Taney v. Penn National Bank, 232 U.S. 174 (1914)

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Taney v. Penn National Bank of Reading

No. 115

Argued December 9, 10, 1913
Decided January 26, 1914
232 U.S. 174

APPEAL FROM THE CIRCUIT COURT OF APPEALS

FOR THE THIRD CIRCUIT

In determining the relative rights of the trustee in bankruptcy and a secured creditor, the legal effect of the transaction securing the loan depends upon the local law.

The rule that physical retention by the vendor of goods capable of delivery to the vendee is a fraud per se does not apply in Pennsylvania in a transaction the inherent nature of which necessarily precludes delivery, or in which the absence of a physical delivery is excused by the applicable usages of trade.

Under the revenue laws of the United States, the government, although not strictly a bailee, is in complete control of a distillery warehouse which is in effect a bonded warehouse of the United States.

A distiller is not debarred from passing title or creating a special interest by way of pledge in whiskey deposited in his distillery warehouse in conformity with the revenue laws of the United States.

This Court will not condemn honest transactions growing out of the recognized necessities of a lawful business, and so held that the established practice of the distillery business to issue warehouse receipts for whiskey deposited in the distillery warehouse and pledge such receipts as security for loans is not one opposed to public policy.

In Pennsylvania, certificates issued by the owner of a distillery on whiskey in the distillery warehouse represent the property, and the delivery thereof as security for a loan made in good faith and in accordance with the usages of the trade amounts to actual delivery of the property itself.

187 F. 689 affirmed.

The facts, which involve the relative rights of the trustee in bankruptcy, and the holder as security for loans of warehouse receipts for whiskey in a distilling warehouse issued by the distiller, are stated in the opinion.