strongly favored by modern authorities, and especially so with reference to the pledge parties themselves, the pledgee ought to follow any such constructive delivery by acts evincing the intention of pursuing his opportunities to make the corporeal transfer complete; for a symbolized transfer stands for something which may be made conclusive.1 And as to bills of lading, he should consider that, notwithstanding the modern tendency of courts and legislatures to treat them substantially as negotiable in many respects, they are not necessarily negotiable in any such sense as to make his rights secure merely because he has become a bona fide holder of the instrument on good consideration.2 The element of seasonable notice to the warehouseman, or, in case of various incorporeal instruments to the fundholder or fundamental debtor, is an important one to make the pledgee's security complete. 3 § 400. The Same Subject. Now, supposing the delivery of the pledge is once completed, and possession has vested in the pledgee, what will be the effect of his delivering the thing back and parting with its possession? It is important, in such event, to gather from the circumstances what was the pledgee's intention in so doing. If he redelivers the pledge to the pledgor for a temporary purpose only, and upon the understanding that it shall be returned, or in order that something may be substituted for it; or if the pledgor wrongfully, whether by force or stratagem, gets possession again without the pledgee's acquiescence, wherever, indeed, as a fact, the pledgee has not redelivered the pledge of his own knowledge and consent fully and completely; the pledgee may in such case demand and recover the pledge again.1 This principle is illustrated in a case where the pledgee of a promissory note returned it under an agreement that the 1 Schoul. Bailm. § 190; Barber v. Meyerstein, L. R. 4 H. L. 317. Where bills of lading are issued in duplicate or triplicate, the danger of a pledgee who does not promptly present his bill to the carrier is greater. Glyn v. East India Dock Co., 7 App. Cas. 59. 2 101 U. S. 557; c. 8, post. 8 Schoul. Bailm. § 194. 4 Walcott v. Keith, 2 Fost. 196; Robert v. Wyatt, 2 Taunt. 268; Way v. Davidson, 12 Gray, 465; Schoul. Bailm. § 193. The pledgor who gets back the thing with felonious intent may be indicted for larceny. Bruley v. Rose, 57 Iowa, 651. pledgor should return it or another note.1 Nor is property beyond the pledgee's reach, if he gave it back to the owner in some new character, as a special bailee or agent, for example.2 But whether, under circumstances like these, the pledgee can follow the property into the hands of a bona fide holder for value, without notice of the transaction, to whom the pledgor had meantime transferred it, is quite another matter; and upon this point the authorities are somewhat at conflict.3 However this may be, the pledgee certainly loses the benefit of his security, whenever by a complete out-and-out delivery back to the pledgor he voluntarily places the property beyond his own reach; and by wantonly or negligently abandoning possession to any third person and failing to assert his pledge rights against others, when it was proper to do so, he may likewise be debarred of the advantage of a pledgee. 1 Way v. Davidson, 12 Gray, 465. And see Hays v. Riddle, 1 Sandf. 248. 2 Macomber v. Parker, 14 Pick. 497; Thayer v. Dwight, 104 Mass. 254; 7 Cow. 670; Schoul. Bailm. § 193. 8 See Story Bailm. § 299; Reeves v. Capper, 5 Bing. N. C. 136; Bodenhammer. Newsom, 5 Jones, 107; Schoul. Bailm. §§ 193-199. 4 Whitaker v. Sumner, 20 Pick. 399; 1 Atk. 165; Day v. Swift, 48 Me. 368; Black v. Bogert, 65 N. Y. 601; Schoul. Bailm. §§ 201-203; Casey v. Caveroc, 96 U. S. 467. Two leading conclusions may be drawn from the modern precedents as to pledge delivery and retention of possession. (1.) That in the growing complexity of commercial and mercantile transactions, with so many new classes of incorporeal rights coming into the list of things personal, the disposition increases to apply to all chattel transfer the test of mutual intent; so that the English and American courts, while abating little of the theory that a change of possession must attend every pledge transaction, have come to swerve very far from it in practice. (2.) That, The with the present laxity of construction, pledge delivery seems to comport itself differently under three leading aspects: (a) as between the pledge parties themselves; (b) as between the pledge parties and the public or the pledgor's general creditors; (c) and as between pledge parties and those, like a pledgor's attaching creditors or purchasers, who acquire intervening rights in rem without notice. In this connection, the element of notice to the debtor or fundholder is further of consequence. In general, we may add, the position of a pledgee is far less favorable for maintaining his cause where he is out of full personal control and must take the offensive, than where he has such control and has only to defend. Schoul. Bailm. §§ 201, 202. 