from the days of Bracton. The bailment being beneficial to both parties, the duty of the bailee in the keeping of the property, is substantially the same as in a bailment for hire. He is bound to keep and preserve the property with ordinary care; that care which a prudent man ordinarily takes of his own property. He is not bound for the exactest care and diligence required of a borrower; and he is liable for a greater degree of care than the law exacts of a depositary without reward.2 § 235. The pledgee is not liable for a loss of the pledge by fire or by theft, where he has kept it with ordinary and reasonable care, considering the nature of the property. By itself, the fact of a loss by theft does not render the pledgee liable; it bears upon the question of diligence; it calls for some explanation; the pledgee is liable where the theft is occasioned by his negligence, and he is not liable where the property is stolen without any want of due care on his part.3 1 Bracton, 99 b; Henry de Bracton is supposed to have been a judge or justiciary. He wrote his treatise De Legibus et Consuetudinibus Angliæ, as early as the reign of Henry III. His quotations come down to the forty-sixth year of that long reign of fifty-six years, which commenced in 1217. Almost nothing seems to be known of his personal history, notwithstanding he held for a long period so high a place as one of the authorities of the English law, and was cited as late as the time of Lord Coke, as the first source of legal knowledge. He is admitted to have been a master of the common law, and he quotes the Roman Code with great freedom; from which he is supposed to have derived his clear, nervous, and expressive style. Many of our current maxims came to us through him from the civil law. 2 Reeves' English Law, 88, 90; 2 Ld. Raym., 909; see also Lives of the Chief Justices, by Lord Campbell, 1 vol., p. 78. Erie Bank v. Smith, Randolph & Co., 3 Brewster, 9; St. Losky v. Davidson, 6 Cal., 643; Commercial Bank v. Martin, 1 La. Auu., 344; Petty v. Overall, 42 Ala. R., 145; Jenkins v. The National Village Bank, &c., 58 Maine, 275; For a late case illustrating the liability of a depositary without reward, see Lancaster Co. National Bank v. Smith, 62 Penn. St., 47; and for a case applying the rule of liability of the borrower of bonds to be used as a pledge for advances, see Archer v. Walker, 38 Ind., 472. That the pledgee is liable for the same degree of care as a bailee for hire is assumed in all the cases; Jenkins v. Tho National Village Bank, supra; and Feld v. Brackett, 56 Maine, 121; Schmidt v. Blood, 9 Wend., 268; and Bakewell v. Talbott, 4 Dana (Ky.), 216, a peculiar case. 32 Kent's Comm., 580, 581; per Chief Justice Holt, 2 Ld. Raym., 909; Jenkins v. The National Village Bank, &c., supra, 58 Maine, 275; Petty v. Overall, 42 Ala. R., 145. Where the goods are placed in a given store for safe keeping with a mutual understanding, a removal of them by the pledgee will go far to establish his liability for a subsequent loss; St. Losky v. Davidson 6 Cal., 643. The pledgee is bound to exercise that sort of care of the goods which a man of business takes of his own property of a like kind; he is bound to employ the usual means for their safe keeping. And where he uses the property in any manner, it is quite clear that he must take additional care to prevent loss or injury from such use. Using the pledge without any express or implied permission, he ought to bear the risk of all losses arising from his use of the property. But where the pledge is of such a nature that the pledgee is at a charge for its keeping, as a horse or cow, he may use the horse in a reasonable manner, or milk the cow in recompense for the meat. The use not being the object of the contract, the pledgee has no implied permission to use a pledge for the keeping of which he incurs no expense.3 § 236. Where the goods are lost, it is incumbent upon the bailee to account for his failure to restore them, by showing a loss by some violence, theft or accident; this being done, the burden of proving a want of due care rests with the bailor; and he cannot recover unless the facts and circumstances in evidence, shew a want of due care on the part of the bailce, and a loss or injury arising therefrom. Where the bailce is bound for ordinary diligence, and wholly fails to restore the goods, it is incumbent upon him to shew a loss under such circumstances as will exculpate him; and this sometimes casts upon him the burden of proof upon the main issue in the cause. But if the plaintiff's right to recover depends upon proof of a loss by the defendant's negligence, the affirmative must be established by the plaintiff; the law cannot presume the fact in his favor, though the jury may find it from the circumstances attending the loss." Proof of a loss by fire does not ordinarily raise a presumption of negligence on the part of the bailee; that being one of the casualties against which most men guard themselves by insurance. More intentional, if not more habitual, care is generally taken to prevent losses by theft and embezzlement; and hence the omission of customary precautions in the 1 Thompson v. Patrick, 4 Watts (Pa.), 414. 