the value of the cotton from the purchaser from the mortgagor who has no actual notice of the mortgage, although he has constructive notice by virtue of the fact that the mortgage is duly recorded.
Hawkins v. Nash, 163 Miss. 500, 140 So. 522.
In the case at bar the tenants acquired and retained possession of the receipts with the knowledge of appellant who made no demands for the same.
In the case at bar, all parties, including landlord and tenants, agree that there was no agreement between them as to the manner and by whom the cotton should be warehoused and sold; and the record amply shows that the appellant, the landlord, did not at any time so much as request the tenants not to store and sell the cotton in the names of the tenants.
As we understand the cases cited in this brief and in appellant's brief, our court has established certain principles of law applicable to the facts in the case at bar, which principles of law may be stated in our own language as follows:
1. The equitable maxim that equity aids the vigilant, and the equitable principle that where one of two innocent parties must suffer by reason of the wrongful act of a third person, the loss should fall upon that party whose negligence made the wrongful act possible.
2. Where there is no agreement between a landlord and his tenant as to how cotton grown on the leased premises shall be handled, stored, or sold, and the tenant places the cotton grown on the leased premises in a warehouse, and takes negotiable warehouse receipts therefor, payable to bearer, or to the tenant, and the landlord knows these facts and makes no protest and takes no steps to deprive the tenant of the possession of said receipts, and the tenant remains in the undisputed possession of said receipts for a reasonable time after the landlord acquires knowledge of said facts, the landlord is estopped to assert his lien against bona fide purchasers for value without notice from the tenant.
3. When a landlord does not expect or desire his tenant to deliver cotton grown on the leased premises, or warehouse receipts representing same, to the landlord, but, on the contrary, expects the tenant to sell the cotton or warehouse receipts, or to borrow money thereon, and to account to the landlord for the proceeds of the sale or loan as rental, and trusts the tenant to do so, the landlord has insofar as bona fide purchasers for value without notice from the tenant are concerned waived its landlord's lien and is estopped to assert it against innocent purchasers.
The application of these principles of law to the facts of the case at bar preclude the appellant from having any recovery herein, and we respectfully submit that this court should affirm the decree of the court below.
Argued orally by J.J. Breland, and Richard Denman, for appellant, and by H.T. Odom, and Hardy Lott, for appellee.
On November 1, 1934, the appellant, Tennessee Joint Stock Land Bank, exhibited its original, and subsequently its amended and supplemental bills of complaint against E.P. Fryer, C.O. Fryer, W.V. Woods, Itta Bena Compress Company, Bank of Greenwood, and W.G. Humphrey, all residents of Leflore county, Miss.; the Commodity Credit Corporation and Reconstruction Finance Corporation, non-residents, and C.H. Aldridge, a resident of Montgomery county, Miss. The bill alleged that the Tennessee Joint Stock Land Bank, hereinafter called the land bank, as assignee of the Mississippi Joint Stock Land Bank, rented about 400 acres of land to the defendants E.P. and C.O. Fryer for a cash rental of $2400, evidenced by a written rent contract. This farm, hereinafter called the Coleman Place, was the only place owned or operated by the land bank in LeFlore county, and 1934 was the first year in which it operated same. That the land bank was the landlord of the Fryers, and that they were indebted on account of the rent for that year to the land bank in the sum of $1300.95. It alleged that two lots of cotton had been sold by the tenants to the various defendants without authority, and sought to subject the cotton so sold to the payment of said rent, and a decree for the amount thereof against the purchasers of the cotton and the conversion of the same for the balance of the rent.
At the return term, a decree pro confesso was rendered against the Fryers and W.V. Woods, who failed to answer, for the balance of the rent, which decree became final, and they have not appealed.
The only relief sought against the Itta Bena Compress Company was a temporary injunction enjoining it from disposing of the cotton stored in its warehouse, and no personal decree was sought against it.
All the other defendants filed answers denying the material allegations of the bill, and setting up the defenses that the land bank, as landlord, had permitted its said tenants to store the cotton in controversy in the said Itta Bena Compress and take, in the name of one of said tenants, C.O. Fryer, negotiable warehouse receipts therefor, and had permitted and authorized the tenants to dispose of the cotton, and further that the land bank had expressly waived its landlord's lien, and further, by its act and conduct in dealing with said cotton, had impliedly waived its lien thereon.
