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make good the deficiency, for there was evidence that the latter had distinctly refused to preserve his interest by any separate bid of his own at the sale. On the other hand, appellant having taken the risk was entitled to the profit on the resale. The burden of showing the circumstances that entitled him to buy, clear of any trust for the pledgor, being on the appellant, the case must go to the jury on that point.'
§ 660. A pledgee's interest by foreclosure of the mortgage becomes a mortgagee's interest. The pledgee becomes a mortgagee. The land in his hands is affected by a trust, to convert it into money, and pay over any balance of the proceeds remaining after payment of the debt due from his debtor to him, or, upon the debtor's payment of the debt, to release and quitclaim the land to him. But in such case, the debtor must bring his bill to redeem within twenty years from the time that possession was obtained, no interest having been paid meanwhile; this being the period which equity has adopted, beyond which a mortgagor will not be admitted to redeem without special cause.
If a pledgee holding a mortgage as collateral security forecloses it by a suit in equity, to which he makes the pledgor a party, and the latter takes no appeal, and claims no defense, he will not afterwards be allowed any relief as regards the mortgage or the mortgage note, on the ground that he had suffered loss through the negligence of the pledgee in not sooner enforcing the security.*
§ 661. A pledge of any chose in action other than stocks and bonds should be enforced by collection, rather than by sale. Thus, a pledge of a contract for building a road should be enforced by collecting the amount due upon the contract.
1 Plucker v. Teller, 174 Pa. St. 529, v. Barker, 58 Neb. 402, 78 N. W. Rep. 534, 34 Atl. Rep. 208. 730; Maxwell v. Home F. Ins Co., 57 Neb. 207, 77 N. W. Rep. 681. 3 Jones on Mortgages, § 1144. Wells v. Wells, 53 Vt. 1. 5 Gay v. Moss, 34 Cal. 125.
2 Stevens v. Dedham Inst. for Savings, 129 Mass. 547, per Soule, J.; Brown v. Tyler, 8 Gray (Mass.) 135, 69 Am. Dec. 239; Montague v. Boston & Albany R. Co., 124 Mass. 242; Ross
§ 662. A pledge of a savings-bank book, and of the deposit represented by it, would not ordinarily be sold under proceedings in equity; but the court, after the failure of the administrator to pay the debt, with interest and costs, within a time designated, would appoint an officer to receive the deposit, and make proper disposition of it.1 And so a pledgee of any chose in action, such as a contract for the payment of a sum of money, is ordinarily bound to collect the amount due and reimburse himself out of the proceeds.2
§ 663. A creditor may pursue his remedies simultaneously or successively upon the principal debt and upon the collateral obligation. If the collateral note be secured by mortgage, the creditor may have his remedy upon this, also, at the same time with the personal remedies. And in like manner he may proceed to enforce any other collateral security or lien. Thus, a mechanic or contractor, having a lien under the mechanic's lien. law, and also a collateral note of a third person, to secure him for work done, may simultaneously enforce the principal debt, the collateral note, and the statutory lien by legal proceedings and suits adapted to the respective remedies, and may recover separate judgments in each; but there can be but one satisfaction.9
A creditor holding collateral security may enforce it by suit, although he has a suit pending against the principal debtor, who claims that the debt has been paid. The collateral security is put into the hands of the creditor, to enable him to make his claim out of it. If, before he has done so, the principal debtor discharges the debt, then the collateral must be surrendered, or any suit pending upon it must be placed within the control of the debtor. Nothing short of satisfaction
1 Boynton v. Payrow, 67 Me. 587. 2 Gay v. Moss, 34 Cal. 125.
3 Gambling v. Haight, 59 N. Y. 354; and see Jervis v. Smith, 1 Sheldon (N. Y.) 189, 195; Plant's Manufacturing Co. v. Falvey, 20 Wis. 200. 'Chambersburg Ins. Co. v. Smith,
11 Pa. St. 120; Olvey v. Jackson, 106 Ind. 286, 4 N. E. Rep. 149. Unless there be an agreement to use every legal means to collect the debt before resorting to the collateral. Barr v. Kane, 32 Ind. 416.
of the original debt will prevent a recovery by the creditor upon the collateral;' and even after such satisfaction, if this occur after the commencement of suit upon the collateral, the pledgor may continue the suit and obtain judgment for his own benefit. But after the principal debt has been satisfied, the pledgee can not continue the suit against the maker of the collateral note against the will of the pledgor, or after the maker of the collateral note has paid it to the pledgor; though the pledgee would be entitled to be paid the costs of suit commenced upon the collateral note.*
If one makes two promissory notes amounting to nine hundred dollars, and a third note to the same payee of the same date and payable at the same time as the other notes, but containing a statement that the maker had deposited therewith as collateral security certain shares of stock with authority to the payee to sell the stock on the non-payment of the note, the payee may maintain an action on the first two notes .and at the same time an action on the third note, and may take judgment in both actions for the full amounts of the notes, though there can be but one satisfaction of the debt of nine hundred dollars and interest.3
II. Suit upon Collateral Paper.
§ 664. No demand upon the pledgor is necessary before bringing suit to collect negotiable paper pledged as collateral security, when the debt to secure which the pledge was given is payable at a time certain. If the payee of a promissory note deliver it before maturity to a creditor as collateral security, in such a form that the pledgee has the legal title to it,-as where it is a note payable to bearer, or if payable to order is regularly indorsed,-the creditor may, upon its ma
'Lazier v. Nevin, 3 W. Va. 622; Savage v. Stevens, 128 Mass. 254; Smith v. Strout, 63 Me. 205. Vanuxem v. Burr, 151 Mass. 386, 24 N. E. Rep. 773.
