Alabama State Bank v. Barnes

• Decision Date: 02 June 1887
• Citation: 82 Ala. 607,2 So. 349
• Parties: ALABAMA STATE BANK v. BARNES AND OTHERS.
• Court: Alabama Supreme Court

2 So. 349

82 Ala. 607

ALABAMA STATE BANK v. BARNES AND OTHERS.

Supreme Court of Alabama

June 2, 1887

Appeal from circuit court, Greene county.

Action in detinue by the Alabama State Bank, a corporation doing business in Birmingham, against B. B. Barnes and others, who were engaged in business as partners under the name of the Bank of Eutaw, to recover 100 bales of cotton. Judgment for defendants. Plaintiff appeals.

CLOPTON J.

Whether the appellant, who brought the suit, has title or property in the cotton in controversy sufficient to maintain an action of detinue, depends on the legal effect of the following facts Cleage Bros. were lessees of a warehouse at Eutaw, known as the "McGee Warehouse," in which they stored cotton bought by themselves, and also the cotton of other persons. As collateral security for money borrowed from the National Bank of Birmingham in February, 1884, they deposited with the bank, without indorsement, a receipt for 100 bales of cotton designated therein by numbers. The receipt is as follows "Received Eutaw, Ala., February 2, 1884, at the McGee warehouse, in good order, from Cleage Bros., 100 bales of cotton, which we promise to deliver to him, or bearer, on paying customary charges, (loss by fire excepted.)" The receipt was signed by J. W. Deadrick, who was in fact their clerk, without any indication that he issued it as clerk or agent or in any other than his individual capacity. In May following, Cleage Bros. borrowed from the plaintiff over $11,000, and executed a written instrument, by which, after reciting that the money was loaned on 230 bales of cotton stored in warehouses at Tuscaloosa and Eutaw, of certain quality and weight, they agreed to keep the cotton insured loss, if any, payable to plaintiff, and to pay on demand, and after notice, such additional sum as plaintiff might deem necessary to cover any decline in the price of cotton; and, on default in the performance of the agreement, or in paying the loan at maturity, plaintiff was authorized to sell the cotton without notice, and to apply the proceeds, after deducting expenses, to the payment of the loan. It was also agreed that, out of the money loaned, the plaintiff should pay the National Bank of Birmingham, and take up and hold the receipt deposited with that bank as collateral security for the money loaned, the cotton included in the receipt representing the cotton mentioned in the written instrument as stored at Eutaw; which was done. At the time of the transaction, and until shortly before the commencement of the suit, plaintiff was not informed that Cleage Bros. were the lessees of the warehouse, or had any connection with it as proprietors, or that Deadrick was not the warehouseman. Soon after the receipt was deposited with the National Bank, Cleage Bros. caused 100 bales of cotton to be marked with tags, numbered to correspond with the numbers in the receipt, and set apart from the other cotton in the warehouse belonging to them. The cotton so tagged and marked remained in the warehouse, separated from the other cotton, until about June, 1884, when it was removed by Cleage Bros., without the knowledge or consent of plaintiff, to the platform of the depot of the railroad company at Eutaw, where it remained, except 24 bales, which were sold by Cleage Bros., others being substituted, until possession thereof was taken by defendants. Cleage Bros. indorsed the receipt to plaintiff, after defendants had taken possession as hereinafter stated, but before the commencement of the suit.

The general rule, independent of statutory regulations, is conceded, that the delivery, without indorsement, of a warehouse receipt payable to bearer, as collateral security, passes the legal title, and vests possession of the property in the pledgee, equivalent to its actual and manual delivery. But it is insisted that the transfer of such receipts is regulated by the statutes, and that indorsement is requisite, not only to convey the title, but also to confer a special property, and to operate a constructive delivery of possession. Section 2099 of the Code provides: "All bonds, contracts, and writings for the payment of money or other thing, or the performance of any act or duty, are assignable by indorsement so as to authorize an action thereon by each successive indorsee." Under this section as construed by our decisions, an indorsement of a warehouse receipt, though payable to bearer, is necessary to convey the legal title. Allen v. Maury, 66 Ala. 10; Lehman v. Marshall, 47 Ala. 362. The section is enabling; and was specially designed to provide the mode, in respect to such documents, of passing the legal title, so as to enable the real owner to prosecute an action thereon in his own name. So far as it relates to the passing of title by the delivery of warehouse receipts and similar documents, the statute is an innovation on the mercantile law, and will not be construed as abrogating or modifying it further than is expressed, or is absolutely required to effectuate the purposes. By section 6 of the act of February 28, 1881, being the other statute relied on, warehouse receipts given for cotton stored or deposited may be transferred by indorsement; and any person to whom the same may be so transferred, shall be deemed and taken to be the owner of the property, so far as to give validity to any pledge, lien, or transfer made or created by such person; and no cotton shall be delivered except on surrender and cancellation of the original receipt, or the indorsement thereon of the delivery, in case of a partial delivery. Acts 1880-81, p. 133. This statute does not imperatively require indorsement. The intention is to protect the warehouseman against a mistaken or wrongful delivery, and to protect the holder for value of such indorsed receipts against latent equities and rights. The statute, being permissive, does not prevent the passing of title, and delivering possession, in any mode previously effectual. Rice v. Cutler, 17 Wis. 351; Jones, Pledges, § 301. Notwithstanding section 2099 requires indorsement to convey the legal title, neither statute operates to prevent the transfer of a special property and constructive possession by the delivery of the receipt without indorsement, sufficient to create a valid pledge, as between the parties, and as to third persons not having acquired prior or intervening rights. Fourth Nat. Bank v. St. Louis Cot. Com. Co., 11 Mo.App. 333; St. Louis Nat. Bank v. Ross, 9 Mo.App. 399.

It may be regarded as now settled that a warehouseman having property of his own stored in his warehouse may, in the absence of statutory enactments, issue receipts therefor, and pledge the property as collateral security for his own debt by the delivery of such receipts. Merchants' & Manufacturers' Bank v. Hibbard, 48 Mich. 118, 11 N.W. 834; Cochran v. Ripy, 13 Bush. 495; Parshall v. Eggert, 54 N.Y. 18. Section 2 of the act of February 28, 1881, is declaratory of the general rule. It provides that no warehouseman shall issue any receipt upon any goods, cotton, or other produce to any person as security for money loaned or other indebtedness, unless such goods, cotton, or other produce is in his custody and in store, or on the premises and under his control, at the time of issuing such receipt. It may be a question whether such receipts, in order to operate a transfer of the right of property and possession, should not be made directly in the name of the person to whom transferred; and it may be said the receipt delivered to the plaintiff having been signed by the clerk of Cleage Bros., and issued in their name, though payable to their order, or bearer, does not come within the rule. In De Wolf v. Gardner, 12 Cush. 19, the plaintiff executed a duplicate warehouse receipt in his own name for a large number of barrels of flour, acknowledging that he had received the flour in store, branded and marked, which he agreed to hold subject to the order of Gibson, and to ship the same by the first opportunity, consigned to him, with condition that the receipt should remain attached to a certificate referring to the property. The receipt and certificate were attached to a draft drawn on the consignee as evidence of a lien on the property in favor of the holders of the draft, but reserving to the consignee the right to sell, and hold the proceeds in trust for the holders of the draft. The consignee wrongfully pledged the property, while in transitu, for his own debt, and the plaintiff brought trover against the pledgee. It was held that the plaintiff had so far parted with the right of property and of possession, and the same had so far vested in the holders of the draft, for security of which he had pledged the flour, that he could not maintain the action. In this case, however, actual possession was delivered to...