Plucker v. Teller

Opinion by Mr. Justice Mitchell, The principle that a pledgee shall not make a profit out of the pledge without liability to account for it to the pledgor is beyond question, but it is not applicable to the facts of the present action. It is not the case of a sale by the pledgee against the will or in derogation of the interest of the pledgor, or without notice to him, but one made by the pledgor’s direction or request. The interest on the mortgage pledged as well as on the prior mortgage being unpaid, its value as an investment and as collateral security for the debt was depreciating, and the appellee himself called upon the appellant to realize on it by selling it out. This could not have been done by the terms of the pledge which only authorized appellant to sell and transfer the mortgage, a power which of course would have to be strictly pursued. By waiting a few days until his debt matured, appellant under the terms of the pledge could have sold the mortgage at public or private sale with the right to purchase and hold free of any trust or claim on the part of plaintiff. This however he did not do but acquiescing in plaintiff’s request he sued out the mortgage, and in due course the property was put up by the sheriff for sale. Appellant was under no obligation to bid, but chose to do so in order to protect his interest in the mortgage as security for his debt. Had he bought in the property without further notice to the plaintiff the presumption might still have been that the purchase was to preserve the pledge for their mutual benefit according to their respective rights, and therefore that the relation of trust still continued, and the sale made, as the learned judge below held that it did, a mere substitution of the land for the mortgage. But appellant did not take this course. He gave explicit notice that he would act only for himself and would not bid up the property for any more than enough to protect the loan, and that if plaintiff desired to bid anything above that amount it would be necessary for him to be on hand himself. This relieved appellant from any trust in case he purchased, and put him in the position of an ordinary purchaser at a mortgage sale, who takes a clear title, even though he be the mortgagee. [535] This feature clearly distinguishes the present case from Brown v. Tyler, 8 Gray, 135; In re Gilbert, 104 N. Y. 200, and the other New York cases cited by appellee. In fact this case is more closely analogous to Bloomer v. Sturges, 58 N. Y. 168, in which the mortgagee was made a party defendant to the assignee’s bill of foreclosure and his interest was held to have been extinguished. The principle of all the cases is that the pledgee being within certain limits a trustee is therefore presumed to act for the pledgor’s interest as well as his own, but their interests are not identical, and where they may require different action the pledgee is entitled to regard his own, after having put the other party on his guard, by notice to him that he must look out for himself. This is what appellant did. When he bought therefore he bought for himself and in his own right. He thereby elected to take the property on account of the debt. If he had subsequently sold it at a loss he could not have called upon the plaintiff to 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. In any view of the case it was error to disallow the claim for commissions. If the jury should find in plaintiff’s favor he would thereby get the profit of a good sale, and he should pay the commissions earned by the firm which made it. Judgment reversed and venire de novo awarded.