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lowed to retain the goods, on the ground that the debt for which the goods were pledged was an illegal one; for the pledgee would then, in his turn, be compelled to set up his own wrong as the basis of his asserted right.

THE TITLE OF THE PLEDGOR

72. The pledgor need not be the absolute owner of the goods; but ordinarily he can pledge, just as he can sell, any assignable interest that he has.

In the absence of statute, unauthorized attempts by factors or other agents to pledge the owner's goods will confer no rights as against such owner.

Pledgor Need Not be Absolute Owner

It is not necessary that the pledgor be the absolute owner of the thing pledged." He may have only a limited interest therein, such as a life interest. But when a thing is pledged by one having only such a limited interest, the pledgee acquires no right to sell the pledged goods on default, because to do so would divest the rights of the ultimate owner.55 He can, however, sell whatever interest the pledgor has, and the purchaser in such case gets a mere right to hold the goods as long as the pledgor could have held them.56 Even a pledgee may make a subpledge of his interest as pledgee."

However, one who has only a lien on a thing cannot make a valid pledge of it. If he attempts to do so, his pledgee cannot hold the thing against the owner, even for the amount of the lien.58 This results from the rule that a lien is a personal right to retain possession, and cannot be assigned. In some states it is specifically provided by statute that a lienholder may pledge property in his

53 McCombie v. Davies, 7 East (Eng.) 5; Eddy v. Fogg, 192 Mass. 543, 78 N. E. 549; Kelly v. Richardson, 100 Ala. 584, 13 South. 785. But a partner cannot. pledge partnership property as security for his private debts. Oliphant v. Markham, 79 Tex. 543, 15 S. W. 569, 23 Am. St. Rep. 363. A joint owner in possession may pledge his own interest, but not that of the co-owner, without the latter's consent. Frans v. Young, 24 Iowa, 375.

54 Hoare v. Parker, 2 Term R. (Eng.) 376; Robertson v. Wilcox, 36 Conn. 426, 430.

55 Robertson v. Wilcox, 36 Conn. 426.

56 Eddy v. Fogg, 192 Mass. 543, 78 N. E. 549; Jones on Collateral Securities (3d Ed.) § 60.

57 Lewis v. Mott, 36 N. Y. 395; Jarvis v. Rogers, 15 Mass. 389; McCombie v. Davies, 7 East (Eng.) 5, 7.

68 McCombie v. Davies, 7 East (Eng.) 5.

possession, to the extent of his lien, and a like result might follow when a statute in general terms makes liens assignable." Factors 60

Factors are agents employed by the owner to sell the goods which the owner delivers to them.1 Since the factor has authority from his principal to sell, a sale of the goods by the factor passes a good title to the goods, according to the rules of agency. But the factor, ordinarily, has no authority to make a pledge of the goods delivered to him. Therefore, in such a case, his attempt to pledge the goods (being in excess of his authority) confers no rights on the pledgee as against the owner of the goods. But the authority to make a valid pledge may be conferred on the factor by the doctrine of estoppel, as when the owner in any way holds out the factor as one having such authority. The rights of the parties

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59 See Civ. Code Cal. 1906, § 2990; Rev. Codes N. D. 1905, § 6197; Civ. Code S. D. § 2108.

