The question involved has been many times the subject of careful consideration from the appellate courts. It is sufficient to refer to the following decisions: Stevens v. Irwin, 15 Cal. 503, [76 Am. Dec. 500]; Woods v. Bugbey, 29 Cal. 473; Callender v. McLeod, 74 Cal. 376, [16 P. 473]; Ruddle v. Givens, 76 Cal. 457, [18 P. 421]; Murphy v. Mulgrew, 102 Cal. 547, [41 Am. St. Rep. 200, 36 P. 857]; George v. Pierce, 123 Cal. 172, [55 P. 775, 56 P. 53]; Sequeira v. Collins, 153 Cal. 426, [ 95 P. 876], and Guthrie v. Carney, 19 Cal.App. 144, [ 124 P. 1045]. There is no dissent from the principles stated in one of the opinions that "The vendor cannot be allowed to remain in the apparent sole and exclusive possession of the goods after the sale, for that would be inconsistent with such an open and notorious delivery and actual change as the statute exacts in order to exclude from the transfer the idea of fraud.
If the receipts were not true warehouse receipts, the transactions did not constitute a pledge of the leather by Flanders to the Trust Company which would be valid against attaching creditors. Casey v. Cavaroc, 96 U.S. 467; Sinsheimer v. Whitley, 111 Cal. 378; Second Nat. Bank v. Gilbert, 174 Ill. 485; Harding v. Eldridge, 71 N.E. 115; Sholes v. Asphalt Co., 183 Pa. 528; Union Trust Co. v. Trumbull, 137 Ill. 146; George v. Pierce, 123 Cal. 172; Watson v. Dealy, 59 N.Y.S. 623; Harington v. Blanchard, 70 N.H. 597; Story v. Cordell, 13 Mont. 204; Button v. Rathbone, 126 N.Y. 187; Caperton v. McCormick, 74 Miss. 85; Martin v. Sexton, 72 Ill. App. 395; Moores v. Redding, 167 Mass. 322; Drury v. Moores, 50 N.E. 618. The Trust Company had no equitable lien upon the leather enforceable against a trustee in bankruptcy.
the evidence thereof educed by the bank itself in connection with its original and amended third-party claim sufficiently show Dellaira to have been prior to June 4, 1919, the owner and in possession of the property in question; that he made an assignment of the same to the defendant Bank of Italy as security for an indebtedness to it, and delivered the same to the bank as a pledge with said assignment; that thereafter the bank restored the possession of said goods to Dellaira and thus destroyed said pledge; that it then took from Dellaira the trust receipts in question, leaving the latter in full possession and control over said property; that its claim of ownership of said property, as set forth in its original and amended third-party claim, rests wholly upon the aforesaid state of facts. The conclusion is irresistible that such a claim of ownership is void upon its face as against creditors, for the reason that it is violative of the provisions of section 3440 of the Civil Code. ( George v. Pierce, 123 Cal. 172 [ 55 P. 775, 56 P. 53]; People v. Martin, 53 Cal.App. 671 [ 200 P. 808.].) Trust receipts of this character, resting upon no prior ownership of the property by the creditor for whose benefit the so-called trust is created, have quite uniformly been held to be void as against creditors. ( In re Fountain, 282 Fed. 816 [25 A. L. R. 319]; Jordan v. Fed. Tr. Co., 296 Fed. 738, and cases cited.)
(McKee Stair Bldg. Co. v. Martin, 126 Cal. 557, [ 58 P. 1044].) The change of possession must be "actual, not merely constructive" (Sequeira v. Collins, 153 Cal. 426, [ 95 P. 876]; Bunting v. Saltz, 84 Cal. 168, [24 P. 167]); it must be "open and unequivocal, carrying with it the usual marks and indications of ownership" (Stevens v. Irwin, 15 Cal. 503, [76 Am. Dec. 500]; George v. Pierce, 123 Cal. 172, [55 P. 775, 56 P. 53]). Whether, under these tests, there has been a delivery and change of possession is a question of fact, to be determined by the trial court or jury upon a consideration of all of the evidence.
