§ 275. The relation in which the pledgee stands towards the pledgor under his contract, is very similar in some respects to that which a factor or commission merchant who has made advances on the goods in his hands, holds towards his principal; it is like and unlike. Like a pledgee, the factor has an interest in and a lien upon the goods for his advances. Unlike the pledgee, the factor ordinarily holds the goods with authority to sell them, in his own name and in the usual manner. A revocation of the factor's authority to sell after advances made, leaves him in substantially the situation of a pledgee. As a pledgee, he cannot sell the property until he has first demanded payment of the debt secured, and thus given the owner a reasonable opportunity to redeem the property.1

§ 276. The pledgee may, but he is not obliged to resort to the property for the payment of his demand; he is not bound to exhaust his security.2 On the other hand, the factor is bound to exhaust the fund in his hands, before he can call upon his principal for reimbursement; on the ground that his advances are understood to be made in anticipation of the moneys to be realized from a sale of the goods. And left without instructions, he may sell the goods for that purpose; after that he may call upon his principal for any balance that may remain due to him.'

§ 277. A pledgee has in some particulars more freedom in dealing with the goods in his hands, than the factor is allowed under the common law; the pledgee may transfer or assign the pledge with the debt secured, and invest his assignee with all his rights in the security, so that practically the assignee may hold the pledge on the same terms and conditions; on the other hand, the factor cannot at common law pledge the goods of his principal, for his own benefit to the extent of his lien, or for the benefit of his principal; as an agent he has no authority

governs the application. Baker.v. Stackpole, 9 Cowen, 420; Dows v. Morewood, 10 Barb., 183; Allen v. Culver, 3 Denio, 284; Truscott v. King, 6 N. Y., 147; and the rules of equity as frequently; Stone v. Seymour & Bouck, 15 Wend., 19-44; Thomas v. Kelsey, 30 Barb., 268; and the contract or security itself as often; that is, where moneys are collected on securities covering all the debts; Bridenbecker v. Lowell, 32 Barb., 9-24; Cowperthwait v. Sheffield, 1 Sandf., 416; 3 N. Y., 243. The application is sometimes made on the debtor's implied direction; Berrian v. Mayor, &c., of N. Y., 4 Robt., 538, 551.

1 Allen v. Dykers, 3 Hill, 593; 7 Hill, 493; Wilson v. Little, 2 N. Y., 443; 4 Kent's Comm., 139, 140; Tucker v. Wilson, 1 P. Wms., 261.

Elder v. Rouse, 15 Wend., 218; Kimball v. Huntington, 10 Wend., 675; Sterling v. The M. & S. Trading Co., 1 Serg. & R., 179; Field v. Leavitt, 37 N. Y. (S. C.), 215; Moody v. Andrews, 39 N. Y. (S. C.), 302.

3 Gibon v. Stanton, 9 N. Y., 476.

Blackmar v. Thomas, 28 N. Y., 67.

B Ante, §§ 257, 258, 266, 267.

to pledge the property; and if he assumes to do so, without express permission, he is guilty of a violation of his trust; and his act, being tortious and void, passes no title and can create no lien; on the contrary, it gives to the owner an immediate right of action for the goods against the pledgee, who is not allowed either to bar a recovery or reduce its amount by any inquiry into the state of the accounts between the prin. cipal and his unfaithful agent. By wrongfully pledging the goods and parting with the possession, the factor loses even his lien.'

§ 278. A factor receiving goods to sell on commission is impliedly authorized to sell them in the usual manner and on the usual terms and conditions; with a warranty or upon a credit, where that is the customary mode of selling the property in question. When his instructions are express, he must follow them ;3 when given in general terms, he has a right, and it is his duty, to interpret them with reference to the usage of the business. His occupation as a factor implies certain rights and duties; among others the right to sell in his own name, without disclosing that of his principal; and the duty to safely keep and sell the goods to the best advantage. Intrusted with a discretion, he must act in good faith and with reasonable prudence, for the benefit of his principal.

1 Walther v. Wetmore, 1 E. D. Smith, 7; Bonito v. Mosquera, 2 Bosw., 401, 427; Phillips v. Huth, 6 Mees. & W., 595; Kennedy v. Strong, 14 John., 128; Buckley v. Packard, 20 John., 422; McFarland v. Wheeler, 26 Wend., 467 ; ante, $214.

2 Smith v. Tracy, 36 N. Y., 79; Andrews v. Kneeland, 6 Cowen, 354.

3 EDWARDS ON FACTORS AND BROKERS, § § 16-32.

4 Higgins v. Moore, 34 N. Y., 417.

Milliken v. Dehon, 27 N. Y., 364; Linley v. Carpenter, 4 Robt., 200; Adams v. Capron, 21 Md., 186.

