under the same circumstances that a surety who is personally bound would be." 76

§ 3053. Redelivery.-The pledgee is under the same duty to redeliver as any other bailee, and when the pledge is redeemed, he must return the article pledged, together with all its increase and profits." He must return the identical property received, except that in the case of certificates of stock he may return other certificates of precisely similar character."

78

§ 3054. Pledgee's remedies upon pledgor's default.-Upon default in his obligation by the pledgor, the pledgee may either sue upon the debt, in which instance he retains his lien upon the pledge until the satisfaction of the debt secured by the payment of the judgment, or exercise his power of sale of the property at common law, upon notice to the pledgor, by a proceeding in equity, under a special power given by special contract, or under. a power given by statute.80

§ 3055. Suit on the debt.-The holding of a pledge as security for a debt does not prevent a suit on the debt, and the pledgee may sue on the debt while retaining the pledge as security, and may hold the pledge until the judgment obtained in the suit is satisfied, for the pledge is good until the debt is satisfied,81 and it is held that the debt is not extinguished by being merged in the judgment to such an extent as to release the pledge.82 Even though the pledgor has tendered the amount of

But a

162, § 35; Van Zile Bailments (2d
ed.), § 296; Goddard Bailments, §98;
White River Sav. Bank v. Capital
Sav. Bank, 77 Vt. 123, 107 Am. St.
754; note, 73 Am. St. 566.
statutory provision for notice and
public sale, being for the benefit of
the pledgor, may be waived by the
pledgor. Ardmore State Bank V.
Mason, 30 Okla. 568, 120 Pac. 1080.

81 See cases cited in note 82. Skud v. Tillinghast, 195 Fed. 1; De Cordova v. Barnum, 130 N. Y. 615, 29 N. E. 1099, 27 Am. St. 538.

Black v. Reno, 59 Fed. 917; Harding v. Hawkins, 141 Ill. 572, 31 N. E. 307, 33 Am. St. 347; Jones v.

the debt, and this has been refused, the pledgee still has his remedy upon the debt, though he has lost his lien upon the pledge.83 If the pledgee in his suit upon the debt attaches the pledged property, or levies an execution upon it, he is held to have waived the lien of the pledge, since he has by the levy admitted that the property is in the possession of the pledgor subject to execution, or attachment, and thus he is estopped from setting up in himself a right to its possession. The pledgor, when sued on the pledge debt, cannot set off the value of the pledge at common law85 unless it has been converted, but in several states the pledgee who sues on the debt must produce the pledge or be liable for its value, at the time of trial.87

84

86

§ 3056. Common-law sale of the pledge.-Upon default by the pledgor, the pledgee may make a demand for payment, and if he fails to comply, the pledgee may then, after reasonable notice to the pledgor of the time and place of the sale, sell the property pledged at public auction.88 Notice is necessary because the pledgor has the right to redeem at any time before the sale, and also in order that he may see that the sale is conducted fairly, and may find prospective purchasers to make the price better, and the pledgee cannot lawfully sell without giving notice, unless the debtor is informed of the time and place of the

89

Bank of British Columbia v. Marshall, 8 Sawy. (U. S.) 29, 11 Fed. 19; Bigelow & Co. v. Walker, 24 Vt. 149, 58 Am. Dec. 156.

87 See cases cited in note preceding. Ocean Nat. Bank v. Faut, 50 N. Y. 474; Stuart v. Bigler's Assignees, 98 Pa. St. 80.

88

Mauge v. Heringhi, 26 Cal. 577; McDowell v. Chicago Steel Works, 124 Ill. 491, 16 N. E. 854, 7 Am. St. 381; Sell v. Ward, 81 Ill. App. 675; Robinson v. Hurley, 11 Iowa 410, 79 Am. Dec. 497; In re Jeane's Appeal, 116 Pa. St. 573, 11 Atl. 862, 2 Am. St. 624; Toronto Gen. Trusts Corp. v. Cent. Ontario R. Co., 10 Ont. L. R. 347, 4 Ann Cas. 1163 and cases cited in note.

89 McDowell V. Chicago Steel Works, 124 Ill. 491, 16 N. E. 854, 7 Am. St. 381; Milliken v. Dehon, 27 N. Y. 364; In re Jeane's Appeal, 116

90

sale from other sources, and then notice is unnecessary, since actual notice is all that the law requires. The rule is that the pledgee has not the right to purchase at his own sale, and if he does, the sale is voidable at the option of the pledgor." If he avoids the sale the pledge is in the same condition as before, the pledgee still holding his lien for the debt secured.92 The pledgee must exercise the utmost good faith in the sale, and must hold it at a reasonable time, and at a proper place.93 As to any surplus of the proceeds of the sale of the pledged property, over the amount of the debt secured, the pledgee is a trustee for the pledgor. If notice cannot be given to the pledgor because he cannot be found, a judicial sentence is necessary to a valid sale by the pledgee.95 If the sale is legally and fairly conducted, inadequacy of price is not a ground for setting it aside."

