them, including the things pledged, subject to existing liens; no security or right of property is gained or lost by the pledgor's death.'

§ 266. It is not essential that the bailee or lienholder should retain the pledge or collateral security in his personal custody; he does not lose his lien by delivering the property to his agent or servant to hold for him, with notice of his lien. In other words, there is nothing strictly personal in the contract of pledge; there is nothing in the agreement requiring the pledgee's personal care over the property. He may therefore store the goods or keep them in the usual manner.2 And the contract not being of a personal nature, there is nothing to prevent the lienholder from transferring his demand with the security which he holds for its payment; and no rule of law to prevent his transferring both as a pledge or security for a debt of his own, provided he does not assume to transfer any more than his true interest. The original pledgor is not harmed so long as his right to redeem remains unaffected.3

§ 267. The pledgor has a remedy for any breach of the contract on the part of the bailee; he may reclaim the goods pledged, where they have been transferred in violation of the trust. He cannot maintain an action of trespass against a purchaser to whom the bailee wrongfully sells and delivers them, because here he cannot establish a wrongful taking of the property; his true remedy is by a suit in equity against the pledgee and his assignee to redeem, or by an action of trover for the goods, after a demand and refusalan action in which the defendant should be permitted to limit the plaintiff's recovery to the value of the goods, after deducting the amount of the debt to secure which they were pledged. A purchaser in good faith should certainly be allowed this degree of protection; otherwise the plaintiff will recover more than he is entitled to, at the expense of an honest purchaser."

1 Cortelyou v. Lansing, 2 Caines' Cas., 200; Webb v. Cowdell, 14 Mees. & Wels., 820; Morgan v. Ravey, 6 Hurl. & Nor., 265; Henry v. Eddy, 34 Ill., 508; Middlesex Bank v. Minot, 4 Met., 325. The rule applies to all contracts except those which involve or depend upon the personal skill of the deceased. Wills v. Murray, Exch. R., 866.

2 Urquhart v. M'Iver, 4 John. R., 103: Holds that a factor may thus preserve his lien; see also Laussat v. Lippincott, 6 Serg. & Rawle, 386; and Ingersoll v. Van Bokkelin, 7 Cowen, 670, 680.

3 Nash v. Mosher, 19 Wend., 431; Jarvis v. Rogers, 15 Mass., 408; Whitaker v. Sumber, 20 Pick., 399, 406; Moore v. Conham, Owen, 123; Ratlciffe v. Davis, 1 Buls., 29; M'Combie v. Davies, 7 East, 7; Bullard v. Billings, 2 Vt., 309. 4 Dudley v. Hawley, 40 Barb., 397, and cases there cited: S. C., Spraights v. Hawley, 39 N. Y., 441; Rogers v. Weir, 34 N. Y., 463.

5 Lewis v. Varnum, 12 Abbott Pr., 305.

6 Ante, § 257.

Vested with express authority to sell or transfer stocks or debentures, on a failure to pay the debt or demand for which they are held as a sccurity, the pledgee is liable in damages for a breach of the contract, where he sells before any default or demand of payment is made; but his unauthorized sale or transfer does not put an end to the contract of pledge; it does not of itself give the debtor an immediate and uncondi tional right to reclaim the pledge. On the contrary, a bona fide purchaser of the pledge acquires an interest in it which cannot be taken from him, without tendering to him the amount due on the pledge.2

§ 268. The owner of securities or of goods and chattels held in pledge, may transfer his interest in them subject to the lien. He cannot complete the sale of goods thus situated, by an actual delivery; but he can sell and transfer the title, so that the purchaser will be entitled to them on a payment or tender of the amount for which they are held. In order to render a sale of them valid under the statute of frauds by a delivery, the bailee must consent to hold them subject to the buyer's order; he must attorn to the purchaser. But where the sale is in writ ing, or valid under the statute without a delivery, the consent of the bailee is not required; the purchaser may demand the goods as a matter of right on complying with the terms of the pledge. The pledgee's position does not enable him to prevent a transfer which leaves his rights unaffected.

§ 269. The rule is that a bailee must retain possession of the goods, in order to preserve his lien upon them. Various exceptions have been

1 Donald v. Suckling, Law Rep., 1 Q. B. 585. Pledge of debentures as security for an indorsed note, with power to sell on default, and the pledgee again pledged the same before a default for a larger demand; held in detinue that the repledge did not put an end to the contract of pledge, and that the first pledgor could not recover without having paid or tendered the amount of the note. Halliday v. Holgate, Law Rep., 3 Ex., 299. A sale of a pledge, scrip of stock, before a demand of the debt, assuming it to be wrongful, does not give the pledgor an immediate right to the possession of the shares; he cannot maintain trover for them without first making a tender of the debt.