2 Key v. Fielding, 32 Ark. 56.
3 Burnham v. Windram, 164 Mass. 313, 41 N. E. Rep. 305.
White v. Phelps, 14 Minn. 27, 100 Am. Dec. 190.
turity, maintain an action against the maker without previously demanding from the pledgor repayment of the loan. The bearer or indorsee of the note is entitled to collect it.' It does not matter that the debt for which the note is held as collateral is not due when suit is brought upon the collateral note. Having the legal title, the holder of the collateral note may maintain an action upon it when it becomes due, without averring or showing that the indebtedness secured by the note has not been paid. He is entitled to collect the collateral note when it falls due. So long as the creditor holds the collateral note in pledge he has the right to collect it on its maturity, and the creditor is not precluded from so collecting it by a receipt for the collateral note given to the debtor, whereby the creditor agrees to return the note upon the payment of the debt for which he took it as security, and to use all legal means to collect it if so directed by his debtor. The creditor in such case need not wait for a direction from the debtor to collect. He may collect the full amount of the note or bond pledged, and not merely the amount of the debt secured, subject, however, to the liability to account to the debtor for any surplus. Although the principal debt be paid pending a suit upon the collaterals, such suit may properly be continued to judgment by the creditor or in his name. If he afterwards collects such collaterals he will hold the amount so collected as trustee for the benefit of the debtor."
A bank which has discounted a note for a depositor, receiving as collateral the notes of other persons, may enforce the
'Paine v. Furnas, 117 Mass. 290; Lindsay v. Chase, 104 Mass. 253; Nelson v. Edwards, 40 Barb. (N. Y.) 279, 5 Bosw. 178; Moody v. Andrews, 39 N. Y. Super. Ct. 302; Louisiana State Bank v. Gaiennie, 21 La. Ann. 555; Dix v. Tully, 14 La. Ann. 456; Ducasse v McKenna, 28 La. Ann. 419; Third Nat. Bank v. Harrison, 10 Fed. Rep. 243; Hilton v. Waring, 7 Wis. 492.
2 Jones v. Hawkins, 17 Ind. 550. 3 McCarty v. Clark, 10 Iowa 588.
'Farwell v. Importers' & Traders' Nat. Bank, 47 N. Y. Super. Ct. 409, 90 N. Y. 483; Wheeler v. Newbould, 16 N. Y. 392; Nelson v. Eaton, 26 N. Y. 410; Comstock v. Smith, 23 Me. 202.
Bay v. Gunn, 1 Denio (N. Y.) 108. 6 Rice v. Southern Penn. Iron & R. Co., 9 Phila. 294; Hilton v. Waring, 7 Wis. 492.
7 Houser v. Houser, 43 Ga. 415; and see Overstreetv. Nunn, 36 Ala. 666.
latter notes, although the bank has had on deposit moneys belonging to the debtor, and has made no effort to collect the demand from such deposits.'
§ 665. The pledgee may enforce payment of collateral paper upon its maturity, although the principal debt has not then matured. Yet while he is entitled to collect a collateral note upon its maturity, he has no right to apply the proceeds to the payment of his loan until after default in the payment of that. The money when received is a substitute for the note, and is to be held upon the same terms, and subject to the same rights and duties as the note. If the debt secured is payable at a definite time, no application of the proceeds of a collateral note can be made until that time arrives. If the debt secured is payable upon demand, a demand upon the debtor must be made before applying the proceeds of a collateral note.
A loan upon call was obtained by a broker from a bank upon a pledge of several promissory notes for an amount exceeding the amount of the loan. One of these notes had been delivered to the broker by the maker of it, to be sold in the market, and nothing was ever paid upon it to the maker. The maker paid the note at maturity to the bank, and gave notice to it of the circumstances under which the note had been given, and of the fact that he had never received any of the proceeds of the note. He also claimed of the bank, before it had called upon the pledgor to redeem, and gained any right of appropriation of the collections made, any surplus that might remain from the proceeds of the notes pledged after payment of the loan made thereon. The bank collected all the notes, and had a surplus above the amount of the loan. In an action by the maker against the bank it was held that he was entitled to recover so much of the proceeds of his note as was not, after the
Third Nat. Bank v. Harrison, 3 McCrary 316; Bank v. Mann, 94 Tenn. 17, 24, 27 S. W. Rep. 1015; Logan v. Cassell, 88 Pa. St. 288, 32 Am. Rep. 453.
Nat. Bank, 47 N. Y. Superior Ct. 409; Garlick v. James, 12 Johns. (N. Y.) 146, 148, 7 Am. Dec. 294; Blydenburgh v. Thayer, 3 Keyes (N. Y.) 293. 3 Lewis v. Varnum, 12 Abb. Pr. (N.
2 Farwell v. Importers' & Traders' Y.) 305; Wilson v. Little, 2 N. Y. 443.