Case Name: Thorne v. First National Bank
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1881-01
Citations: 37 Ohio St. 254
Docket Number: 
Parties: Thorne v. First National Bank.
Judges: 
Reporter: Ohio State Reports, New Service
Volume: 37
Pages: 254–261

Head Matter:
Thorne v. First National Bank.
An instrument in the form of a warehouse receipt, executed by a debtor to his creditor, on property owned by the debtor, who is not a warehouseman, for the sole purpose of securing such creditor, is void as against other creditors, where the property remains in the possession of such debtor. Gibson v. OMllicotfoe Bank, 11 Ohio St. 811, distinguished.
Error to the Court of Common Pleas of Clinton County. Reserved in the District Court.
In 1876, Elias Thorne brought suit in the Court of Common Pleas of Clinton county, against the First National Bank of Wilmington. The cause was submitted to a jury, on the petition, answer and evidence, and a verdict was found in favor of the defendant, and, after a motion for a new trial had been overruled, judgment was rendered on the verdict. All the evidence is set forth in a bill of exceptions, which is made part of the record. The material facts are as follows: In 1871, S. M. Thorne, I. C. McMillan and J. H. McMillan formed a partnership and engaged in the business of slaughtering hogs and packing pork, under the firm name of Thorne, McMillan & Co. The business was carried on at Wilmington, Clinton county, and the partnership continued until the spring of 1874.
On November 6, 1873, Elias Thorne loaned to the firm $2,600, on December 3, 1873, $2,600, and on December 22, 1873, $8,000, to be used generally in their business. The first two loans were at sixty days, and at the expiration of that time they were extended, and the last loan was at ninety days. It was understood when these loans were made, that security for their repayment was to be given, and at the time the last sum was advanced, H. T. Davis became surety for that sum. As further security for the repayment of that sum, the firm executed and delivered to Elias Thorne, at the time the money was advanced, a certain instrument in writing, and on December 25, 1873, the firm executed and delivered to him another instrument as security for the payment of the sums first men- ' tioned, which instruments are in the following form:
“Wilmington, Dec. 22d, 1873.
“We have received from Elias Thorne, of Skaneateles, New York, on storage, six thousand hams in process of curing, which we hold subject to his order, and to be delivered to him free of expense of curing, on presentation of this warehouse receipt, on which we have received an advance of ($8,000) eight thousand dollars; said hams stored in our porkhouse, Wilmington, Clinton county, Ohio, in casks marked E. Thome.
“ Thorne, McMillan & Co.
“ Attest: H. T. Davis.”
“Wilmington, O., Dec. 25th, 1873.
“ Received of Elias Thorne five thousand dollars ($5,000), as an advance on fifty thousand pounds of hams, now in process of curing in our porkhouse, for which he holds two notes twenty-six hundred dollars ($2,600) each.
• “ Thorne, McMillan & Co.”
S. M. Thorne,, after testifying that the sum of $8,000 was advanced to the firm by Elias Thorne, on December 22, 1873, at a bank in Wilmington, says: “We came out of the ban! and Elias Thorne and myself went directly to the porbhouse, and I delivered the hams to him.” [Witness was told to state what was said and done, and he proceeded as follows :] “ 1 pointed out the hams to him; they were on the first floor, and mostly in hogsheads, some in the front room, but most in the back room—100 hogsteads—something over 100,000 pounds; I pointed to the hams, and said to him, £ I make you a delivery of the hams ;’ I also said, ‘ I will mark them for youhe replied, £ That is all right;’ I marked some that afternoon and some more the next day, by marking on the hogsteads, in chalk, plainly, iE. Thorne. ’ When I said I would mark them, and he replied £ All right,’ he added that I could do so at some other time, as he was in a hurry. In the afternoon of that day I marked some of them by writing the name ‘ E. Thorne’ with chalk, and the next day I marked some more the same way, in all a half dozen or a dozen of the outside casks. The casks or hogsheads were all in the main part of the building. All the hams embraced or mentioned in the warehouse receipt were separate and apart from all other hams and meats in the house. A few days afterward, and while he was still here in Wilmington, we gave him another receipt to cover what we called the five-thousand-dollar loan; it was the receipt which has been offered in evidence, bearing date December 25th, 1873.”
In February and March, 1874:, without the knowledge or consent of Elias Thorne, the hams were shipped by the firm to Pittsburgh, where they were sold, and the proceeds of the sale, $7,025,32, were applied by the firm in satisfaction of money due from the firm to the bank. This debt to the bank existed at the time the warehouse receipts were given. The suit was brought to recover the money so received by the bank.
