ing what was the understanding or contract between the parties.1 And when the contract confers a power of sale in express terms, it must be followed; a departure from the authority will render the sale unlawful. But though unlawful, the sale will not discharge a surety liable for the principal debt.3

§ 256. The rights of the parties may be further illustrated by the rule prescribing the demand necessary to charge the indorser of a note secured by collaterals. The maker having deposited railroad bonds to secure the payment of the note, has a right to demand their surrender when called upon to pay the note; and if he offers to pay on their surrender, being ready and willing to do so, and the collaterals be not tendered to him, the demand is ineffectual to charge the indorser.* A sale of the collaterals, with authority, before the note becomes due, changes the relation of the parties; the purchaser acquires the pledgor's title discharged of the trust. Hence, a demand of payment after the sale, will be valid, without a transfer of the collaterals.

§ 257. Where the pledgee sells the collaterals prematurely, or without authority, and afterwards brings an action to recover the debt secured, the defendant is entitled to have the value of the pledge wrongfully sold, deducted from the amount of the plaintiff's demand; he is not bound to accept the price received on the illegal sale. And where the pledge wrongfully sold, exceeds in value the amount of the debt, the pledgor may maintain an action to recover the value of the things pledged, or their value at the time of the sale; and in this action the defendant

1 6 Duer, 56, 60; 19 N. Y., 170; 41 N. Y., 235; 53 N. Y., 19.

2 Stenton v. Jerome, 54 N. Y., 480.

3 Vose v. Florida R. Co., 50 N. Y., 339. If the avails of the sale be sufficient to pay the debt, the surety is discharged; Strong v. Wooster, 6 Vt., 535. Ocean National Bank v. Fant, 50 N. Y., 474. The action was brought against the indorser of a note in these terms:

$3,352.61.

NEW YORK, October 15, 1869. On demand I promise to pay to Hamilton G. Fant or order $3,352.61 for value received, with interest at the rate of seven per cent per annum, having deposited with him as collateral security with authority to sell the same at the broker's board, or at public or private sale, or otherwise at his option, on the non-performance of this promise and without notice, one land grant bond of the Union Pacific Railroad Company, Eastern Division, of the par value of $1,000, and four Construction Bonds Series B" of the said Union Pacific Railroad Company, convertible into the land grant bonds of the same description as the one first named, and all of the par value of $1,000 each, said bonds being deposited with Ocean National Bank. Jos. B. STEWART.

A note of this kind remains negotiable, notwithstanding the addition to it of the contract of pledge: Fancourt v. Thorne, 58 Eng. Com. Law, 610.

Lewis v. Mott, 36 N. Y., 395.

6 Stearns v. Marsh, 4 Denio, 227.

is entitled to set off or recover the amount of the debt due to him.' A tender of the debt need not be made before the suit is brought. The pledgor has a right to recover in an action on the contract of pledge; and the pledgee, though liable in damages for a breach of the contract, is permitted to set off his demand in the action.3 And the pledgor cannot prevent this by bringing an action of trover; he cannot by merely changing the form of his action entitle himself to recover damages greater than the amount to which he is in law entitled, according to the true facts of the case and the real nature of the transaction. The plaintiff recovers his damages, namely, the value of the property, less his debt.

In trover by a lienholder, against the general owner or against any one claiming under him, the plaintiff recovers the value of his interest in , the goods; this rule is well settled. Against a stranger he recovers their full value."

§ 258. We have seen that a legal sale, or a sale made with authority, transfers the title to the collaterals." What is the effect of an unauthorized sale by the pledgee, on the title to the things pledged? In a transfer of stocks where the pledgee is entrusted with the title, the purchaser paying value in good faith, will certainly acquire the title, disencum

1 Allen v. Dykers, 3 Hill, 593; S. C., 7 Hill, 497; Wilson v. Little, 2 N. Y., 443; 31 Conn., 146; 25 Md., 242, 269; Treadwell v. Davis, 34 Cala., 601; Fisher v. Fisher, 98 Mass., 503.

2 The current of authorities is to this effect, and the Special Term decision in Butts v. Burnett, 6 Abbott Pr. R. (New Series), 302, was hardly intended to change the rule.

3 The defence may be set up under the Code as a counter claim. Seaman v. Reeve, 15 Barb., 454; Johnson v. Stear, 15 Com. B. (N. S.), 338; Hart v. Miller, 17 Gratt., 187; Lane v. Bailey, 47 Barb., 395. Where the plaintiff pledged a watch to secure the payment of a debt he was owing, and the defendant obtained possession of it in right of the pledgee and sold it prematurely, and received for it other property; it was held the plaintiff could not recover in assumpsit for money had and received. Kidney v. Persons 41 Vt., 396.

