235 F. 32 | 6th Cir. | 1916
(after stating the facts as above).
hollowing its plan of either creating, or recognizing and then regulating, a class of instruments having defined attributes and results, section 2 defines those receipts concerning which the act speaks, and to which, by sections 25 and 41, it gives peculiar force. Sections 2, 4, and 5 are quoted in the margin.
“A warehouseman shall be liable to any person injured thereby for all damages caused by the omission from a negotiable receipt of any of the terms herein required.”
If a paper from which one of the terms required by section 2 has been left out' is nevertheless a “negotiable receipt,” and so gives to the good-faith holder thereof all the rights declared by various parts of the statute, it is not easy to see how such holder could suffer “damages caused by the omission.” On the other hand, if the omission of a prescribed element from what otherwise would be a negotiable receipt makes the receipt invalid and so deprives the holder of his otherwise existing rights thereunder, there would be “damages caused by the omission,” and this sentence would have applicability and force; yet that theory is not wholly satisfactory. If the effect of this sentence is confined to the clause in which it is found (i), and if the warehouseman’s lien is treated as valid in spite of the omission properly to claim it, the sentence could be intelligently applied in all cases.
“(d). A statement whether the goods received will be delivered to the hearer or to a specified person or to a specified person or his order; if to a specified person, the receipt is nonnegotiable; if to bearer or to a specified person or order, it is negotiable.”
If it could be assumed that the definition of a negotiable receipt found in section 5 was intended to be exclusive and complete in itself, it would follow that even the signature of the warehouseman required by section 2 (g) would be quite unnecessary; and, of course, this cannot be.
We do not find that this section has been construed by other decisions in a way here helpful, and we must, without such aid, determine its force as applied to the present case. It seems a proper sum
Bales of cotton certainly do not belong to the first group; their mutual equivalency is not clear and certain.. A lot of bales coming from one source might belong to the second group; their equivalency would be so possible, if not probable, that an agreement, or custom therefor might well exist. The evidence, however, puts beyond controversy that cotton bales in a large mass, such as would accumulate in any general warehouse, and such as did accumulate in this warehouse, are as inherently incapable of acquiring this mutual equivalency as would be the cloth and the boots and shoes. The cotton in such bales is of all varieties, qualities, and grades, and the bales themselves are of various sizes. The actual selling value of the bales involved in this controversy varied from a minimum limit of about $20 to a maximum limit of about $90, and the variation was arbitrary by units, or by small lots. The figures brought here do not show results for each bale, but only as to the lot belonging to each consignor, by which can be stated the average price 2 bales or 5 bales or 10 bales. These figures cover about 1,000 bales out of the 2,000 involved. There is no reason " to think that there was any more uniformity among the other thousand.
It is only illustrative of the difficulty which the receipt holders here have, in standing upon section 23 and the supposed custom, to query what would happen if the holder came to the warehouse and demanded the bales of cotton called for by his receipt. Who could say what bales he should have? If he had loaned $50 per bale, must he take those bales that were worth $20 or could he take the $90 bales and leave the poorer ones for later comers? If the warehouseman were indifferent, an execution creditor or a consignor would not be. No theory of fungibility can answer these questions.
The receipt holders have other difficulties to meet—the universality of the custom set up is not clear; much of the cotton which came) to the trustee was not in existence when 'some of the receipts were given; at the date of some receipts, there was no cotton in the warehouse not already appropriated, etc., These become immaterial.
“That is a matter to be considered in a distribution of the fund between the holders of warehouse receipts, but has no relevancy whatever to the legal rights of the parties.”