6 Milbank v. Dennistoun, 21 N. Y., 386; 52 N. Y., 90, 605. The effect of a commission del credere is, in several particulars, to place the factor in new relation as to his principal. It is true, he is the debtor, but the principal still retains the right, at any time before payment, to resort to the purchaser as collateral security. It is a rule for the protection of the principal. A general factor may wait to receive instructions as to the mode of remitting the net proceeds, and is not liable to an action until a default, on his part, in remitting or paying the proceeds according to the orders of his principal: Ferris v. Parris, 10 John. R., 285. The only difference between a factor, acting under a del credere commission, or without one, is as to the sales made. In the former case he is absolutely liable, and may correctly be said to become the debtor of his principal; but it is not strictly correct to say that he is placed in the same situation, as if he had become the purchaser himself; for, as we have seen, the principal, notwithstanding this liability, may exercise a control not allowable between creditor and debtor. When the principal appears, the right of the factor to receive payment ceases. The effect of the commission is not to extinguish the relation between principal and factor, but applies solely to a guaranty that the

§ 279. Sale or Foreclosure. On a failure by the pledgor to pay the debt or discharge the obligation for which the pledge is given, the pledgee may file a bill in equity for a foreclosure and proceed to a judicial sale; or he may sell without judicial process, upon giving reasonable notice to the pledgor to redeem, and of the intended sale. Nonpayment of the debt does not work a forfeiture, either under the civil or common law; it simply clothes the pledgee with authority to sell the pledge and reimburse himself for his debt, interest and expenses; the residue of the proceeds belongs to the pledgor. The old rule, existing in the time of Glanville, required a judicial sentence to warrant a sale, unless there was a special agreement to the contrary. But it is now settled that the pledgee may sell on a reasonable notice to the pledgor.1

2

A lien on personal property does not of itself confer a right to sell; and the law seems to place the pledgee's right to sell the pledge and apply the proceeds to the payment of his demand, on the ground of an implied authority arising from the nature of the transaction: the debtor intends that the security shall be made available, and the proceeds applied if necessary to the satisfaction of the debt; and the law sanctions a sale by the pledgee, under certain restrictions, as a proper and safe mode of applying the pledge in payment of the debt. It affirms his right to sell, like a mortgagee of chattels.3

§ 280. Under the Code of Louisiana, the pawnee cannot, on a failure of payment, dispose of the pledge; but must apply to a judge to order that the thing shall remain to him in payment for as much as it shall be valued at by two appraisers, or that it shall be sold at public auction, at the choice of the debtor; and every agreement authorizing the creditor to appropriate the pledge to himself, or to dispose of it without

purchaser shall pay. The liability is not contingent, so as to require legal measures to be exhausted against the purchaser, before the factor is bound, but an engagement to pay on the day the purchase money becomes due. Although the factor is absolutely liable, he is not bound to pay until the money becomes due from the purchaser. Subject to the limitations above mentioned, the fac tor, under a commission, becomes a debtor to his principal. Baker v. Lang. horne, 6 Taunt., 519; Leverich v. Meigs, 1 Cowen R., 645; M'Kenzie v. Scott, 6 Brown Par. Cas., 280; 7 Taunt., 164; 35 N. Y., 384.

1 Cortelyon v. Lansing, 2 Caines' Cas., 200; Stearns v. Marsh, 4 Deuio, 227. 2 Pigot v. Cubley, 15 C. B. (N. S.), 701.

Pothonier v. Dawson, Holt N. P., 385; Cortelyon v. Lansing, 2 Caines' Cas., 200; Doane v. Russell, 3 Gray (Mass.), 382; Garlic v. James, 12 John. R., 146; Robinson v. Hanley, 11 Iowa, 410; Patchin v. Pierce, 12 Wend., 61; Hart v. Ten Eyck, 2 John. Ch., 62, 100; Nelson v. Edwards, 40 Barb., 279,

such formalities, is void. In the other States, where the common law prevails, the pawnee is allowed to sell at his discretion, being held responsible, at his peril, to deal fairly and justly with the pledge. The difference between the civil and the common law in this respect, is modal; it hardly touches the essential rights of the parties under the contract. The civil law assumes the direction of the proceeding, working a foreclosure; and the common law gives a remedy for any violation of its principles, in a like proceeding.

§ 281. Under the ordinary contract of pledge, the pledgee's right to sell at common law, does not accrue until after a default is made in the payment of the debt secured, or in fulfilling the engagement. It is a breach of trust, a tortious act, to sell the pledge before the debt becomes due, or before the principal obligation matures. His right to sell arises, like that of the mortgagee of chattels, on a default; until that occurs, he holds the pledge merely as a security. The right to foreclose or to sell the pledge, is a remedy given to the creditor to enforce the principal obligation; the pledgee cannot therefore resort to either of these remedies, until his right accrues to enforce that principal obligation.