The firm was never engaged in the business of ware-housemen.
The court charged the jury, among other things, that if it appeared that the papers called warehouse receipts were in fact given by the firm to Elias Thorne “ simply by way of security for a loan of money made by him to them, and not otherwise,” then that the bank, which was a creditor of the firm at the time, was not liable.
L. Pope and J. S. Savage, for plaintiff in error:
The instruments executed by Thorne, McMillan & Co. to Elias Thorne were warehouse receipts, and their legal effect was to pass the general property and right of possession to the holder. Gibson v. Chillicothe Bank, 11 Ohio St. 311; Second National Bank v. Walbridge, 19 Ohio St. 419; Shepardson v. Carey, 29 Wis. 34; Rice v. Cutler, 17 Wis. 362; Harris v. Bradley, 2 Dillon, 284; Hale v. Milwaukee Dock Co., 29 Wis. 482; Emery v. Irving National Bank, 25 Ohio St. 360; Gibson v. Stephens, 8 How. U. S. 384; Cool v. Phillips, 66 Ill. 216. Act in relation to chattel mortgages has no application. Shepardson v. Carey, Rice v. Cutler, supra. Legal effect of the instruments for the court. Whitaker v. Sumner, 20 Pick. 399; Miller v. Baker, Id. 285; Sawyer v. Fisher, 32 Maine, 28; 2 Hilliard on Mortgages, 348, 354; Wadsworth v. Alcott, 6 N. Y. 65 ; Macomber v. Parker, 13 Pick. 175. The bank is liable for money had and received. 2 Bouv. Inst. § 3432; 4 U. S. Dig. 460, § 2; Lewis v. Anderson, 20 Ohio St. 281; Sanders v. Keber, 28 Ohio St. 630. As to the general doctrine of equity, that one having money which in equity and good conscience belongs to another, should be compelled to refund it, see 2 Story’s Eq. §§ 1258, 1261, a, c, 1262; Hartford v. Lloyd, 20 Beav. 310; Ernest v. Croysdill, 6 Jur. N. S. 740; Rolf v. Gregory, 11 Jur. N. S. 98, 238; Moreland v. Lemaster, 4 Blackf. 383; 2 Ves. Jr. 437; Van Alen v. American National Bank, 52 N. Y. 1.
Hoadly, Johnson & Colston, W. B. Telfair, and M. Hayes, for defendant in error-:
The instmments called warehouse receipts are in legal contemplation chattel mortgages, and as such are invalid, because there was not a change of possession, nor a filing as required bj statute. 1 S. & C. 475 ; Robinson v. Fitch, 26 Ohio St. 659 ; Yenni v. McNamee, 45 N. Y. 614 ; Shepardson v. Green, 21 Wis. 539 ; Adams v. Merchants' Bank, 19 Am. L. Reg. N. S. 714, s. c., 5 Law Bulletin, 303. Counsel also commented on Gibson v. Chillicothe Bank, and other cases cited for plaintiff in error.

Opinion:
Okey, J.
The verdict was right unless the charge was wrong. But the charge, as we shall see, Avas right. Clearly the hams were not held by Elias Thorne in pledge, for, to constitute a pledge, he must have received and retained possession of the property. Nor was this, as against the bank, a valid deposit by a bailor with a bailee, for the reason hereinafter stated. Nor, as to the bank, which does not claim under the instruments executed t.o Elias Thorne, Avere such instruments warehouse receipts, for the firm was not engaged in the business of warehousemen, and the property belonged exclusively to the firm.
There is nothing in the statutory provisions relating to warehouse receipts, in force in 1873 and 1874, which affects the question before us. 1 S. & C. 420-424; S. & S. 93, 94. In several states, however, and in England, the rights, duties and liabilities of persons with respect to such instruments, are regulated by statutes, and in construing those statutes, the eourts have considered the general subject. See Cochran v. Ripy, 13 Bush, 495 ; Sexton v. Graham, 53 Iowa, 181; Price v. Wisconsin, &c., Insurance Co., 43 Wis. 267; Sewing Machine Co. v. Heller, 44 Wis. 265 ; Insurance Co. v. Kiger, 103 U. S. 352; Harris v. Bradley, 2 Dillon, 284 ; McCabe v. McKinstry, 5 Dillon, 509; Yenni v. McNamee, 45 N. Y. 614; Adams v. Merchants' National Bank, 19 Am. L. Reg. N. S. 714; Greenleaf v. Dows, 12 Reporter, 545; Johnson v. Roe, 10 Central L. Jour. 328. See, also, Edwards on Bail. (2 ed.) § 332, 333; 10 Central. L. Jour. 421; Daniel on Neg. Inst. § 1713, 1714; Benj. on Sales (2 Am. ed.), § 780, 781. The conclusion already stated, that the instruments in question are not warehouse receipts, was reached after a careful examination of these authorities.
