Full opinion text
HANSON, District Judge. This is an action brought by the United States of America based upon the claim of Commodity Credit Corporation. Jurisdiction is conferred by 15 U.S.C. § 714b (c). The United States alleges that Commodity entered into a grain storage agreement with Martin Vust doing business as Correctionville Elevator and Mill. The United States alleges that the ware-housemen and warehouse were licensed under the Iowa Bonded Warehouse Law, Chapter 543, Code of Iowa, I.C.A. The United States alleges that Merchants Mutual Bonding Company is a surety on a certain bond in which Martin Vust doing business as Correctionville Elevator and Mill is the principal and Commodity Credit Corporation, a wholly owned corporate agency and instrumentality of the United States of America, was a beneficiary. The United States alleges that the bond was dated August 6, 1958, and a rider was attached dated September 17, 1958. The United States alleges the sum of the bond to be $58,000.00. The United States further alleges the following: 1. That the obligee under the bond is the State of Iowa for the use and benefit of any person lawfully entitled to receive the same in compensation for damages growing out of the principal’s operation of warehouse under the provision of Chapter 543, Code of Iowa, I.C.A., and licensed under said Act, License No. W— 2315; and that the bond is conditioned upon said principal’s faithful performance of the duties of a licensed warehouseman in conformity with the provision of Chapter 543, Code of Iowa, I.C. A. 2. That under the aforesaid Uniform Grain Storage Agreement, Commodity deposited or caused to be deposited in the warehouseman’s warehouse licensed under the provision of Chapter 543, Code of Iowa, I.C.A., 213,616.36 bushels of corn for storage, for which corn the warehouseman issued warehouse receipts. Between April 4, and May 11, 1960, Commodity surrendered the aforesaid warehouse receipts to the warehouseman and directed him to load out and redeliver to Commodity all of the corn thereby represented. Notwithstanding the foregoing, the warehouseman loaded out and redelivered to Commodity only 137,509.57 bushels of corn, leaving a shortage of 72,654.51 bushels, which quantity of corn the warehouseman had wrongfully converted to his own use. In addition, the com loaded out and redelivered to Commodity by the warehouseman was of a lower grade and quality than that specified in the applicable warehouse receipts surrendered by Commodity. Moreover, the warehouseman claimed and was paid for warehousing services in and about the 72,654.51 bushels of corn which he had converted to his own use, to which he was not entitled under the terms of the aforesaid Uniform Grain Storage Agreement. As a result of the warehouseman’s aforesaid breaches of the aforesaid Uniform Grain Storage Agreement, plaintiff has been damaged in the net sum of $89,724.-86. 3. That under the aforesaid Uniform Grain Storage Agreement, Commodity deposited or caused to be deposited in the warehouseman’s warehouse, licensed under the provisions of Chapter 543, Code of Iowa, I.C.A., 2,699.72 bushels of soybeans for storage, for which the warehouseman issued warehouse receipts. About May 6, 1960, Commodity surrendered all of the aforesaid warehouse receipts to the warehouseman and directed him to load out and redeliver to Commodity all the soybeans thereby represented. Notwithstanding the foregoing, the warehouseman failed, neglected and refused to redeliver to Commodity said 2,699.72 bushels of soybeans, which he had converted to his own use. Moreover, the warehouseman claimed and was paid for warehousing services in and about said soybeans which he had converted to his own use, to which he was not entitled under the terms of the aforesaid Uniform Grain Storage Agreement. As a result of the warehouseman’s aforesaid breaches of the aforesaid Uniform Grain Storage Agreement, plaintiff has been damaged in the net amount of $5,-352.16. 4. That under the aforesaid Uniform Grain Storage Agreement, Commodity deposited or caused to be deposited in the warehouseman’s warehouse, licensed under the provisions of Chapter 543, Code of Iowa, I.C.A., 6,336.29 cwt. of grain sorghums for storage for which the warehouseman issued warehouse receipts. On or about April 11, 1960, Commodity surrendered the aforesaid warehouse receipts to the warehouseman and directed him to load out and redeliver all of the grain sorghums thereby represented. Notwithstanding the foregoing, the warehouseman loaded out and redelivered to Commodity only 6,015.40 cwt. of grain sorghums, leaving a shortage of 320.89 cwt. of grain sorghums, which the warehouseman had converted to his own use. In addition, the grain sorghums redelivered by the warehouseman to Commodity were of a lower grade and quality than that represented by the warehouse receipts surrendered by Commodity. As a result of the warehouseman’s aforesaid breaches of the aforesaid Uniform Grain Storage Agreement, plaintiff has been damaged in the sum of $809.66. 5. That by reason of the foregoing, the conditions of said warehouseman’s bond have been breached by defendant’s principal to plaintiff’s damage in the sum of $58,000.00, and there is now due and payable to plaintiff from defendant the aforesaid sum of $58,000.00, no part of which sum having been paid. Merchants Mutual Bonding Company answered the Complaint by the United States and admitted paragraph 4 of the Complaint which reads as follows, to-wit: “Defendant, Merchants Mutual Bonding Company, is surety on a certain bond dated August 6, 1958, a rider thereto dated September 17, 1958, and a rider thereto dated August 21,1959, in the principal sum of $58,000.00, naming Martin Vust, doing business as Correctionville Elevator and Mill, Correctionville, Iowa, principal; the State of Iowa for the use and benefit of any person lawfully entitled to receive the same in compensation for damages growing out of the principal’s operation of warehouse under the provision of Chapter 543, Code of Iowa, and licensed under said Act, License No. W-2315, as obligee; and conditioned upon said principal’s faithful performance of the duties of a licensed warehouseman in conformity with the provision of Chapter 543, Code of Iowa,” and admits that no part of the sum allegedly due to plaintiff from defendant has been paid. Merchants Mutual Bonding Company amended its Answer to the Complaint of the United States and alleged that the action is based solely upon rights under the provisions of Chapter 543 of the 1958 Code of Iowa, I.C.A. and that the plaintiff cannot maintain this action under the provisions of said Chapter 543. The United States replied to this defense or answer of Merchants Mutual Bonding Company as follows, to-wit: “1. On or about September 17, 1958, the defendant Merchants Mutual Bonding Company made and executed a rider to the bond sued upon in this action wherein said Bonding Company agreed to give Commodity Credit Corporation (hereinafter designated as CCC) 90 days notice in the event of cancellation of said bond. “2. That said rider is and has been a standard requirement on all bonds posted by bonded warehousemen within the State of Iowa and the defendant Merchants Mutual Bonding Company has executed similar riders ' in numerous instances on bonds on which it is surety for bonded ware-housemen in the State of Iowa. “3. That said defendant was at all times aware that C.C.C. was relying on said