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$ 70. Effect of transfer by pledgee. In Johnson v. Stear (3) one Cumming had pledged some brandy with the defendant to secure a loan payable on January 29th and gave the defendant a dock warrant for the brandy. Cumming was declared a bankrupt on the 17th, the loan was not paid, and on the 28th the defendant sold the brandy and on the 29th delivered the dock warrant to the purchaser, who took possession on the 30th. This was an action of trover by the assignee in bankruptcy of Cumming. It was held for the plaintiff. Two questions were discussed by the court. First: Was there a conversion! And, second: If so, what was the measure of damages ? The court held that the sale on the 28th followed on the 29th by the delivery of the dock warrant in pursuance thereof was a conversion. The pledgor had the whole of the day of the 29th in which to redeem the pledge. So the pledge was sold before default, and the pledgee put it out of his power to return the property if the amount of the loan was tendered him. On the other point, the plaintiff was allowed to recover nominal damages only. That is, the defendant was really allowed to offset his interest, the amount of the debt, against the value of the property. The real theory of the case is that the interest of a pledgee is a right of property in the goods which is more than a mere lien and that that interest is not destroyed if the pledgee sells before default. He does, however, by so doing make a conversion of whatever surplus interest the pledgor has in the property over and above the interest of the pledgee, in this case a merely nominal

(3) 15 C. B. (N. S.) 330.

interest, and, hence, an action can be maintained without any tender, but all that can be recovered is that surplus interest.

On this second point there was a strong dissenting opinion by one judge, on the ground that the sale of the property before default was tortious and destroyed the bailment, and that in consequence the title of the plaintiff to the goods became as free as if the bailment had never taken place. If the bailment really was destroyed by the sale, it would seem necessarily to follow on principle that the sale was a conversion, not merely of the pledgor's surplus interest in the property over and above the interest of the pledgee, but of the whole property and that all that was left to the defendant was a contract claim and that that could not be offset against a claim in tort for the conversion of the property.

871. Same (continued). Donald v. Suckling (4) was detinue for certain debentures. The defendant pleaded that the plaintiff had pledged the debentures, as security for the payment of a bill of exchange with one Simpson, who had repledged them with defendant to secure a debt due the defendant from Simpson, and that the bill to secure the payment of which they were pledged to Simpson had not been paid. The case came up on demurrer to the plea. No tender of the sum secured by the original deposit was alleged to have been made by the plaintiff. It was assumed against the defendant, on the demurrer, that the repledge was made before default in payment of the bill and that the repledge was for a greater sum than the

(4) L. R., 1 Q. B. 585.

original debt for which Simpson held the debentures. The court held for the defendant, that the plea was good. The doctrine of the case is that when a pledgee repledges he does not destroy all his interest in the property and that, notwithstanding the repledge, the original pledgor cannot recover the specific property without paying or tendering the sum for which the original pledge was made. The case is in accord with Johnson v. Stear in holding that the interest of the pledgee is not destroyed by his transfer of the property. It was not necessary in the former case, in the view taken by the court, to require a tender or payment before allowing the action, because being an action for damages, they could restrict the damages to the value of the property over and above the amount of the defendant's interest which still existed; but in Donald v. Suckling, as the action was for the recovery of the specific property, there could be nothing in the nature of a set off, the whole property was recovered or it was not, there was no other alternative. Therefore, the only way in which the pledgee's interest could be protected was to require payment or a tender of the amount due him before the plaintiff could recover the property. This, it seems, is the only ground upon which the cases can be reconciled on the point as to the necessity of a tender. In Halliday v. Holgate (5) the owner of certain stock certificates had pledged them with the defendant to secure a demand note. Later the pledgor became a bankrupt. Thereafter the defendant, without making any demand, sold the stock. The plaintiff, assignee in bank

(5) L. R., 3 Ex. 299.

ruptcy of the pledgor, without making any tender to the defendant, brought trover for the conversion of the stock. It was held for the defendant. The plaintiff was allowed to recover neither nominal nor full value damages. The court professed to follow Johnson v. Stear in not allowing full damages on the ground that an allowance must be made for the amount of the original debt, and to follow Donald v. Suckling in not allowing any action at all until the debt is paid, saying that until the debt was paid the pledgee had the whole present interest. The case is in accord with the two previous cases in holding that the pledgee's interest is not destroyed by a sale before default, but it is in conflict with Johnson v. Stear in requiring a tender before allowing an action of trover, and held that a sale by the pledgee does not constitute a conversion of the pledgor's interest because, until tender or payment, the pledgee has the entire present right of possession. On the point that an action may be maintained for the pledgor's actual damages before tender, Johnson v. Stear must be considered overruled.

§ 72. Same (continued). These three cases settle the English law and establish it to be that until payment or tender of the amount of the debt to secure which the pledge was made, the pledgee has the whole present interest and right of possession; that his interest is greater than that of a bailee under a common law lien; that that interest is not destroyed by his transfer of the property by way of repledge or sale before default; that such repledge or sale is not a conversion and that the pledgor cannot on account thereof bring trover or an action to recover the specific property before tender of the amount of the original debt.

The American law is unsettled. Some of the cases adopt the English view that the pledgor is not entitled to a return of the property or an action for damages without making a tender, although the pledgee may have sold or repledged the property for a greater amount than the original debt (6). Others take the position that if the pledgee tortiously sells the pledged property, the pledgor may bring trover without a tender (7).

In Whipple v. Dutton (8) it was held in an action for the conversion of pledged property, where the pledgee had made an unauthorized sale of it, that the only effect was to entitle the pledgor to recover any damages sustained thereby, and, it appearing that the property had been sold for its full value and the proceeds applied on the debt, that the plaintiffs had no cause of action.

(6) See Cummock v. Newburyport Savings Institution, 142 Mass. 342.

(7) Stearns v. Marsh, 4 Den, 227. (8) 175 Mass. 365.

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