American Pig Iron Storage Warrant Co. v. German

126 Ala. 194 | Ala. | 1899

SHARPE, J.

This case is the remaining one of four suits at one time pending between the Alabama Iron & Steel Company and. its creditors, in vrhieh .there wras a common receivership. The other three suits have each been dismissed without trial, but the receivership, together with certain intervening claims to property in the recever’s charge, still survives to be disposed of with this suit. i

The litigation originated under circumstances substantially as follows: The Alabama Iron & Steel Company, a domestic corporation, was, for several years, engaged in the manufacture and sale of charcoal pig iron. The appellant, the American Pig Iron Storage Warrant Company, a corporation having its principal office in New’ York city, did a warehouse business which consisted mainly in the storage of pig iron. Its yard, No. 38, was located near the furnace of the Alabama Iron & Steel Co. (winch we will refer to hereafter as the Furriaee Company) near Briarfield, Ala., and was divided into three •sections, designated respectively as “A,” “B,” and “C.” Under its regulations iron, when stored in it was placed in separate piles, each containing one hundred tons, and marked with letters to identify its location, and with figures to designate its grade. For each of these hundred ton lots the local yardmaster gave to the depositor his certificate, and upon that certificate, when forwarded to the New York office, the Storage Company issued to whom the Furnace Company might direct its several warrants for each of such lots, which warrants described the iron covered by it, and stipulated that “this company has received into its storage yard, located as above, and entered in its storage books in New York in the name and subject to the order of (name of holder) one hundred tons of 2,240 pounds each of pig iron of the brand, grade and weight represented by this warrant, which will be delivered free on board cars in the yard above named, only on surrender of this warrant at the New York office, properly endorsed and witnessed, with payment of charges as noted -below.” The storage yard system was availed of by the Furnace Oomjxmy for the purpose of borrowing money on the security of its unmarketed iron, the warrants for which could be conveniently used as evidence of a pledge of iron to secure its notes. In some instances of borrowing the Storage Company and its yard were not resorted to, and the iron was delivered elsewhere in pledge to the lender independently of the Storage Company. Besides other investors who from time to time made loans to the Furnace Company upon the security of storage warrants, was the Storage Company itself. In this way it became the pledgee of its own warrants, representing about 2,100 tons of iron in its yard 38.

Until May 26th, 1894, E. T. Peter was the Storage Company’s local yardmaster. He was also a director in and the manager of the Furnace Company. On May 21, 1894, he, as a director in the Furnace Company, claiming to act by authority of its board of directors, filed a bill .against that 'company and one of its creditors, alleging .among other things its insolvency and consequent inability to continue business, and praying among other things for the appointment 'of a receiver of its property -and for the adjustment of its debts.

Under that bill T. J. Peter, who was the president of •the Furnace Company, and the father of that complain•ant, was appointed receiver, and as such took charge of ■rhe Furnace Company’s unpledged property, and' subsequently where a question arose ■ involving the validity-of the warrant pledges, he, acting under orders of the court, took charge of the Storage Company’s yard and the iron therein, consisting of about 10,300. tons. .

The filing of that bill was followed by the filing in the same court of three others including..the .present one, wherein different creditors of the Furnace Company sought to reach its property, one of them charging that the first suit was brought collusivelv to hinder creditors. 'To each of these suits the receivership was extended under chancery rule 112. While they were pending two ..intervening petitions were filed, one by E. H. Pfaff, setting up a claim as pledgee of the Furnace Company to 700 tons of iron held by the receiver in the storage yard, and the other by L. and E Lamar, Minthorne Woolsev and Frank Moore claiming a lien by receiver’s certificates on iron manufactured by the receiver.

From a decree on demurrer to one of the original bills an appeal was taken and was determined in this court. See McKeever v. Ala. Iron & Steel Co., 112 Ala. 134.

In October, 1897, each of the original suits except the present one was dismissed without trial but without prejudice to the intervening petitions referred to; and they, together with this suit, were tried and decreed on jointly, and are jointly involved in this appeal.

During the pendency of the several suits, upon petitions of the appellant Storage Company and other warrant holders, orders of'court were made and carried into effect, paving the several warrant holders .except the Storage Company, by sales to them of the iron appar•entlv covered by their respective warrants. Under the .same decretal orders, the Storage Company was likewise paid in part but 1,300 tons of iron was reserved to' abide the final decree, 700 of same to stand in lieu of that claimed under this original bill, and the remainder in lieu of that claimed by the interveners.

Joseph Verchot brought this suit and thereafter lie having died, it was revived, in the name of his executrix.. It seeks to enforce a pledge of 700 tons of iron alleged (o have been made to him by the Furnace Company as security for money loaned on its seven notes each reciting a pledge of 100 tons of designated iron and further reciting that “any excess in the value of said collaterals or surplus from the sale thereof beyond the amount due hereon shall be applicable upon any other note or claim held by the holder hereof against us now due or to become due or that may hereafter be contracted.” It is alleged in substance that after the iron was so delivered in pledge it was under the direction of the furnace company’s president wrongfully removed into the storage warrant yard where interests in it were claimed by other parties defendant.