2 Per Chief Justice Holt, in Coggs v. Bernard, 2 Ld. Raym., 909, 917. The pledge is given as a security; it does not imply any intent to give the pledgee an indirect benefit; he must therefore account for whatever income he receives from the pledge. Houton v. Holliday, 2 Murphy, N. C., 111. 4 Foot v. Storrs, 2 Barb. R., 326; Schmidt v. Blood, 9 Wend., 268; the bailee must give some account of the property; Bush v. Miller, 13 Wend., 481. Arent v. Squires, 1 Daly, 347; Schwerin v. McKie, 5 Robt., 404, 419. 6 Lamb v. Camden & Amboy R. R. & Tr. Co., 46 N. Y., 271, 278. 746 N. Y., 271, 278-282. Is a loss by fire on one's own premises presump tive evidence of negligence? See Judge Peckham's disseating opinion, 46 N. 285. X.. line of one's business affords some evidence of negligence; such as the failure to lock up the premises where the goods are stored, or the neglect to secure valuable articles, negotiable bonds and securities in a place of safety, or the neglect to adopt approved methods of guarding against robbery and theft.1 § 237. The bailee receiving a benefit from his services, stands in the relation of a trustee of the property and is bound to keep it with the care and diligence of a provident owner. A trustee of personal property, under a voluntary assignment to him, must exercise the same care and attention which a prudent person or a man of reasonable and ordinary diligence would use for himself. The rule is not as it is sometimes stated to be, that the trustee must take precisely the same care in behalf of his cestui que trust as he would do for himself. The rule does not bend itself to the individual character; and therefore an assignment is void, which contains a provision exempting the assignee from liability for any losses to the trust fund, unless the same happen by reason of his gross negligence or misfeasance. The law prescribes a more stringent rule of liability, and it refuses to uphold an assignment designed to defeat a just rule of responsibility. It will not suffer an insolvent to place his property in the hands of a trustee on such terms. Public policy does not prevent ordinary bailees from stipulating for an increased or for a diminished liability; on the contrary, it gives the utmost freedom, within the limits of fair dealing. No other persons being interested in the contract except the immediate parties, the law allows them to stipulate for the manner in which the property shall be kept or stored. It even allows a common carrier, whose duties are of a public nature, to stipulate for a liability less than that implied by law; and these stipulations often place him in the category of a bailee for hire, liable for ordinary care and diligence. But a stipulation by an ordinary bailee, exempting himself from any care whatever, can hardly be upheld; it has the form of a contract, without its substance.5 1 Schwerin v. McKie, supra, 5 Robt., 405. The defendant, a warehouseman, failed to deliver 52 boxes of cigars, part of a large parcel, and there was some proof of negligence by omission of proper fastenings. See Erie Bank v. Smith, Randolph & Co., 3 Brewster, 9. 2 Litchfield v. White, 3 Sand. R., 545; S. C., 7 N. Y. (3 Seld.), 438; Olmstead v. Herrick, 1 E. D. Smith, 310. 3 Conway Bank v. American Ex. Co., 8 Allen R., 512; Eastman v. Patterson, 38 Vt., 146; ante, § 48. 4 Transportation Co. v. Downer, 11 Wallace, 129; Clark v. Barnwell, 12 How. U. S., 272; French v. N. Y. & Erie R. R. Co., 4 Keyes, 108. Alexander v. Greene, 3 Hill R., 9 ; S. C., 7 Hill R., 533; Smith v. N. Y. C. R. R. Co., 24 N. Y., 222-251; Wooden v. Austin, 51 Barb., 11; 54 Barb., 559. § 238. When the promissory note of a third person is deposited by a debtor with his creditor, as collateral security for a debt, the note is a pledge; the pledgee has a special property in the note, and a right to receive the amount to become due upon it; and in case of non-payment, a right to collect the same by an action thereon against the maker.1 The pledgee receiving it as security on an existing debt, cannot be regarded as a holder for value in the commercial sense; but he has the right to recover on the note. He has the possession, and the maker cannot safely pay it to any other party. The note being payable to bearer, or to order and endorsed in blank, is transferable by mere delivery so as to vest the legal title in the holder; hence he may recover on it the amount due.