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Docket Number

Civ. No. 3945.

Attorney(S)

Nathan H. Frank and Irving H. Frank for Appellant. Earll H. Webb, Bert Schlesinger and S.C. Wright for Respondent.

Judges

WASTE, P. J. —

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Smart Summary

Yokohama Specie Bank, Limited v. Trans-Oceanic Company — Court of Appeal of California, 1921

Factual and Procedural Background

Plaintiff and respondent (Yokohama Specie Bank) brought replevin to recover possession of 920 tons of steel rails and accessories, or in the alternative $75,000, the alleged value. The jury returned a verdict for the plaintiff for possession of the property and for costs, and judgment was entered accordingly. Defendant and appellant (Trans-Oceanic Company) appealed.

The rails had been purchased for the Sakura Trading Company and were financed by respondent as security for loans aggregating $100,000 evidenced by a promissory note. Bills of lading were presented to the bank and drafts representing the purchase price were paid. Upon arrival in San Francisco, those bills of lading were delivered by respondent to the Sakura Trading Company to enable delivery.

Sakura delivered the bills of lading to W. J. Ahern, doing business as Independent Trading Company, who obtained the rails from the carrier and stored them in a warehouse. Non‑negotiable warehouse receipts were issued in the name of the Independent Trading Company. Ahern indorsed and delivered these receipts to Sakura, which in turn delivered them to respondent. The receipts were returned by respondent to Sakura to be changed to negotiable receipts for redelivery to the bank.

Ahern subsequently withdrew the rails from the warehouse and delivered them to appellant's wharf, taking from appellant four receipts that appear to have been returned to respondent. Respondent asserted that Ahern's withdrawal and delivery to appellant occurred without respondent's knowledge or consent and was in fraud of respondent's rights. Respondent notified appellant that it was entitled to possession and that neither the shipper nor the bank had consented to shipment to Japan by appellant. Appellant refused to surrender the property, respondent brought the replevin action, and the rails were taken from appellant's possession by preliminary statutory proceedings upon bond.

Legal Issues Presented

Whether the respondent's receipt of bills of lading and non‑negotiable warehouse receipts (and the express pledges in promissory notes) constituted a sufficient symbolic delivery/pledge that vested a special property in respondent adequate to maintain replevin against a third party.
Whether appellant had a valid lien or other interest in the property in good faith for value, or whether any lien was waived by appellant's admissions in its answer (possession and refusal to deliver after demand) and failure to set up the lien.
Whether appellant's denial, on information and belief, of respondent's allegation that it was authorized to do business in California raised a triable issue requiring proof from respondent.

Arguments of the Parties

Appellant's Arguments

Appellant contended that the warehouse receipts had been delivered by respondent to Ahern for the purpose of enabling the rails to be withdrawn from storage and delivered to appellant for transportation to Japan pursuant to arrangements Ahern had made on behalf of the Sakura Trading Company.
Appellant also relied on procedural and evidentiary objections (rulings on evidence and jury instructions), asserting errors by the trial court.
Appellant denied respondent's allegation that it was authorized to do business in California, doing so on information and belief.

Respondent's Arguments

Respondent asserted that Ahern's withdrawal of the rails and their delivery to appellant was surreptitious, without respondent's knowledge or consent, and in fraud of respondent's rights as pledgee.
Respondent maintained that its receipt of the bills of lading and the non‑negotiable warehouse receipts, together with promissory notes expressly pledging the rails, constituted a valid pledge and symbolic delivery sufficient to vest in respondent a special property right enabling it to maintain the replevin action.
Respondent treated appellant's denial regarding authorization to do business as insufficient to raise an issue, because it was unsupported by public record evidence and was asserted only on information and belief.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Callahan v. Marshall, 163 Cal. 552, 558 (126 P. 358)	That delivery of bills of lading and warehouse receipts as evidence of security constitutes sufficient symbolic delivery to create a valid pledge and vest a special property right enabling replevin.	The court relied on this authority to hold that the respondent's receipt of bills and receipts constituted a binding pledge and a symbolical delivery of the rails, sufficient to maintain replevin against appellant.
21 R.C.L. 644 (legal treatise)	Supporting principle concerning pledges and symbolic delivery (as cited in the opinion).	The court cited this text along with case law to support the conclusion that respondent held a special property interest by symbolic delivery.
Williams v. Ashe, 111 Cal. 180, 184 (43 P. 595)	That a defendant may waive a lien by failing to assert it upon demand for delivery of property.	The court applied this principle to conclude appellant waived any lien it might have had by admitting possession and refusal to deliver and by not asserting a lien in its answer.
Lee v. De la Motte et al., 47 Cal.App. 23 (189 P. 1034)	Rule regarding waiver of lien by failure to set up the lien when demand for possession is made.	Used to support the court's conclusion that appellant waived any lien by failing to plead or assert it after demand.
Mullally v. Townsend, 119 Cal. 47, 54 (50 P. 1066)	That a denial on information and belief is insufficient to raise an issue when the fact could be ascertained from public records.	The court relied on this authority to hold that appellant's denial, on information and belief, that respondent was authorized to do business did not raise an issue at trial.
Mulcahy v. Buckley, 100 Cal. 484, 489 (35 P. 144)	Supporting the rule that unsupported denials on information and belief are insufficient when public records could establish the fact.	The court cited this case to reinforce that appellant's denial did not create a triable issue about respondent's authority to do business in California.