The demurrer to the bill was properly overruled. Verchot not, having possession of the iron could not pursue the ordinary way of enforcing his security bjr a sale of the iron, and his sale if it could be made would be embarrassed by the conflicting claims upon it. In such case equity has jurisdiction to determine the rights of rival claimants and to enforce the pledge by judicial sale.—3 Pom. Eq. Jur. § 1231; 18 Am. & Eng. Encyc. Law, 674; Sharp v. Bank, 87 Ala. 644; Freeman v. Freeman, 17 N. J. Eq. 44.

There was nothing in the pendency of other creditors* bills to preclude him from proceeding by original bill instead of by intervention under those bills.—McKeever v. Ala. Iron & Steel Co., supra.

, The statutes requiring chattel mortgages to be in writing and 'authorizing their registration have no application to a pledge. A pledge differs from a mortgage in that the pledgee must have possession"and the pledgor the legal title of the property, while a mortgage passes the title to the mortgagee and may allow possession to-remain in the mortgagor.—Jones on Pledges, §§ 4, 7; Geilfuss v. Corrigan, 37 L. R. A. (Wis.) 166.

Notice to the public of the pledgee’s interest in. the-property is sufficiently given by the possession which m us t resi do in the pledgee. Such possession,, however, to. be effective either for notice or to give validity at law to the pledge must be complete, unequivocal and exclusive of the pledgor’s possession in his own right. Jones on Pledges, § 40; Casey v. Cavaroo, 96 U. S. 467; First Nat. Bank v. Caperton, 74 Miss. 857; 60 Am. St. Rep. 540.

As bearing on the question of what constitutes such possession the reported cases are numerous; but those* which can be relied on as express authority are few, since each case is determined upon its- peculiar facts.

In this case it is clearly proven that under the agreement of pledge between the Furnace Company acting by its president and Verchot, a particular spot of ground belonging to that company and located apart from its own iron yards ivas tendered by the president and accepted by Verchot for his use and that a quantity of iron was placed thereon, piled in 100' ton lots and marked with paint with Verehot’s initials. There is nothing to show that-any power was reserved or allowed to the Furnace-Company or its officers or employes either-to repledge, sell, use, or have charge of the iron after it was so placed.

It was not essential for the delivery to be made at the* time of the contract and the pledge took effect upon subsequent delivery made in performance of the contract. Nobles v. Christian-Craft Grocery Co., 113 Ala. 220; Denis on Contracts of Pledge, § Í36. Considering the character of the property involved, its delivery must be taken as vesting complete possession in Verchot thereby validating the pledge. The cases of Allen v. Smith, 10 Mass. 308, and Summer v. Hamlet, 12 Pick. (Mass.) 76, may be referred to as analogous in principle.

It is proven that T. J. Peter, president of the Furnace Company, had active charge of its affairs and that by his-direction iron was taken from the Verchot yard and placed in the Storage Company’s-yard, and there is nothmg to show that Yerchot ever authorized or ratified such •removal excepting a statement attributed to T. J. Peter, which is hearsay and for that reason incompetent as -evidence. There is, however, evidence tending to show that contrary to the Storage Company’s printed rules its yard master had in some instances given certificates 'upon which warrants were issued to and pledged by the Furnace Company representing deposits of iron in the ■storage.yard before, they were actually made. .The, necessity for supplying the shortage thus created for which E. T. Peter, the yard master, might have been ‘held responsible to the Storage Company, furnishes a probable motive for so using the iron ’ in -controversy. It may be that the Peters expected that Yerchot would ratify such removal upon restitution made to him from iron to be manufactured, but there is no proof .of such ratification. On the contrary,-there is evidence tending 'to show that on being-informed of the-removal he objected and held to his original contract.

As to the quantity of iron delivered to Yerchot on the yard assigned to him and likewise -as to the quantity ' thence removed into the. Storage Company’s yard the -evidence is not clear. Those matters being" referred to the register he ascertained that the entire 700 tons were so delivered and removed. The testimony is not in accord as to the quantity removed, neither does it accord as to the time of removal, and the weighing books in -evidence are not shown to have been accurately kept. The testimony can be best harmonized upon the supposition that removals in different quantities occurred at ■different dates and that all of such acts of removal were not known to each witness. So viewed the evidence supports the register’s findings.

