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property is lost or misappropriated by the depositary, all owners must bear the loss pro rata. All parties to the appeal concede the correctness of this rule as a general proposition of law.

[1] Before taking up the merits, we must dispose of a contention made by the appellee and cross-appellant to the effect that this court cannot consider the sufficiency of the evidence to support the findings or judgment under its decisions in China Press v. Webb (C. C. A.) 7 F. (2d) 581, Wulfsohn v. Russo-Asiatic Bank (C. C. A.) 11 F. (2d) 715, and Gillespie v. Hongkong Banking Corporation (C. C. A.) 25 F. (2d) 670. The contention is well taken if this was an action at law; but the proceeding was equitable in its nature and objects. It was a proceeding against a trustee or assignee for the equitable distribution of a fund in his hands, and it is well settled that such a proceeding is properly instituted in a court of equity. As said by the court in Dows v. Ekstrone (C. C.) 3 F. 19, 20:

"When a warehouseman, having in store a quantity of wheat deposited by several persons, for which, under the statute, he issues receipts to each depositor, fraudulently disposes of part of the wheat, the receipt holders must share in what remains according to the equitable interest of each, to be ascertained by an accounting. No one of such receipt holders can recover at law the whole, nor could any number of such holders, less than the whole number, recover possession as against the remainder. This case must be brought in a court of equity, where all the claimants can be heard and decree can be rendered establishing the rights of each with respect to the property in controversy."

And to such a proceeding it would seem that the New York City Bank was an indispensable party; but that objection was not urged in the court below, nor is it particularly urged in this court. National City Bank v. Harbin Electric Joint-Stock Co. (C. C. A.) 28 F.(2d) 468.

[2,3] We come now to a consideration of the merits. The only claim in controversy is the claim of the New York City Bank, and that claim is based on six separate and distinct transactions, all of which are similar in form, except one which was later accompanied by a warehouse receipt, and is for that reason more favorable to the appellant than the remaining five. We will refer to one of the transactions as illustrative of the others. April 5, 1927, the Union Trading Corporation executed its promissory note payable to the order of the warehouse company for the

sum of $80,000, Tientsin currency, with interest at the rate of 10 per cent. per annum, and deposited with the warehouse company as collateral security for the payment of the loan 40,000 bags of flour of two different brands and 60 bales of gunny bags containing 400 bags each. This note was apparently discounted by the National City Bank of New York and the Warehouse Company gave the bank the following receipt: "We have received the goods mentioned in this instrument and we will hold them to the order of the National City Bank of New York, and we hereby transfer all our rights under this instrument to the National City Bank of New York."

The court below held that these instruments conferred no rights on the appellant as against the holders of warehouse receipts, unless the appellant was able to identify the flour that came into the possession of the assignee as the identical flour delivered in pledge. This, of course, the appellant, like other claimants, was unable to do. The correctness of this ruling is the question for decision here. The first question is, was there a valid pledge in the first instance. Two things are essential to constitute a pledge: First, possession by the pledgee, and, second, that the property pledged be under the power and control of the creditor. Casey v. Cavaroc, 96 U. S. 477, 24 L. Ed. 779. The transaction between the Union Trading Corporation and the warehouse company satisfied those requirements. Whether the property pledged could be identified or was part of a general mass at the time the pledge was made, is not disclosed by the record, nor do we deem that fact material so long as the pledgee had possession of the whole. Weld v. Cutler, 2 Gray (Mass.) 195; Merchants' Bank of Detroit v. Hibbard, 48 Mich. 118, 11 N. W. 834, 42 Am. Rep. 465.

In the latter case Judge Cooley said: "Undisputed authorities bring the legal controversy within very narrow compass, and render general discussions needless. We have already said that it is conceded a warehouseman may transfer title to property in his warehouse by the delivery of the customary warehouse receipt. In such cases there is no constructive delivery of the property whereby to perfect the sale except such as is implied from the delivery of the receipt; and when the property represented is only part of a large mass as was the case here, there could not well be any other constructive delivery. But for the convenient transaction of the commerce of the country, it has been found necessary to recognize and sanction this method of transfer, and vast quantities of grain are daily sold by means of such receipts. We are then to see whether a constructive transfer of possession that is recognized in the case of sale shall be held inoperative in case of an attempted pledge.

