6 Am. L. Rev. 450: Sexton & Abbott v. Graham et al., 53 Iowa 181; Nelson v. Brown et al., Id. 555.

Some of the cases while admitting the power of an owner to sell his own goods, without segregation and without actual delivery, deny him the power to So pledge them; it is proposed in this note to examine a few typical cases, with a view of determining the correctness of this attempted distinction.

Gibson v. Stevens, 8 Howard 384 (1850), a part of the syllabus of which is as follows: "Where personal property is, from its character or situation at the time of the sale, incapable of actual delivery, the delivery of the bill of sale, or other evidence of title, is sufficient to transfer the property and possession to the vendee.

"Where articles of commerce were purchased in the state of Indiana, and the vendors in whose warehouses they were lying, gave a written memorandum of the sale, with a receipt for the money, and an engagement to deliver them on board of canal-boats soon after the opening of canal navigation, these documents transferred the property and the possession of the articles to the purchasers.

"These documents, being endorsed and delivered to a merchant in New York, in consideration of advances of money in the usual course of trade, transferred to him the legal title and constructive possession of the property.

"Therefore, an attachment subsequently issued, at the instance of a creditor of the original purchasers, which was levied upon the property in question, could not be maintained."

Gibson, the merchant in New York, was, by his contract, to sell the stuff, repay himself and turn over the balance, less commissions and charges, to the original purchasers, McQueen & McKay. TANEY, C. J., says: "Nor, as respects the legal title, can there be any distinction between the advance made

*

by Gibson, and the case of an actual purchaser. To the extent of his advances he is a purchaser, and the legal title was conveyed to him to protect his advances. * The legal title, the right of property, passed to him, and McQueen & McKay retained nothing but an equitable interest in the surplus, if any remained after satisfying the claim of Gibson."

It was not denied that the equitable interest of McQueen & McKay was liable to attachment, but the decision was that Gibson was entitled to the possession of the goods. The goods were in the warehouses of third persons. It is submitted that this case, properly understood, is a decision recognising the validity of a pledge of merchandise by a symbolical delivery thereof by means of the transfer of a warehouse receipt.

To show the nature of the transaction when there is such a symbolical delivery of property in pledge, the following extract from the opinion of BRADLEY, J., in Casey v. Cavaroc, 6 Otto 467 (1877), is of interest: "The difference ordinarily recognised between a mortgage and a pledge is, that title is transferred by the former, and possession by the latter. *** The possession need not be actual: it may be constructive; as where the key of a warehouse containing the goods pledged is delivered, or a bill of lading is assigned. In such case the act done will be considered as a token, standing for actual delivery of the goods. It puts the property under the power and control of the creditor. In such cases, such constructive delivery cannot be effected without doing what amounts to a transfer of the property also. The assignment of a bill of lading is of that kind. Such an assignment is necessary, where a pledge is proposed, in order to give the constructive possession required to constitute a pledge; and yet it formally transfers the title also. In such a case there is a union of two distinct

forms of security-that of mortgage and that of pledge; mortgage by virtue of the title, and pledge by virtue of the possession."

In Yenni v. McNamee, 45 N. Y. 614, (1871), S. was the owner and in possession of a quantity of petroleum at his factory. His superintendent signed and delivered to him the following receipt, dated Dec. 6th 1866: "Received on storage for account of S., 600 barrels of petroleum, crude and refined, contained in tanks, and 700 barrels to hold the same; deliverable to his order on payment of the charge named therein, in accordance with the marginal note hereto. Storage, per month. Labor,

The receipt was not for any designated or separate parcel of oil, but was intended to cover oil, crude, refined or in process of refining in the works, and empty barrels to hold it. On the 16th of Dec. the Ocean Bank loaned Stokes $5000 and received his note therefor and, as collateral security, took the receipt above set out, endorsed by him. There was no change of possession of the oil; none of it was set apart to answer the call of this receipt; and no one, on behalf of the bank, ever saw the oil. An execution was issued against Stokes and the sheriff the defendant in this case, levied on all the oil, barrels, &c., in the works. Stokes was authorized by the bank to sell the oil covered by the receipt, on their account, and, after the levy, sold and delivered the oil in question, which the sheriff reclaimed, and to recover which this action was brought.