2 Talty v. Freedman's Savings & Trust Co., 3 Otto, 321, A. D. 1876; Lewis.. v. Mott, 36 N. Y., 395.

3 Bush v. Lyon, 9 Cowen, 52; or where the lfen is waived. Bailey v. Adams, 14 Wend., 201, 203; the goods cannot be taken, nor the value of them recovered in trover until the lien has been discharged. Wood v. Orser, 25 N. Y., 348.

* Dixon v. Buck, 42 Barb., 70; Potter v. Washburn, 13 Vt., 538; Barrows v. Harrison, 12 Iowa, 588; Biddle v. Bend, 6 Best & Smith, 225; Feltzplace v. Dutch, 13 Pick., 388.

5

Anthony v. Wheatons & Whitford, 7 R. I., 490; Carter v. Willard, 19 Pick, 1; Plessant v. Pendleton, 6 Randolph, 478,

6 Homer v. Crane, 2 Pick., 607; Jarvis v. Rogers, 15 Mass.; 389.

allowed to this rule; as where a pledge is delivered back to the owner for a temporary purpose, on a promise to restore it; or where it is handed back to the owner for some special purpose, to be returned as soon as the purpose has been fulfilled. The pledgee of a bond, who hands it back to the pledgor to exchange it for and substitute stock in lien of it, does not part with his interest. And the holder of notes as collateral security, does not relinquish his interest in them by giving them to the pledgor to collect or to receive the money upon them. In these and like cases the pledgor receives back the things pledged in a new character, on a special trust; and this trust is one which the law will always enforce in suits between the parties, and against third persons where the transaction is fair and reasonable. The pledgor thus receiving back the pledge, holds it as a special bailee, and is bound by the trust, on the same ground as an ordinary bailee." He is equally liable, where he wrongfully obtains the custody or control of the goods. He is liable in an action of trover or replevin.8

§ 270. In an action by the pledgee against the pledgor for the conversion of a bond, the measure of the plaintiff's damages is the value of the bond, with interest from the time of the conversion, unless such amount exceeds the sum due to the pledgee; in which case that sum is the proper measure of damages-that sum being the exact measure of his interest in the security. As against a third person tortiously appropri ating or converting a chose in action, the pledgee recovers the value of the security; prima facie he recovers the face of the bond, bill or note.1o

Roberts v. Hyatt, 2 Taunt., 266; Hutton v. Arnett, 51 Ill., 198; Way v. Davidson, 12 Gray (Mass.), 465; Cooper v. Ray, 47 Ill., 53.

2 Macomber v. Parker, 14 Pick., 497.

3 Hays v. Riddle, 1 Sandf., 248.

* White v. Platt, 5 Denio, 269; Bank of State of N. Y. v. Vanderhorst, 1 Robt., 211, 220; 32 N. Y., 553.

5 Cooper v. Ray, 47 Ill., 53; Jones v. Baldwin, 12 Pick., 316; Reeves v. Capper, 5 Bing. N. C., 136.

6 McBride v. Farmers' Bank, 25 N. Y., 450.

▾ Walcott v. Keith, 2 Foster, 196.

8

Ingersoll v. Van Bokkelin, 7 Cowen, 670; Rogers v. Arnold, 12 Wend., 30; 7 N. Y., 555. A surrender of the pledge with intent to abandon the lien, puts an end to the interest of the pledgee:, Arnold v. Morgan, 5 Sneed, 703; and where the pledgee permits the property to go back into the hands of the owner, and remain here indefinitely, the lien ceases against third persons. Day v. Swift, 48 Maine, 368; and it has been held that a surrender of it for a special purpose puts an end to the lien. Bodenhamer v. Newson, 5 Jones Law Rep., 107; and see Beeman v. Lawton, 37 Maine, 543.

9 Hays v. Riddle, 1 Sand., 248

10 Ingalls v. Lord. 1 Cowen, 240; Benjamin v. Stremple, 13 Ill., 466; Little v. Fassett, 34 Maloe, 545; White v. Bascom, 28 Vt., 268.

In this action of trover, the plaintiff need not give the defendant notice to produce the note or bond; bringing the suit is a sufficient notice. But the plaintiff must in his complaint set forth or describe the instru ment with reasonable precision. A slight variance between the proof and the complaint will not be regarded as material."

§ 271. It is the duty of the bailee to keep the things pledged separate from his own; and if he blends or so confounds them with his own, that they cannot be distinguished, he must bear all the inconvenience of the confusion; if he cannot distinguish and separate his own, he must lose it—a rule which is perfectly just, where the bailee's misconduct admits of no other adjustment. The owner may also follow and reclaim his goods from a party receiving them wrongfully and with knowledge. He may follow and reclaim them when transferred to a party receiving them in bad faith, from a trustee invested with a power of sale; c. g., when the transfer is made by an executor; much more when the transfer is made by a pledgee. But it is equally well settled, that an honest purchaser from a party having the power to sell, will acquire the title."

