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the court in the late case of Metropolitan L. / much to be desired. This case seems to me Ins. Co. v. New Orleans, 205 U. S. 395, 51 L. an apt illustration of the contrary view; by ed. 853, 27 Sup. Ct. Rep. 499, said: "In denying the power to Indiana to tax these both of these cases the written evidences notes under the circumstances shown, the of the credits were continuously present in scheme of the owner to avoid any tax upon the state, and their presence was clearly the them is made effectual, and, except for the dominant factor in the decisions."

recovery after his death for a small part of In Blackstone v. Miller, 188 U. S. 206, 47 the taxes actually due, this vast sum of L. ed. 445, 23 Sup. Ct. Rep. 277, Mr. Justice money escapes taxation altogether. I think Holmes, speaking for the court, said: that the powers of taxation here invoked

“There is no conflict between our views by the state of Indiana ought not to be deand the point decided in the case reported nied, and if the practical effect can be given under the name of State Tax on Foreign- any weight in deciding legal rights, to me held Bonds, 15 Wall. 300, 21 L. ed. 179. it seems evident that such denial will work The taxation in that case was on the inter- immunity from just taxation of property est on bonds held out of the state. Bonds represented in promissory notes and mortand negotiable instruments are more than gages sent beyond the jurisdiction of the merely evidences of debt. The debt is in- state where the owner is domiciled, and held separable from the paper which declares and by agents in distant states, within the proconstitutes it by a tradition which comes

tection of their laws, for the sole purpose down from more archaic conditions. Bacon of avoiding contribution to the public treasv. Hooker, 177 Mass. 335, 337, 83 Am. St. ury. As I understand the opinion, municRep. 279, 58 N. E. 1078."

ipal bonds or other such securities held as. To the consideration of the subject in the these are would be legitimately subject to opinions of the learned Justices just quoted, taxation. They are but promises to pay, , it may be added that bills and notes are in a concrete form, of the same character as the subject of conversion in trover, and notes and mortgages. In my opinion there the measure of damages is the collectible is no constitutional objection to their localvalue of the obligation. Mercer v. Jones, ization for taxation by the law of the state 3 Campb. 477; 2 Ames's Bills & Notes, p. when the owner has chosen to give them a 693, and numerous cases there cited. Bills situs there as in this case. and notes may be the subject of donatio

Without further extending these views, I causa mortis, even though payable to order am constrained to dissent from the opinion and unindorsed. 2 Ames's Bills & Notes, and judgment of the court in this case. 699-701. They are held to be governed by the designation of "goods and chattels" in Mr. Justice Brewer concurs in this disthe statute of frauds and other statutes. 2 sent. Ames's Bills & Notes, 706.

Bills and notes have been held to be "goods, wares, and merchandise” within the SECURITY WAREHOUSING COMPANY, meaning of the statute of frauds. Baldwin

W. B. McKeand, the L. C. Hyde & Brit

tain Bank of Beloit, and Citizens Bank v. Williams, 3 Met. 365; Somerby v. Buntin,

of Mukwonago, Appts., 118 Mass. 279, 19 Am. Rep. 459.

In view of this recognition of the char- ELBERT R. HAND, Andrew Dietrich, and acter of bills and notes as tangible property, E. McDill, Trustees of the Racine Knitit seems to me inaccurate to say that they ting Company, Bankrupt. are mere evidences of debt. They are tangible things, capable of delivery, passing Pledge—of warehouse receipts-change of from hand to hand, and for many purposes

possession. may be regarded as of the value of the

1. No such change of possession re

sults from the issuance of so-called waredebt which they evidence. It is elementary that the power of the goods on premises really occupied by the

house receipts acknowledging the receipt of states as to matters of taxation is very owner, though in form leased by the latter broad, and subject only, in the limitation of to the warehousing company, as renders valits exercise, to the Constitution of the state id a pledge of such receipts, where actual and the nation.

possession of the goods was exercised by and It seems to me that a state, in pursuance existed with the owner substantially the of its taxing policy, may give a situs to such same after issuance of the receipts as be

evidences of debt held within its jurisdiction
as have taken the tangible form of bonds,

Bankruptcy-equitable lien-validity as notes, and mortgages.

against trustee.

