application of the proceeds of the other notes, required to satisfy the loan.' The bank had no right to make an application of the proceeds of this note to the payment of the loan, before a time when a sufficient amount had been collected from the other notes to repay the loan, and therefore it became a quasitrustee for the maker of this note as to proceeds of it.

§ 666. If the collateral note be pledged with the understanding that it is not to be resorted to unless the maker of the principal note fails to pay that at maturity, then a suit upon the collateral note can not be maintained until both notes are due.2

§ 667. But a pledgee is not bound to collect the collateral security upon its maturity, before the maturity of the principal debt, except upon the request of the pledgor, or in pursuance of an express contract to do so. Even where a creditor, receiving as collateral security the note of a third person, promised to use all reasonable means to collect it and account for it, it was held that by the subsequent payment of the principal debt he was absolved from all further obligation to collect the note, and was only bound to return it to the owner.3

A provision in an assignment of a judgment as collateral security, that if the debt secured be not paid at maturity, the creditor might sell the judgment at public sale, does not impose any obligation upon him to take steps for the collection of the judgment, before maturity of the principal debt.*

A pledgee who has taken as security notes secured by the retention of title to personal property, is under no obligation to maintain an action of replevin to recover possession of such property; and if he does so at the request and for the benefit of the pledgor, the pledgee is under no obligation to take charge of the property after its recovery, and advance money

Farwell v. Importers' & Traders' Nat. Bank, 47 N. Y. Superior Ct. 409, 90 N. Y. 483.

'Moore v. Miller, 7 Ore. 486.

Overlock v. Hills, 8 Me. 383.

Bast v. First Nat. Bank, 101 U. S. 93, 19 Am. Law Reg. (N. S.) 306.

for expenses, and to sell it and apply its proceeds to the debt secured.'

§ 668. A pledgee of negotiable bonds is entitled to demand payment of coupons as they fall due, whether this be before or after the maturity of the debt which the bonds were pledged to secure. The bonds and the coupons are together pledged for the payment of the debt. The fact that the debt is not due when the coupons become payable, does not relieve them, any more than the bonds themselves, from the effect of the hypothecation.

One who holds the bonds of a railroad company as collateral security for its debts, is entitled to enforce payment thereof, so long as the debts for which they were pledged remain unpaid.3

§ 669. A pledgee may collect the collateral note in his own name, if it was properly indorsed to him, either specially or in blank. Such indorsement gives him the legal title. If the note be pledged without indorsement, the pledgee acquires the same rights that the assignee of a note not negotiable has; that is, he may bring suit upon it in the name of the payee. An indorsement sufficient to pass the legal title to the note may, however, be made on a separate paper.

The pledgee may sue collateral notes in his own name, although the indorsement to him be in the form, "Pay to A.

1 Bank v. Chattanooga Pulley Co., turers' Bank, 33 Mich. 408; Hilton v. 97 Tenn. 308, 37 S. W. Rep. 8.

2 Warner v. Rising Fawn Iron Co., 3 Woods 514, 523. "To hold otherwise would be to hold that if the bonds themselves fell due before the debt secured by the pledge of the bonds, their hypothecation was without any effect whatever." Per Woods, J.

Waring, 7 Wis. 492; Curtis v. Mohr, 18 Wis. 615; Kinney v. Kruse, 28 Wis. 183; Tarbell v. Sturtevant, 26 Vt. 513; Jones v. Hawkins, 17 Ind. 550; Houser v. Houser, 43 Ga. 415; Morton v. New Orleans & Selma R. Co., 79 Ala. 590, 621; Kavanaugh v. Brodball, 40 Neb. 875, 59 N. W. Rep. 517. 5 Jones v. Witter, 13 Mass. 304; and

Allen v. Dallas & Wichita R. Co., see White v. Phelps, 14 Minn. 27, 33, 3 Woods 316.

'Bowman v. Wood, 15 Mass. 534; Lobdell v. Merchants' & Manufac

100 Am. Dec. 190.

B. (the pledgee) for account of C. D." (the pledgor). Such an indorsement is not inconsistent with the lien of the pledgee and the right of the latter to collect the notes and apply them to the account of the pledgor by discharging the debt they were pledged to secure. The special indorsement expresses no more than the understanding of the parties in every case of a pledge of a note.'

The pledgee can not maintain a suit upon the collateral after the secured debt is paid, except for the benefit of the pledgor.2

Under codes which dispense with the rule requiring the assignee of a chose in action to sue in the name of the assignor, a promissory note pledged by the payee without indorsement may be collected by the pledgee upon default by an action at law in his own name. There is nothing in the nature of such a pledge which indicates an intention to restrict the pledgee to a proceeding in chancery."

§ 670. If the pledgee is not invested with the legal title of the collateral, so as to be entitled to maintain an action upon it in his own name, as where the paper is not negotiable in form, or where it has not been formally indorsed to him, it is his right to maintain a suit in the name of the pledgor or other legal owner of it. The delivery or transfer of the collateral to the pledgee by the legal owner implies authority to use the name of such legal owner, if necessary, for its collection. The pledgee is not entitled, by reason of not having the legal title himself, to maintain a bill in equity to have the collateral sold."

§ 671. The holder of collateral paper may sue and recover upon it of the maker, without regard to any defenses which

'Nelson v. Wellington, 5 Bosw. the pledgee has the right to sue the (N. Y.) 178.

2 Mutual Bank v. Burrell, 60 N. Y. Supp. 522, 29 Misc. Rep. (N. Y.) 322. 3 White v. Phelps, 14 Minn. 27, 100 Am. Dec. 190.

