UNIVERSITY 
 
 OF CALIFORNIA 
 
 LOS ANGELES 
 
 SCHOOL OF LAW 
 LIBRARY
 
 A TREATISE 
 
 ON THE LAW OP THE 
 
 CONTRACT OF PLEDGE 
 
 AS GOVERNED BY BOTH THE 
 
 Common Law and the Civil Law. 
 
 By henry DENIS, 
 
 Of the New Orleans Bar, 
 
 Professor of Civil Law at the Tulane 
 University of Louisiana, 
 
 NEW ORLEANS: 
 
 PUBLISHERS. 
 1898.
 
 3)/ 
 
 [ C { c 
 
 Entered according to Act of Congress, in the year 1898, by 
 
 F. F. HANSELL & BRO., LTD., 
 
 In the office of the Librarian of Congress, at Washington, D. C. 
 
 3^1 544 
 
 PRESS OF ELECTROTYPED BV 
 
 L GRAHAM 8c SON, LTD., T. A. SLATTERV & BRC, 
 
 NEW ORLEANS, LA. „^^ ORLEANS, LA.
 
 4o 
 
 PREFACE, 
 
 I would not have thought of writing at this late day a book on the 
 Contract of Fledge of the Common Law exclusively. Several treatises 
 have already been published on that subject. Text- books, besides, are 
 too often mere repetitions of one another. My object in this work is to 
 arrive at a better knowledge and understanding of the law of Pledge of 
 the Common Law by comparing it with the law of Pledge of the Civil 
 Law, from which it descends. The comparative study of scientific 
 subjects is always profitable, whether it is that of comparative 
 anatomy or that of comparative jurisprudence. Both Judge Story and 
 Mr. Schouler in their Treatises on Pledges recognized the relative 
 obscurity and uncertainty of the Common Law on that subject, and 
 suggested that assistance could be derived for its better understanding 
 from the knowledge of the Civil Law. This is my reason, and, if 
 necessary, my excuse, for presenting this book to the consideration of 
 the Bench and Bar of this country. 
 
 HENRY DENIS.
 
 TABLE OF CONTENTS. 
 
 CHAPTER I. 
 
 l*A<iKS. 
 
 Introduction. Real and personal securities. Contract of 
 pledge known to the Mosaic Law. Origin of the word 
 2)ledge. Pigmis of the Roman Law. Growing importance 
 of personal property. Hence the great importance of the 
 pledge in modern times. It is the pivot of commerce. 
 Difference between the chattel mortgage and pledge. Con- 
 fusion in Common law in this respect. M'o confusion in 
 the Civil law. Equitable liens of the Common law have 
 encroached upon the law of pledge and caused a departure 
 from its fundamental principles 1-21 
 
 CHAPTER II. 
 
 Nature and subject matter of the pledge. What things may 
 be pledged. Possession of the pledge by pledgee is indis- 
 pensable. Therefore what can not be delivered to him can 
 not be pledged. A thing maybe sold which can not be 
 pledged. Incorporeal things could not be pledged under 
 the Roman. They may be imder modern Civil law and 
 under the Common law. Transfer of incorporeal things, 
 when a sale and when a pledge. Xotice to debtor of claims 
 indispensable in the Civil law. Xot necessary in the Com- 
 mon law. Real rights in the Civil law may be immovable 
 or movable. Only the latter can be pledged 28-86 
 
 CHAPTER III. 
 
 Things in expectancy or which have a mere potential exist- 
 ence can not be pledged because possession can not be 
 given to the pledgee. Error of Judge Story on this subject 
 in respect to the Civil law. Difference between the pledge 
 and the mortgage of the Roman law as shown by Domat. 
 Also by Troplong. Fulucia of the Roman law 8>S-4.t 
 
 CHAPTER IV. 
 
 Can rights of inheritance be pledged ';:' In the Civil law. rights 
 of inheritance can not be the subject of a contract by the
 
 vi Table of Contents. 
 
 PAGES. 
 
 heir while the ancestor is alive. The prohibition is founded 
 on reasons of morality and public order. Not so in the 
 Common law. There, the sole (luesti'on is the sufficiency of 
 interest in the heir to form the consideration of a contract. 
 In the Civil law, the rights of inheritance after the death of 
 the ancestor may be pledged by the heir if the estate is 
 composed of personal property. A lease of real estate may 
 be pledged. A patent of invention may be pledged. Works 
 of the mind may be pledged 47-iil 
 
 ' CHAPTER V. 
 
 A pledge may be given <o secure the fulfilment of any ob- 
 ligation, besides the payment of money. It may be given 
 also to secure the debt of another person than the 
 pledgeor. In that case the pledgeor is not personally 
 bound. lies non persona debet. The pledge being an ac- 
 cessory contract falls with the principal. Accesfiorihm 
 seqiHtur principale. In case of the pledge securing an 
 immoral agreement, the pledgeor has no right of action to 
 recover the thing pledged 6;:J-77 
 
 CHAPTER VI. 
 
 Forms and essentials of the pledge. At Common law the 
 contract may be verbal. In the Civil law, except in com- 
 mercial transactions, the pledge must be evidenced by an 
 act or deed in writing, stating the amount of the debt and 
 describing the thing pledged. Deliverj- to the pledgee is 
 indispensable. He must receive and retain possession. 
 And his possession must be ostensible and free from doubt 
 or ambiguity 79-90 
 
 CHAPTER VII. 
 
 Pledge in form of a sale. Valid both in the Common and 
 
 Civil 'aw, if it contains all the requirements of the pledge. 91-100 
 
 CHAPTER VIII. 
 
 Contracts of securitj' which are neither pledges nor mort- 
 gages. Pignorative transactions in which the debtor 
 makes a simulated sale of his property to secure the creditor. 
 In the absence of fraud or injury to third persons these 
 contracts have been held valid. But they create no right 
 of preference in favor of the creditor 101-107
 
 Table of Contexts. vii 
 
 CHAPTER IX. 
 
 PAGES. 
 
 Delivery and possession of the pledge. Any ambiguity in 
 the character of the pledgee's possession may invalidate 
 the pledge. Several instances of pledges set aside by the 
 courts for that reason. Possession of the pledge may be 
 given to a third person for account of the pledgee. The 
 pledgenr himself may in some cases be the detainer ad hoc 
 for the benetit of the pledgee 109-120 
 
 (CHAPTER X. 
 
 Possession by the pledgee is indispensable for the validity of 
 the pledge, but the possession may precede or follow the 
 contract. When it follows it, the pledge attaches from 
 that moment. Roman law on that point. Substitution of 
 the thing pledged valid. Delivery and possession of the 
 pledge may be symbolical or tietitious. Possession of 
 goods in a store valid by delivery of the keys of the store. 
 This doctrine criticised by some writers. Possession of 
 goods by delivery of bill of lading. Possession of things 
 too bulky to be delivered corporeally valid by signs of pos- 
 session 121-132 
 
 CHAPTER XI. 
 
 Possession of incorporeal things. Difference between the 
 Common law and the Civil law. In the former mere deliv- 
 ery of title to creditor sufticient. In the latter, notice of 
 the transfer of title must be given to the debtor of the credit 
 or claim. Rights or claims which are not evidenced bv 
 title can not be the subject of a pledge. Discussion of 
 this point between French writers. Sale of rights which 
 are not evidenced by title valid as such. But can such 
 sale validly cover the contract of pledge? Common law 
 and Civil law authorities In8-14S 
 
 CHAPTER Xn. 
 
 The possession of the pledgee being precarious, as he does 
 not possess as owner, he can never, under the Civil law, 
 acquire the ownership of the pledge by occupation or 
 usncapio through the longest prescription. Xor can the 
 pledgeor ever obtain the release of the debt by the i»-e- 
 scriptio liberandi causn , as long as the pledge remains in the 
 hands of the pledgee, because this is a continuous acknowl- 
 edgment of the obligation which suspends the course of
 
 viii Table of Contents. 
 
 FAUES. 
 
 presoription. Interesting discussion of French writers 
 on ttiis point, when the character of the possession has 
 changed b}' paj-nient of the debt, the pledge being still 
 left in the hands o-f the pledgee 1 49-154 
 
 CHAPTER XIII. 
 
 Under the Common law, the pledgeor is debarred by no length 
 of time from the right of demanding the return of the 
 pledge on payment of the debt. And the pledgee never 
 acquires the ownership of the thing pledged except by 
 foreclosure of the pledge. Yet, in direct contradiction of 
 the principle, some writers, and among them Judge Story, 
 say that after a long lapse of time, if the pledgeor makes 
 no claim for redemption, the right will be presumed to be 
 extinguished, and the pledge will remain absolutely the 
 property of the pledgee. Under the Civil law. prescription 
 is based upon the presumption of payment, and therefore 
 when the debt is prescribed the pledge lapses. Under the 
 Common law, it is only the right of action which is barred 
 by limitation, and the debt remains alive after the right to 
 sue is barred ]5.")-ltU 
 
 CHAPTER XIV. 
 
 Rights and obligations of the pledgee. The act in writing, 
 which, under the Civil law. is necessary in the contract 
 of pledge, is only intended to protect third persons. 
 Between the parties themselves the pledge is valid without 
 the writing. The thing pledged is in the hands of the 
 pledgee on deposit. He has therefore no right to use it. 
 under the rules of the Civil law. In the words of the 
 Roman law. Si creditor pignore utatur farUim committit. 
 Case of the banker Mires condemned to imprisonment by 
 the French Courts for wrongfully disposing of the securi- 
 ties pledged to him. Exceptions to the rule that the 
 pledgee has no right to use the pledge ... l(i.5-17<i 
 
 CHAPTER XV. 
 
 tSubpledge or Repledge by Pledgee. On principle, to sub- 
 pledge or repledge is to make use of the pledge, and there- 
 fore it is violative of the contract. Troplong favors the 
 repledging of goods in commercial transactions. When a 
 bank repledges the collaterals in localities where it is cus- 
 tomary to do it. the pledgeor is presumed to have tacitly
 
 Table of Contents, ix 
 
 PAGES. 
 
 consented to it. The custom in such cases enters into the 
 contract. The Roman law allowed the pledgee to sub- 
 pledge to his own creditor 177-182 
 
 CHAPTER XVI. 
 
 Right of the pledgee to use the pledge under the common 
 law. The law writers say that the pledgee may use the 
 pledge if it is not damaged thereby. Source of the common 
 law jurisprudence on this point. Lord Holt held that the 
 pledgee could use the pledge at his own peril. The ruling 
 repeated by Sir William Jones and Justice Buller. Con- 
 demnation of this reasoning by Judge Story. Preponder- 
 ance of authorities in the United States that the pledgee 
 may subpledge the collaterals to secure his own debt 183-189 
 
 CHAPTER XVU. 
 
 Tortious pledge of another person's property. In the fraud- 
 ulent pledge of negotiable paper by an agent of the 
 owner, if the pledgee is in good faith and without notice 
 of adverse rights, the defrauded owner has no recourse 
 against the pledgee. For the pledge of other property than 
 negotiable paper, the law of England, the United States 
 and Louisiana protects the true owner against the pledgee 
 in good faith, under the rule that nobody can transfer a 
 right which he himself does not own. But in France and 
 other continental countries in Europe, which followed its 
 legislation, the possession of movable or personal property 
 is equivalent to title, and, therefoi'e, the pledgee in good 
 faith is protected against the true owner of property 
 pledged by an unauthorized pledgeor 191-19i> 
 
 CHAPTER XVIII. 
 
 Right of pledgeor to demand the return of the pledge on 
 account of unauthorized use of the same; the rule is 
 based upon the principles of the law of contract. English 
 decisions opposed to it. Even when the pledgee has made 
 an improper and wrongful use of the pledge, the pledgeor 
 is relegated to an action for damages under the authority 
 of the English cases. This is a clear departure from the 
 principles of the contract of pledge 197-206 
 
 CHAPTER XIX. 
 
 Right of other creditoi's of the pledgeor to seize the pledge. 
 In the Civil law the right of retention of the pledge spring-
 
 X Table of Contents. 
 
 PAGES. 
 
 ing from the law and the contract, only affects the 
 pledgeor. Against him the pledgee may retain the 
 pledge until it is foreclosed. But neither the law nor the 
 contract prevent third persons from seizing the pledge in 
 the hands of the pledgee, if the value of the thing pledged 
 exceeds the debt, and the rights of preference of the 
 pledgee may be protected in the seizure and sale of the 
 pledge. 
 
 At Common law the other creditors of the pledgeor can not 
 seize or attach the pledge as long as it is unforeclosed in 
 the hands of the pledgee. The right of retention of the 
 latter is absolute. In some States of the Union the Com- 
 mon law has been amended by statute and the pledge may 
 be attached in those States, subject to the lien of the 
 pledgee. 
 
 The pledgee is not bound to surrender the pledge to the as- 
 signee of the pledgeor. Jurisprudence of the Supreme 
 Court of the United States; Jurisprudence of Louisiana 207-211 
 
 CHAPTER XX. 
 
 The pledgee must take proper care of the pledge. He is not 
 responsible for the lUjht fmtlt. His care must be the same 
 that he would take of his own property. He is entitled to 
 the expenses incurred in preserving the pledge and has a 
 lien for those expenses. 
 
 In the Civil law the pledgee has the right to demand a new 
 pledge if the first is insufficient, or the immediate payment 
 of the debt, even if the latter is not yet due. Not so in the 
 Common law; there, the pledgee caa only demand the 
 rescission of the contract, and damages if he suffers any 223-234 
 
 CHAPTER XXI. 
 
 The power of attorney to sell the pledge is not revoked by 
 the bankruptcy or death of the pledgeor. Doctrine of the 
 power of attorney, coupled with an intex'est of the Common 
 law. Procurator in rem suam, of the Civil law. What inter- 
 est, with which the power of attorney is coupled, will pre- 
 vent the revocation. The interest must be in the subject 
 itself. Case of Hunt vs. Rousmanier's Administrators. 
 Authority of Chief Justice Marshall. In the Civil law the 
 rule is absolute. No distinction is made between the 
 interest in the subject and the interest in the proceeds 235-243
 
 Table of Contents. xi 
 
 CHAPTER XXII. 
 
 PAGES. 
 
 The pledge is indivisible. Every portion of the thing 
 pledged secures every part of the debt. The principle is 
 of the nature of the contract of pledge, but not of its 
 essence. The parties may, by agreement, render the 
 pledge divisible. The consequence of the indivisibility of 
 pledge is that, in case of death of the pledgeor, if one of his 
 heirs pay his share of the debt, he can not demand the 
 release of the pledge for the amount paid 245-24H 
 
 CHAPTER XXni. 
 
 What debt is secured by the pledge. In default of an agree- 
 ment to the contrary. The pledge only secures the debt for 
 which it is given. The retention of the pledge by the 
 pledgee after payment of the debt is wrongful and entitles 
 the pledgeor to an action for damages. In France and other 
 countries of the Civil law, the pledge secures, in default of 
 an agreement to the contrary, the other debts of the 
 pledgeor to the pledgee, provided they are contracted pos- 
 teriorly to the pledge and are due before the debt origi- 
 nally pledged. Roman law on this point 247-2.51 
 
 CHAPTER XXIV. 
 
 The pledgee can not by previous agreement appropriate the 
 pledge to himself, in default of payment. Both the Com- 
 mon and the Civil law forbid it. The Lex Commissoria of 
 the Roman law. Intended to protect the debtor against 
 the greed of the creditor. But, after the debt has become 
 due, the debtor can transfer the thing pledged to the credi- 
 tor in payment 2o3-2(iO 
 
 CHAPTER XXV. 
 
 Right of the pledgee to have the pledge sold. By agreement, 
 the pledge may be sold without the intervention of the 
 courts, at private sale, by the pledgee himself, on the 
 terms and conditions fixed in the contract. Error of Mr. 
 Jones and Mr. Edwards in regard to the sale of the pledge 
 in Louisiana 2Gl-2(i.") 
 
 CHAPTER XXVI. 
 
 Right of the pledgee to buy the pledge. The parties may 
 agree that in default of payment, the pledgee will have the 
 right to cause the thing pledged to be sold at public or
 
 xii Table of Contents. 
 
 PAGES. 
 
 private sale, with or without notice, through an agent, or bv 
 the pledgee himself, and that he may himself buy it. All 
 such agi'eements are valid and are now in daily practice 267-2(i9 
 
 CHAPTER XXYII. 
 
 Commercial Pledges. Even under the Civil law, the written 
 act or deed of pledge is not necessary in commercial 
 pledges. Delivery of negotiable paper payable to bearer, 
 or endorsed if payable to endorser, constitutes the pledge 
 of it. The pledgee of negotiable paper without notice is a 
 holder for value. Even the pledge of such paper by a 
 factor without authority is valid. The law merchant pre- 
 vails in such cases 271-282 
 
 CHAPTER XXVIIl. 
 
 Comnieicial pledges under the law of France and other 
 countries of the Civil law. No writing necessary. Xo 
 foreclosure of the pledge other than the sale of the thing 
 after eight days to the debtor. Article of the Code of 
 Commerce of the German Empire protects the pledgee in 
 good faith even against the true owner. The Code of 
 Commerce of the Netherlands does the same thing 283-289 
 
 CHAPTER XXIX. 
 
 Pledges of bills of lading. It is more properly the merchan- 
 dise which is pledged by the pledge of the bill of lading. 
 Possession of the goods is given to the pledgee by tx'ansfer 
 of the bill of lading. The common carrier holds the 
 goods for account of whomever is the transferee of 
 the bill of lading. His possession is that of such trans- 
 feree. Yet the latter is only the ap-parent owner of the 
 goods when he is a pledgee. Erroneous expressions of 
 certain decisions of the Supreme Court of the United 
 States which speak of the o-wnership of the pledgee of 
 bills of lading. Bills of lading in this country, except in 
 the State of Maryland, are only </«asj'-negotiable instru- 
 ments. The assignee of them has only the rights which 
 the assignor had. Attempts in some States to make bills 
 of lading fully negotiable nullified by the courts 291-313 
 
 " CHAPTER XXX. 
 
 Bills of Lading under the Civil law. In France and the coun- 
 tries of Europe which followed her legislation, the holder
 
 Table of Contexts. xiii 
 
 PAGES. 
 
 in good faith of a bill of lading is entitled to tlie goods 
 again<t the ti-ue owner, even if the bill of lading has been 
 fraudulently transferred. The bill of lading has, therefore, 
 in those countries the elements of full negotiabilitj-. The 
 principle was first based upon the necessities of com- 
 merce, and was recognized and enforced in the early 
 days of Italian jurisprudence. Casaregis and Deluca 315-319 
 
 CHAPTER XXXI. 
 
 A bill of lading is at the same time a receipt for the goods and 
 a contract to carry them, The contract is entered into at 
 the place where the bill is drawn, and it is executed at the 
 place where the goods are delivered. When the lex loci 
 contractus is not the same as the lex loci solutionis, which is 
 to govern in cases of bills of lading? Doctrine of the lex 
 loci sohitionis under both the Common law and Civil author- 
 ities 321-337 
 
 CHAPTER XXXII. 
 
