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Where the purchaser at a sale of stock never paid for it, and soon after transferred it to the pledgee, but both the pledgee and the purchaser testified that there was no previous understanding between them as to making such transfer, it was held that after a lapse of four years the pledgor should not be allowed to redeem.'

Though a pledgor who accepts the benefits of an irregular sale presumptively ratifies it, yet if he acted in ignorance of the fact that the pledgee himself was the purchaser, he may within a reasonable time after discovering such fact, disaffirm it.2

§ 638. The pledgor may, however, elect to treat such sale as valid;3 and such election would be inferred from his acceptance, with full knowledge of the facts, of the proceeds of such sale, to be applied as a credit on the indebtedness for which the pledge was made. The sale is also valid when the pledgee has purchased with the consent of the pledgor; and such assent may be presumed where the facts are notorious and no dissent is shown. A promise by the pledgor made after the sale with full knowledge of the facts to pay a deficiency due to the pledgee is also a waiver of any irregularity in the sale."

Even under a statute which provides that "a pledgee or pledge-holder can not purchase the property pledged, except by direct dealing with the pledgor," it is held that a sale made by a pledgee in contravention of the statute may be ratified by the pledgor. "The section was undoubtedly enacted for the protection of the pledgor-to the end that no unfair advantage be taken of him. It prohibits a pledgee or pledge-holder from purchasing the property pledged, 'except by direct dealing

1 Earle v. Grant, 14 R. I. 228.

2 Sharpe v. National Bank, 87 Ala. 644, 7 So. Rep. 106; Hill v. Finigan, 77 Cal. 267, 19 Pac. Rep. 494.

3 Stokes v. Frazier, 72 Ill. 428, per Walker, C. J.; Chouteau v. Allen, 70 Mo. 290, 335; per Sherwood, C. J.; Appleton v. Turnbull, 84 Me. 72, 24 Atl. Rep. 592.

See, however, Fitzgerald v. Blocher, 32 Ark. 742, 29 Am. Rep. 3.

* Carroll v. Mullanphy Sav. Bank, 8 Mo. App. 249; Hamilton v. State Bank, 22 Iowa 306.

Child v. Hugg, 41 Cal. 512, 519. 6 California Civ. Code, § 3010. 'Child v. Hugg, 41 Cal. 512, 519.

with the pledgor.' By such dealing with the pledgor, the pledgee may purchase it. Why should it be held that by this is meant that the pledgee or pledge-holder can only purchase by taking a direct transfer from the pledgor? The statute does not say so, and the reason of the prohibition suggests the contrary. If the pledgor chooses to do so, we see no reason why he may not consent that the pledgee may buy at the public sale. In some cases it may be to his interest that this be done. Such consent may be given either at the making of the pledge or at any subsequent time without changing 'the form of the original contract,' and without consideration.""

§ 639. A pledgee who has purchased the collateral is not estopped to show that the sale was made for the purpose of valuing the security by agreement between the pledgee and a person liable upon another debt secured by the same collateral. Thus, a pledgee in an action upon the principal debt which the pledgor claims has been paid by a sale of bonds held as collateral, may show by parol evidence that the bonds were also held as collateral for other debts, and that a party liable upon another debt so secured became bankrupt, and that the plaintiff made an arrangement with the assignee in bankruptcy of such party, by which the bonds were sold at public auction, the creditor agreeing to bid a certain sum for them, and to prove the balance of the claim against the bankrupt's estate; that there being no higher bid the pledgee kept the bonds and . proved the remainder of the claim. The pledgee may show the real nature of the transaction, and that the sale was merely for the purpose of agreeing with the assignee upon the value of the bonds, so that proof could be made against the bankrupt's estate; that in short there was no actual sale, and that the bonds never left the hands of the pledgee."

§ 639a. The purchaser of the property pledged at a sale by the pledgee pursuant to the terms of the pledge acquires the 2 Globe National Bank v. Ingalls, 126 Mass. 209.

'Hill v. Finigan, 77 Cal. 267, 19 Pac. Rep. 494, 10 Pacific Coast L. J. 576, 578.

entire interest, so that the pledgor is not entitled, as against the purchaser, to a surplus realized by him in disposing of the property for a sum greater than the amount for which the pledge was made. The pledgor can only recover a surplus of the pledgee, and can recover of him only when he has received a sum in excess of the debt secured by the pledge.'

VI. Sales under Proceedings in Equity.

§ 640. The earliest common law rule in regard to a sale of the property upon default was that before the pledge could be sold, the pledgee was required to bring a suit in equity and obtain authority to sell by judicial proceeding. Such was the rule of the civil law; and such also is the rule under the Civil Code of Louisiana, where even a power to the pledgee to sell the object pledged is a nullity even as between the parties. There can be no sale except by virtue of a judicial order.*

A pledgee may properly enforce his lien by a bill in equity, especially when the contract of pledge neither provides for the time of redemption nor the manner and time of sale, and his rights and powers are in any manner questioned or denied." This remedy is more complete than the common law right to sell the pledge, after notice. The pledgee thereby relieves himself from ulterior questions as to the propriety of his course, and the court can act with due regard for the rights of all parties concerned. In equity, while the security is enforced

