The following opinion was filed February 23, 1897:
ViNslow, J.
The so-called storage warrants were not warehouse receipts, either under the laws of Pennsylvania ■or of Visconsin. In order to be such, they must be issued by a warehouseman or one openly engaged in the business of storing property for others for a compensation. 1 Brightly’s *664Purd. Dig. (12th ed.), 165, § 1; Bucher v. Comm. 103 Pa. St. 528; Shepardson v. Cary, 29 Wis. 34. And the fact that the receipt was executed by a warehouseman must affirmatively appear in the evidence. Shepardson v. Cary, supra. Not only was there no proof in this case that the furnace' company was in the warehousing or storage business, but,, pn the contrary, the proof was conclusive that it was not in such business, and never had been. The fact that it surreptitiously issued the false receipts in question did not constitute it a warehousing corporation. As well might it be argued that the issuance of counterfeit bank bills constitutes the counterfeiter a bank. It seems that, had the certificates been negotiable warehouse receipts, the bank would have acquired a valid lien upon the iron they represented by the' transfer and indorsement of the receipts to it by the Buffalo-Mining Company. Price v. Wis. M. & F. Ins. Co. 43 Wis. 267; 1 Brightly’s Purd. Dig. (12th ed.), 165, § 1. But we may dismiss this question, because they were not such certificates, and the plaintiff obtains no advantage from the fact that they were in the usual form thereof. Nor were-the certificates valid as chattel mortgages upon the iron named in them, not only because they are not chattel mortgages in legal effect, but also because by the law of Pennsylvania, as well as by the law of Wisconsin, a chattel mortgage-is only valid as to third persons when filed in the proper-office, and there is no claim of any filing here. 1 Brightly’s Purd. Dig. (12th ed.), 665, §§ 200, 201-214.
Thus, at the outset of the case, it appears that the plaintiff had no interest in or lien upon the iron in question, as indorsee of a warehouse receipt nor as a chattel mortgagee.. Nor can it be claimed that the plaintiff actually bought or obtained legal title to the iron. These possible claims-being thus eliminated, we know of no other claim which the plaintiff can make, unless it be a claim as pledgee of the iron-as collateral to the debts of the Buffalo Mining Company- *665and of Schlesinger; and this, in fact, is the claim made in tbe complaint, and the only claim which the evidence tends, to justify. It becomes necessary, then, to consider the question whether the evidence shows a valid pledge. The principles of law governing a pledge of personal property aro simple and familiar. To constitute a valid pledge, there must be transfer of possession to the pledgee, actual or constructive. Seymour v. Colburn, 43 Wis. 71. A pledge differs from a mortgage in this important respect, namely, that the legal title to the property pledged remains in the pledgor, subject to the pledgee’s lien for his debt, while a mortgago passes the legal title to the mortgagee. In the case of a pledge, a lien is created, to the existence of which possession is absolutely necessary; in the case of a mortgage, title-passes, subject ,to be revested by performance of a condition subsequent. Jones, Pledges, §§ 4, 7; Thompson v. Dolliver, 132 Mass. 103. Therefore, if the bank had any interest in the iron at the time of its seizure, it was that of a lien thereon, by way of a pledge.
In considering the question of whether it had such a lien which was valid as against the creditors of the furnace company, a brief recapitulation of the essential facts will be useful. Ferdinand Schlesinger owned two corporations,— one, a mining corporation, engaged in mining ore in Michigan; the other, a furnace company, engaged in smelting ore in Pennsylvania. These corporations were nominally furnished with full complements of officers, but in fact the business of each was directed and controlled by Schlesinger as though it were , his own. The furnace company had a large stock of pig iron constantly on hand in its yards in Pennsylvania, and was largely indebted to Corrigan, Ives & Co., of whom it purchased its iron. It refused to give Corrigan, Ives & Co. security on the iron, on the ground that such a course would injure its credit. In order to raise money for the furnace company, Schlesinger caused the fur*666nace company to issue apparent storage receipts to the mining company, without consideration, and without agreement to purchase, and without selection or delivery of the property, either actual or constructive, unless the handing over ■of the receipts be deliverjq and with the agreement that the receipts should be returned whenever the furnace company needed them on account of sale of the iron. On receiving the receipts, he borrowed money of the plaintiff bank upon the notes of the mining company, secured by assignment of the receipts as collateral. What was done with all the money so borrowed does not appear. The original purpose seems to have been, as said in respondent’s brief, to raise money for the furnace company, and the evidence shows the fact that the mining company was almost daily remitting money in large amounts to the furnace company, as well as the fact that the furnace company was frequently remitting to the mining company. None of the remittances were made in payment of the iron certificates, nor were they ever intended to be applied thereon. The fact seems to be that each enterprise was bolstering up the other as occasion required, or, rather, that Mr. Schlesinger was using the property and credit of his apparently separate concerns indiscriminately, to obtain money as it was needed. It ■seems probable that much of the money borrowed on the notes of the mining company secured by the receipts in question was forwarded to the furnace company.
