Hunter v. Hamilton

The opinion of the court was delivered by JOHNSTON, J.: Robert Hunter brought this action against A. P. Hamilton to recover damages for the alleged wrongful sale and disposition of a pledge. The pledge was a promissory note for $250, executed by James H. White in favor of D. S. Kennett, who turned it over to Hamilton as collateral security for the payment of an indebtedness of $52, which Kennett owed Hamilton. Kennett sold the note to the plaintiff, Hunter, subject to the claim of Hamilton for $52, the payment of which Hunter assumed. White failed to pay the note when it became due, but no steps were taken by Hamilton to enforce its collection. Hamilton afterward sold the note for the amount of the debt which it was given to secure. Hunter claims that when the note became due he urged Hamilton to enforce the collection against White, by suit if necessary, but he refused, and subsequently sold it without authority, or the taking of any legal steps for its collection. The claim of Hamilton was that White, the maker of the collateral note, [198] was insolvent; that Hunter was repeatedly requested to pay the Kennett note, which he had assumed, and to take up the collateral note, but he declined, saying he would not invest any more money in White’s paper, and that Hamilton might sell it to anyone who would pay the amount of the Kennett debt. He claims that, in pursuance of this authority, he sold it for that sum, and at once informed Hunter of what he had done, who responded that the sale was satisfactory to him, but that afterward Hunter tendered the amount of the debt secured and demanded the collateral note. The claim of Hamilton was sanctioned by the jury upon sufficient testimony, and hence we are relieved from any further concern as to the findings. If there was a wrongful disposition or conversion of the note, Hunter was entitled to the difference between the value of the note and the debt for which it stood as a pledge. He insists that Hamilton could not sell the pledge with or without authority from him, and that the only legal course was to collect the note, apply sufficient of the proceeds to the debt due, and pay over any residue to him. This position is not tenable. The disposition to be made of a pledge, in case of default or in any other contingency, may be controlled by the agreement of the parties, providing such agreement be not fraudulent, is not in contravention of statute, nor against public policy. In the absence of an agreement as to the remedy to be pursued, a pledgee may ordinarily, upon default, sell any chattel deposited with him as a pledge; but a different rule has been held in some courts in respect to a pledge of commercial paper as collateral security for the payment of a debt. By some of the authorities cited, it is held that, without express authority, the pledgee cannot sell the paper, but that it is his duty to collect it when it falls due, apply enough of the proceeds to pay his debt, and then return what remains to the pledgor. (Trust Co. v. Rigdon, 93 Ill. 458; Zimpleman v. Veeder, 98 id. 613; Fletcher v. Dickinson, 7 Allen, 23; Roberts v. Thompson, 14 Ohio St. 1; Dan. Neg. Inst., § 833.) Upon this question there is a diversity of opinion, some of the authorities holding that there are no good [199] reasons to sustain such an exception. (Porter v. Thompson, 10 R. I. 1; Brightman v. Reeves, 21 Tex. 70; Davis v. Funk, 39 Pa. St. 243.) We are not called upon, however, to determine whether Hamilton had a right to sell the note independent of an agreement, as the issue presented and tried was, whether Hunter authorized Hamilton to make the sale, and this issue has been resolved by the jury in favor of Hamilton. The authorities are uniform upon the question that the disposition to be made of a pledge may be regulated by the contract of the parties. The case was fairly submitted to the jury, and the law governing it correctly stated by the court in its charge. We find no error in the record, and hence the judgment of the court will be affirmed. All the Justices concurring.