187 F. 689 (3rd Cir. 1911), 5, Taney v. Penn Nat Bank of Reading

Docket Nº:5 (1,355), 54 (1,423).
Citation:187 F. 689
Case Date:June 19, 1911
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

Page 689

187 F. 689 (3rd Cir. 1911)







Nos. 5 (1,355), 54 (1,423).

United States Court of Appeals, Third Circuit.

June 19, 1911

Joseph Hill Brinton, for appellant.

A. Leo Weil, Alexander Simpson, Jr., and Lawrence Maxwell, for appellee.

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Appeal from the District Court of the United States for the Western District of Pennsylvania.

In the matter of the Foxtown Distilling Company, bankrupt. From an order adjudging J. M. Selden & Co. to be the owners of certain property, Isaac N. Boarts, trustee, appeals. Affirmed.

H. H. Fisher, for appellant.

A. Leo Weil, Alexander Simpson, Jr., and Lawrence Maxwell, for appellee.

Before GRAY, BUFFINGTON, and LANNING, Circuit Judges.

GRAY, Circuit Judge.

These cases come before us on a rehearing. The first of them was originally argued at the March term, 1910, and the latter at the October term, 1910, both being appeals from decrees of the District Courts for the Eastern and Western Districts of Pennsylvania, respectively, sitting in bankruptcy. As the determining question was the same in both cases, they were argued together at the rehearing, and will now be considered together.

As to the first case, the facts are briefly summarized from the record and the opinion of the court below, as follows: On August 27, 1907, the Penn National Bank of Reading, Pa., loaned $2,500 to the Miller Pure Rye Distilling Company, for which it made its note to the Bank, payable four months after date, it being stated in said note that there was deposited with the said Bank, as collateral security, 'the following property, to wit, 200 barrels of whisky in the bonded warehouse of the Distilling Company at Womelsdorf, Pa., as per warehouse receipts, gauger's certificate, etc., accompanying. ' This bonded warehouse was erected by the Distilling Company upon its own premises, pursuant to the requirements of the revenue laws of the United States, and was under the control, as hereinafter stated, of the Collector of Internal Revenue for the district.

There was no actual delivery of the whisky, or of any part of it. The note was not paid at maturity, and on February 5, 1908, the Bank, after due notice, exposed to public sale the warehouse certificates for said 200 barrels of whisky, deposited as collateral for said note, and became the purchaser thereof, and claimed, by virtue of said sale, to have become the absolute owner and holder of the said 200 barrels of whisky embraced in said certificates. On February 3, 1908, the creditors' petition in bankruptcy was filed against the said Distilling Company. On February 19, 1908, the said company was adjudicated a bankrupt, and on March 24, 1908, the appellant, Joseph A. Taney, was duly appointed trustee in bankruptcy. Thereafter, the Bank, by its petition, offered to pay all taxes and charges, and asked the referee in bankruptcy for an order, directing the trustee to take whatever steps might be required under the internal revenue laws to bring about the physical delivery of the whisky to the Bank. In reply, the trustee denied that the Bank had become the owner, and averred that no delivery had ever been made, asserting that the whisky was under the Distilling Company's exclusive control and protection when the receipts were executed and pledged. The referee

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refused the order, holding that the trustee, as the representative of the general creditors, could successfully attack the pledge of the receipts, taking the ground that the whisky itself had not been validly pledged, because it had not been delivered either actually or constructively; that the company, therefore, continued to be the owner, and that the trustee succeeded to its title. A copy of one of the so-called warehouse receipts, duly indorsed by the Distilling Company to the Penn National Bank of Reading, is as follows:

No. 5454.

First District of Pennsylvania.

25 Bbls.

United States Internal Revenue Distillery Bonded Warehouse of Miller


Rye Distilling Company.

Ryeland, Berks Co., Pa., August 26, 1907.

Received on storage from ourselves twenty-five (25) barrels of Miller Pure Rye Whisky Distilled, marked and numbered as per record attached subject to our order and risk of loss or damage by fire, the elements, leakage, evaporation or accident. Deliverable only upon surrender of this certificate, payment of tax and other charges due thereon, and storage at the rate of five cents per barrel per month, from August 26, 1907. Inspection Spring, 1907.

Stored in Warehouse No. 2. Miller Pure Rye Distilling Co., Serial Nos. of Packages, 7964/7988.