33 F.(2d) 816

"If a distinction is made in the cases it ought to be upon some ground that would seem reasonable in commercial circles, where men may naturally be expected to be familiar with the ordinary methods of doing business but not with technical rules for the government of special cases. For business purposes rules should as far as possible be general, for the very satisfactory reason that special exceptions not made upon obvious reasons are not likely to be understood or observed. And the special exception supposed to exist in this case would be peculiarly liable to mislead if it were recognized. If a merchant may buy grain in store and receive a transfer of title in a warehouse receipt, he should be very likely if he had occasion to receive grain in pledge, to suppose a similar receipt to be sufficient for that purpose. No reason would occur to him why it should be otherwise, and this because there would in fact be no reason except one purely technical depending on nice legal distinctions. When that is found to be the case any proposition to establish a distinction should be rejected, decisively and without hesitation; for the laws of trade are made and exist for the protection and convenience of trade, and they should not tolerate rules which have the effect to border the chambers of commerce with legal pitfalls."

[4] As long as the Warehouse Company held the note of the Trading Corporation, it will be conceded that it could assert no right as pledgee in any of the flour in storage as against the holders of warehouse receipts, where there was not sufficient flour in storage to meet the demands of all. 27 R. C. L. 979. [5,6] But when the warehouse company at torned or transferred its right in the pledged property to the appellant, a different situation arose. For while prior to the transfer the warehouse company held the pledged property in its own right, after the transfer it held it as agent or bailee for the transferee. It may be conceded that the relations existing between the warehouse company and the holders of outstanding warehouse receipts were somewhat different from the relation existing between the warehouse company and the appellant, but in the absence of some statute giving a priority of right to the holders of warehouse receipts, we are of opinion

that the several claimants stand on an equal footing in a court of equity.

"Thus in equity it is a general rule that equitable assets shall be distributed equally and pari passu among all the creditors without any reference to the priority or dignity of the debts; for courts of equity regard all debts in conscience as equal jure naturali and equally entitled to be paid; and here they follow their own favorite maxim that equalty is equity: 'Æquitas est quasi æqualitas.' And if the fund falls short, all the creditors are required to abate in proportion." 2 Story's Eq. Jur. (14 Ed.) § 754. See, also, Eggers v. Hayes, 40 Minn. 182, 41 N. W. 971; Union Trust Co. v. Wilson, 198 U. S. 530, 25 S. Ct. 766, 49 L. Ed. 1154. The decree must therefore be reversed. (7) Inasmuch as the court below left undetermined the question whether any flour of a certain brand came into the possession of the assignee, a final decree cannot be entered here. That question should be determined, however, in advance of any final decree. The case will therefore be remanded to the court below for further proceedings not inconsistent with this opinion.

DIETRICH, Circuit Judge (dissenting). I am unable to take the view that there should be a reversal upon the assignee's appeal. He, of course, has no real interest and can be recognized only as representing the National City Bank. For some reason, not disclosed, that institution has not seen fit to appear, by intervention or otherwise, and thus become bound by any judgment that may ultimately be entered. Admittedly it holds no formal go-down warrants or warehouse receipts. I agree that mere form is not controlling, and that, with informal documents resting upon the fact of actual warehousing, it should be given a footing with the holders of formal receipts. But under commercial usage and the law a formal warehouse receipt, like more common negotiable instruments, carries certain presumptions, and its production establishes for the holder a prima facie case. Such presumptions I do not think attend the documents here produced on behalf of the National City Bank. Ordinarily a warehouse receipt imports an obligation of the warehouse company, and thus being against interest, it may be presumed to have been issued only for goods actually received. Here there was no such safeguard. The certificate or document relied upon as a warehouse receipt was issued by the warehouse company, in the furtherance of its own interests. It wanted the bank's money and could get it only by executing such a paper.