 Pledge of warehouse receipts. Like the bill of lading the 
 warehouse receipt is a muniment of title. The holder 
 of it is eiititled to the possession of the goods, and the 
 warehouseman holds them vicariously for him. The two 
 subjects are to some extent governed by the same prin- 
 ciples. Warehouse receipts are also 5««si-negotiable. 
 The pledge of the receipt is the pledge of the goods. The 
 assignee or transferee of it has the same rights that the 
 assignor or transferror bad. Such is tae law in the United 
 States, except in the State of Maryland, where the bona fide 
 holder of a warehouse receipt is protected against the true 
 owner, even if the receipt was fraudulently transferred. 
 Law of Louisiana. Law of Xew York. Indicia of ownership 339-359 
 
 CHAPTER XXXIII. 
 
 Law of France for warehouse receipts 361-363 
 
 CHAPTER XXXIV. 
 
 Pledge of corporate stock. Both under the Common law and 
 the Civil law corporate stock may be pledged. It was a 
 subject of doubt for a long time whether that kind of prop- 
 erty could legally be pledged. Is the mere delivery of the 
 certificate of shares sufijcient to constitute a pledge of the 
 stocky It is so in jjouisiana by statute. It seems to be the
 
 xiv Table of Contents. 
 
 PAGES. 
 
 general opinion that in the other States there must be a 
 written transfer of the stock to the pledgee. The transferee, 
 in such ease, if the transfer is made on the books of the cor- 
 poration, is liable in the same manner as a stockholder. 
 Such is the case with pledgees of stock of the national 
 banks. Recent decisions of the Supreme Court of the 
 United States showing how such liability may be avoided 
 by pledgees .3(i5-ii79 
 
 CHAPTER XXXV. 
 
 Pledgee of corporate stock entitled to the dividends, but he 
 must account for them; they reduce the debt protanto. 
 Pledgee of stocks not obliged to return the same specific 
 shares ; he may deliver to the pledgeor instead, stocks of the 
 same kind and value. Such is the jurisprudence in this 
 country and in England. It is clearly a departure from the 
 true principles of the contract of pledge. The agreement 
 between the parties that the pledgee may return something 
 equivalent to the pledge, but not the specific thing pledged, 
 is valid according to the Civilians, but the contract in that 
 case is not that of the pledge properly speaking . :-^81-:-iS7 
 
 CHAPTER XXXVI. 
 
 Pledges of policies of insurance. A policy of insurance being 
 a chose in action may be pledged at Common law by mere 
 delivery to the pledgee ; but only so when it is payable to 
 the person named in the policy. Under the Civil law. as 
 the pledge must be evidenced by an act in writing, stating 
 the amount of the debt secured, is the simple endorsement 
 and delivery sufficient? The pledge by transfer of the 
 policy is not binding on the insurer; but, in such case, it is 
 the transfer which is not valid without the consent of the 
 insurer, not the pledge 389-895 
 
 CHAPTER XXXVII. 
 
 Pledge of policies of insurance to a person who has no inter- 
 est in the life of the insured. Early days of life insurance. 
 The principle is settled that no policy can originally issue 
 to a person who has no interest in the life of the insured. 
 Bat after being validly issued to one having the required 
 interest, can it be transferred to one having no interesty The 
 United States Supreme Court has decided that such trans- 
 fer is invalid. The jurisprudence of rhe State of Xew
 
 Table op Contents. xv 
 
 -tr 1 • 1 ■ rn PAGES. 
 
 \ ork IS Otherwise. The principle underlying this question 
 is whether the life insurance is a contract of indemnity, or 
 a mere contract to pay a sum of money in consideration of 
 the premiums, af the death of the insured. Jurisprudence 
 of England settled in the latter sense. Recognition of the 
 same doctrine in France 897-408 
 
 CHAPTER XXXVni. 
 
 Under the rule established by the Supreme Court of the 
 United States, that the pledgee of a policy of life insurance 
 has an interest in the life of the insured only to the extent 
 of his debt, he is obliged to return to the pledgeor the excess 
 of insurance money recovered under the policy. But when 
 the creditor himself has insured the life of his debtor, for 
 his own account, and has paid the premiums out of his own 
 funds, is he entitled to the whole amount of the policy if it 
 exceeds the debt? Decided in the afiirmative in France 409^11 
 
 CHAPTER XXXIX. 
 
 Pledge of Margins. The Common law jurisprudence has estab- 
 lished the rule that when a broker purchases stocks or 
 goods for account of a customer, who deposits a margin 
 with him, as security, the contract of pledge takes place 
 tacitly between them. The margin deposited constitutes 
 the pledge, as well as the shares of stock and the goods, if 
 the same are delivered by the seller to the broker. The 
 implication of the understanding of the contracting parties 
 arises from the custom of the locality. The Court of Xew 
 York has been prominent in establishing this jurispru- 
 dence 413-422 
 
 (CHAPTER XL. 
 
 The doctrine of the implied contract of pledge between the 
 broker and his customer in the purchase of slocks or 
 goods which the former carries for the latter, was adopted 
 by the court of Connecticut and carried farther than it 
 was by the court of New York. In the Connecticut cases 
 it was held that the broker was not under any obligation of 
 keeping the identical stocks purchased for the customer, 
 and that, provided he was ready to deliver stocks of the 
 same kind to the customer at the redemption of the 
 pledge, his duties as pledgee were not violated. The 
 iionvt of Massachusetts refused to recognize this doctrine.... 42;-5-431
 
 xvi Table of Contents. 
 
 CHAPTEK XLI. 
 
 PAGES. 
 
 Pledge? by factors. At Common law the rule is that a 
 factor to whom property is consigned for sale has no au- 
 thority to pledge it. In the early part of the present 
 century, the rule was changed in England by statute. The 
 necessities of commerce demanded it. English Factors* 
 Acts. The titate of Xew York soon followed the example 
 of England, and in 1830, its Factor's Act was passed. 
 This law did not afford complete security to the pledgee. 
 The State of Massachusetts took a more decided position 
 on this subject by its legislation. Efforts of the Legislature 
 in Louisiana to protect the pledgee in transactions with 
 factors .433-447 
 
 CHAPTER XLn. 
 
 In the Civil law no distinction is made in pledges of factors, 
 depositories, common carriers, or other possessions of per- 
 sonal or movable property generally. Such was the .rule 
 of the old commercial law in some countries of Europe 
 during the middle ages. Casaregis and Cardinal Deluca 
 quoted. Troplong on the same subject. French Code of 
 Commerce. Tendency of the Common law to protect the 
 true owner against the pledgee in good faith. Opposite 
 doctrine of the Ci\il law. to protect the pledgee in good 
 faith against the true owner. Pledge by factors of negoti- 
 able paper valid against the owner. Indicia of ownership. 449-464 
 
 CHAPTER XLllI. 
 
 Liens at Common law and Tacit pledges of the Civil law. Sim- 
 ilarity of the two subjects. In both cases the right of pref- 
 erence and priority of the creditor rests upon possession. 
 The denomination of tacit pledge hardly a correct one. 
 The pledge is necessarily contractual. Privilegia of the 
 Roman law. Explanation of statutory pledge. Lien at law 
 and tacit pledge of the lessor, the artisan, the inn-keeper, 
 the common carrier, etc. The lien resulting from judicial 
 seizure. Pignns coactiviim of the Roman law 465-477 
 
 CHAPTER XLIV. 
 
 Lien from seizure under the Common law. Difference be- 
 tween the Civil and the Common in respect to notice of 
 seizure to debtor of the credit seizure. Su«h notice indis- 
 pensable in the Civil law to create the lien. In the Com-
 
 Table of Contents. xvii 
 
 I'AliES. 
 
 nion law the lien arises from the seizure independently of 
 the notice. Origin of the word lien. Right of retention 
 of the lessee's property for the rent. Distress at Common 
 law. Exemptions from seizure for rent 479-490 
 
 CHAPTER XLV. 
 
 Equitable liens of the Common law. Privileges of the Civil 
 law. Similarity of the two subjects. In both cases the 
 creditor has a right of preference and priority over the 
 proceeds of the property ; but in neither case is he put in pos- 
 session of it. The equitable lien is derived from the hypoth- 
 cca of the Romans. The pignux and the fidncia. In both 
 of these contracts of security the creditor was in possession 
 of the property, and the debtor suffered in consequence 
 from the deprivation of il and the neglect or mismanage- 
 ment of it by the creditor. This was remedied by the 
 hypothem. Mature of the equitable liens. Recent decisions 
 of the Supreme Court of the United States 49I-.W2 
 
 CHAPTER XLVI. 
 
 Continuation of the subject of Equitable Liens, Professor 
 Pomroy. Privile<na of the Roman law, Domat. Code 
 Napoleon and Civil Code of Louisiana provide for Privi- 
 leges; they are of strict law and interpretation. Decisions 
 in Louisiana. Difficulties of the vital question in that State 
 when equitable liens are claimed in the Federal courts. 
 Can they be recognized and enforced within the territory 
 of a State of which the municipal law forbids them? The 
 Supreme Court of the United States, and the Court of Ap- 
 peals abstained from deciding the question .503-517 
 
 CHAPTER XLVn. 
 
 Although the doctrine qi Equity is not systematized in Lou- 
 isiana as it is in England and in the States of the Com- 
 mon law, yet it is recognized and applied in that SSate. 
 Its peculiar admixtion of law and equity has been well 
 stated and explained by Mr. Hennen in his Digest. Re- 
 marks of Merlin and of Chief Justice Hale on Equity .519-527
 
 LIST OF AUTHORS CITED. 
 
 COMMON LAW. 
 
 Addison on Contracts. 
 Benjamin on Sales. 
 Brandt on Suretyship. 
 Burge on Suretyship. 
 Chitty on Contracts. 
 Colebrookon Collateral Soouriiies. 
 Cook on Stock and Stockholders. 
 Dicey, Conflict of Laws. 
 Dos Pasos on Stock Brokers. 
 Drake on Attachment. 
 Edwards on Bailments. 
 Fonblanque, Equitj^ 
 Jones on Mortgages. 
 Jones on Pledges. 
 Joyce on Insurance. 
 Kent Commentaries. 
 Lowton on Bailments. 
 
 Marksby, Elements of Law. 
 
 May on Insurance. 
 
 Mechem on Agency. 
 
 Overton on Liens. 
 
 Parsons on Contracts. 
 
 Pomeroy, Equity Jurisprudence. 
 
 Porter on Bills of Lading. 
 
 Schouler on Bailments. 
 
 Story on Agency. 
 
 Story on Bailments. 
 
 Story on Conflict of Laws. 
 
 Story on Contracts. 
 
 Story, Equity .Jurisprudence. 
 
 Tiedeman on Mortgages. 
 
 "Waterman on Corporations. 
 
 Wharton on Conflict of Laws, 
 
 Wharton on Contracts. 
 
 CIVIL LAW. 
 
 Aubry et Kau. Droit Civil. 
 Baudry-Lacantinerie, Du Xan- 
 tissement. 
 
 Baudry-Lacantinerie, Des Privi- 
 leges et Hypotheques. 
 
 Casaregis, De Credito. 
 
 Colmet de Santerre, Commen- 
 taries. 
 
 Demolombe, Des Biens. 
 
 De St. Joseph, Concordance des 
 Codes Civils. 
 
 Domat. Des Gages. 
 
 Domat, Des Prescription. 
 
 Ducaurroy, Instituts Expliques. 
 
 Duranton, Droit Civil. 
 
 Fuzier-Herman, Code Civil. 
 
 Goirand, French Code of Com- 
 merce. 
 
 Granger, Des Hypotheques. 
 
 Larombiere, Des Obligations. 
 Laurent, Du Gage. 
 Laurent, Des Obligations. 
 Laurent, De la Prescription. 
 Locre, Vol. VUI, p. 106. 
 
 Marcade De la Prescription. 
 Marcade, De la Vente. 
 Merlin, Repertoire. 
 Montesquieu, Esprit des Lois. 
 Mourlon, Examen Critique. 
 Ortolan, Instituts. 
 Pont, Du Nantissement. 
 Pont, Des Privileges. 
 Pothier, Du Nantissement. 
 Pothier, Des Obligations. 
 Pothier, Pandectes. 
 Pothier, De la Possession. 
 Pothier, Du Louage. 
 Pothier, De la Vente. 
 Kogron, Code Civil Explique. 
 Savigny, Droit Romain. 
 Toullier, Droit Civil. 
 Troplong, Du Cautionnement. 
 Troplong, Du Nantissement. 
 Troplong De la Prescription. 
 Troplong, De la Privileges. 
 Troplong, De la Vente.
 
 TABLE OF CASES CITED. 
 
 j^ 
 
 PAGE 
 
 Abbott VS. Goodwin 120 
 
 Adams vs. Bowerman 461 
 
 Adams, Joy vs 158 
 
 Adams vs. Sturges 248 
 
 Adams, Vermilye vs 195, 280 
 
 Agnew vs. Johnson 195 
 
 Albert, Matthews vs 373 
 
 Allen, Bush & West vs. Nettles 
 
 243, 237, 97 
 
 Allen, Mutual Company vs 406 
 
 Allen vs. Smith 120 
 
 Allen vs. St. Louis Bank 
 
 436, 437, 439, 446 
 Am. D. & T. Co., Corn Exchange 
 Bank vs 341 
 
 PAGE 
 
 Am. D. & T. Co., Hanover Bank 
 
 vs 341 
 
 Anderson, Thibodaux vs 99 
 
 Anderson vs. Warehouse Co 372 
 
 Andrews vs. Pond 321 
 
 Antoine vs. Smith 71 
 
 Argote's Succession 55 
 
 Arick vs. Walsh 488 
 
 Armstrong, Cammack vs 401 
 
 Arnold vs. Brown 479 
 
 Association Co., City Bank vs 390 
 
 Auje vs. Variol 210 
 
 Austin, Howe vs 99 
 
 Ayres & Reed Co. vs. Dor?ey Co.. 300 
 
 Bagley vs. Sheriff 246 
 
 Bain vs. Brown 268 
 
 Baker vs. Drake 127 
 
 Baker vs. Drake et al 425 
 
 Baker, Merrifield vs 390 
 
 Baker, IS'eevins vs 389 
 
 Baker vs. Smith 106 
 
 Baldwin vs. Bradley 249, 246 
 
 Baldwin vs. Ely 461 
 
 Bank, Burnap vs 248 
 
 Bank vs. Dean et al 341 
 
 Bank, Deering vs 390 
 
 Bank, Emery vs 296 
 
 Bank vs. Fisher 296 
 
 Bank vs. Galley 341 
 
 Bank, Givanovich vs 280, 349, 461 
 
 Bank vs. Hanson 248 
 
 Bank vs. Harkness 120 
 
 Bank vs. Harris 248 
 
 Bank vs. Hingham Co 373 
 
 Bank, Holmes vs 296 
 
 Bank vs. Janin 110, 98 
 
 Bank vs. Kelly 296 
 
 Bank vs. Knapp 154, 26 
 
 Bank vs. Laird 246 
 
 Bank, Latham vs 390 
 
 Bank vs. Loeb 249, 248 
 
 Bank vs. Logan 296 
 
 Bank, Loyd vs 248 
 
 Bank vs. Marshall 82 
 
 Bank, Means vs 300 
 
 Bank vs. Meyer 296 
 
 Bank vs. Maureau et als 510 
 
 Bank vs. Moreau 507 
 
 Bank vs. Nomeyer 296 
 
 Bank, Gates vs 280 
 
 Bank, Railroad Co. vs 280 
 
 Bank of Randall, Means vs 47, 13 
 
 Bank, Rowan vs 231 
 
 Bank, Saloy vs 349, 461 
 
 Bank, Searight vs 248 
 
 Bank, Soule vs 390 
 
 Bank, State vs 482,507, 510 
 
 Bank, Stern vs 280 
 
 Bank, Stern Bros, vs 191 
 
 Bank, Thompson vs 383 
 
 Bank vs. Vanderhorst 282, 274 
 
 Bank vs. Wiltz 248
 
 XXll 
 
 Table of Cases Cited. 
 
 PAGE 
 
 Banking Co., Lewis vs 300 
 
 Banking Co., Woolly vs 248 
 
 Bannen, Wilson vs 154 
 
 Barber, Starret vs 231 
 
 Barker, Delauney vs 435 
 
 Barnard vs. Campbell 461 
 
 Barton, Roscarrick vs 556 
 
 Batner, Herrins vs 395 
 
 Bauze, Senecal vs 249 
 
 Baxter, Parker vs 461 
 
 Bay, Codington vs 280 
 
 Bayard, llomero vs 249 
 
 Beck & Co. vs Brady et al 477 
 
 Beer, Gunibel vs 296 
 
 Belknap vs. Gleason 158 
 
 Beltran & Co., Webre Syndic vs.. .509 
 
 Benjamin, Succession of 513 
 
 Bennett, Geddes vs 118 
 
 Bernard, Coggs vs 206, 186 
 
 Best, Waller vs 479 
 
 Billet vs. Woods 248 
 
 Bird vs. Cockren 191, 280 
 
 Blanc vs. Herzog 154, 26 
 
 Blanchard, Landry vs 507 
 
 Blanchard, White vs 210 
 
 Blevins, Farmers' Bank vs 341 
 
 Bodley, Goodrich vs 470 
 
 Boldero, Godsall vs 406 
 
 Bombach vs. Insurance Co 401 
 
 Boone, Wallis vs 210 
 
 Bossiere, Kennedy vs 70 
 
 Bouchereau, LeBlanc vs 106 
 
 Bowerman, Adams vs 461 
 
 Bowers, Taylor vs 77 
 
 FA.GE 
 
 Bowman, Dewey vs 59 
 
 Bovce. National Bank vs 341 
 
 Boyd vs. Chaffe 71 
 
 Boyd, Uardin vs ,158 
 
 Boynton vs. Payroux 127 
 
 Bovson AS. Coles 435 
 
 Bradley, Baldwin vs 249, 246 
 
 Bradley, Lee vs 133 
 
 Brady et al., Beck & Co. vs 477 
 
 Breaux, Jauresvs 210 
 
 Brewster vs. Hartley 148 
 
 Brockway vs. Express Co 324 
 
 Brother vs. Saul 215 
 
 Brown, Arnold vs 479 
 
 Brown, Bain vs 268 
 
 Brown, Finn vs 372 
 
 Brown vs. Ins. Co 161 
 
 Brown, Walker vs 497 
 
 Brownrigg, Navulshaw vs 437 
 
 Bruce vs. Forbes 390 
 
 Bry, Hanna vs 31 
 
 Bryant, State Bank vs 341 
 
 Buckley, Hanchetfc vs 341 
 
 Building Association vs. Fergu- 
 son 282 
 
 Bullard, Gause vs 482 
 
 Burdon Sugar Ketining Co. vs. 
 
 Pavne 517 
 
 Burdrich et als., Seewall vs ...300, 296 
 
 Burgess vs. Seligman 374 
 
 Burham vs. C. V. S. Co :..341, 387 
 
 Burke, Forbes vs 55 
 
 Burnap vs. Bank 248 
 
 Burnes, Greenbaum vs 341 
 
 o 
 
 C. V. S. Co., Burham vs 341, 387 
 
 Caffin vs. Kirwan 57 
 
 Cammack vs. Armstrong 401 
 
 Campbell, Bernard vs 461 
 
 Campbell vs. Slidell 215 
 
 Capel, Cooper vs 488 
 
 Caperton vs. McComick 120 
 
 Carraby, Gravier vs 71 
 
 Carriere, Tua vs 477 
 
 Carter vs. Merrill & Co 341, 357 
 
 Cartwrightvs. Wilmerdin..439, S5S, 355 
 
 Case, Henderson vs 191 
 
 Case vs. Kloppenburg .<»487 
 
 Case, National Bank vs 370 
 
 Casey vs. Cavaroc..516, 220, 113, 97. 
 