5 Schoul. Bailm. §§ 201-203; Whitaker v. Sumner, 20 Pick. 399; Treadwell v. Davis, 34 Cal. 601; 5 Humph. 308. Cf. Arendale v. Morgan, 5 Sneed, 703. Pledge of savings-bank book by delivery with suitable intention may be sufficient as amounting to an equitable assignment. Taft v. Bowker, 132 Mass. 277. The modern fact of a redelivery or repossession of the pledge is not therefore conclusive, but remains open to explanation.1 laxity of this rule of assignment, as compared with the old common law concerning incorporeal personalty, has elsewhere been noticed at length. Supra, §§ 72-80. The various kinds of incorporeal personalty are treated somewhat differently in different States. Thus, stock, in order to be fully protected as collateral security, must, under some statutes, be transferred on the books, and suitable certificates issued. But in some other States a certificate of stock with blank indorsements, &c., affords substantially full indicia of pledge title. See Cherry v. Frost, 7 Lea, 1; 31 La. Ann. 149. Bills of lading give rise to many decisions. See chapter 8, post. But it by no means follows that, because the instrument is in a sense negotiable, all the favorable consequences of possession as against third parties must ensue. Shaw v. Merchants' Bank, 101 U. S. 557. And see, as to the effect of incomplete delivery or failure of possession, Dunn v. Meserve, 58 N. H. 429. Cf. Holmes v. Bailey, 92 Penn. St. 57. Seasonable notice to the fundholder or debtor is an important element in completing a delivery and retention of possession as against third parties. People's Bank v. Gayley, 92 Penn. St. 518. And such is the rule in assignments generally. Supra, §§ 78, 79. So applied in England recently, where a bona fide delivery was made under one bill of lading, where the old custom (not to be commended for modern dealings) prevailed of making out such bills in triplicate, and the pledgee who took one of the three in security failed to notify the carrier of his rights. Glyn v. East India Dock Co., 7 App. Cas. 591; s. c. 6 Q. B. D. 475. Delivery is especially essential to the validity of a parol pledge. 18 Hun, 187. And in the case of cor poreal property, as compared with certain kinds of incorporeal, the necessity as against bonâ fide third parties of keeping and retaining possession, and not voluntarily permitting the pledgor to take and use the thing as owner, is still strongly asserted in the latest cases. Siedenbach v. Riley, 111 N. Y. 560; Thompson v. Dolliver, 132 Mass. 103. Where a pledgee was induced by fraud to let the pledgor have temporary possession, and the latter pledged them elsewhere, it was recently held that though the pledgee might have compelled their return, yet the transfer meantime to a bona fide third party for value obstructed his claim. Babcock v. Lawson, 5 Q. B. D. 284; 142 Mass. 76. Cf. Moors v. Wyman, 146 Mass. 60 (as against general creditors, where the pledgor goes into insolvency); [1895] App. 56. What complicates the rule of pledge delivery and retention of possession greatly is the doctrine, now well established, that the agent to keep and hold possession for the pledgee may be the pledgor himself. Martin v. Reid, 11 C. B. N. s. 730; Parshall v. Eggert, 54 N. Y. 18. But this doctrine must be understood as subject to limitations with reference to third persons misled in consequence and attaching or making bonâ fide advances without knowledge of the pledgee's rights. Schoul. Bailm. § 193. And see Thompson v. Dolliver, 132 Mass. 103; Casey v. Caveroc, 96 U. S. 467. By vigilance and seasonable notice of his claim to third parties before they acquire adverse claims upon the thing, the pledgee may preserve his rights unimpaired, even though not retaining strict personal possession thereof. Palmtag v. Doutrick, 59 Cal. 154; Carrington v. Ward, 71 N. Y. 360. 