60 For discussion of pledges by factors, see Jones, Collateral Securities (3d Ed.) $ 327-353.

61 Black, Law Dictionary, p. 476; Howland v. Woodruff, 60 N. Y. 80; In re Rabenau (D. C.) 118 Fed. 474. See, also, Civ. Code Cal. § 2026. 62 Morsch v. Lessig, 45 Colo. 168, 100 Pac. 431; Kennedy v. Strong, 14 Johns. (N. Y.) 128; Rodriguez v. Hefferman, 5 Johns. Ch. (N. Y.) 417; Newbold v. Wright, 4 Rawle (Pa.) 195; Kinder v. Shaw, 2 Mass. 398; Gray v. Agnew, 95 Ill. 315; Kelly v. Smith, 1 Blatchf. 290, Fed. Cas. No. 7,675; Van Amringe v. Peabody, 1 Mason, 440, Fed. Cas. No. 16,825; Warner v. Martin, 11 How. 209, 13 L. Ed. 667; First Nat. Bank of Macon v. Nelson, 38 Ga. 391, 95 Am. Dec. 400; Wright v. Solomon, 19 Cal. 64, 79 Am. Dec. 196; Merchants' Nat. Bank of Memphis v. Trenholm, 12 Heisk. (Tenn.) 520; McCreary v. Gaines, 55 Tex. 485, 40 Am. Rep. 818; Paterson v. Tash, 2 Strange (Eng.) 1178; Daubigny v. Duval, 5 Term R. (Eng.) 604; Newsom v. Thornton, 6 East (Eng.) 17; Graham v. Dyster, 2 Starkie (Eng.) 21; Martini v. Coles, 1 Maule & S. (Eng.) 140; Shipley v. Kymer, Id. 484; Solly v. Rathbone, 2 Maule & S. (Eng.) 298; Cockran v. Irlam, Id. 301, note; Boyson v. Coles, 6 Maule & S. (Eng.) 14; Fielding v. Kymer, 2 Brod. & B. (Eng.) 639; Queiroz v. Trueman, 3 Barn. & C. (Eng.) 342; Bonito v. Mosquera, 2 Bosw. (N. Y.) 401. But cf. Hutchinson v. Bours, 6 Cal. 384; Leet v. Wadsworth, 5 Cal. 404; Wright v. Solomon, 19 Cal. 64, 79 Am. Dec. 196; Miller v. Schneider, 19 La. Ann. 300, 92 Am. Dec. 535; McCreary v. Gaines, 55 Tex. 485, 40 Am. Rep. 818; First Nat. Bank of Macon v. Nelson, 38 Ga. 391, 95 Am. Dec. 400.

63 Leet v. Wadsworth, 5 Cal. 404, in which the factor purchased the goods in his own name, stored them, and paid storage in his own name. For other cases in which the owner, by clothing the factor with the indicia of ownership, lost his right to take the goods from the pledgee of the factor, see Calais S. B. Co. v. Scudder, 2 Black 372, 17 L. Ed. 282; Babcock v. Lawson, 4 Q. B. Div. (Eng.) 394. Where an agent fraudulently misappropriates negotiable collaterals deposited with him on a loan of the principal's money, the borrower offering to pay the loan at maturity, the principal is liable to him for the value of the collaterals at that time. Reynolds v. Witte, 13 S. C. 5, 36 Am. Rep. 678. A clerk or salesman has no power to pawn his employer's

in all the cases given are governed by the general principles of agency.

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In a number of states, however, the rules of the common law as to factors have been changed by statute. These enactments, commonly known as "Factors' Acts," were passed for the protection of innocent third persons, and frequently enable such innocent third parties dealing with factors to take pledges of goods held by the latter, and, by so doing, acquire rights superior to those of the owner. Even under these statutes, the real owner may recover the goods pledged by the factor by paying to the pledgee the amount of money he has advanced, or otherwise fulfilling the undertaking secured by the factor's pledge of the goods. Factors' Acts protect only the innocent third person, and do not affect the remedies of the owner against the factor. As the various acts differ greatly in scope and effect, the specific statute should in all cases be carefully consulted.

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WHAT MAY BE PLEDGED

73. Unless public policy or some statute forbids, any assignable interest in personal property, corporeal or incorporeal, may be pledged.

