Hallgarten v. Oldham

Holmes, J. Two questions only are raised: the main one, whether enough had been done to give the plaintiffs a good title as against the attaching creditor; the other, a preliminary inquiry whether the sufficiency for that purpose of what was done is to be determined by the law of Hew York or of Massachusetts. s To dispose first of the preliminary matter. This case must be governed by the ordinary rules applicable to similar transactions taking place wholly within this State. When a sale, mortgage or pledge of goods within the jurisdiction of a certain state is made elsewhere, it is not only competent, but reasonable, for the state which has the goods within its power to require them to be dealt with in the same way as would be necessary in a domestic transaction, in order to pass a title which it will recognize as against domestic creditors of the vendor or pledgor. This requirement is not peculiar to Massachusetts, but has the sanction of the highest courts of the United States and of other States. Lanfear v. Sumner, 17 Mass. 110. May v. Wannemacher, 111 Mass. 202, 208, 209. Green v. Van Buskirk, 5 Wall. 307, 312; S. C. 7 Wall. 139, 150, 151. Guillander v. Howell, 35 N. Y. 657. Olivier v. Townes, 2 Mart. (N. S.) La. 93. Clark v. Tarbell, 58 N. H. 88. Rice v. Courtis, 32 Vt. 460. Martin v. Potter, 34 Vt. 87, 88. See also Dicey on Domicil, 262, rule 57. It is not necessary for the purposes of this case to consider whether it should be dealt with as an exception to general — 8 — rules, as it is regarded in Rhode Island Central Bank v. Danforth, 14 Gray, 123, cited for the plaintiffs, or as an illustration of a sound and fundamental principle. We pass to the question whether enough had been done to give the plaintiffs a good title as against the defendant. As this is to be decided by the same rules as if the whole transaction had taken place in Massachusetts, it is immaterial whether the indorsement of the warehouse receipt, if effectual, created a pledge, a mortgage, or, as has been suggested, a transfer of the absolute title in trust to accomplish the purposes of the transfer. Farmers & Mechanics' National Bank v. Logan, 74 N. Y. 568, 582, 583. See also De Wolf v. Gardner, 12 Cush. 19, 26; Gibson v. Stevens, 8 How. 384, 400; The Thames, 14 Wall. 98, 108; Dows v. National Exchange Bank, 91 U. S. 618, 632; Casey v. Cavaroc, 96 U. S. 467, 477; Glyn v. East & West India Dock Co. 7 App. Cas. 591, 606; S. C. 6 Q. B. D. 475, 480, 490, 499, and 5 Q. B. D. 129, 130. For, as against attaching creditors, the law of Massachusetts has always required a delivery, as well in the case of an absolute transfer, even a sale, as in that of a chattel mortgage or pledge, from the time of Lanfear v. Sumner, ubi supra, down to the latest volumes of reports. Burge v. Cone, 6 Allen, 412. Dempsey v. Gardner, 127 Mass. 381. Cf. Harlow v. Hall, 132 Mass. 232. Lanfear v. Sumner has been criticised in England, where the law appears to be otherwise; Blackburn on Sales, 327, 328; Meyerstein v. Barber, L. R. 2 C. P. 38, 51; a fact to be remembered in dealing with the English cases. But the plaintiffs do not attempt to overthrow the long-established rule of this State; they say that they have satisfied it. And their argument is that the warehouse receipt, being the key to the property, has become a symbol representing it by a commercial usage of which the court will take notice, and that therefore an indorsement and delivery of the receipt, under circumstances in which they carry an interest in the goods, amount also, by construction of law, to a delivery of the goods within the requirements of the rule. It is said that, in adopting this view, we should only be extending the principles already applied to bills of lading to other documents which are dealt with by merchants on the same footing. — 9 — The difficulty in dealing with this argument arises largely from the very great ambiguity attaching to the word “delivery,” in both American and English cases. It has been used often when it is evident that the true question was only whether the property had passed. The simplest explanation even of Gibson v. Stevens, ubi supra, would be that delivery was not necessary to pass property as against third persons by the law of Indiana. See Pierce v. Gibson, 2 Ind. 408, 412. But the delivery required by the rule in Lanfear v. Sumner is delivery in its natural sense, that is, a change of possession. And it cannot be borne in mind too carefully that the only matter now under discussion is whether there has been a delivery in this sense, or dealings having the legal effect of such delivery, of the goods referred to in the warehouse receipt. Cases which turn on a question of property only, or in which delivery or its equivalent was not essential, whether because the question arose between the parties to the sale or mortgage, or because delivery was not necessary in that jurisdiction to complete the transaction as against third persons, or for any other reason, are not precedents in point. Many such cases will be found which speak of documents as symbols of the goods. But that expression will not help us, unless it means that a transfer of the documents has the effect of a delivery of the goods as against an attaching creditor, who would be preferred unless the goods had changed hands. The question is, then, how the transfer of any document can have that effect. The goods are in the hands of a middleman, and they remain there. A true change of possession could only be brought to pass by his becoming the servant of the purchaser for the purpose of holding the goods, so that his custody should become the possession of his master. But this is not what happens, and it has been held that less would satisfy the law. A carrier, or the warehouseman in this case, is not the servant of either party quoad the possession, but a bailee holding in his own. name, and asserting a lien for his charges against all parties. He alone has possession of the goods, whether the document is transferred or not. But it has been held that the principle of the rule requiring a delivery is satisfied, although the letter of it is not, if the possessor of the goods becomes the purchaser’s bailee. Tuxworth v. — 10 — Moore, 9 Pick. 347. Russell v. O’Brien, 127 Mass. 349, 354. Dempsey v. Gardner, 127 Mass. 383. Now it