bond for protection. “4. At no time did the defendant Bonding Company, directly or indirectly, ever state or indicate to C.C. C. that it disclaimed liability to C.C. C. on the bond sued upon in this action or other similar bonds furnished by it in the State of Iowa. “5. The defendant Merchants Mutual Bonding Company has waived the legal defenses relative to non-liability to the plaintiff as asserted in its Second Defense and is estopped to deny liability on the bond sued on in this action.” Merchants Mutual Bonding Company then filed a counterclaim for interpleader. In this counterclaim, Merchants Mutual Bonding Company alleges that there are a number of other claims against the same bond which the United States is claiming against and that the total of these claims is in excess of the principal sum of the bond. Merchants Mutual Bonding Company amended this claim for interpleader to list additional parties who may have claims against the bond. The United States replied to the counterclaim for interpleader and admits that its claim alone is in excess of the limits of Merchants Mutual Bonding Company’s liability on the bond. The Court ordered that the following parties identified in the counterclaim for interpleader and amendment thereto be joined: Benson-Quinn Company, Lee Smith, Dale Powell, John Moon, Al Henrichsen, Max Flathers, Maurice Shever, Lloyd Stines, Wayne Smith, Dick Deeds, Eugene Baker, Lester Wright, Stanley Fitch, Roy Walker, Tom Cobb, Gilbert Baker, and Roy Stines. The Court later ordered that Ronald Randolph be joined as a party defendant and that his pleadings be permitted to stand. R. L. Madison and Helen Vust were impleaded by Merchants Mutual Bonding Company. The allegations of Merchants Mutual Bonding Company against these third-party defendants are as follows: “Defendant, Merchants Mutual Bonding Company, is surety on a certain Warehouseman’s Bond dated August 6,1958, a rider thereto dated October 6, 1958, and a rider thereto dated August 21, 1959, in the principal sum of $58,000, on which bond Martin Vust, doing business as Correctionville Elevator and Mill, Correctionville, Iowa, is principal. “In consideration of Defendant, Merchants Mutual Bonding Company, executing said bond as surety and in order to induce said Defendant to remain as surety on said bond, 3rd-Party Defendant, R. L. Madison, executed an Application for Bond of said Martin L. Vust in which said R. L. Madison agreed to indemnify and save harmless the said Merchants Mutual Bonding Company for, from, and against any and all losses, costs, damages and expenses of every nature whatsoever, including counsel fees and expenses, which may accrue to the said Bonding Company by reason of its having become surety on said bond. Said indemnity was limited to the sum of $22,-000. “In the event Plaintiff (United States) is held to be entitled to a judgment against Defendant, (Merchants Mutual Bonding Company), then pursuant to said Application for Bond and Indemnity Agreement executed by R. L. Madison, Defendant and 3rd-Party Plaintiff would be entitled to judgment against said 3rd-Party Defendant, R. L. Madison, to the extent of said judgment but not in excess of $22,000 together with Attorney fees, expenses, and Court costs incurred by Defendant. “Under date of March 5, 1959, Martin Vust executed an Application for Bond in the sum of $36,000 and in consideration of Defendant, Merchants Mutual Bonding Company, executing the bond applied for and to induce said Defendant to continue to retain said bond in force, 3rd-Party Defendant, Helen M. Vust, signed an Indemnity Agreement together with said Application in which she agreed to indemnify and save harmless the said Merchants Mutual Bonding Company for, from and against any and all losses, costs, damages and expenses of every nature whatsoever including Counsel fees, expenses, and costs which may accrue to the said Defendant by reason of its having become surety on said bond. “In the event that a judgment shall be rendered in this action in favor of Plaintiff against Defendant, Merchants Mutual Bonding Company, said Defendant and 3rd-Party Plaintiff, is entitled to recover judgment against 3rd-Party Defendant, Helen M. Vust, for the amount of such judgment to the extent of $36,000, together with Attorney fees, expenses, and costs in connection with said 3rd-Party Complaint.” R. L. Madison answered the 3rd-Party Complaint filed by Merchants Mutual Bonding Company and alleged: “The 3rd-Party Defendant, (R. L. Madison), herein admits that the plaintiff, United States of America, has filed against the defendant, Merchants Mutual Bonding Company, a corporation, a Complaint, but the 3rd-Party Defendant, R. L. Madison, herein denies the materiality of said Complaint, and for further answer to Paragraph One, Count I, of the 3rd-Party Complaint, the defendant states that said Complaint known as Exhibit A fails to state a cause of action. “The 3rd-Party Defendant herein, R. L. Madison, without consideration did execute an Application for Bond with the defendant and 3rd-party plaintiff herein. That said Application was specifically limited and that said limitation specifically provided ‘indemnity limited to that amount of bond #122557 which exceeds $36,000.00, but in no event more than $22,000.00.’ That in no event would the liability of the 3rd-Party Defendant, R. L. Madison, commence until such time as the defendant and 3rd-Party Plaintiff herein had already expended the sum of $36,000.00. “That the Application signed by the 3rd-Party Defendant, R. L. Madison specifically provided that the liability of R. L. Madison would not commence until the defendant and 3rd-Party Plaintiff, had already expended the sum of $36,000.00. “That the 3rd-Party Defendant, R. L. Madison, did execute and ‘Application for Bond' on or about the 31st day of August, 1959, as shown in Exhibit F of 3rd-Party Complaint and that there was no consideration for obtaining the signature of the 3rd-Party Defendant herein. “That at the time the signature of the 3rd-Party Defendant, R. L. Madison, was obtained on the ‘Application for Bond’ on the 31st day of August, 1959, certain statements and promises were made by Martin Vust and Chas. Isbell to said 3rd-party defendant that were untrue and which induced said 3rd-Party Defendant to sign said Exhibit F and that the signature of R. L. Madison was obtained by fraud.” R. L. Madison also answered plaintiff’s reply to the second defense of Merchants Mutual Bonding Company as follows: “The Third-Party Defendant (R. L. Madison) herein specifically alleges that the said Third-Party Defendant had no knowledge of any kind or nature of any Rider by and between the Plaintiff herein and the Defendant Merchants Mutual Bonding Company and that the Merchants Mutual Bonding Company as of September 17, 1958 had no authority to bind the Third-Party Defendant herein in any way or nature. “The Third-Party Defendant herein specifically alleges that the said Third-Party Defendant was never informed in any way, form, shape, or manner of any ‘standard requirement on all bonds posted by bonded warehousemen.’ “The Third-Party Defendant herein specifically alleges that the Third-Party Defendant had no knowledge or any reliance on the part of the C.C.C. and of any agreement of any kind or nature between the Plaintiff herein and Defendant Bonding Company. “The Third-Party Defendant herein specifically alleges that the acts of the Defendant Bonding Company in no way bound the Third-Party Defendant herein. “The Third-Party Defendant specifically alleges that the alleged Rider was purportedly signed on or about the 17th day of September, 1958 and that the Third-Party Defendant herein did sign an Application with the Defendant Bonding Company herein on or about the 31st day of October, 1959. That the Defendant Bonding Company in no way indicated to Third-Party Defendant herein that the liability under the warehouse bond in question herein in any way exceeded what was stated on said application or that it exceeded Chapter 543 of the Iowa Code of 1954 and that the Third-Party Defendant herein was never informed of any possible liability involving the Plaintiff. That in no event should the liability of the Defendant to the Plaintiff herein exceed $22,-000.00 and that even in the event Judgment is granted in favor of the Plaintiff as against the Defendant Bonding Company that said Defendant Bonding Company is not entitled to Judgment over and against the Third-Party Defendant, R. L. Madison.” Statements presented by Merchants Mutual Bonding Company and United States of America for pretrial consideration are as follows: “The above case involves the following issues: “1. Whether defendant is liable to the United States of America under the claim made in the complaint. The issue of the liability under the bond itself was decided by Judge Graven in the case of United States v. West View Grain Company, D.C., 189 F.Supp. 482. In this case, Judge Graven held that the Government was not covered by the bond, and the bonding company was not liable under the bond to the Government. However, the West View Grain Company case did not decide the issues of whether the Government could prevail on the basis of estoppel or waiver. “2. Whether the Third-Party-Defendant, R. L. Madison, is liable to the defendant on its coindemnity agreement for any sum in excess of $36,000. “3. Whether defendant is liable to any of the other party-defendants who have claims under the bond issued by defendant. “4. If the Government prevails, is there any priority for its claim over that of the other party-defendants who have claims on the bond? “In the event the Government does not prevail on its claim nearly all the other issues will be resolved because there likely would be no defense against the other party-defendants except for one. On the other hand, if the Government does prevail, then the defendant likely would pay the bond proceeds into Court and require the parties to interplead as to the share of such proceeds to which they might be entitled. For these reasons, the Merchants Mutual Bonding Company suggests to the Court that the claim of the United States first be tried before any of the issues involving the other parties be presented for hearing. It is quite likely that there will be no further litigation once the issue involving the Government’s claim is determined.” At the pretrial conference the parties agreed that the claim of the United States against Merchants Mutual Bonding Company and the indemnifier, R. L. Madison, should be tried before any of the issues involving the other pax-ties were presented and tried. This portion of the cause came on for trial on January 28, 1963. Evidence was offered on behalf of plaintiff, defendant, and third-party defendant, R. L. Madison. The Court also allowed any intex-pleaded parties to present evidence. Defendant, Lee Smith, offered evidence in his behalf and made further statements. The issues raised at this trial were in substance: (1) Is there a contractual liability which has been incurred by the defendants, Merchants Mutual Bonding Co. and R. L. Madisoxi which is now due and owing to the United States; (2) Are the defendants, Merchants Mutual Bonding Company and R. L. Madison estopped to deny any contractual obligations now due and owing to the United States; and, ■ (3) Is there xxow a liability which has been incurred by the defendants, Merchants Mutual Bonding Company and R. L. Madison, under the provisions of Chapter 543 of the Code of Iowa, I. C.A. which is now due and owing to the United States. The parties have filed and answered a number of interrogatories and have made a number of admissions pursuant to requests therefor. The substaxxce of these are as follows: The following are the admissions by Merchants Mutual Bonding Company in the pleadings: That exhibits B, C, and D attached to the plaintiff’s Complaint are true and exact copies of the bond and riders attached thereto; That Merchants Mutual Bonding Company is the surety on the said bond axxd attached riders; and, That no sum alleged to be due the United States from Merchants Mutual Bonding Company has been paid. Admissions in the Interrogatories: Merchants Mutual Bonding Company was requested to execute Rider No. 122,-557, Exhibit C, about September 17, 1958. Mr. Charles D. Isbell of the Is-bell Agency, Correctionville, Iowa, was the person who requested the Rider, Exhibit C, which was executed by M. J. Corbin. The request for the Rider, Exhibit C, was made in writing. The Rider is in the Home Office of Merchants Mutual. The transmittal letter or document which is the request for the Rider, Exhibit C, is in the Home Office of Merchants Mutual. The Rider, Exhibit C, was mailed by Merchants Mutual to the Iowa State Commerce Commission. Merchants Mutual states that the Rider, Exhibit C, was executed because this was requested by the Is-bell Agency. Plaintiff made the following request for admission of fact: “The form of rider appended to the complaint as Exhibit C was presented for execution to defendant Merchants Mutual Bonding Company, Des Moines, Iowa, with a slip of paper attached thereto by a staple, reading as follows: “ ‘Surety bonds filed with the Iowa State Commerce Commission qualify for substitution for bonds to Commodity Credit Corporation provided that the bond filed with the Iowa State Commerce Commission includes a rider providing for ninety (90) days notice to Commodity Credit Corpox-ation prior to cancellation of the bond. A specimen copy of the form of rider required for this purpose is attached. Please obtain the rider from your surety and forward it to this office.’ ” The answer to the request states: “ * * * that the slip of paper referred to therein might have been attached to the rider referred to as Exhibit ‘C’ in the Complaint, but Defendant does not have any record of whether or not such slip of paper actually was attached to said Exhibit ‘C’. Hence, it is unable to definitely confirm that said slip of paper was attached to said Exhibit ‘C’.” It is admitted that the rules and regulations of the Iowa Commerce Commission governing bonded warehouses under Section 543.3, Code of Iowa, I.C.A., are Exhibit G appended to the request for admission. It is admitted that the Correctionville Elevator and Mill was licensed under the provisions of Chapter 543, Code of Iowa, I.C.A., at all times pertinent to the issues of this case, until such license was suspended by the Iowa State Commerce Commission on or about March 28, 1960. It is admitted that no corn, grain, sorghums, soybeans, or other grains were received into the grain storage facility known as Correctionville Elevator and Mill subsequent to April 27, 1960. It is admitted that the form of rider marked Exhibit C was transmitted for execution to defendant Merchants Mutual Bonding Company by the Isbell Agency, Correctionville, Iowa, with an accompanying memorandum, a true copy