Murdock v. Columbus Insurance & Banking

Campbell, J., delivered the opinion of the court. The transaction which gave rise to this controversy was had in Alabama, and we recognize the applicability of the law of Alabama, but are satisfied that there is nothing peculiar in it, and that the law applicable to the case is the same in that State as in our own and elsewhere. The written instrument executed by the appellant fixed the rights of parties. By it the title of the dioses in action described was vested in Winston, who was constituted the agent of the appellant, and — 157 — was invested, with power to sell and dispose of the things assigned, at his discretion, as to time and manner of selling, and the price for which to sell; and, if the interest on the note to the appellee, accrued on May 22, 1878, was not paid, Winston was required to sell enough to pay the principal and interest of. the note. He had full discretion to sell all of the securities, at any time, as he pleased, but it was made obligatory on him to sell to pay the note, if the interest due on May 22, 1878, was not paid. The interest mentioned was not paid, and Winston sold the securities to pay the note, as he had the right to do, and was required to do, in that contingency, and the appellant had no legal cause of complaint; because he armed Winston with the power, and charged him with the duty, to do what he did. The appellant was not entitled to notice of the sale, or to demand of payment of the interest on the note, before a sale, because he conferred the power of sale on Winston, his agent and trustee, with full discretion as to time, manner, and price, and prescribed the contingency in which he should sell, and did not stipulate for notice of sale or demand of payment as conditions of the exercise of the power' of sale. The written instrument is to receive a reasonable interpretation, with the view to ascertain the intent of the maker ; and it is manifest that his purpose was to place the title and control of the securities transferred in Winston, and to arm him with the fullest power of disposition of them, as expressed in the assignment, and that he never contemplated that any notice should be given to him or demand made of him. His interests were committed to Winston, who was made his agent with respect to the matters embraced in the transaction. It was not a mere pledge, but a transfer, in trust, to a third person, other than the creditor, with a power to sell and pay certain debts. The securities were not delivered to the appellee nor to its agent. The title was vested in Winston, as a trustee and agent of the appellant, and the appellee was a mere custodian of the securities for Winston, in whom the right of control was placed by the written instrument. The appellee had no power over the securities, and no right to deal with them. It was by the terms of the assignment made responsible to Winston for — 158 — the things assigned, and to be committed to its custody. In no contingency could it dispose of them, with or without notice, or after repeated demands for its money. Winston only could do that. In Nabring v. Bank of Mobile, 58 Ala. 204, the shares of railroad stock were transferred by the debtor to the creditor, on the books of the company, to secure the money borrowed. There was no written instrument conferring a power to sell the shares on a prescribed contingency, or at discretion ; and the court held the transaction to be a pledge, and that the bank, as pledgee, “ had no right to sell the shares without first demanding payment of the debt from Nabring,-or giving him notice of the intention to sell.” That case differs widely from this. It was strictly a pledge, subject to the rules of law applicable to pledges, because the shares were vested in the creditor as a security for the debt, with the legal right to have them upon payment of the debt, and there was not a transfer of them to a third person, constituted trustee and agent of the transferor, with power to sell and apply the proceeds in discretion, or in a given contingency. In Wilson v. Little, 2 N. Y. 443, cited in the opinion in the Alabama case mentioned above, there was a transfer of shares of railroad stock to the lender of the money, as security for the loan. It was insisted by one party that the transaction was a mortgage, and not a pledge, because the legal title to the stock was vested in the lender; but the court held that that fact did not destroy the character of the transaction as a pledge, and that the transfer of the title to the stock to the creditor was “equivalent to actual possession, because it is a delivery of the means of obtaining possession.” The argument was that in a pledge the title remains in the pledgor, and the pledgee has only a special propertyin the pledge, and, as the complete title was by the transfer of the stock vested in the creditor, that was inconsistent with the nature of a pledge, and made a mortgage. The court rejected that view as unsound, and declared that the transfer of title to the creditor is not inconsistent with a pledge, if by the terms of the contract the debtor has a legal right to the restoration of the pledge on payment