is obvious that a custodian cannot become the servant of another in respect of his custody except by his own agreement. And, a fortiori, when that custodian does not yield, but maintains his own possession, it is clear that his custody cannot enure to the benefit of another, as if it were the possession of that other, unless the bailee consents to hold for him subject to his own rights. The only way, therefore, in which a document can be a symbol of goods in a bailee’s hands, for the purposes of delivery to a purchaser, is by showing his consent to become the purchaser’s bailee. It may or may not be true, that, if a warehouse receipt contains an undertaking to deliver to order, that undertaking is to be regarded as an offer by the warehouseman to any one who will take the receipt on the faith of it, and that it will make him warehouseman for the indorsee, without more, on ordinary principles of contract. That is the argument of Benjamin on Sales (2d ed.) 676 & seq., criticising Farina v. Home, 16 M. & W. 119, and Blackburn on Sales, 297. But the criticism and the case agree in the assumption, that the only way in which the indorsement of a document of title can have the effect of a delivery is by making the custodian bailee for the holder of the document,, and that he cannot be made so, otherwise than by his consent. The necessity for notice, in those cases where notice is necessary, stands on the same ground. If the custodian has not assented in advance, he must assent subsequently; and the principle is the same whether an express acceptance of a delivery order be required, or it is held sufficient if he does not dissent when notified. Boardman v. Spooner, 13 Allen, 353, 357. Cf. instructions of Shaw, C. J. to the jury in Carter v. Willard, 19 Pick. 1, 3; Bentall v. Burn, 3 B. & C. 423. It is true that there are one or two decisions of this court which it is somewhat hard to reconcile with the foregoing principles. The strongest of these is Green Bay National Bank v. Dearborn, 115 Mass. 219. In that case the plaintiff discounted Parks & Co.’s draft on Harvey Scudder & Co. against a railroad receipt, of which the following were the material words: “ Received from R. G. Parks & Co. one hundred barrels of flour consigned to Harvey Scudder & Co., Boston.” This was delivered — 11 — to the plaintiff in Wisconsin, on the understanding that the property was thereby transferred as security for the advance. Scudder & Co. declined to accept the draft, and the goods were attached by the defendant. The plaintiff brought replevin and was held entitled to recover. It will be observed that the document did not run to order, and was not indorsed, so that it could not be argued that the railroad company had attorned in advance, and there was no notice to the company, so that it had not made itself the plaintiff’s bailee subsequently, if ordinary principles were to be applied. It was said, however, that the carrier became the plaintiff’s bailee from the time its receipt was delivered. A carrier does stand differently from other bailees in one respect. He has no delectus personarum, but is bound to carry for any one who takes proper steps to make him do so. There is, too, the further circumstance, that the usual mode of shipping grain is to draw against it, and to get a bank to discount the draft. But it may be doubted whether the suggestion was warranted that a carrier would not ordinarily give up the goods except upon a production and surrender of the receipt. Forbes v. Boston & Lowell Railroad, 133 Mass. 154, 158. And, so far as the language might seem to imply that the mere passing of the property, as between the parties, made the carrier bailee for the plaintiff by the general law of bailment, it seems to us too broad. Cf. Henderson v. Comptoir d’Escompte de Paris, L. R. 5 P. C. 253. But whatever the scope of Green Bay National Bank v. Dearborn, we cannot apply it as a precedent in the present case, so long as Lanfear v. Sumner stands. When a private warehouseman, who has an unfettered right to choose the persons for whom he will hold, gives a receipt containing only an undertaking to his bailor personally, without the words “ or order,” or any other form of offer or assent to hold for any one else, it is impossible to say that a mere indorsement over of that receipt will make him bailee for a stranger. He has not consented to become so, even under the principles argued for by Mr. Benjamin. And, until he has consented to hold for some one else, he remains the bailee of the party who entrusted him with the goods. There was therefore nothing done in this case to satisfy the rule of Lanfear v. Sumner. — 12 — If it be suggested that the rule would not help a party chargeable with notice, and that the fact that the receipt had been indorsed over amounted to constructive notice to the defendant, the answer is, that, supposing notice would have put an end to his right to attach, when there had not been a delivery or its equivalent, the defendant was not bound to inquire for the receipt. To call such an instrument a key to the goods, is a petitio principii. For it assumes that the receipt must be produced in order to obtain them, or that a transfer of it without the bailee’s knowledge will affect his rights. But the bailor is not bound to produce the receipt as a condition precedent to his right to get back the goods on payment of charges, and the bailee can safely deliver the goods without it. The appeal to commercial usage cannot help the plaintiffs’ case. If there be any usage to treat such documents as this as symbols of property, in the sense of the argument for the plaintiffs, it is simply a usage to disregard well-settled rules of law affecting the rights of third persons. But we doubt if a prudent merchant would advance on the indorsement of a private warehouse receipt not running to order, before he had made sure of the warehouseman’s assent. We are confirmed in the view which we take, by observing that the Legislature, in dealing with public warehousemen, and providing that “the title to goods stored .... shall pass to a purchaser or pledgee by the indorsement and delivery to him of the warehouseman’s receipt,” (Pub. Sts. c. 72, § 6,) as a preliminary to that result, expressly requires, in § 5, that the receipt “ shall be negotiable in form.” Judgment for the defendant.