On the trial of the case the court finally dismissed the bill, and the land bank appeals from that decree.
The two lots of cotton — one of 29 bales and the other of 5 bales — were raised by the Fryers on the Coleman Place, stored in the Itta Bena Compress prior to October 15, 1934, and standard negotiable warehouse receipts were issued for the 29 bales by number and weight in the name of E.P. Fryer, or bearer, and the several receipts for this lot of cotton, which we shall hereinafter designate as the Fryer cotton, were ultimately hypothecated to the Greenwood Bank for a government loan on October 2, 1934. The 5-bale lot was stored in the warehouse and negotiable warehouse receipts issued in the name of W.V. Woods, who afterwards sold this cotton to either Humphrey or Aldridge, and applied the proceeds of the sale to the payment of his indebtedness to Aldridge who had furnished him supplies to make the crop in 1934. Woods was a subtenant of the Fryers and was to pay one-fourth of the cotton as rent.
The lease contract executed by the land bank to the Fryers was dated January 13, 1934, and contained this stipulation: "The party of the first part (the land bank) further agrees to waive its statutory rent lien in favor of what is commonly known as a furnisher's mortgage, made for the purpose of furnishing funds for the making of the 1934 crops, however, this waiver is to be upon the following expressed conditions: (1) The waiver in no case shall exceed $1200.00 on the cultivated land, and shall be only for such amount as it actually furnished."
About February 21, 1934, E.P. Fryer obtained a loan amounting to $1,265 from the Greenwood Production Credit Association, secured by deed of trust on the crops raised on the Coleman Place, and the land bank executed its waiver in pursuance of the above stipulation in the lease contract. During the year the land bank executed further waivers in the total sum of $175.
Stating the facts now as applied to the Fryer cotton — 29 bales — the land bank had employed three agents as its representatives in Mississippi. R.L. Stockett and Trull were two of such agents. Stockett's main duties were to effect sales of land, the land bank having 57 separate plantations in the Mississippi Delta, and sometimes to effect rentals, and he negotiated the lease between the Fryers and the land bank. He had no authority to effectuate a contract, but he recommended this contract which was approved by the land bank. In the spring of 1934, he was directed by the land bank to make certain improvements on the Coleman Place, and was on the place frequently. According to the record, he made his last visit to the place about August 15. The Fryers testified to certain statements and waivers made by Stockett, which statements were rejected by the chancellor, in his finding of fact, as not being contractual. Stockett testified that on the other places it was the custom of the bank to have the cotton stored in warehouses in the name of the land bank and of the particular tenant; that on occasions tenants had stored the cotton in their own names, and on some few occasions he had collected cash from a few tenants on account of rent due the land bank. He further testified that he had no authority to execute a waiver, or to give consent to the tenants to dispose of the cotton.
Trull was an agent of the land bank, and his duties carried him to these various plantations in the Mississippi Delta looking after the crops. He testified that his duties were limited, in that he was to collect the rents from the tenants, and to see that the tenants accounted for the crop productions on the various places. About August 15, he began inspection of the Coleman Place, went there for the purpose of overseeing the planting of vetch on the lands rented to the government. About that time, the Fryers had begun picking their cotton, and the record shows that it was rapidly harvested and ginned at Itta Bena, and then sent by trucks to the Itta Bena Compress Company, receipts issued in the name of E.P. Fryer, and receipts for the 29 bales issued to Fryer or bearer, and delivered to the Greenwood Production Credit Association. All of this lot of cotton had been stored in the compress warehouse before October 1st. Trull was of the opinion that during the first two weeks he was planting the vetch there was very little cotton picked. He testified that he had no other authority other than that detailed.
On October 2, 1934, C.O. Fryer executed a sworn application for what is commonly called the government 12-cent cotton loan on this Fryer lot of cotton, for a loan of $1,838.04, stating therein that there were no liens. This application was received by the Bank of Greenwood, the loan made on Fryer's note for that amount due some time later, secured by the compress receipts for this cotton. The evidence shows that this cotton was worth, at the time, $2,160.70. Fryer discharged the balance of his debt for "furnish" to the Greenwood Production Credit Association, paying them $990.11 from this 12-cent cotton loan. He also paid therefrom to the land bank on his rent $261.08. The balance of the proceeds of this loan is not accounted for, and was evidently appropriated by Fryer to his own purposes.