2. Holders of so-called warehouse reIt is said to deny this power to the states, ceipts under a pledge which was invalid for under the circumstances of this case, will want of a change of possession have no tend to prevent double taxation,-a thing'equitable lien which takes precedence of the

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title of the trustee in bankruptcy of the I was for an order that the appellees be repledgeor, by virtue of the special provisions strained from interfering with the petitionof the bankrupt act of July 1, 1898 (30 er in its custody and control of the propStat. at L. 544, chap. 541, U. S. Comp. Stat. erty. The other appellants then intervened 1901, p. 3418), § 70a, vesting in the trustee the title of the bankrupt to all property and also set up the same facts, and prayed transferred by him in fraud of his creditors, that the appellees might be restrained from and to all property which, prior to the filing interfering with the security company in of the petition, might have been levied upon delivering the merchandise to the petitionand sold by judicial process against him, ers, and from asserting any right or title and of g 70e, giving the trustee power to to the property as against them. Issues avoid transfers by the bankrupt which a creditor of the latter might avoid, and to to the referee, who reported his findings of

were joined and the matters were referred recover the property so transferred or its value.

fact. From these findings it appeared that [No. 229.]

the Security Warehousing Company was a

corporation of the state of New York, duly Argued March 7, 8, 1907. Decided May 27, licensed to do business in the state of Wis1907.

consin, and that it was engaged in the

business of “field warehousing," so called; PPEAL from the United States Circuit that it owned no warehouse of its own and A

Court of Appeals for the Seventh Cir-occupied no public warehouse at any place. cuit to review a judgment which affirmed a The warehousing company leased certain decree of the District Court for the East- premises from the knitting company in Raern District of Wisconsin, dismissing, forcine, in the state of Wisconsin, and also want of equity, the petitions of persons certain premises at a place called Stevens claiming to be pledgees of a bankrupt to Point, in the same state. These two places restrain the trustees in bankruptcy from were occupied by the knitting company asserting title to the property. Affirmed.

with their goods to be sold, and the goods See same case below, 74 C. C. A. 186, were placed on the premises really occupied 143 Fed. 32.

by the knitting company, although in form

leased by it to the warehousing company, Statement by Mr. Justice Peckham: and the so-called warehouse receipts were

The above-named appellants have ap- given to the knitting company by the warepealed from a judgment of the circuit court housing company, acknowledging the reof appeals of the seventh circuit, affirming ceipt of the property at such places. There a decrce of the United States district court

was no change of possession in fact, and for the eastern district of Wisconsin, dis- scarcely any in form. These receipts were missing certain petitions of the appellants in turn pledged by the knitting company to for want of equity. 74 C. C. A. 186, 143 various banks, and moneys obtained upon Fed. 32.

the security of such receipts from them. Certain creditors filed a petition in bank. The general character of business of this ruptcy October 5, 1903, against the Ra- form is stated in Union Trust Co. v. Wilcine Knitting Company, a company engaged son, 198 U. S. 530, 49 L. ed. 1154, 25 Sup. in manufacturing hose and other knit Ct. Rep. 766, but the particular facts in goods, with factories at Racine and Stevens this case, given in detail as findings by the Point, Wisconsin.

The company was, on referee, and adopted by the district court the 26th of October, 1903, duly adjudged a and circuit court of appeals, may be found bankrupt, and the appellecs were appointed in 143 Fed. supra. Reference is made to receivers and were later elected trustees that report for the findings of the referee. The appellees asserted the right to certain The report shows a radically different state merchandise covered by receipts issued by of facts from the Wilson Case. the appellants, the security company, which company thereupon filed in the bankruptcy Mr. Henry S. Robbins for appellants. court an intervening petition asserting its Mr. John B. Simmons for appellees. exclusive possession and control of the merchandise in question and the issuing of its Mr. Justice Peckham, after making the receipts therefor to the knitting company, foregoing statement, delivered the opinion and their negotiation by it prior to its of the court: bankruptcy, and that those receipts were A careful reading of the findings of the given to the other appellants in good faith referee and of the evidence upon which they in due course of business as security for were based satisfies us that they ought to loans. The intervening petitioner alleged be approved. The findings show that the that the appellees were claiming title to receipts of the warehousing company were the merchandise, and were obstructing the not entitled to the status of negotiable inpetitioner in its possession, and the prayer struments, the transfer of which operates

