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to recover a balance of the debt secured; but ground only for charging the debtor in such suit with the full value of the property pledged.'

A pledgee of a mortgage who sells the mortgaged property for a sum less than the mortgage debt, and himself becomes the purchaser at the sale, and immediately resells it for a greater sum than the mortgage debt, is bound to account to the pledgor, not for the sum at which he purchased nor for the price at which he sold, but for the amount of the mortgage debt. That is the extent of the pledgor's interest in the mortgage.


Where one pledged a second mortgage as security for a debt, the holder of the first mortgage afterwards brought a suit to foreclose his mortgage, and a decree was entered foreclosing both mortgages, the land being bought by a stranger. Sometime after this sale, the pledgee bought the land from the purchaser, the pledgor's attorney negotiating the sale and receiving a bonus. The pledgee afterwards sold the land at a profit. It was held that the pledgor could not recover from the pledgee out of such profits the amount of the note pledged. The purchase by the pledgee was made after his relations with the pledgor were wholly closed, and was an entirely independent transaction.3

The pledgor may lawfully stipulate that the pledgee may purchase at the sale of the property pledged. This stipulation may be made at the time of the pledge or afterwards.*

§ 635a. Even in case the power of sale provides that the pledgee may purchase at the sale, this will be held invalid if the sale was not advertised, and was conducted without regard to the pledgor's interest. A bank held $40,000 in notes, part of which were secured, as collateral to secure other notes under an agreement which provided for a public or private sale

1 Duden v. Waitzfelder, 16 Hun (N. Y.) 337.

2 Richardson v. Mann, 30 La. Ann. 1060.

3 Raben v. First Nat. Bank, 37 Neb. 364, 55 N. W. Rep. 1055.

Appleton v. Turnbull, 84 Me. 72, 24 Atl. Rep. 592.

of such notes, and that the bank could purchase such notes in its own name. The bank turned the collection of such collateral over to an agent, who published notices of a public sale for four days prior to the sale which did not show the authority to make the sale, that it was made by the bank, to whom the notes belonged, or the terms of the sale. A similar notice, but stating that the sale was made by the bank, was given to the pledgor. The weather being inclement on the day of sale, this was held inside the storm doors of the courthouse, and out of public view, instead of at the door thereof, as advertised. But few persons were present at the sale, and the bank purchased the collateral for $8,825, which was an inadequate consideration. It was held that the sale was invalid for want of proper notice, and moreover that it should be set aside, because the bank was under the circumstances bound to continue the sale.' Robinson, J., for the court said: "Having power, under the exercise of a sound discretion, it was the clear duty of the bank to adjourn the sale in order to prevent a sacrifice of the securities, and obtain a fair price therefor." The trust relation occupied by the bank towards the pledgor, made it incumbent upon the former to obtain the best possible price, and to use every reasonable means to obtain the full value of the pledged property. The condition of the weather and the absence of any censiderable number of bidders rendered an adjournment necessary in order to prevent a sacrifice of the securities. In view of the character of the securities sold, consisting of numerous notes secured by sundry deeds of trust on different lots of land, we do not think the bank exercised a proper discretion in selling on four days' notice. The notice given was wholly inadequate to enable prospective purchasers to investigate into the value of the securities offered. In the sale of the collateral in question, the amount to be realized therefrom is governed, to a great extent at least, by the value of the property embraced in the deeds of trust securing the same. Consequently, time and opportunity should have

1 Laclede Nat. Bank v. Richardson, 2 Jones Mortgages, § 1873. 156 Mo. 270, 56 S. W. Rep. 1117.

been given for an examination of the notes and property covered by deeds of trust securing the same. It was expecting too much within the four days given, to examine all these matters, and it certainly can not be claimed that a prudent person would have sold similar securities on such short notice, owned absolutely by himself.

§ 636. A general partner in a firm holding property in pledge is incapacitated from purchasing at a sale made by the firm equally with the firm itself, because such a partner is one of the persons who have a duty to perform in the conduct of the sale which is inconsistent with the character of a purchaser. But a special partner is not incapacitated by his relations with the firm from becoming a purchaser; for he has no share in the management of the affairs of the firm, and is therefore not one of the persons charged with the duty of selling the property at the best price that can be reasonably obtained.'