1 Macomber v. Parker, 14 Pick. § 401. Duty of Pledgee as to taking Care of the Pledge, etc. -The situation of the parties to a pledge, pending the maturity of the debt which it was given to secure, is next to be considered. By reason of delivery the pledged property is now in the pledgee's keeping; and, being in his keeping, he is bound to exercise ordinary care, as in any bailment for mutual benefit, and is answerable for negligence to a corresponding extent. This is the rule of the civil law and of Continental Europe, as well as that of the common law; and by none of those systems is the pledgee's liability carried further. It was observed in an old case: "If a man bails me goods to keep, and I put them among my own, I shall not be charged if they be stolen."2 And Sir William Jones thinks that a distinction should be drawn between the taking of the pledge by robbery and stealing or the taking by stealth; and while he admits that in the former instance a pledgee is not chargeable, in the latter instance he considers that the responsibility exists. These are false tests upon any true conception of bailment law, and the views of Judge Story and Chancellor Kent on this point are decidedly preferable; being, in effect, that theft per se establishes neither responsibility nor irresponsibility in the bailee; and that the true question in any case of this sort, as in other bailments of the same class, is whether, in view of all the circumstances, there was culpable negligence, or, in other words, the failure on the pledgee's part to exercise due or ordinary care. It certainly appears quite reasonable, if a loss occurs, to presume against the pledgee, and to require of him an explanation at 497; 12 Kent Com. 578; 2 Ld. Raym. 916; Dig. 13, 6, 5, 2; Story Bailm. § 332. 2 Year Book, 29 lib. assis. 28; Bro. Abr. Bailment, pl. 7 8 Jones Bailm. 75. 4 See Story Bailm. §§ 334-338; 1 Co. Inst. 89 a, which is criticised in part by Story; 2 Kent Com. 580, 581; Schoul. Bailm. §§ 204, 205, and cases cited; Abbett v. Frederick, 56 How. Pr. 68 (a good case in point). A pledgee who damages a pledge is liable therefor, like any one else who has a special property in goods with a lien and fails to exercise proper diligence; but he does not thereby forfeit the security nor the secured debt. Thompson v. Patrick, 4 Watts, 414. See Ouderkirk v. Central Nat. Bank, 119 N. Y. 263, where want of ordinary care rendered the pledgee liable under the usual bailment rule. least of his failure to produce in safety, on accomplishment of the pledge undertaking, the property which had been so exclusively within his own keeping; but the explanation once given, and the facts making it appear that the pledgee exercised ordinary care, he is no longer to be treated as liable for the loss.1 So, too, if the pledge be lost by casualty, or unavoidable accident, or by superior force, or if it perishes from some intrinsic defect or weakness, or naturally, and the loss from such cause be duly made to appear, and no act was done or omitted to be done inconsistent with the pledgee's duty, so that he did not contribute to or proximately cause the loss, the pledgee is not answerable.2 The nature of the suit might cause a difference in the method of proof requisite to shift the responsibility from the pledgee's shoulders, and in any case the presumption might shift from either party to the other, or back again; and we may well remember that whether ordinary care was exercised is a question of fact, and that the want of it may be shown by acts of omission as well as of commission; at the same 1 See ib. Story and Kent differ somewhat on the question of a presumption of carelessness. As to civil law rule, see Pothier Traité du Contrat de Nantissement, n. 31. See, also, Schoul. Bailm. § 205. 2 Pothier, supra; Story Bailm. § 339; 2 Ld. Raym. 909; 2 Kent Com. 579; Scott v. Crews, 2 S. C. N. s. 522; 3 Brewst. 9; Schoul. Bailm. § 204; Girard Fire Ins. Co. v. Marr, 46 Penn. St. 504; Petty v. Overall, 42 Ala. 145. Ordinary care or diligence bestowed by a pledgee relates mainly to custody. But sometimes the pledge undertaking, from its nature and the circumstances, requires such other acts as collecting pledged negotiable instruments on maturity, presentment so as to charge an indorser, undertaking to realize on book debts as security, &c. So, too, in making a sale on default and otherwise realizing, this legal standard of mutual-benefit bailments finds an appropriate application. See Schoul. Bailm. §§ 206208. And see Lamberton v. Windom, 12 Minn. 232; Lawrence v. McCalmont, 2 How. 426; Wells v. Wells, 53 Vt. 1. In such cases ordinary care does not require the pledgee, without his own special agreement to that effect, to spend his money on litigation over defaulted notes, stubborn debts, and the like; but rather to go far enough to test a fair collection and leave further proceedings under the security open for mutual contract, or abandonment on his own part. For a bank as pledgee to neglect presentment of a note so as to charge the indorser is want of ordinary care. 50 Fed. 798. Supine negligence in collecting coupons or in allowing debts to get outlawed may also charge the pledgee. 13 R. I. 40; Semple Co. v. Detweiler, 30 Kan. 386. |