Few of the decisions cited by counsel are pertinent enough to need comment. In Manufacturers Co. v. Monarch Co., supra., the point decided was that the paper given by the warehouseman did not fail to be a statutory negotiable receipt merely because it omitted the rate of charges. Union Trust Co. v. Trumbull, 137 Ill. 146, 27 N. E. 24, involved the necessity of identification, but it was held that the party who was a common-law assignee stood in the shoes of his assignor, the depositor, and so that the controversy had the same aspect as if between the depositor and the receipt holders. It is admitted (137 Ill. 178, 27 N. E. 24) that further identification would be necessary for many purposes, and the result reached is based upon the mutual estoppel of all parties. No rights of any person not estopped are involved. Stewart v. Phœnix Co., 9 Lea (77 Tenn.) 104, applies the rule of estoppel against the warehouseman, and touches no other rights. Bank v. Haselton, 15 Lea (83 Tenn.) 216, holds that the property involved there was really fungible. The blanket description in the receipt was therefore sufficient, and the receipt became immune to attack on this ground. The opinion, with seeming purpose, omits bales of cotton from its list of the class of property which was under discussion (pages 244, 245). In Bank v. Bryant, 49 La. Ann. 467, 473, 22 South. 89, 93, we find pertinent comment, meriting quotation. There was in use, in New Orleans, a form of cotton warehouse receipt generally similar to that used in Memphis, and a controversy arose between the holder of such a receipt and the administrator of the depositing cotton factor. The latter claimed under an equally vague warehouse receipt, but of later date. It was held that the administrator had no higher rights than the depositing factor and could not dispute the truthfulness of the earlier receipt which he had pledged to his creditor. In the course of the opinion, and after describing the New Orleans custom, the court says:
“The practice which we have alluded to is not only a very loose but a very dangerous one to all parties relying upon it. Under its operation as claimed, a factor having stored in a press several lots of cotton, part of which he could legally sell or pledge and part of which he could not legally pledge for his own debt, can leave a part of it unreceipted for and cause to be executed to himself special receipts for a limited number of bales, leaving their identity (so fax as the receipts themselves are concerned) undetermined. He can then pledge these special receipts to a bank for a loan of money, but before the particular cotton to he covered by the receipts is fixed in favor of the bank or pledgee, he can sell the cotton which he was authorized to sell or pledge to a third person, and through the instrumentality of an order directed to*44 the press, ordering them to deliver that specific cotton to parties named, he can withdraw it from the possession of the proprietors of the warehouse, and from the possible operation of the warehouse receipts, and drive the holders of the receipts into an unsuccessful litigation with the owners of the cotton still on hand. Civ. Code, arts. 1921, 1922. The lenders, in the end, will find themselves, unless, under exceptional circumstances, the holders of worthless pieces of paper. Even if matters in some given case did not go to the full extent here supposed, the lenders, under the operation of this loose practice might be driven in execution of their collaterals, upon a worthless grade of cotton; whereas, had they taken the simple precaution of causing the marks of specific cotton to be inserted in the receipts, they would have been amply protected. So long as business men elect to deal in this way, in order by affording commercial facilities to their customers, to retain their business, they must not be surprised that they should occasionally be called upon to suffer loss.”
In a generally similar situation at Little Rock, the warehouseman was held to a double liability, and the.Supreme Court of Arkansas said (Citizens’ Bank v. Arkansas Co., 80 Ark. 601, 613, 96 S. W. 997, 1002 (117 Am. St. Rep. 102):
“In fact, this custom that the compress company relies on seems to have been based on the theory that all men were honest, * * * but this loose method of doing business was calculated to attract the attention of dishonest commercial adventurers. That years passed before any harm was felt speaks well for the honesty of those dealing with cotton in this market. But the unscrupulous man arrived a.t last, and then a day dawned full of danger to these unsuspecting dealers.”
The one decision which seems indistinguishable from the instant case (save that the receipt called for less than the whole number of bales in existence—and we have pointed out the insufficiency of this distinction) is that of the Supreme Court of Louisiana in Gragard’s Succession v. Bank, 106 La. 298, 30 South. 885. Similar receipts were asserted by the holder against the general title of the administrator of the depositing factor. So far as concerns the binding effect upon the administrator of the estoppel which existed against the factor himself, the case necessarily overrules Bank v. Bryant, though without mentioning that then still recent case. It is to be noted that two of tire justices participating in Bank v. Bryant, dissent in the later case. What the court says regarding the position of the administrator applies with even greater force to the position of the bankruptcy trustee since 1910 (106 La. 300, 30 South. 886).
“To deny to' this administrator, therefore, a standing to contest the validity of a pledge would be to deny the same right to the creditors; and to deny the right to the creditors would be the exact equivalent of asserting one of the two things, either that under the Louisiana, law invalid pledges are as effectual as valid pledges, or that under Louisiana law invalid pledges are made valid by the death of the pledgor” [bankruptcy of depositor].
The court then distinctly determines the invalidity of the receipts in this language:
“On such a receipt the warehouseman could not possibly make any delivery. Abundant testimony to that effect is found in the record. Between the different bales of the cotton there might be great variance, nearly or fully as one to four; that is, one bale may contain nearly twice as much cotton as another and the cotton be of a quality twice as valuable. And in the case of this particular cotton, there was a further and, if possible, a more serious dis*45 parity between the different bales; some of it the decedent had not a legal or even a moral right to pledge, whereas some he had a perfect right to pledge. This circumstance added infinitely to the already fatal uncertainty of the receipt, for until proof to the contrary should be administered the presumption would have to obtain that the decedent intended to pledge, and the defendant bank intended to receive in pledge, only those bales which the decedent had the right to pledge, and the identification of these bales in the absence of any designation of them was utterly impracticable.
“We must hold that, owing to the irideterminateness of the property intended to be pledged, there was no delivery, and in consequence no pledge. A warehouse receipt in the form prescribed by Act 72 of 1876 may stand for the goods themselves, in such way that its delivery will operate a delivery of the goods; but in order that this should be, the receipt must represent specific goods, or, at any rate, must represent a specific part of a common, or uniform, mass; and, as just shown, a lot of cotton bales cannot be treated as a common or uniform mass, especially when, to the physical disparity of the component bales, there is added a moral and legal disparity.”
