Block v. Oliver & O'Bryan, Etc.

• Decision Date: 19 November 1897
• Citation: 102 Ky. 269
• Parties: Block v. Oliver & O'Bryan, Etc.
• Court: Kentucky Court of Appeals

Page 269

102 Ky. 269

Block v. Oliver & O'Bryan, Etc.

Court of Appeals of Kentucky.

November 19, 1897.

APPEAL FROM JEFFERSON CIRCUIT COURT, LAW AND EQUITY DIVISION.

FAIRLEIGH & STRAUS FOR APPELLANT.

STROTHER & GORDON FOR OLIVER & O'BRYAN.

GIBSON & MARSHALL FOR THE GERMAN SECURITY BANK.

JUDGE Du RELLE DELIVERED THE OPINION OF THE COURT.

The firm of J. G. Mattingly & Sons, distillers, prior to February 23, 1892, was composed of J. G., P. J., and L. D. Mattingly. On that date A. R. Sutton became a member of the firm, under the following agreement signed by all the parties: "It is agreed between the undersigned that A. R. Sutton shall furnish from time to time sufficient capital, at seven per cent. interest thereon, to the firm of J. G. Mattingly & Sons to enable said firm to distill and manufacture whisky in Kentucky in the manner and to the extent they have presently undertaken to do.

"In consideration of furnishing said capital said A. R. Sutton shall have one-third interest and right in and to the property of all kinds, business and profits of said partnership of J. G. Mattingly & Sons. It is further agreed that said firm shall consign and deliver to said Sutton the whisky so distilled and manufactured for sale on account of said firm in the usual course of trade. The partnership contract of J. G. Mattingly & Sons, heretofore made of date November 3, 1891, is so modified by and subject to the terms and conditions of this agreement. This 23d day of February, 1892."

From that time Sutton was the financial manager of the concern, and procured all the money for carrying on the business. As whisky was manufactured, warehouse receipts therefor were executed and placed in his hands, and were by him sold or pledged as security for notes executed for money borrowed. The receipts were signed by Mattingly & Sons and issued to A. R. Sutton & Co., though the "company" meant nothing, no one being associated with Sutton except the Mattingly firm.

It appears — though we do not regard this fact as important — that, for a time after Sutton became a member of the firm, the receipts used were printed on yellow paper, taken from an old book of warehouse receipts used by a former firm of the same name, and that it was determined to have new receipts printed on green paper, to be used in future transactions, and that the yellow receipts should be taken up and green ones substituted therefor. Be that as it may, green receipts duplicates of the outstanding yellow receipts, were issued and delivered to Sutton.

On June 3, 1892, Sutton, as A. R. Sutton & Co., executed his note to Joseph Wolf for $2,500, due December 3d, and deposited as collateral yellow warehouse receipts for two hundred and fifty barrels of whisky. This note was paid at maturity, and on the following day (December 7th) Sutton executed his note to the German Security Bank for $2,000 due December 29th, and pledged as collateral security the same yellow warehouse receipts for two hundred and fifty barrels. On the same day the note to the German Security Bank was executed Sutton as Sutton & Co., drew a note for $2,500, payable to A. R. Sutton, dated December 6th, at four months, and on the 13th of December endorsed this note to Leon Block, the appellant, and delivered to Block as collateral security green warehouse receipts for the same two hundred and fifty barrels of whisky, bearing the same serial numbers as those covered by the yellow warehouse receipts, which were then held by the German Security Bank. There was, therefore, a duplicate issue of outstanding receipts covering the same identical whisky, the yellow receipts held by the bank being undoubtedly at that time valid, and the green receipts held by Block invalid, inasmuch as the yellow receipts were first issued. On December 29th Sutton paid the note due at the German Security Bank by a check on the Louisville Banking Co., took up of the yellow warehouse receipts held by the bank as collateral, only receipts covering two hundred barrels, and left with the bank the receipts covering the remaining fifty barrels. On the same day he drew a draft on Oliver & O'Bryan, of Kansas City, for about $2,700, payable in four months, and discounted it at the Louisville Banking Co., depositing the yellow warehouse receipts which he had obtained from the German Security Bank as collateral. The Louisville Banking Co. placed the proceeds of the discount to the credit of A. R. Sutton & Co. in time to meet Sutton's check given to the German Security Bank when it reached the banking company on that day through the clearing house. Oliver & O'Bryan accepted the draft for the accommodation of Sutton.

The note at the German Security Bank contains a clause providing that the collateral was deposited to secure that note and all other indebtedness owing to the bank by the payor. At that time the German Security Bank had other notes of Sutton & Co. to an amount exceeding $5,000. Some days after the payment of the note — the bank still holding yellow receipts for fifty barrels of whisky, being fifty of the barrels covered by the green receipts in the hands of Block — Sutton executed a new note to the bank, and the yellow receipts for the fifty barrels were specially pledged as collateral for that note.

Sutton did not pay the Oliver & O'Bryan draft, the Block note or the indebtedness to the bank (which was renewed two or three times), and accordingly, having enforced their liens upon the collateral held by them respectively, the bank became the owner of the yellow receipts for fifty barrels, Oliver & O'Bryan became the owners of yellow receipts for two hundred barrels, and Block the owner of green receipts, covering the same two hundred and fifty barrels covered by the yellow receipts.

This suit was brought by Mattingly and others against Sutton and others to settle the partnership accounts. A receiver was appointed, and Block intervened, making the appellees, Oliver & O'Bryan and the German Security Bank, defendants, claiming that...