* The pledgee has no right to compromise with the maker of the note, or surrender it for anything less than the amount due, or to dispose of it in any other manner. He holds the note as a security, and the money when collected or received upon it, as a substitute for the note, upon the same terms, until his principal debt becomes due. Like other choses in action, bills, bonds, and mortgages, notes are to be collected; the pledgee cannot sell them at public or private sale, unless he is specially autnorized to do so; a usage to that effect is illegal. And though specially authorized to sell the note at public or private sale, the pledgee may also sue and recover upon it in his own name. Having a right to collect, he has the right to recover on a chose in action, in furtherance of the object of the trust." § 239. The pledgor retains the right to negotiate or collect the note, provided he discharge the lien of the pledgee before judgment; he may 1 Bowman v. Wood, 15 Mass., 534; Tarbell v. Sturtevant, 26 Vt., 513; Andros. Railroad v. Auburn Bank, 48 Maine, 335; 5 Bosw., 372. 2 Manhattan Co. v. Reynolds, 2 Hill, 140: the pledgee is a holder for valne when he receives it as a security on a present loan; Bank of N. Y. v. Vanderhorst, 32 N. Y., 553. 3 President Bank of Poughkeepsie v. Hasbrook, 2 Seld., 6 N. Y., 216. 4 Bank of Charleston v. Chambers, 11 Rich., 657; Sheldon v. Middleton, 10 Iowa, 17; Wright v. Boyd, 3 Barb., 523, 528; 15 Mass., 534; 2 Hill, 140; Bank of Chenango v. Osgood, 4 Wend., 607–612; Flagg v. Munger, 9 N. Y. (5 Seld.), 483, 492; Jones v. Hawkins, 17 Ind., 550. Garlick v. Jones, 12 John. R., 145; Depru v. Clark, 12 Ind., 432; Livor v. Orser, 5 Duer, 501, 506; see Chapman v. Brooks, 31 N. Y., 75. 6 Wheeler v. Newbould, 16 N. Y., 392 ; Strong v. National Mechanics B. Asso., 45 N. Y., 718. 7 Nelson v. Eaton, 26 N. Y., 410. Flagg v. Munger, supra, 5 Seld., 483, 492. • Fisher v. Bradford, 7 Greenl., 28. transfer the note to a third person, subject to the lien, and that person may maintain an action on it as indorsee in his own name; but he must redeem and produce the note before he can have a recovery, because a judgment on it works a merger of the note; the note is merged in, and extinguished by the judgment. On this ground a judgment against one of several partners on a promissory note executed by the firm, is held a bar to a subsequent action against the other partners. It extinguishes the original debt, or merges it in the higher security. Hence, to permit the pledgor or his indorsee to prosecute the note deposited in pledge to judgment, without discharging the lien, would be to permit him to wrest from the pledgee his security or interest in the pledge.3 § 240. The pledgee of indorsed negotiable paper has the right to demand payment and to charge the indorsers by giving them due notice of non-payment ;* and it is without doubt his duty to use all reasonable care to charge them with notice. He alone has the right to demand and receive payment; and he has the custody of the paper. Under the circumstances, no other person can practically present the paper; it is, therefore, the duty of the pledgee to take the necessary steps to charge the indorsers. He impliedly engages to do so; the same as a creditor who receives notes for the price of goods previously sold, or on an existing demand. An immediate notice to the debtor or to the pledgor is not required; it is sufficient to give him a reasonable notice of the failure to obtain the money on the paper.' § 241. Securities and choses in action are often assigned or transferred as collateral security, upon an agreement or trust making it the duty of the transferee to collect the same and apply the proceeds upon the debt thus secured. Under such a contract, the pledgee is bound for the exercise of active diligence; his duties are like those of a general assignee for the benefit of creditors; and not unfrequently an assign 1 Thompson v. Hewitt, 6 Hill R., 254; Pierce v. Kearney, 5 Hill R., 82. 2 Robertson v. Smith, 18 John. R., 459; Olmstead v. Webster, 8 N. Y. (4 Seld.), 413; see Suydam v. Barber, 18 N. Y., 468, 470; and Oakley v. Aspinwall, 4 Comst., 513. 3 In a suit on a negotiable note, the plaintiff in order to recover, must ordinarily produce the note. He cannot otherwise prove its execution. Bachellor v. Priest, 12 Pick., 399; Jones v. Fort, 9 B. & C., 764; 4 Man. & R., 547; Tenant v. Strachan, Moody & M., 377; 4 Carr. & P., 31; EDWARDS on Bills and Notes, 495. Foot v. Brown, 2 M'Lean, 369; Russell v. Hester, 10 Ala., 535. 6 Tobey v. Barber, 5 John. R., 68; Jones v. Savage, 6 Wend., 658; Dayton v. Trull, 23 Wend., 345. 7 Gibson v. Tobey, 53 Barb., 191, 199. |