The demurrers to the intervening petitions show no tenable grounds. Such petitions are not required to conform to all the technical rules applicable to pleading as between the principal parties. When filed by leave -of court other parties in interest are entitled to notice and an opportunity to defend, hut the petition need not name them as -defendants and it needs n© formal prayer lor process. •

Pfaff’s petition presents a case for the most part similar to that of Verchot. He claims- as the holder -of notes containing agreements for pledges of iron as collateral security transferred to him by C. S. Plumb who is alleged to have made loans thereon to the Furnace Company aggregating $5,000. There is evidence amply supporting the petition and showing that pursuant to the contracts, iron was set -apart to Mrs. Plumb by being-placed upon a spot of ground leased to her by the Furnace Company for that purpose, and was there marked with initial of her name. There is no evidence of any right reserved or allowed to the Furnace Company or any •one connected with it to thereafter use or exercise any control over the iron. This delivery vested Mrs. Plumb with possession and in that respect fully executed the pledge contract.

It was ascertained by the Register upon a reference that 300 tons of iron was by direction of the Furnace Company’s president removed from the Plumb yard into the Storage Company’s yard and that 200 tons of same remained on that yard the warrants -describing same being held by the Storage Company, and that a warrant describing the other 100 tons ha-cl been issued to an innocent holder for value, and that this last mentioned 100 tons had been removed from the State but that there had been another 100 tons substituted and held in lieu of it in the storage yard.

Though a pledgee does not acquire the legal title to the pledged property, and though relinquishment of his possession will ordinarily defeat the pledge, yet the pledgor cannot accomplish such defeat by wrongfully retaking possession—Way v. Davidson, 12 Gray (Mass.) 466; Palmctag v. Doutrick, 59 Cal. 154. Verchot and Mrs. Plumb, in-whose place Pfaff now stands, being without fault, might have recovered possession from the Furnace Company when the iron was taken by it or its representatives from their respective yards; and the same right of action lay against the Storage Company after it was held in its .yard.- Neither the .Storage.Company nor its .warrant'holders, either with or without notice of the pledge,'could acquire any'greater interest than their transferor the Furnace Company had, which was only to have the property after satisfaction of the debts it was pledged to secure.—Burton v. Curyea, 40 Ill. 320, 89 Am. Dec. 350; Solomon v. Bushnell, 11 Oregon, 277, 50 Am. Rep. 475. The statute—Code, § 4222—regulating the issuance of warehouse receipts was not intended to -confer rights upon their holders prejudicial to one whose property is stored without authority. Commercial Bank v. Hurt, 99 Ala. 130.

The Lamar, Woolsey and Moore petition involves only matters pertaining to the receivership. Receiver’s certificates were issued by T. J. Peter the first receiver, pursuant to a decretal order authorizing him to borrow money thereon, to pay charges and make repairs on the furnace property and to convert accumulated raw material into iron, and providing that the certificates should be a lien on the iron to be made by the receiver and its proceeds. These petitioners intervened in the original suits as owners of certain of these certificates, for the protection and enforcement of their respective liens on the remaining receiver m)ade iron, which except about 40 tons they -alleged had been wrongfully placed in the Storage Company’s yai$ by1'the receiver.

Upon a reference to the register he- ascertained that about 300 tons of the receiver made iron had been so placed during the administration of receiver Peter. After examination of the evidence taken and reported by the register, we cannot affirm that he-erred in this conclusion. Upon that and other issues submitted to the register evidence documentary and oral was taken and appears voluminously in the record. It would be profitless here to discuss it in detail or to pass specifically upon objections to parts -of the-evidence. The rule is settled that the admission by the register of incompetent testimony, will not reverse a -decree which i-s supported by competent testimony, and that the findings of the register upon testimony taken before him will not be set aside when like testimony would support-a jury’s verdict .

Whether the chancery court has power in cases like the present to subordinate pre-existing liens to those of receiver’s certificates is a question referred to in argument, but it does not arise liere. The storage, warrant holders had no lien on the receiver made iron. . The receiver was given no power to create liens in their favor.

To preserve.andmake valuable the Furnace Company’s property the court had power in the interest of that company and its creditors to direct the discharge of threatening incumbrances and to have its accumulated raw material changed into a marketable product. Beckwith v. Carroll, 56 Ala. 12. It could authorize its receiver to contract debts for such purposes even without the issuance.of certificates and to make them a charge upon the furnace property.-Thornton v. H. A. & B. R. R. Co., 94 Ala. 353. It had likewise power to designate a mode for borrowing and for repayment of the money out of the iron to be manufactured by its use, and to transfer the lien so created to other iron which by the order of the court, acquiesced in and acted upon by the parties, had been substituted for that allowed to be removed from the yard.

We discover nothing inequitable in the apportionment made by the decree of expenses incident to the receivership. The evidence shows that those expenses were reasonably incurred by the receiver chiefly in affecting the issuance and registration of the second series of receiver’s certificates issued at the instance of the appellant Storage Company among others, and in employing a watchman to guard not only the furnace property but iron in the storage yard which may have been as expressed by the appellant’s petition for its sale “in danger of being taken away by irresponsible parties.” It was proper to prorate such expense between the two companies according to the value of their respective properties needing such protection.

In the matters assigned for error there is nothing which should reverse the decree. It will be affirmed at cost of the appellant Storage Company..