CASEY
v.
SCHUCHARDT
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In Casey v. Schuchardt, the Supreme Court held that a purported pledge of securities by a national bank to secure advances made by bankers was invalid because the bank retained continuous possession and control of the securities, failing to meet the legal requirement that a pledgee must take and retain possession of the pledged property to establish a valid pledge against third parties. The Court reversed the lower court's decree and directed entry of judgment for the bank's receiver, finding that the mere designation of securities in an envelope and their selection for pledge purposes were insufficient where the bank never relinquished actual possession or control of the collateral.
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Mr. Justice Bradley delivered the opinion of the court. •
The case is similar to that of Casey v. Cavaroc (supra, p. 467). Schuchardt & Sons weré bankers in New York, .through whom the New Orleans National Banking Association was in the habit of drawing on foreign houses, and who indorsed and dis posed of .the drafts, or transmitted them for' collection, and made advances thereon. They were thus in-the habit of indorsing and advancing on bills drawn by tbe bank on Seignouret Freres, of Bordeaux. In August and September they became uneasy, and required security; and it was agreed between them and the bank'that they would receive arid indorse drafts on Seignouret Fréres, and accept the drafts of the bank on themselves to a certain limited amount, upon being securéd by a pledge of commercial securities,, to be deposited in the hands of Charles Cavaroc & Son. In pursuance of this arrangement, on the 17th of September, the bank transmitted to Schuchardt & Sons its drafts on Seignouret Freres to the amount of 250,090 francs, and, at the saíne time, drew on Schuchardt & Sons against said drafts for the sum of $50,000. On the same day, or the day following, securities of thé bank to the amount of $60,000 were selected by the note clerk, by direction of Charles • Cavaroc, president of .the bank, put into an envelope indorsed with the name of Schuchardt & Sons, and 'handed to Cavaroc, who handed them to the cashier; and thereafter they were treated in'precisely the same manner as the securities which were selected for the Credit Mobilier' and the Park Bank, as shown in the cases which have just been decided. When due they were collected, or renewed, and when wanted by the bank for other purposes they were taken and used, and other securities were substituted in their place. They coritinued to remain and figure on the books of the bank and in its statements as belonging, to the mass of its bills discounted, no memorandum was made of the transaction, and no transfer was made of the bills until after the failure v of the bank. As in the other cases referred to, they were never out of the possession of the officers of the bank, or out of the bank1 for a single moment, but were always subject to its disposal. As the only claim made by Schuchardt & Sons, in their answer, to the securities in question is by way of pledge, and as there was no such delivery and retention of possession by them, or theii agents or trustees, as the law requires, to. constitute the. privilege of a pledge a§ to third. persons, their claim cannot be sustained.
The decree of the Circuit Court must be reversed, and the case remitted with directions to enter a decree for the complainant below in conformity with this opinion; and it is
So, ordered.
Mr. Justice Swayne, Mr. Justice Field, and Mr. Justice Harlan dissented.