§ 282. Before the pledgee can proceed to a sale, under the usual contract of pledge, he must demand payment of the debt; he must call upon the pledgor to redeem, and must give him an opportunity to do so." The right to sell is conditioned upon a prior demand; it is to be exercised in a reasonable manner, after giving the pledgor a reasonable time to redeem the pledge. Hence a waiver of notice of sale, embodied in the contract or pledge, does not dispense with the necessity of such prior demand; and the rule is the same where the principal debt is already due. The law requires a demand, so that the pledgor may redeem, and thus save himself from a sacrifice of his property on a forced sale ; and this principle is carried into the construction of special contracts of pledge."

1 Code, Art. 3132; Flournoy v. Milling, 15 La. Ann. R., 473. The Code of Louisiana is quite specific in regard to the making of the contract as well as the mode of sale. Art. 3123 to 3129.

Wilson v. Little, 2 N. Y., 443, 448; Genet v. Howland, 45 Barb., 560; Hanks v. Drake, 49 Barb., 186; Markham v. Jaudon, 49 Barb., 462; S. C., 41 N. Y., 235 ; Stevens v. Hurlbut, 31 Conn., 145; Davis v. Funk, 39 Pa. St., 243.

6 Wilson v. Little, supra.

7 Milliken v. Dehon, 27 N. Y., 364; Merwin v. Hamilton, 6 Duer, 244; Taylor v. Ketchum, 5 Robt., 607; Lawrence v. Maxwell, 53 N. Y., 19; Stenton v. Jerome, 54 N. Y., 480; Odgen v. Lathrop, 35 N. Y. (S. C.), 73; S. C., reversed, 65 N. Y.,

§ 283. An agreement by the debtor that the pledge shall become the property of the creditor on a failure to pay the debt secured, is illegal; the creditor is not allowed to stipulate for a forfeiture.' Subject to this rule of law, the parties are free to regulate the sale of the property in the contract of pledge; and as a matter of fact, they do often agree upon the place and mode of the sale, and upon the notice to be given. Without any agreement, the law requires that the sale shall be open and public; and it is competent for the parties to agree upon a sale at the Brokers' Board, not open to the general public; or upon a private sale;2 the pledgee being bound to sell the property fairly, in the exercise of his rights under the contract. In the absence of any agreement, the sale must be made at public auction, at a place open to the general public, under circumstances fitted to insure a sale for an adequate price.3

§ 284. On short loans the custom now is to take from the borrower his note for the amount, accompanied with stocks or bonds as a collateral security, with authority to sell the same at the Brokers' Board, or at public or private sale, on the non-payment of the note, and without notice. The authority is inserted in the note, in the form of a recital, and does not take from it its negotiable character.5 Under an agreement so ample, the pledgee has the right to sell the pledge as soon as the note is due; the contract, being fairly made and executed, prescribes'

1 Williamson v. Culpepper, 16 Ala., 211; Lucketts v. Townsend, 3 Texas, 119. The rule is everywhere assumed: Walker v. Staples, 5 Allen (Mass.), 34; Kimball v. Hildreth, 8 Allen, 167; ante, § 250; Jesup v. City Bank, 14 Wis., 331.

2 Brass v. Worth, 40 Barb., 648, 653; Costelo v. City Bank, 1 N. Y. Leg. Obs.,. 25; Rankin v. McCullough, 12 Barb., 103; Dykers v. Allen, 7 Hill, 497, 499; see Maryland &c. Ins. Co. v. Dalrymple, 25 Md., 242; Baltimore &c. Ins. Co. v. Dalrymple, 25 Md., 269, 424; Willoughby v. Comstock, 3 Hill, 389; Brown v. Ward, 3 Duer, 660; Bryson v. Rayner, 25 Md., 424.

3 In Brown v. Ward the Court hold that a sale of stocks by the pledgee must be made at the Merchants' Exchange, at public auction, unless some other mode of sale is agreed upon by the parties; 3 Dner, 660. It is for the owner to show that the sale was not made at the proper place; so held where the pledge, gold, was sold at the Gold Board in New York; Schepeler v. Eisner, 3 Daly, 11. 4 Here is a form of the note, with the authority: $500.

ALBANY, January 30, 1875. Ninety days after date I promise to pay Richard Roe or order, at the First National Bank of Albany, five hundred dollars for value received, with interest, having deposited with him as collateral security, with authority to sell the same, at the Brokers' Board in the City of New York, at public or private sale, or otherwise, at his option, on the non-performance of this promise, and without notice, 5 shares N. Y. Central stock. JOHN DOE.

Fancourt v. Thorn, 9 Q. B., 312; 10 Jur., 639; 16 L. J. Q. B., 244.