The purported taking possession of the cotton by one receipt holder on the day before the bankruptcy was, obviously, ineffective, when the rights given by the receipts themselves are treated- as we find they must be. If such taking possession were given effect, it would accomplish a preference, and we have no doubt this receipt holder was chargeable with knowledge that the result of sustaining the change of possession (if there was any) as creating a definite lien would be to bring about the forbidden inequality.
Although it is quite unnecessary, for the purposes of these appeals, to decide whether the loans from the Interstate Banking & Trust Company were usurious, and, if so, what the effect would be, yet we have seriously considered whether we ought to express our opinion thereon, based upon the present record. If this company has filed proof of its claim in bankruptcy, or if the intervening petition shown by the present record shall be thought amendable so as to become a, formal proof, or if the decree herein is thought to be a “liquidation” (questions concerning which we intimate no opinion),
It results that the decree below must be vacated, and the case remanded for the entry of a modified decree consistent with this opinion. The trustee should recover the costs of his appeal (No. 2718). Each of the appellants in the other three appeals has already paid the bulk of the costs involved therein, and since apportioning among all the parties entitled the small remaining costs which might be awarded against these appellants would be difficult, the order will be that no costs will be recovered in any one of these appeals (Nos. 2717, 2885, and 2886). Claims of counsel for compensation from the fund coming to the trustee should be disposed of by the bankruptcy court.
“ * * * To fix and define rights of creditors of alleged owners of warehouse goods; * * * to define and fix the rights of persons holding warehouse receipts and their assignees and transferees. * * * ”
Whether or not it is accurate to call such delivery symbolical, rather than actual (Union Co. v. Wilson, 198 U. S. 530, 536, 25 Sup. Ct. 766, 49 L. Ed. 1154), the nomenclature of the text is not uncommon, and is intelligible.
“Section 25. Be it further enacted, that if goods be delivered to a ware-, houseman by the owner or by a person whose act in conveying the title to them to a purchaser in good faith for value would bind the owner, and a negotiable receipt is issued for them, they cannot thereafter, while in the possession of the warehouseman, be attached by garnishment or otherwise, or be levied upon under an execution unless the receipt be first surrendered to the warehouseman or its negotiation enjoined. The warehouseman shall in no ease be compelled to deliver up the actual possession of the goods until the receipt is surrendered to him or impounded by the court.”
“Section 41. Be it further enacted, that a person to whom a negotiable receipt has been duly negotiated acquires thereby:
“(a) Such title to the goods as the person negotiating the receipt to him had or had ability to convey to a purchaser in good faith for value, and also such title to the goods as the depositor or person to whose order the goods were to be delivered by the terms of the receipt had or had ability to convey to a purchaser in good faith for value; and
“(b) The direct obligation of the warehouseman to hold possession of the goods for him according to the terms of the receipt as fully as if the warehouseman had contracted directly with him.”
“Section 2. Be it further enacted, that warehouse receipts need not be in any particular form, but every such receipt must embody within its written or printed terms:
“(a) The location of the warehouse where the goods are stored.
“(b) The date of issue of the receipt.
“(c) The consecutive number of the receipt.
“(d) A statement whether the goods received will be delivered to the bearer, to a specified person, or to a specified person or his order.
“(e) The rate of storage charges.
“(f) A description of the goods or of the packages containing them.
“(g) The signature of the warehouseman, which may be made by his authorized agent.
“(h) If the receipt is issued for goods for which the warehouseman is owner, either solely or jointly or in common with others, the fact of such ownership. And:
“(i) A statement of the amount of advances made and of liabilities incurred, for which the warehouseman claims a lien. If the precise amount of such advances made or of such liabilities incurred is at the time of the issue of the receipt unknown to the warehouseman or to his agent who issued it, a statement of the fact that advances have been made or liabilities incurred and the purpose thereof is sufficient. A warehouseman shall be liable to any person injured thereby for all damage caused by the omission from a negotiable receipt of any of the terms herein required.
“Section 4. Be it further enacted, that a receipt in which it is stated that the goods received wiíl be delivered to the depositor or to any other specified person is a nonnegotiable receipt.
“Section 5. Be it further enacted, that a receipt in which it is stated that the goods received will be delivered to the bearer, or to the order of any person named in such receipt, is a negotiable receipt.
“No provision shall be inserted in a negotiable receipt that it is nonnegotiable. Such provisions, if inserted, shall be void.”
As is thought by the Supreme Court of Illinois, in. Manufacturers Co. v. Monarch Co., 266 Ill. 584, 107 N. E. 885.
“Section 23. Be it further enacted, that if authorized by agreement or by custom, a warehouseman may mingle fungible goods with other goods of the same kind and grade. In such case the various depositors of the mingled goods shall own the entire mass in common, and each depositor shall be entitled to such portion thereof as the amount deposited by him bears to the whole.”
As said of the 40 bales of corks, in Llado v. Morgan, 23 U. C. C. P. 517, 525, “it seems impossible to apply any custom we have ever heard of to a case like this.”
Loveland on Bankruptcy (4th Ed.) §§ 332, 333.