S. V. Nagle, President.

Special Notice.-- Particular care should be taken of this certificate as the whisky cannot be delivered without its surrender.

The gauger's certificates accompanied the receipts and bore dates between April 23 and June 7, 1907. Exceptions being filed on behalf of the Bank to the referee's report, the learned judge of the court below, in a well-considered opinion (reported in (D.C.) 176 F. 606), reversed the order of the referee, and directed him to make an appropriate order, under which the Bank might be put into possession of the whisky in dispute.

As to the second case, the material facts, collected from the report of the special master and the record before us, are as follows: The Foxtown Distilling Company was a partnership owning and operating a distillery at the village of Foxtown, in Westmoreland county, Pa. For several years prior to the commencement of bankruptcy proceedings, it was engaged in the manufacture and sale of whisky. On the distillery premises of said company, and constituting a part of it, there was erected, as in the former case, pursuant to the revenue laws of the United States, a bonded distillery warehouse, under the control of the Collector of Internal Revenue for the district. In this warehouse, the whisky claimed by the appellee was entered, with other whisky, by the Distilling Company, and received, gauged, inspected and marked by a United States gauger, who issued gauger certificates therefor to the Distilling Company.

It is not disputed that, by a transaction purporting to be one of purchase and sale, the Distilling Company sold and the appellee bought and paid for in full 410 barrels of the whisky thus stored, between the 15th day of May, 1908, and the 12th day of February, 1909, the Distilling Company delivering to the appellee vouchers or receipts therefor, with the gauger's certificates attached thereto. The general form of these so-called warehouse receipts, was the same in this

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as in the former case, and as in the trade generally. For want of a better name, we will refer to them hereafter as whisky certificates or vouchers. A copy of one of them is as follows:

Serial Wine Proof Date Nos. Gal. P. F. Gal. Inspection. Withdrawn. 1265 4419 100 Feb. 5, 09 1266 4573 " " " " 1267 4727 " " 9 " 1268 4m45 " " " " 1269 4619 " ---- ---- Total 22783

Gauged by A. C. Barnhart, U.S. Gauger, 23 District.

No. . . . .


United States Internal Revenue, Bonded Warehouse of Foxtown Distilling Co. No. 27, 23rd District Pa.

Youngwood, Pa., February, 1909.

This certifies that I have in this Distillery Warehouse Five Barrels of . . . Whiskey branded

Foxtown Rye Whiskey.

Serial Nos. 1265-1269 inclusive and to be delivered to J. M. Selden Co. or order, on return of this Warehouse Receipt and the payment of tax and charges due thereon. Storage on said whiskey from Feb. 12-09 at 5 cents per barrel per month. Loss or damage by fire, the elements, leakage, evaporation or unavoidable accident at owner's risk. Outage guaranteed not to exceed the tariff bill of 1894.

No allowance after 7 years.

Stored in Warehouse No. . . . Foxtown Dist. Co. B.

L. N. Johnson, Prop.

(Indorsed:) J. M. Selden Co.,

J. M. Selden, Treas.

On June 15, 1909, a voluntary petition in bankruptcy was presented by the partners constituting the Foxtown Distilling Company, upon which petition, on the same day, the said petitioners were adjudged bankrupts, individually and as a partnership, and an order, made referring the case to the referee for further proceedings. Also, on the same day, the appellant, Boarts, was appointed receiver of the bankrupt's estate. On July 21st, upon the petition of the appellee, Selden & Co., a rule was granted on the receiver to show cause why he should not deliver to the petitioner the whiskies claimed by them under the purchase and sale hereinbefore recited. The rule was referred to the referee, as special master, to take testimony and make report, and on March 28, 1910, the referee reported recommending that the rule be made absolute, and that the whisky stored in the warehouse be delivered to the appellees, as the proper owner thereof, upon payment of all taxes and storage charges due thereon. This report was confirmed nisi, April 1, 1910, by the court below, and afterwards became absolute.

The facts stated in these appeals present, in the first case, the question whether the transaction between the Miller Distilling Company and the Bank was a valid and binding pledge of the whisky in bond as against the trustee in bankruptcy of the Miller Distilling Company, and, in the second case, whether the transaction between the Foxtown Distilling Company and Selden & Co., the claimant of the

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whisky, was a valid and binding sale against the trustee in bankruptcy of the Foxtown Distilling Company. It should be premised that the records disclose that the pledge in the one case and the sale in the other were for value...

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