Charles Dale v. Edward Pattison

• Decision Date: 08 June 1914
• Docket Number: No. 330,330
• Citation: 34 S.Ct. 785,234 U.S. 399,58 L.Ed. 1370
• Parties: CHARLES W. DALE, Edward Rott, and Henry Ampt, Trustees in Bankruptcy of David Rohrer, Bankrupt, Appts., v. EDWARD M. PATTISON
• Court: U.S. Supreme Court

234 U.S. 399

34 S.Ct. 785

58 L.Ed. 1370

CHARLES W. DALE, Edward Rott, and Henry Ampt, Trustees in Bankruptcy of David Rohrer, Bankrupt, Appts.,

v EDWARD M. PATTISON.

No. 330.

Argued April 23, 1914.

Decided June 8, 1914.

Statement by Mr. Justice Pitney:

David Rohrer for many years prior to November 5, 1909, owned and operated a distillery in Montgomery county, Ohio. On that day he was adjudicated a bank- rupt, and the appellants were appointed his trustees. In the following month they filed an application in the bankruptcy proceedings, setting forth that in the distillery warehouses of the bankrupt there were stored about 9,800 barrels of Bourbon and rye whiskies, to which there were many conficting claims; among the claimants being certain named persons to whom it was alleged the bankrupt had pledged or hypothecated certain barrels of the whiskies. One of the parties so named was the respondent, Edward M. Pattison. The application prayed that all of the claimants be notified of the proceedings, be made parties thereto, and be required to set up their respective claims. Pattison filed an answer and intervening petition, claiming that 210 barrels of whisky (specifying them by numbers) were a part of a lot of 800 barrels that had been pledged or hypothecated to him by Rohrer as security for certain loans; the remainder of the 800 barrels having been sold by Rohrer without the knowledge of Pattison. It was denied that the whiskies were or ever had been in Rohrer's possession, it being alleged that all of them, as soon as manufactured, were placed in the storage warehouse in the possession and control of the government of the United States, and that certain moneys were loaned by Pattison to Rohrer, to secure payment of which the latter assigned and transferred in writing to the former his entire interest in certain designated barrels of whisky then on storage in said warehouse, the agreement and transfer being evidenced by documents in the form of warehouse receipts, of which the following is a sample: of their manufacture, the warehouse stamps thereon, and the number of the bonded

No. 750.

Stored in Warehouse.

56 bbls. in No. 2.

94 bbls. in No. 1.

The David Rohrer Distillery, montgomery County.

Fire Copper Bourbon and Pure Rye.

Brand and Distillery Established in 1847.

Germantown, O., Feb. 23, 1906.

Received in my distillery, Bonded Warehouse No. 11, first district of Ohio, for account and subject to the order of E. M. Pattison, deliverable only on the return of this warehouse receipt and the written order of the holder thereof, and on payment of the United States government tax and all other taxes and storage at the rate of 5 cents per barrel per month from storage free,

One hundred and fifty barrels D. Rohrer pure Bourbon whisky, entered into bond as follows: 56 bbls. Rye; 94 bbls. Bourbon.

                     Special  Net wine           Proof     When            Warehouse
                     number.  gallons.  Proof.  gallons.   made.             stamp
                 
                     107,853
                     -------                           Feb. 10, 12, 13,           Y
                     108,002  7,600.48  102  7,405.70    14, & 15/06         44,953
                                                                           ---------
                                                                             45,102
                 

56 Rye.

94 Bourbon.

Gauged by F. P. Thompson, U. S. gauger.

Loss or damage by fire, the elements, riots, accidents, evaporation, and shrinkage at owner's risk. It is hereby guaranteed that the loss by natural evaporation and on account of defective cooperage on each and every barrel of this whisky shall not be more than 1 gallon in excess of the government allowance during the first seven years of the bonded period.

It is expressly provided that in the payment of excess under this guaranty the basis of settlement shall be the cost price of said whisky in bond at the date of tax, payment figured upon the original contract price therefor, and the carrying charges thereon at the rate of tax imposed by the internal law upon distilled spirits at the date of the withdrawal.

The owner of the whisky under this receipt in accepting it agrees to furnish the money to pay all taxes when the same become due.

This warehouse receipt is given in conformity with the warehouse laws of the state of Ohio and the laws of the United States in force at this date.

David Rohrer, Proprietor.