The claim that, in so holding, the decision is inconsistent with Gibson v. Chillicothe Bank, 11 Ohio St. 311, is not well founded. In that case, as in this, the instruments claimed to be warehouse receipts were not such receipts, strictly speaking. But in that case it was claimed that Gibson, Stockwell & Co., to whom the receipts were given, were the owners of the property, and evidence was offered to show such ownership. The true ground of that decision appears in the statement of the judge delivering the opinion, that the papers called warehouse receipts were given, "not to secure an indebtedness merely, . . . but on the contrary, that the plaintiffs, under a previous and subsisting contract, furnished and advanced the money for the purchase of the property, upon an agreement on the part of Bartlett & May to so pass to them the title thereto." The court below charged the jury that the receipts did not even tend to prove such ownership of Gibson, Stock-well & Co., and in so charging cleai'ly erred, and for that error the judgment was properly reversed. To that extent we fully recognize the case as authority. But in this case it is not pretended there was any agreement whereby Elias Thorne became owner of the property. Indeed, there was no proposition on the part of the firm to give, nor on the part of Elias Thorne to receive, a lien upon or interest in the property now claimed to have been embraced by the receipts, until all the property had been purchased by the firm, nor until such property had come to its possession, and, for aught that appears, payment therefor had been made.
The instruments not being as to third persons warehouse receipts, the question arises as to the interest Elias Thorne acquired in the property. We do not doubt that as to persons other than creditors of the firm, and subsequent purchasers and mortgagees in good faith, Elias Thorne acquired an interest in the hams. But the only interest he attempted to acquire was under those receipts, the acts called a delivery of the property having reference solely to perfecting his title under such instruments. The bank, however, was then a creditor of the firm. The statute in force at the time provided, " that every mortgage or conveyance, intended to operate as a mortgage of goods and chattels hereafter made, which shall not bo accompanied by an immediate delivery, and followed by an actual and continued possession of the things mortgaged, shall be absolutely void as against the creditors of the mortgagor, and as against subsequent purchasers and mortgagees in good faith, unless the mortgage, or a true copy thereof, shall be forthwith deposited as directed in the succeeding section of this act." 1 S. & C. 475 ; Rev. Stats. § 4150. In this case the place of deposit would have been the office of the township clerk. 3 Sayler, 2219.
Here Was an attempt to create, by the instruments in question, a lien on the hams, to secure the debt of Elias Thorne. There was no change of possession, much less a continued change of possession. There was no execution of a chattel mortgage on the property, much less a filing of such mortgage with the township clerk. The attempt was, therefore, within the inhibitions, and in conflict with the policy of the above section, and the lien so attempted to be secured was, as to the bank, a creditor of the firm, simply a nullity.
Another view of this case may be taken, equally satisfactory to all of us, and leading to the same result. Whether the bank, at the time it received the proceeds of the sale of the hams in payment of its debt, had knowledge that Elias Thorne held the alleged warehouse receipts, is a question concerning which the evidence is in direct conflict. The verdict, in view of the charge to the jury, is virtually a finding that the bank did not have such notice. The finding of a jury can only be disturbed when it appears from the evidence to be clearly wrong (McGatrick v. Wason, 4 Ohio St. 566, 575), and that we cannot say is shown by the evidence in this case. Elias Thorne having permitted the firm to retain the possession and control of the property, the firm sold it and paid the proceeds of the sale to the bank, which was one of its creditors, and, we are bound to say, ignorant of the fact that Elias Thorne had. or. claimed any lien upon, or interest in the property. That a bailor has, ordinarily, a remedy against a person who has converted his property to his own use, is not denied. Roland v. Gundy, 5 Ohio, 202 ; Knapp v. Hobbs, 50 New Hamp. 476. But where a bailee, in violation of his trust, sells the property of the bailor, and applies the proceeds in payment of his (the bailee's) debt to a third person, who was ignorant of the breach of trust, the bailor cannot maintain, against such third person, an action for money had and received. Kingsley v. Plimpton, 17 Pick. 159; Thatcher v. Pray, 113 Mass. 291; Culver v. Bigelow, 43 Vt. 249 ; Foster v. Green, 7 Hurl. & Nor. 881. In this view the verdict is right, even if the instruments relied on'should be regarded strictly as warehouse receipts.
Judgment affirmed.