US SUPREME COURT DECISIONS

The general law of pledge requires possession, and it cannot exist without it, and this is the law in Wisconsin.

Where there is no delivery or change of possession, receipts issued by a warehouse company are not entitled to the status of negotiable instruments, the transfer of which operates as a delivery of the property mentioned therein. Union Trust Co. v. Wilson, 198 U. S. 530, distinguished.

Although the assignee or trustee in bankruptcy stands in the shoes of the bankrupt, and property in his hands, unless otherwise provided in the Bankrupt Act, is subject to all the equities impressed upon it in the hands of the bankrupt, on the facts in this case and the law of the state, there was no valid pledge of, and no equitable lien on the merchandise in favor of the holders of warehouse receipts, which take precedence of the title of the trustee.

The above-named appellants have appealed from a judgment of the Circuit Court of Appeals of the Seventh Circuit, affirming a decree of the United States District Court for the Eastern District of Wisconsin, dismissing certain petitions of the appellants for want of equity. 143 F. 32.

Certain creditors filed a petition in bankruptcy October 5, 1903, against the Racine Knitting Company, a company engaged chanrobles.com-red

Page 206 U. S. 416

in manufacturing hose and other knit goods, with factories at Racine and Stevens Point, Wisconsin. The company was, on the twenty-sixth of October, 1903, duly adjudged a bankrupt, and the appellees were appointed receivers and were later elected trustees. The appellees asserted the right to certain merchandise covered by receipts issued by the appellants, the security company, which company thereupon filed in the bankruptcy court an intervening petition asserting its exclusive possession and control of the merchandise in question and the issuing of its receipts therefor to the knitting company, and their negotiation by it prior to its bankruptcy, and that those receipts were given to the other appellants in good faith in due course of business as security for loans. The intervening petitioner alleged that the appellees were claiming title to the merchandise, and were obstructing the petitioner in its possession, and the prayer was for an order that the appellees be restrained from interfering with the petitioner in its custody and control of the property. The other appellants then intervened and also set up the same facts, and prayed that the appellees might be restrained from interfering with the security company in delivering the merchandise to the petitioners, and from asserting any right or title to the property as against them. Issues were joined, and the matters were referred to the referee, who reported his findings of fact. From these findings it appeared that the Security Warehousing Company was a corporation of the State of New York, duly licensed to do business in the State of Wisconsin, and that it was engaged in the business of "field warehousing," so called; that it owned no warehouse of its own and occupied no public warehouse at any place. The warehousing company leased certain premises from the knitting company in Racine, in the State of Wisconsin, and also certain premises at a place called Stevens Point, in the same state. These two places were occupied by the knitting company with their goods to be sold, and the goods were placed on the premises really occupied by the knitting company, chanrobles.com-red

Page 206 U. S. 417

although in form leased by it to the warehousing company, and the so-called warehouse receipts were given to the knitting company by the warehousing company, acknowledging the receipt of the property at such places. There was no change of possession in fact, and scarcely any in form. These receipts were in turn pledged by the knitting company to various banks, and moneys obtained upon the security of such receipts from them. The general character of business of this form is stated in Union Trust Company v. Wilson, 198 U. S. 530, but the particular facts in this case, given in detail as findings by the referee and adopted by the district court and circuit court of appeals, may be found in 143 F. 32, supra. Reference is made to that report for the findings of the referee. The report shows a radically different state of facts from the Wilson case. chanrobles.com-red

Page 206 U. S. 420