assets as security for his own debts. Oliphant v. Markham, 79 Tex. 543, 15 S. W. 569, 23 Am. St. Rep. 363. But, for cases where it was held that the pledgor did not have sufficient indicia of ownership, see Agnew v. Johnson, 22 Pa. 471, 62 Am. Dec. 303; Gallaher v. Cohen, 1 Browne (Pa.) 43; Branson v. Heckler, 22 Kan. 610; Cox v. McGuire, 26 Ill. App. 315. An administrator or executor may make as to an innocent third person a valid pledge of the goods of the estate. Pickens v. Yarborough's Adm'r, 26 Ala. 417, 62 Am. Dec. 728; Carter v. Manufacturers' Nat. Bank of Lewistown, 71 Me. 448, 36 Am. Rep. 338; Leitch v. Wells, 48 N. Y. 585; Hutchins v. President, etc., of State Bank, 12 Metc. (Mass.) 421; Bayard v. Farmers' & Mechanics' Bank of Philadelphia, 52 Pa. 232; Appeal of Wood, 92 Pa. 379, 37 Am. Rep. 694; Petrie v. Clark, 11 Serg. & R. (Pa.) 377, 14 Am. Dec. 636; Russell v. Plaice, 18 Beav. (Eng.) 21; Vane v. Rigden, L. R. 5 Ch. App. (Eng.) 663.

64 See Jones, Collateral Securities (3d Ed.) §§ 333-340. For specimens of factors' acts, see Civ. Code Cal. 1906, § 2368; Rev. Laws Mass. 1902, c. 68, §§ 1-6; 3 Birdseye's C. & G. Consol. Laws N. Y. 1909, p. 3232, § 182; Gen. Code Ohio, §§ 8358-8362; Purdon's Dig. Pa. (13th Ed.) pp. 1608-1610; St. Wis. 1898, §§ 3345-3347.

65 Jones, Collateral Securities, § 333; Allen v. St. Louis Nat. Bank, 120 U. S. 20, 7 Sup. Ct. 460, 30 L. Ed. 573; Wisp v. Hazard, 66 Cal. 459, 6 Pac. 91; New York Security & Trust Co. v. Lipman, 157 N. Y. 551, 52 N. E. 595; Cole v. Northwestern Bank, L. R. 10 C. P. (Eng.) 354; Henry v. Philadelphia Warehouse Co., 81 Pa. 76.

66 Stollenwerck v. Thacher, 115 Mass. 224.

Any legal or equitable interest whatever in any form of personal property may be pledged, provided the interest can be put, by actual delivery or by written transfer, into the hands, or within the power, of the pledgee, so as to make such interest available to him for the satisfaction of the debt or engagement secured." Goods at sea may be pledged by a transfer of the muniments of title, as by a written assignment of the bill of lading. This is equivalent to a transfer of possession, because it is a delivery of the symbols of the goods and the means of obtaining possession of them. And debts and choses in action are also capable, by means of a written assignment, of being conveyed in pledge.""

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The common law, unlike the Roman law," permits a debtor to pledge any of his goods, and it is immaterial whether or not these are necessary articles, such as one's household furniture or even the tools of one's trade. Thus even goods expressly exempted by statute from execution may be pledged by the owner as security for the payment of his debts." By pledging his property, the owner expressly waives the benefit of the exemption, as far as the pledge in question is concerned. As a pledge is a bailment, it applies only to personalty and there can be no pledge of real estate.

On the ground of public policy, the pay and pensions of soldiers and sailors cannot be pledged. This has been frequently held in England," in the absence of a statute. In the United States, there are also statutes to the same effect.78 National banks are prohibited from lending money on their own stock."

Future Property

The general rule is that property not yet in existence or not yet acquired cannot be pledged." This may be the subject of

67 In re Pleasant Hill Lumber Co., 126 La. 743, 52 South. 1010.

68 Story, Bailm. § 293.

69 Wilson v. Little, 2 N. Y. 443, 51 Am. Dec. 307. But a chose in action growing out of a personal tort is not assignable, and therefore cannot be pledged. Pindell v. Grooms, 18 B. Mon. (Ky.) 501.

70 See Story, Bailm. § 293.

71 Kyle v. Sigur, 121 La. 888, 46 South. 910; Frost v. Shaw, 3 Ohio St. 270; Jones v. Scott, 10 Kan. 33.

72 McCarthy v. Goold, 1 Ball & B. 387; Lidderdale v. Montrose, 4 T. R. 248. 78 As to pay, Rev. St. § 1291 (U. S. Comp. St. 1901, p. 918). As to pensions, Rev. St. § 4745 (U. S. Comp. St. 1901, p. 3278).

