Union Trust Company v. Henry Wilson

• Citation: 25 S.Ct. 766,49 L.Ed. 1154,198 U.S. 530
• Decision Date: 29 May 1905
• Docket Number: No. 424,424
• Parties: UNION TRUST COMPANY and Security Warehousing Company v. HENRY L. WILSON, Trustee in Bankruptcy of Harry L. Flanders
• Court: United States Supreme Court

198 U.S. 530

25 S.Ct. 766

49 L.Ed. 1154

UNION TRUST COMPANY and Security Warehousing Company

v HENRY L. WILSON, Trustee in Bankruptcy of Harry L. Flanders.

No. 424.

Submitted January 23, 1905.

Decided May 29, 1905.

Messrs. Henry S. Robbins and Charles R. Holden for the Union Trust Company et al.

[Argument of Counsel from pages 531-533 intentionally omitted] Messrs. Edwin Burritt Smith, George Packard, Vincent J. Walsh, and W. Tudor Ap Madock for Wilson, trustee.

[Argument of Counsel from pages 533-534 intentionally omitted] Mr. Justice Holmes delivered the opinion of the court:

The questions certified by the circuit court of appeals arise upon the following facts, abridged from the statement submitted to us. The bankrupt, Flanders, was a wholesale leather dealer. He walled off a part of the basement of his place of business, and let it at a nominal rent to the Security Warehousing Company. There were doors to this part, with padlocks bearing the name of the company, which were kept locked, and to which the company had the only keys. The company had a key to Flanders' front door, and access to the part let to it at all hours of day or night. No one else could get such access without breaking in. There were two signs on the outside, stating, in large letters, that the premises were occupied by the company as a public warehouseman. The company received leather from Flanders into this place, issuing a certificate that it had received the same on storage, subject to the order of H. L. Flanders & Co., and identifying the leather; 'said commodity to be retained on storage, and delivered only upon surrender of this receipt, properly indorsed, and payment of all charges thereon.' To every parcel of the leather was attached a card, legibly stating that it was in the possession of the warehouse company. The company stipulated in the receipt against liability for damage by fire, water, etc., and, by a general contract with Flanders, the latter assumed all risk of loss except from dishonesty of the company's servants. Flanders paid the company $20 a month for the first $10,000 worth of property or less, and a dollar a month for each additional $1,000. He also paid the expenses of the company in connection with storing the goods. The certificates of the company issued as above were all indorsed by Flanders to the Union Trust Company as security for loans made by it to him in the regular course of business. If Flanders desired to remove any part of the leather, he paid the necessary sum to the trust company, was intrusted with the receipts, got the warehouse company to send a man to unlock the place of enclosure and allow the removal, indorsing on the receipt the amount delivered, if less than all, and then, as the case might be, returned the receipt to the trust company or surrendered it into the warehousing company's hands.

Flanders became bankrupt, and his trustee filed a bill in the district court, alleging the storage arrangement to have been fraudulent, and claiming the leather on the ground that it always had been in the possession of Flanders, and therefore had come to the possession of the trustee. Upon these facts the circuit court of appeals certifies the following questions:

'1. Whether, upon the facts above recited, the receipts issued by the warehousing company are to be deemed valid warehouse receipts, so that their indorsement by Flanders to the trust company, as security for loans, constituted a pledge or pledges to the trust company of the leather covered by such receipts, which would be valid against attaching creditors.

'2. Whether, if the receipts are not to be deemed valid as warehouse receipts, upon the facts above recited, the transactions are to be regarded as constituting pledges of such leather by Flanders to the trust company, which would be valid as against attaching creditors.

'3. If there was no pledge, whether the trust company, under the facts above recited, acquired an equitable lien upon such leather that is superior to the title thereto of the trustee in bankruptcy.'

No question under the statutes of Illinois is suggested. Apart from statute, a warehouse receipt simply imports that the goods are in the hands of a certain kind of bailee. A bailee asserting a lien for charges has the technical possession of the goods. But it always is recognized that if the bailee of the owner, by direction of the latter, assents to becoming bailee for another, to whom the owner has sold, mortgaged, or pledged the goods, the change in the character of the bailee's holding satisfies the requirement of a change of possession to validate the sale or pledge. Therefore it is common for certain classes of bailees to give receipts to the order of the bailor, because, by a receipt in that form, the bailee assents in advance to becoming bailee for any one who is brought within the terms of the receipt by an indorsement of the same. That, at least, is the argument of Benjamin on Sales, 2d ed. 676 et seq., 6th Am. ed. 795, § 817, is the understanding of merchants, and is the principle adopted as to public warehouse receipts by the statutes of Illinois (Rev. Stat. chap. 114, § 24), and probably adopted by the courts, apart from statute. Union Trust Co. v. Trumbull, 137 Ill. 146, 173, 27 N. E. 24; Northrop v. First Nat. Bank, 27 Ill. App. 527; Millhiser Mfg. Co. v. Gallego Mills Co. 101 Va. 579, 589, 44 S. E. 760; Hallgarten v. Oldham, 135 Mass. 1, 10, 46 Am. Rep. 433. The transfer of the receipt is not a symbolical delivery, it is a real delivery, to the same extent as if the goods had been transported to another warehouse named by the pledgee.

If, then, the Security Warehousing Company had possession of the goods, it had it as bailee; and, unless some reason appears to the contrary, the indorsement of its receipt, the same being drawn to Flanders' order, was a delivery sufficient to validate the pledge. But there can be no doubt on the facts as stated, without more, that the company had possession of the goods. It had them under lock and key, in a place to which it had a legal title and right of...