Court's Reasoning and Analysis

The court's analysis proceeded along several lines that together supported affirmance of the judgment:

Factual determination and sufficiency of the evidence: The jury found that Ahern's withdrawal of the rails and delivery to appellant was surreptitious and in fraud of respondent's rights. The appellant offered no rebuttal evidence on that issue; consequently, the jury's finding was conclusive on appeal. The court emphasized that factual probabilities and possibilities were matters for the jury.
Legal effect of the delivery of documents and promissory notes: The court held that respondent's acceptance of the bills of lading and the non‑negotiable warehouse receipts as evidence of security constituted a sufficient delivery to create a valid and binding pledge and a symbolic delivery of the rails. This symbolic delivery vested in respondent a special property interest adequate to maintain replevin against a third party, relying expressly on precedent (Callahan v. Marshall) and an authority (21 R.C.L.). In addition, the separate promissory notes each carried an express pledge of the rails by apt words and description, reinforcing respondent's security interest.
Effect of the alleged surreptitious taking: The court reasoned that the surreptitious taking by Ahern and the delivery to appellant did not destroy respondent's rights under the pledge/symbolic delivery doctrine.
Waiver of lien by admissions in answer: Appellant's answer admitted possession of the rails and refusal to deliver after demand, but did not assert that appellant was a creditor of Sakura Trading Company, nor that appellant had any interest or lien in good faith for value. Relying on authorities concerning waiver, the court concluded appellant waived any lien it might have had by failing to set it up in the answer or upon demand.
Insufficiency of denial regarding authority to do business: Respondent alleged it was authorized to do business in California; appellant denied on information and belief. The court treated that denial as insufficient to raise an issue because the fact could have been ascertained from public records, citing Mullally v. Townsend and Mulcahy v. Buckley. The trial proceeded on the view that no issue was raised.
Procedural and evidentiary objections: The court reviewed appellant's claims of error in rulings on evidence and jury instructions and found them without merit based on examination of the record.

Holding and Implications

Holding: Judgment affirmed.

Implications:

The trial court's judgment awarding possession of the 920 tons of steel rails and accessories to respondent and awarding costs was upheld on appeal.
The court concluded that respondent's receipt of bills of lading, non‑negotiable warehouse receipts, and promissory notes pledging the rails created a valid pledge and a symbolic delivery vesting a special property right sufficient to maintain replevin against appellant.
The court found that appellant waived any lien by admitting possession and refusal to deliver and by failing to plead a lien or interest in its answer.
The opinion does not announce any novel legal rule; it applies established principles (as cited) to the facts and resolves the dispute in favor of respondent. No broader or new precedent beyond the application of the cited authorities is expressly stated in the opinion.

Additional procedural note in the opinion: A petition for hearing in the supreme court was denied on December 12, 1921.

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YOKOHAMA SPECIE BANK, LIMITED, Respondent, v. TRANS-OCEANIC COMPANY, Appellant.

WASTE, P. J. —

Plaintiff and respondent brought this action to recover from the defendant and appellant possession of 920 tons of steel rails and accessories, or $75,000, the value thereof. The jury returned a verdict in favor of the plaintiff and against the defendant for possession of the property, and for costs. From the judgment entered thereon the defendant has appealed.

