liable to be suddenly thrown upon the market whenever they, as speculators, see profit in such course. The defendants are large dealers in futures on the Chicago Board of Trade and together hold an enormous supply of grain ready to aid their opportunities as speculators. The warehouseman issues his own warehouse receipt to himself. As public warehouseman he gives a receipt to himself as individual, and is enabled to use his own receipts for the purpose of trade and to build up a monoply and destroy competition. That this course of dealing is inconsistent with the full and impartial performance of his duty to the public seems clear. The defendants answer that the practice had a beneficial effect upon producers and shippers, and naturally were able to prove that when, by reason of their advantages, they were overbidding other dealers, there was benefit to sellers, but there was an entire failure to show that in the general average there was any public good to producers or shippers. The answers also set up, and it is claimed here that there was at the time of the passage of the warehouse act a general custom of warehousemen to deal in grain, and to store it in their warehouses, and that the law was passed with reference to that existing custom. The evidence fails to establish any such custom. The amount so bought and stored or dealt in up to the year 1885 was trifling, and the first time when there was any material increase was in 1890. Many witnesses who would have known if such a practice or usage existed united in denying all knowledge of it, and many of them testified that they never knew or heard of any elevator owner buying or selling grain prior to 1885. There was no such custom. Finally, it is claimed that there has been a practical construction of the law by the warehouse commissioners, permitting the practice complained of. There was a little buying and storing of grain by warehousemen from time to time, but it was so insignificant as to call no attention to it until in recent years. If the commissioners were derelict, it would not bind the public, and indifference on their part could not have that effect. * * * The decree of the circuit court is affirmed.22 * * * Even while the appeal was pending in the Central Elevator case an attempt was made to render the court's action nugatory by the passage of an act in the general assembly of 1897, amending the warehouse act of 1871 so as to legalize the specific practices forbidden by the injunctions of the circuit court. The passage of this act 23 made it necessary for the opponents of the elevator interests to institute new proceedings. Accordingly, contempt proceedings were brought against a member of the firm owning the Central Elevator Co. The Circuit Court of Cook County (Judge Tuley presiding) held the statute of 1897 to be unconstitutional and fined the defendant $100 for contempt of court. This case was reviewed by the supreme court of the State in Hannah v. the People.24 The court took the same ground as in the previous decision and upheld the language of that decision. Proceeding further, they said: It was manifestly beyond the power of the general assembly, by the enactment of the amendatory act of 1897, to relieve public warehousemen of a duty charged upon them by the provisions of the constitution of the State or to remove the inhibition clearly implied by the organic law. The constitutional remedy of protection is that the warehousemen shall act only as a trustee for others, and the producers and shippers shall not be subjected to the danger of loss through the pressure of personal interest of the trustee to wrong them. 51 N. E., 256-257. Illinois Laws 1897, p. 302. 24 198 Illinois, 77, 1902. No question is presented by this record, as to the right of a public warehouseman to store his own grain in vacant places in his own warehouse where the space so vacant was not occupied and not needed for the storage of grain of customers of the warehouse. That which the warehouseman here seeks to do and which the court has prohibited from being done is the mixing of the grain of the keeper of a public warehouse with that of his customers, and issuing and dealing in certificates or warehouse receipts representing a mass of grain composed of that of the keeper of the warehouse and of his customers. No question of an infringement of a right secured by the Constitution of the United States is involved in that controversy. This decision established the present practice in Chicago whereby public warehousemen are permitted to store their own grain in special bins, but are forbidden to mix such grain with that of their customers. In 1899 approximately 25 per cent of the grain received at the Chicago market was handled by public licensed elevators, the rest passing into private storage,25 and the ratio has increased in favor of the private elevators. The statutory restrictions upon mixing and conditioning grain, the regulation of storage charges, and the annulment of the act of 1897 led many elevators (about 1899) to cancel their licenses and operate as private houses. The operators pointed out that cleaning machinery was allowed in public elevators in Minneapolis and Duluth and declared that unless this were allowed in Chicago they could more profitably operate on a private basis.26 There has been a corresponding decline in the number and capacity of regular elevators until in 1918 these elevators included only about 20 per cent of the storage capacity of the market. This decline in regular elevator storage appears in the table below. TABLE 33.-Total elevator warehouse capacity at Chicago, relative storage capacity of houses declared regular, of houses operated on a "private" basis, and of houses operated under the custodian rules, 1902 to 1918, inclusive. TABLE 33.