of which is marked Exhibit L. Exhibit L states: “Will you please execute the enclosed forms in connection with the above bond? “No doubt you are familiar with the way in which bonds filed with the Iowa State Commerce Commission are substituted for the bonds to the Commodity Credit Corporation. We assume that it will be necessary to file a copy of this bond with the rider attached with the Commodity Credit Corporation. If that is the case, please send the copy of the bond to this office and we will have Mr. Yust send it on to the Commodity Credit Corporation with his application. “/s/ Charles D. Isbell.” Admissions of R. L. Madison: That R. L. Madison did execute an Application for Bond with the defendant and Third-Party Plaintiff, Merchants Mutual Bonding Company; and, That R. L. Madison signed and executed bond application shown as Exhibit F attached to the Third-Party Complaint. A portion of Exhibit F reads as follows: “The undersigned further agrees to indemnify and save harmless the said Company for, from and against any and all losses, costs, damages and expenses of every nature whatsoever, including counsel fees and expenses, which may accrue to the said Company by reason of the said Company having become surety on said bond. “The undersigned hereby further agrees that the vouchers or other evidence of payments made by the said Company under its obligations of suretyship shall be conclusive evidence against the undersigned of the fact and extent of the undersigned’s liability to the said Company under said obligation of the undersigned, whether such payments were made to discharge a penalty thereunder, incurred in the investigation of a claim made thereon or adjusting a loss or claim in connection' therewith, or in completing the work covered thereby, and whether voluntarily made or paid after suit and judgment against said Company. * * * ” (Emphasis added) Most significant parts of the admitted exhibits: Excerpts from Exhibit B, the Warehouseman’s Bond: “ * * * lawful money of the United States for the use and benefit of any persons lawfully entitled to receive * * * compensation for damages growing out of the operation of said warehouse under the provisions of Chapter 543. * * *» “The conditions of the above obligation are such that: If the said Martin Vust dba Correctionville Elevator & Mill, Correctionville, Iowa, shall faithfully perform the duties of a licensed warehouseman, in conformity with the provisions of the said Chapter 543, The Code, 1954, as amended By Acts of The 56th General Assembly, * * * upon notice by the Surety by registered mail, to the Principal and to the Iowa State Commerce Commission, and upon refund of premiums paid pro-rated to final cancellation date, obligations of the Surety shall cease at the end of the tenth day after receipt of such notices as to any future acts of the Principal other than such acts as may relate to warehouse receipts that are then outstanding. The obligation as to such outstanding receipts shall continue to the end of the stipulated storage period evidenced by the receipt in accordance with Section 543.23. * * * ” (Emphasis added) “Countersigned in Iowa “By /s/ Chas. D. Isbell “Resident Agent” Exhibit C reads as follows: “RIDER “To be attached to and form a part of Bond No. 122,557 issued by the' Merchants Mutual Bonding Company, Des Moines, Iowa in the amount of $24,000.00, in favor of the Iowa State Commerce Commission, on behalf of Martin L. Yust dba Correctionville Elevator and Mill. “In consideration of the premium charged for the attached bond, it is hereby agreed: “1. In the event the Surety decides to cancel the attached Bond, it shall so notify the Commodity Credit Corporation by Registered Mail addressed to Joseph Haspray, Director, Evanston CSS Commodity Office, 2201 Howard Street, Evans-ton, Illinois, at least 90 days prior to the effective date of such cancellation. “2. This rider shall become effective as of August 6, 1958. “3. The attached Bond shall be subject to all its terms, conditions and limitations except as herein expressly modified. “Signed, sealed and dated September 17, 1958.” Exhibit D shews the principal sum of the bond was increased to the sum of $58,000.00. Exhibit F (the Application for Bond signed by R. L. Madison (contains the following: “ * * * The undersigned further agrees to indemnify and save harmless the said Company for, from and against any and all losses, costs, damages and expenses of every nature whatsoever, including counsel fees and expenses, which may accrue to the said Company by reason of the said Company having become surety on said bond. “The undersigned hereby further agrees that the vouchers or other evidence of payments made by the said Company under its obligations of suretyship shall be conclusive evidence against the undersigned of the fact and extent of the undersigned’s liability to the said Company under said obligation of the undersigned whether said payments were made to discharge a penalty thereunder, incurred in the investigation of a claim made thereon or adjusting a loss or claim in connection therewith, or in completing the work covered thereby, and whether voluntarily made or paid after suit and judgment against said Company. * * * ” (Emphasis added) The United States admits that Form Iowa C.C.W-4 is the form that has been used since enactment of the Amendment to Section 543.1(7) of the Code of Iowa, I.C.A. by the 59th General Assembly. The United States admits with qualifications that Form 33 is the standard form bond of Commodity Credit Corporation. These are attached to defendant’s Request for Admissions. The parties have entered into a stipulation as to the amount of damages incurred by the United States as a result of Martin Vust’s failure to redeliver grain stored by Martin Vust for Commodity Credit Corporation. This has made it unnecessary for the parties to introduce evidence as to the amount of loss sustained in that such loss was actually sustained by reason of Martin Vust’s failure to faithfully perform his agreements with the United States. The stipulation is as follows: “The undersigned stipulate that the damages incurred by the United States of America as a result of the failure of Martin Vust to redeliver to Commodity Credit Corporation all grain stored by said corporation was in excess of $58,000.00. This Stipulation shall not prejudice the right of the United States to establish damages sustained by the United States in excess of the sum of $58,000.00 against other parties to this action by way of interpleader to establish the pro rata share to which the United States is entitled out of the funds available.” This Court is faced with a companion case in this instance which involves United States v. Tyler, D.C., 220 F.Supp. 386, Central Division, and the present case under consideration, No. 1201 Civil, Western Division. United States v. Tyler has not been fully and completely tried. The ruling in that case has been precipitated by a Motion to Dismiss or for Judgment on the Pleadings by Home Indemnity Company of New York, one of the defendants in that cause. Opinions in the two causes are being submitted simultaneously by reason of their identical issues. Due to the elaborate character of the pleadings, the Court feels that the issues, the allegations, and the nature of the case are fully set out and explained. There is no necessity of making any further statement of the case. FINDINGS OF FACT 1. The defendant, Merchants Mutual Bonding Company, assented and agreed to act as surety on the contract for storage between the United States and the surety’s principal, Martin Vust. 2. The United States and the warehouseman entered into a valid contract of storage. 