Citizens Banking Co. v. Peacock & Carr , 1897 Ga. LEXIS 385 ( 1897 )

Little, J.

The Citizens Banking Company of Eastman-brought an action against Peacock & Carr, warehousemen, for the recovery of sixty-seven bales of cotton, which were described in the petition, and of the alleged value of five thousand dollars. The trial resulted in a nonsuit, and to this judgment of the court, and other rulings made in the case, the plaintiff excepted.

1. The first exception is, that the court erred in refusing to-admit in evidence three warehouse receipts, which were offered by the plaintiff as showing title to three bales of the cotton sued for. These receipts, which were in the usual form issued by this warehouse firm, had printed on them the name of the firm, and other words and figures convenient for being filled at the warehouse before being issued. The execution of the receipts for the other bales of the cotton sued for was admitted; but these three were objected to, because it did not appear that they were executed by the authority of the warehouse firm. There was no proof as to the identity of “ J. C. D.,” by whom these receipts were signed, nor that the warehouse company authorized any one to so sign receipts. There was, in our judgment, no error committed by the court in refusing to permit the introduction of these receipts in evidence, without proof of their due execution for the warehouse firm.

2. In their answer to the petition filed to recover the cotton > defendants in error denied that the plaintiff had any title to such cotton or any such interest therein as would entitle the plaintiff to maintain an action of trover for its recovery. For the purpose of determining the question made, reference must be had to the evidence which the bank relied on to show title. It appears that one Curry was a cotton-buyer in the town of Eastman, and had made arrangements with the plaintiff to pay for the cotton which he might buy. It was -agreed that when Curry bought cotton, he should make check on the hank for the amount of the purchase, and attach to it the warehouse receipt showing the weight and mark of the cotton; and that the bank should retain.the warehouse receipt as collateral security for the payment of the amount advanced on the check. The amount paid was debited to Curry, and when he had sold and shipped any part of such cotton, he would draw a draft on the consignee, for the amount of the purchase-money, and attach the bill of lading to the draft, and deliver it to the bank for collection, and take from the bank, in exchange, warehouse receipts representing the number of bales shipped. When the draft was collected, Curry’s account at the bank was credited with its proceeds, less exchange. So that the legal effect of the arrangement made between Curry and the bank was to pledge the cotton receipts as collateral to secure the payment of the money advanced to pay for the cotton. The defendants denied that the pledge so made put either the title to, or possession of, the cotton in the bank; and this is the first question we have to determine.

By our code such a deposit of warehouse receipts is a pledge or pawn. Civil Code, § 2956. It will be noticed that this section of the code declares that delivery of the property is essential to a bailment of this character. It is self-explanatory; however, on the subject of delivery, when it declares: “but promissory notes and evidences of debt, warehouse receipts, elevator receipts, bills of lading, or other commercial paper symbolic of property, may be delivered in pledge.” Originally, warehouse receipts, elevator receipts, and bills of lading were not by our statute authorized to be pledged as collateral. By an act approved October 3, 1887, this section of the code, which prior to that time only authorized the pledge, in express terms; of promissory notes and evidences of debt, was amended, and warehouse receipts, elevator receipts, and bills of lading, or other commercial paper symbolic of property, were expressly made the subject of pledge. Acts 1887, p. 36. Prior to the passage of this act, this court, in the cases of the Planters’ Rice-Mill Co. v. Merchants National Bank, 78 Ga. 574, and National Exchange Bank v. Graniteville Mfg. Co. 79 Ga. 22, in passing upon questions in which the legal effect of the pledge of warehouse receipts was involved, made certain rulings which, without careful examination, would seem to decide, to some extent at least, the question here made; but when those cases are examined it will be found that no ruling was made in either of them based on similar facts; nor do the rulings made really involve the question here. Some of the dicta in the latter case could be construed as affecting the principle as to whether title passed to the pledgee by the symbolic delivery. But however this may be, the act supra directly made warehouse receipts the subject of pledge, and they therefore occupy a status not given to them by statute at the time the decisions referred to were made, and must, from the date of the passage of the act, be invested with all the incidents which attach to property pledged, not only by our code, but by the common law as well, where such has- not been changed. 'Some of the incidents which attach to the contract of pledge are pointed out by the code. Section 2957 declares that the pledgee is such a bona fide holder of the property as will protect him under the same circumstances as a purchaser; and section 2960 provides that, while the general property in the goods remains in the pledgor, the pledgee has a special property for the purpose of the bailment. Section 2958 makes provision for the sale of the property after the debt becomes due, for the purpose of making application of the proceeds to the debt. And all these incidents by express terms of the statute apply to warehouse receipts. It was the intention of the General Assembly, by the act referred to, to make warehouse receipts, stand for the property which they represent; and the receipt being the symbol -of the property, it must be held that when a warehouse receipt representing cotton is pledged, the property it represents is as much pledged as if manual delivery thereof had been made.