-Total elevator warehouse capacity at Chicago, relative storage capacity of houses declared regular, of houses operated on a "private" basis, and of houses operated under the custodian rules, 1902 to 1918, inclusive-Continued. Three private elevators with an aggregate capacity of 2,060,000 bushels were closed during 1904 and are not included in this total. One private elevator with a capacity of 400,000 bushels which was omitted from the tabulation in the Chicago Board of Trade Year Book (1904) is included here. Five elevators with an aggregate capacity of 2,290,000 bushels closed during 1905 are not included in this total. One elevator with a capacity of 400,000 bushels is included which was omitted from the published list in Chicago Board of Trade Year Book 1905. Eight elevators with a total capacity of 5,365,000 bushels closed during 1906 not included in total. As the table shows, about 80 per cent of the elevator storage capacity at Chicago in 1918 was operated on a private basis. Two important features of the elevator situation have been (1) the ownership of over 21,000,000 bushels storage (rated capacity) by Chicago board members in other markets and (2) the fact that fully 60 per cent of the aggregate private storage capacity has been included in houses leased from railroads. THE CUSTODIAN SYSTEM.-A A unique plan to provide public storage for receivers of grain was inaugurated in Chicago in 1911 by the establishment of the custodian department. Table 33 shows the relative increase in private elevators at Chicago during recent years. As already stated, the bulk of the grain placed in storage has been increasingly handled by private elevators, with the consequence that prior to 1911 there was no protection to the seller of the grain against the financial failure of an elevator buyer after delivery and before he had paid the purchase price. The condition was stated by the secretary of the board in 1914 as follows: For many years all grain arriving here and unloaded in elevators was stored in public elevators, which were bonded to and licensed by the State and their warehouse receipts registered by the State. Under these conditions the seller retained full control of the grain and received the receipt and therefore assumed no risk of failure of the buyer. Some years ago, however, the private elevator industry began making very large inroads on this business, and now probably 90 per cent at least and perhaps more of all grain arriving here goes into private elevators, and through the failure first and last of three or four important firms operating private elevators large losses to our receiving merchants were sustained. Furthermore it was desired to secure the validity of warehouse receipts issued by private elevators as collateral security. Public elevators had been under bond and supervised by the State; and there were certain guaranties that the warehouse receipt represented a definite quantity and grade of grain held in safe custody for the owner. These guaranties were lacking in the case of elevators whose operators were constantly merchandising the grain which they held in store. Accordingly a rule was adopted 27 by the association in 1911 authorizing the board of directors to establish a custodian department whereby an officer of the Board of Trade should assume trusteeship, as "agent of the seller, to hold possession of any and all commodities placed in his care and control until the purchase price of the same is paid. * * *"" Under this authority the chief weighmaster was made custodian and placed under a bond of $40,000. His assistants were also bonded in the sum of $5,000. Detailed regulations were adopted 28 including the form of custodian certificate to be issued to the owner of the grain: 17 Rule IV, sec. 22. * The regulations in force July 21, 1919, were as follows: I. A custodian duly appointed by the board of directors shall be placed at such private elevators or other buildings or places of private ownership as the custodian committee shall deem necessary and such custo dian shall keep a daily record containing the official board of trade weights of all commodities dealt in under the rules of the association and weighed by the official board of trade weighmaster which commodities have been unloaded into or loaded out of such private elevators of other buildings or places of private ownership. II. When any of such commodities shall be unloaded as above provided, the custodian shall promptly issue and deliver to the party for whose account the same is unloaded an official certificate as evidence of such unloading, except in cases where the commodity is loaded out in whole or in part on the same day as received, in which case the custodian shall procure the shipping receipt or bill of lading given for such property, and shall deliver the same to such party with a certificate for such quantity that is not loaded out the two together representing the entire quantity unloaded. HII. The custodian shall not allow the loading out of any commodity from such private elevators or other buildings or places of private ownership, except as provided in the second of these regulations, until the proprietor or manager thereof shall surrender to him for cancellation official certificates properly indorsed equal to the amount of the commodities to be loaded out and such commodities shall be weighed by the weighing department of the Board of Trade of the City of Chicago. IV. The custodian shall estimate daily the amount of shrinkage incidental to the handling, cleaning, or clipping of grain; also of any variation between the "in" and the "out" weight and report same at once to the proprietors or managers, and it shall be their duty to surrender to the custodian certificates for cancellation sufficient to cover same. It further shall be the duty of the proprietors or managers to keep in store at all times in excess of all outstanding certificates a quantity equal to at least 3 per cent of the total quantity in store represented by outstanding certificates in addition to the estimated amount of shrinkage, as berein before provided. V. In such places