 95, 80, 15 
 
 Casey vs. Credit Mobilier 216 
 
 Casey, Martin vs 507 
 
 Cavaroc, Casey vs..516, 220, 113, 97, 
 
 95, 80 15 
 
 Cerf, Windham vs 71 
 
 Cassation, Court of 318, 297, 93, 54 
 
 Chaffe, Boydvs 71 
 
 Chaffe & Sons vs, DuBose 175 
 
 Chapman vs. Mclllrath 390 
 
 Cliester, Taylor vs 73 
 
 Chicago Dock Co. vs. Foster 358 
 
 Citizens Bank of La. vs. Cotton 
 
 Press Co 468 
 
 Citizens Bank of La. vs. Heirs of 
 
 Gray 468 
 
 Citizens Bank vs. Maureau 482 
 
 City Bank vs. Ass. Co 390 
 
 Clark, France vs 383 
 
 Clark et al., Hubert vs 26 
 
 •Clark, Hulbert vs 158
 
 Table op Cases Cited. 
 
 XXlll 
 
 PAGE 
 
 Clark, McCalla vs 231 
 
 Clark vs. Iselin 95 
 
 Cochran & Co. vs. Walker 507 
 
 Cockren, Bird vs 191, 280 
 
 Codington vs. Bay 280 
 
 Coevdrey vs. Vandenberg 280 
 
 Coggsvs. Bernard 206, 186 
 
 Coldeleugh vs. Johnson 158 
 
 Coles, Boyson vs 435 
 
 Coles, Martini vs 300, 435 
 
 Colgate & Co. vs. Penn & Co..300, 29S 
 
 Collins vs. Dauley 390 
 
 Collins vs. Pellerin 106 
 
 Collins vs. Kalli 357 
 
 Combs vs. Tutchett 120 
 
 Commercial Bank vs. Hunt 341 
 
 Comstock vs. Hier 280 
 
 Conger vs. Xew Orleans 154, 26 
 
 Corn Exchange Bank vs. Am. D. 
 
 & T. Co 341 
 
 Conner vs. Creyham 313 
 
 Conner vs. Hile 313 
 
 Connors, Watts vs 320 
 
 Conrad vs. Fisher 341 
 
 Consolidated Association, Forstall 
 
 vs 468 
 
 Cook vs. Tullis 216 
 
 Cooper vs. Capel 488 
 
 Cooper vs. Roy 206 
 
 PAGE 
 
 Corcoran, Hall vs 73 
 
 Corlet vs. Underwood 431 
 
 Corning, Porter vs 215 
 
 Cosgrove, Lawler & Hugh vs 106 
 
 Cotton Press Company, Citizens 
 
 Bank vs 468 
 
 Cotton Press Company, St. Romes 
 
 vs 31 
 
 County vs. Huchburger 248 
 
 Court of Cassation 318, 297, 93, 54 
 
 Cox vs. United States 326, 321 
 
 Crain vs. Paine 390 
 
 Credit Lyonnais, Jacobi vs 324 
 
 Credit Mobilier, Casey vs 216 
 
 Creditors, Delogny vs 511 
 
 Creditors, Fields vs 484 
 
 Creditors, Hanna vs 477 
 
 Creditors, Jacquet vs 237, 117 
 
 Creditors, Lallande vs 298, 442 
 
 Creditors, Levert vs 71 
 
 Creditors, Marsin vs 84 
 
 Creditors, Martin vs 341 
 
 Creditors, Renshaw vs 262, 237, 97 
 
 Creyham, Conner vs 313 
 
 Crouley vs. Insurance Co 390 
 
 Crowley vs. Savings Bank 461 
 
 Currier vs. Howard 390 
 
 Cutter, Rice vs 312 
 
 ID 
 
 Dalby vs. India and London Life 
 
 Insurance Co 407 
 
 Daniels, Thayer vs 32 
 
 Daubigny vs. Duval 435 
 
 Dauley, Collins vs 390 
 
 Davies, McCombic vs 435 
 
 Davis vs. Holbrook 71 
 
 Davis, Peugh vs 260 
 
 Davis, Stewart vs 73 
 
 Davis, Warnock vs 401 
 
 Daws vs. Kidder 313 
 
 Dean et al.. Bank vs 341 
 
 Dean vs. Martin 71 
 
 Dearborn, Tucker vs 296 
 
 Deblieux et al.. Mineral Water 
 
 Company vs 379 
 
 DeBlois vs. Reiss 85 
 
 Deering vs. Bank 390 
 
 Delauney vs. Barker 435 
 
 Delaware, The 321 
 
 Delgadovs. Wilbur 305, 296 
 
 Delogny vs. Creditors 511 
 
 Deloach vs. Jones 133 
 
 Delop & Co. vs. Windsor & Ran- 
 
 doph 98 
 
 D'Meza's Succession 48 
 
 Dewey vs. Bowman 59 
 
 Dillon vs. Poirier 488 
 
 Ditson vs. Randall 358 
 
 Dixon vs. National Life Ins. Co.. .405 
 
 Dolhonde's Succession 175 
 
 Dolliver, Thompson vs 47, 12 
 
 Donaldson vs. Fan-ell 213 
 
 Donald vs. Suckling 205, 203, 188 
 
 Dorsey Co., Ayres& Reed Co. vs. 300 
 
 Drake, Baker vs 127 
 
 Drake et a!.. Baker vs 425 
 
 Drake, Stewart vs 385 
 
 Dreyfus, Freiburg vs 88 
 
 Dry Dock Co., Insurance Co. vs... .378 
 
 DuBose, Chaffe & Sons vs 175 
 
 Ducasse vs. McKenna 175 
 
 Dunlap, Pepper vs 240 
 
 Duval, Daubigny vs 435
 
 XXIV 
 
 Table of Cases Cited. 
 
 E 
 
 PAGE 
 
 Eckel vs. Reros 405 
 
 Edson vs. Freret 477 
 
 Elder vs. Rouse 246 
 
 Ellis vs. Kreutzinger 395, 389 
 
 Elton, Pritchard vs 260 
 
 Ely, Baldwin vs 461 
 
 Euiery vs. Bank 296 
 
 PAGE 
 
 Enions, Miller vs 52 
 
 Estate, Handy's 56 
 
 Express Co., Brockway vs 324 
 
 Express Co., Fitzsimmons vs 269 
 
 Eycleshimer, Stover vs 53 
 
 Ezekiel, Schiff vs 488 
 
 IF- 
 
 Farmers' Bank vs. Blevins 341 
 
 Farwell, Donaldson vs 213 
 
 Feagin, Schiffer vs 248 
 
 Fenley vs. Pritchard 127 
 
 Fei'guson, Building Association vs 282 
 
 Fielding vs. Kymer 435, 300 
 
 Fields vs. Creditors 484 
 
 Finch vs. Mansfield ...329 
 
 Finn vs. Brown 372 
 
 Fishe, Hazard vs 358, 341 
 
 Fisher, Bank vs 296 
 
 Fisher, Conrad vs 341 
 
 Fisher vs. Gardely 210 
 
 Fisher vs. Kyle 73 
 
 Fisher vs. Seligman 374 
 
 Fitzpatrick vs. Insurance Co 405 
 
 Fitzsimmons vs. Express Co 269 
 
 Flagg vs. Mann 496 
 
 Florshein Bros. vs. Howell, Phelps 
 
 & Co 128 
 
 Forbes, Bruce vs 390 
 
 Forbes vs, Burke 55 
 
 Forstall vs. Consolidated Associa- 
 tion 468 
 
 Forsyth et al., Union Bank vs 263 
 
 Foster, Chicago Dock Co, vs 358 
 
 Fourth Street Bank vs. Yardley ... 499 
 
 France vs. Clark 383 
 
 Freiburg vs. Dreyfus 88 
 
 Freret, Edson vs 477 
 
 o 
 
 Gaither, Gates vs 99 
 
 Galley, Bank vs 341 
 
 Gates vs. Gaither 99 
 
 Gay vs. Moss 95 
 
 Gause vs. Bullard 482 
 
 Gayarre vs. Tunnard 484 
 
 Geddes vs. Bennett 118 
 
 Gerdau, Soltan vs 357, 457, 462 
 
 Gibson vs. Stevens 358, 341 
 
 Gibson vs. Warden 215 
 
 Gill vs. Kymer 300, 435 
 
 Gillet et al. vs. Whiting 426 
 
 Gillet vs, Whitney ..127 
 
 Gilpin vs. Howell 385 
 
 Givanovich vs. Bank 349,280, 461 
 
 Gleason, Belknap vs 158 
 
 Gloster, Morton vs 73 
 
 Godsall vs. Boldero 406 
 
 Goodrich vs. Bodley 470 
 
 Goodwin, Abbot vs 120 
 
 Goodwin vs. Loan Co 280, 441 
 
 Gottlieb vs. Hartman 195 
 
 Gordely, Fisher vs 210 
 
 Gover, Price vs 385 
 
 Grant, Shaw & Co. vs 507 
 
 Gravier vs. Carraby 71 
 
 Green, King vs 73 
 
 Greenbaum vs. Burnes 341 
 
 Griswold vs. Seligman 374 
 
 Gruman vs. Smith 127 
 
 Guichard vs. Morgan. 300 
 
 Grant, Insurance Co. vs 390 
 
 Greenwell vs. Haydon 273 
 
 Guerdon, Norwood vs 390 
 
 Guibert, Lloyd vs 324 
 
 Guichard vs. Morgan 435 
 
 Gumbel vs. Beer , 296
 
 Table of Cases Cited. 
 
 XXV 
 
 h: 
 
 PAGE 
 
 Hale vs. Milwaukee Dock Co 341 
 
 Hall vs. Coresran 73 
 
 Halliday vs. Holgate 206 
 
 Halsey vs. Warden 296 
 
 Hamlet, Sumner vs 120 
 
 Hanchett vs. Buckley 341 
 
 Hancock vs. Insurance Co 158, 26 
 
 Handy's Estate 56 
 
 Hanna vs. Bry 31 
 
 Hanna vs. Creditors 477 
 
 Hanover Bank vs. Am. D. & T. Co..341 
 
 Hanson, Bank vs 248 
 
 Hardie vs. Wrio;ht 248 
 
 Hardin vs. Boyds 158 
 
 Harkness, Bank vs 120 
 
 Harris, Bank vs 248 
 
 Harris, Parker & Co. vs. Nicolo- 
 
 poalo 347, 343 
 
 Hart, Taussig vs 385 
 
 Hartley, Brewster vs 148 
 
 Hartman, Gottlieb vs 195 
 
 Hawkins, Lewis vs 158 
 
 Hay don, Greenwell vs 273 
 
 Haves, Wood vs .385 
 
 Hazard vs. Fishe 358, 341 
 
 Hazzard, Life Insurance Co. vs 401 
 
 Heber vs. Thompson 99 
 
 Heerins vs. Batner 395 
 
 Heirs of Gray, Citizens Bank of 
 
 Louisiana vs 468 
 
 Henderson vs. Case 280, 191 
 
 Hentz vs. Miller 357 
 
 Hertz, Yickers vs 437 
 
 Herzog, Blanc vs 154, 26 
 
 Hier, Comstock vs 280 
 
 Hile, Conner vs 313 
 
 PAGE 
 
 Hilliker vs. Kuhn 120, 117 
 
 Hills vs. Smith 231 
 
 Hilton vs. Tucker 127 * 
 
 Hingham Co., Bank vs 373 
 
 Hobson vs. Trevor 52 
 
 Hodgkin, U. S. Mutual Ass'n vs.. .405 
 
 Hogan vs. Sompayrac 48, 38 
 
 Holbrook, Davis vs 71 
 
 Holgate, Halliday vs 206 
 
 Holmes vs. Bank 296 
 
 Holton & Winn vs. Hubbard & Co..348 
 
 Honold vs. Meyer 461, 313 
 
 Hornor vs. Sheriff 210 
 
 Horton vs. Morgan 385 
 
 Hoss et al. vs. Williams 482 
 
 Howard, Cun-ier vs 390 
 
 Howe vs. Austin 99 
 
 Howe vs. Powell 106 
 
 Howell, Gilpin vs 385 
 
 Howell, Phelps & Co., Florshein 
 
 Bros, vs 128 
 
 Howland vs. Woodruff 357, 439 
 
 Hubbard & Co., Holton & Winn 
 
 vs 348 
 
 Hubert vs. Clark et al 26 
 
 Huchburger, County vs 248 
 
 Hughes, Hyllested &Co. vs. Klin- 
 gender Bros 98 
 
 Hulbert vs. Clark 158 
 
 Hunt, Commercial Bankvs 341 
 
 Hunt vs. Eousmanier 238, 97 
 
 Hunt & Macauley vs. Railroad 
 
 Co 320, 309 
 
 Husband, Marotvs 210 
 
 Hyde, Stockton vs 477 
 
 India and London Life Insurance 
 
 Co., Dalby vs 407 
 
 Ingersoll et al., Williams etal. vs.. 34 
 
 Ingraham, Lallande vs 133 
 
 Insurance CJo., Bombach vs. 401 
 
 Insurance Co., Brown vs 161 
 
 Insurance Co., Crowley vs 390 
 
 Insurance Co, vs. Dry Dock Com- 
 pany 378 
 
 Insurance Co, Fitzpatrick vs 405 
 
 Insurance Co. vs. Grant 390 
 
 Insurance Co, Hanesck vs 158, 26 
 
 Insurance Co. vs. Kijer 346, 341 
 
 Insurance Co., Lynde vs 395 
 
 Insurance Co., Norton vs 390 
 
 Insurance Co., Sherman vs 390 
 
 Insurance Co., Webster vs 390 
 
 Insurance Co., Wheeler vs 519, 515 
 
 Iselin, Clarke vs 95 
 
 Israel, Turner vs 300
 
 XXVI 
 
 Table of Cases Cited. 
 
 PAGE 
 
 Jackson vs. Lemie 106 
 
 Jackson, Parsons vs 280 
 
 Jacobi vs. Credit Lyonnais 324 
 
 Jacquet vs. Creditors 237, 117 
 
 James, Poche vs 479 
 
 Janin, Bank vs 110, 98 
 
 Jarvis, Joslin vs 269 
 
 Jarvis vs. Rogers 249, 248, 188 
 
 Jaudon, Markhain vs 127, 420, 421 
 
 Jaures vs. Breaux 210 
 
 Jaures vs. Pike 69 
 
 Jenness, Peck vs 477 
 
 PAGE 
 
 Jerome vs. McCarter 265, 236, 213 
 
 .Jewett vs, Warren 132 
 
 Jones, Deloach vs 133 
 
 Jones, Moore & Janney vs 373 
 
 Johnson, Agnew vs 195 
 
 Johnson, Coldcleugh vs 158 
 
 Johnson, Pitotvs 378, 377 
 
 Johnson vs. JStear 206 
 
 Johnson vs. Van Epps 401 
 
 Joslin vs. Jarvis 269 
 
 Joy vs. Adams ,„„„ 158 
 
 ik: 
 
 Kaltenback vs. Lewis 437 
 
 Kelly, Bank vs 296 
 
 Kennedy vs. Bossiere 70 
 
 Ketchum vs. ISt. Louis 502 
 
 Keyes et al., Olmstead vs 405 
 
 Kidder, Daws vs 313 
 
 Kidder, Moore vs 358 
 
 Kijer, Insurance Co. vs 346. 341 
 
 Kimbal, Stokell vs ...401 
 
 King vs. Green 73 
 
 Kirkpatrick & Co. vs. Oldham 210 
 
 Kirwan, CaflQn ys 57 
 
 Kittridge vs. "Warren 479 
 
 Klingender Bros., Hughes, Hy ne- 
 sted tt Co. vs 98 
 
 Kloppenburg, Case vs 487 
 
 Knapp, Bank vs 154, 26 
 
 Knowlton, ISpring Co. vs 77 
 
 Knox, Tiedman vs 311, 342 
 
 Kreutzinger, Ellis vs 389, 395 
 
 Kuhn, Hillikervs 120, 117 
 
 Kyle, Fisher vs 73 
 
 Kymer, Fielding vs 300, 435 
 
 Kymer, Gill vs 300, 435 
 
 Labanrie vs. Woods 488 
 
 Labouisse vs. Rope Co 507 
 
 Lacombe, Steward vs 489 
 
 Laird, Bank vs 246 
 
 Lalaurie et als., Morris et al. vs 507 
 
 Lallande vs. Ingraham 133 
 
 Lallande vs. His Creditors 298, 442 
 
 Laloirevs. Wiltz 248 
 
 Lamar vs. Micon 326 
 
 Lambeth, Moore vs 313 
 
 Lambert, Youngvs 341 
 
 Lanaux' Succession 112 
 
 Landry vs. Blanchai'd 507 
 
 Latham vs. Bank 390 
 
 Lathrop, Ogden vs 206 
 
 Lawler & Hugh vs. Cosgrove 106 
 
 Lawrence vs. Maxwell 206 
 
 LeBlanc vs. Bouchereau 106 
 
 Lecroy vs. Waite 385 
 
 Lee vs. Bradley 133 
 
 Le Merchant vs. Moore 383 
 
 Lemle, Jackson vs 106 
 
 Leristones, Wickham vs 114 
 
 Levert vs. Creditors 71 
 
 Levy vs. Wise 70 
 
 Lewis vs. Banking Co 300 
 
 Lewis vs. Hawkins 158 
 
 Lewis vs. Mott 188 
 
 Lewis, Kaltenback vs 437 
 
 Life Insurance Co. vs. Hazzard 401 
 
 Little, Wilson vs 147 
 
 Liverpool Steam Co. vs. Phoenix 
 
 Ins. Co 333, 324 
 
 Lloyd vs. Guibert 324 
 
 Loan Company, Goodwin vs.. 280, 441 
 
 Loan and Trust Co., Pauly vs 376 
 
 Loeb, Bank vs 249, 248 
 
 Logan, Bank vs 296 
 
 London Joint Bank vs. Simmons.. 300 
 
 Loyd vs. Bank 248 
 
 Lynde vs. Insurance Co 395 
 
 Lynn, Penney vs 56
 
 Table of Oases Cited. 
 
 xxvii 
 
 :m: 
 
 PAGE 
 
 Macon Bank, Nesbit vs 369 
 
 Mann, Flag^ vs 496 
 
 Mansfield, Finch vs 329 
 
 Markham vs. Jaudon 127, 420, 421 
 
 Marot vs. Husband 210 
 
 Marshall, Bank vs 82 
 
 Marshall, Tanneret vs 71 
 
 Marth vs. Whitmore 268 
 
 Martin vs. Casey 507 
 
 Martin vs. Coles 435 
 
 Martin vs. Creditors 84, 341 
 
 Martin, Dean vs 71 
 
 Martin vs. Stebbins 405 
 
 Martini vs. Coles 300 
 
 Matthews vs. Albert 373 
 
 Matthews & Finlay vs. Their Cred- 
 itors 474 
 
 Matthews, Finlay & Co. vs. Ruth- 
 erford 287, 90 
 
 Maureau, Citizens Bank vs ...482, 510 
 
 Maxwell, Lawrence vs 206 
 
 Means vs. Bank of Randall 300, 
 
 47, 13 
 
 Merrifield vs. Baker 390 
 
 Merrill, Palmer vs 390 
 
 Merill & Co., Carter vs 341, 357 
 
 Meyer, Bank vs 296 
 
 Meyer, Honold vs 313, 461 
 
 PAGE 
 
 Meyers vs. Schuman 405 
 
 Micon, Lamar vs 326 
 
 Milford, Milford vs 216 
 
 Miller vs. Emons 52 
 
 Miller, Hentz vs 357 
 
 Miller vs. Shotwell 106, 102 
 
 Milwaukee Dock Co., Hale vs 341 
 
 Mineral Water Co. vs. Deblieux et 
 
 al 379 
 
 Mitchell vs. Winslow 216 
 
 Monticon vs. Mullen 31 
 
 Moore & Janney vs. Jones 373 
 
 Moore vs. Kidder 358 
 
 Moore vs. Lambeth 313 
 
 Moore, Le Merchant vs 383 
 
 Moreau, Bank vs 507 
 
 Morgan, Guichard vs 300, 435 
 
 Morgan, Horton vs 385 
 
 Morris et al vs. Lalaurie et als 507 
 
 Morris vs. Sheriff 24& 
 
 Morris, Ware vs 106 
 
 Morton vs. Gloster 73 
 
 Moss, Gay vs 95 
 
 Mott, Lewis vs 188 
 
 Mullen, Monticon vs 31 
 
 MuUer vs. Ponder 281 
 
 Murphy vs. Red 405 
 
 Mutual Company vs Allen 405 
 
 IMCc 
 
 McCalla vs. Clark 231 
 
 McCarter, Jerome vs 265, 236, 213 
 
 McCombic vs. Davies 435 
 
 McCormick, Caperton vs 120 
 
 McCullough vs. Roots 341 
 
 Mcllrath, Chapman vs 390 
 
 McKenna, Ducasse vs 175 
 
 IsT 
 
 National Bank vs. Boyce 341 
 
 National Bank vs. Case 370 
 
 National Life Insurance Co. , Dixon 
 
 vs 405 
 
 Navulshaw vs. Brownrlgg 437 
 
 Nelson & Co. vs. Simpson 477 
 
 Nesbit vs. Macon Bank 369 
 
 Nettles, Allen, Bush & West vs. 
 