Prof. Schouler, in his Law of Bailments and Carriers (§ 190), speaking of transfers of bills of lading as security for debt, says: “Such transfers are firmly sustained by American courts as amounting to a pledge of the goods themselves for the pledgor’s paper indebtedness, and, whether the transit were by land or sea, valid, on the score of a constructive delivery as against both the pledgee and the public. The exercise of further dominion over the goods by such a pledgor, without his pledgee’s assent, is held to confer upon a third party only a tortious possession, such as can not prevent the pledgee from recovering them.” The principle is the same as to delivery of warehouse receipts. In the case of Gibson v. Stevens, 8 Howard (U. S.), 383, the Supreme Court of the United States held : “ The delivery of the evidences of -title, and the orders indorsed upon them, was-equivalent, in the then situation of the property (stored in a warehouse), to the delivery of the property itself.” This case was quoted approvingly in the case of Conrad v. Fisher (Missouri Court of Appeals), 8 L. R. A. 164, wherein Thompson, J., delivering the opinion of the court, says: “It is now the recognized law of this country that the owner of goods, or the one having the legal right to the sale or pledge of them, may invest another with the full title and constructive possession of them, by transferring to him a bill of lading or warehouse receipt, which has been issued as their symbolical representative, either by the carrier or warehouseman in whose custody they are, so as to discharge the vendor’s lien or his right of stoppage in transitu, if the transferee of the bill of lading or warehouse receipt receives it bona fide and for a valuable consideration.” See also Lickbarrow v. Mason, 1 Smith’s L. C. 188. Such- we find to be the doctrine of the text-writers, supported by adjudicated cases; and it is plainly established now, that when warehouse receipts for cotton or other goods are delivered in pledge, the legal effect of such delivery is to put in the possession of the pledgee the property described in such receipt.

3. The form of the warehouse receipt used by the defendants in error, and which was given for the cotton sued for in this case, contained a stipulation that the cotton represented in such receipt was “subject to the presentation of this receipt only on paying customary expenses and all advances. Acts of Providence and fire excepted.” This stipulation made the cotton represented by the receipt subject to the control of its bona fide holder. Such a paper, while not made negotiable by our law, is quasi-negotiable, and may pass from hand to hand by delivery, because of the fact that, by express stipulation, delivery of the cotton which it represents is made subject only to the presentation of the receipt. Mr. Colebrooke, in his work on Collateral Securities (§413), says: “The transfer for value, as collateral security, of warehouse receipts, by indorsement and delivery, or by delivery only, where such receipts are made payable to ‘holder’ or ‘only upon the return of this receipt,’ vests the legal title and possession of the property in the pledgee, and is equivalent to an actual delivery of the property.” It has been held that, if the parties so intend, the delivery of the warehouse receipt without indorsement, as collateral security, transfers both title and possession of the property represented by such receipt. 17 Wis. 359; 48 Mich. 118; 8 Cal. 603. In the case of Rice v. Cutler, 17 Wis., supra, it was held that even where in the language of the statute such receipts may be transferred, the provision is regarded as permissive only, and is without effect upon the right to transfer by delivery, existing independently of the statute. And further Mr. Colebrooke says (§ 414)': “The pledgee of warehouse receipts, receiving the same, with or without indorsement, as collateral upon a bona fide loan or discount of commercial paper, stands in the same privileged position as a bona fide purchaser for value of like receipts.” And that “The pledgee of warehouse receipts is under no obligation to notify the warehousemen of the transfer to him of such receipts as collateral security.”

