paying the debt, for the obligation to pay continues, even though the remedy is barred."2

Again, though the pledgee may not, because of the statute, then sue on the barred debt, he may either retain the pledged goods until the debt is paid or else sell them and retain the amount of the debt out of the proceeds of the sale. If, as is not usually the case, the pledgor, seeking to redeem, has to invoke the powers of a court of equity," he might be met with the defense of laches (or that he has unduly delayed in asserting his rights), under the maxim "Equitas vigilantibus non dormientibus subvenit," even though the period prescribed by the statute of limitations has not yet run.

RIGHTS AND DUTIES OF THE PLEDGEE AS AFFECTED BY PLEDGOR'S DEFAULT

76. The rights and duties of the pledgee depend largely upon whether or not there has been a default by the pledgor.

As has already been seen, a pledge is a bailment that is incidental to a debt or other undertaking, which the pledge is created to secure. Until there has been a default by the pledgor in the payment of this debt or the performance of this undertaking, the pledgee is little more than an ordinary mutual benefit bailee. But when the debt becomes due, or the time for the performance of the undertaking arrives and the pledgor is in default, the pledgee has unique rights not possessed at all by mutual benefit bailees in general. We shall accordingly proceed to discuss the pledgee's rights before a default by the pledgor, and later take up his rights after such a default.

62 Jones v. Merchants' Bank of Albany, 6 Rob. (N. Y.) 162; In re Oakley, 2 Edw. Ch. (N. Y.) 478; Spect v. Spect, 88 Cal. 437, 26 Pac. 203, 13 L. R. A. 137, 22 Am. St. Rep. 314.

63 Jones v. Thurmond's Heirs, 5 Tex. 318.

64 As to the need of resorting to a court of equity by the pledgor, see Jones, Collateral Securities, § 556. As to redemption in equity, see, also, Merrill v. Houghton, 51 N. H. 61; Appeal of Conyngham, 57 Pa. 474; Bartlett v. Johnson, 9 Allen (Mass.) 530.

RIGHTS AND DUTIES OF THE PLEDGEE BEFORE DEFAULT-ASSIGNABILITY OF THE PLEDGEE'S INTEREST

77. The interest of the pledgee is assignable.

Unlike the interest of the lienholder, the interest which the pledgee acquires is transferable." He may make an absolute assignment of all his interest in the goods pledged," or he may assign his interest conditionally, to secure payment of his own debt; that is, he may subpledge it," or he may even deliver it to a bailee to hold for him. The transfer of the pledged goods in any one of these ways would be a legal disposition of them authorized by the nature of the pledgee's interest.""

68

The subpledgee (or assignee of the original pledgee) can in turn claim the possession of the goods originally pledged, both as against the original pledgor and the original pledgee; but such subpledgee (or assignee of the pledgee) can acquire, ordinarily, only the rights of the original pledgee."

65 Hawkins v. Fourth Nat. Bank, 150 Ind. 117, 49 N. E. 957; Brittan v. Oakland Bank of Savings, 124 Cal. 282, 57 Pac. 84, 71 Am. St. Rep. 58; Boswell v. Thigpen, 75 Miss. 308, 22 South. 823; Rand v. Barrett, 66 Iowa, 731, 24 N. W. 530; Talty v. Freedman's Sav. & T. Co., 93 U. S. 321, 23 L. Ed. 886. 66 Jarvis v. Rogers, 15 Mass. 389, 408; Whitaker v. Sumner, 20 Pick. (Mass.) 399; Bush v. Lyon, 9 Cow. (N. Y.) 52; Ferguson v. Union Furnace Co., 9 Wend. (N. Y.) 345; Thompson v. Patrick, 4 Watts (Pa.) 414; Appeal of Ashton, 73 Pa. 153; Goss v. Emerson, 23 N. H. 38; Bailey v. Colby, 34 N. H. 29, 66 Am. Dec. 752; Warner v. Martin, 11 How. 209, 13 L. Ed. 667; Calkins v. Lockwood, 17 Conn. 154, 42 Am. Dec. 729; Belden v. Perkins, 78 Ill. 449; Bradley v. Parks, 83 Ill. 169. The consent of the pledgor to the assignment is not necessary. Curtis v. Leavitt, 15 N. Y. 9. A pledgee of negotiable instruments may assign them. Chapman v. Brooks, 31 N. Y. 75; Duncomb v. New York, H. & N. R. Co., 84 N. Y. 190; Id., 88 N. Y. 1; Baldwin v. Ely, 9 How. 580, 599, 13 L. Ed. 266; Merchants' Nat. Bank v. State Nat. Bank, 10 Wall. 604, 19 L. Ed. 1008.