74 Act June 3, 1864, c. 106, 13 Stat. 99. First Nat. Bank v. Lanier, 11 Wall. 369, 20 L. Ed. 172; Bullard v. National Eagle Bank, 18 Wall. 589, 21 L. Ed. 923; Hagar v. Union Nat. Bank, 63 Me. 509.

75 In re Pleasant Hill Lumber Co., 126 La. 743, 52 South. 1010; Gittings v. Nelson, 86 Ill. 591; Owens v. Kinsey, 52 N. C. 245; Smithurst v. Edmunds, 14 N. J. Eq. 408. For a pledge of an interest in a partnership not yet in existence, see Appeal of Collins, 107 Pa. 590, 52 Am. Rep. 479.

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an agreement to pledge, but not of a pledge. Any attempt to pledge such property can create only contract rights or rights in personam, as distinguished from rights in rem; for manifestly there could be no in rem rights without a res. The pledge, however, may take effect when the property is acquired or comes into existence, provided the rights of innocent third persons have not in the meantime intervened."

According to the analogy of a doctrine frequently held in the case of sales, many courts hold that property which is potentially in existence, such as crops in the ground" and wool to be raised from sheep which are already owned, may be pledged, with the rights of the pledgee attaching to such property as its potential existence merges into actual existence. Thus, under this rule, a man may pledge all the wool that he may take from his flocks in a certain year, but not all the wool that shall grow upon sheep that he may thereafter buy.78

The American Sales Act," however, abolishes the distinction as to sales between future goods and goods having a potential existence, and a like doctrine is probably advisable in the case of pledges.

Incorporeal Property

Not only corporeal property (that which may be seen and touched and which is ordinarily valuable for itself rather than for what it represents), but also incorporeal property, may be the subject of a pledge. In fact, by far the most important pledge transactions in the commercial world have to do with this latter class of property. Examples of incorporeal property frequently pledged are the ordinary negotiable instruments, such as bills of exchange and promissory notes,80 nonnegotiable instruments, such as in

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76 Sequeira v. Collins, 153 Cal. 426, 95 Pac. 876; Macomber v. Parker, 14 Pick. (Mass.) 497; Goodenow v. Dunn, 21 Me. 86; Smith v. Atkins, 18 Vt. 461; Ayers v. South Australian Banking Co., L. R. 3 P. C. (Eng.) 548.

77 Smith v. Atkins, 18 Vt. 461. But an attempt to pledge crops not yet planted is ineffectual against a landlord's lien. Gittings v. Nelson, 86 Ill.

591.

78 Smithurst v. Edmunds, 14 N. J. Eq. 408.

79 American Sales Act, § 5; Williston, Sales, §§ 127–137.

80 Casey v. Cavaroc, 96 U. S. 467, 24 L. Ed. 779; Atkinson v. Foster, 134 Ill. 472, 25 N. E. 528; American Exch. Nat. Bank of New York v. Federal Nat. Bank of Pittsburg, 226 Pa. 483, 75 Atl. 683, 27 L. R. A. (N. S.) 666, 134 Am. St. Rep. 1071, 18 Ann. Cas. 444; Eddy v. Fogg, 192 Mass. 543, 78 N. E. 549; Wilson v. Little, 2 N. Y. 443, 447, 51 Am. Dec. 307; McLean v. Walker, 10 Johns. (N. Y.) 471; White v. Phelps, 14 Minn. 27 (Gil. 21), 100 Am. Dec. 190; Appleton v. Donaldson, 3 Pa. 381; Loomis v. Stave, 72 Ill. 623; Sanders v. Davis, 13 B. Mon. (Ky.) 433; Morris Canal & Banking Co. v. Fisher, 9 N. J. Eq. 667, 64 Am. Dec. 423; Fennell v. McGowan, 58 Miss. 261; William

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