where the cominodities herein described are manufactured into products or the original commodity otherwise changed in form, the custodian may permit the proprietors or managers thereof to use such commodities without the surrender of custodian certificates for the same whenever the said proprietors or managers shall furnish to said custodian written evidence of the consent to such use by the party for whose account the said commodities were unloaded: provided, however, that the custodian shall not issue any certificates for commodities used under such circumstances. VI. It shall be the duty of the custodian to require the official weighing of all commodities in each and every private elevator or other building or place of private ownership hereinbefore described by the board of trade weighmaster as often as in his judgment may be needful to enable him to accurately determine the quantity of commodities stored in such elevators or other buildings or places of private ownership for the purpose of verifying the correctness of his outstanding certificates; or the custodian committee may at any time in the exercise of its discretion order the weighing of such commodities. OFFICIAL CERTIFICATE OF THE CUSTODIAN DEPARTMENT OF THE BOARD OF TRADE OF THE CITY OF CHICAGO. I hereby certify that this day at this Department ..pounds of .under the supervision of were unloaded from .Car No. ...... which will not be loaded out except upon surrender of this receipt for cancellation as provided in the rules and regulations of the board of trade of the city of Chicago governing the custodian department. This scheme seems to have met the approval of traders, banks, and elevator operators. Adequate security is given to the seller until he has received the purchase price of the grain.29 Agents of the custodian supervise the loading and unloading of grain, inspect the condition of the elevators, weigh over the grain when stocks are low enough to make it advisable, and even seal the elevators at the close of business hours. A blanket insurance policy is carried by the custodian to cover the grain while in the process of unloading. VII. Whenever in the judgment of the custodian or of the custodian committee it shall be deemed advisable the proprietor, or manager, of such private elevators, other buildings, or places of private ownership shall be required to increase his ordinary line of fire insurance upon such private elevators, other buildings, or places of private ownership and the contents thereof for which custodian certificates have not been surrendered for cancellation, to such an amount as may be determined by the committee or the custodian; and such proprietor, or manager, shall allow an inspection of the amount and character of said insurance carried by such proprietor, or manager, whenever requested by the custodian committee or by the custodian. VIII. Whenever such a course shall, in the judgment of the custodian committee, be deemed necessary it is hereby empowered to impose upon such proprietors or managers the duty of preserving the identity of all grain thereafter unloaded into such private elevators, or other buildings, or places of private ownership, or in lieu thereof, the adoption of such measure or measures as in the judgment of the custodian committee may be adequate to protect the parties for whose accounts the commodities aforesaid were unloaded. IX. The buyers of commodities sold and delivered as hereinbefore provided shall tender in payment certified checks whenever the party for whose account such commodities have been unloaded shall give reasonable notice of his intention to demand the same, and the latter may retain in his possession the custodian's certificate until such certified check is thus tendered. X. It shall be the duty of the custodian at such private elevator or other building or place of private ownership at the close of each day to seal the engine, shipping bins, or other bins, or to adopt any other measues which in the judgment of himself or the custodian committee are necessary to prevent the removal of grain or other commodities from such private elevator or other building or place of private ownership during the absence of such custodian. XI. All such commodities unloaded as aforesaid shall be held in such private elevator or other building or place of private ownership and shall not be released therefrom except in accordance with the rules and regulations of this association governing the custodian department, but the custodian, his assistants or subordinates shall not be liable in their official bonds or otherwise for any losses unless such losses are directly attributable to the negligence of said custodian, his assistants or subordinates in issuing certificates for commodities not in fact unloaded or in allowing, during the hours when such private elevator or other building or place of private ownership is open for business, such commodities to be loaded out without requiring the surrender of official certificates for the same, and nothing herein or any custom or private agreement to the contrary shall be construed to extend such lability; provided, however, that the board of trade, of the city of Chicago shall in no case be liable for any losses except to the extent that such losses are due to its failure to keep in force a good and reasonable bond for the honesty and fidelity of said custodian, his assistants or subordinates. However, receipt of the custodian certificate does not constitute, necessarily, a reservation of title by the seller. It was provided in the rule authorizing this department "that nothing in the said section, or the regulations passed in conformity thereto, shall be construed as a reservation of title by the seller to any and all commodities in the possession of the custodian, if, in the absence of this section, the agreement between parties, or the custom of trade shall contemplate the transfer of title thereto to the buyer." |