Court Opinion

ID: 5586035
Source: CourtListenerOpinion
Date Created: 2022-01-11 01:53:47.27454+00
Date Added: 2024-06-11T08:36:14.995385
License: Public Domain

Gilbert, J.,
dissenting. “Every transferor of a negotiable instrument, whether by indorsement or delivery, warrants (unless otherwise agreed by the parties) that he is the lawful holder and has a right to sell, that the instrument is genuine, and that he has no knowledge of any fact which proves the instrument to be worthless, either by insolvency of the maker, payment, or otherwise.” Civil Code (1910), § 4277. There is here no mention of implied warranty as to collateral security attached to negotiable instruments. The Code of Georgia above quoted states explicitly what warranties in such circumstances are implied. Under the •facts stated, none other than those enumerated will be implied. Under the Code there was no implied warranty by the Continental Trust Company that the cotton represented by the receipt was in the warehouse at the time the Bank of Harrison purchased the note. At most, the Continental Trust Company warranted that it had *765no knowledge that the cotton was not stored as represented by the warehouse company. Counsel for the Bank of Harrison has submitted an able and elaborate brief. The argument, however, is based on the theory that the Continental Trust Company sold not only the note of “The Cotton Warehouse Company,” but as well the collateral attached to that note. The question expressly states that the Bank of Harrison bought from the Continental Trust Company “a promissory note for the principal sum of $5000,” and it further states that this note was executed by “The Cotton Warehouse Company." The question further states that “attached to the note as collateral security" was another promissory note executed by “The Ellis Cotton Company,” and that “attached to'the Ellis Cotton Company note, as collateral security to it, was a warehouse receipt of ‘The Cotton Warehouse Company.' “This warehouse receipt represented that 32 bales of cotton with described markings had been deposited in the cotton warehouse, and that this cotton was in the actual possession of the cotton warehouse on the day the Bank of Harrison bought the note for $5000. It will be seen that the warehouse receipt was “attached as collateral security55 to the Ellis Cotton Company note, and that this latter named note, payable to “The Cotton Warehouse Company,55 together with the cotton warehouse receipt, was held as collateral security by the Continental Trust Company, and that what the Bank of Harrison bought from the Continental Trust Company was the $5000 note of the Cotton Warehouse Company.
Pawns and pledges stand upon the principles of collateral security. Our Code (1910), § 3533, declares: “The pawnee may transfer his debt, and with it the possession of the thing pawned, and the purchaser stands precisely in his situation.” In Bank of Forsyth v. Davis, 113 Ga. (supra), at page 342 this court said: “When, the pawnee transfers his debt, and delivers to the transferee the property given to secure the debt, the transaction is not a sale of the pledge, but simply places the transferee in the same position which the original creditor occupied.” The above facts and the words of the question show that the Bank of Harrison only obtained a special property right in and to the warehouse receipt. Bouvier defines the word “collateral” to mean: “That which is by the side, and not in direct line. That which is addi*766tional to or beyond a thing.” Bouvier’s Law Dictionary, Bawle’s Third Edition, 519. For further definition see 11 C. J. 961, and notes. Had the Cotton Warehouse Company paid their note for $5000 to the Bank of Harrison, obviously neither the Ellis note nor the cotton warehouse receipt would have been subject to the demands of the Bank of Harrison. The Bank of Harrison only in a limited sense held title to them. Whatever title the Bank of Harrison held to the Ellis note and the Cotton Warehouse Company’s receipt became null and void upon the event of the payment of the note by the Cotton Warehouse Company. Compare People’s State Bank v. Penello, 59 Cal. App. 174 (210 Pac. 432). I am authorized to say that Mr. Justice Hill concurs in this dissent.