3. The warehouseman breached this contract. 4. Commodity was damaged in an amount in excess of $58,000.00. 5. Commodity relied upon and had a right to rely upon the surety’s assenting to act as surety on the grain storage agreements between Commodity and Martin Vust. 6. Merchants Mutual Bonding Company, by now refusing to act as surety on the grain storage agreements between Commodity and Martin Vust, is taking a position inconsistent with the position taken at the time that the bond, Exhibit B, and the Rider, Exhibit C, were executed. 7. Merchants Mutual Bonding Company intended that Commodity should deposit grain in the warehouse operated by Martin Vust in reliance upon the bond, Exhibit B, and the rider, Exhibit C. 8. Merchants Mutual Bonding Company should have reasonably foreseen such reliance and did foresee such reliance. 9. Merchants Mutual Bonding Company should have reasonably foreseen that Commodity would in reliance on the action taken by Merchants Mutual Bonding deposit grain in the warehouse for which Mutual was acting as surety. 10. . Commodity substantially changed their position as a result of the actions of Merchants Mutual Bonding Company by depositing grain in the warehouse and not demanding any surety other than Merchants Mutual Bonding Company. 11. Commodity had no reason to know Merchants Mutual Bonding Company would refuse to perform as surety on the contracts between Commodity and Martin Vust. 12. Merchants Mutual Bonding Company mislead Commodity by leading them to believe that they were acting as surety on the contracts between Commodity and the warehouseman, Martin Vust. 13. The Court further finds that on Exhibit B Merchants Mutual Bonding Company held out Charles D. Isbell to be their resident agent. CONCLUSIONS OF LAW ADDITIONAL CONTRACTUAL LIA- ■ BILITY: Defendant, Merchants Mutual Bonding Company, contends that their liability and obligation can rise no higher than that which can be predicated upon the statutory bond which is required by Iowa law for warehousemen under Chapter 543 of the Iowa Code, I.C.A. as such statute existed at the time the agreements in question were made. The defendant alleges that under the statutory bond required by this Chapter as it then existed, a surety on the bond would have no obligation to insure the warehouseman’s faithful performance contracts for storage of grain with Commodity Credit Corporation. If, for the moment, this allegation of Merchants Mutual Bonding Company is taken as correct, but that Merchants Mutual Bonding Company did actually agree to act as surety for Martin Vust on the grain storage contracts between Martin Vust and Commodity, then and in that event, the surety would have taken on an obligation additional to those obligations required of it under the bond issued pursuant to Chapter 543, Code of Iowa, I.C.A., as it then existed. This raises the question as to whether this obligation additional to the obligations in the statutory bond is enforceable or whether a statutory bond should be limited to the obligations required by the statute despite a broader intention by the parties involved. Iowa law controls as to what the Iowa statute was intended to mean. However, federal law controls the rights of Commodity under its contracts. United States v. McCabe Co., 261 F.2d 539 (8th Cir., 1959). The law is settled that a surety is bound by what he has assented to. Mundy v. Stevens, 3 Cir., 61 F. 77; Leach v. Commercial Sav. Bank, 205 Iowa 1154, 213 N.W. 517, 527; United States v. McMullen, 222 U.S. 460, 32 S.Ct. 128, 56 L.Ed. 269 (Holmes, J.) R.S. of Surety, Secs. 83, 85, 88. The undertaking of a paid surety engaged in that business for profit is considered by the Iowa Court to be controlled by the rules applicable to insurance contracts rather than by rules applied to an accommodation surety. Rowe v. Stufflebeam, 249 Iowa 985, 89 N.W. 2d 875, 878, 879. The same rule was applied in Massachusetts Bonding & Insurance Co. v. Feutz, 182 F.2d 752 (8th Cir., 1950). The court said: “The defendant, however, is a compensated surety and in the construction or interpretation of the contract of such a surety the contract is construed most strongly against the surety and in favor of the indemnity. Such a contract is to be regarded as in the nature of an insurance contract governed by the rules applicable to insurance contracts * * In the present case, the meaning of the bond and the rider is ambiguous because the meaning of the rider which is part of the bond must be reconciled with the surety’s allegation that the United States cannot sue on the bond. There are also a number of other ambiguities that must be interpreted. Was the notice in the rider to supplement the notice in the bond wherein Section 543.23 is referred to? Also, what is the significance of the specific reference to Section 543.23? When the condition states “ * * * shall faithfully perform the duties of a licensed warehouseman * * * ”, does this mean all of the warehouseman’s duties under the statute or does this in some way mean a limited number of his obligations ? It is clear from the statute that the warehouseman has obligations to all depositors and that the United States can be a depositor. When the bond refers to “ * * * warehouse receipts that are then outstanding * * * ”, does this mean all of the warehouse receipts of the warehouseman then outstanding? When the bond refers to “ * * * obligations as to such outstanding receipts shall continue * * * in accordance with Section 543.23 * * * ”, does this mean all warehouse receipts referred to in Section 543.23? Is that part of the bond which reads: “ * * * for the use and benefit of any persons lawfully entitled to receive the * * * compensation for damages growing out of the operation of said warehouse under the provisions of Chapter 543 * * * ” inconsistent with the other parts of the bond mentioned above? Also, the Court must give meaning and reason to the rider. Why did Commodity Credit Corporation ask for the rider? Why did Merchants Mutual Bonding Company grant the rider? In relation to Exhibit D, why was the principal sum of the bond raised to §58,000.00? Recourse must be had to the circumstances and other documents known to all parties in order that the Court may determine their intent. Peterson v. Miller Rubber Co., 8 Cir., 24 F.2d 59; Massachusetts Bonding & Insurance Co. v. Feutz, supra. A contract of suretyship is normally between the surety and his principal; in this case, Martin Vust and Merchants Mutual Bonding -Company. The obligee or beneficiary,- in this case Commodity, is in the nature of a third-party beneficiary. The surety is bound to those obligees or beneficiaries that he has assented or agreed to be bound to. In this case, the question is whether the bond, the rider, and the other circumstances show that the surety agreed to be bound to .the United States. The standard used to determine whether or not this agreement was made is an objective one. The rule is well known. Castor v. Coppock, 211 F. 2d 136 (8th Cir., 1954); Corbin on Contracts, Section 104; Restatement of Contracts, Sections 233 and 228. See also Comment (a) of Section 228 in Restatement of Contracts and the Comments under Section 228 in Iowa Annotations