Source: https://law.justia.com/cases/federal/appellate-courts/F2/386/199/62153/
Timestamp: 2020-01-27 15:38:08
Document Index: 796106710

Matched Legal Cases: ['§ 1', '§ 25', '§ 27', '§ 105', '§ 343', '§ 105', '§ 105', '§ 105', '§ 105', '§ 25', '§ 57', '§ 105']

P. W. Davenport, Tax Collector for the City of Charlotte and Mecklenburg County, and City of Charlotte and Mecklenburg County, Appellees, v. Ralph N. Peters & Co., a Limited Partnership, Appellants, 386 F.2d 199 (4th Cir. 1967) :: Justia
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P. W. Davenport, Tax Collector for the City of Charlotte and Mecklenburg County, and City of Charlotte and Mecklenburg County, Appellees, v. Ralph N. Peters & Co., a Limited Partnership, Appellants, 386 F.2d 199 (4th Cir. 1967)
US Court of Appeals for the Fourth Circuit - 386 F.2d 199 (4th Cir. 1967) Argued April 7, 1967
COPYRIGHT MATERIAL OMITTED R. E. Cabell, Jr., Richmond, Va., and Thomas Ashe Lockhart, Charlotte, N. C. (Moncure & Cabell, Richmond, Va., and Cansler & Lockhart, Charlotte, N. C., on brief), for appellants.
Whether a Chicago commodities broker (Ralph N. Peters & Co., a partnership, hereafter called "Peters") was properly before the Court and was correctly held personally liable for 1963 and 1964 personal property ad valorem taxes on cottonseed oil stored in Charlotte, Mecklenburg County, North Carolina, when, at most, it had only a security interest in the warehouse receipts, had repledged them for loans to itself, and the receipts were in the physical possession of bank which lent money to Peters, are the questions to be decided. The district court gave judgment against Peters for $22,282.11. Davenport, Tax Collector v. Ralph N. Peters & Co., 274 F. Supp. 99 (W.D.N.C. 1966). We reverse.
North Carolina law permits original attachments against non-residents and foreign corporations, N.C.G.S. § 1-440.3, and Rules 4(e) and (f), Fed. R. Civ. P., authorize a district court to provide for service of process in accordance with a statute of the state in which the district court is held, even beyond the territorial limits of the state. Because North Carolina law does not permit an attachment against property in the possession of a warehouseman who has issued a negotiable warehouse receipt therefor, unless the receipt is first surrendered or its negotiation enjoined, N.C.G.S. § 25-7-602 (formerly N.C.G.S. § 27-25), plaintiffs sought and obtained, ex parte, an order of attachment and a temporary restraining order enjoining Peters and Chase from negotiating the 145 warehouse receipts. Thereafter, a consent order was entered which, among other things provided for dissolution of the attachment and the temporary restraining order upon the filing of a bond in the penal sum of $25,000.00 to assure payment of the liability "if any" of Peters and Chase. The consent order recited and provided:
" [A]ll brokers dealing in tangible personal property who have in their possession such property belonging to others, shall file with the supervisor of taxation of the county in which such property is located a full and complete list of the owners of such property, together with the amount of such property owned by each * * * [B]rokers failing to make such reports shall be liable to payment of the tax * *."
The federal policy of liberality in permitting amendments to pleadings, as embodied in Rule 15, Fed. R. Civ. P., is self-evident. Within the discretion of the trial judge, "Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues [issues not raised in the pleadings but tried by express or implied consent of the parties] may be made upon motion of any party at any time, even after judgment * * *." Rule 15(b). Rule 15(a) also directs that leave to amend "shall be freely given when justice so requires."
Relying, however, on the doctrine that amendments to complaints can be made only if the effect is neither to enlarge nor to restrict federal jurisdiction, Peters contends that it did not submit itself generally to the jurisdiction of the district court when it appeared to dissolve the attachment, when it filed an answer and amended answer and when it went to trial, and that it has not been served with process, and could not be served with process, in the in personam cause of action under § 105-317, alleged in the amended complaint so that jurisdiction in personam does not exist over it. Support for this contention may be found in Falls Industries, Inc. v. Consolidated Chemical Industries, Inc., 258 F.2d 277 (5 Cir. 1958); Phillips v. Murchison, 194 F. Supp. 620 (S.D.N.Y. 1961); Lasch v. Antkies, 161 F. Supp. 851 (E.D. Pa. 1958); Maya Corp. v. Smith, 32 F.2d 350 (D. Del. 1929). See also, Freeman v. Bee Machine Co., Inc., 319 U.S. 448, 63 S. Ct. 1146, 87 L. Ed. 1509 (1942); International Ladies' Garment Workers' Union v. Shields & Company, 209 F. Supp. 145 (S.D.N.Y. 1962); 3 Moore's, Federal Practice, ¶ 15.02 [2] pp. 815, et seq.