By an amendment to his intervening petition, Pattison set forth:

'That for more than forty years last past, and ever since the enactment by the Congress of the United States of the laws relating to the storing by distillers of whisky in distillery bonded warehouses, it has been and still continues to be the usual and customary course of doing business by distillers of whisky to sell, pledge, and transfer whisky deposited by them in their distillery bonded warehouses by the making, issuing, and delivering by them of their warehouse receipts to the vendee or pledgee of the barrels of whisky sold or pledged (describing and identifying in said warehouse receipts the barrels of whisky sold or pledged, by their serial numbers, the date warehouse in which situated), and agreeing in said warehouse receipts to hold said barrels of whisky sold or pledged for the account and subject to the order of the vendee or pledgee thereof, and in and by the sale and pledge as aforesaid of barrels of whisky in their distillery bonded warehouses to obtain money and advances of money to enable them to carry on business as distillers, and during all of said time it has been and continues to be among distillers and bankers, brokers, dealers in whisky, and all persons having transactions with distillers, an established custom and a commercial usage generally known and acted upon to regard and consider said warehouse receipts as giving constructive possession of the barrels of whisky mentioned therein, and as conveying either an absolute title or a special interest, according to the nature of the transaction, and as partaking in many respects of the character of commercial paper, transferable by indorsement, either absolutely or as collateral security, and as investing the holder of the warehouse receipts with the title, property in, or possession of the barrels of whisky mentioned in said warehouse receipts according to the rights of the original parties to the transaction, and as constituting the owner of the distillery bonded warehouse issuing and delivering such warehouse receipts, as the bailee for the vendee or pledgee of the barrels of whisky in said warehouse receipts mentioned; and this practice and method of doing business has obtained for more than forty years, and become an important part of the commercial system of the country, so that it is well understood and according to the usual course of business that the use and purpose of a warehouse receipt is to enable the owner of said distillery bonded warehouse to sell, pledge, and transfer the title or the possession of the barrels of whisky in his bonded warehouse for the purpose of raising money or securing advances thereon either by sale or pledge.'

The trustees filed a general demurrer, which was sustained by the referee, and the order sustaining it was affirmed by the district court (186 Fed. 997). The circuit court of appeals reversed the district court, and remanded the case for further proceedings (115 C. C. A. 639, 196 Fed. 5). Thereupon the district court, in obedience to the mandate, overruled the demurrer and rendered final judgment in favor of Pattison, which was affirmed by the court of appeals; and an appeal to this court was then allowed.

Mr. Lee Warren James for appellants.

Messrs. W. H. Mackoy and M. L. Buch-Walter for appellee.

Mr. Justice Pitney, after making the foregoing statement, delivered the opinion of the court:

The transactions in question, as between Rohrer, the bankrupt, and Pattison, the appellee, are not distinguishable from those that were under consideration in Taney v. Penn. Nat. Bank, 232 U. S. 174, 58 L. ed. ——, 34 Sup. Ct. Rep. 288. In that case the distilling company deposited as security for the loan made by the bank certain gauger's certificates, in addition to warehouse receipts issued by itself. But the sole significance of the gauger's certificates was that they constituted evidence that the whiskies had been deposited in the storehouse in barrels marked and numbered as required by the act of Congress. Since it is admitted in the present case that the whiskies in question were in fact on storage, as men tioned in the warehouse receipts delivered by Rohrer to Pattison, and that the barrels were stamped, marked, and numbered as therein stated, the fact that no gauger's certificate was delivered to Pattison is of no present consequence.

The legal effect of such a transaction depends upon the local law. In Taney v. Penn Nat. Bank, upon finding that, by the law of Pennsylvania, the ordinary rule as to the effect of the retention of physical possession by the vendor of personal property, which he is capable of delivering to the vendee, is not applied by the courts of that state to cases where the inherent nature of the transaction and the attendant circumstances are such as to preclude the possibility of a delivery by the vendor that would be consistent with the avowed and fair purpose of the sale, or where the absence of a physical delivery is excused by the usages of the trade or business in which the sale is made, we held that, considering the situation of the property and the usages of the business, the transaction between the distiller and the bank was valid, and gave to the latter a lien upon the whisky superior to that of the trustee in bankruptcy.

The question here presented is whether the local law of Ohio so far differs from that of Pennsylvania that a different result...