to Restatement of Contracts. Also Section 622.22 of the Iowa Code, I.C.A. This rule is that Merchants Mutual Bonding Company is bound by that meaning of its words which it knew or had reason to know that the other parties would give to the words. This rule applies where the intention of the parties is unclear, or in the words of the Restatement, where there is no integration. There is no integration in the present case. The bond designates the beneficiaries unclearly. It designates them as those to whom duties are owed under Chapter 543 and as those who may lawfully receive compensation for damages out of the operation of the warehouse under Chapter 543. Also, because of the rider, there is evidence that they specifically intended that Commodity was to be a beneficiary under the bond. It may be that if the bond, Exhibit B, alone was being interpreted, this standard of interpretation would not be used, but in order to determine whether Merchants Mutual expressly agreed that the United States was to be a beneficiary under the bond, the bond itself, the rider, Exhibit L, and the surrounding circumstances must be considered and the standard of interpretation which must be used is that statement set out above in Castor v. Coppock, supra, and the other authorities cited. But see also R.S. of Contracts, Sec. 231. The present case takes on some of the aspects discussed by Corbin on Contracts, Sections 792 and 793. These things bothered Corbin when used only to get around a requirement of privity, but in this case, this theory fits the facts of the case. Certainly; there is no reason why the beneficiary cannot make a direct agreement with the surety. R.S. of Surety 83, 85, 88. Charles Isbell was the agent of Merchants Mutual who requested that this rider be attached to the bond. The notice to the agent is notice to the corporation and the knowledge of the agent is the knowledge of the corporation. M.F.A. Mutual Insurance Co. v. Jackson, 271 F.2d 180 (8th Cir., 1959); Schram v. Burt, 6 Cir., 111 F.2d 557. There is no question but that Charles Isbell had knowledge of the thinking of Commodity Credit Corporation when they requested the rider be attached to the bond. This is shown by Exhibit L which Merchants Mutual admits was sent to them by Isbell with the request for the rider. Exhibit L is evidence that Commodity intended and believed it was to be covered by the bond. This admission shows that Merchants Mutual and Isbell had actual knowledge of what Commodity was thinking and intended in this respect. In Fidelity & Deposit Co. of Md. v. State of Montana, 9 Cir., 92 F.2d 693, at p. 697, the court said: “The agent of the appellant was shown to have been familiar with the nature of the business conducted by Chatterton & Son and with the fact that its Billings warehouse was used solely for the handling and storage of beans. There is persuasive evidence that the parties intended to execute a bond for the protection of those using the warehouse for that purpose. Indeed, if that was not the purpose of the instrument, it served no purpose at alb Since the bond was written up on a printed form obtained by appellant’s agent from the State of Montana, it is easy to understand how the mistake occurred resulting in the failure of the instrument to express the true intent of the parties.” Merchants Mutual Bonding Company has placed some emphasis on the fact that a new form of bond is now being used by Commodity in Iowa. This casts no reflection on what the intent of the parties was concerning the bond now being interpreted. It only makes sense and is good draftsmanship for a party who has been forced into much litigation over a problem to write its subsequent agreements so as to be sure of avoiding the problem which resulted in the litigation. The reason no express written agreement was made between the parties showing that they all intended that Commodity was to be covered by the bond is undoubtedly because they all at that time believed the United States was already covered by that bond, and could sue on the bond under Section 543 of the Iowa Code, I.C.A. There are a number of reasons why the Court feels the bond, Exhibit B, itself shows that the parties intended the United States was to be covered by the bond before the rider, Exhibit C, was ever signed. The Court takes note of the fact that the bond itself makes special reference to Section 543.23. The bond states that if the surety shall desire to cancel the bond, it would remain in effect as to outstanding receipts in accordance with Section 543.23. Section 543.23 deals with termination of storage contracts. This Section states that a storage contract shall have a forced termination : “On termination or lawful cancellation of bond provided and failure of the warehouseman to immediately replace same.” Section 543.24 says that “In the event of forced termination of a storage contract as provided in section 543.23, the warehouseman shall provide such reasonable opportunity as the circumstances will permit for the depositor or other person entitled to delivery of the storage products to take possession of the storage product.” The reasonable interpretation of this part of the bond is that the warehouseman did not want his storage contracts all terminated if the surety would suddenly terminate its bond. When you say that the United States is not covered by the bond, you are saying that when “receipt” is mentioned in the bond, it means all the receipts referred to in Section 543.23 except the United States receipts. This exception is not expressed but unless it is construed to be in the bond, the phrase “storage contract” in Section 543.23 cannot include the United States storage contracts and the word “depositor” in Section 543.24 cannot include the United States. In other words, to conclude that the United States is not covered by the bond is to conclude either that no duty is owed to the United States under Sections 543.23 and 543.24, or it is to conclude that the obligations owed to the United States by the warehouseman are greater than the obligations owed to the United States by the warehouseman’s surety. There are able reasons why neither of these latter two conclusions could have been intended. First, the condition of the bond states that it will guarantee the duties of a licensed warehouseman in conformity with the provisions of said Chapter 543. Here again you would have to say either that it does not cover duties owed to the United States or that no duties are owed under these statutes to the United States. Secondly, you cannot help reaching the conclusion that there are duties under Chapter 543 which can be owed by warehouseman to the United States. Section 543.28 shows that it is contemplated that the United States would be a depositor in the licensed warehouse. Section 543.18 states that warehouse receipts shall be issued for all agricultural products that become storage in a licensed warehouse. This conclusively shows that when the United States (as contemplated in Section 543.28(3)) becomes a depositor, a receipt must be issued to the United States. Section 543.