GROVER, J., says: "The inquiry is, did the bank acquire an absolute title to the property by the endorsement of the receipt to it by Stokes, so that it was not thereafter liable to be levied upon and sold upon an execution against him.* * * There is no doubt but that Stokes intended to confer some title to the property by indorsing and delivering the receipt to it; and the bank, by accepting it, intended to acquire an interest in the pro

perty. Although the mode adopted was informal it was, I think, effectual to accomplish the object of the parties. A transfer of a warehouse receipt by indorsement, with intent to transfer the title to the property specified therein, is effectual under the law merchant, independent of the statute, to transfer the title: [ Gibson v. Stevens, 8 How. U. S. Rep. ] Had Stokes, therefore, indorsed and delivered the receipt to the bank in good faith, upon an absolute sale of the property to the bank, I am not prepared to say that the bank would not thereby have acquired the title, although the receipt was a mere fiction between Stokes and Chapman. Both of the latter would have been estopped from denying that the receipt was based upon a real transaction. This estoppel would have been equally effectual against all claiming under Stokes upon a title subsequently acquired. *** But Stokes transferred the receipt, and, therefore, the title to the property, as a mere security for the payment of his note. It was therefore a mere mortgage security," and void as against creditors, because not accompanied by immediate delivery, or filed as required by the state statute. Sce to same effect Farmers & Mechanics' National Bank v. Lang, 87 N. Y. 209, (1881). (See, however, Parshall v. Eggert, 54 N. Y. 18). Adams, Assignee, &c. v. Merchants' National Bank, 2 Fed. Rep. 174, and 19 Am. L. Reg. (N. S.) 714, opinion by DRUMMOND, J., is a very similar case.

In Smyth v. Craig. (1841) 3 W. & S. 14, S., the defendant, bought and received from C., B. & Co. flour, to be paid for half in cash and half in 60-day notes. Being pressed for payment he consented to let molasses in his distillery stand either as their property or as collateral security on condition that they would take his notes at 60 and 90 days, in lieu of the former terms. He pointed out the molasses, consisting of 400 hogsheads, to be ascertained by counting them off, in rows, from a particular place, and in

a particular manner. He agreed that the molasses should remain in his yard, and to send them the rum to be distilled from the molasses, to be sold by them and ap. plied to his debt. GIBSON, C. J.: "Had it rested there, the plaintiff, or the firm he represents, could not have recovered as in the case of a pawn: for at this time there was no delivery or possession, and consequently no pawn. Indeed, retention of possession was necessarily a part of the arrangement, because it was indispensable to enable the defendant to carry the other parts of it into effect."

Merchants', &c., Bank v. Hibbard, (1882) 48 Mich. 118. In this case there was issued by the defendants as security for a loan of $20,000 made to them by the bank, the plaintiff, the following warehouse receipt: "Received, Grand Rapids, Michigan, January 17, 1880, in store for account of the Merchants' and Manufacturers' National Bank of Detroit, Michigan, eighteen thousand (18,000) bushels No. 1 white and 2 red winter wheat, to be delivered in wheat or its equivalent in flour upon return of this receipt properly endorsed, to be kept insured for account of whom it may con

cern.

HIBBARD & GRAFF."

H. & G. were not only buying, storing, manufacturing, shipping and selling wheat on their own account, but were also receiving into their mills wheat to be stored for others, for which they issued the customary warehouse receipt. The firm of Hibbard & Graff failed in March 1880, and the bank sued out this writ of replevin. COOLEY, J., says," The defendants do not deny that title may pass by the delivery of a warehouse receipt in pursuance of an actual sale, nor, as we understand it, do they dispute that when one is owner of property represented by a warehouse receipt or other instrument of a similar nature, he may make pledge of it and transfer constructive possession by delivering to the pledgee the instrument that represents his property. * * * But in this case the plaintiff never had

either title or actual possession of the property; it was not intended that the warehouse receipt should pass the title to the plaintiff. It is therefore contended that there was and could be in the case no constructive possession except such as might be implied in any case in which an owner should undertake to pledge the property, and at the same time without delivery retain it in his own hands and under his own exclusive control.

