Prior to the petition, the bankrupt, a wholesale merchant in
Chicago, walled off part of the basement of his store and let it at
a nominal rental to a warehouse company, and there stored goods, so
that they were not seen from the store, and the company alone had
access thereto, and it exhibited signs to the effect that it
occupied the premises and had possession of the goods, it charged
the merchant for storage, and issued to him certificates or
receipts for the goods, which he pledged and endorsed over to banks
as collateral for loans. In an action brought by the trustee who
claimed that goods were in the possession of the bankrupt, and not
of the warehouse company,
held that:
A bailee asserting a lien for charges has the technical
possession of the goods. The transfer of a warehouse receipt is not
a symbolical delivery, but a real delivery to the same extent as if
the goods had been transported to another warehouse named by the
pledgee.
Upon the facts in this case, there is no reason to deny such a
place of storage the character of a public warehouse so far as the
Illinois statutes are concerned.
The receipts issued in this case were to be deemed valid
warehouse receipts so that their endorsement and delivery as
security for loans constituted a pledge of the goods represented
thereby valid as against attaching creditors, and if the receipts
were not valid as warehouse receipts, the transaction constituted
an equally valid pledge of the goods as such security.
Upon the facts, the following questions of law were
certified:
1. Whether, upon the facts above recited, the receipts issued by
the warehousing company are to be deemed valid warehouse receipts,
so that their endorsement by Flanders to the trust company, as
security for loans, constituted a pledge or pledges to the trust
company of the leather covered by such receipts, which would be
valid against attaching creditors.
2. Whether, if the receipts are not to be deemed valid as
warehouse receipts, upon the facts above recited, the
transactions are to be regarded as constituting pledges of such
leather
Page 198 U. S. 531
by Flanders to the trust company, which would be valid as
against attaching creditors.
3. If there was no pledge, whether the trust company, under the
facts above recited, acquired an equitable lien upon such leather
that is superior to the title thereto of the trustee in
bankruptcy.
Page 198 U. S. 534
MR. JUSTICE HOLMES delivered the opinion of the Court.
The questions certified by the circuit court of appeals arise
upon the following facts, abridged from the statement submitted to
us. The bankrupt, Flanders, was a wholesale leather dealer. He
walled off a part of the basement of his place of business, and let
it at a nominal rent to the Security Warehousing Company. There
were doors to this part, with padlocks bearing the name of the
company, which were kept locked, and to which the company had the
only keys. The company had a key to Flanders' front door, and
access to the part let to it at all hours of day or night. No one
else could get such access without breaking in. There were two
signs on the outside, stating, in large letters, that the premises
were occupied by the company as a public warehouseman. The company
received leather from Flanders into this place, issuing
Page 198 U. S. 535
a certificate that it had received the same on storage, subject
to the order of H.L. Flanders & Co., and identifying the
leather; "said commodity to be retained on storage, and delivered
only upon surrender of this receipt, properly indorsed, and payment
of all charges thereon." To every parcel of the leather was
attached a card, legibly stating that it was in the possession of
the warehouse company. The company stipulated in the receipt
against liability for damage by fire, water, etc., and, by a
general contract with Flanders, the latter assumed all risk of loss
except from dishonesty of the company's servants. Flanders paid the
company $20 a month for the first $10,000 worth of property or
less, and a dollar a month for each additional $1,000. He also paid
the expenses of the company in connection with storing the goods.
The certificates of the company issued as above were all indorsed
by Flanders to the Union Trust Company as security for loans made
by it to him in the regular course of business. If Flanders desired
to remove any part of the leather, he paid the necessary sum to the
trust company, was entrusted with the receipts, got the warehouse
company to send a man to unlock the place of enclosure and allow
the removal, indorsing on the receipt the amount delivered, if less
than all, and then, as the case might be, returned the receipt to
the trust company or surrendered it into the warehousing company's
hands.
Flanders became bankrupt, and his trustee filed a bill in the
district court, alleging the storage arrangement to have been
fraudulent, and claiming the leather on the ground that it always
had been in the possession of Flanders, and therefore had come to
the possession of the trustee. Upon these facts, the circuit court
of appeals certifies the following questions:
"1. Whether, upon the facts above recited, the receipts issued
by the warehousing company are to be deemed valid warehouse
receipts, so that their indorsement by Flanders to the trust
company, as security for loans, constituted a pledge or pledges to
the trust company of the leather covered by such receipts, which
would be valid against attaching creditors. "
Page 198 U. S. 536
"2. Whether, if the receipts are not to be deemed valid as
warehouse receipts, upon the facts above recited, the
transactions are to be regarded as constituting pledges of such
leather by Flanders to the trust company, which would be valid as
against attaching creditors."
"3. If there was no pledge, whether the trust company, under the
facts above recited, acquired an equitable lien upon such leather
that is superior to the title thereto of the trustee in
bankruptcy."
No question under the statutes of Illinois is suggested. Apart
from statute, a warehouse receipt simply imports that the goods are
in the hands of a certain kind of bailee. A bailee asserting a lien
for charges has the technical possession of the goods. But it
always is recognized that, if the bailee of the owner, by direction
of the latter, assents to becoming bailee for another, to whom the
owner has sold, mortgaged, or pledged the goods, the change in the
character of the bailee's holding satisfies the requirement of a
change of possession to validate the sale or pledge. Therefore it
is common for certain classes of bailees to give receipts to the
order of the bailor, because, by a receipt in that form, the bailee
assents in advance to becoming bailee for any one who is brought
within the terms of the receipt by an indorsement of the same. That
at least is the argument of Benjamin on Sales, 2d ed. 676
et
seq., 6th Am. ed. 795, § 817, is the understanding of
merchants, and is the principle adopted as to public warehouse
receipts by the statutes of Illinois, Rev.Stat. c. 114, § 24, and
probably adopted by the courts, apart from statute.