 243, 237, 97 
 
 Neevins vs. Baker 389 
 
 Neven vs. Roup 132 
 
 New Orleans, Conger vs 154, 26 
 
 Newsom vs. Thornton 435, 300 
 
 Nicolopoalo, Harris, Parker & "" 
 
 Co. vs 347, 343 
 
 Nickerson, Pope vs 324 
 
 Nisbit vs. Trust Co 120 
 
 Nomeyer, Bank vs 296 
 
 Northampton, Salt vs 390 
 
 Norton vs. Insurance Co 390 
 
 Norton. Pritchard vs 326 
 
 Norwood vs. Guerdon 390
 
 XXVlll 
 
 Table of Cases Cited. 
 
 O 
 
 PAGE 
 
 Gates vs. Bank 280 
 
 Ogden vs. Lathrop 206 
 
 Oldham, Kirkpatrick & Co. vs 210 
 
 Olmstead vs. Keyes et al 405 
 
 Ory, Winchester vs 133 
 
 Paine, Grain vs 390 
 
 Palmer vs. Merrill 390 
 
 Parker vs. Baxter 461 
 
 Parsons vs. Jackson 280 
 
 Pauly vs. Loan and Trust Co 376 
 
 Payne, Burdon Sugar Ref. Co. vs.. 517 
 
 Payroux, Boynton vs 127 
 
 Peek vs. Jenness 477 
 
 Pellerin, Collins vs 106 
 
 Peninsular Co. vs. Shand 324 
 
 Penn Co., Colgate & Co. vs 300, 296 
 
 Penney vs. Lynn 53 
 
 Pepper vs. Dunlap 246 
 
 Peugh vs, Davis 260 
 
 Phoenix Ins. Co., Liverpool Steam 
 
 Co. vs 333, 324 
 
 Piclievs. James 479 
 
 Pickens vs. Sheriff 487 
 
 Piffet et als.. Publishing Co. vs 470 
 
 Pike, Jaures vs 69 
 
 Pitot vs. Johnson 378, 377 
 
 Pollard vs. Vinton 321, 299 
 
 Pond, Andrews vs 321 
 
 Ponder, 31uller v? 281 
 
 Pope vs. Xickerson 324 
 
 Porter vs. Oorring 215 
 
 Powell, Howe vs 106 
 
 Price vs. Cover 385 
 
 Pritehard vs. Elton 260 
 
 Pritchard, Fenlev vs 127 
 
 Pritehard vs. Xorton 326 
 
 Publishing Company vs. Piffet et 
 
 als 470 
 
 Putnam vs. Upton 370 
 
 IR 
 
 Railey vs. Row 231 
 
 Railroad Co. vs. Bank 280 
 
 Railroad Co., Hunt-McCauley vs. 
 
 320, 309 
 Railroad Companj', Shaw vs.. .307, 
 
 319, 445 
 
 Railroad Co., Woodward vs 114 
 
 Ralli, Collins vs 357 
 
 Randall, Ditson vs 358 
 
 Ray, Cooper vs 206 
 
 Red, Murphy vs 405 
 
 Reiss, DeBlois vs 85 
 
 Renshaw vs. Creditors 262, 237, 97 
 
 Reros. Eckel vs 405 
 
 Rice vs. Cutter 312 
 
 Rice vs. Wood 269 
 
 Richardson vs. Bank,. 296 
 
 Ritter vs. Smith 405 
 
 Robb vs. Wagner 488 
 
 Rogers, Jarvis vs 249, 248, 188 
 
 Romero vs. Bayard 249 
 
 Roots, McCullough vs 341 
 
 Rope Company. Labouisse vs 507 
 
 Roscarrick vs. Barton 556 
 
 Roup, Neven vs 132 
 
 Rouse, Elder vs 246 
 
 Rousmanier. Hunt vs 238, 97 
 
 Rousseau, Succession of 482 
 
 Row, Railey vs 231 
 
 Rowan vs. Bank 231 
 
 Russell, Shropshire vs 507 
 
 Russell vs. Southard 260 
 
 Rutherford, Matthews. Finiey & 
 Co. vs ; 282, 90 
 
 s 
 
 Saloy vs. Bank 461 
 
 Salsy vs. Bank 349 
 
 Salt vs. Northampton 390 
 
 Saul, Brother vs 215 
 
 Savings Bank, Crowley vs 461 
 
 Savings Bank, Tucker vs 273
 
 Table of Cases Cited. 
 
 XXIX 
 
 PAGE 
 
 Savings Co., Talty vs 18S 
 
 Savings Institution, Yeatinan vs.. .213 
 
 Sawver vs. Upton 370 
 
 Schiff vs. Ezekiel 488 
 
 Schiffer vs. Feagin 248 
 
 Schuman, Meyers vs 405 
 
 Scudder vs. Union Bank 321, 326 
 
 Searight vs. Bank 248 
 
 Seawall vs. Burdrich et als ....300, 296 
 
 Seligman, Burgess vs 374 
 
 Seligman, Fisher vs 374 
 
 Seligman, Griswold vs 374 
 
 Senecal vs. Bauze 249 
 
 Shand, Peninsular Co. vs 324 
 
 Shaw vs. Railroad C0....445, 319, 307 
 
 Shaw vs. Silloway 158 
 
 Shaw & Co. vs. Grant 507 
 
 Sheriff, Hornor vs 210 
 
 Sheriff, Morris vs 246 
 
 Sheriff, Pickens vs 487 
 
 Sheriff vs. Stoddard 429 
 
 Sherman vs. Insurance Co 390 
 
 Shotwell, Miller vs 106, 102 
 
 Shropshire vs. Russell 507 
 
 Silloway, Shaw vs 158 
 
 Simpson, Nelson & Co. vs 477 
 
 Skiff vs. Stoddard 429, 425, 385 
 
 Slaughterhouse Co., Smith vs 378 
 
 Slidell, Campbell vs 215 
 
 Slocomb, Union Bank vs 248 
 
 Smith, Allen vs 120 
 
 Smith, Antoine vs 71 
 
 Smith, Baker vs 106 
 
 Smith, Gruman vs .127 
 
 Smith, Hills vs 231 
 
 Smith, Eitter vs 405 
 
 Smith vs. Slaughterhouse Co 378 
 
 Soltau vs. Gerdau 457 
 
 Sompayrac, Hogan vs 48, 38 
 
 Soule vs. Bank 390 
 
 Soltau vs. Gerdau 357,462 
 
 Southard, Russell vs 260 
 
 Spring Co. vs. Knowlton 77 
 
 PAGE 
 
 Spruance, Tewbury vs 268 
 
 St. Louis Bank, Allen vs 
 
 446, 439, 437, 436 
 
 St, Louis, Ketchum vs 502 
 
 St. Romes vs. Cotton Drew Co 31 
 
 Starret vs. Barber 231 
 
 State vs. Bank 482, 507, 510 
 
 State vs. Tomlinson 390 
 
 State Bank vs. Bryant 341 
 
 Steamer, Swasey & Co. vs 507 
 
 Stear, Johnson vs 206 
 
 Stebbins, Martin vs 405 
 
 Stern vs. Bank 280 
 
 Stern Bros. vs. Bank 191 
 
 Stevens, Gibson vs 358, 341 
 
 Stevens vs. Warren 401 
 
 Stevens vs. Wilson 439 
 
 Steward vs. Lacombe 489 
 
 Stewart vs. Davis 73 
 
 Stewart vs. Drake 385 
 
 Stockton vs. Hyde 477 
 
 Stoddard, Sheriff vs 429 
 
 Stoddard, Skiff vs 385, 429, 425 
 
 Stokell vs. Kimbal 401 
 
 Stone, Succession of 474 
 
 Stout vs. Yager Milling Co 390 
 
 Stover vs. Eycleshimer 53 
 
 Sturges, Adams vs 248 
 
 Succession, Argote's 55 
 
 Succession of Benjamin 513 
 
 Succession, D'Meza's 48 
 
 Succession, Dolhonde's 175 
 
 Succession, Lanaux' 112 
 
 Succession of Rousseau 482 
 
 Succession of Stone 474 
 
 Succession of Walsh 508 
 
 Suckling, Donald vs 205, 203, 188 
 
 Suit vs. Woodhall 329 
 
 Sumner vs. Hamlet 120 
 
 Sumner, Whitaker vs 206 
 
 Swasey & Co. vs. Steamer 507 
 
 Swift vs. Tyson „ 280 
 
 T 
 
 Talty vs. Savings Co 188 
 
 Tanneret vs. Marshall 71 
 
 Taussig vs. Hart 385 
 
 Taylor vs. Bowers 77 
 
 Taylor vs. Chester 73 
 
 Tewbury vs. Spruance 268 
 
 Texas vs. White 195, 280 
 
 Thames, The 321 
 
 Thayer vs. Daniels 32 
 
 The Delaware 321 
 
 The Thames 321 
 
 Thibodauxvs. Anderson 99 
 
 Thompson vs. Bank 383 
 
 Thompson vs. Dolliver 47, 12 
 
 Thompson, Heber vs 94 
 
 Thompson vs. Toland 385 
 
 Thornton, Newsom vs 300, 435 
 
 Tibbotts, Whitney vs 132
 
 XXX 
 
 Table op Cases Cited. 
 
 PAGE 
 
 Tiedman vs. Knox 311, 342 
 
 Toland, Thompson vs 385 
 
 TomlinsoD, State vs 390 
 
 Torne}^ Worthington vs 385 
 
 Trebiloch, Upton vs 370 
 
 Trevor, Hobson vs 52 
 
 Trumbal, Trust Co. vs 120 
 
 Trumbull, Union Trust Co. vs 300 
 
 Trust Co., Nisbit vs 120 
 
 Trust Co. vs. Trumbal 120 
 
 PAGE 
 
 Tua vs. Carriere 477 
 
 Tucker vs. Dearborn 29(> 
 
 Tucker, Hilton vs 127 
 
 Tucker vs. Savings iBank 27^ 
 
 Tullis, Cook vs 216 
 
 Tunnard, Gayarre vs 484 
 
 Turner vs. Israel 300 
 
 Tutchett, Combs vs 120 
 
 Tyson, Swift vs 280 
 
 TJ 
 
 Upton, Putnam vs 370 
 
 Upton, Sawyer vs 370 
 
 Upton vs. Trebiloch 370 
 
 Upton, Webster vs 360 
 
 Union Bank vs. Forsyth et al 263 
 
 Union Bank, Scudder vs 321, 320 
 
 Union Bank vs. Slocomb 248 
 
 Union Trust Company vs. Trum- 
 bull * 300 
 
 United States, Cox vs 326, 321 
 
 Underwood, Corlet vs 431 
 
 U. S. Mutual Association vs. 
 Hodgkin 405 
 
 ^7" 
 
 Vandenberg, Coevdrey vs 280 
 
 Vanderhorst, Bank vs 282, 274 
 
 Van Epps, Johnson vs 401 
 
 Variol, Auje vs 210 
 
 Vermilj^e vs. Adams 195, 280 
 
 Vickers vs. Hertz 437 
 
 Vinton, Pollard vs 321, 299 
 
 "W^ 
 
 Wagner, Robb vs 488 
 
 Waite, Lecroy vs 385 
 
 Walsh, Arick vs 488 
 
 Walker vs. Brown 497 
 
 Walker, Cochran & Co. vs 507 
 
 Walker vs. Walker 241 
 
 Waller vs. Best 479 
 
 Walsh, Succession of 508 
 
 Warden, Gibson vs 215 
 
 Warden, Halsey vs 296 
 
 Ware vs. Morris 106 
 
 Warehouse Co., Anderson vs 372 
 
 Warnock vs. Davis 401 
 
 Warren, Jewelt vs 132 
 
 Warren, Kittredge vs 479 
 
 Warren, Stevens vs '. 401 
 
 Watts vs. Connors 326 
 
 Weil vs. Insurance Co 390 
 
 Webre, Syndic, vs. Beltran«fcCo....509 
 
 Webster vs. Insurance Co 390 
 
 Webster vs. Upton 370 
 
 Wheeler vs. Insurance Co 515, 519 
 
 Whitaker vs. Sumner 206 
 
 White vs. Blanchard 210 
 
 White, Texas vs 195, 280 
 
 White, Whitten vs 22& 
 
 Whiting, Gilletet al. vs 426 
 
 Whitney, Gillet vs 127 
 
 Whitney vs. Tibbotts 132 
 
 Whitmore, Marth vs 268 
 
 Whitten vs. White 226 
 
 Wilbur, Delgado vs 305, 296 
 
 Wickham vs. Leristones 114 
 
 Williams et al. vs. Ingersoll 34, 502 
 
 Willis vs. Boone 210 
 
 Wilmerding, Cartwright vs 355, 
 
 358, 439 
 
 Wilson vs. Bannen 154 
 
 Wilson vs. Little 147 
 
 Wilson, Stevens vs 439 
 
 Wiltz, Bank vs 248 
 
 Wiltz, Laloire vs 248 
 
 Winchester vs. Ory 133 
 
 Windham vs. Cerf 71
 
 Table of Cases Cited. 
 
 XXXI 
 
 PAGE 
 
 Winslow, Mitchell vs 21(5 
 
 Windsor & Randolph, Delop & 
 
 Co. vs 98 
 
 Wise, Levy vs 70 
 
 Wright, Hardie vs 248 
 
 Wolf vs. Wolf 94 
 
 Wood, Rice vs 2G9 
 
 Wood vs. Hayes 385 
 
 PAGE 
 
 Woodhall, Suit vs 329 
 
 Woodruff, Howland vs 357, 139 
 
 Woods, Billet vs 248 
 
 Woods, Labaurie vs 488 
 
 Woodward vs. Railroad Co 114 
 
 Worthington vs. Torney 385 
 
 Woolly vs. Banking Co 248 
 
 IT 
 
 Yager Milling Company, Stout vs. 390 
 Yardley, Fourth Street Bank vs. .499 
 
 Yeatman vs. Savings Institution ...213 
 Young vs. Lambert 341
 
 A TREATISE 
 
 ON THE LAW OK THK 
 
 CONTRACT OF PLEDGE 
 
 AS GOVEKNED BY BOTH THE 
 
 Common Law and Civil Law.
 
 CHAPTER I. 
 
 I N T R O D Li, q T I 
 
 When men, in their bu^n^Wrelatio?^i§j_>lo not trust 
 each other, the creditor tlkmands o^ie debtor securi- 
 ties for the fulfilmen'bpf his ob].rwation. The securi- 
 
 are those' which rest upon the personalty, or personal 
 property, and also those which depend upon the per- 
 sonal obligation of a surety, warrantor, or endorser. 
 
 In the Civil law real securities are those which rest 
 upon the thing given as security, the 7'es^ whether 
 it is realty or personalty, or, in the terms of the 
 Civil law, movable or immovable propert}- ; and 
 the personal securities are those which rest upon 
 the obligation of a person, such as that of a 
 surety, or warrantor, or endorser. A mortgage 
 on land is a real security, both in the Common 
 law and the Civil law. But a pledge is a personal 
 security in the Common law, while it is a real security 
 in the Civil law. Hence, the contract of pledge is a 
 personal contract in the Common law, and a real con- 
 tract in the Civil law. 
 
 And hence, the action to enforce the pledge is a 
 personal one at Common law, and a real one in the 
 Civil law. Yet, the pledge performs the same office 
 and it is of the same utility, though it presents great 
 differences, in the two systems of law.
 
 2 The Law of Pledge. 
 
 The Contract of Pledge. 
 
 I do not propose to define the contract of pledge. 
 There are already numerous definitions of it. ]Many 
 of them are defective ; very few are instructive 
 or useful. Definitions, at best, seldom convey 
 knowledge or information, and they sometimes create 
 confusion. As the Latin maxim says: Omnia 
 definitio in lege ^ericulosa est. Every broker, 
 banker, merchant, knows what a pledge is, without 
 the law writer defining it. But let us look into its 
 origin, its histor}', its nature, its rules and its effects. 
 
 The pledge springs from natural law and is of the 
 farthest antiquity. It was used as a means of securing 
 a debt in the primitive relations of men. We find it 
 in the Mosaic law. " No man shall take the nether 
 or the upper millstone to pledge ; for he taketh a man's 
 life to pledge." — Deuteronomy, Chapter xxix, 6.* 
 
 It is curious to observe in this provision of the 
 Mosaic law, not only the mention of pledge in the 
 early days of ihe Hebrews, but also the exemption 
 from the creditor's reach of the tools and instruments 
 by which the debtor gains a living, a rule of law which 
 is so salient in the modern legislation of civilized 
 nations. 
 