Peters did not respond to the attachment by a "special" appearance but, since the advent of Rule 12(b), Fed. R. Civ. P., the distinction between general and special appearances in federal practice has been abolished. "There is no longer any necessity for appearing specially, as subdivision (b) provides that every defense may be made either in the responsive pleading or by motion. * * The familiar aphorism that the filing of an answer to the merits involves an appearance for all purposes, is still valid but quite worthless for any practical use since all objections to jurisdiction, venue and process and all defenses in abatement or bar may be set up in a motion or answer to the merits without waiving any of them." 1A Barron and Holtzoff, Federal Practice and Procedure (Wright's Ed.) § 343, pp. 284-286. See also, 2A Moore's, Federal Practice, ¶ 12.12.
"Possession" is a word ambiguous in meaning; it is not capable of exact definition because its definition varies according to the context in which it is used. National Safe Deposit Co. v. Stead, 232 U.S. 58, 34 S. Ct. 209, 58 L. Ed. 504 (1914); Boyd v. Travelers Fire Ins. Co., 147 Neb. 237, 22 N.W.2d 700 (1946). It is quite true, as plaintiffs contend, that the definition of "possession" in the North Carolina sales and use tax law, as stated in Watson Industries v. Shaw, 235 N.C. 203, 69 S.E.2d 505 (1952), cannot blindly be applied to § 105-317.10 Indeed, when § 105-317 is considered in its entirety,11 its basic legislative purpose would seem to be to require a disclosure by certain persons having a connection with and knowledge of property of others so that the property may be taxed and state and local tax revenues protected. "Possession" should accordingly be given a broad and general meaning; yet we are not at liberty to ignore the choice of language selected to accomplish that purpose.
The district judge so found in his formal findings of fact. In his memorandum decision, the district judge stated that on these dates physical possession of the receipts was in Peters or Chase, and the opinion stated that in the event of a discrepancy the recapitulation and summary in the memorandum decision should control. However, our examination of the record fails to disclose any factual basis to support the conclusion that the receipts were in the physical possession of anyone other than Chase on the date of assessment. Plaintiffs, in their brief, treat Chase as having physical possession of the receipts on the dates in question.
As the 1967 supplement to the text reveals, C. S. Foreman Co. v. H. B. Zachry Co., 127 F. Supp. 901 (D.Mo.1955) (opinion by Judge, later Justice, Whittaker) is in accord. See also, George v. Lewis, 204 F. Supp. 380 (D. Colo. 1962). Contra is Canaday v. Superior Court, 10 Terry 456, 119 A.2d 347 (Del.1955), but we agree with the commentator that this result is "* * * contrary to one of the principal purposes of the rules, and thus the federal decisions to the contrary are clearly preferable." Id. (1966 Pocket Part), p. 86. In the instant case, the district judge commented that "the better rule" was that Peters did not waive its jurisdictional objection by defending the attachment on the merits
Under N.C.G.S. § 105-241, a lien for state taxes on personal property is not enforceable against a bona fide purchaser for value, except upon a levy upon such property under an execution or a tax warrant; but when a tax lien is perfected, it is, by N.C.G.S. § 105-376(c), superior to all other liens or rights prior or subsequent in time. By N.C.G.S. § 25-7-502(c) (formerly N.C.G.S. § 57-41) a bona fide purchaser of a warehouse receipt acquires good title against a lien senior in time of which the purchaser had no notice. Cf., Commercial National Bank of New Orleans v. Canal-Louisiana Bank and Trust Co., 239 U.S. 520, 36 S. Ct. 194, 60 L. Ed. 417 (1916). Thus, an enforceable lien on the oil would not arise until it was executed on; but it could not be attached when a warehouse receipt therefor was in the hands of one who purchased it not knowing of the lien
Although it is unnecessary for us to pass on the question, § 105-317 might be read as limited to a broker having possession of property belonging to others in his capacity as a broker. Strictly speaking, a broker is one who acts as negotiator between buyer and seller. Hence, a broker having possession of property of others is an anomaly and more nearly describes a factor rather than a broker. If the strict definition of broker is read into the statute, Peters was not a broker having possession of property belonging to others in its capacity as a broker. Peters' interests in the receipts arose after the sale of them was completed by reason of the moneys which Peters lent to finance the purchase. Peters was thus in the same position as Chase, which all of the parties concede was correctly exonerated.
The opinion in Watson Industries speaks of "possession" as meaning the right to exercise power over property at pleasure and to the exclusion of all others. Section 105-317 must mean something less because it speaks of possession of property "belonging to others." Unfettered dominion and control over the property cannot thus be vested in the possessor.