« AnteriorContinuar »
it would have been futile. The pledgee had merely exercised a contract right, which he acquired when the pledge was made. The pledgor's passive acquiescence in the exercise of that right constituted neither a voluntary payment as of that date, nor a new promise in writing to pay the balance of the debt.'
"Some of the cases may be misleading for the reason that they seem to lay some stress on the fact that the debtor never knew of, and consequently never assented to, the application by the creditor of the proceeds of the collaterals. If the debtor had any option in the matter, or any power to object effectively to the application, there would be some force in the suggestion that his assent to it amounted to a voluntary payment by him. as of that date. But this can not be so where the creditor is merely exercising an absolute legal right under the original contract.'"
§551b. But if the sums collected by the pledgee from the collateral securities are, by understanding with the pledgor, to be applied in payment of the debt as they are collected, such collections are to be regarded as payments as of the date and at the time they are received, so as to take the debt out of the statute of limitations. In the absence of such an understanding, the money received by a pledge upon collaterals is to be held upon the same terms that the collateral is held. If the debt is payable at a definite time, no application of collections from the collateral securities can be made until that time arrives; and if it is payable on demand, a demand of the debtor must be made before applying the proceeds to the debt secured. If, however, it is agreed or understood that the amounts collected from the collaterals are to be applied in payment of the debt as they are received, such application takes the balance of the debt out of statute of limitations. "In order
'Citing Harper v. Fairley, 53 N. Y. 442; Smith v. Ryan, 66 N. Y. 352, 23 Am. Rep. 60; Brown v. Latham, 58 N. H. 30, 24 Am. Rep. 568.
2 Wolford v. Cook, 71 Minn. 77, 78, 73 N. W. Rep, 706, per Mitchell, J.
See, also, Porter v. Blood, 5 Pick. (Mass.) 54; Roscoe v. Hale, 7 Gray 274; Brown v. Latham, 58 N. H. 30, 24 Am. Rep. 568.
3 § 665, post.
that part payment of a debt shall lead to the inference that it is at that time an acknowledgment of the debt which revives the original promise of payment, it is not necessary that such payment should be made by the debtor personally. It is sufficient that it be made by his direction and authority, and it takes effect from the time when it is thus made. Where a debtor deposits with his creditor notes, accounts, etc., against third persons, not in satisfaction of his debt, but as collateral security therefor, to be applied in payment of the debt as the same may be collected, if the creditor acts in good faith and with reasonable expedition when he realizes thereon, his collections are to be regarded as payment by the principal as of the date and at the time when they are received.""
III. Redemption in Equity and at Law.
§ 552. In general.-When personal property is conveyed as security by way of mortgage, the legal title passes to the creditor, and his title becomes absolute at law upon breach of the condition. The debtor has no legal right to redeem, and it is only in equity that he can be relieved from the forfeiture and allowed to redeem. He has no legal right to redeem unless such a right be given by statute. But in case of a pledge, as has already been noticed, the pledgor does not part with the general title, but only with the possession and a special property. Upon default the debtor still retains the general title. The property is not conveyed upon a condition that the conveyance shall be void upon performance of the condition. There is no conveyance of the thing pledged, and no condition upon the breach of which the property becomes absolute in the creditor. Therefore the debtor has a legal right to re
1 Buffinton v. Chase, 152 Mass. 534, 538, 25 N. E. Rep. 977, per Devens, J., citing Porter v. Blood, 5 Pick. (Mass.) 54; Brown v. Tyler, 8 Gray (Mass.) 135; Whipple v. Blackington, JONES PLEDGES-38
97 Mass. 476; Hancock v. Franklin Ins. Co., 114 Mass. 155; Butler v. Price, 115 Mass. 578; Haven v. Hathaway, 20 Me. 345.
2 Jones on Chattel Mortgages, § 683.
deem, although he has not paid the debt secured at its maturity, or otherwise performed the conditions of his contract. His assignee in bankruptcy or for the benefit of creditors, may likewise redeem.' Upon his decease his administrator may redeem."
§ 553. A right of redemption attaches to every pledge. This right is a part of the contract, whether it be express or implied; and the parties can make no valid agreement that there shall be no redemption after default. "Once a mort
gage always a mortgage," is one of the most important maxims in the law of mortgages. With a change of terms it is equally applicable in the law of pledges. "The right of redemption attaches equally to both, and it is as difficult to transmute the one as the other into a sale, by the operation of the original contract. Though anciently at Rome, the creditor and debtor were permitted, by the lex commissoria, to make an agreement at the date of the pledge whereby it would, on a prescribed contingency, become the absolute property of the pawnee; such a power was not indulged, even at Rome, since the days
'Durfee v. Harper, 22 Mont. 354, 56 should pass to the creditor without Pac. Rep. 582. sale or appraisement, or that the
2 Chambers v. Kunzman (N. J. Ch.), debtor should forfeit his right of re45 Atl. Rep. 599.
3 Jones on Mortgages, §§ 7, 340; Clark v. Henry, 2 Cow. (N. Y.) 324; Hughes v. Johnson, 38 Ark. 285; Hart v. Burton, 7 J. J. Marsh. (Ky.) 322; Baldwin v. Bradley, 69 Ill. 32, 36; Peugh v. Davis, 96 U. S. 332.
