Baker v. Burkett

Stockdale, J., delivered the opinion of the court. The appellee has still an equitable interest in the note which was transferred to Louis Cobn & Bros. Wheeler v. Newbould, 16 N. Y., 392; Joliet Iron & Steel Co. v. Scioto Fire Brick Co., 82 Ill., 548; Jenness v. Bean, 10 N. H., 266. The pledgee, or holder of a note as collateral security, is not liable for impairment or loss of the pledge, and cannot be required to credit the amount on his debt, unless he acts in bad faith or with faulty discretion. Wells v. Wells, 53 Vt., 1. The pledgee is bound to exercise ordinary diligence only. He will not be liable for the loss of the collateral unless negligence can be proved on him. Lamberton v. Windom, 12 Minn., 232. The pledgee can use his own discretion as to whether he will sue on the collateral, and before he can be made liable for the pledge, it must be shown that he used faulty discretion, or was wilfully negligent. The pledgee has the right to determine for himself as to the occasion and mode of enforcing payment of the collateral securities so long as he acts in good faith and in the exercise of a reasonable judgment and discretion, in view of the rights and interest of the pledgor. And if the owner of the collateral be dissatisfied, because the pledgee does not proceed to collect the same, the owner himself may do so, giving [93] proper indemnity. Colebrooke on Collateral Securities, p. 116, et seq. We see no reason why complainant should be denied the right to collect his credits and pay his debts. The contention that he has only a remedy at law, unless he goes to the county where the administration is, is not tenable. This is an original equity proceeding to enforce an equitable right. Complainant in the case at bar having an equitable interest in the pledge, and the holder having refused to sue upon it, he has the right to have the note collected and placed as a credit on his debt to Cohn & Bros. The bill alleges that he cannot pay the debt now, and, therefore, wants the pledged note collected and placed to his credit. It would be a hardship on him to require him to delay collection and risk the possible insolvency of Cohn & Bros., and the possible waste .of the estate of Cannon, the maker of the note pledged, and to be compelled to enter into an expensive and vexatious suit to determine whether Cohn & Bros, were guilty of negligence in case of the loss of the pledged note by delay. In short, he has the right to have his business settled up, and his debts paid, by application of his assets to their payment. We think the complainant, under the facts set up in his bill and admitted by the demurrer, is entitled to proceed to collect his debt against the appellant, and we cannot see how anyone can be harmed by it. The judgment of the court below is affirmed, with leave to defendant to answer within sixty days from the filing of the mandate of this court in the court below.