27 S. C.-46.

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as a delivery of the property mentioned in , That this was the only business contem- . them. Upon that question the case is suffi- plated is disclosed by the agreement that ciently stated in the opinion of the court the knitting company should be restored to below, wherein it was said that the "re- full possession of the premises at any time

“ ceipts themselves would put the holders on it returned the outstanding receipts. This, notice of the facts."

in our judgment, was not warehousing If the receipts were not negotiable in- within the law of Wisconsin.” struments, it is contended that the trans- Also: "So far from the security comactions showed a valid pledge of the prop- pany's maintaining an open, exclusive, unerty to some of the appellants, and hence equivocal possession during the two years they are entitled to its possession until they this arrangement was carried on, it seems are paid the debts due them from the bank- to us that the security company might as rupt. Whether there was a sufficient well have been eliminated, and the knitting change of possession of the thing pledged to company have employed its own stockkeeprender the same valid under the law of ers and shipping clerks as custodians for Wisconsin, we think was correctly answered intending lenders, directly, instead of indiin the negative by the courts below. Geil

Geil- rectly through the security company. In fuss v. Corrigan, 95 Wis. 651, 665, 669, 37 that view this becomes one of the cases

v L.R.A. 166, 60 Am. St. Rep. 143, 70 N. W. 'in which the exclusive power of the so306. The general law of pledge requires called bailee' (Union Trust Co. v. Wilson, possession, and it cannot exist without it. 198 U. S. 530, 537, 49 L. ed. 1154, 1156, 25 Casey v. Cavaroc, 96 U. S. 467, 24 L. ed. Sup. Ct. Rep. 766) tapers away to noth779. There was scarcely a semblance of an ingness (Drury v. Moors, 171 Mass. 252, 50 attempt at such change of possession from N. E. 618; Tradesmen's Nat. Bank v. Kent the hands of the knitting company to the Mfg. Co. 186 Pa. 556, 65 Am. St. Rep. 876, hands of the warehousing company. Actual 40 Atl. 1018). possession of the property in question was The actual transactions in the case at exercised by and existed with the knitting bar differ radically from the facts as stated company substantially the same after the in Union Trust Co. v. Wilson, supra. The issuing of the receipts as before. It is a court there held that there was sufficient trifling with words to call the various proof to show a change of possession, and transactions between the knitting company that the transaction was valid within the and the warehousing company a transfer law of the state of Illinois. Assuming the of possession from the former to the lat-law of Wisconsin to be the same on the ter. There was really no delivery, and no subject of possession by the pledgee of the change of possession, continuous or other property pledged, the facts in this case are wise. The alleged change was a mere pre- so different from the Wilson Case as to tense, a sham. Upon the subject of change prevent that case from forming a foundaof possession the opinion of the circuit tion for holding there was a sufficient court of appeals contains the following change of possession here to make the statement of fact: "In the present case pledge a valid one. the main office of the security company was

We are satisfied with the decision of the in New York; the nearest district office was courts below upon the merits. in Chicago; from there the receipts were There is, however, an important matter issued; and in Wisconsin the security com- which has been raised by the appellants pany had no office and no warehouses, un- aside from the merits. That is, whether less the inclosures within the buildings of a trustee in bankruptcy can question the the knitting company at Racine and Ste-validity of these receipts, or the sufficiency vens Point be counted such. The receipts of the alleged transfer of the property bethemselves would put the holders thereof on longing to the bankrupt knitting company, notice of these facts. And at Racine and to constitute a pledge of such property. Stevens Point the security company gave The right is denied by the appellants, and no evidences to the public of its presence. it is contended that the transfers were No signs were displayed to the passer-by. valid between the parties; that the trustee No business was sought from the public. in bankruptcy takes only the title and right The only property within the inclosures of the bankrupt, and therefore he cannot was the knitting company's. The knitting assert a right not possessed by the knitting company did not want storage room, but company. collaterals, which the security company It is no new doctrine that the assignee agreed to furnish for a commission upon or trustee in bankruptcy stands in the the amount thereof plus all expenses. The shoes of the bankrupt, and that the propsecurity company's only agents on the scene erty in his hands, unless otherwise prowere the agents of the knitting company, vided in the bankrupt act, is subject to all who cared for and shipped out its goods. I of the equities impressed upon it in the

