Trademen's National Bank v. Thomas Kent Manufacturing Co.

Opinion by Mr. Justice Mitchell, This belongs to the class of cases unfortunately too common, where one of two entirely innocent parties must suffer from the fraud of a third. The decision must therefore follow the better title by strict law. The wool in controversy was the property of the Keen-Sutterle Company who were the perpetrators of the fraud. The appellants have the actual possession, having received the wool in the regular course of business from the Keen-Sutterle Company and made advances upon it to nearly its full value. Their lien for repayment is now put in peril by an alleged prior transfer of title to the plaintiff by means of a warehouse receipt. The substantial question is whether the receipt was in fact issued by a bona fide warehouseman. [563] The Act of September 24, 1866, P. L. (1867) 1363, makes a warehouse receipt negotiable to the extent that the person taking a transfer of it by indorsement and delivery is to be deemed the owner of the goods therein specified. By the general law governing such instruments this means that the transfer of the receipt is a constructive delivery of the goods. If therefore the receipt under which the plaintiff claims was a valid warehouse receipt within the statute the plaintiff’s title must prevail, notwithstanding the good faith and priority of the appellants’ actual possession. But in order to have this effect, the requisites of the statute must be complied with, and plainly the first of these is that there must be a receipt issued from a bona fide warehouse. The act does not prescribe any form of receipt, and it is conceded that the one in controversy is sufficient in that respect. It purports to be issued by a warehouseman, and to be for goods held on storage and deliverable on the order of the depositor and the return of the receipt. Nor does the act define a warehouse or a warehouseman, but uses the latter word in connection with “ wharfinger or other person” (ejusdem generis, Bucher v. Com., 103 Pa. 528), in its ordinary signification of one who carries on the business of receiving and keeping goods on storage for the owners, for compensation. The act prohibits the issue of a receipt unless the goods shall have been actually received into store or upon the premises of the warehouseman; the issue of any second or duplicate receipt while the first is outstanding, without writing the word duplicate across the face of the second; the delivery of any goods receipted for except on surrender of the receipt; and the sale, incumbrance, etc., by the warehouseman of goods receipted for. These provisions plainly contemplate that the warehouseman shall be one engaged in the business, and also that he shall be another than the owner of the goods. A large part of the security of the holder of the receipt for the actual jmoduction of the goods when called for is tbe business interest and good faith of the warehouseman, and the penal consequences of any breach of duty by him. This security would be greatly diminished, if not rendered worthless, if any owner could choose to say his goods were on storage with himself and issue receipts which should pass from hand to hand for value, [564] while the goods remained under his own control, or subject to levy by his creditors. On this subject, see the remarks of Wins-low, J., in Geilfuss v. Corrigan, 70 N. W. Rep. 306, 311, and of Gurney, J., in Mechanics’ Trust Co. v. Dandridge, 37 S. W. Rep. 288 (Ct. of App. of Ky.). In the present case one Turtle issued the receipt in question, in sufficient form as already said, purporting to be from “ Turtle’s Warehouses, 220, 222 and 224, Wood St.,” and plaintiff at the trial showed the issue of a number.of similar receipts by Turtle, over a period of about two years ; the negotiation of loans by several'New York banks to the Keen-Sutterle Company, on these receipts; and the lease by Turtle of the premises on Wood street in his own name as a warehouse. Many exceptions are raised by appellants to the method of proof of these facte, and to their relevancy. But it is not necessary to discuss them, though some of them are clearly well founded. For present purposes it may be conceded that, standing alone, the facte so proved would make out a prima facie case of warehouse receipt, though the case would be weak in the respect that nearly all the evidence was of the kind that may be called corroborative rather than positive in character. But the above stated facts shown by plaintiff did not stand alone. On the contrary they were accompanied by an array of others, undisputed, or so feebly contested as to be practically admitted, that deprived them of all real weight. It appeared that Turtle, during all the time he was nominally keeping the warehouse and issuing receipts for goods on storage there, was a clerk in the employ of the Keen-Sutterle Company, at a salary; that the rent of the so-called warehouse was not paid by Turtle, but by the Keen-Sutterle Company or by F. W. Sutterle, one of the partners, and the rent due to Turtle from the subtenants of a part of the warehouse was not paid to him but to the KeenSutterle Company or F. W. Sutterle, and the only explanation given was that there was some private arrangement, not disclosed, between Turtle and Sutterle, on this subject; that no storage charges were paid by the Keen-Sutterle Company to Turtle on account of this warehouse, nor any credit given him on their books; that no iiersons other than the Keen-Sutterle Company deposited any goods in the so-called warehouse, though a few receipts were issued in the name of J. B. Moors [565] & Company, under some arrangement with the Keen-Sutterle Company, which the learned judge declined to permit to be inquired into ; and that Turtle had no sign on the warehouse to indicate his proprietorship, kept no books of the business except a book of blank receipts, bad no office or even a desk in the warehouse, did not keep the key in bis possession, was rarely there, and left the whole charge, including the depositing and removal of goods, to the employees of the Keen-Sutterle Company. On these facts it is perfectly clear that there was no real warehouse at all in the case and that Turtle was a mere employee or man of straw used by the Keen-Sutterle Company to cover their own operations with their own goods. The counsel for appellee have argued very strenuously the proposition that if Turtle held himself out to the world as a warehouseman, and plaintiff had no knowledge to the contrary, it would he sufficient to put plaintiff under the protection of the statute. And the learned court below seems to have fallen into the same view. But this is not enough. To defeat the title of defendants as a consignee without notice, for value, and in good faith, Turtle must have been a warehouseman in fact, and plaintiff’s tide derived through an actual valid warehouse receipt. It is not a question of good faith, or even of diligence, on plaintiff’s part, but of the possession of a good title by means of a valid and genuine receipt. Tliis the plaintiff has failed to prove. The paper given to it was not such a receipt, but a fraudulent imitation, and the bank must, unfortunately for it, bear the Loss. On the practically undisputed facts the verdict should have been directed for defendants. Judgment reversed.