Fryer testified that while he was operating a tractor for Trull, engaged in planting the vetch, he told Trull that he was going to get a 12-cent loan on his cotton from a government agency. This conversation was, at first, denied by Trull, but he finally admitted that some such conversation might have occurred, and that he might have said to Fryer, in response, that the land bank was selling its cotton, however, he did not agree that Fryer might dispose of the cotton by securing a loan, neither did he prohibit it, nor was any other action taken by the land bank. Trull declares that he did not know where the cotton from this plantation was ginned, nor that it was stored in a warehouse, and did not know that there was a warehouse in Itta Bena. He testified that he was often unable to see Fryer when he visited the place, and that the inquiries he made did not elicit the whereabouts of the cotton until he sent another employee, Smith, after October 18, 1934, to investigate as to the products of the place, and received a report from Smith to the effect that this lot of cotton had been stored with the compress warehouse, and that he so reported to the land bank about October 24, 1934, in response to this letter to him from the president of the land bank:
"October 18, 1934.
"Mr. E.S. Trull, Marks, Miss.
"Dear Mr. Trull: — In Re #28, Coleman Place.
"I have your letter in regard to the rents of the Coleman Place and am getting just as nervous as I can be about these rents. Cant you or one of your men go down there and if necessary spend a couple of days to get this rent. Perhaps I ought not to be nervous, but I just cant help it. Wont you please do this, as I think it is really essential. Why dont you write them on receipt of this letter, telling them you will be down there Monday to get the money. If it takes two days to collect this, it will be time well spent. I am including the note in this letter so there will be no excuse for them not paying you, and even if the note is not due, it should be paid because they have the cotton on hand to do it."
Stockett also denied that he had any knowledge of the fact that the cotton was being stored in the name of Fryer in a warehouse.
The managing officers and agents of the land bank testified that only Thompson, vice president, and Moore, president of this corporation, had authority to permit the Fryers to store the cotton in a warehouse, or take negotiable receipts therefor.
Trull testified that he went with Fryer to the county agent to secure what are called "Bankhead Cotton Tags" which appear to be necessary in order to gin cotton, and that he, for the land bank, applied therefor, making C.O. Fryer trustee, and delivered them to Fryer. Afterwards, the land bank bought some of the tags from Fryer to be used in other counties, and credited the Fryer brothers therewith at 2 1/2 cents per pound. Fryer testified that Trull agreed to pay him 4 cents per pound, and that Trull knew he was ginning the cotton and storing it in the warehouse. When or how does not appear.
The Greenwood Bank, which advanced the money to Fryer on the 12-cent cotton loan, transferred and assigned the note and cotton warehouse receipts hypothecated as security for the note to a Memphis Bank, and they were successively assigned to the Commodity Credit Corporation, and, at the time of the trial, appeared to have been in the possession of the Reconstruction Finance Corporation. The custom was to use local banks as agents for the Commodity Credit Corporation, which, at that time, was making cotton loans, at 12 cents per pound, to cotton owners. If there is liability on the part of the Greenwood Bank, and others, for the conversion of this cotton, the amount that would be due thereon would be $907.62, with 6 per cent. interest per annum from October 2, 1934.
As to the 5 bales of Woods' cotton, it is contended by him that, in the light of the agreement in the lease contract as to the alleged waiver by the landlord tenant in the above statement of facts, he and Aldridge are not liable, because he was a subtenant of the Fryers, and the limitation in the contract as to the waiver by the landlord to the extent only of $1200 that had been increased to, at least, $1375, without the knowledge and consent of Woods, released Woods, the subtenant, as surety for Fryer; further, that the agricultural products, consisting of cottonseed from the 45 bales of cotton, raised on the place, and other products, had been appropriated by the Fryers without any effort on the part of the land bank to assert its lien thereon. The record does show that Fryer retained two tons of cottonseed valued at $100 and sold it months after this litigation was initiated.
