Sholes v. Western Asphalt Block & Tile Co.

Opinion by Me. Justice Fele, The contest before the auditor was between the general creditors of the Western Asphalt Block and Tile Company and two creditors, Graham and Son and Byrnes, the appellants, who claim as pledgees to have had a lien upon certain of its assets. The evidence of the indebtedness of the corporation to these two creditors is in the form of collateral promissory notes, one of which, after the usual promise to pay, reads as follows : “ Having deposited herewith as collateral security eight thousand No. 2 asphalt blocks, one lot seventy-five tons more or less crude asphalt and one lot fifteen tons refined asphalt, more or less, now on'the company’s property at New Castle, Pa.,” etc., and the other: “ Having deposited as collateral security for said sum the following property: sixty thousand asphalt blocks and tiles in our yard at New Castle, Pa. which we agree to save harmless for the payment of this note,” etc. The receiver was notified that the appellants claimed to have a lien upon the goods by reason of the pledges. Under an order of court he manufactured the raw material into asphalt blocks and sold the same, together with the blocks previously manufactured, the terms of the order being that the lien of the pledges if any, should remain upon the net proceeds of the sale. At the audit of his account the appellants claimed that part of the fund which arose from the sale of the goods alleged to have been pledged to them. It was not disputed that the debts were valid and the pledges made in good faith. The goods pledged had been stored in the company’s yard before the making of the collateral notes. Neither at that time nor at any time thereafter was anything done by either of the parties to carry the pledges into effect; the pledgor did not deliver the goods, nor did the pledgees remove them or take possession of them either actually or constructively. The goods were not even separated, marked or in any'way' distinguished from the unpledged, assets of the.com [531] pany, and they came into tbe receiver’s hands in exactly the same state they were in before the contracts of pledge were made. Tbe finding of the auditor upon the subject is as follows : “ It was not shown what number of blocks, and what number of tiles were on hand in the yard, nor was it shown that the blocks and tiles so claimed to be hypothecated were marked in any1- way', or that anything was done to distinguish them from the unpledged assets of the company; nor that would have enabled the pledgees, in ease they desired to enforce their pledge, to enter upon the grounds of the company and designate or distinguish what particular part of the product there stored was covered by their lien.” Under this finding of facts the pledges cannot be sustained. The rule is that delivery is essential to tlie contract of pledge. It is true that tbe rule has been relaxed in eases where, because of tbe nature of the thing pledged or for other reasons, the requirement of delivery would be such a hardship as to defeat the purpose of the contract; but the policy of the law is against such relaxation, and it has been mainly confined to cases in wbicb tbe goods bave remained in the possession of the pledgor as agent of the pledgee under an express agreement to that effect. Even in such cases the want of constructive or symbolical delivery, or of some act whereby tbe goods pledged may be distinguished and set apart from the other goods in tbe possession of tbe pledgor, has not been excused. Here we have no evidence of such an agreement, or of anything in the nature of a constructive delivery; and to relax tbe rule for any other reason sufficiently to include such a case as this would be to abrogate it entirely. The order of the court confirming tbe report of the auditor is affirmed.