67 Interurban Const. Co. v. Hayes, 191 Mo. 248, 89 S. W. 927; Drake v. Cloonan, 99 Mich. 121, 57 N. W. 1098, 41 Am. St. Rep. 586; Meyer v. Moss, 110 La. 132, 34 South. 2; Lewis v. Mott, 36 N. Y. 395; Jarvis v. Rogers, 15 Mass. 389; National Bank of Pulaski v. Winston, 5 Baxt. (Tenn.) 685; McCombie v. Davies, 7 East, 5, 7. One to whom securities have been pledged to secure the payment of a note may, on negotiating the note, transfer the securities, without being liable to a suit for conversion by the pledgor. Waddle v. Owen, 43 Neb. 489, 61 N. W. 731. Nor is the consent of the original pledgor necessary. Cumming v. McDade, 118 Ga. 612, 45 S. E. 479; Coleman v. Anderson, 98 Tex. 570, 86 S. W. 730.

68 Ingersoll v. Van Bokkelin, 7 Cow. (N. Y.) 670.

69 Goss v. Emerson, 23 N. H. 38.

70 Norton v. Baxter, 41 Minn. 146, 42 N. W. 865, 4 L. R. A. 305, 16 Am. St. Rep. 679; Williams v. Ashe, 111 Cal. 180, 43 Pac. 595; Interurban Const,

SAME-RELATIVE TITLE ACQUIRED BY THE PLEDGEE

78. The rights and interest of the pledgee are ordinarily neither more nor less valid than those of the pledgor. EXCEPTIONS: (1) Agency by estoppel.

(2) Negotiable instruments.

When a valid pledge of goods is created, the pledgee acquires rights which neither the pledgor and those in privity with him nor third parties can dispute." As to third persons, by virtue of the general principle of jurisprudence that a person can confer no greater interest in goods than he himself has, the pledgee's interest is only as valid as that of the pledgor."2 If the pledgor has a title good against all the world, the pledgee's rights are equally as valid. If the pledgor's title is defective, the pledgee holds the pledged goods subject to the same defect. By a pledge the pledgee acquires no better rights in the goods than the pledgor had." To this rule there is an exception (apparent, at least) in the case of agency by estoppel, and another exception in the case of negotiable paper. Agency by Estoppel

We have already discussed instances of this kind in the case of factors, who, having no real authority as between the owner and themselves to pledge goods intrusted to them, may yet create pledges of the goods (valid against the owner) to third persons, when such owner has, by clothing the factor with the indicia of title or otherwise holding him out as having the power to pledge the goods, estopped himself from denying such authority in the factor." The principle is of general application, both in the field of pledges and elsewhere, and requires no further discussion here. Negotiable Instruments

When a person takes negotiable paper before maturity, without notice of any defenses to such paper, in the usual course of busi

Co. v. Hayes, 191 Mo. 248, 89 S. W. 927; Jenckes v. Rice, 119 Iowa, 451, 93 N. W. 384; Waddle v. Owen, 43 Neb. 489, 61 N. W. 731.

71 See post, § 79.

72 Duell v. Cudlipp, 1 Hilt. (N. Y.) 166; Taylor v. Turner, 87 Ill. 296; Agnew v. Johnson, 22 Pa. 471, 62 Am. Dec. 303; Hooper v. Ramsbottom, Camp. (Eng.) 121; Gottlieb v. Hartman, 3 Colo. 53; Hartop v. Hoare, 3 Atk. (Eng.) 44; Patton v. Joliff, 44 W. Va. 88, 28 S. E. 740; Worthington v. Vette, 77 Mo. App. 445.

78 Swett v. Brown, 5 Pick. (Mass.) 178; Reeves v. Smith, 1 La. Ann. 379; Agnew v. Johnson, 22 Pa. 471, 62 Am. Dec. 303; Gallaher v. Cohen, 1 Browne (Pa.) 43.