94

§ 3057. Sale in equity.—The pledgee who has an adequate remedy at law is not entitled to go into equity, and it seems that

Pa. St. 573, 11 Atl. 862, 2 Am. St. 624. But see as to waiver by pledgor, Ardmore State Bank V. Mason, 30 Okla. 568, 120 Pac. 1080. 90 Jones on Pledges, § 613; Alexandria L. & H. R. Co. v. Burke, 22 Grat. (Va.) 254.

91 Hill v. Finigan, 77 Cal. 267, 19 Pac. 494, 11 Am. St. 279n; Winchester v. Joslyn, 31 Colo. 220, 72 Pac. 1079, 102 Am. St. 30; Glidden v. Mechanics Nat. Bank, 53 Ohio St. 588, 42 N. E. 995, 43 L. R. A. 737 and note; Thomas v. Gilbert, 55 Ore. 14, 101 Pac. 393, 104 Pac. 888; Ann. Cas. 1912A. 516 and note. See Holston Bank V. Wood (Tenn.), 140 S. W. 31, where it was held that the pledgor may not hold liable for conversion the pledgee who purchases collateral at his own sale, but who retains possession and does not refuse to return them upon tender of amount of the debt.

22 Farmers Loan &c. Co. v. Toledo &c. R. Co., 54 Fed. 759; Stokes v. Frazier, 72 Ill. 428; Bank of Old Dominion v. Dubuque &c. R. Co., 8 Iowa 277, 74 Am. Dec. 302; Bryson v. Rayner, 25 Md. 424, 90 Am. Dec. 69; Bryan v. Baldwin, 52 N. Y. 232; Glidden v. Mechanics' Nat. Bank, 53

Ohio St. 588, 42 N. E. 995, 43 L. R.
A. 737.

93

Guinzburg v. H. W. Downs Co., 165 Mass. 467, 43 N. E. 195, 52 Am. St. 525; Hagan v. Nat. Bank, 182 Mo. 319, 81 S. W. 171; King v. Texas Banking & Ins. Co., 58 Tex. 669.

* Jones Pledges, 88 649, 650; Taylor v. Turner, 87 Ill. 296; Miles v. Walther, 3 Mo. App. 96; Foster v. Berg & Co., 104 Pa. St. 324. Where a pledgee who foreclosed a mortgage purchased the property to prevent sacrifice, under a power given in the mortgage, but was not authorized by the pledge contract to purchase at his own sale, he holds as the trustee for the pledgor, subject to his right to redeem. Union Trust Co. v. Hasseltine, 200 Mass. 414, 86 N. E. 777, 16 Ann. Cas. 123.

Indiana &c. R. Co. v. McKernan, 24 Ind. 62; Garlick v. James, 12 Johns. (N. Y.) 146, 7 Am. Dec. 294n; Stearns v. Marsh, 4 Denio (N. Y.) 227, 47 Am. Dec. 248.

96 Farmers' Nat. Bank v. Venner, 192 Mass. 531, 78 N. E. 540, 7 Ann. Cas. 690. Nor the fact that but one bidder attended. Guinzburg v. H. W. Downs Co., 165 Mass. 467, 43 N. E. 195, 52 Am. St. 525.

98

only where there is an accounting necessary," or where there are conflicting claims or intervening rights to the property, or where the pledgor cannot be personally notified," is the pledgee entitled to bring a bill in equity, and obtain a decree for the sale of the property.

§ 3058. Sale under statute.-In most of the states the foreclosure of a pledge and its sale is regulated by statute. In some of these states any other method of sale is forbidden, in others sale at common law, or under a special power given by contract, is permitted as well as the statutory sale. It is sufficient to say here that before foreclosing any pledge, the statutes of the state where the foreclosure is sought should be examined.

