Court Opinion

ID: 6832689
Source: CourtListenerOpinion
Date Created: 2022-07-23 19:57:12.526168+00
Date Added: 2024-06-11T16:04:36.503887
License: Public Domain

HOUGH, Circuit Judge
(after stating the facts as above). The history of this transaction has three chapters: First, relating to the time when the metal lay on the leased premises of a duly incorporated warehouse company; i. e., in building No. 6. Second, when the bankrupt (unknown to the bank) repossessed itself of the goods and deposited them in its own building and one in daily *498use for its own purposes. Third, when the bank, learning what had been done and being fully able itself to take possession of the metal, left it with the bankrupt, though marked as the property of the hank in such a manner that (as one witness puts it) one who came near could read what was on the tag.
In form the transaction between borrower and lender was an assignment by way of pledge of the Lackawanna Storage Yards warehouse receipts. Admittedly that incorporated company is still liable on its receipts; but it was a mere shell, and when this bankruptcy occurred it crumbled.
An argument might he made that the bank’s right to the proceeds of the metal could not grow out of its ownership of the warehouse receipt, because the metal as metal was never pledged by bankrupt to bank. But we shall assume in favor of appellant (hut without so holding) that there was an intent directly to pledge this metal to the hank.
In anything like the form presented by this record we have not hitherto considered this question, hut in American Can Co. v. Erie Preserving Co., 183 F. 96, 105 C. C. A. 388, we held, following Casey v. Cavaroc, 96 U. S. 467, 24 L. Ed. 779, that however honest, however clear of all fraud or fraudulent intent, a pledge may be, it is by law “utterly invalid unless accompanied by actual or constructive possession.”
Let it now be assumed (hut not held, as the point is not necessary for decision) that the original method of procedure showed an actual change of possession from bankrupt to warehouse company, followed by. a valid pledge of a warehouse receipt as an instrument of title, and that this transaction was within Union Trust Co. v. Wilson, 198 U. S. 530, 25 S. Ct. 766, 49 L. Ed. 1154. Let it he next assumed that the hank should not he and was not placed in any worse position by the bankrupts conversion of the metal through the transfer thereof from building No. 6 to No. 4.
But with all these assumptions the time admittedly came when the hank knew what had occurred, knew it had been wronged, had 'full opportunity to resume possession of the goods, and did not do so; it left the metal in the possession of the bankrupt pledgor. The legal status depends upon what was done last, and when that situation is considered there is no legal difference between this ease and Security Warehousing Co. v. Hand, 206 U. S. 415, 27 S. Ct. 720, 51 L. Ed. 1117, 11 Ann. Cas. 789.
Order affirmed, with costs.