§ 637. A pledgee who purchases the pledge at a public sale is not chargeable with a conversion of it. Such a sale is ineffectual to change the title to the property which remains vested in the pledgor as it was before the sale; but that is the only result. The sale is not void but voidable at the election of the defendant. The debtor is at liberty to ratify the sale, and should he do so it would be valid for all purposes. The ratification would make it lawful and relieve it from any imputation of being tortious as to the debtor. The pledgee's title to the property would thereby become perfect, and the debtor would be entitled to credit upon his debt for the net proceeds of the sale. But if the debtor does not do this, but elects to treat the purchase by the pledgee as illegal, the sale thereupon. is void, and the parties are remitted to their rights as they

2 Bryan v. Baldwin, 7 Lans. (N. Y.) 174, affirmed, 52 N. Y. 232; Canfield v. Minneapolis Agricultural & Mechanical Asso., 14 Fed. Rep. 801;

'Lewis v. Graham, 4 Abb. Pr. Minneapolis Asso. v. Canfield, 121 U. (N. Y.) 106. S. 295, 7 S. C. Rep. 887, modifying decree; Leighton v. Burkham, 7 Ohio C. C. 487; Glidden v. Mechanics' Nat. Bank, 53 Ohio St. 588, 600, 42 N. E. Rep. 995.

existed before any sale was made or attempted. The debtor is liable upon his debt, and the creditor still holds the property in pledge.' The right to avoid such a sale, as against a subsequent purchaser for value, is lost if it is not exercised within a reasonable time."

In a suit by a pledgor to recover from the pledgee damages caused by a wrongful sale of the property pledged, the doctrine that a pledgor can avoid a sale of the pledge for the reason that the pledgee was directly or indirectly the purchaser at such sale, only by exercising the right to avoid it within a reasonable time, has no application. This doctrine applies to cases in which the pledgor, seeks to avoid such a sale and assert title to the property in the hands of a third person who was a purchaser for value, without notice or knowledge of any defect in the exercise by the pledgee of his power of sale.

§ 637a. The reasons for this rule against purchases by the pledgee are clearly stated by Mr. Justice Williams, delivering the opinion of the supreme court of Ohio, in a recent case. "The rule results from the nature of the contract between the parties. Under a contract of pledge, the right of the pledgee to retain possession of the property continues until the debt or engagement for the security of which it was pledged has been discharged by payment or performance, or a tender, and demand for its return; and his obligation is to keep the article pledged, with due care, and restore it to the pledgor upon the performance of his agreement. On the other hand, in the absence of any stipulation to the contrary, it is the duty of the debtor to seek the creditor at the proper place and pay the debt, or tender its payment, before he is entitled to receive back the pledge. These obligations of the parties are recipro

1 Per Grover, J., in Bryan v. Baldwin, 52 N. Y. 232, affirming 7 Lans. 174.

2 Learned v. Foster, 117 Mass. 365; Lord v. Hartford, 175 Mass. 320, 56 N. E. Rep. 609; Hayward v. National Bank, 96 U. S. 611.

3 Lord v. Hartford, 175 Mass. 320, 56 N. E. Rep. 609; Silva v. Turner, 166 Mass. 407, 44 N. E. Rep. 532; Rogers v. Barnes, 169 Mass. 179, 183, 47 N. E. Rep. 602.

cal, and neither can require performance by the other without himself being able and ready to perform on his part; so that, the possession of the pledgee being lawful as long as he retains the actual control and custody of the pledge, with the ability to perform his obligation by restoring it, he is not in default, until a demand, accompanied by a tender of the debt is made. If he then refuse or fail to restore the pledge, he may be charged with its value. The action for its recovery, though treated as one for conversion, is in reality founded on the breach of the contract, and hence, the creditor is entitled to recoup his debt. Until the breach occurs, no right of action accrues in favor of the pledgor; suffering the debt to run unsatisfied after maturity, does not destroy the pledgee's lien, or the pledgor's right to redeem.""

§ 637b. But as against a pledgee who purchased the property pledged, a considerable delay in redeeming the pledge will be regarded as an affirmance of the sale, the pledgor having knowledge of the purchase by the pledgee. The cases generally hold that the pledgor must disaffirm the sale by a tender within a reasonable time after he has knowledge that the pledgee himself was the purchaser.2

What is such a reasonable time may depend somewhat upon the circumstances of the case. Where the property pledged was shares of stock, a delay of two months by the pledgor after being informed of the purchase of the stock by the pledgee, and until the stock had risen to a very high price was held to warrant an instruction to the jury as a matter of law that the delay was unreasonable."

1 Glidden v. Mechanics' Nat. Bank, 53 Ohio St. 588, 600, 42 N. E. Rep. 995; citing Whelan v. Kinsley, 26 Ohio St. 131; Jones on Pledges, §§ 543, 566,


'Hyams v. Bamberger, 10 Utah 3, 36 Pac. Rep. 202; Sharpe v. National Bank, 87 Ala. 644, 7 So. Rep. 106; Greer v. Lafayette County Bank, 128 Mo. 559, 30 S. W. Rep. 319; Bryan v.

Baldwin, 52 N. Y. 232, 7 Lans. 174;
Hamilton v. Schaack, 16 N. Y. Weekly
Dig. 423; First Nat. Bank v. Rush, 85
Fed. Rep. 539, 29 C. C. App. 333;
Downer v. Whittier, 144 Mass. 448, 11
N. E. Rep. 585; McDowell v. Chicago
Steel Works, 124 Ill. 491, 16 N. E.
Rep. 854.

Hill v. Finigan, 77 Cal. 267, 19 Pac.
Rep. 494.

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