Union Trust
Co. v. Trumbull, 137 Ill. 146, 173;
Northrop v. First Nat.
Bank, 27 Ill.App. 527;
Millhiser Mfg. Co. v. Gallego Mills
Co., 101 Va. 579, 589;
Hallgarten v. Oldham, 135
Mass. 1, 10. The transfer of the receipt is not a symbolical
delivery, it is a real delivery, to the same extent as if the goods
had been transported to another warehouse named by the pledgee.
If, then, the Security Warehousing Company had possession
Page 198 U. S. 537
of the goods, it had it as bailee, and, unless some reason
appears to the contrary, the indorsement of its receipt, the same
being drawn to Flanders' order, was a delivery sufficient to
validate the pledge. But there can be no doubt on the facts as
stated, without more, that the company had possession of the goods.
It had them under lock and key, in a place to which it had a legal
title and right of access by lease. Even if it had not had a right
of access to the place, it would have had possession of the
contents of the room, according to the analogy of the settled law
that a carrier who breaks bulk and takes the goods is guilty of
larceny. Y. B. 13 Edw. IV. 9, pl. 5. The act is a trespass, as
agreed in Keilwey, 160, pl. 2;
Ward v. Turner, 1 Dick.
170, 172, 2 Ves. Sr. 431, 443;
Moore v. Mansfield, 182
Mass. 302, 303. So, again, if the goods had been in a place under
the exclusive control of the company, even without the company's
knowledge, they would have been in the company's possession.
Elwes v. Brigg Gas Co., 33 Ch.D. 562, 568;
Reg. v.
Rowe, Bell, C.C. 93.
See Barker v. Bates, 13 Pick.
255, 257, 261;
Northern Pacific Railroad v. Lewis,
162 U. S. 366,
162 U. S.
378-379,
162 U. S. 382.
When there is conscious control, the intent to exclude and the
exclusion of others, with access to the place of custody as of
right, there are all the elements of possession in the fullest
sense.
Gough v. Everard, 2 H. & C. 1, 8;
Ancona v.
Rogers, 1 Exch. Div. 285.
We deal with the case before us only. No doubt there are other
cases in which the exclusive power of the so-called bailee
gradually tapers away until we reach those in which the courts have
held as matter of law that there was no adequate bailment.
Bank
v. Jagode, 186 Pa. 556;
Drury v. Moors, 171 Mass.
252. So, different views have been entertained where the owner has
undertaken to constitute himself a bailee by issuing a receipt. We
may concede for purposes of argument that all the forms gone
through in this case might be emptied of significance by a
different understanding between the parties, which the form was
intended to disguise. But no such understanding is stated here, and
it cannot be assumed.
Page 198 U. S. 538
There is no reason even to infer it as a conclusion of fact, if
such inferences were open to us to draw. It is true that the
evident motive of Flanders was to get his goods represented by a
document, for convenience of pledging, rather than to get them
stored, and the method and amount of compensation show it. But that
was a lawful motive, and did not invalidate his acts, if otherwise
sufficient. He could get the goods by producing the receipt and
paying charges, of course, but there is no hint that the company
did not insist upon its control. It is suggested that the goods
gave credit to the owner. But, in answer to this, it is enough to
say that the goods were not visible to anyone entering the shop.
They could be surmised only by going to the basement, where signs
gave notice of the company's possession, and probably could be seen
only if the company unlocked the doors. There is nothing stated
which warrants us in doubting that all the transactions were in
good faith.
Although the first question does not refer in terms to the
statutes of Illinois, it is proper to add that we see no sufficient
reason for denying to the place of storage the character of a
public warehouse. "Public warehouses of Class C shall embrace all
other warehouses or places where property of any kind is stored for
a consideration." Rev.Stat. c. 114, par. 121, § 2. These sweeping
words embrace any place so used, whether owned or hired by the
warehousemen, and, if so, they embrace as well a place hired of the
owner of the goods as one hired of anybody else.
See Sumner v.
Hamlet, 12 Pick. 76;
Gough v. Everard, 2 H. & C.
1. If we are right in this, then the indorsement of the receipts
transferred the property in the leather by the express terms of the
statute already referred to. Rev.Stat. c. 114, § 24. If not, we
should come to the same result by the common law; for even if we
did not adopt the argument of Mr. Benjamin, to which we have
referred above, against the earlier view of Blackburn on Sales,
297, followed in
Farina v. Home, 16 M. & W. 119, still
all the authorities agree that, if an assent in advance is not
enough, yet, as soon as the bailee
Page 198 U. S. 539
attorns to the assignee, the delivery is complete. The statement
has not this point in view. But we should suppose that a fuller
statement would make it plain that the warehouse company knew and
assented to the transfers to the trust company, if that be
material, which we do not imply.
See also Union Trust Co. v.
Trumbull, 137 Ill. 146, 173;
Millhiser Mfg. Co. v. Gallego
Mills Co., 101 Va. 579, 589;
Gibson
v. Stevens, 8 How. 385,
49 U. S.
399.
As we answer the first and second questions in the affirmative,
it is unnecessary to consider the third.
It will be so certified.
MR. JUSTICE HARLAN, MR. JUSTICE BREWER, and MR. JUSTICE DAY
dissent.