-18(3) states that this receipt must be issued subject to the Iowa Bonded Warehouse Act and the rules and regulations prescribed thereunder. This is conclusive that duties can be owed by the licensed warehouseman to the United States. When the surety, the warehouseman and the depositor entered into this bond, they could hardly have intended the surety to have fewer obligations to the depositor than the warehouseman. Yet, if you say that the United States is not intended to be covered by this bond, that is the distinction in obligations which must be read into its guarantee of the warehouseman’s performance. Under Section 543.23, a storage contract has a forced termination if the bond is cancelled and is not immediately replaced. Therefore, if the United States storage contract was not covered by the bond it did not, in this particular case, have lawful existence under this statute. Section 543.24 talks of the depositors under the storage contracts which are considered in 543.23. It seems clear that Section 543.23 meant storage contracts to exist only when insured and bonded. The only way they could exist is if “storage contract” in Section 543.23 does not include United States storage contracts. No one knew at the time this bond was executed what meaning would be given to Section 543.14 by the courts as it had not been previously interpreted. The bond does say that it is for the use and benefit of any persons lawfully entitled to receive compensation for damages growing out of the operation of said warehouse under the provisions of Chapter 543. If the United States is not a person in this clause, it is inconsistent with literal words of other parts of the bond. Certainly when this Section is considered, when the other language of the bond is considered, and Exhibits C and L are considered, it was reasonable for Commodity to believe that the United States was intended to be covered by the bond. Having now decided that Merchants Mutual Bonding Company is held to have agreed to act as surety on the Grain Storage Agreements, the next question is whether or not this agreement is enforceable if it is an obligation not contemplated by Chapter 543 of the Iowa Code, I.C.A. The rule is that where a bond was by mistake or otherwise voluntarily substituted by the parties for the statutory bond, it is enforceable notwithstanding the statute required different obligations than the parties intended and contracted for. Indemnity Insurance Co. of North America v. United States, 5 Cir., 74 F.2d 22; United States v. Tingey, 5 Pet. 115, 30 U.S. 115, 128, 8 L.Ed. 66; United States v. Hartford Accident & Indemnity Co., 2 Cir., 117 F.2d 503; National Surety Co. v. Peoples Milling Co., D.C., 57 F.Supp. 281; Southern Surety Co. v. Dawes, 161 Ga. 207, 130 S.E. 577; Robinson Clay Product Co. v. Beacon Const. Co., 339 Mass. 406, 159 N.E.2d 530; Hartford Accident & Indemnity Co. v. United States, 127 F. Supp. 565, 130 Ct.Cl. 490; State ex rel. Bronteager v. Mundy, 53 N.D. 249, 205 N.W. 684; United States v. Continental «Casualty Co., 139 F.2d 770; Osceola County v. Michigan Surety Co., 264 Mich. 8, 249 N.W. 445, 450, 4 Cir., 88 A.L.R. 636 (concurring opinion); Cases on this subject are collected in 18 A.L.R. 1227 and 93 C.J.S. Warehousemen & Safe Depositaries § 15, p. 414. In a number of these cases, the variance from the statute was more than a mere matter of form, e. g., Southern Surety Co. v. Dawes, supra; Hartford Accident & Indemnity Co. v. United States, supra. In most of these cases cited, the variation from the statute was apparently by mistake. In Southern Surety Co. v. Dawes, supra, the variation was that the parties intended beneficiaries other than the statute. In Hartford Accident & Indemnity Co. v. United States, supra, the court said that the statute was for the benefit of the United States and that the surety couldn’t complain of the deviation. It is to be noted that in that case, the statute would have apparently prevented the Government from assessing liquidated damages against the surety. Nonetheless, the court was probably applying the correct rule. The party for whose benefit the statute existed is the only party that should be able to complain about its deviation from the statute. In the present case, Chapter 543 was not written for the benefit of surety companies. It was written for the benefit of depositors. See Fidelity & Deposit Co. v. Montana, supra. In National Surety Co. v. Peoples Milling Co., supra, the court said the contract controls unless some principle of public policy is violated. Of course, the statute can be read into a statutory bond, but this does not mean that the bond cannot have obligations in addition to those of the statute. If Merchants Mutual Bonding Company did agree to act as surety on the government contracts, then even if this obligation is in addition to the obligations required of the surety under the statute, the effect of the statute upon this additional obligation in favor of Commodity would be governed by the rule of United States v. McCabe Co., supra. In that case, the court said that the rights of Commodity cannot be limited by a state statute or state rule of law. The court said that CongTess had no intention to make the rights of Commodity subservient to state law. Therefore, if the agreement is an obligation of the surety in excess of the obligations required by the statute, the obligation is not predicated on the statute and the statute has no effect in preventing the enforcement of the obligation. There is no indication that the Commodity Credit Corporation intended that it should be bound by any state law in enforcing its contracts. Based upon the facts in the record and upon the law as cited, .the. Court concludes that Merchants Mutual Bonding Company must be held to have assented and agreed to allow Commodity Credit Corporation to be a beneficiary on its bond shown in Exhibit B. The Court further concludes that the assent and agreement give Commodity enforceable rights against Merchants Mutual Bonding Company notwithstanding any possibility that these rights might not have been conferred by Chapter 543 of the Iowa Code of 1958, I.C.A. ISSUE OF ESTOPPEL-. The United States also alleges that the surety is estopped from asserting that the obligations under the statute are different from the obligations arising out of the agreement among the parties by which the surety assented to act as surety on the grain storage agreements between Martin Vust and Commodity. Estoppel does not create a contract but the general rule is that if in making a contract, the parties agreed upon or assumed the existence of a particular fact as the basis of their negotiations, they are estopped to deny the fact as long as the contract stands, in the absence of fraud. Triphagen v. Labbe, 332 Mich. 583, 52 N. W.2d 226 (1952); 19 Am.Jur. 634, Sec. 34; Woodard v. General Motors Corporation, 298 F.2d 121 (5th Cir., 1962). This rule has been applied where the fact assumed was a question of the interpretation of a statute. Carroll v. National Surety, 58 App.D.C. 3, 24 F.2d 268; Sisseton v. Western Surety Co., 50 S. D. 205, 208 N.W. 982; Bell v. Kirkland, 102 Minn. 213, 113 N.W. 271; Fidelity & Deposit Co. v. Madson, 202 Wis. 271, 232 N.W. 525; American Surety Co. of N. Y. v. City of Aleron, 6 Cir., 95 F.2d 966; Hartford Acc. & Indemnity Co. v. United States, supra. All the elements of estoppel are present in this case. The parties assumed that the United States was covered by the statutory bond and contracted on that basis. They cannot now deny what was the very basis of the agreement. The cases cited show that when the parties had contracted assuming the law allowed the contract ■ to be enforced, they cannot then, after the other party has fully performed, escape their performance by claiming that the law