“We have already said that it is conceded a warehouseman may transfer title to property in his warehouse by the delivery of the customary warehouse receipt. In such cases there is no constructive delivery of the property whereby to perfect the sale except such as is implied from the delivery of the receipt; and where the property represented is only part of a large mass as was the case here, there could not well be any other constructive delivery. But for the convenient transaction of the commerce of the country it has been found necessary to recognise and sanction this method of transfer, and vast quantities of grain are daily sold by means of such receipts. *** We are then to see whether a constructive transfer of possession that is recognised in the oase of sale shall be held inoperative in case of an attempted pledge.

"If a distinction is made in the cases it ought to be upon some ground that would seem reasonable in commercial circles. ***

"If a merchant may buy grain in store and receive a transfer of title in a warehouse receipt, he would be very likely if he had occasion to receive grain in pledge, to suppose a similar receipt to be sufficient for that purpose. No reason would occur to him why it should be otherwise, and this because there would be in fact no reason except one purely technical, depending on nice legal distinctions. When that is found to be the case any proposition to establish a distinction should be rejected, decisively and with

out hesitation; for the laws of trade are made and exist for the protection and convenience of trade, and they should not tolerate rules which have the effect to border the chambers of commerce with legal pitfalls. ✶✶✶

"Some stress was laid by the defendants upon the fact that two kinds of wheat are mentioned in the receipt, and there is no specification of the quantity of each to be held. The circumstances explain this, for they show that the two kinds were mixed in grinding, and it was evidently contemplated that flour rather than wheat should be held. In the absence of any specification of the quantity of each kind that was to be held, the legal construction we think would entitle the pledgee to an equal amount of each kind if it remained unmanufactured. The return of the officer shows that he found no red wheat, and but 3051 bushels of white wheat. For the remainder he took an equivalent in flour according to the terms of the receipt."

See also Cochran v. Ripy, 13 Bush (Ky.) 495; Ferguson, Jr., Assignee, v. Northern Bank of Kentucky, 14 Id. 555; Gibson v. The Bank, 11 Ohio St. 311; Rice v. Cutler, 17 Wis. 351; Whitney v. Tibbits et al., Id. 359; Shepardson v. Cary, 29 Id. 34; Nat. Bank of Green Bay v. Dearborn, 115 Mass. 219; Cool v. Phillips, 66 Ill. 216; Taylor v. Turner, 87 Id. 296; Osborn v. Koenigheim, 57 Tex. 91; Dougherty v. Haggerty, 96 Penn. St. 515.

The conclusions which the writer deduces from his examination of the authorities, are, First: That while possession by the pledgee is a necessary condition of

the existence and continuance of a pledge, yet that that possession is not required to be actual physical possession. The holding of a recognised symbol of title, a bill of lading or a warehouse receipt is sufficient. And the owner of goods, if a warehouseman, can pledge the same by delivering his own warehouse receipt to the pledgee.

The qualification of this last proposi tion, that the pledgor must be a warehouseman, seems to have been overlooked in the consideration given by the judges deciding them to some of the cases cited. That the pledgor is a warehouseman and the instrument, a warehouse receipt should be shown by pleadings and proof. Shepardson v. Cury, supra; Thorne v. First Nat. Bank, 37 Ohio St. 254.

Second: That segregation from a uniform mass is no more required in the case of a pledge by means of the transfer of a warehouse receipt, than in the case of a sale thereby. Where the pledgor is a warehouseman, the world has notice from that fact that the legal possession of the goods in his warehouse is probably in another, although the physical possession and control of them is in himself if he be not a warehouseman and yet desire to pledge bulky articles not easily susceptible of actual delivery, he must, at least, clearly and unequivocally designate the articles pledged, so that third persons need not be deceived. Anderson v. Brenneman, 44 Mich. 198; Reeder v. Machen, 57 Md. 56; Collins v. Buck, 63 Me. 459; Thompson v. Dolliver, 132 Mass. 103; Crawford v. Davis, 99 Penn. St. 576.

BENJAMIN H. LOWRY.

Philadelphia.