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hands of the bankrupt. This has been the property in fraud of creditors, and the rule under former acts and is now the rule. property was not, at the time of the filing Hewit v. Berlin Mach. Works, 194 U. S. of the petition in bankruptcy, or at the 296, 48 L. ed. 986, 24 Sup. Ct. Rep. 690; time of the adjudication, liable to levy and Thompson v. Fairbanks, 196 U. S. 516, 526, sale under judicial process against the bank49 L. ed. 577, 25 Sup. Ct. Rep. 306; Hum- rupt. It had already been taken possession phrey v. 'Tatman, 198 U. S. 91, 49 L. ed. of by the mortgagee under a valid mort956, 25 Sup. Ct. Rep. 567; York Mfg. Co. v. gage, and was not subject to any other Cassell, 201 U. S. 344, 352, 50 L. ed. 782, | liability of the mortgagor. 785, 26 Sup. Ct. Rep. 481.

Humphrey v. Tatman reiterates the prinIn the Hewit Case there was a sale of ciple that whether such a mortgage as is property to the bankrupt upon condition referred to in the Fairbanks Case is good that the title should not pass until the or bad depends upon the state law. property was paid for. Such a conditional In York Mfg. Co. v. Cassell, the same sale was good in New York state, where question arose as in the Hewit Case. There the contract was made, and it was held was a sale of property to one who theregood as against the trustee in bankruptcy, after became bankrupt, with a condition because it was good against the bankrupt. that no title to the property should pass It was further held that the property was until it was paid for. Such a conditional not, under the facts and the law of New sale was good under the Ohio law, where York, such as might have been levied upon the instrument was executed, except as to and sold under judicial process against the those creditors who, between the time of bankrupt, nor could she have transferred the execution of the instrument and the it, within the meaning of $ 70 of the bank filing thereof, had obtained some specific rupt act. It was a clear case for the ap- lien upon the property. There were no plication of the doctrine that the trustee such creditors, and hence there was no one stands in the shoes of the bankrupt, and who could question the validity of the inthere was nothing in the act which made strument at the time the trustee's title any inconsistent provision.

would have accrued, unless it was the trustIn Thompson v. Fairbanks the question ee in bankruptcy. He made the claim that arose as to the validity of a chattel mort- the adjudication in bankruptcy was equivagage (which had been duly filed) upon aft- lent to a judgment or an attachment or other-acquired property as against the trustee er specific lien on the property, so as to prein bankruptcy of the mortgagor. The mort- vent the vendor from asserting its title and gagee took possession of the mortgaged its legal right to remove the property on property before the filing of the petition in account of the nonpayment of the purchase bankruptcy, and the question raised was price. We held that, as the conditional sale whether there was a violation of any pro- was valid by the law of Ohio, except as to vision of the bankruptcy act. It was held a certain class of creditors, if there were

a that the validity of such a mortgage was no such creditors there was no one who a local, and not a Federal, question, and could question the validity of the instruthat in such case this court would follow ment; that the adjudication in bankruptcy the decisions of the state court; and as in did not give the trustee the right to do so, Vermont such a mortgage was good, and because in that case the adjudication did the taking possession of the property re- not operate as the equivalent of a judglated back to the date of the mortgage, ment or attachment or other specific lien even as against an assignee in insolvency, on the property. The trustee represented it was good as against the trustee in bank- no one who had that right as there were ruptcy. It was said: “Under the present no creditors who had liens on the property bankrupt act, the trustee takes the prop- when the title of the trustee to the property of the bankrupt, in cases unaffected by erty of the bankrupt accrued. Section 70 fraud, in the same plight and condition that of the bankrupt act had no application. the bankrupt himself held it, and subject There was no property within either the to all the equities impressed upon it in fourth or fifth subdivision of that section. the hands of the bankrupt, except in cases The fact that if there had been a creditor where there has been a conveyance or en