4. When a warehouse receipt in the form of those which were in evidence in this case is delivered as collateral security to another person, to be held as pledge for the payment of a debt, the effect of such delivery is to constitute the warehouseman the bailee of the person receiving such receipt in pledge; and this is trae although the warehouseman has no notice of the transfer. Colebrooke, Coll. Sec. § 413, and authorities cited under note 2. This is so from the nature of the contract entered into originally between the depositor and the warehouseman, and because the property passes by the transfer to the pledgee under the law merchant, independently of any statute.

5. One of the defenses-insisted on by the defendants in the court below was, that the plaintiff in error had in fact received the proceeds from the sale of the cotton for which it had brought its action. The object of pledging the cotton was to enable the pledgee, under the limitations of law, to sell the property pledged, and apply the proceeds to the payment of the debt of the pledgor. If, therefore, the pledgee has in fact received the proceeds from the sale of the cotton pledged, then it would follow that the title of the pledgee to the cotton is extinguished, because he could recover the cotton only for the purpose of sale and application of the proceeds to his debt, and having the benefit of the proceeds, he could ask no more, although he still held the warehouse receipts. On production in evidence of the warehouse receipt, and proof of demand and value, the plaintiff makes out a prima facie case; and if the defendant is to be relieved from his liability on the receipt which he has issued,, he must show the facts entitling him to such relief. Therefore, where he claims that the plaintiff has received the proceeds, the burden of proof is on him to show that fact in the trial of an action instituted by the pledgee against the warehouseman for the recovery of the cotton pledged. A warehouseman, when he delivers cotton deposited with him under the terms and conditions which are incorporated in the receipts put in evidence in this case, takes the risk, when he delivers such cotton without the production of the receipt, that the person to whom he delivers it has the possession of the receipt, or is rightfully entitled to it. To free himself from liability in such a case, when it is shown that the receipt is outstanding in the hands of an innocent purchaser for value, or in the hands of a pledgee who received it as collateral to secure the payment of money, the burden of showing the facts which would relieve him from the production of the cotton called for must be borne by him.

6. By section 2960 of the Civil Code it is declared that the pawnee has a special property in the property pledged, for the purposes of the bailment, but the general property in the goods remains in the pledgor. The purpose of the bailment being security for the payment of a debt, the method of applying it is prescribed by the statute (Civil Code, § 2958), by a sale of the property after the debt becomes due and remains unpaid. Having then a special property in the goods for the purposes of the bailment, and the manner of applying such property to such payment being prescribed to be by a sale of the property, actual possession so as to deliver the same to the purchaser must be in the pledgee. When, therefore, there has been a symbolic delivery of the property in pledge, as by the delivery of a warehouse receipt given for cotton, and it being established that such transfer vests in the pledgee the possession of the cotton described in the receipt, it must follow that if the manual possession of the property represented by the receipt be held by another, the special property which the pledgee lias in such property authorizes him to maintain an action of trover for its recovery. As we have endeavored to show, the delivery of the' warehouse receipt to a pledgee is the- delivery of the cotton to him, and he has a right of action against the warehouseman-to recover the actual possession for the purposes of the bailment; that is to say, for the purpose of selling the same and applying the proceeds to the payment of the debt. Colebrooke, Coll. Sec. § 12; Lawson on Bailments, § 68.

7. Under the view which we entertain of the questions of law involved in the record in this case, the granting of a non-suit by the court' below was error, and the case should have been submitted to the jury for determination of the facts involved. Judgment reversed.

All the Justices concurring.