In Louisiana it is well settled that

pledged note in his own name. Bank of Lafayette v. Bruff, 33 La. Ann. 624; Ducasse v. McKenna, 28 La. Ann. 419. 'Whitteker v. Charleston Gas Co., 16 W. Va. 717.

the pledgor has upon the debt for which the paper was pledged as security, unless the maker of the collateral paper is thereby deprived of some equitable defense which he might have against the payee.' The fact that the right of property in the collateral paper has passed back to the payee, by his payment of the debt for which he pledged such paper as security, does not prevent the holder of it from maintaining an action upon it in his own name, so long as the maker remains liable. Whether such holder sue for himself, or as trustee for the payee, is immaterial.

§ 672. If the maker of a collateral note pay it to the pledgor, with knowledge that the payee has transferred it as collateral security, his payment is a nullity as to the pledgee, who may collect it notwithstanding such payment."

§ 673. The pledgee may enforce payment of accommodation paper held by him as collateral security, to the extent of the principal debt for which it was pledged, and the maker has no right to have the collection of such paper enjoined until the creditor holding the same shall first exhaust other securities for the same debt placed with him by his debtor, even though the making of such paper was procured by fraudulent statements. The principle of equity, that where a party has a lien on two funds, out of either of which his debt can be paid, and another has a lien on one only of the funds for his debt, the

Bank of The University v. Tuck, 96 Ga. 456, 23 S. E. Rep. 467; Partridge v. Williams, 72 Ga. 807; Gammon v. Huse, 9 Ill. App. 557; Saylor v. Daniels, 37 Ill. 331, 87 Am. Dec. 250; Farmers' State Bank v. Blevins, 46 Kan. 536, 26 Pac. Rep. 1044; Maitland v. Citizens' Nat. Bank, 40 Md. 540, 17 Am. Rep. 620; St. Paul Nat. Bank v. Cannon, 46 Minn. 95, 48 N. W. Rep. 526; Logan v. Smith, 62 Mo. 455; Crawford v. Spencer, 92 Mo. 498, 4 S. W. Rep. 713; Haas v. Bank of Commerce, 41 Neb. 754, 60 N. W.

Rep. 85; Barmby v. Wolfe, 44 Neb. 77, 62 N. W. Rep. 318; Haydon v. Nicoletti, 18 Nev. 290, 3 Pac. Rep. 473; Logan v. Cassell, 88 Pa. St. 288, 32 Am. Rep. 453; Jackson v. Chemical Nat. Bank (Tex. Civ. App.), 46 S. W. Rep. 295; Union Nat. Bank v. Roberts, 45 Wis. 373.

2 Fennell v. McGowan, 58 Miss. 261. 3 Vanliew v. Second Nat. Bank, 21 Ill. App. 126; Bell v. Bean, 75 Cal. 86, 16 Pac. Rep. 521; Robbins v. Richardson, 2 Bosw. 248.

latter has a right to compel the former to resort to the other fund in the first instance for satisfaction of his debt, is applicable to sureties only. And the maker of such accommodation paper is in no sense a surety. He is a principal debtor on

the note.'

But the maker of the accommodation paper which is the subject of a pledge is not liable upon it beyond the amount of the debt which it was pledged to secure."

If a pledgee forecloses an accommodation note and mortgage, after receiving payment of the debt due him from the pledgor, he will be held as a trustee of the surplus for the benefit of the accommodation mortgagor."

3

When a creditor obtains judgment upon the accommodation note of a third person held as collateral security, the judgment takes the place of the note, and stands as security merely for the principal debt.*

The payee of a promissory note, given as collateral security for his liability as indorser of another note made by the same person, may maintain an action thereon against the maker, although payment of the other note has not been enforced, and it is still outstanding and unpaid."

§ 674. The holder of the collateral paper may recover the full amount due upon it, although this exceed the debt for which it was pledged, unless it is held subject to equitable defenses which the maker may have against his payee. These

1 Prout 3 v. Lomer, 79 Ill. 331; Cronise v. Kellogg, 20 Ill. 11.

2 Fisher v. Fisher, 98 Mass. 303; Duncan v. Gilbert, 29 N. J. L. 521; Allaire v. Hartshorne, 21 N. J. L. 665, 47 Am. Dec. 175; Atlas Bank v. Doyle, 9 R. I. 76; Maitland v. Citizens' Nat. Bank, 40 Md. 540; Beckhaus v. Commercial Nat. Bank (Pa.), 12 Atl. Rep. 72; Handy v. Sibley, 46 Ohio St. 9, 17 N. E. Rep. 329; Mechanics' & Traders' Bank v. Livingston, 4 Misc. (N. Y.) 255, 23 N. Y. Supp. 814, 53 N. Y. St. Rep. 693.

JONES PLEDGES-46

Handy v. Sibley, 46 Ohio St. 9, 17 N. E. Rep. 329.

Harding v. Hawkins, 141 Ill. 572, 31 N. E. Rep. 307.

5 Hapgood v. Wellington, 136 Mass. 217.

Tooke v. Newman, 75 Ill. 215; Partridge v. Williams, 72 Ga. 807; Crawford v. Spencer, 92 Mo. 498, 4 S. W. Rep. 713; Bank of Claflin v. Rowlinson, 2 Kan. App. 82, 43 Pac. Rep. 304; Cook v. Norwood, 106 Ill. 558; Saylor v. Daniels, 37 Ill. 331, 87 Am. Dec. 250; Seeley v. Wickstrom, 49 Neb.