 The same prohibition to pledge the tools of the aiti- 
 san is found in the Roman law and in the early law 
 of France. f 
 
 Tiie Greeks in their earliest commercial transactions 
 
 ♦Sf-e also Sees. 10. 11, 12. 13, lUd. 
 
 fDig. L. 6 and 7; Doniar. Tawns, XXV, Cashing Ed
 
 The Contract of Pledge. :i 
 
 made great use of the pledge, as all trading nations 
 must necessarily do. It is from them also that the 
 Romans took the mortgage or hypotheca^ which, in 
 its incipiency, strongl}- resembled the pledge. The 
 hypotheca covered both real and personal property, as 
 the pledge, the pigiius^ did. Though possession 
 did not follow the hypotheca or mortgage, as it did 
 the pledge, the distinctions which later jurisprudence 
 established between those real securities barely ex-« 
 isted at first. The Roman jurisconsult said: " Inter 
 pignus et hypothecain tantuni nominis sonus divert.'''' 
 
 The mortgage of the old French law itself was, at 
 first, the dead pledge, mortuum vadium^ the pledge 
 of land of which the revenue or fruits belonged to the 
 creditor.* 
 
 But long before the mortgage was introduced into 
 the legislation of the Romans, the pledge of real estate 
 had been established among them. By the early pig- 
 norative contract known as the fiducia^ the land 
 owner secured his debt b}' transferring the possession 
 of his land to his creditor. 
 
 The word pledge comes from the old French law 
 term pleige, which meant a suretv, consequently a 
 personal security, not the real security of the pledge or 
 pawn. The ancient French law writers, to mark the 
 superiority of the })ledge over the suretyship, said : 
 " Pleige plaide et gage rend.'''' The suret}^ pleads, 
 or resists, but the pledge pays. 
 
 The pledge in the Civil law applies to real estate as 
 
 * Baudrj'-Laeantinerie, Xanti«seniPnt. page xvii.
 
 4 The Law of Pledge. 
 
 well as to personal property. In the first case it takes 
 the name of Antichresis^ which is also of Grecian 
 origin. But it is in the pledge or pawn of personal 
 property that we find the immense importance of the 
 subject in the present age of vast financial and com- 
 mercial transactions. Trade is the support of the 
 world. It is by it that nations become prosperous, great 
 and powerful. It has given England the maritime 
 empire of the universe. It gave Venice its once for- 
 midable powder. It gave the Italian republics of the 
 middle ages their wealth and importance. It is the 
 principal factor of the phenomenal prosperity and 
 riches of the United States of America. The aristo- 
 cratic and military countries which affect to despise 
 trade and tradesmen are fed and maintained by it, 
 and would fall without it. When Napoleon expressed 
 his contemptuous opinion of the English in saying 
 that they were a nation of merchants^ he was giving 
 the very reason of the enormous strength which 
 finally mastered his own genius. 
 
 But trade without credit to help it would be emas- 
 culated and pnralyzed. It is credit that builds up 
 trade at home and carries it round the world. The 
 rich as well as the poor need credit in commercial 
 business, for it is seldom that trade is carried on upon 
 a cash basis entirely. With a capital of $100,000 a 
 merchant will extend his mercantile or financial 
 operations to the amount of $1,000,000. But 
 credit signifies the means of boirowing, and the means 
 of borrowinsj are obtained by securing the loan. The
 
 The C'ontract of PleditIE. 5 
 
 precept of Shakespeare: " Neither a borrower nor a 
 lender be," is only true when the loan is unsecured. 
 
 To secure the loan necessary to commerce, the 
 mortgage is too slow, too difficult of immediate and 
 safe execution. It demands the investigation of title 
 deeds, the discussion and framing of written contracts, 
 the recording of the same. All this takes time, days 
 or weeks, while the borrower must have his money 
 immediately, or his venture may be lost. To secure 
 the loan, therefore, there are only two available 
 modes left in commercial transactions : either the per- 
 sonal security of the endorser or surety, or the real 
 security of the pledge of jjersonal property. 
 
 The former mode is objectionable in many respects. 
 Persons able to pay the debt of the borrower which 
 they guarantee are loath to bind themselves. The 
 borrowers themselves are loath to ask for such ser- 
 vices. The guaranties of endorsers and ordinary sure- 
 ties are always more or le^s uncertain and may escape 
 the vigilance of the creditor. T'heir ability to make 
 good such securities is itself eventual. Finall}^, as we 
 said above, in the words of the old French law writers, 
 '' the surety resists^ bat the pledge pays,''"' and as the 
 Roman law expresses it: ""Plus est cautionis in re 
 quam in perso7ia . ' ' 
 
 The pledge is, therefore, the great security of the 
 capitalist, banker and merchant, and conversely the 
 means of the borrower to obtain the required loan. 
 
 It has become for that reason the most important 
 and the most in use of all contracts of security in the
 
 6 The Law of Pledge. 
 
 innumerable transactions of the great commercial cities 
 of the world. In its rapid movements it passes from 
 hand to hand, without dilatory formalities. It secures 
 in the same day several and successive banking or 
 other financial operations. It transmits capital to dis- 
 tant places, or draws it home. It takes the shape of bills 
 of lading for that purpose. It takes the shape of the 
 ma?'gi?i in the sale of futures, for mone}- itself may be 
 pledged. It takes the shape of bottomry bonds in 
 maritime contingencies. It takes the shape of ware- 
 house receipts when money is borrowed on merchan- 
 dise at home. It takes the shape of policies of insur- 
 ance either on life or property : so protean-like is 
 the contract of pledge, so universal its necessity, so 
 great the securit}^ it offers to the lender of money. 
 
 It rests, therefore, both upon natural law and the 
 law of nations. It takes from equity its essential 
 rules ; and though it is submitted to some judicial 
 forms, as to what will constitute the proof of it in the 
 Civil law, it is not the less one of those contracts which 
 are found among all nations, which are necessary in 
 civil life, and which are interpreted everywhere by 
 common principles of justice and honor. '^ 
 
 Cicero placed the contract of pledge among those 
 principal acts of civil life of which the element is good 
 faith.f 
 
 In the earlier days of modern civilization the pledge 
 had been the subject and means of abases which had 
 
 * Troplong. Xantissement, Sec. iJS. 
 t III De Officiis, 17.
 
 The Contract of Pledge. 7 
 
 thrown a certain disfavor upon it. It had faciUtated 
 and covered fraudulent transactions in which dishon- 
 est debtors would screen and save their property from 
 the reach of their creditors. It had also served to 
 conceal usurious terms of credit which rapacious 
 money lenders would impose upon hard pressed bor- 
 rowers. For these reasons the legislators in the Civil 
 law countries surrounded the contract of pledge with 
 strict formalities and severe conditions, such as a writ- 
 ten act or deed in which the sum loaned is fixed arid the 
 thing pledged is described minutely. But gradually 
 the interest of commerce demanded the emancipation 
 of the pledge ; facts, as usual, imposed their authority 
 upon legislation ; the wants of the mercantile world 
 had to be considered and protected, and, in commer- 
 cial and financial transactions, the pledge was disen- 
 cumbered of the obstructing requirements. Hence, 
 both under the Common and the Civil law that con- 
 tract is now effected by mere delivery of commercial 
 paper or effects, and by endorsement if the same is 
 made to order. 
 
 Troplong, the eminent Civil law writer of France, 
 shows the all-important part which the pledge plays 
 in the affairs of a merchant, in the following words : 
 "The rapidity with which commercial business is car- 
 ried on does not accommodate itself to the forms of 
 the mortgage and the dilatoriness inseparable from 
 landed securities. Besides, real estate is frequenth'^ 
 mortgaged by merchants only at the last extremity. 
 A stranger to the commercial movement, real estate
 
 8 The Law of Pledge. 
 
 only becomes its auxiliary and surety by altering the 
 conditions of the merchant's credit. In the normal 
 state of a well-established commercial house, if its 
 word alone is not sufficient to obtain confidence, it is 
 on the merchandise on which it speculates that it must 
 place the basis of its credit. The merchandise in that 
 case does not cease to fulfil its destination ; it is the 
 natural security offered to third persons, and either by 
 procuring money when sold, or by procuring it on a 
 loan which it secures, it remains within its purpose 
 and its destiny. But when public confidence is not 
 satisfied with either the word or the commercial assets 
 of the merchant ; when the capitalist only consents ta 
 lend him money on the security of things v/hichare not 
 mercantile ; when it is necessary that the landed 
 property come to the assistance of failing com- 
 mercial credit, then it is a signal of distress and of 
 trouble. That is why merchants of high commercial 
 standing will not encumber their real estate. It is in 
 the merchandise which constitute their assets that they 
 put the confidence offered to third persons, and the 
 safety of their transactions. Their real estate remains 
 outside of their commercial ventures ; they do not 
 draw it into the movement of their speculations ; they 
 keep it away, on the contrary, because commercial 
 business is prosperous only so far as it may depend 
 upon its own resources." * 
 
 The contract of pledge may, therefore, well be said 
 to be the pivot of commerce. 
 
 * Troplong, Xantissement. Preface, page xiv.
 
 The Contract of Pledge. 9 
 
 It has in modern times even a greater importance 
 than it had formerly, owing to the immense develop- 
 ment that personal or movable property has taken 
 within the present century in every part of the civilized 
 world. With the Romans and in the countries of 
 Europe in ancient times, personal property was of 
 comparative inferiority to real estate. '•''Res mobilis 
 res V II is,'''' was an expression used to show the poor 
 estimation in which movable property was held. The 
 wealth of those times consisted in landed estates and 
 belonged almost exclusively to the nobility and the 
 clergy. The law bearing upon immovable property 
 or realty was, therefore, of much more importance 
 and had attained a higher degree of perfection than 
 that which governed personal property. 
 
 But within the nineteenth century, human industry, 
 modern discoveries and inventions, the establishment of 
 numerous corporations and joint stock companies, the 
 opening of new avenues of commerce, have created a 
 wealth of personal property, equal if not superior to 
 that of real estate. The laws which govern it have 
 grown in proportionate importance, and foremost 
 among these laws that of the contract of pledge has 
 taken a considerable development. But the law of 
 pledge of the Civilians has necessarily progressed in a 
 more methodical manner, and, therefore, reached a 
 higher and earlier degree of improvement than that of 
 the Common law. Statutory law provides for the 
 future with such prevision or foresight as the human 
 mind is susceptible of. Common law is formed in
 
 10 The Law of Pledge. 
 
 proportion as new facts and new events arise, upon 
 "which it is based. It looks to the past, not the future. 
 lit moves, therefore, slowly and irregularly Prece- 
 dents have to be established before custom may be 
 fixed and acquire the force of law. Judge Story, in 
 speaking of some rules of the contract of pledge, says : 
 ^' Few cases have arisen upon this subject in the Com- 
 mon law ; and it would be unsafe to rely wholly upon 
 the Civil law, as furnishing safe analysis for our guid- 
 ance. In the absence, however, of any authority, the 
 Civilians may assist our inquiries ; and for this purpose, 
 Domat, in an especial manner, may be consulted with 
 advantage."* 
 
 A more recent writer of the Common law has made 
 a similar acknowledgment and said : " This whole 
 doctrine of pledge is one which has unevenly developed 
 at the Common law, and our rules are frequently de- 
 rived from the Roman law of pledge, which, however, 
 in many points differs from our own ; or else we bor- 
 row from the analogies of the chattel mortgage." f 
 
 For those who will follow the advice of Judge 
 Story, there are more modern and even better au- 
 thorities to consult in the difficulties of the law of 
 pledge than Domat, who was still fettered in the then 
 unchanged principles of the Roman law. Those safer 
 guides are the great commentators of the Code Napo- 
 leon, whose books have cleared the confusion of the 
 ancient law of pledge and who expound the subject 
 as it now stands in the modern Civil law. 
 
 * Story, on Bailments, Sec. 313. 
 
 t Schonler, on Bailments, pp. 233, 234.
 
 The Contract of Pledge. 11 
 
 There is still among those distinguished writers 
 «ome diversity of opinion on certain minor points, 
 wliicli is inseparable from the discussion of legal doc- 
 trines ; but the Civil law of pledge altogether is at 
 the present time fixed and established with far more 
 precision than that of the Common law. In the lat- 
 ter there is yet a great deal of confusion and of disa- 
 o^reement between the text writers and the decisions 
 of the courts. Some of these, being unbound by any 
 rules prescribed by statutes, have departed widely 
 from the original and even essential principles of the 
 pledge proper, and have established a jurisprudence 
 which it is sometimes difficult to reconcile with the 
 definition of the pledge given by the commentators of 
 the Common law itself, from Judge Stor}- down to 
 those of the present day. 
 
 A cause of confusion and uncertainty on tiiat sub- 
 ject is to be found also in the likeness of the pledge 
 and the chattel mortgage. In substance always, and 
 in form often, these two contracts of security differ; 
 yet, when the form is the same, they are sometimes 
 taken one for the other, and it is then for the courts 
 a source of embarrassment and difficulty to distinguish 
 between them. In point of substance they differ in 
 this, that in case of the pledge, the general property 
 oi* title remains in the pledgeor, and only a special 
 property or lien passes to the pledgee ; and, in case of 
 the chattel mortgage, the general property itself 
 passes to the mortgagee, with a right of redemption 
 remaining in the mortgageor. In the pledge, if the
 
 12 The Law of Pledge. 
 
 debt is not paid at maturity, the creditor must fore- 
 close and cause the thing pledged to be sold in order 
 that he may be paid out of the proceeds ; but he does 
 not become the owner of the thing for want of re- 
 demption by the pledgeor. In the mortgage, if the 
 debt is not paid at maturity, the mortgagee becomes 
 absolute owner of the thing mortgaged by the mere 
 want of redemption by the mortgageor, subject, it is 
 true, to the equity of redemption. 
 
 In point of form the two contracts differ in two 
 particulars. In the pledge, no writing is necessary. 
 The agreement is verbal, and may even be implied. 
 In the mortgage, the contract must be in writing. In 
 the pledge, possession must be transferred to the 
 pledgee, in the mortgage, possession generally 
 remains in the mortgfao^eor. 
 
 When the pledge is in writing, or when by the 
 mortgage possession is given to the mortgagee, the 
 question often arises whether the contract is one of 
 pledge or of mortgage, and the question is sometimes 
 of difficult solution. The Court of Massachusetts has 
 acknowledged the confusion and the difficulty when it 
 said: "While the distinction between these two forms 
 of security is well defined, yet, owing to the haste with 
 which transactions are often made, and the measrre- 
 ness or abbreviations of the written papers which ac- 
 compan}^ them, it is not easy always to determine 
 what character is properly to be attributed to them."* 
 
 The confusion between the pledge and chattel mort- 
 
 " Thompson vs. Dolliver. 13-2 Mass. 104.
 
 The Contract of Pledge. 13 
 
 gage has produced a certain vagueness or looseness of 
 language in relation to the two modes of securit}^ 
 which has reached the courts of this country, and 
 even the highest of them all, the Supreme Court of 
 the United States. In a case in which that august 
 tribunal passed upon a question of pledge, the organ 
 of the court, one of its most distinguished members, 
 said: "As the verbal mortgage or pledge included 
 all the cattle, and was accompanied by a delivery, it 
 was good, at least as against the defendants, irre- 
 spective of notice. The defendants were chosen as 
 factors, they having before acted for the same parties 
 in similar transactions, where drafts had been drawn 
 on them against the shipments. The}- did not advance 
 an}' money on account of this shipment, they parted 
 with no interest, relinquished no legal right, and stood 
 in no better position to dispute the validity of the 
 mortgage or pledge than did Lyons himself.''* 
 
 There seems to be in the mind of the eminent Jus- 
 tice some confusion whether the transaction at issue 
 was a pledge or a chattel mortgage ; or, more prob- 
 ably, he meant to use the words "verbal mortgage," 
 as equivalent to *' pledge,"" making the term mortgage 
 a generic one for the modes of security depending 
 upon personal property, but designating, in this in- 
 stance particularly the pledge, inasmuch as the mort- 
 gag-e proper must be in writing, and can not be ver- 
 bal. With all due respect, we doubt that the use of 
 
 * Means vs. Bank of Randall. 14(i U. S. 628.
 
 14 The Law of Pledge. 
 
 such language is warranted by the law of either pledge 
 or mortgage. 
 
 The Civil law is free from such confusion or uncer- 
 tainty in this respect ; first, because its law of pledge 
 is better determined by statute ; and secondly, because 
 it contains no chattel mortgage and allows the mort- 
 gage of immovable or real property only. 
 
 In a previous case arising under the law of Louis- 
 iana, where the Civil law is established, the same con- 
 fusion of the pledge and mortgage appears in the 
 judgment of the Supreme Court of the United States, 
 The question was as to the validity of a pledge of 
 commercial securities, which had remained, under 
 certain circumstances, in the possession of the pledgeor. 
 The court, in commenting upon the transfer of the 
 collaterals, said : "When, as in that case, the title has 
 been transferred to the creditor, and the collections 
 are made for his benefit, the pledgeor merely acting 
 as his servant or agent in making them, the character 
 of the security is not affected at the Common law b}' 
 the debtor having actual possession of the collaterals, 
 there being no fraud in the transaction. In such case 
 they are held by the creditor by way of mortgage as 
 well as -pledge, and a mortgage is valid notwithstand- 
 ing the mortgageor has the possession. The difference 
 (jrdinarily recognized between a mortgage and a 
 pledge is, that title is transferred by the former and 
 possession by the latter. Indeed possession may be 
 considered 'as of the essence of a pledge (Pothier, 
 Nantissement, 8) ; and if possession be once given 
 up, the pledge, as such, is extinguished. The posses-
 
 l^HE Contract of Pledge. 15 
 
 sion need not be actual ; it may be constructive ; as 
 where the key of a warehouse containing pledged goods 
 is delivered, or a bill of lading is assigned. In such 
 case the act done will be considered as a token, standing- 
 for actual delivery of the goods. It puts the property 
 under the power and control of the creditor. In such 
 cases such constructive delivery can not be effected 
 without doing what amounts to a transfer of the prop- 
 erty also. 
 
 " The assignment of a bill of lading is of that kind. 
 Such an assignment is necessary where a pledge is 
 proposed in order to give the constructive possession 
 required to constitute a pledge ; and yet it formally 
 transfers the title also. In such case there is a union 
 of two distinct forms of security — that of mortgage 
 and that of pledge; mortgage by virtue of the title, 
 and pledge by virtue of the possession. This advan- 
 tage exists when notes and bills are transferred to a 
 creditor by way of collateral securit3\ His possession 
 of them gives them the character of a pledge. Their 
 endorsement if payable to order, or their delivery if 
 payable to bearer, gives him the title also, which is 
 something more than a pledge." * 
 
 These remarks about the double security of pledge 
 and mortgage, which we have underscored, are mere 
 obiter dicta, it is true ; but they are hardly at their 
 proper place in a case governed by the Civil law, 
 because the mortgage of chattels or personal property 
 does not exist in the Civil law; and the commercial 
 
 * Casey vs. Cavaroc, 9(» U. S. 477.
 
 10 The Law of Pledge. 
 
 securities which formed the subject of the contention 
 in that case, being personal propert}', constituted a 
 pledge exchisively of a mortgage. 
 