4

§ 272. The bailee is held to a strict compliance with the terms of his contract, and is bound to apply the proceeds derived from the sale of a pledge in an equitable manner. If, having two demands against a debtor, he receives a third person's note as security for one debt, and a pledge of the debtor's property for both, and afterwards sells the property for enough to pay both debts, he cannot pay over a part of the avails of the sale to his debtor, and then maintain an action on the surety's note. The law obliges the pledgee to apply the proceeds of the sale to the payment of both debts, thus relieving the surety. Until the pledge is rendered available by a sale, the creditor has a right to hold both securities; but he cannot as we understand the rule surrender the pledge without discharging the surety." This is on the ground that the pledge enures as a protection to the surety; and the creditor or pledgee becomes bound to use it as a means of obtaining payment from the debtor."

1 Bissel v. Drake, 19 John. R., 66; Pierson v. Townsend, 2 Hill R., 550. Hays v. Riddle, supra. Under § § 169, 170 of the Code a variance is easily dealt with.

3 Hart v. Ten Eyck, 2 John., Ch., 62, 108; 1 Cowen, 743; Roth v. Wells, 29 N. Y., 471, 486, 491; S. C., 41 Barb., 194.

Colt v. Lasmer, 9 Cowen, 320.

Bogert v. Hertell, 4 Hill, 492.

Sacia v. Berthould, 17 Barb., 15.

1 Strong v. Wooster, 6 Verm. R., 536.

Pitts v. Congdon, 2 Comst. N. Y. Rep., 352; Chapman v. Clough, 6 Verm., 123. 9 Ramsey v. Lewis, 30 Barb., 403, 414. The surety's right of subrogation implies the same thing. Lewis v. Palmer, 29 N. Y., 271; and Ellsworth v. Lockwood, 42 N. Y., 89, 98.

8 § 273. A party receiving a pledge or mortgage as a security for sev eral debts contracted at the same time, must apply the proceeds derived from a sale of the pledge in equal proportion to the discharge of each debt; with this qualification, that the interest thereon is to be first paid, and the balance applied. On the other hand, if the debts secured by pledge be contracted at different times, and the pledge is deposited as a security for the first, with a subsequent agreement that it shall be retained as a further security for the others, the proceeds derived from the sale must be applied to the payment of the debts in the order in which they were contracted; for it is to be presumed that the pawnor pledged for the security of the debts last contracted only what remained of the pledge after payment of the first.'

§ 274. In the application of payments, there are two general rules: 1. where a debtor owes his creditor several debts upon distinct causes, and pays him a sum of money, he (the payor) has a right to say to which debt or debts the money shall be appropriated, provided he directs this at the time of the payment; and 2. the creditor is free to make the application as he deems proper, where the debtor gives no direction on the subject. These rules are confessedly subject to several qualifications. Without stopping to dwell upon these, it is apparent that the creditor must often have the opportunity to apply a general payment upon the unsecured debts, leaving those unpaid for which he holds some pledge or security. And as this opportunity is given to him on the theory that the debtor has waived his right to make the application, it is quite clear that he must apply the payment equitably, and at or near the time it is made. Otherwise the law makes the application, upon principles of equity depending upon the circumstances; generally, to the satisfaction of the debts in the order in which they accrued; and pro rata where moneys are collected on securities embracing them all.

1 Van Blarcom v. Broadway Bank, 9 Bosw., 532; S. C., 37 N. Y., 540; Her kimer M. & II. Co. v. Small, 21 Wend., 273; S. C., 2 Hill, 127; Pattison v. Hull, 9 Cowen, 747, and note b, 776. The theory that a corporation authorized to declare a forfeiture of stock for non-payment of calls thereon, holds the stock as a pledge, has been rejected. Small v. Herkimer Manuf. Co., 2 N. Y., 330.

2 Patty v. Milne, 16 Wend., 557; 22 Wend., 558.

3 Clark v. Burdett, 2 Hall, 197; Wilcox v. Fairhaven Bank, 7 Allen, 27. This case holds that the pledgee, in the absence of any stipulation to the contrary, may apply the proceeds of the collateral security to his own benefit.

4 It is assumed in some of the cases that the law will apply a general pay. ment to the secured or more burdensome debt, that is for the benefit of the debtor. Patterson v. Hull, 9 Cowen, 747. But that rule does not seem to beestablished on any firm foundation; the priority of the debt more often