4 Md. Fire Ins. Co. v. Dalrymple, 25 Md., 242; Baltimore Marine Ins. Co. v. Dalrymple, 25 Md., 269, 309; Seaman v. Reeve, supra; Brierly v. Randall, 17 Q. B., 937; Chinery v. Viall, 5 Hurl. & Nor., 288.

5 Parish v. Wheeler, 22 N. Y., 494, 511, 515; Manning v. Monaghan, 28 N. Y., 585; Chadwick v. Lamb, 29 Barb., 518; this case overruled on another point, 35 N. Y., 277; 42 N. Y., 324.

6 Spoor v. Holland, 8 Wend., 445; Russell v. Butterfield, 21 Wend., 300, 303.

7 Alt v. Weidenberg, 6 Bosw., 176.

* Ante, § 256.

bered of the trust; because here the owner invests the pledgee with the title, and arms him with written authority to transfer the property. And the effect is the same where the pledgor entrusts the pledgee with a blank power of attorney, to make the transfer on the books of the corporation. The purchaser naturally relies upon the indicia of title, and is entitled to the property where he buys it in good faith, from a party holding a written power to transfer it. Considered as a mere agent, the pledgee has authority to sell under certain circumstances; and the facts justifying the sale are peculiarly within his knowledge; his position is not unlike that of a factor, under instructions limiting the price at which he may sell the goods in his hands; and though he violates his instructions or departs from the understanding under which he holds the property, a sale made by him in the usual course of business is valid.3 The form of the transaction shews a clear intent to place the stock under the control and at the disposal of the pledgee; and it is noticeable that the remedy usually chosen in these cases, assumes that the transfer is effectual, though unauthorized in the actual situation of the parties; and such is at length the settled understanding of the law.3

4

§ 259. At common law, goods pawned or pledged, are not liable to be taken in execution in an action against the pledgor. The possession of the pledgee could not be disturbed, because the officer could acquire no greater interest in, or control over the property than that possessed by the defendant, against whom he held the process of the court. And as public sales of personal property, not within the view of the bidders at the sale, were declared void by judicial decisions, on the plainest grounds of public policy, it became extremely difficult to sell even the pledgor's

1 In re Tahiti Cotton Co. ; ex parte Sargent, 7 English R., 813; Law Rep., 17 Equity Cases, 273.

2 Crocker v. Crocker, 31 N. Y., 507; Dillaye v. Com. Bank of Whitehall, 51 N. Y., 315.

3 Little v. Barker, 1 Hoff. Ch. R., 487; Fatman v. Lobach, 1 Duer, 354; Leavitt v. Fisher, 4 Duer, 1, 20; Kortright v. Com. Bank of Buffalo, 22 Wend., 348, 350; N. Y. & N. H. Railroad Co. v. Schuyler, 34 N. Y., 30, 80; Bridgeport Bank v. N. Y. & N. H. R. R. Co., 30 Conn. 279; see Ballard v. Brugett, 40 N. Y., 314.

4 Wilson v. Little, 2 N. Y., 443; Romaine v. Van Allen, 26 N. Y., 309; see Moore v. McKibben, 33 Barb., 246; Sargent v. Blunt, 16 John., 74; and Scott v. Rogers, 31 N. Y., 676.

5 McNiel v. Tenth Nat. Bank, 46 N. Y. 325; Moore v. Met. Nat. Bank, 55 N. Y., 41.

6 Wilkes v. Ferris, 5 John. R., 336; Marsh v. Lawrence, 4 Cowen R., 461; Badlam v. Tucker, 1 Pick., 389; Pomeroy v. Smith, 17 Pick., 85; Scott v. Sholey, 8 East, 467, Metcalf v. Scholey, 5 Bos. & Pull., 461.

2

Interest in the property on execution.' Where the property was so situated that it could be brought within the view of the bidders, it seems, property in the nature of a pledge might be sold on execution, but not so as to defeat the interest of the pledgee. The interest of the bailor could be sold, but the possession of the bailee having a lien or special property in the goods levied upon, could not be disturbed; there could be, in fact, no taking or actual seizure under the execution. Hence it frequently happened that the pledging, of many kinds of personal property, operated to place them beyond the reach of an execution; and this induced the passage of the statute in this State, authorizing a sale of the pledgor's right or interest in the goods or chattels pledged for the payment of money, or for the performance of any contract or agreement."

5

3

Under this statute the question was seriously litigated whether the sheriff, holding an execution against the pledgor, may by virtue thereof take the property pledged out of the hands of the pledgee into his own possession, for the purpose of selling the interest of the pledgor therein. And it was held, first, that the right and interest of the pledgor cannot be sold on execution unless the goods be present and within the view of those attending the sale; that for the purpose of the sale the sheriff may under this statute seize and detain the goods in the same manner as if they were not under pledge, but that he must sell them subject to the lien of the pledgee; and that after the sale, he must hold them in the custody of the law to await a redemption by the purchaser. If not redeemed presently, the sheriff must then deliver them again into the custody of the pledgee, to whom the purchaser must look for them. The effect of such a sale under the statute is to vest in the purchaser the precise right and interest of the pledgor. Afterwards the purchaser may of course redeem upon the same terms."