 But we are disposed to doubt the correctness of the 
 distinguislied Justice's theory, even under the rules of 
 the Common law, as to the union of the pledge 
 and the mortgage resulting simply from the pledge of 
 securities transferred to the creditor. A fundamen- 
 tal principle of the law of contract is, that the 
 intention of the parties, if lawful, governs the 
 agreement. That intention of the parties, in a word, 
 is the law of the contract. When a debtor pledges 
 commercial paper or other securities, and, for the pur- 
 -pose of the pledge^ transfers them, either by endorse- 
 ment, or deliver}', or in any other way, to the creditor, 
 he does not intend to mortgcacre them. He reserv^es 
 all his rights under the pledge — the right to have his 
 propert}' returned to him if he pays the debt, or that 
 it should be sold to pay the creditor, under the terms 
 of the law or of the agreement ; but he does not grant 
 any right of mortgage to the creditor ; the latter could 
 not become absolute owner of the thing pledged by 
 the mere failure of the debtor to redeem the pledge. 
 In a word, the debtor has pledged, but not mortgaged, 
 his property, whatever may be the form of the pledge. 
 He has given to the creditor the single securit}' of the 
 pledge, but not the double security' of pledge and 
 mortgage. Could it be said that, in such a case of 
 pledge, if the creditor abandoned the possession of the 
 thing pledged, and thereby lost his rights upon it, he
 
 The Contract of Pledge. 17 
 
 would still retain his rights of mortgage over it, be- 
 cause, for the purpose of the mortgage, he need not 
 have possession ? 
 
 It is true that in the pledge of negotiable paper or 
 other commercial securities, the ^^hX-Ox transfers them 
 to the creditor, and the title thereb}' passes to the lat- 
 ter ; but it only passes for the purpose of pledge, not 
 of mortgage. In some States such transfer is pro- 
 vided for bv statute as the mode and means of 
 pledging that kind of property. 
 
 The title of the creditor in that case is onl}- a legal 
 simulation. The debtor does not in reality convey his 
 property to him. The creditor is only an apparent 
 owner. The ownership is still in the debtor after 
 the transfer, as it is a constitutive element of the 
 pledge that the pledgeor remains, during the exis- 
 tence of the pledge, the owner of the thing pledged. 
 The principle is not the same in the case of a mort- 
 gage, at all events, of a mortgage at law, leaving 
 aside the mortgage in equity. There, when the title 
 passes to the creditor, the general property, which is 
 the ownership itself, is in realit}' transferred to the 
 creditor, subject to the defeasance which pa3^ment of 
 the debt will or may produce. During the existence 
 of the mortgage, the creditor is the real owner, under 
 condition, of the things morto^ai^-ed. He only fore- 
 closes the mortgage for the purpose of entering into 
 possession of the property and defeating the equity 
 of redemption. 
 
 We are speaking of the mortgage of the Common
 
 18 The Law of Pledge. 
 
 law alone, for that of the Civil law transfers no title 
 or general property to the creditor, and only gives 
 him a lien or right of preference in the thing mort- 
 o-asfed, to be reahzed from the proceeds of the snle 
 thereof b}' means of foreclosure. 
 
 It seems clear, in cases of pledge, that the union of 
 the pledge and the mortgage can not be said to arise 
 from the mere fact of a transfer of the securities to the 
 creditor without the intention, expressed or implied, 
 of the debtor that the mortgage should accompany 
 the pledge. But we are inclined to think that even 
 with the consent of the parties the pledge and the 
 mortgage at law can not coexist in the same act; in 
 other words, that the same property can not be 
 pledged and mortgaged at the same time for the 
 same debt to the same creditor, owing to the differ- 
 ences and incompatibility of the two contracts. The 
 mortgage at law is a contract by which the debtor 
 conve3's his property to the creditor as security, it is 
 true, but with the stipulation that in default of pay- 
 ment of the debt the creditor shall become absolute 
 owner. The stipulation is of the very nature of the 
 contract. But such stipulation would be null and 
 void in the contract of pledge. Any clause by which 
 the pledgee would become the owner of the pledge 
 in default of payment is prohibited by the law. There 
 is evidently some confusion and uncertainty in this 
 subject of the pledge and mortgage being united in 
 the same act and fused together by the transfer of the 
 securities to the creditor ; and there is nothing set-
 
 The Contract op Pledge. 19 
 
 tied or determined yet in that respect by the juris- 
 prudence of the Common law, whatever may be the 
 weight of authority of the dicta in the opinion of the 
 case of Casey vs. Cavaroc. 
 
 In his recent work on bailments, Mr. Edwards ex- 
 presses his views on this subject, in a sense adverse 
 to the theory of the united pledge and mortgage. 
 Speaking of the transfer of title of commercial se- 
 curities, he says: " In respect to goods and chattels 
 personal, this distinction is very plain ; but there is a 
 large class of cases wliere the contract still remains a 
 pledge, notwithstanding the title is conveyed. Choses 
 in action can not be otherwise delivered as a collateral 
 security, and hence, as to these and such incorporeal 
 property as can not be passed from one to another by 
 delivery, the fact that the title passes does not, as has 
 sometimes been held, create a mortgage. Whether 
 the contract shall be held a mortgage or a pledge is 
 not determined by that fact alone ; the title must be 
 conveyed in order to create a mortgage, but it is not 
 a mortgage simply because the title is conveyed."* 
 
 These views coincide with the principles of the Civil 
 law. Baudry-Lacantinerie, one of the more modern 
 commentators of the Code Napoleon, says, in his re- 
 cent work on Pledge, that the possession of an incor- 
 poreal thing or right, indispensable to the validity of 
 a pledge, can only be effected by the transfer of the 
 title to the pledgee ; but that such transfer is only 
 made by way of giiaranty ^ and d;)es not convey the 
 
 * Edwards on Bailments, Sec. 246. 
 Id. Ibid., Sees. 219 and 220.
 
 20 The Law of Pledge. 
 
 ownership or property of the thing. If it did the 
 transaction would not be a pledge. The transfer of 
 the ownership or property can only be effected by 
 subsequent foreclosure of the pledge. And even 
 when the parties adopt the form of the sale for the 
 purpose of a pledge, the ownership is only apparently 
 transferred. In reality, the title is only transferred 
 for the purpose of securing the creditor, and the 
 debtor remains, notwithstanding, the unqualified 
 owner of the thing pledged, subject only to the lien 
 of the former, which itself depends upon the fact of 
 possession. There is no diversit}' of opinion in this 
 respect among the Civilians.* 
 
 Another cause of the departure of the Common law 
 from the original and fundamental principles of the 
 contract of pledge may be found in the doctrine of the 
 Equitable liens, peculiar to the jurisprudence of Eng- 
 land and the United States, and unknown to the Civil 
 law. In the latter no lien or privilege, as it is there 
 termed, can be contracted for b}' the parties. It is 
 created by statute, or it does not exist at all. The 
 pledge only confers the lien and right of preference 
 to the creditor if the contract is accompanied by pos- 
 session of the thing pledged. The same indispensa- 
 ble condition of possession in the pledgee is part of the 
 Common law; but there the equitable lien, without 
 the possession, produces very nearly all the effects of 
 the pledge and gives to the preferred creditor, to a 
 
 Baudry-Lacantinerie, Xanlissement, pp. 44, 4i) 
 Troplong, Nantissement, Sec. 30. 
 Laurent, Du Gage, See. 288 ct seq.
 
 The Contract of Pledge. 21 
 
 considerable extent at least, all the benefits and ad- 
 vantages of that contract, to the prejudice of the other 
 creditors, by the mere intention of the parties that he 
 should have a right of preference over some specific 
 property of the debtor. In this respect all that equity 
 jurisprudence has gained in favor of the equitable lien 
 is detracted from the law of pledge. Where, under 
 the inflexible rule of this law, that the pledgee should 
 be in notorious and unequivocal possession of the 
 property of his debtor, and thereby that third persons 
 dealing with the latter should be informed^'of the en- 
 cumbered condition of his property, by the principle 
 of equitable liens, the third persons have no notice 
 whatever of the right of preference given by him to 
 some favored creditor, and thc}^ deal with him in the 
 false belief that his property will answer for his debts 
 generally and without a claim of priority over them. 
 The equitable lien, therefore, works in the dark and 
 arises from an occult understanding with the debtor, 
 whilst the pledge must act in broad daylight, under 
 pain of nullity. 
 
 This relation of the equitable lien to the law of 
 pledge will be the subject of a special chapter in this 
 book.
 
 CHAPTER II. 
 
 Nature and Subject Matter of the Pledge. 
 What Things May Be Pledged. 
 
 1 . All personal property, according to the Common 
 law, and everything movable, according to the Civil 
 law, corporeal or incorporeal, which is susceptible of 
 alienation and of delivery, actual or symbolical, may 
 be pledged. Not only tangible property and choses 
 in action, but even mere rights are the subject of 
 pledge, provided they may be delivered at least ficti- 
 tiously or symbolically."^ 
 
 2. But, as the ulterior object of the pledge is to 
 enable the creditor to realize it by sale and receive the 
 proceeds in payment of his claim, it is evident that 
 what can not be sold does not ordinarily form the sub- 
 ject of a pledge. Such was the Roman law, as enun- 
 ciated in the Digest. " Earn rem quam quis emere nofi 
 potest quia commercium ejus non est jure -pignoris 
 accipere non potest.'' '''\ 
 
 The modern Civil law and the Common law agree 
 in this respect. 
 
 * Code Xapoleon, Art. 2075. 
 
 Civil Code of Louisiana, Arts. 3154, 3155. 
 
 Troplong, Nantissement, Sec. 261 et seq. 
 
 Story, on Bailments, Sec. 290. 
 
 Jones, on Pledges, Sec. 49. 
 t Digest, L. 1, Sec. 2. 
 
 Domat, Des Gages, Vol. 2, Sec. 10. 
 
 23
 
 24 The Law of Pledge. 
 
 3. Yet, in some cases, a thing which the owner could 
 not sell, might be given in pledge, to be used and re- 
 tained by the pledgee until redeemed by the pledgeor. 
 The creditor could not expect in that case to be paid 
 from the proceeds of the sale, or to obtain by fore- 
 closure the ownership of the pledge. But he could 
 have the use and benefit of the thing pledged, if it 
 were so stipulated in the contract, until the pledge 
 were redeemed by payment of the debt.* < 
 
 4. In the same manner, a thing which, by law, could 
 not be seized or attached, might be given in pledge 
 under the same stipulations.! 
 
 In France the ''''rentes sur T Etat " (the interest on 
 public funds), which can not be seized and sold, ma}- 
 be pledged. J 
 
 5. The pledge is a contract by which a debtor de- 
 livers a thing to his creditor as security for the debt.§ 
 And the pledge confers on the creditor the right to 
 cause himself to be paid from the thing pledged, by 
 privilege and preference over the other creditors.! 
 Payment, therefore, from the proceeds of the pledge 
 is ordinarily the object and the effect of that contract. 
 But it need not necessarily be so. The mode and pro- 
 
 * Lanrent, Nantisseuient, Vol. 2S, Sec. 44.5. 
 
 Troplong, Nantissement, Sec. 52. 
 t Laurenr,*/?>(VZ., svpra. 
 X Pont, Des Petits Contrats, Vol. 2, Sec. 1080. 
 
 F. Herman, Code Civil, Art. 2071, Xo. 14. 
 
 Laurent,, Nantissement, See. 445. 
 §. Code Napoleon, Art. 2071. 
 
 Civil Code of Louisiana, Art. 3138. 
 
 Story, on Bailments, See. 2S0. 
 
 .Tones, on Pledges, Sec. 1. 
 li Code Napoleon, Art. 2073. 
 
 Civil Code of Louisiana, Art. 31.57.
 
 What Things May Be Pledged. 25 
 
 cess by which the debt is secured may be left to the 
 choice of the parties. If tlie thing pledged could not 
 be sold, the parties might contemplate in their agree- 
 ment that the deprivation of his property by the 
 debtor, and the possession and enjoyment of it by the 
 creditor, if such enjoyment was permitted by the con- 
 tract, would be a sufficient reason for the pledge ; and 
 the consequent inducement to the debtor to pay the 
 debt might be considered as the means of security in- 
 tended by the parties. 
 
 6. There is no limit in the Civil law to the duration 
 of contracts of real securityship. As long as the debt 
 secured is kept alive, such security, pledge or mort- 
 gage, may be kept alive also. The thing pledged 
 may, therefore, remain indelinitively in the hands of 
 the creditor, if the pledge is not redeemed. It may be 
 so even when payment from the proceeds of sale is the 
 object of the contract, because the creditor is not com- 
 pelled to demand or effect the sale of the thing 
 pledged."^ 
 
 7. As the possession of the pledgee is ^r^cc?;'/^'//^, and 
 not exercised in the quality of owner, it follows that 
 he never can, by the mere fact of his possession, ac- 
 quire, through any lapse of time, the ownership of the 
 thing pledged. And the converse, if it be so, of the 
 rule is equally true, to-wit, that the debtor can not be 
 released from the debt by any length of time, because 
 the debtor, by not redeeming the pletlge and leaving 
 
 * Laurent, Du Gage, Sec. 516. 
 .Jones, on Fledges, Sees. 004 and OOG.
 
 26 The Law of Pledge. 
 
 it in the hands of the creditor, thereby acknowledges 
 continuously the existence of the debt.* The two 
 prescriptions, acquirendi causa and liberandi causa, 
 are equally ineffective in the contract of pledge. Such 
 is the rule of the Civil law, but it seems to be differ- 
 ent in some of the Common law States, where the 
 debt may be barred by the Statute of limitations, even 
 Avhilst the pledge which secures it remains in the hands 
 .of the creditors. t 
 
 But we will consider this subject more at length 
 later on. 
 
 8. Inasmuch as possession is the essential element of 
 a pledge, what can not be delivered, either actually 
 or constructively, can not be pledged, even if it can 
 be sold.t 
 
 Hence, it follows that though ordinarily nothing 
 can be pledged that can not be sold, some things can 
 be sold that can not be pledged, because delivery is 
 not of the essence of sale, inasmuch as a thing may 
 be legally sold and yet remain in the possession of 
 the seller. 
 
 9. Money itself may be given in pledge. Instances of 
 this are found in the deposits made with gas light 
 
 * Pont, Xantissenient, Sec. 11(3(3. 
 
 Laurent. Du Gage, Sec. 497. 
 
 Marcade, Vol. 7, p. 205. 
 
 Conger vs. New Orleans, 32 La. Au. 1253. 
 
 Blanc vs. Herzog, 23 La. An. 199. 
 
 Bank vs. Knapp, 22 La. An. 117. 
 t .lones, on Pledges, Sees. 5S1, 582 and 5S3. 
 
 Edwards, on Bailments, Sec. 249. 
 
 Hancock vs. Insurance Conipanv, 114 Mass. 156. 
 
 Hiilbert vs. Clark et al.. 128 X. Y. 295. 
 X Laurent, Droit Civil, Vol. 28, Sees. 444. 477. 
 
 Baudry-Lacantinerie, Xantissenient. Vol. 1. p. 34. Sec. 75.
 
 What Things May Be Pledged. 27 
 
 companies, public or circulating libraries, to secure the 
 payment of their customers' accounts, or the return of 
 the books borrowed ; and in the margins deposited 
 with brokers as security for the sums advanced by 
 them.* 
 
 Could the creditor, in such a case, in default of pay- 
 ment, retain the money and thereby pay himself, 
 without any legal proceedino-s and decree of court? 
 On principle, the creditor could have no such right 
 under the rule that any agreement which would au- 
 thorize him to appropriate the pledge to himself, in 
 case of non-payment of the debt, would be null and 
 void ; a rule which is common to the Civil law and to 
 the Common law, as we will see hereafter. 
 
 10. It was doubtful in Pothier's time whether in- 
 corporeal things, such as credits or claims, could be 
 pledged. The reason of the doubt was that, under the 
 Roman law, incorporeal things could not be delivered 
 and given possession of to the pledgee ; hence could 
 not be the subject of pledge. 
 
 1 1 . Both in the Common law and in the Civil law 
 of the present time the question has been solved in the 
 sense that such rights and choses in action may be 
 delivered S37mbolically or constructively, and therefore 
 may be pledged. The principle has passed into legis- 
 lation, in the Code Napoleon and in the Civil Code of 
 Louisiana. The first provides simply that the pledge 
 
 * Civil Code of Louisiana, Art. 3154. 
 Pothier, Nantissement, No. 6. 
 Troplong, Xantissement, Xo. 55. 
 Story, on Bailments, Sec. 290.
 
 28 The Law of Pledge. 
 
 of incorporeal things, such as claims, credits, etc., 
 shall be made by an act in writing, authentic or 
 private, recorded and notified to the debtor of the debt 
 given in pledge.* 
 
 This act in writing is to be an act of pledge clearly, 
 but in what form ? 
 
 The French commentators say that the act provided 
 for in that article of the Napoleon Code is an act of 
 transfer oi the incorporeal rights, credits and so forth, 
 and that the delivery and possession consist in the 
 handing of the title^ or muniment of title, of the 
 rights or credits to the pledgee. The transfer of 
 such rights and delivery of possession are provided 
 for in both of the Codes. That of Louisiana, in two 
 articles taken verbatim from that of France, provides 
 that: " In the transfer of credits, rights or claims to 
 a third person, the delivery takes place between the 
 transferrer and the transferee by the giving of the 
 title." 
 
 "The transferee is only possessed, as it regards 
 third persons, after notice has been given to the 
 debtor of the transfer having taken place. The 
 transferee may nevertheless become possessed by the 
 acceptance of the transfer by the debtor in an authen- 
 tic act." f 
 
 12. But, in providing for the pledge of such claims, 
 the Code of Louisiana is more particular and precise 
 
 * Code Xapoleon, Art. 2075. 
 
 t Civil Code of Louisiana, Arts. 2642, 2(543; Code Xapoleon, Arts. 
 1GS9, 1G90.
 
 What Things May Be Pledged. 29 
 
 than its great model, and leaves nothing on this point 
 for initerpretation or construction. It says : "When a 
 debtor wishes to pawn a claim on another person, he 
 must make a fransfer of it in the act of pledge and 
 deliver to the creditor to whom it is transferred the 
 note or instrument which proves its existence, if it be 
 under priv^ate signature, and must endorse it if it be 
 negotiable." * 
 
 13. It is evident that the transfer in question is not 
 one of ownership, for it would not constitute a pledge, 
 but a transfer of the title only for the purpose of 
 security or g-uarantv. This distinction between the 
 transfer ill guaranty for the purpose of a pledge, and 
 the transfer ofozunership, in case of a sale, is clearly 
 shown b}' Professor Baudrv-Lacantinerie, in com- 
 mentmg upon this subject. f 
 
 14. The Code of Louisiana, unlike the Code Na- 
 poleon, provides for the necessity of notifying the 
 debtor of the claim, of the tran'sfer or pledge. It 
 enacts that: '' When the thing given in pledge con- 
 sists of a credit not negotiable, to enable the creditors 
 to enjoy the privilege above mentioned, it is necessary' 
 not only that the proof of the pledge be made by an 
 authentic act, or by an act under private signature, 
 duly recorded, but that a copy of this act shall have 
 been duly served on the debtor of the credit given in 
 pledge." X 
 
 * Civil Code of Louisiana. Art. 315G. 
 
 t Baudry-Lacantinerie, Xantissem<>nt. 11. 44. 
 