On these facts, in a written opinion, the chancellor held that the agents of the land bank, Trull and Stockett, were constantly in touch with the farming operations throughout the year 1934, and had full knowledge of the way in which crops were grown and handled. He further found that no agreement was ever made between the land bank and the Fryers as to how the crops should be handled, and correctly held that no agreement had been claimed. He held, however, that, from this evidence the complainant knew that the cotton was being picked, ginned, and stored in a warehouse and that negotiable warehouse receipts were being issued thereon, and that it never, at any time, demanded same, but, on the contrary, permitted this to be done, and trusted the Fryers to account to it for the rent. He also held that the doctrine of equitable estoppel applied, and that the maxim of "Equity aids the Vigilant," obtained in this case, and, further, that where two innocent parties must suffer by reason of the wrongful act of a third person, the loss should fall upon the party whose negligence made the wrongful act possible. He held that all the purchasers of the cotton were bona fide purchasers for value without notice, and granted a decree against Aldridge for $96.11, the value of one-fourth of the Woods' cotton unquestionably due by him to the Fryers as rent; against the Fryers for the balance of the rent, and stated that whatever equity the Fryers had in the 29 bales of cotton then in the hands of the Reconstruction Finance Corporation should be applied to the rent, after payment of the loan and interest originally made by the Greenwood Bank.
We think the court below erred in its conclusion of law as to the Fryers' 29 bales of cotton. The record demonstrates that there was never any personal communication or correspondence between the Fryers and the managing officers of the land bank; no kind of communication between the pledgee of the cotton, the Greenwood Bank, or any of its assignees, relative to this cotton, and no affirmative consent on the part of any of the officers or agents of the bank, either a farm agent or a managing officer, that Fryer could store his cotton and take warehouse receipts therefor in the name of the tenant, or to bearer.
We think it is without dispute that no officer or agent of the land bank had any knowledge of the warehouse receipts until long after October 2, 1934, when these warehouse receipts were pledged by the Fryers to the Greenwood Bank, which took them as security for a loan without any notice of any infirmity therein.
No custom had been established by the landlord in the case at bar with the tenant, for the reason that only in the year 1934 had such relation existed. At the time the warehouse receipts were pledged to the Greenwood Bank, the rent was not due.
The fact that Trull, the farm agent of the land bank, obtained the "Bankhead Cotton Tags" in order that the tenant might gin his cotton does not point to any agreement to make disposition of the cotton. The evidence as to the 12-cent cotton loan was in no sense a permission to Fryer to store his cotton, or to pledge same, in his own name. On the contrary, Trull, the agent, told Fryer that the bank was selling its cotton.
Fryer knew that, so far as he was concerned, the landlord had a lien on his cotton for the unpaid rent. He did not seek permission to sell or pledge it.
It is a violent assumption and unwarranted by the record that Trull knew, or had reason to believe or suspect, that Fryer intended to violate the law and pledge his cotton without his landlord's consent.
All these facts did not tend to show that the landlord, Trull, or Stockett expected the tenant to sell or pledge his cotton and pay the rent from the proceeds of such sale or pledge.
From an analysis of these facts, we think the conclusion is inescapable that the landlord, in this case, did not waive his lien, and did not tacitly consent to the disposition of the products, and the letter quoted, supra, in our opinion, is a clear declaration, on the part of the landlord, to look to the cotton for the payment of the rent.
Section 2186, Code 1930, establishes a paramount lien on agricultural products in favor of the landlord to secure payment of the rent, and the removal of such products from the leased premises does not interfere with the landlord's right to enforce such lien. Fitzgerald v. Fowlkes, 60 Miss. 270, and Henry v. Davis, 60 Miss. 212, 213.
Any person, with or without notice, who purchases such agricultural products on which a lien exists in favor of the landlord is liable to the landlord for the value thereof. Warren v. Jones, 70 Miss. 202, 14 So. 25; Schmitt et al. v. Federal Compress Warehouse Co. et al., 169 Miss. 589, 153 So. 815.
In order to constitute a waiver of a landlord's lien, the evidence must preponderate that the landlord either affirmatively agreed, or, by his conduct and course of dealing, permitted a tenant to deal with the agricultural products as though they had been freed from his lien. This court said in McGee v. Carver, 141 Miss. 463, 106 So. 760, 761, that "Having trusted Norwood [the tenant] with the indicia of ownership, he is precluded by the statute from asserting a lien thereon against one who purchased the warehouse receipt in good faith for value. Commercial National Bank of New Orleans v. Canal Bank, 239 U.S. 520, 36 S.Ct. 194, 60 L.Ed. 417, Ann. Cas. 1917E, 25."