The quantity of steel rails in question was pledged by the Sakura Trading Company, a partnership, its owner, to the respondent as security for loans aggregating $100,000, evidenced by a note for that amount. The money was advanced to enable the partnership to pay for the rails, which were manufactured in Chicago for shipment to Japan. Bills of lading covering the rails were presented to the bank, and drafts representing the purchase price were paid by it. When the rails arrived in San Francisco these bills of lading were delivered by respondent to the Sakura Trading Company to enable it to obtain delivery. The Sakura Trading Company delivered the bills of lading to W. J. Ahern, operating as the Independent Trading Company, who obtained the rails from the carrier and stored them in a warehouse. Non-negotiable warehouse receipts were issued in the name of the Independent Trading Company. Ahern indorsed and delivered these receipts to the Sakura Trading Company, which, in turn, delivered them to the bank. The receipts were then returned by the bank to the Sakura Trading Company in order that they might be changed to negotiable receipts, to be redelivered to the bank. Ahern withdrew the rails from the warehouse and delivered them to appellant's wharf, taking from the appellant four receipts, which appear to have been returned to the respondent. Contending that the action of Ahern in withdrawing the property from the warehouse and delivering it to the appellant was without its knowledge or consent, the bank notified the defendant that it was entitled to possession of the steel rails; that neither the shipper nor the bank had consented to the shipment of the property to Japan by the defendant. Defendant refused to surrender the property. The present action in replevin was then brought by the bank. The rails were taken from the possession of the defendant by preliminary statutory proceedings and the giving of a bond.

It was the contention of the appellant that the warehouse receipts were delivered by the respondent to Ahern for the purpose of enabling the rails to be withdrawn from storage and delivered to it, to be transported to Japan, pursuant to arrangements theretofore made by Ahern on behalf of the Sakura Trading Company. [1] The position taken by the respondent was that the withdrawal of the rails from the warehouse by Ahern and their delivery to the appellant was surreptitious, without its knowledge, and in fraud of its rights. On the issue thus presented there was ample testimony on the part of the respondent to support its position. The appellant offered no evidence in rebuttal. Consequently the finding of the jury is conclusive of the controversy on that point. The probability, or the possibility, of the situation claimed by the respondent to exist, were matters addressed to the consideration of the jurors in the court below. This court is not called upon to pass upon those questions on appeal. The fact that the final collateral note, the one for $100,000, given to the bank by R. Sadanaga for the Sakura Trading Company, by its terms recited that it was secured by "26,860 pieces of Steel Rails, covered Trans-Oceanic Company's receipts (No. 11, No. 18, No. 33 and No. 40)," is without significance in view of the real nature of the entire transaction.

[2] The respondent had advanced large sums of money to the Sakura Trading Company. The delivery by that company to the bank of the various bills of lading and the non-negotiable warehouse receipts, as evidence of security for the loans, was a sufficient delivery to constitute a valid and binding pledge, and was a symbolical delivery of the rails which vested a special property in the respondent sufficient to enable it to maintain replevin against the appellant. ( Callahan v. Marshall, 163 Cal. 552, 558 [ 126 P. 358]; 21 R. C. L. 644.) In addition there were the various promissory notes (several were executed as the shipments arrived from the east), each carrying an express pledge of the rails by apt words and description, as security for the specified advances. The surreptitious taking by Ahern and the delivery of the rails to the appellant did not operate to destroy respondent's rights in the premises.

[3] For another reason the judgment should be affirmed. Appellant in its answer to the replevin suit admitted the possession of the rails, and its refusal after demand to deliver the same. No claim is asserted in the answer that the appellant is a creditor of the Sakura Trading Company, the real owner of the property, nor was there any claim that the appellant has any interest in the property in controversy, nor any lien in good faith for value, or other wise. Appellant therefore waived a lien, if it ever had any, by its failure to set it up upon demand being made for the delivery of the property. ( Williams v. Ashe, 111 Cal. 180, 184 [43 P. 595]; Lee v. De la Motte et al., 47 Cal.App. 23 [ 189 P. 1034].)

[4] The respondent, which is a corporation organized under the laws of the empire of Japan, alleged that it was authorized to do business in the state of California. The appellant denied the allegation on information and belief, which was insufficient to raise an issue as to the fact, which could be ascertained from an examination of the public records of the state. ( Mullally v. Townsend, 119 Cal. 47, 54 [50 P. 1066]; Mulcahy v. Buckley, 100 Cal. 484, 489 [35 P. 144].) Notwithstanding the impotency of the denial, appellant now contends that the parties tried the case upon the theory that the answer raised an issue in the court below, and that the proof was insufficient to sustain the allegation. Appellant is mistaken. Both the trial court and the respondent took the view that no issue was raised by the answer, and the trial proceeded on that theory.

Certain errors, alleged to have been committed by the trial court as to rulings on evidence, and in the matter of instructions to the jury, are called to our attention. From our examination of the record we are satisfied there is no merit in the points thus made.

The judgment is affirmed.

Richards, J., and Kerrigan, J., concurred.

A petition to have the cause heard in the supreme court, after judgment in the district court of appeal, was denied by the supreme court on December 12, 1921.

All the Justices concurred, except Richards, J., pro tem., and Waste, J., who did not vote.

YOKOHAMA S. BK. v. TRANS-OCEANIC CO