§ 3059. Sale under the provisions of a special contract.The parties may agree upon the power of the pledgee to sell the pledge upon default, upon such conditions as they see fit, so long as they are not illegal, or unconscionable. Thus if permitted by contract the sale may be held privately, demand and notice may be omitted, the pledgee may purchase at the sale, or the pledgee's liability may be increased,1 but a provision in the pledge contract that the pledgee shall become absolute owner upon default is unenforcible, this being perhaps the only strict limitation upon the

See cases cited under note 95. Schouler Bailments (3d ed.), §§ 225, 249; Farmers' National Bank v. Venner, 192 Mass. 531, 78 N. E. 540, 7 Ann. Cas. 690; Cooper v. Simpson, 41 Minn. 46, 42 N. W. 601, 4 L. R. A. 194, 16 Am. St. 667; Palmer v. Mutual L. Ins. Co., 114 Minn. 1, 130 N. W. 250. In re Jeane's Appeal, 116 Pa. St. 573, 11 Atl. 862, 2 Am. St. 624. A provision in a note se

cured by a pledge of collateral, giving the holder the right to make such use of the collateral as he may desire, so that he returns to the pledgor collateral of the same amount and kind, gives him no right to sell and end the pledgor's rights, before default in payments on the note. Commonwealth V. Atlhause, 207 Mass. 32, 93 N. E. 202, 31 L. R. A. (N. S.) 999n.

New York L. Ins. Co. v. Curry, 115 Ky. 180, 72 S. W. 736, 103 Am. St. 297. See Darrill v. Eaton, 35 Mich. 302. It was held in Kentucky that one may not assign a paid-up insurance policy to the insurance company as collateral for a loan and give it the right to forfeit the policy, or cancel it upon default (Mutual L Ins. Co. v. Twyman, 122 Ky. 513, 92 S. W. 335, 121 Am. St. 471) but that he may surrender it at its cash value

power of the parties to contract that the sale shall be carried out in any manner they see fit.

3

§ 3060. Further of pledgee's rights in case of defaultWhere pledge is a chose in action, or corporate stock.-The rule is that where the pledge is divisible, the pledgee can sell no more than enough to satisfy his debt, or the sale may be avoided by the pledgor. It is also the pledgee's duty to try to realize the most possible for the pledgor by the sale, and if the property would bring more divided and sold in separate parcels or lots than if sold altogether, it is his duty so to sell it.* Default by the pledgor of a negotiable instrument does not authorize the pledgee to sell it, in the absence of special contract, but his remedy is to hold it and collect it as it becomes due, applying the proceeds upon the pledge debt. As was said in a preceding section, the pledgee of negotiable instruments is held to due diligence in collecting them, and when they become due, is entitled to maintain an action upon them, whether or not the pledge debt is due. He has no right to compromise upon negotiable securities by accepting a less amount than is due, and the general rule is that if he does he is liable to the pledgor for the difference between the amount accepted and the face of the security,' though a compromise may be upheld in a case where the maker is insolvent, and it was for the best interest of the pledgor as well as the pledgee. It has been held proper to sell stocks and bonds on the

in payment. Crice v. Illinois L. Ins. Co., 122 Ky. 572, 92 S. W. 560, 121 Am. St. 489.

3

Fitzgerald v. Blocher, 32 Ark. 742, 29 Am. Rep. 3.

'Hale Bailments, p. 169; Fitzgerald v. Blocher, 72 Ark. 742, 29 Am. Rep. 3; Howard v. Ames, 3 Metc. (Mass.) 308.

Joliet Iron Co. v. Scioto Fire Brick Co., 82 Ill. 548, 25 Am. Rep. 341; Wheeler v. Newbould, 16 N. Y. 392. See Moses Exr. v. Grainger, 106 Tenn. 7, 58 S. W. 1067, 53 L. R. A. 857n, and full note; also note 4 L. R. A. 587. As to recovery of full amount of note by pledgee, see Gold Glen &c. Co. v. Dennis (Colo. App.), 121 Pac. 677, and Slack v. Elkins (Ga. App.), 73 S. E. 862.

See $ 3044. Joliet Iron &c. Co. v. Scioto Fire Brick Co., 82 Ill. 548, 25 Am. Rep. 341; Slevin v. Morrow, 4 Ind. 425; Hazard v. Wells, 2 Abb. N. Cas. (N. Y.) 444.

Zimpleman v. Veeder, 98 I11. 613; Union Trust Co. v. Rigdon, 93 Ill. 458; Wood v. Mathews, 73 Mo. 477; Fairbanks v. Sargent, 117 N. Y. 320, 22 N. E. 1039, 6 L. R. A. 475.

"Story Bailments (9th ed), § 214; Bowman v. Wood, 15 Mass. 534; Exeter Bank v. Gordon, 8 N. H. 66; Garlick v. James, 12 Johns. (N. Y.) 146, 7 Am. Dec. 294. And if all the collateral is insufficient to satisfy the debt, the pledgor cannot complain of a compromise made by the pledgee. Zollman v. Jackson Trust & Savings