Sabel v. Planters National Bank

Opinion op the cotjbt by JUDGE HOBSON' Affirming. B. D. Chalkley & Co., who are merchants at Richmond, Va., received an order from L. Marx & Bro., merchants at Louisville, Ky., for ten bales of dry hides. Chalkley & Co. shipped tbe hides to Louisville, and took a bill of lading consigning the bides to their own order. They then dre-w a draft on Marx & Bro. for $l,735.6lf), the amount for which the hides were sold, and sol'd the draft to the appellee, the Planters’ National Bank of Virginia, with the bill of lading attached. At the foot of the bill of lading was this indorsement.; “L. Marx & Bro. to be notified.” Tbe bank forwarded the draft, with the bill of lading attached, to its correspondent at Louisville for collection on its own, account, having paid Chalkley & Co. the amount of it, less the discount. AVhen the hides reached Louisville, Marx & Bro. refused to receive them on the ground that they did nut come up to the sample; and while the hides were lying in the railroad depot they were attached by M. Sabel & [303] Sons for a debt due them by Ohalldey & Co., as the property of Ohalldey & Co. The bank intervened in the suit, setting up the foregoing facts, and claiming the hides. It was shown by the evidence that Ohalldey & Co. were customers of the bank, and deposited with them; that the amount paid for the dnaft was credited to their account, and checked out by them soon thereafter; but it also appeared that they deposited other money with the bank from time to time, and when the pro,of was taken had a balance to their credit as large as the amount ■of the draft. The court below adjudged the hides' to the bank, and it is insisted by appellants that this was error, for the reason that the bank had only a lien on the hides to secure the amount due, and that, having in its hands other funds of Chalkley & Co. sufficient to cover the amount of the draft, it should, as between it and the attaching creditor in this State, who had a lien only on the hides, be compelled to look first to the funds already in its hands to protect, itself. In other words, it is insisted that the doctrine should be applied that a creditor having a lien on two funds, one of which is covered by a junior lien, will be required to exhaust as against, the junior lienholder the fund not covered by his lien before resorting to the other fund. On the other hand, it is insisted for the bank that it has legal rights to which this equitable doctrine does not apply. The question is not without difficulty, and its proper solution depends upon the rights acquired by the bank under its contract and by appellants under their attachment. In Petitt v. Bank, 67 Ky., 338, this court, after showing that actual or constructive possession of the property pledged is essential to the existence of a pledge, said, in a case somewhat similar to this: ‘‘But, to -constitute a valid lien by a pledge of property, it is not [304] necessary that the legal title should be transferred, as in the case of a mortgage; on the contrary, the title generally remains in the pledgor. 2 Pars. Cont., p. 113. The question is not, therefore, whether the deposit of the bills of lading was effectual to pass the legal title to the- cotton, but whether it was a constructive or symbolic delivery of the cotton. By the law merchant, bills of lading are, to a certain extent, treated as negotiable instruments. In the hands of the original owner they generally represent his title to the property, at least until it oomes to the possession of the consignee; and under certain circumstances the owner may, by his mere indorsement of a bill of lading, pass to a purchaser the absolute property for which it is given.” This case was followed in Douglas v. Bank, 86 Ky., 176, (5 S. W., 420), where the validity of a pledge created by the delivery of a bill of lading wras upheld. These cases are in accord with the current of authority. See- Coleb. Coll., secs. 379, 380; Jones, Liens (2d Ed.) 824; 12 Am. & Eng. Ency. Law, p. 243. The evidence does not show that the bank bought the hides. It simply to-ok the bill of lading to -secure the draft to which it was attached. The only interest the bank had in the matter was the payment of the draft, and to secure it in this the ten bales of hides were pledged, and symbolically delivered to it by the delivery of the bill of lading. The hides did not sell for enough to pay the -draft. It remains, therefore, to determine what rights, if -any, appellants acquired in the hides by the levy of their attachment. In Drake, Attaclim., sec. 245, the rule is thus stated: “A fundamental principle is that an attaching creditor can acquire no greater right in attached property than the defendant has at the time of the attachment. If, therefore, the property be in such -a situation that the defendant has lost his power over it, or has not yet acquired [305] such interest in or power over it as to permit him to dispose of it adversely to others, it can not be attached for his debt. Thus a chattel pawned ... is not attachable in an action against the pawnor.” To same effect, see Am. & Eng. Ency. Law (2d Ed.) 231. This rule was recently followed by this court in Newman v. Mantle, 58 S. W., 783. Under these authorities, the hides, being in the constructive possession of the bank as pledgee, could not be levied upon under the attachment of appellees. They therefore acquired, by their attachment, no valid lien upon the property; and it was properly restored to the pledgee, from whom it had been wrongfully taken. Under facta substantially similar to those before us, the same question was recently determined by the Supreme Court of West Virginia in Neill v. Produce Co., 23 S. E., 702, and by the Supreme Court of Missouri in Scharff v. Meyer, 34 S. W., 858; and in both cases the superior right of the bank was upheld. We have been referred to.no contrary authority on the precise question, and. this ruling seems tons both sound and reasonable. A large part of the commercial business of the country is now done by means of bills of lading attached to drafts, as in this case; and, if the purchaser of such paper must take it subject to attachments, executions, or the like, against the original owner, the value of such paper for commercial purposes would be entirely destroyed. As the hides did not sell for enough do pay- the draft, and there was no garnishment of the pledgee, the right to reach by garnishment any balance of H.he proceeds of the sale of the property after the payment of the debt is not presented. Judgment affirmed. Petition by appellant for rehearing overruled.