In the ordinary case of warehousing, the warehouse company would have no incentive to falsify the facts by issuing a receipt for goods it did not actually receive; here by issuing a false receipt it would be able to get the bank's money. Though without a formal receipt the bank here offered no evidence that the actual facts were such as to justify the issuance of such a document. Not only did the assignee, who, having possession of the records of the warehouse company, presumably was in a better position than any other party to the suit to make proof, fail to offer any evidence, but he resisted the efforts of appellee, affirmatively to show that the company had never received the flour. No explanation is offered of the circumstances surrounding the transaction with the bank, and no evidence even of its date. While in the briefs it is argued that the bank should be protected as a holder in good faith, it did not see fit to disclose to the court the facts from which it would appear to be such a holder. In the opinion of the majority it is said: "As long as the warehouse company held the note of the trading corporation, it will be conceded that it could assert no right as pledgee in any of the flour in storage as against the holders of warehouse receipts where there was not sufficient flour in storage to meet the demands of all. 27 R. C. L. 979. But when the warehouse company attorned or transferred its right in the pledged property to the appellant, a different situation arose." But there is no evidence other than the self-serving certificate that the warehouse company had on hand any of the supposed flour when it dealt with the bank. And if, as stated in the majority opinion, it could assert no right against other holders of warehouse receipts, if at the time it dealt with the bank "there was not sufficient flour in storage to meet the demands of all," how could it transfer to the bank a right it did not possess? We know only that on August 1, 1927, there were in the warehouse 91,666 bags of flour, against which there were outstanding regular receipts for 996,500 bags. Are we to presume that a short time prior to that date, when the warehouse company gave to the bank the certificate or acknowledgment (the precise date of which is not shown) it had in its possession more than 1,000,000 additional bags?

I think the decree should be affirmed, with the exception only that as suggested in the last paragraph of the majority opinion,

the court below should be directed to make a finding on the undetermined question there referred to.

QUIG v. UNITED STATES.

Circuit Court of Appeals, Third Circuit. June 12, 1929.

No. 4020.

1. Embezzlement 24-If party gave note believing it would be discounted and because it was unsatisfactory gave one afterwards paid, no criminal intent to aid and abet bank cashier in converting bank's funds could be inferred (12 USCA §§ 501, 591, 592).

If defendant, in prosecution for aiding and

abetting misapplication and converting of funds of bank to use of bank's cashier, in violation of Rev. St. §§ 5208, 5209 (12 USCA §§ 501, 591, 592), gave company note in belief that it would be discounted, and, when advised that first note was not satisfactory, immediately gave note indorsed by another, who afterwards paid note, no criminal intent could fairly or properly be inferred.

2. Criminal law 7031171(1)-District Attorney's opening statement that indictment for converting bank's funds was against defendant and cashier pleading guilty and who would tell truth, and that parties pleaded guilty to Indictments, held error, requiring reversal (12 USCA §§ 501, 591, 592).

In prosecution for aiding and abetting bank cashier in misapplying and converting to other's own use money of bank in violation of Rev. St. §§ 5208, 5209 (12 USGA §§ 501, 591, 592), statements of district attorney that indictment was against defendant and cashier, and that the cashier pleaded guilty and was sentenced to penitentiary and was present to do right thing by telling truth about matter, and that parties were arraigned and both pleaded guilty to two indictments, and that defendant made settlement and took release from bank, held prejudicial, requiring reversal.

3. Criminal law 369(1)-Indictments of separate offenses two years before trial for alding and abetting bank cashier's conversion of funds held inadmissible (12 USCA §§ 501, 591, 592).

In prosecution for aiding and abetting bank cashier in the misapplication and conversion of funds of bank in violation of Rev. St. §§ 5208, 5209 (12 USCA §§ 501, 591, 592), indictments offered in evidence against defendant and cashier of separate and distinct offenses committed some two years prior to trial of case held inadmissible.