"By the early Roman law, the debtor and creditor might agree that if the debtor did not pay the debt within a time specified, the thing pledged should be forfeited and become the absolute property of the creditor. But a law of Constantine prohibited such contracts, on the ground that they were unjust and oppressive to debtors; and declared that every contract should be null and void
which provided that the thing pledged
demption if he failed to pay at the proper time. Cod. lib. 8, tit. 35, 1, 3. This law of Constantine prohibiting such contracts, has been imported into the law of France (Poth. Nantissement, 18), and into the modern law of Continental Europe. The creditor can not stipulate that if he is not paid at the time appointed, the thing pledged shall become his own property, for such an agreement would be contra bonos mores; for the pledge is given to the creditor only as a security for the debt, and not to enable him to profit by the indigence of his debtor. Domat, lib. 3, tit. 1, §§ 3, 11;" Folkard's Law of Pawnbrokers, p. 11, n. f.
of Constantine, who abolished the law by which it had been sanctioned. Every agreement for preventing redemption of pawns is proscribed by the common law as emphatically as are similar agreements in mortgages of real estate." Therefore, if in a written or verbal contract of pledge it is stipulated that the property shall be absolutely the property of the pledgee, if the debt be not paid at a time stipulated, the right to redeem exists, notwithstanding the agreement of the parties. The law recognizes no agreement to prevent a redemption of the pledge. Any contract which is a pledge in the beginning continues a pledge until the debt is paid or the right of redemption is foreclosed. The parties may, by a subsequent agreement for a valid consideration, release the right of redemption; but they can not in the original contract agree that no right of redemption shall attach to it. Thus, a stipulation made by a mortgagee in the assignment of a mortgage as collateral security, that he shall forfeit all interest in it if he fail to pay his debt at maturity, does not cut off his right to redeem it afterward."
§ 554. An agreement by a pledgor that the property pledged shall become the pledgee's absolutely upon his failure to pay the debt at the time specified, will not be enforced; but in a suit by the pledgee to recover the principal debt he will be held to account for the proceeds of the property pledged, if this has been sold. Moreover, the pledgor, upon a tender of the full amount of the debt, may, in replevin, recover the thing pledged, or may recover its value in action of trover; or in exceptional cases may maintain bill in equity to redeem." A creditor holding notes of third persons as collateral
1 Hart v. Burton, 7 J. J. Marsh. (Ky.) 322, 323, per Robertson, C. J. And see Wadsworth v. Thompson, 8 Ill. 423, 427; Marshal v. Williams, 2 Hayw. (N. C.) 405; Luckett v. Townsend, 3 Tex. 119, 49 Am. Dec. 723; Hughes v. Johnson, 38 Ark. 285.
Hughes v. Johnson, 38 Ark. 285.
Kingsbury v. Phelps, Wright (Ohio), 370; Clark v. Henry, 2 Cow. (N. Y.) 324; Vickers v. Battershall, 84 Hun (N. Y.) 496, 32 N. Y. Supp. 314, 65 N. Y. St. Rep. 470; Ritchie v. McMullen, 79 Fed. Rep. 522, 168 U. S. 710.
Stoker v. Cogswell, 25 How. Pr. (N. Y.) 267.
security must account for them or their proceeds, although his debtor has agreed with him, that if the debt be not paid at a specified time, the collateral notes shall become his absolutely. If the creditor in such case brings suit upon the principal debt, recover judgment and collect it in full, and, pending the suit or afterwards, he sells the collateral notes, and fails to account for their proceeds to the debtor, the latter may recover the same of the creditor. "Courts of law as well as of equity very frequently refuse to carry out the express agreements of parties where the result would be gross injustice to one, without any corresponding loss to the other, calling for such injustice. Especially should this be the case where an agreement made between mortgagor and mortgagee, or borrower and lender, is sought to be enforced or interposed as a defense. The law should and does scrutinize closely all such agreements, and refuses to enforce them, especially where, as in this case, to do so would be both unjust and unconscionable."
§ 555. The parties may at a time subsequent to the pledge agree that the creditor shall take the pledge in satisfaction of the debt, and their contract to this effect, if clearly proved, will be enforced. They may also agree that the creditor may sell the property pledged at a stipulated price, or may himself take the property at that price and credit the pledgor with the amount. But to prevent a redemption there must be clear and satisfactory proof not only of the contract itself, but of the creditor's election to take the property at the price agreed upon, either by his giving personal notice of such election, or by his crediting the amount upon his books. A mere resolution in the creditor's own mind to take the opportunity is not sufficient. The appropriation must be such that the debtor could have availed himself of it."
Such an arrangement, moreover, will not be sustained if the creditor has made any fraudulent or oppressive use of his position and power over the debtor.
'Dorrill v. Eaton, 35 Mich. 302.
2 Beatty v. Sylvester, 3 Nev. 228.