Irving Park Ass'n v. Watson

Mr. Chief Justice Bean, after stating the facts as above, delivered the opinion of the court. 1. The first contention for the defendant is that the instrument sought to be foreclosed is a chattel mortgage, and under Act 1866, p. 688, § 2 (Section 3838, Hill’s Ann. Laws), as interpreted in Jacobs v. McCalley, 8 Or. 124, can be foreclosed only in the manner stipulated, since plaintiff has possession of the property; while for the plaintiff the contention is that the transaction was a pledge, and not a mortgage. Speaking generally, the distinction between a mortgage and pledge of personal property is that in the former the thing pledged must be delivered to the pledgee, while in the latter the possession may remain with the mortgagor. It is often difficult to determine whether a given transaction is a mortgage or a pledge when possession of the property is delivered to the creditor. But the general rule is that an assignment and transfer of shares of stock in a corporation by a debtor as security for a debt is a pledge, and not a mortgage. Indeed, it is said by Mr. Cook that “it is difficult to ascertain from the cases how shares of stock may be mortgaged; and a few early decisions, which held certain transactions to be mortgages, would to-day be held to be pledges’’: Cook, Stock and Stockh, § 464. Mr. Edwards, in his work on Bailments (2 ed.), § 219, says: “Shares of stock in a corporation are now, and have been for many years, habitually pledged as collateral security for money loaned. The pledge is made by a direct transfer of the scrip in writing, with an authority to effect a transfer in due form on the books of the corporation; and in his note for the sum loaned the borrower further authorizes the pledgee to sell the stock. The effect of the transaction is not a mortgage, but a pledge of the stock to secure the prompt payment of the money borrowed. On account of its incorporeal nature, property in stocks cannot [102] be' otherwise delivered. The delivery of the scrip alone is not considered sufficient, because it does not of itself enable the pledgee to sell the stock and apply the proceeds to pay the debt. * The contract of pledge is entirely consistent with the owner’s right as a stockholder. Until the pledge is rendered available by a foreclosure, he remains a member of the corporate body, interested in its management.” And Mr. Jones, in his work on Pledges (section 153), says that the transfer of the legal title to the stock to the pledgee is not inconsistent with the existence of a pledge, but, on the contrary, it cannot generally be pledged without a written transfer of the title, because it is not capable of manual delivery; and “in general it may be said that any transfer as collateral security of shares in a corporation, made in the ordinary form of an indorsement of a certificate, or by delivery of it with a power of attorney to make a transfer upon the books of the corporation, or by an actual transfer upon the books, is a pledge, and not a mortgage; and it is immaterial in this respect whether such transfer appear to be absolute or is expressed to be made as security.” Within these authorities we think the transaction between the plaintiff and the defendant as set out in the pieadings constituted a mere pledge of the stock, coupled with 'a right to sell it in case of default; and such a construction was given by this court to practically a similar transaction in State ex rel. v. Smith, 15 Or. 98 (14 Pac. 814, 15 Pac. 137, 386). 2. The other questions require but a brief notice. The defendant is sued upon a written contract or agreement for the payment of money secured by the deposit of her stock as collateral security. Upon this contract the plaintiff has a right to maintain a suit without regard to the solvency or insolvency of the other stockholders, and there is no right of contribution between stockholders which can be enforced therein. 3. The other matter is a question between the corporation and the stockholders. If there is a right of action against them to recover the money which it is alleged they received as commission or rebates from the vendor of the land, it rests in the corporation, and cannot be the subject of adjudication in a [103] suit to enforce payment of an indebtedness from the defendant to it. From these views it follows that the decree of the court below must be affirmed, and it is so ordered. Affirmed.