The court found that the bank took the certificates innocently, without knowledge of any defect.- We cannot probably disturb this finding, because it is based on the affirmative evidence of the cashier who made the loans; but, in view of the facts proven on cross-examination of the cashier himself, this finding seems to be a considerable tax on the credulity. The facts are, in brief, that the cashier was well acquainted with Mr. Schlesinger, so much so that in 1892 Schlesinger put in his hands one share of stock in *667the Buffalo Mining Company, in order' that he might become a director of the company, and he was thereupon made a director and secretary of the company, and remained such until April, 1893, when he resigned, and returned his share of stock. This was after the loans on the credit of the receipts had begun to be made. Notwithstanding his high official position in the mining company, he testifies that he knew nothing of its business,” except that it was engaged in mining. We think he could hardly have failed to discover the manner in which Mr. Schlesinger conducted the business of his nomipal corporations. However this may be, he knew, as he testifies, that the mining company was engaged in mining ore, and not in buying or selling pig iron. He knew “something” about the furnace company; knew where it was doing business; knew Mr. Hirschfeld, the nominal president; discounted some of the furnace company’s paper; obtained general information about it by inquiries through commercial agencies at the time of the pledging of the receipts. In view of all these facts which were within his knowledge, and the facts which he might have ascertained without difficulty by very little inquiry, it seems almost an impeachment of his intelligence to say that he received the receipts in ignorance of any defect or infirmity in them; but we suppose we are bound by the finding, and we shall proceed on that basis.
It is very apparent that, had the certificates remained in the hands of the mining company, they would have constituted no obstacle' to creditors of the furnace company in the collection of their debts. They were subject to nearly, if not quite, all the objections which render transfers void as to creditors. They were absolutely false in fact. There was no change of possession of the iron; no payment nor agreement to pay for it; no intention to pass title. They were the merest shams. There was in effect an agreement that the furnace company should remain the apparent owner, *668with the right to sell and receive and dispose of the proceeds, of sales, and that it should have the right to call back certificates whenever it needed them for this purpose; and it was further expected that, when the need for borrowing money was over, the certificates should all be returned. The scheme-was certainly a brilliant one. If successful, it created a shifting title or interest, which readjusted itself from day to day as the stock changed, automatically attaching to each new pig of' iron as it emerged glowing from the furnace, and with equal facility detaching itself from each pig that was sold as it was loaded on the car for transportation to the vendee. Certainly, if such a scheme could be successful, the inventor should take high rank among a certain class of financiers and the laws which have been supposed to prevent secret transfers and conveyances in fraud of creditors must be at once revised, or they will pass into the dim limbo of unexe-cuted and worn-out legislation.
It is seriously and ably argued that the scheme has been successful; that the original transaction has been purged of' all objections by the intervention of the innocent thjrd person, in the shape of the plaintiff bank; and thus that the shifting and self-adjusting, but void, title of the mining company has been turned into an equally shifting and delusive, but good, lien for the benefit of the bank,— a lien which is secret and invisible to creditors, but entirely visible and very real to the plaintiff. As before said in this opinion, the only interest which the plaintiff claims or can claim in the iron in question is that of a lien thereon as pledgee; and, in order to-make a valid pledge, there must have been either actual or constructive delivery of the property pledged. Bona fides--does not avail the pledgee in the absence of delivery and possession, either actual or constructive. There was confessedly no actual delivery here, and the only thing that can be claimed to be a symbolical or constructive delivery is the indorsement and delivery of the false receipts. Hence the *669•question becomes whether the delivery of the receipts under the circumstances is a constructive delivery of so much iron. Had they been in fact warehouse receipts, the transfer and indorsement thereof by way of pledge would have operated ■as a sufficient constructive delivery of the property, both by the common law and by the statute. R. S. sec. 4194; Shepardson v. Cary, supra; Price v. Wis. M. & F. Ins. Co., supra. Bills of lading and railroad receipts are placed by the stat■utes of both states on the same footing. See statutes of Pennsylvania before cited in this opinion. The reasons for 'this rule are very apparent. In such cases the property itself is in the hands of a third person or corporation, instead ■of in the possession of the vendor or pledgor.' Consequently it does not furnish any false basis of credit, nor