74 Ante, pp. 184-185.

75

ness, as collateral security, and makes advances at the time upon the credit of such paper, he is considered by all the authorities as a bona fide holder for value, within the rule for the protection of holders of commercial paper. Such a negotiation cuts off previous equities (as distinguished from absolute defenses, which are not thus cut off) which might have been set up against the pledgor or other prior parties, so that the pledgee thus acquires a better title than his bailor had." This is really what is meant by "negotiable" as applied to written instruments.

As to whether a pledgee who takes negotiable instruments merely as security for a pre-existing debt is a holder for value, the cases are in conflict. The question is important, since, unless he is a holder for value, previous equities are not cut off, but may be set up against him just as they could be set up against the pledgor, or other prior parties.

When the instrument is received in whole or part payment of

75 Swift v. Tyson, 16 Pet. 1, 10 L. Ed. 865; Brooklyn City & N. R. Co. v. National Bank of the Republic, 102 U. S. 14, 26 L. Ed. 61; American Exchange Nat. Bank v. New York Belting & Packing Co., 148 N. Y. 698, 43 N. E. 168; Des Moines Nat. Bank v. Chisholm, 71 Iowa, 675, 33 N. W. 234; Best v. Crall, 23 Kan. 482, 33 Am. Rep. 185; Bell v. Bell, 12 Pa. 235; Bowman v. Van Kuren, 29 Wis. 209, 219, 9 Am. Rep. 554; Curtis v. Mohr, 18 Wis. 615; Bond v. Wiltse, 12 Wis. 611; Jenkins v. Schaub, 14 Wis. 1; Kinney v. Kruse, 28 Wis. 183; Dix v. Tully, 14 La. Ann. 456; Warner v. Fourth Nat. Bank, 115 N. Y. 251, 22 N. E. 172; Nelson v. Eaton, 26 N. Y. 410, 416; Exchange Bank v. Butner, 60 Ga. 654; Griswold v. Davis, 31 Vt. 390; Worcester Nat. Bank v. Cheeney, 87 Ill. 602. One who receives, as collateral security to a loan then made, negotiable bonds not yet matured, without knowledge of any defense to such bonds, is entitled to protection, as a purchaser thereof, to the extent of the amount of such loan. Hayden v. Lincoln City Electric Ry. Co., 43 Neb. 680, 62 N. W. 73.

76 Allaire v. Hartshorne, 21 N. J. Law, 665, 47 Am. Dec. 175; Youngs v. Lee, 12 N. Y. 551; First Nat. Bank v. Fowler, 36 Ohio St. 524, 38 Am. Rep. 610; Zellweger v. Caffe, 5 Duer (N. Y.) 87, 91; Farwell v. Importers' & Traders' Nat. Bank, 16 Wkly. Dig. (N. Y.) 20; Fisher v. Fisher, 98 Mass. 303; Stoddard v. Kimball, 6 Cush. (Mass.) 469; Draper v. Saxton, 118 Mass. 427; Buchanan v. International Bank, 78 Ill. 500, 504; Stotts v. Byers, 17 Iowa, 303; Crosby v. Roub, 16 Wis. 616, 84 Am. Dec. 720; Helmer v. Commercial Bank of B. M. Webster, 28 Neb. 474, 44 N. W. 482; Haydon v. Nicoletti, 18 Nev. 290, 3 Pac. 473; Duncomb v. New York, H. & N. R. Co., 84 N. Y. 190; Richardson v. Crandall, 48 N. Y. 348, 364; Bank of New York v. Vanderhorst, 32 N. Y. 553; Miller v. Pollock, 99 Pa. 202; Munn v. McDonald, 10 Watts (Pa.) 270; Stotts v. Byers, 17 Iowa, 303; Crosby v. Roub, 16 Wis. 616, 84 Am. Dec. 720; Lyon v. Ewings, 17 Wis. 61; Bowman v. Van Kuren, 29 Wis. 209, 219, 9 Am. Rep. 554; Hotchkiss v. National Shoe & Leather Bank, 21 Wall. 854, 22 L. Ed. 645; Tiffany v. Boatman's Sav. Inst., 18 Wall. 375, 21 L. Ed 868; Michigan Ins. Bank v. Eldred, 9 Wall. 544, 19 L. Ed. 763.

the debt," when any previously held securities are surrendered," or when any indulgence or forbearance" is granted to the debtor, in consideration of the pledge of the instrument, then the courts agree that the pledgee is a holder for value. The dispute, then, is limited to the case when the pledgee takes the instrument, without surrendering any of his former rights, solely as security for the pre-existing debt.80