made the contract invalid. Even if the surety company is presumed to know the law (see Fidelity & Deposit Co. of Md. v. Montana, supra, 92 F.2d p. 697), this is all the more reason for an estoppel as they would then fully realize that Commodity was being mislead to its prejudice. ACTION BASED UPON CHAPTER 543, CODE OF IOWA, I.C.A.: This third issue is of great concern in the ultimate disposition of this type of case. Here we have the construction and interpretation of a legislative enactment as proclaimed in Chapter 543 of the 1958 Code of Iowa, I.C.A. In addition to this, the Court is faced with the persuasive and scholarly opinion written in United States v. West View Grain Company, D.C., 189 F.Supp. 482. At one juncture, the eminent trial court mentioned a citation of the Iowa Supreme Court, as follows, to-wit: “To sustain plaintiff’s argument would be to hold the legislature did not mean to say what the language it used plainly means. It is pertinent to repeat here the much quoted admonition of the late Justice Oliver Wendell Holmes, ‘We . do not inquire what the legislature . meant. We ask only what the statute means.’ * * * ” . Many statements have been made with relation to the search for legislative intent. It has been referred to as being elusive. This reference amounts to understatement in the case at hand. The great jurist Hand has indicated that a search for legislative intent constitutes a reason for the existence of judges and indicated, in his words, that to find it constitutes a “delightful uncertainty.” • ■ The ruling in the West View case, supra, is purely confined to the matter of an interpretation of the statute, the court in’-'said' cáuse having stated that there were-other phases which were to be determined later. The other phases have been raised in this cause in the first two issues indicated. The West View case was closed in such a manner as never to result in a final appealable order. This was so by reason of the matters left undetermined and by reason of settlement. Merchants Mutual Bonding Company claims that under a proper statutory construction, Chapter 543 of the Code of Iowa, I.C.A. as it existed at the time of liability on any bond given by them excluded the United States as an entity entitled to bring action for recovery on said bond. Actually, the entire Chapter must be looked upon for proper consideration of the ultimate result reached herein. The legislative history as proclaimed in the West View case, supra, indicates the various steps and changes made from time to time since its enactment except since the time of the decision, the decision having been rendered on December 2, 1960. On March 6, 1961, at the very next session of the Legislature subsequent to the rendering of this decision, Chapter 267 of the Laws of the Fifty-Ninth General Assembly, being House File 49, was enacted. The statute as it existed prior to March 6, 1961, is hereinafter set out and the Chapter as it is today and subsequent to March 6, 1961, is hereinafter set out. In practically all instances, and in particular as the present statute was enacted in Chapter 246 of the Laws of the Fiftieth General Assembly, the title has been “Bonded Warehouses for Agricultural Products Act.” It has in most instances been referred to as relating to bonded warehouses for agricultural products. The Act itself removes any doubts as to its purpose whatsoever. The pertinent provisions of the Iowa Code, I.C.A. as indicated prior to March 6, 1961, were provisions in being at the time of the allegations of liability in this cause as follows, to-wit: “543.1 Terms defined. As used in this chapter: * * * 7. ‘Person’ shall mean an individual, corporation, partnership, or two or more persons having a joint or common interest in the same venture, but shall not mean the United States or Iowa state government or any subdivision or agency of either. * * * ” “543.12 Bond required. Any person applying for a license or licenses to conduct a warehouse or warehouses in accordance with this chapter shall, as a condition to the granting thereof, execute and file with the commission a good and sufficient bond, other than personal security, to secure the faithful performance of his obligations as a warehouseman under the terms of this chapter and the rules and regulations prescribed hereunder, and of such additional obligations as a warehouseman which may be assumed by him under contracts with depositors of agricultural products in such warehouse. Any person applying for an amended license under the provisions of section 543.8 shall, as a condition to the granting of the amendment to his license, file such additional or substituted bond or such amendment to a bond already on file as will result in a bonded liability in total effect equivalent to the bonded liability which would be required if such person were applying for an original license for the storage of agricultural products of types and in amounts specified in the application for an amended license.” “543.14 Action on bond. Any person injured by the breach of any obligation of a warehouseman, for the performance of which a bond has been given under any of the provisions of this chapter, may sue on such bond in his own name in any court of competent jurisdiction to recover any damages he may have sustained by reason of such breach.” “543.17 Acceptance of bulk grain for purposes other than storage. * * * Provided, however, that in each instance of a deposit of grain by the United States government or any subdivision or agency thereof, a period of thirty days shall be permitted in each instance where a period of ten days is above specified, and action which is specified above to be taken on the tenth day, shall be taken on the twenty-ninth day.” “543.19 Rights and obligations ■with respect to warehouse receipts. * * * and privileges of licensed warehousemen and other persons dealing with such warehousemen.” “543.24 Sale of products in the event of forced termination. In the ■event of forced termination of a storage contract as provided in section ■543.23, the warehouseman shall provide such reasonable opportunity as the circumstances will permit for the depositor or other person entitled to delivery of the storage products to take possession of the storage product.” “543.27 Discrimination. * * * without making any discrimination between persons desiring to avail themselves of warehouse facilities.” “543.28 Rates. *' * * Provided, however, that a storage or delivery charge other than that specified above may be made, if such charge is required by the terms of a written contract with the United States government, any of its subdivisions or agencies, providing copy of such contract is filed with the commission. * * *-» These and other provisions of the statutes may from time to time be referred to. After the decision in the West View case, supra, which occurred on December 2, 1960, and thereafter and on March 6, 1961, the following provisions of the Code as it relates to Chapter 543.1, subsection 7, is now as follows, to-wit: “543.1. * * * 7. ‘Person’ shall mean an individual, corporation, partnership, or two or more persons having a joint or common interest in the same venture, and, except with respect to the privilege of operating a warehouse under this chapter, shall include the United States or Iowa state government, or any subdivision or agency of either. * * * ” The above set out sections of the 1958 Code of Iowa, I.C.A. under the titl