of the debt at any time. The court held the transfer of stock to be a pledge, with all its incidents, except as varied — 159 — by the contract between the parties. In that case there was no time fixed for a payment of the monej^ borrowed, and no contingency prescribed in which the power to sell was to be exercised. The stock was stated in a recital in the written contract to have been deposited as collateral security, with authority to sell the same on the non-performance of the promise to pay the money, without notice. It was held that the pledgor had, by his contract, waived the right to notice of the sale of the stock, but was entitled to a demand of payment of the money, to secure which it was deposited, before the pledgee could lawfully sell. The court said : “ It is well settled that, where no time is expressly fixed by contract between the parties for the payment of a debt secured by a pledge, the pawnee cannot sell the pledge without a previous demand of payment, although the debt is technically due immediately. Story on Bailments, § 308; Stearns v. Marsh, 4 Denio, 227.” In Brewster v. Hartley, 37 Cal. 15, the question for decision was, whether McLane, who held certain shares of the stock which were transferred to him as trustee for Wells, Fargo, & Co., by the railroad company, to secure money loaned by them to the company, could lawfully vote such stock in the election of directors of the railroad company. In order to decide this question, the court examined into the nature of the transaction by which the stock was transferred to McLane, to determine whether it was a pledge or a mortgage, and concluded that it was a pledge, whereby the general property in the stock remained in the railroad company as its owner, and, therefore, that it could not under the charter of the company be voted by McLane, who did not hold it as owner. The transaction was this : By resolution of the directors ten thousand shares of the stock of the railroad company were issued to McLane, as trustee for Wells, Fargo, & Co., as security for money advanced by them to said company, and McLane gave his written obligation to return the stock to the company on payment of the indebtedness to Wells, Fargo, & Co. No power was vested in McLane to sell the stock. No time was fixed for payment of the money due to Wells, Fargo, & Co. McLane, although called “ trustee ” in the transaction, was a mere agent of the creditors, and delivery of the stock to him was — 160 — the same as a delivery to the creditors, as held by the court. So that it was treated by the court as a mere pledge of stock by the company to Wells, Fargo, & Co., as security for'money loaned, with the legal incidents of a pledge. The case at bar is widely different from that. In it there was no transfer of securities to the creditor, but to a trustee, who was made the agent of the owner, and armed with full power of disposition, to the end that a sale might be made and the proceeds applied as directed by the instrument evidencing the transfer. There was no putting of the creditor in possession of the securities, except as a mere custodian of them for Winston, the agent of appellant. The appellee had neither title, possession, except mere custody as a depositary for Winston, nor any control whatever of the securities transferred. In McLemore v. Hawkins, 46 Miss. 715, it was not controverted that the transaction was a pledge. The parties so denominated it in making it, and it was so treated by counsel and court. There was no dispute as to its character. The controversy was as to the rights of parties with respect to the pledge, and not whether or not there was a pledge. We have examined all of the authorities relied on for the appellant, and have not found any to sustain his claim, that his transaction with Winston was a pledge. The particular examination of the cases cited by counsel for the appellant, made above, points out the manifest distinction between them and this case. There is a strong resemblance between it and Milliken v. Dehon, 27 N. Y. 364, which presents what the court, in its opinion, denominated “ a peculiar contract between the parties,” “ to be construed according to its own language and circumstances,” and therefore not to be governed by the “ rules at best only applicable to relations of strict and simple pledgor and pledgee; ” language which, we think, is appropriate to the case at bar, and decisive of it. In a case of “ strict and simple ” pledge the law applicable to pledges must govern the rights of the parties to it, but to apply these rules to the transfer made by the appellant to Winston would be to disregard the plain terms of the written contract, and fritter away the rights of the parties in a too close adhesion to rules established by the courts to govern the transaction known as a — 161 — mere pledge or pawn, in which the subject of the pledge is delivered to the pledgee as a security, and to be re-delivered when it has served its purpose. Our task in the examination of this case was made - easy and pleasant by the very learned and exhaustive arguments of counsel on both sides, which made plain onr way to the conclusion reached. Judgment affirmed.