# Insurance Company v. Kiger/Opinion of the Court

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* Opinion of the Court
United States Supreme Court
103 U.S. 352
Insurance Company v. Kiger
There are two questions in this case: 1, whether the insurance company can hold the cotton as against Kiger; and, 2, whether, if it cannot, Boyd & Co. are liable for the amount for which their receipts were pledged.
1. As to Kiger. Before the act of 1876 it was settled by numerous decisions in Louisiana that a factor could not pledge for his own debts the property of his principal. Stetson v. Gurney, 17 La. 166; Hadwin v. Fisk, 1 La. Ann. 43-74; Miller v. Schneider & Zuberbier, 19 id. 300; Young v. Scott & Cage and Cavaroc, 25 id. 313. The act of 1876 does not, as it seems to us, materially enlarge this power, so far as the facts of this case are concerned. It makes warehouse receipts the representatives of property in store, and provides for their use to borrow money on; but the implication is clear that their use in that way by a factor for more than the value of his interest in the property would be wrongful and invalid against the owner. This we do not understand to be disputed by the counsel for the plaintiff in error. His claim is that there was in this case no pledge, but, 'as the effect of the stipulation in the press receipts,' 'an absolute transfer of the legal title to the insurance company by parties in possession having the absolute control of the property, and the security was thus taken to enable the insurance company to sell the cotton and reimburse themselves if the debt was not paid.' The transaction between the parties was certainly not a sale, and in the answer of the company it is distinctly stated that the cotton was delivered into the possession of the company to be held as security for the payment of the notes given for the money borrowed. Undoubtedly the possession of the receipts was equivalent to the possession of the property, but the title which the company acquired was such as grew out of its contract with the factors. That clearly was a pledge and nothing more. There was, first, the cotton; second, the debt for the money borrowed; and, third, the delivery of the property into the possession of the creditor, to be held as security for the debt. These are all the elements of a pledge, and fix the rights of the parties. Aiken & Watt were the pledgors, but as they were only factors and had no interest in the property as against Kiger, the owner, their pledge was wrongful and invalid as to him. The pledge was by a factor of the property of his principal, in which he had no interest whatever, as security for his own debt.
2. As to Boyd & Co. They were simply warehousemen. Their duty under the law was not to issue receipts until they had the property actually in store, and not to deliver the property until the receipts were surrendered for cancellation. They did have the property in store when they gave the receipts, and as soon as it was taken from them by judicial process they notified the insurance company, and upon that notice the company is now here asserting its title. This is a substantial compliance with their obligation not to deliver without a surrender of the receipts. There is no pretence of fraud or collusion, and we think it would be a surprise to warehousemen to be told, that when they issued their receipts for property in store they became not only responsible as custodians of the property, but guarantors of its title to the assignees of their receipts. Such a rule would make it necessary for a warehouseman, before giving a receipt, not only to ascertain whether he had the property actually in store, but whether the title of the bailor was valid and unincumbered. Certainly this could not have been in contemplation when warehouse receipts were made by statute negotiable and to some extent evidence of ownership. The duty of the warehouseman is performed when he gets the property into his own possession before he issues the receipt, and transfers that possession when demanded to the lawful holder of the receipt.
In this case the liability of Boyd & Co. is just what it would have been if the company had put the cotton in store and taken a receipt to its own order. The fact that Aiken & Watt originally stored the property is a matter of no importance so far as Boyd & Co. are concerned. The receipt in the hands of the company represented the cotton stored by Aiken & Watt, and gave the company the same rights it would have had if the cotton, instead of the receipt, had been handed over. The company got by the receipt such interest in the cotton as Aiken & Watt could by their pledge convey, and that is all Boyd & Co. agreed to deliver on the return of their receipt. Boyd & Co. cannot, as against the company, say they never had the cotton, or that they did not promise to deliver it on the return of their receipt by the lawful holder. They received the actual possession of the property from Aiken & Watt, and that possession they agreed to deliver to the insurance company when called On. This, as has just been seen, they have in legal effect done, and the rights of the parties in this case are to be determined precisely as they would be if the company had got the cotton from Boyd & Co., on the surrender of the receipts, and had afterwards been sued by Kiger for its possession.
Judgment affirmed.

## Notes

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