Under the Uniform Warehouse Receipts Act, section 3521, Code 1930, subdivision (a), a purchaser without notice for value of warehouse receipts does not acquire title when he purchases from a mere trespasser. Marine Bank Trust Co. v. Greenville Sav. Bank Trust Co., 133 Miss. 91, 97 So. 526; Schmitt v. Federal Compress Warehouse Co., supra.
In the case of Commercial Nat. Bank of New Orleans v. Canal Bank, supra, the Supreme Court of the United States said that a pledgee of bills of lading for cotton who permits the pledgors to withdraw same under an agreement to hold for the pledgee's account, and thus enable the pledgors to obtain negotiable warehouse receipts which they pledge to a bank as security for their notes, cannot question the title of the bank, having clothed the pledgors with the indicia of ownership within the meaning of the doctrine established by the uniform warehouse receipts act.
The gravamen of the decision of the court below in the case at bar is based upon the fact, as argued by the various appellees, that, in his opinion, before the rent was due, the landlord was under the duty to act as a detective in his dealings with his tenant and suspect him of dishonesty, when no fact or circumstance, implying such, has been brought to the attention of the principal, the land bank, or any of its subordinate agents. Prior to October 18, 1934, there is nothing in this record to indicate that the land bank, or the agent, Trull, had any cause to suspect dishonesty on the part of its tenants, nor is there any language which can be attributed to them, indicating that the landlord expected the tenants to sell the cotton and pay the landlord the money.
What we have said is based on the assumption that whatever notice came to the agent, Trull, bound his principal, the land bank, and that it was within the scope of his authority. We assume this, but do not so decide same from this record, as it is unnecessary for the court to so decide. Of course, Trull was not a general agent but was one of limited authority, and if such notice as attributable to him was beyond the scope of his authority, it did not bind the principal.
We conclude that the record does not warrant the finding that the landlord, in the case at bar, clothed the tenant by its permission with the indicia of apparent ownership.
All the facts in this case do not warrant the assumption by this court that there was negligence on the part of the landlord, or authorize it to apply the maxim, "Equity aids the Vigilant."
Assuming that Trull knew that the tenant was picking, ginning, and storing his cotton in a warehouse, the proof wholly fails to show that Trull had reason to suspect that the tenant was taking negotiable warehouse receipts therefor payable to Fryer or bearer.
Without this statement of Fryer that Trull knew he was storing the cotton in a warehouse, the court could not have reached its conclusion. The chancellor repudiated Fryer's evidence upon material points, but accepted this statement.
Did this knowledge, without action on the part of the land bank, clothe Fryer with indicia of ownership, or estop it? We say not, and the answer is found in the language of Chief Justice Hughes, in the case of Commercial National Bank of New Orleans v. Canal Bank, supra, which is as follows:
"It is a familiar rule that one who has no title to chattels cannot transfer title unless he has the owner's authority or the owner is estopped. See Civil Code (La.), arts. 2452, 3142, 3145, 3146. It follows that, in the absence of circumstances creating an estoppel, one without title cannot transfer it by the simple device of warehousing the goods and indorsing the receipts. But if the owner of the goods has permitted another to be clothed with the apparent ownership through the possession of warehouse receipts, negotiable in form, there is abundant ground for protecting a bona fide purchaser for value to whom the receipts have been negotiated. Pollard v. Reardon, 65 F. 848, 852, 13 C.C.A. 171, 21 U.S. App. 639; Williston, Sales, Section 421."
Warehousing cotton is, in this day, good husbandry. Fryer had the receipts issued in his own name and excluded the landlord without the latter's knowledge and consent. Under the facts of this record, Fryer was not clothed by the landlord with indicia of ownership — therefore no recognized principle of estoppel can be applied here, and the fact that the landlord did not promptly discover the trespass upon his rights by his tenant cannot be said to be negligence which would, on any principle of estoppel, relieve the appellees from liability for their conversion of the cotton. As to the Fryers' 29 bales of cotton, a decree will be entered against the appellees who took over this cotton on the pledge for $907.62 with 6 per cent. interest per annum from October 2, 1934.
As to the Woods' 5 bales of cotton, a decree was entered in favor of Aldridge and Woods on the theory we have declined to adopt. It follows that the chancellor has not passed on the facts at issue in this behalf. We have therefore decided to reverse and remand the case as to the Woods cotton.
Reversed and judgment here for appellant in part; reversed and remanded in part.