of the bankrupt of the class mentioned who cumbrance of the property which is void as had obtained a specific lien on the propagainst the trustee by some positive pro-erty prior to the adjudication in bankruptvision of the act.” As there was no pro-cy, the trustee could in that case have envision therein making such a mortgage void, forced the same, did not make any difthe mortgagee was permitted to enforce his ference, because no such thing had been mortgage as a valid instrument, and to re- done when the adjudication in bankruptcy tain possession of the property. There was was made. This court had theretofore apno fraud in fact and no transfer of any proved the remark in Re New York Economical Printing Co. 49 C. C. A. 133, 110 | consin law, was a fraud in fact, and neither Fed. 514, 518, that the present bankrupt the receipts nor the so-called pledge could act contemplates that a lien good as against be asserted against any of the creditors. the bankrupt and all of his creditors at the It was held by the circuit court of aptime of the filing of the petition in bank- peals in a case arising in Wisconsin, relaruptcy should remain undisturbed. Hewit tive to a chattel mortgage, which gave Case, supra. Upon these facts it was re- power to the mortgagor. to make sales from iterated that the trustee takes the property the mortgaged property for his own use as the bankrupt held it.

and benefit, that such a mortgage was The case at bar bears no resemblance in fraudulent in fact, so it could not be asits facts to the cases just cited. There was serted even against general creditors; citing no valid disposition of the property in the Wisconsin cases. Re Antigo Screen Door case before us, or any valid lien. The so- Co. 59 C. C. A. 248, 123 Fed. 249, 254. called warehouse receipts issued by the A further question was ruled upon in the warehousing company to the knitting com- above-cited case. It was in respect to a pany, upon the faets of this case, gave no second mortgage upon chattels, which had lien under the law in Wisconsin, in which not been properly filed, but the mortgagee state they were issued. In such case this had taken possession of the mortgaged court follows the state court. Etheridge v. property prior to the filing of the petition Sperry, 139 U. S. 266, 35 L. ed. 171, 11 Sup. in bankruptcy, although long subsequent Ct. Rep. 563; Dooley v. Pease, 180 U. S. to the giving of the mortgage, and it was 126, 45 L. ed. 457, 21 Sup. Ct. Rep. 308. held that the mortgagee might hold the

By § 70a, the trustee in bankruptcy is property as against the trustee in bankvested, by operation of law, with the title ruptcy representing general creditors. There of the bankrupt to all property transferred was no fraud in fact alleged. It was said by him in fraud of his creditors, and to all by Judge Jenkins, in delivering the opinion property which, prior to the filing of the of the court: “When the

“When the statute (Rev. petition, might have been levied upon and Stat. Wis. 1898, § 2313) declares that a sold by judicial process against him; and, chattel mortgage shall be invalid against by subdivision (e) of the same section, the any other person than the parties thereto, trustee in bankruptcy may avoid any trans- unless possession be delivered and retained, fer by the bankrupt of his property which or the mortgage be filed,--there being no any creditor of the bankrupt might avoid, actual fraud and no collusive delay in the and may recover the property so trans- filing or the taking of possession,—we think ferred, or its value. Here are special pro- the statute must be construed to mean that visions placing the title to the property the omission to file or to take possession transferred by fraud or otherwise, as men- renders the mortgage invalid only as to the tioned, in the trustee in bankruptcy, and creditor who, by execution or attachment, giving him the power to avoid the same. has acquired a lien upon the property.”

The title to this property was in the The case illustrates the distinction taken knitting company. There had been no val- between fraud in fact and the mere failure id pledge of it, because the possession had to file a mortgage otherwise valid against been, at all times, in the knitting company, the world. and it could have been levied upon and sold Under the circumstances of this case we under judicial process against the knitting are satisfied there was no valid pledge and company at the time of the adjudication no equitable lien in favor of the intervenin bankruptcy. The security company had, ers which would take precedence of the title of course, full knowledge that the knitting of the trustee by virtue of the special procompany in fact, at least, shared in the visions of the bankrupt act. possession of the property. It was itself The decree is affirmed. an actor, or it acquiesced in the arrangement under which it had, at most, bụt a partial possession, and even that was subject to the control of the knitting company.

HIGINIO ROMEU, Appt., The method taken to store the property

V. was, as found by the district court, a mere

ROERT H. TODD. device or subterfuge to enable the bankrupt to hypothecate the receipts, and thus raise Lis pendens--in Porto Rico-cautionary no

tice. money upon secret liens on property in the possession of the pledgeor and under

1. A suit in equity to enforce a judg. its control; and such scheme, the court said, standing upon the public records in the

ment upon real property which, though ought not to receive judicial sanction. Such

name of another than the judgment debtor, a scheme, under the facts, and as carried is alleged to have been paid for with his out in this case, and with regard to Wis- money, resulting in a decree that such judg

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