1 McDougall v. Hazelton TripodBoiler Co., 88 Fed. Rep. 217, 31 C. C. A. 487.

22 Kent's Com. 582; 2 Story's Eq., § 1008; Ogden v. Lathrop, 1 Sweeny (N. Y.) 643, per Fithian, J.

3 Hart v. Ten Eyck, 2 Johns. Ch. (N. Y.) 62, 100, per Chancellor Kent.

R. Civ. Code, 1870, art. 3165; Brother v. Saul, 11 La. Ann. 223.

5 Boynton v. Pay row, 67 Me. 587; Briggs v. Oliver, 68 N. Y. 336, 339, per Andrews, J.; Vaupell v. Woodward, 2 Sandf. Ch. (N. Y.) 143; Sitgreaves v. Farmers' & Mechanics' JONES PLEDGES-44

Bank, 49 Pa. St. 359; Cushman v. Hayes, 46 Ill. 145; Stokes v. Frazier, 72 Ill. 428; Robinson v. Hurley, 11 Iowa 410, 79 Am. Dec. 497; Arendale v. Morgan, 5 Sneed (Tenn.) 703.

In Iowa it is provided by statute that there may be a foreclosure in equity. See § 620a.

In Montana foreclosure may be by judicial sale. 1 Codes 1895, Civ. Code, § 3915.

Porter v. Frazer, 6 Misc. (N. Y.) 553, 560, 57 N. Y. St. Rep. 516, 27 N. Y. Supp. 517.

in behalf of the creditor, others who are interested in it are fully protected.'

It may become necessary or desirable to proceed in equity to enforce a pledge, for the reason that the pledgor can not be found so that a personal demand can be made upon him for payment, or so that a personal notice of the time and place of sale of the pledge can be served upon him.'

§ 641. There is jurisdiction in equity to enforce a pledge in case an account must be stated. Even where jurisdiction in equity is limited to cases where at law there is no full, complete, and adequate remedy, a court of equity has jurisdiction to enforce a pledge of stock given as security for claims and liabilities then existing or afterwards to be incurred, when these claims and liabilities are alleged to consist of a large number of items of money loaned, notes discounted and indorsements made for accommodation. Such a case gives rise to a matter of account; and account is a matter of equity jurisdiction. There is also jurisdiction in equity where there is a fiduciary relation between the parties in the nature of a trust, trust being a matter of equity jurisdiction.*

But if the amount due rests in simple computation, and there are no other liens or incumbrances, there is no necessity for resort to a court of equity, as the remedy by notice and sale of the property is adequate; and a court of equity would probably withhold its aid in such case. Where there is a pledge for a definite and ascertained sum there is no occasion for an account before the sale; and the mere fact that after the sale there may be some possibility of questions of account aris

'Homer v. Savings Bank of New Haven, 7 Conn. 478; Halle v. National Park Bank, 140 Ill. 413, 29 N. E. Rep. 727.

Indiana & Ill. Cent. R. Co. v. McKernan, 24 Ind. 62; Stearns v. Marsh, 4 Denio (N. Y.) 227, 47 Am. Dec. 248.


474; Durant v. Einstein, 5 Robt. (N. Y.) 423.

4 San Pedro Lumber Co. v. Reynolds, 111 Cal. 588, 596, 44 Pac. Rep. 309; Thornton v. Thornton, 31 Gratt. (Va.) 212; Taylor v. Tompkins, 2 Heisk. (Tenn.) 89; Evans v. Goodwin, 132 Pa. St. 136, 19 Atl. Rep. 49. Dupuy v. Gibson, 36 Ill. 197.

5 Conyngham's Appeal, 57 Pa. St.

ing, such as to require the aid of a court to adjust, does not give a court of equity jurisdiction to decree a sale.1

§ 642. A pledge of shares of a land association was foreclosed by a decree of sale in a case arising in Massachusetts where the jurisdiction in equity was at the time of limited extent. Equitable relief was also required in this case, because the certificates provided that a pledge of the shares might be made by the general owner, by an assignment in writing approved by the trustees and recorded in the books, and the shares in pledge still stood in the name of the general owner on the books of the trustees, and could be transferred only by them; and such a transfer, or some instrument of conveyance, was necessary to give the pledgee a clear title to the shares. The deed of trust, moreover, provided that all transfers should be subject to the approval of the trustees, although the owner might sell to an assignee not approved by the trustees, if they should not within a limited time offer to take the stock at the price offered, for the common benefit of the association. The court declared that there was nothing in the facts of the case to prevent the application of the general rule that the pledgee may sell the property after default; that the entire right of the pledgor in the certificate was pledged, and that the ordinary right of foreclosure implied in a pledge of stock or personal property was included. It was further declared that the transfer to be made under the decree of sale, whether it be to the pledgee himself or to a purchaser, must be with the approval of the trustees, or after refusal by them to purchase, as provided in the declaration of trust; that if the certificate be sold, it should be subject to that condition, and if transferred to the pledgee, after the amount at which it should be taken is ascertained, the trustee should have an opportunity to take it at that sum."

1 Thames Iron Works Co. v. Patent Merchants' Nat. Bank v. ThompDerrick Co., 1 Johns. & Hem. 93, 99, son, 133 Mass. 482. per Wood, V. C.

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