The view supported by the great weight of authority, and the sounder reason, declares the pledgee in such cases to be a holder for value. This is the rule of the United States Supreme Court,82

81

77 Mayer v. Heidelbach, 123 N. Y. 332, 25 N. E. 416, 9 L. R. A. 850; American Exch. Nat. Bank v. New York Belting & Packing Co., 74 Hun, 446, 26 N. Y. Supp. 822; Ward v. Howard, 88 N. Y. 74; Chrysler v. Renois, 43 N. Y. 209; Brown v. Leavitt, 31 N. Y. 113; Youngs v. Lee, 12 N. Y. 551; Mix v. National Bank of Bloomington, 91 Ill. 20, 33 Am. Rep. 44; Bardsley v. Delp, 88 Pa. 420; Norton v. Waite, 20 Me. 175; Brush v. Scribner, 11 Conn. 388. 29 Am. Dec. 303; Dixon v. Dixon, 31 Vt. 450, 76 Am. Dec. 128; Kellogg v. Fancher, 23 Wis. 21, 99 Am. Dec. 96; McKnight v. Knisely, 25 Ind. 336, 87 Am. Dec. 364; Mayberry v. Morris, 62 Ala. 116.

78 Goodwin v. Conklin, 85 N. Y. 21; Phoenix Ins. Co. v. Church, 81 N. Y. 218, 37 Am. Rep. 494; Park Bank v. Watson, 42 N. Y. 490, 1 Am. Rep. 573; Salina Bank v. Babcock, 21 Wend. (N. Y.) 499.

79 Central Sav. Bank v. Smith, 43 Colo. 90, 95 Pac. 307; Atlanta Guano Co. v. Hunt, 100 Tenn. 89, 42 S. W. 482; Mechanics' & Farmers' Bank of Albany v. Wixson, 42 N. Y. 438; Traders' Bank of Rochester v. Bradner, 43 Barb. (N. Y.) 379; Burns v. Rowland, 40 Barb. (N. Y.) 368; Watson v. Randall, 20 Wend. (N. Y.) 201.

80 As to ordinary chattels the cases hold, in the absence of a statute, that a pledge of these merely as security for, and not in payment of, pre-existing debts does not constitute the pledgee a holder for value. Chartered Bank v. Henderson, L. R. 5 P. C. (Eng.) 501; Goodwin v. Massachusetts Loan & Trust Co., 152 Mass. 189, 25 N. E. 100; Sleeper v. Davis, 64 N. H. 59, 6 Atl. 201, 10 Am. St. Rep. 377.

81 Jones, Collateral Securities (3d Ed.) §§ 107-121; Sackett v. Johnson, 54 Cal. 107; Tomblin v. Callen, 69 Iowa, 229, 28 N. W. 573; Wilkins v. Usher, 123 Ky. 696, 97 S. W. 37, 29 Ky. Law Rep. 1232; Birket v. Elward, 68 Kan. 295, 74 Pac. 1100, 64 L. R. A. 568, 104 Am. St. Rep. 405, 1 Ann. Cas. 272; Herman v. Gunter, 83 Tex. 66, 18 S. W. 428, 29 Am. St. Rep. 632; Hotchkiss v. Fitzgerald Patent Prepared Plaster Co., 41 W. Va. 357, 23 S. E. 576; Barney V. Earle, 13 Ala. 106; Brush v. Scribner, 11 Conn. 388, 29 Am. Dec. 303; Meadow v. Bird, 22 Ga. 246; Conkling v. Vall, 31 Ill. 166; McKnight v. Knisely, 25 Ind. 336, 87 Am. Dec. 364; Homes v. Smyth, 16 Me. 177, 33 Am. Dec 650; Blanchard v. Stevens, 3 Cush. (Mass.) 162, 50 Am. Dec. 723; Thacher v. Pray, 113 Mass. 291, 18 Am. Rep. 480; Outhwite v. Porter, 13 Mich. 533; Stevenson v. Hyland, 11 Minn. 198 (Gil. 128); Struthers v. Kendall, 41 Pa.

82 Swift v. Tyson, 16 Pet. 1, 10 L. Ed. 865; Oates v. First Nat. Bank, 100 U. S. 239, 25 L. Ed. 580; RAILROAD CO. v. NATIONAL BANK OF THE REPUBLIC, 102 C. S. 14, 25, 26 L. Ed. 61, Dobie Cas. Bailments and Carriers,