4. Criminal law 371(1)-Where offense appears to be one of series, evidence of prior offense may be shown as bearing on intent.

In some rare cases, such as passing of counterfeit money, where offense for which defendant is being tried appears to be one of series of offenses of like character, evidence of offense may be shown, but solely for purpose of bearing on intent with which particular act was committed for which defendant is being tried.

83 F.(2d) 820

Appeal from the District Court of the for clearance. No mention was made by

United States for the District of New Jersey; William Clark, Judge.

Charles H. Quig was convicted of aiding and abetting another in the misapplying and converting to his own use certain funds of a bank, and he appeals. Reversed, and a new trial awarded.

T. McKean Chidsey, of Easton, Pa., John A. Bernhard, of Newark, N. J., and Chidsey, Maxwell & Frack, of Easton, Pa., for appellant.

Phillip Forman, U. S. Atty., of Trenton,

N. J.

Before BUFFINGTON, Circuit Judge, and SCHOONMAKER and THOMSON, District Judges.

THOMSON, District Judge. The defendant was indicted for violation of the National Banking Laws under sections 5208 and 5209 of the Revised Statutes (12 USCA §§ 501, 591, 592). One Hunsberger was indicted as principal with Quig as accessory be fore the fact, the indictment containing four counts. The court directed a verdict for the defendant as to the first three counts, submitting the fourth count to the jury. This count charged Hunsberger with willfully misapplying and converting to his own use $500 of the funds of the bank, charging Quig with aiding and abetting therein. Hunsberger pleaded guilty to the indictment, and, on the fourth count submitted to the jury, a verdict of guilty was rendered against Quig. A motion for a new trial being overruled and judgment entered on the verdict, this appeal was taken.

[1] It appears that in 1921 appellant became interested in a patent device for fastening tires on automobiles, and in September of that year registered under the laws of Pennsylvania as Triangle Tire Rack Company. In the latter part of the year, he applied to Hunsberger, who for quite a time had been cashier of the Hope Bank, for a loan in his business, and Hunsberger accepted the note of the Triangle Tire Company for $500, payable to Hunsberger, which was to be indorsed by him and discounted at the bank. A check of the Triangle Company was then drawn by Quig, the appellant. Hunsberger, however, did not indorse this note or have it discounted, but, without appellant's knowledge, took care of the check of the Triangle Company by sending a draft of the Hope Bank to the Federal Reserve Bank of New York, which had passed through a third party to the Reserve Bank

Hunsberger in his direct examination of this note, stating merely that he had taken care of the Triangle Company check by sending the Hope Bank draft to the Reserve Bank, and that no funds to meet the Triangle Company check were received until the following April, when a note of that company, indorsed by one Porter, was brought to the bank and discounted by him. On cross-examination, however, he admitted the receipt from appellant of the earlier note, which was submitted to him and identified, stating that he had a faint recollection of return of original note to appellant, stating that the bank would not discount it and that a note with an indorser would be required. The sharp issue of the case was whether or not appellant intended to injure and defraud the bank. It would seem that if he gave the Triangle Company note in the belief that it would be discounted, and when advised that this first note was not satisfactory, immediately gave the note indorsed by Porter, who afterwards paid the note, no criminal intent could fairly or properly be inferred. The matter reduced itself to the question whether the Porter note had been given on or before its date and under the circumstances claimed by the defendant. The transaction occurred in 1921 and Hunsberger's testimony, which seems to be contradictory and uncertain, certainly permitted, if not impelled, the conclusion insisted upon by the defendant. (2) In this situation, where guilt of defendant rested upon a slender foundation, extra care in the trial should have been observed in order that the defendant's rights might not be unduly prejudiced.

When the case was presented to this court, two matters stand out as of importance and are controlling in the decision of the case. These relate, first, to the remarks of the district attorney in opening the case to the jury, and, second, in relation to the admission by the court against defendant's objection of the record of certain offences theretofore committed by the defendant.