That is to say, the change of possession must be actual, not merely constructive (Bunting v. Saltz, 84 Cal. 168, [24 P. 167]); it must be "open and unequivocal, carrying with it the usual marks and indications of ownership." (Stevens v. Irwin, 15 Cal. 503, [76 Am. Dec. 500]; George v. Pierce, 123 Cal. 172, [55 P. 775, 56 P. 53].) As was said in McKee Stair Co. v. Martin, 126 Cal. 557, [ 58 P. 1044], "there must be a visible and apparent change of the custody of the property, such as to give evidence to the world of the claims of the new owner."
From that time forward, however, the rule was gradually relaxed in a long series of decisions which reduced the law on this point almost to the condition of a dead letter, though there were occasional revivals of the older, and, as I think, the better, doctrine. This condition of fluctuation contined until the decision in George v. Pierce, 123 Cal. 172, in which the judgment and order of the superior court upholding a transfer as against creditors was reversed on the evidence by a strict application of the old rule of Engles v. Marshall, Stevens v. Irwin, and other like cases. Since then until now that old and strict doctrine has been uniformly enforced in all cases coming to this court, and in at least three other appeals (McKee etc.Co. v. Martin, 126 Cal. 557; Lilienthal v. Ballou, 125 Cal. 183; and O'Kane v. Whelan, 124 Cal. 200) the finding of the trial court in favor of the vendee has been set aside on a review of the evidence, the principle of all the decisions being, that there must be an open and visible change of the status of the property sufficient to make manifest to the world the change of ownership.
The delivery must be as complete as is required in case of sales of personal property by section 3440 of the Civil Code, and change of possession must be continuous and open. (George v. Pierce , 123 Cal. 172.) In the agreement it was stipulated that the business should be managed by Adolph Phillips under the supervision of the trustees, but the trustees not only did not take personal possession, but they could not take such possession until after the expiration of six months, for they were bound to carry on business for that length of time, and also bound to employ Phillips as manager.
(2) First, although good faith and mistake are not defenses to an action for conversion, the plaintiff's damages will be reduced if the defendant returns the property or the plaintiff otherwise recovers the property. ( Blewett v. Miller (1900) 131 Cal. 149 [ 63 P. 157]; George v. Pierce (1898) 123 Cal. 172, 176 [55 P. 775, 56 P. 53]; Ross v. Sweeters (1932) 119 Cal.App.3d 716, 721 [ 7 P.2d 334]; see generally, 4 Witkin, Summary of Cal. Law (8th ed. 1974) Torts, § 875, p. 3162.) (3) Second, it has long been recognized that if one tortfeasor pays partial compensation to the plaintiff, the liability of other tortfeasors will be correspondingly reduced: ". . . payments by one tortfeasor on account of a harm for which he and another are each liable, diminish the amount of the claim against the other whether or not it was so agreed at the time of payment and whether the payment was made before or after judgment.
[3] The transferee's possession must be continued and so open and unequivocal as to carry with it the usual marks and indicia of ownership. ( Hurlburd v. Bogardus, 10 Cal. 518; George v. Pierce, 123 Cal. 172 [55 P. 775, 56 P. 53]; Sequeira v. Collins, 153 Cal. 426 [ 95 P. 876]; Southern Cal. Collection Co. v. Napkie, 106 Cal.App.2d 565, 570 [ 235 P.2d 434].) [1b] Here there was no actual and continued change of possession of the physical assets of Sancal, and the transfer therefore falls directly within the terms of the statute.
"The delivery must be as complete as is required in case of sales of personal property by section 3440 of the Civil Code, and change of possession must be continuous and open. ( George v. Pierce, 123 Cal. 172 [55 P. 775, 56 P. 53].)"