1 Linuendoll v. Doe and Terhune, 14 John. R., 222; Sheldon v. Soper, id., 352; Cresson v. Stont, 17 John. R., 116.

2 Moore v. Hitchcock, 4 Wend. R., 292; Wheeler v. McFarland, 10 Wend. R., 318.

3 Reynolds v. Shuler, 5 Cowen R., 323; 7 Cowen R., 735 and 670.

4 Bailey v. Burton, 8 Wend. R., 339; 2 R. S., p. 464, 3d ed.

Blackwell v. Ellsworth, 6 Hill R., 484; Franklin's case, 5 Rep., 47; seo Tift v. Barton, 4 Denio, 171.

6 Stief v. Hart, 1 N. Y., 20. Legislation recognizes the rights of both parties, and protects them in different ways.

MAINE. A creditor may attach personal property held under a mortgage or pledge and sell the same, provided ho first pays or tenders the amount due to the pledgee or mortgagee; and he may take first from the proceeds of the sale the amount paid to redeem. R. S. of Maine of 1871, page 623. The same rule holds where an officer sells on execution. Id., 669. The statute applies where there exists a valid lien by a pledge or mortgage. Birch v. Roberts, 50 Maine

§ 260. It is to be noticed that the effect of a sale on an execution against the pledgor, is not in any respect to vary the terms of the con

R., 395. The levy or attachment may precede the tender or payment, under the statute: Barrows v. Turner, 50 Maine, 127.

MASSACHUSETTS.—The debtor's personal property may be attached and held as if it were unincumbered; but the attaching creditor must within ten days pay or tender to the pledgee, mortgagee or lienholder, the sum for which the property is held; i. c., ten days after a demand made by the lienholder, with a written statement of the amount claimed. Unless the creditor pays or tenders the amount due, the attachment is to be dissolved, and the property restored. Gen. Statutes of 1860, p. 627, 727. The law requires a payment of the lienholder's demand according to the statement required by the statute; and the statement must be made within a reasonable time; Simonds v. Parker, 3 Met., 144; Johnson v. Sumner, 1 Met., 172, 294, 325, 515. No technical strictness is required by the lienholder in pointing out the parcels of the property covered by the lien. Averill v. Irish, 1 Gray (Mass.), 254. If a mortgagee intends to rely upon the remedy given by the statute, he must not assume to dispose of any part of the goods after the attachment is levied. He is entitled to his debt, and the attaching creditor is entitled to the property. Granger v. Kellogg, 3 Gray, 490.

NEW HAMPSHIRE.-"Any personal property not exempt from attachment, subject to any mortgage, pledge or lien, may be attached as the property of the mortgagor, pledgor, or general owner;" the officer or creditor paying or tendering the amount for which the same is held. The officer or attaching creditor has a right to demand of the pledgee or lienholder, an account on oath of the amount of the debt for which the property is held; and unless the same is given within fifteen days, and given honestly, the lien is held discharged. General Statutes (1867), p. 417, 418, § § 17, 18. A true and fair account satisfies the statute; Barton v. Chellis, 45 N. H., 135. Personal property may be sold on execution against the mortgagor or pledgor in the same manner as it may be attached; and where the officer or creditor pays the debt secured, he is entitled to apply the proceeds of the sale to pay the amount so paid in order to release the property, and the balance on the execution. Gen. Statutes, p. 441. The theory of the statute is that the pledgee or lienholder is entitled to be protected in his rights; and that he cannot be disturbed in his possession otherwise than is allowed by statute; Briggs v. Walker, 21 N. II., 72. A trustee process does not prevent the pledgee from proceeding to a sale. Chapman v. Gale, 32 N. H., 141.

VERMONT.-Personal property held by any one as lessee, bailee, pledgee, or by virtue of any contract establishing a reversionary interest or title, may be attached and levied upon as the property of the lessor, bailor, pledgor, or person owning the reversionary interest, subject to the title or interest of the lessee or pledgee; and the reversionary interest may be sold. General Statutes (1862), second ed. Appendix, 1870, pages 293, 294.

PENNSYLVANIA.-The statute allows a sale of goods or chattels held as a pledge, on execution, subject to the rights and interests of the pledges or pawnee, bailee or lessee. 1 Brightly's Purdon's Digest, 635. Under the statute the practice is to allow, on motion, an execution to sell the pledgor's