In opening his case, the district attorney, among other things, said:

"This indictment is against Quig and Hunsberger. Hunsberger pleaded guilty and was sentenced to ten years in the Atlanta Penitentiary, and Hunsberger is here today to do the right thing by the Government by telling the truth about this matter. Hunsberger will be one of the witnesses upon whom the Government depends in this case, and we want to say at the out-set that it is no pleasure to the Government to produce men who have been convicted of crime, and ask you, Gentlemen of the Jury, to take their word as against the word of men who have not been convicted of crime, but I want you to look this man over; see the man who has paid for the crime, and determine whether this young man, branded for life as a felon, should alone suffer for these transactions which we believe we can prove to you were entirely for the benefit of another man, who has not suffered or been penalized in any way.

"These indictments were returned in 1921 by our Grand Jury and Quig and Hunsberger were arraigned on these two indictments and they both pleaded guilty to these two indictments.

"Pleas were made and they were belittled to such an extent that sentence was imposed upon them; sentence upon Hunsberger that he should pay a fine of $1000.00 and sentence upon Quig that he should pay a fine of $500.00.

"Quig owed about $55,000 to the Bank and he made a settlement and took a release from the Bank, paid them $45,000 and they agreed not to hold him for any more." [3,4] These statements made by the district attorney in his opening to the jury, before the offer of any testimony, or any opportunity for the defendant to object or the court to pass on such objection, very naturally took serious, and, perhaps, permanent lodgment in the minds of the jury. They went far beyond the rights possessed by government counsel in outlining its case to the jury; contained statements wholly incompetent, were seriously prejudicial to defendant's case, and should not have been admitted. The court would well have been justified in withdrawing a juror and continuing the

case.

In the second place, against the objection of defendant's attorney, indictments were offered in evidence against the appellant and Hunsberger of separate and distinct offenses committed some two years prior to the trial of this case. This testimony should have been excluded. In some rare cases, such as the passing of counterfeit money, where the offense for which the defendant is being tried appears to be one of a series of similar offenses of like character, evidence of a prior offense may in some cases be shown, but solely for the purpose of bearing on the intent with which the particular act was committed for which the defendant is being tried. Such cases are rare, and the admission of such testimony should not be permitted, except in the clearest case and for the single

purpose of bearing upon the question of intent. The only other case in which the record of a former conviction is admitted is for the sole purpose of affecting the defendant's credibility as a witness. Such records would not have been competent in the case at bar, because the defendant did not take the stand and was therefore not a witness in the trial. There was no legal justification for the admission of these indictments charging former offenses, and their admission was doubtless very prejudicial to the defendant's case.

Other assignments of error are alleged by the defendant, but these will not be considered, as we are of opinion that the statements of the district attorney in his opening speech to the jury and the admission of the record of prior offenses were so highly prejudicial as to call for reversal of the judgment.

Judgment is therefore reversed, and a new trial awarded.

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Army and navy 5112 - War risk policy for which premium due February 28 was deducted from pay in March, when insured was discharged, lapsed April 30.

Under Bulletin No. 1 of War Risk Bureau issued October 15, 1917, providing that premiums should become due on last day of each month, and, if not paid within 31 days thereafter, insurance should terminate if insured had no money due from United States, and Treasury Decision No. 27 W. R. of December 17, 1918, postponing due date of premium one

day by fixing first day of next calendar month as due date of premium, where premium deducted from soldier's pay on March 14, was premium due February 28, and thereafter no premium was paid, policy lapsed April 30 when

grace period expired.

Appeal from the District Court of the United States for the Northern Division of the Western District of Washington; George M. Bourquin, Judge.

Action by Eino A. Hill against the United States. Judgment for plaintiff [29 F. (2d) 1018], and defendant appeals. Reversed.

Anthony Savage, U. S. Atty., of Seattle, Wash. (James O'C. Roberts and James T. Brady, Attys. U. S. Veterans' Bureau, both of Washington, D. C., of counsel), for the United States..

Rehearing denied July 29, 1929.

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