 I Civil Code of Louisiana, Art. 3101).
 
 30 The Law of Pledge. 
 
 15, In the Civil law it is this notification of the 
 transfer of the claim to the debtor of it which consti- 
 tutes the legal possession of the claim by the trans- 
 feree, whether in case of the sale, pledo^e, garnish- 
 ment, attachment, or seizure under execution. The 
 right of such transferee, or attaching or seizing cred- 
 itor, springs from this notice to the debtor of the 
 claims.* 
 
 In the case of a sale, the incorporeal thing or credit 
 sold is only put in the possession of the vendee by 
 such notice to the debtor of the claim, and until the 
 notice has been given the claim can be seized as 
 property of the creditor of the claim. In case of the 
 pledge of such credit, the lien, or privilege, or right 
 of preference of the pledgee, is only effected by the 
 notice. In case of attachment, garnishment or seiz- 
 ure under execution, the same lien or privilege, or 
 right of preference of the attaching or seizing creditor 
 is obtained also b}^ means of the said notice, and only 
 by means of the notice. This important principle 
 rests upon the fact that the right of preference in 
 question depends upon the transfer or delivery of pos- 
 session, and that the notice to the debtor of the credit 
 is made by law constructive possession of the credit. 
 
 16. Troplong, in his usual happy mode of expres- 
 sion, states the principle in these words: " It is this 
 notice which informs the debtor of the privilege of the 
 creditor. It is it which binds the debtor to the 
 pledgee. It constitutes the mode of taking of possession 
 
 * Troplong, Xantissement, Sees. 261 et seq.
 
 What Things May Be Pledged. . 31 
 
 proper to the transfer of incorporeal movable things. 
 For it has always been a rule of the French law that 
 the transfer itself gives no possession, and that it is by 
 the notice that the creditor takes external possession 
 of his right."* 
 
 17. But the notice of the transfer is only necessar^'^ 
 to establish the right of preference of the transferee 
 over third persons and creditors of the transferrer, as 
 shown by the articles of the Napoleon Code and >^ude 
 of Louisiana. Between the vendor and vendee, and 
 pledgeor and pledgee, such notice is not necessary 
 and the sale or pledge of the incorporeal right, or 
 credit, is valid and binding upon the vendor and 
 pledgeor without it. Clearly the vendor and pledgeor 
 need not be informed by notice of their own act, and 
 they are bound to their vendee and pledgee b}- the 
 contract of sale or pledge itself. 
 
 18. In the Common law the transfer of incorporeal 
 things, for the purpose of a pledge, and for putting 
 the pledgee in possession, is made also by transferring 
 or transmitting the title, or muniment of title, of the 
 claim, credit, or other incorporeal thing or right ; but 
 no notice to the debtor of the credit is required to 
 secure the right of the pledgee against third persons 
 or other creditors. The mere act of the transfer 
 
 Troplong, Xantissement, Sec. 265. 
 
 Troplong, De la Vente, Vol. 2, Sees. 882, 883. 
 
 Pont, Xantissement, Sees. 1108, 1109. 
 
 Baudry-Lacantinerie, Du Gage, Sees. 57, 58, 59. 
 
 Laurent, Du Gage, Sec. 463. 
 
 Hanna vs. Bry, 5 La. An. 656. 
 
 Monticon vs. Mullen, 12 La. An. 273. 
 
 St. Komes vs. Cotton Press Co., 21 La. An. 291.
 
 32 The Law of Pledge. 
 
 of the claims and muniment of title complete the 
 pledge. 
 
 19. Jones, on Pledges, in this respect, says: "The 
 assignment of a chose in action as security is valid, 
 without notice to the debtor of the assignment. The 
 assignment is complete upon the mutaal assent of the 
 parties to it, followed by a delivery ; and it does not 
 gain additional validity as against third persons by 
 notice to the debtor."* 
 
 Judge Story, and Mr. Edwards in his book on Bail- 
 ments, both speak of the pledge of incorporeal things 
 by transfer to the pledgee ; but make no mention of 
 the question of notice to the debtor of the credit. f 
 
 20. The subject, from its Common law view, was 
 fully discussed by the Court of New York, which 
 said : " It was not needful to make the assignment or 
 lien valid and effectual against Heath and against his 
 attacking creditors, that notice thereof should have 
 been given to the debtors, the Ingersolls. Such notice 
 was needful only to defeat a subsequent bona fide pay- 
 ment by the Ingersolls. It has been held in some 
 of the States, and was forinerly supposed to be the 
 rule in England, that such an assignment could be 
 valid and operative only in case of and after notice to 
 the debtors. It was held in Watts vs. Porter (3 E. 
 and B. 743) that an assignment of a mere chose in 
 action without notice to the debtor was imperative as 
 
 * Jones, on Pledges. Sec. 136. 
 t Story, on Bailments, Sec. 290. 
 
 Edwards, on Bailments, p. 191. 
 
 Thaver vs. Daniels. 113 Mass. 129.
 
 "What Things May Be Pledged. 33 
 
 against a subsequent judgment debtor. But the Lord 
 Chancellor and Lords Justices Knight, Bruce and 
 Turner, in Bearan vs. Earl of Oxford (6 De G. M. 
 and G. 492), and the master of the rolls, in Kinderley 
 vs. Jervis (22 Bear, i), held a contrary doctrine ; and 
 in Dickering vs. the Ilfracombe Railway Co. (L. R. 
 3, C. P. 235), Bovill, Ch. J., and Willes, J., agreed 
 with the latter authorities. Still later, in Robinson 
 vs. Nesbitt (L. R. 3, C. P. 264), the case of Watts 
 vs. Porter was directlv overruled, and it was held that 
 a prior equitable assignment of railway shares in 
 the hands of a garnishee was a bar to an attach- 
 ment, notwithstanding that no notice of such assign- 
 ment had been given to the garnishee. In 
 Stevens vs. Stevens (i Ashmead, 190), it was held 
 that the assignment of a debt due by a third person 
 was a good equitable transfer of such a debt as against 
 a subsequent attaching creditor, notwithstanding no 
 notice of such assignment was given to the debtor 
 until after the attachment. In United States vs. 
 Vaughan (3 Binney, 394), a similar decision was 
 made, and it was further held that the plaintiff in a 
 foreign attachment stands upon no better footing as to 
 the thing attached than his debtor, the defendant in 
 the attachment. In Dix vs. Cobb (4 Mass. 508J, 
 Parsons, C. J., said: "Although the trustee in this 
 case had no notice of the assignment until after he 
 was sued as trustee, yet immediately on the assign- 
 ment the equitable interest in the debt, as between the 
 parties to it, immediately passed to the assignee. And
 
 34 The Law of Pledge. 
 
 if the assignor had afterward recovered the debt, he 
 would be obliged to pay it over to the assignee. But 
 an attaching creditor can not stand on a better footing 
 than his debtor (if the assignment be not fraudulent 
 as to creditors), and if he attaches an}^ property of his 
 debtor, it must be attached subject to all lawfully ex- 
 isting liens created by his debtor. And consequently, 
 if his debtor has no equitable interest in a chose in 
 action^ the creditor can not acquire any by his attach- 
 ment." In Muir vs. Schenck (3 Hill, 228), it was 
 held that, as between different assignees of a chose in 
 action by express assignment from the same person, 
 the one prior in point of time will be protected, though 
 he has given no notice to either the subsequent assign- 
 ees or the debtor, and the question between a previous 
 assignee and a subsequent attaching creditor was con- 
 sidered the same in principle as that between conflict- 
 ing assignees. However much that case may have 
 been criticised elsewhere, it has been considered well 
 decided in this State. It was cited with approval in 
 Greentree vs. Rosenstock (61 N. Y. 583), and Freund 
 vs. The Imp. & Tr. Nat. Bank (76 Id. 352)."* 
 
 21. We must bear in mind, in considering the sub- 
 ject of the pledge of incorporeal things, that it is only 
 the movable incorporeal things that can be pledged. 
 And, in case of the pledge of an immovable incor- 
 poreal thing, the pledgeor himself, beside his credit- 
 ors, can demand the nullity of the contract. The 
 principle is not the same as in the case of a pledge 
 
 ♦ Williams tt al. vs. Ingersoll et a?., 89 X. Y. 522 and .523.
 
 What Things May Be Pledged. 35 
 
 given without a written act, which is binding on the 
 pledgeor, though not upon third persons. The pledge 
 of immovable property being no pledge at all, can not 
 bind the parties. 
 
 This was decided by the French courts.* 
 
 22. Troplong, speaking of the article of the Napo- 
 leon Code which provides that incorporeal things ma}^ 
 be pledged, says: "Our article 2075 only covers the 
 pledge of incorporeal movables. It follows hence that 
 if the debtor gave the creditor a real right in pledge, 
 the latter would obtain no privilege." f 
 
 Troplong seems to be the only one of the French 
 commentators whose attention has been drawn to 
 this point ; but he himself should have distinguished 
 between real rights which are movable and those 
 which are immovable. A movable real right may 
 clearly be the subject of a pledge. 
 
 Demolombe says : "Real rights can therefore be 
 movable as well as immovable. In the same manner 
 that personal rights can be immovable as well as 
 movable. Pothier, Introduct. Gen^r. aux Cont., 
 Nos. no, 112 et 119." \ 
 
 The usufruct of real estate, for instance, being an 
 incorporeal immovable, could not be pledged ; whilst 
 the usufruct of personal property or movables, may 
 perfectly well be the subject of a pledge. § 
 
 * Dalloz, 36, 2. 76. 
 t Troplong, Du Gage, Sec. 295. 
 
 X Demolombe, Distinction des Biens, Vol. 1, Sec. 465. 
 § Civil Code of Louisiana, Art. 471. 
 Code Napoleon, Art. 526.
 
 36 The Law of Pledge. 
 
 24. On tliis subject we must distinguish between 
 the pledge of the usufruct of property and the pledge 
 of the property itself. Let us take for instance the 
 case of the pledge of corporate stock. The pledgee 
 may have the stock itself sold to satisfy his debt. But 
 in the case of the pledge of the usufruct of the same 
 stock, the pledgee can have the usufruct sold for the 
 same purpose ; but he can not reach the stock itself. 
 Upon that he has no right, because it is not the stock 
 which is pledged, but the mere usufruct of it. 
 
 In the same manner the usufruct of real estate may 
 be mortgaged, in the Civil law, because it is an incor- 
 poreal immovable ; but the mortgagee, in that case, 
 could only foreclose upon the usufruct itself and have 
 it seized and sold ; but he could not reach the real 
 estate by virtue of his mortgage.
 
 CHAPTER III. 
 
 Things in Expectancy, or which have a mere 
 Potential Existence. 
 
 25. Such things can not be pledged, thougli they 
 may be sold, as animals yet unborn, fish yet uncaught, 
 crops yet un grown, etc.* 
 
 These principles govern both the Civil law and the 
 Common law.f 
 
 Yet, when animals are given in pledge, their 
 young born during the pledge form part of it, though 
 they were not in existence when the contract was 
 entered into. But this is the effect of the principle 
 that the fruits of the thing pledged become part of the 
 pledge.J 
 
 26. A case arose in Louisiana, in which there was 
 a written agreement between a planter and his com- 
 mission merchant, the former -pledging his growing 
 crop to the latter as security for his advances. The 
 Court held that the crop in expectancy could not be 
 delivered at the movement of the pledge, and, there- 
 fore, could not be pledged. 
 
 * Civil Code of Louisiana, Arts. 2450-2451. 
 
 Troplong, Vente, Vol. I, Sec. 203. 
 
 Baudry-Lacantinerie, Nantissement, Sec. 30. 
 t Tiedeman, on Sales, Sec. 52. 
 
 Benjamin, on Sales, Sec. 78. 
 X Pont, Des Petits Contrats, Vol. II, Sec. 1080. 
 
 Baudry-Lacantinerie, Nantissement, Sec. 96. 
 
 .Jones, on Pledges, Sec. 32. 
 
 Schouler, on Bailments, Sec. 200. 
 
 Story, on Bailments, Sec. 292. 
 37
 
 38 The Law of Pledge. 
 
 The Court said : " Property in expectancy maybe 
 the object of a contract of sale, because that contract is 
 complete by the mere consent of the parties. But itcan 
 not be the subject of a contract of pledge, because that 
 contract is what the civilians call a real contract ; one 
 which is not perfected by the consent of the parties, 
 but which requires the delivery of the thing pledged."* 
 
 27. This case was decided under the legislation of 
 Louisiana as it then stood, and under the general 
 principles of the law of pledge ; but subsequently an 
 act of the Legislature of that State was passed to ena- 
 ble the planters to pledge their g'rowing- crops in favor 
 of their commission merchants, to secure advances of 
 money, as if the -pledgees were in -possession of the 
 crops. The formalities necessary for such pledge con- 
 sist in a written agreement of pledge and the recording 
 of the same in the office of Mortgages of the parish 
 or county, where the crops are raised. f This is a 
 pledge sui generis, created by special law and, there- 
 fore, taken out of the general principles which pre- 
 scribe that no pledge is valid without actual possession. 
 
 28. As delivery, and thereby possession, to the 
 pledgee, is of the essence of the contract of pledge, 
 it is evident that property in fiituro, or which has 
 only a potential existence, can not be pledged, because 
 it can not be delivered. J It is, therefore, curious to 
 
 * Hagan vs. Sompayrac, 3 La. 154. 
 
 t Acts of the'Legislature of Louisiana, of the year 1S74, ]>. IM. 
 
 X Pont, Nantissement, Sec. 1080. 
 
 Baudry-Lacantinerie, Nantissement, Sec. 3(j. 
 
 Troplong. Nantissement, Sec. 29H. 
 
 Laurent. I)u Gage, Sec, 469 et seq. 
 
 F. Herman, Code Civil. Art. 2073, No. :^n.
 
 What Things May Be Pledged. 39 
 
 observe the error into which a law writer of such high 
 authority as Judge Story lias fallen on that subject in 
 respect to the Civil law. In his commentaries on Bail- 
 ments, Chapter V, on Pawns or Pledges, Sec. 294, he 
 says : 
 
 " In the Civil law, not only property, of which the 
 party was at the time in possession, or to which he 
 had then a present title, might be pledged ; but prop- 
 erty, of which he had neither possession nor title, and 
 which should be acquired by him in futuro. And 
 when the title was so acquired in futuro the right of 
 the pledgee attached immediately upon it. But, in 
 such cases, it was more properly an hypothecation 
 than a pledge. In our law a pledge is strictly con- 
 fined to property, of which there may be a present 
 possession or title, or in which there is a present 
 vested right." And Judge Story cites Domat and the 
 Digest in support of this extraordinar}- statement, or 
 rather he finds in Domat a note of the law of the 
 Digest on this point. 
 
 29. But Domat does not say so, nor does the Digest. 
 The passages in both of them cited by Judge Story 
 apply to the mortgage, and not to the pledge, of 
 future property. By the Roman law, by the French 
 law, by the Civil law, as well as by the Common law, 
 property may be mortgaged by a person who has only 
 an expectant title and the mortgage will attach when 
 the title vests in the mortgageor. And it is so of the 
 mortgage, because possession in the mortgagee is not 
 necessary.
 
 40 The Law of Pledge. 
 
 The words of Domat, as we find them in Cushing's 
 Edition, are as follows : 
 
 '■''Mortgage on an Estate to Come. — Those who 
 bind themselves by any engagement whatsoever 
 may, for the security of their performance of the 
 engagement on their part, appropriate and mortgage, 
 not only the estate they are masters of at the time of 
 contracting, but likewise all the estate which they 
 shall be afterward seized or possessed of. And this 
 mortgage extends to all the things which they shall 
 afterward acquire that are capable of being mort- 
 gaged by what title soever it may be that they 
 acquire them, and even to those which are not in 
 being when the obligation is contracted ; so that the 
 fruits which shall grow upon the lands will be com- 
 prehended in the mortgage of an estate to come." * 
 
 30. The words of Domat, in the text, are : ''Ceux 
 qui s'obligent a quelque engagement que ce puisse 
 etre, peuvent y affecter et hypothequer, non seule- 
 ment leurs biens presents, mais encore tous leurs 
 biens k venir; ce qui s'^tend c\ toutes les choses 
 qu'on pourra acquerir dans la suite, qui seront sus- 
 ceptibles de I'hypotheque, a quelque titre qu'on 
 puisse les acquerir, et a celles meme qui ne sont pas 
 encore en nature quand on s'oblige; ainsi les fruits 
 qui pourront naitre des heritages, seront compris dans 
 I'hypotheque des biens k venir." f 
 
 31. The words of the Digest in the paragraph cited 
 by Domat and by Judge Story are as follows : 
 
 ♦ Domat, Cushing's Ed., p. 649, No. 1G61. 
 t Domat, Vol. 2, Gages et Hj-poth. No. 5.
 
 What Things May Be Pledged. 41 
 
 "Et quae nondum sunt futura tamen sunt hypothecce 
 dari possunt ; ut fructus pendentes, partus ancillos, 
 fcetus pecorum et ea quai nascuntur sint hypothecse 
 obligata." * 
 
 There is no mention of the pledge in eitlier place, 
 but of the mortgage. 
 
 It is true that the pledge and the mortgage of the 
 Roman law, as we have seen before, were for a time 
 confounded together in many respects, but when the 
 Digest was compiled in the sixth century of the 
 Christian era the Roman law had reached that high 
 degree of perfection which has not been surpassed by 
 modern legislation, and the distinction between the 
 two modes of real securities was well established. 
 
 32. The great commentator of the Napoleon Code, 
 Troplong, who, perhaps, among the brilliant array of 
 those admirable French expounders of the Civil law, 
 has written the best and most complete treatise on 
 Pledge, says in that respect : 
 
 " L'hypoth^que entra done dans la jurisprudence 
 romaine sous son nom grec. Variete du pignus^ elle 
 differait cependant du -pignics proprement dit, en ce 
 que le -pignus etait livre au creancier, tandisque la 
 chose hypothequee restait aux mains du debiteur.'* 
 And he cites the Roman jurisconsult Ulpian, whose 
 words are consecrated in the Digest : " Proprie pignus 
 decimus quod ad creditorem transit; hypothecam 
 cum non transit nee possessio ad creditorem." f 
 
 * Digest, L. 1, De pign. et hyp. 
 
 t Troplong, Du Xantissement, p. 14.
 
 42 The Law op Pledge. 
 
 33. Troplong explains also the apparent confusion 
 of the Roman law on the similarity of the mortgage 
 and the pledge alluded to by the jurisconsult Mar- 
 •cianus in the words : Inter -pignus et hypothecam 
 tantu?n notnitiis sonus differt. The French com- 
 mentator says of this maxim : "This proposition is 
 only true in a restricted sense, and that is, only so far 
 as the mortgage and the pledge belonged to the sub^- 
 ject of real securities. But, in other respects, the 
 mortgage differed considerably from the pledge ; and 
 it differed from it, not only by the name, but also, and 
 especially, because it left to the debtor the possession 
 which the pledge took away from him."* 
 
 34. Domat himself indicates clearly the difference 
 between the mortgage and the pledge, in the French 
 law, and consequently that his words on the mortgage 
 of property i7i futui-o do not apply to the pledge. 
 
