Lilienthal v. Ballou
Before: McFarland, Temple
Synopsis
Pledge oe Merchandise by Partnership—Attachment—Leviable Interest oe Pledgors—A transfer of a stock of merchandise by a partnership to trustees as security for the payment of the claims of certain attaching creditors, who released their attachments when the transfer was made, is in the nature of a pledge, dependent upon actual possession. If the pledge is valid, the firm, as the owner of the property, subject to the rights of the trustees for the creditors, has a leviable interest which may be reached by garnishment; and if it is not valid, the property itself may he seized upon attachment by another creditor of the firm.
Id.—Statute op Frauds—Delivery and Change of Possession.— In order to render such a pledge of the partnership property effective against seizure under an attachment by another creditor of the firm, the delivery to the trustees for the creditors must he as complete, and the actual change of possession as continuous and open, as is required in case of sales of personal property, by section 3440 of the Civil Code.
Id.—Continuance of Managing Partner—Insufficient Change of Possession.—Where the agreement between the firm and the trustees for the creditors provided that the managing partner should he continued in employment, at a salary, subject to the supervision of the trustees, who did not take personal possession, and the business was continued under the control of the same manager, and with the same employees as before, and the conspicuous signs of the partnership were allowed to remain, with a small and less conspicuous sign added, containing the names of the trustees designated as successors to the firm, and the business continued to be advertised extensively in the name of the firm, there was no sufficient change of possession, to prevent seizure of the property under attachment by another creditor of the firm.
Id.—Possession of Pledgors—Attached Property—Effectiveness of Pledge—Actual Change of Possession.—The fact the firm had no actual possession of the attached property, which was in the custody of the sheriff when the agreement for the pledge was made, does not affect the necessity for a transfer of possession of the pledged property, to complete the validity of the pledge. The pledge had no- effectiveness until possession was’given; and that possession, when given, must he actual, and not constructive, and a change thereof could not be effected by merely having the former owner manage the property as servant of the pledgee.
Opinion — Temple
TEMPLE, J. This is an action for the recovery of personal property, brought against the sheriff Ballou, and Orman, an attaching creditor. Defendants appeal from the judgment and from an order refusing a new trial. The property was levied upon under a writ of attachment against Phillips Brothers & Co.
On and prior to September 8, 1896, Phillips Brothers & Co. were engaged in merchandising at Arroyo Grande, in San Luis Obispo county. At that time their property was attached by [185]various creditors, and remained under attachment until October 23, 1896, when it was released in pursuance of an agreement made with all the creditors of the firm except Orman, and transferred to plaintiffs in trust for such creditors. The terms are expressed in the agreement. On the first day of December, 1896, Orman commenced suit to recover a debt due him from the firm, and the goods were levied upon, and the defense in this case consists of a justification under that writ. The question is, whether plaintiffs, under their transfer, can hold against Orman, who was a creditor of the firm before the goods were transferred and also prior to the attachments of the creditors for whom plaintiffs held as trustees.
Phillips Brothers & Co. is a partnership composed of Adolph Phillips and A. L. Phillips. Adolph Phillips had always been the managing partner, L. A. Phillips residing in San Francisco. The agreement was signed by Phillips Brothers & Co. and by sixty-one of their creditors and among other things provided in effect: 1. That the parties appoint'plaintiffs trustees, “to receive, manage, operate, use, and dispose of all the aforesaid property of the aforesaid parties of the first' part upon the terms and conditions hereinafter mentioned; 2. Parties of the first part will within thirty days convey to trustees all of their property except that which is exempt; 3. The trustees shall receive, manage, operate, use and conduct the- merchandise business of said parties of the first part at Arroyo Grande, California, and all assets of property connected therewith, as they the said trustees shall deem meet and proper,” with requisite authority, including power to replenish stock for cash from the receipts from the said business; 4. To collect debts due the firm and compromise claims; 5. To conduct the business for six months, and if then found unprofitable may terminate the trust and sell the goods at public or private sale; 6. All “recoveries” to be distributed through the board of trade to the undersigned creditors; 7. During all the time they conduct the business Adolph Phillips, one of the partners, “shall be employed by said trustees and shall give his exclusive time and services to said business, under the supervision of said trustees, and shall receive as remuneration and compensation for his services the sum of one hundred and twenty-five dollars per month”; 8.
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