is any creditor deceived, because it is well understood that goods in the •hands of warehousemen or carriers are or may be the prop-erty of others, and, by the long usage of trade, subject to just this mode of transfer. No such considerations, however, ■apply in the case of goods in the possession of the vendor or pledgor, or of some third person who is not a warehouseman or wharfinger, and we. know of no rule which makes the mere delivery of a receipt a constructive delivery of the property in pledge in such a case. In Shepardson v. Cary, supra (which was an action in equity to enforce a pledge of personal property as collateral, alleged to hatfe been made by means of the transfer of a warehouse receipt), DixoN, C. J., ■says: “ To uphold the receipt as a proper warehouse document transferring the title to the property, and operating as a good constructive delivery of it to the vendee, it must in all cases distinctly appear that it was executed by a warehouseman, one openly engaged in that business, and in the usual course of trade.” There are numerous examples of •constructive delivery in the books, but none, we think, which holds that the facts here constitute such delivery. Constructive or symbolical delivery is permitted because of the -difficulty or impossibility in some cases, of actual delivery. *670Thus, where the goods are very bulky, as logs in a boom, delivery may be made by pointing them out to the pledgee ; or, where they are goods in a warehouse, by a delivery of the keys; or, where a savings,bank deposit is to be pledged, it may be done by delivery of the pass book. Jewett v. Warren, 12 Mass. 300; Jones, Pledges, §§ 36, 37; Boynton v. Payrow, 67 Me. 587. So, also, where goods are in possession of a third person, and the pledgor gives an order on the custodian to hold the goods for the pledgee, which is brought to the knowledge of the custodian, it seems that this would be a sufficient delivery and change of possession. Whitaker v. Sumner, 20 Pick. 399; Tuxworth v. Moore, 9 Pick. 347. In all these cases it will be readily seen that the property is placed beyond the control of the pledgor, and is not being used to maintain an appearance of wealth by either the pledgor or others with the consent of the pledgee.
In the present case there is no such element. The pledgee never saw or attempted to see the iron described in the certificates, and made no inquiries concerning it. It never notified the furnace company that it held any certificates in pledge, or claimed any interest in any iron in its possession. It tacitly allowed the furnace company to go on in its business for months, selling out the very iron nominally covered by the certificates, and replacing it with other iron, and collecting and using the proceeds of its sales. There can be no constructive or symbolical delivery and continuance of possession logically claimed where such a state of facts appears. Conceding that the title to the iron was in the mining company, the furnace company was the custodian, and the custodian received no notice of pledge, made no agreement to hold for the benefit of the pledgee, but went on in business, selling the property, and substituting other property in its place, with no one to hinder or make it afraid. Apparently the owner of more than 20,000 tons of iron, it was (if plaintiff’s theory is correct) really not the owner of it in case a creditor appeared with an execution. It was held in Casey *671v. Cavaroc, 96 U. S. 467, that where property alleged to have been pledged has at all times been in the actual possession of the pledgor, with authority to dispose of it and substitute another article of equal value in its place, there exists no pledge as against third persons. No reason is perceived why this is not wholesome doctrine, nor why it does not apply with equal force to possession by a third person, with power of sale and substitution, as in the present'case. Our conclusion is that, as against third persons, the bank never perfected its. pledge by obtaining possession, either actual or constructive, of the iron named in the certificates, and hence that it cannot maintain this action.
The trial court found that the judgment note was obtained by threats and fraud, for the purpose of at once levying on the property of the furnace company. We have found no evidence in the case which establishes fraud or duress. There was some excited language, but nothing amounting to duress or fraud. Corrigan, Ives & Co. had a right to obtain a judgment note for the very purpose of entering judgment at once, and levying upon the furnace company’s property. Such is frequently the purpose for which judgment notes are taken, and such purpose does not, of itself alone, constitute fraud or vitiate the note.
We do not find any evidence that justifies the finding that the defendants fraudulently employed Hirschfeld, so as to prevent him from marking off particular lots of iron to the holders of storage warrants. There is nothing to show that Hirschfeld intended to do’ so, or that the plaintiff or any one else expected or wished him to do so. Whether he would have done so or not had he not been employed by the defendants is purely a subject of speculation.
These views necessitate reversal of the judgment.
By the Gourt.— Judgment reversed, and action remanded with directions to dismiss the plaintiff’s complaint.
A motion for rehearing was denied, April 30, 1897.