The Franklin National Bank v. Whitehead
| Decision Date | 24 February 1898 |
| Docket Number | 18,108 |
| Citation | 49 N.E. 592,149 Ind. 560 |
| Parties | The Franklin National Bank et al. v. Whitehead et al |
| Court | Indiana Supreme Court |
From the Hancock Circuit Court.
Affirmed.
Daniel Wait Howe and Baker & Daniels, for appellants.
W. A Ketcham, Morris, Newberger & Curtis and F. E. Matson, for appellees.
In January, 1894, in a proceeding brought for that purpose, the court below appointed a receiver for the Greenfield Iron and Nail Company, an insolvent corporation, located at Greenfield, Indiana, who took possession of the property of said corporation under the order of the court, for the purpose of applying its assets to the payment of its debts. Appellants, two of the creditors of said corporation, filed their separate intervening petitions, claiming that by virtue of certain receipts, purporting to be public warehouse receipts, issued by said corporation, they had liens upon a large portion of the property of said corporation, and were entitled to have the same set apart and applied to the payment of their claims. To these intervening petitions the receiver and the First National Bank, of Brazil, on behalf of themselves and the other general creditors, filed separate answers. The court made a special finding of facts, upon which conclusions of law were stated against the Franklin National Bank of Brazil, on behalf of themselves and intervening petitioners, and, over their separate motions for a new trial, judgment was rendered against them.
The errors assigned call in question each conclusion of law and the action of the court in overruling the motions for a new trial. It appears from the special finding that the Greenfield Iron and Nail Company was organized on November 3 1889, under the laws for the incorporation of manufacturing and mining companies, having its office and principal place of business at the city of Greenfield, Indiana. The object of said corporation, as set forth in its articles of association was, "the manufacture and sale of nails, and other products of steel and iron." In December, 1890, said company made a written application to the auditor of Hancock county for a permit to keep a public warehouse, and received a paper purporting to authorize it to operate a public warehouse of class B. Said company never owned or operated a public warehouse of either class A or B, or pretended to, other than the room used in the manufacture of nails, never received any goods, wares, or merchandise on storage, or owned or leased a place for the storage of goods, and never issued any papers purporting to be warehouse receipts, except the papers so designated in this case, and a similar one to one of appellants, the Franklin National Bank, in a transaction similar to the one in which said bank received the papers mentioned in its intervening petition. The effort of said Greenfield Iron and Nail Company to occupy the position of a warehouseman was to enable it to borrow money without impairing its credit by giving chattel mortgages or making pledges of its stock. While the company was engaged in carrying on its business, the nails manufactured were put in kegs, and upon the head of each keg was branded the name of the company and the kind and size of nails contained therein, and the kegs were placed in rows on one side of the rooms where made. Prior to December 9, 1890, the Greenfield Iron and Nail Company, by its president, applied to appellant the Franklin National Bank for a loan of $ 5,000.00 and promised to secure said loan by giving as collateral security therefor a warehouse receipt covering nails of sufficient value belonging to said company; and on the 9th of December, 1890, said bank loaned said company $ 5,000.00, for which said company executed its note, payable 120 days after date, endorsed by five persons; and it was required that said company should ship and store said nails in a regular warehouse in Indianapolis. Afterwards, in January, 1891, said company made out a statement showing the sale of 2,670 kegs of nails and the size and kind of nails in each keg, to said bank, valued at $ 5,009.95, and at the same time made out a receipt which recited that the Greenfield Iron and Nail Company, in its capacity of a public warehouseman, hereby certifies that it has received of the Franklin National Bank the following described property (describing the kegs of nails the same as in the invoice aforesaid, except no value is mentioned, and the words "marked 'Lot A,'" were used), which is deliverable to the order of said Franklin National Bank upon the return of "this receipt and the payment or tender of proper charges." This receipt was signed by the company. Both of these papers were delivered by said company to the bank for the purpose of complying with its promise to secure said note. Afterwards, in April and May, 1891, loans were made by the National Bank of Rockville to said company, under like arrangements and conditions, to secure which like papers, except the kegs of nails were not designated as being marked "Lot A" or otherwise, were executed and delivered to the National Bank of Rockville. Afterwards, in July, 1893, the company executed and delivered to the Rockville Bank, as additional security for said loans, papers of like kind for "800 kegs of cut steel nails 10 d com." No nails were in fact sold by said company to either of said banks, and said bank made no actual deposit of nails with the company, but said company, at the time said papers were delivered, had in its general stock, in its manufacturing establishment at Greenfield, nails of the kind described in said receipts. The failure of said company to ship the nails to Indianapolis, as agreed with the Franklin National Bank, was not known or assented to until said receipt and invoice were received and accepted by said bank, about February 1, 1891. The nails described in said several receipts were not removed from the room where manufactured, and were not set apart or separated from the general stock then on hand of the same and different kinds, nor were they marked "A," or in any other manner except in common with all other nails manufactured by said company. The bank officers of said bank did not know the method of manufacture and storage of said nails or the kind of place where stored, or that said nails, described in the receipt of the Franklin National Bank, had not been set apart and marked "Lot A," as indicated in said receipt to the Franklin National Bank. Nor did they make any inquiry or effort to ascertain the character of the pretended warehouse at Greenfield, or whether said nails were stored therein or at any other place, or as to what had been done or was being done with respect to said nails, but wholly relied upon said receipts. The loans evidenced by said notes were renewed from time to time by giving other notes with the same indorsers, and the same were accepted by the banks in reliance upon the papers held, respectively, as security for said loans. After the execution of said receipts the Greenfield Iron and Nail Company continued to manufacture nails, and when so manufactured the kegs in which they were placed were mingled indiscriminately with other kegs containing nails of a similar kind on hand at the dates of the execution of said receipts to said banks, and kept in the company's building, and sales were made by the company from time to time, and the nails sold were taken indiscriminately from the stock on hand, and no effort was made to distinguish between the nails on hand when said receipts were executed and those subsequently made. That at the time of the execution and acceptance of said receipts the nail company and the appellants intended to create a valid lien on the nails therein described, as collateral security for said loans. On January 4, 1894, the president of the Greenfield Iron and Nail Company gave directions that nails of the same kind and quality specified in the receipts held by said banks, respectively, be set apart and marked for said banks. On said day the company, to secure the Franklin National Bank a lien on said nails, without the knowledge of said bank, commenced to set apart nails of the same kind, quality, and description as those mentioned in the receipt given to said bank, so far as they were on hand, and the same were placed in piles and separated from other nails, and the piles so set apart were designated as "Lot I." This was completed on January 13, 1894, before the appointment of a receiver. It cannot be determined how many of the nails, if any, so set apart were on hand when said receipt was given to said bank. No nails were set apart for the Rockville bank for the lack of time, as the receiver was appointed immediately after the completion of the work of setting apart the nails designated "Lot I." At the time the order was given to set apart said nails, on January 12, 1894, the Greenfield Iron and Nail Company was insolvent and in embarrassed circumstances, and was unable to meet or pay the claims against it, and when said order was given the officers of said company well knew that said company could not continue in business, and said order was made in contemplation and expectation of the appointment of a receiver, and that the same would be wound up as an insolvent concern. The receiver was appointed on January 13, 1894, and took possession of the property of said company, including the nails, in separate piles designated as "Lot I," but in resorting the nails in order to take an invoice, and in removing them from exposure to the weather, the nails in said piles were mingled with other nails of the same kind in the building. No warehouse charges for storage or other expenses were charged by said company against the holders of said receipts, nor was any...
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