 He sa3's in his Art. I : " But the wov<\ pawn is more 
 properly applied to movable things, which are put 
 into the hands and keeping of the creditor ; and the 
 word mortgage signifies properly the right acquired 
 by the creditor upon the immovables which are ap- 
 propriated to him by his debtor, although he be not 
 put into possession of them." 
 
 Indeed, as possession is the essential and indis- 
 pensable condition of the pledge in the Civil law as 
 well as in the Common law, it is impossible to con- 
 ceive how property not yet in existence, and, there- 
 fore, not susceptible of delivery, can be pledged. 
 
 Troplong, Xantissement, page 9.
 
 What Things May Be Pledged. 43 
 
 35. The mistake of Judge Story is, therefore, 
 hardly justifiable, and would lead the law student into 
 a grave error. But the notions of Judge Story on 
 the subject of the pledge of the Civil law are frequently 
 found to be erroneous, and he is evidently not the 
 safe pfuide in such matters that he is in the Common 
 law. For instance, he says, also: " There are few 
 cases, if any, in our law, where an hypothecation, in 
 the strict sense of the Civil law, exists ; that is, a 
 pledge without possession by the pledgee. 
 
 " In the Civil law, although a delivery of the thing 
 took place in cases of strict pledge, pigiius^ yet, as 
 has been already stated, in the case of an hypotheca- 
 tion, no such delivery or possession was necessary. 
 An hypothecation had a complete effect to transfer 
 and vest a title in the thing, if that was the intention 
 of the parties upon the mere execution of the contract, 
 although no possession was given, or it was even stip- 
 ulated not to be given."* 
 
 36. The statement of the great American jurist on 
 this subject is not sufficiently precise. What he says 
 here of the Civil law, meaning the Roman law, is 
 only true of the antiquities of the Roman law, when, 
 by the mancipatio per res et libram, accompanied by 
 the fidzicia, the contract of security took the form of 
 a sale, transferring the property of the thing condi- 
 tionally to the creditor, under a promise from him to 
 return it to the debtor on payment of the obligation. 
 This was a kind of sale with the right of redemption, 
 
 * Story, Bailments, Sees. 2SS, 298.
 
 44 The Law of Pledge. 
 
 strongly resembling the mortgage of the Common 
 law. But this primitive contract of security had dis- 
 appeared when the Roman law reached its high degree 
 of improvement, and was replaced by the -pigtitts and 
 the hypotheca, in neither of which the title of the thing 
 pledged or mortgaged was transferred, even condi- 
 tionally, to the creditor. The theory of the legal title, 
 or qualified propert}-, transferred to the mortgagee, or 
 pledgee, under condition, is a theory of the Common 
 law, and is contrary and repulsive to the Civil law.'* 
 
 37. Without desiring to constitute myself a critic of 
 Judge Story's views of the Civil law, as the object of 
 this book is to help the student to understand its prin- 
 ciples in the contract of pledge, I am constrained to 
 notice another of his grave errors. He saj's of the 
 pledge of incorporeal things : " But in the Civil law, 
 and French law, Pothier seems to think that incor- 
 poreal things, such as choses in action, are not deemed 
 to be strictly capable of being conveyed in pledge. 
 However, they are capable by assignment of being 
 effectively used for the same purpose. And it may 
 perhaps be doubted if Pothier' s opinion is sustained 
 by the Civil law in its full extent." f 
 
 We must observe, first, that Pothier does not seem 
 to think, but says positively that incorporeal things 
 can not be pledged because the}^ can not be delivered 
 to the pledgee. "In regard to incorporeal things, 
 such as credits, they are not susceptible of being 
 
 * Troplong, Nantissement, Sec. 5. 
 
 Ortolan. Instituts, p. 205 and p. m7. 
 t Story, Bailments, Sec. 290.
 
 What Things May Be Pledged. 45 
 
 pledged because they can not be delivered, which is 
 of the essence of this contract," * 
 
 But in the very note to this paragraph, both of 
 which are cited by Judge Story, Pothier says that 
 since the publication of his book he has been in- 
 formed that the French jurisprudence has been 
 changed on the subject, and that the pledge of in- 
 corporeal things has been recognized as valid by the 
 court. 
 
 Whatever the French law was in Pothier's time, 
 the Code Napoleon, promulgated in 1803 and 1804, 
 provided specifically for the pledge of incorporeal 
 things, and when Judge Story wrote his book, in 1832, 
 he had every means of enlightenment on the subject. f 
 
 38. It would seem that the remark on his want of 
 sufficient precision on the subject of the Roman law 
 of pledge, made by an English writer, is not unmer- 
 ited. Sir William Markby says of him: "As to the 
 Roman law of plegde, at any rate, Story's knowledge 
 appears to me to be incomplete." J 
 
 This author states, which is ver}' true, that Judge 
 Story relies chiefly in questions of Roman law upon 
 Domat and Pothier, but that the labors of these 
 great men have been long ago eclipsed by later 
 discoveries. 
 
 * Pothier, Nantissement, Sec. (». 
 
 t Code Napoleon, Art. 2075. 
 
 i Elements of Law. p. 214, Sec. 435.
 
 CHAPTER IV. 
 
 39. In the modern Civil law there can be no con- 
 fusion of the mortgage and the pledge, as the mort- 
 gage never applies to personal property. But there 
 is still evidently some confusion on that subject in the 
 Common law, and the proof of it lies in the fact that 
 the courts of the Common law States are frequently 
 called upon to decide whether a contract of security 
 between creditor and debtor is a mortgage or a pledge. 
 
 The confusion between the two contracts has been 
 the subject of remarks by the Courts and the text 
 writers.* 
 
 40. In a recent case, to which we alluded in our 
 Introduction, the Supreme Court of the United States, 
 passing upon a contract of that sort, said : 
 
 *'As the verbal mortgage or pledge included all the 
 cattle, and was accompanied by delivery, it was good, 
 at least as against the defendants, irrespective of any 
 question of notice.'' f 
 
 Does the Court mean to say that a verbal mortgage 
 or a pledge is the same thing? Can there be a verbal 
 mortgage? Or is it that, in that case, it was doubtful 
 whether the contract was a chattel mortgage or a 
 pledge ? 
 
 • Thompson vs. Dolliver. 132 Mass. 103. 
 
 Jones, on Pledges, Sec. 4. 
 
 Ante, p. 12. 
 t Means vs. Bank of Randall, 14G U. S. 628. 
 
 Ante, p. 13. 
 47
 
 48 The Law of Pledge. 
 
 In the Civil law, such uncertainty in the language 
 of the Court would be subject to criticism. 
 
 41. There is in respect of the pledge of future prop- 
 erty no difference between the Civil law and the Com- 
 mon law, inasmuch as under both systems, deliver}^ 
 of the pledge to the pledgee is a condition sine qua non 
 of the validity of the pledge. There may be in some 
 cases an agreement to pledge future property, which 
 becomes effective whenever the property rises into 
 actual existence ; but there is in such cases no pledge 
 at the moment the contract is formed, because no 
 delivery is then possible, even fictitiously. There is in 
 such cases a promise of pledge, which may be en- 
 forced by action, but there is no pledge, and, there- 
 fore, no security resulting from it.'^ 
 
 42. Legislation may, of course, create certain 
 pledges sui generis^ by virtue of which future property 
 may be pledged, such as the laws of some agricultural 
 States which provide that the crop of a farm or plan- 
 tation, even before rising into existence, may be 
 pledged to secure loans of money or supplies used in 
 making the crop. Such cases are taken by special 
 laws out of the general principle of the law of pledge.f 
 Such special pledges do not change the rules govern- 
 ing contracts of pledge generally. 
 
 43. It is true that the debtor may pledore property 
 which does not belong to him, if he can deliver it at 
 
 * Laurent, Vol. 28, p. 464. 
 
 Jones, on Pledges, Sees. 28 and 29. 
 
 D'Meza's Succession, 26 La. An. 35. 
 
 Baudry-Lacantinerie, Nant-issement, Sec. 36. 
 t Ante^ p. 38. Hagan V3. Sompayrac, 3 La. 154.
 
 What Things May Be Pledged. 49 
 
 the moment of the pledge, and the agreement will 
 become final, and the right of the pledgee will attach 
 I'etroactively at that time, if thereafter the pledgeor 
 becomes the owner of the property; but this rests on 
 a different principle, and depends upon the rules of 
 estoppel, which will not allow the pledgeor to den}- his 
 obligation and his declaration that the property 
 belonged to him. The same doctrine applies to the 
 mortgageor of property, which at the time of the 
 morto-a^e did not beJonsj to him. 
 
 44. The true owner in such cases, if he has not con- 
 sented to the pledge or mortgage of his property, and 
 thii'd persons, if they are thereby injured, may attack 
 the validity of the transaction, but until they do, the 
 pledgee or mortgagee may have the benefit of it, and 
 is safe from any denial of ownership by the pledgeor 
 or mortgageor.* 
 
 45. But such is not the law in France and the coun- 
 tries of continental Europe which have followed her 
 legislation. There, under the principle that the pos- 
 session of personal property is equivalent to title, the 
 pledgee in good faith can not be disturbed even by 
 the true owner of property fraudulently disposed of. 
 This feature of the French law of pledge will be the 
 subi'?ct of another chapter. 
 
 Can Rights of Inheritance be Pledged? 
 
 46. We must first distinguish between the rights 
 of an heir which have already accrued by the death 
 
 ' Civil Code of Louisiana, Arts. 3144 and 3304 
 
 Jones, on Pledges, Sec. 52.
 
 50 The Law of Pledge. 
 
 of the ancestor, relation or testator, and the mere ex- 
 pectant and eventual rights of a presumptive heir 
 before the death of the ancestor, relation or testator. 
 
 By the Civil law the heir can not dispose by con- 
 tract of his expectant rights of inheritance whilst the 
 ancestor, relation or testator is alive, even with his 
 consent. The proMbition is based upon reasons of 
 morality and public policy, and consequently all such 
 contracts of the heir, whether by sale, exchange, lease 
 or pledge, are invalid and of absolute nullit}\ 
 
 "There are things," says Pothier, "which it is against 
 decency and good morals to expect, such as a future 
 succession, which one can not expect without hoping 
 for the death of the person that will realize the expec- 
 tation, which morality does not permit." * 
 
 A guilty hope might suggest criminal thoughts. 
 Such agreements are, therefore, contrary not only to 
 good morals but also to public order. The Court of 
 Cassation so held : " The agreement by which the 
 eventual rights of an heir in the succession of a living- 
 person are the subject of a bargain, being prohibited 
 by the Arts. 791, ii3oand 1600 of the Civil Code, 
 must necessarily be placed among the contracts which 
 are contrary to good morals and public order." f 
 
 This principle comes from the Roman law, but the 
 modern Civil law has rendered the rule even more 
 
 * Pothier, Des Obligations. Sec. 132; De la Veate Sec 527 
 t Dalloz, 1846, 1, 25. 
 
 Laurent, Des Obligations, Sec. 84. 
 
 Troplong, De la Vente, Vol. I, Sec. 246. 
 
 Toullier, Droit Civil, Vol. 6, See. 115 ef seq. 
 
 Duranton, Droit Civil, Vol. 10, Sees. 310 311 
 
 Marcade, De la Vente, Vol. 6, p. 211,
 
 What Things May Be Pledged. 51 
 
 rigid. By the Roman law the prohibition was only 
 applied to contracts of the kind entered into by the 
 contracting parties without the consent of the person 
 whose succession was the subject of the contract. 
 With the consent of that person the law did not for- 
 bid the agreement,"^ 
 
 47. The Code Napoleon and the Civil Code of 
 Louisiana prohibit such stipulations even in the con- 
 tract of marriage, the most favored of all contracts 
 under the Civil law. f 
 
 By the Civil law, therefore, it is clear that rights of 
 inheritance can not be the subject of the contract of 
 pledge when such rights have not yel accrued to the 
 heir by the death of the ancestor or testator. 
 
 48. It is not so in the Common law. Here the two 
 great systems of law of the civilized world differ, 
 where they seldom do, in the fundamental principles 
 of morality and public order. The right of the expect- 
 ant or presumptive heir to dispose by contract of his 
 eventual rights in the estate of his ancestor, whilst 
 this one is yet alive, has been recognized and sanc- 
 tioned by the courts of England and of this country ; 
 and that jurisprudence has been firmly established by 
 numerous authorities of the highest order. The ques- 
 tion of good morals and public policy has not even 
 been raised or considered in the cases in which the 
 principle has been declared. The subject has been 
 examined by the courts simply as a matter of the suf- 
 
 * L. 30, C, De Pactis; Laurent, loc. cit. 
 t Code Napoleon, Arts. 791, 1130 and 1600. 
 Civil Code of Louisiana. Arts. 979, 1015, 1887, 2327, 2454.
 
 52 The Law of Pledge. 
 
 ticiency of interest in the heir to form the considera- 
 tion of a contract, and for a court of equity to enforce it. 
 
 49. Judge Story says in this respect : " So, even 
 the naked possibiUt}' or expectancy of an heir to his 
 ancestor's estate may become the subject of a contract 
 of sale or settlement, and in such case, if made bo7ia 
 fideiox a valuable consideration, it will be enforced in 
 equity after the death of the ancestor — not, indeed, as 
 a trust attaching to the estate, but as a right of con- 
 tract.'' * 
 
 In Spence's Equity Jurisprudence, the same doctrine 
 is stated in the following manner : '"A naked possibility 
 or expectancv of an heir to his ancestor's estate, or 
 even of the anticipated right of a person or next of 
 kin, may be the; subject of a contract in equity which 
 will be equivalent to an assignment of the property, 
 if, and when, into possession. "f 
 
 Modern English statutes, as well as the American 
 legislation, have changed the Common law so as to 
 permit the assignment at laiu of contingent and 
 future interests, expectancies and possibilities, coupled 
 with an interest, in many cases, either of real estate or 
 of personal propert}-. But the jurisdiction of equit}' 
 continues to be exclusive over all other assignments of 
 contingent, future, expectant interests and possibilities 
 not embraced within the statutes.! 
 
 * Story. Eq. Jurisp. Vol. 2. Sec. 1040. 
 
 t Spence, Eq. Jurisp., Vol. 2, p. 865. 
 
 X Pomroy, Eq. Jurisp., Vol. 3, Sec. 1285 et seq. 
 
 Fonblanque, Equity, p. 213. 
 
 Hobson vs. Trevor,' 2 Peere Williams, 191. 
 
 Miller vs. Emans, 19 X. Y. 384.
 
 What Things May Be Pledged. 53 
 
 50. Such being the Common law, can the expect- 
 ant rights of an heir be pledged? It is evident that, 
 strictly speaking, they can not be, inasmuch as pos- 
 session of the thing pledged could not be transferred 
 to the pledgee. But all the effects of a pledge might 
 be given to contracts in which an heir, to secure his 
 debt, would give to the creditor a power of attorney, 
 irrevocable and coupled with an interest, to ask, de- 
 mand, sue for and recover all such interest, estate, 
 property and effects, real and personal, as he then, or 
 at any time thereafter, might have or claim as heir at 
 law, devisee, legatee or next of kin of his father, 
 and apply the same to the payment of the debt. 
 
 51. In such a case, the Supreme Court of New 
 York, not only recognized the validity of the agree- 
 ment, but decided that the right of the creditor thus 
 secured was paramount to that of another creditor 
 of the same debtor who attached after the death of 
 the father the property inherited by him. Tke court 
 rested its judgment entirely upon the validity of the 
 assignment made by the debtor of his expectant rights 
 as an heir. * 
 
 52. As to the rights of inheritance already accrued 
 by the death of the ancestor or testator, it was decided 
 in France by the Court of Cassation that they could 
 legally be pledged, provided the estate was composed 
 exclusively of movable or personal property, inasmuch 
 as only such property can be pledged ; and provided 
 further, that the rights of the heir were evidenced by 
 
 * Stover vs. Eycleshiiner, 46 Barb. 84.
 
 54 The Law of Pledge. 
 
 a title susceptible of delivery, inasmuch as incorporeal 
 things to which no title is attached, and which, there- 
 fore, can not be delivered, can not be the subject of a 
 pledge. In the case in question the rights of inheritance 
 of the heir were his undivided share in the estate. * 
 
 53. Pothier, after saying that it is only movable 
 property which ordinarily is the object of the contract 
 of pledge, adds : "However, inheritances may also 
 be the object of this contract. It is what takes 
 place when the creditor is put in possession of an 
 estate, in order that he should receive the fruits in 
 pa^-ment of his claim. And he cites both the Digest 
 and the Code of the Roman law, where the same pro- 
 visions are to be found. f We should note that this is 
 the case of an Afitichresis, which is the pledge of real 
 estate or immovable property, a mode of securit}' bor- 
 rowed by the Romans from the Greeks, and which 
 exists also in modern Civil law, though not frequently 
 resorted to at the present day. The principal reason 
 of the unpopularity of the antichresis is, that the cred- 
 itor in possession of real estate for the sole purpose of 
 recovering his debt from the fruits, and only for a lim- 
 ited time, is not likely to take the same care of it and 
 to improve it as the owner himself would do. J 
 
 54. In Louisiana the point does not seem to be 
 
 * Court of Cassation, Sirey, 94, 1, 273. 
 
 Baudry-Lacantinerie, Nantissement. Sec. 34. 
 t Pothier, Nantissement, Sec. 5. 
 
 Pothier, Nantissement, Sec. 20. 
 X Laurent, Nantissement, Sec. 445. 
 
 Code Napoleon, Art. 2085. 
 
 Civil Code of Louisiana, Art. 6. 
 
 Troplong, Nantissement, Sec. 495 et seq. 
 
 Laurent, Nantissement, Sec. 527 et seq.
 
 What Things May Be Pledged 55 
 
 established one way or the other. In a case in which 
 the heir of an estate, for the purpose of securing his 
 creditor, did, by written agreement, transfer, sell and 
 assign to him all his rights, title and interest in the 
 estate, the Court held that the transaction could not 
 be a sale, because no price was fixed, and the price 
 is an essential element of the sale ; and that it could 
 not be a pledge, because delivery could not be made, 
 nor possession given, of the hereditary rights.* 
 
 In a previous case, in which succession rights were 
 transferred by an heir, in the same manner, to his 
 creditor, in order to secH7'e him, the same Court held 
 that the transaction was a pledge, but that it could 
 produce no effect qtioad third persons and other credi- 
 tors, because it was not recorded as required by law^f 
 
 This may be considered as implying that rights of 
 inheritance can be pledged if the act of pledge is 
 properly recorded. The question is, therefore, not 
 settled in the jurisprudence of Louisiana. But, as 
 in that State, it is clear that incorporeal things may 
 be the subject of a pledge, provided a symbolical or 
 constructive delivery may be made, it is difficult to 
 perceive why rights of inheritance in an estate com- 
 posed exclusively of movable property, should not be 
 pledged if the title to such rights is susceptible of de- 
 livery, as was decided by the Court of Cassation in the 
 case alluded to above 
 
 55. Under the principles of the Common law the 
 pledge of rights of inheritance is more easily estab- 
 
 * Forbes vs. Burke, 24 La. An. 85. 
 t Succession of Argote, 3 La. An. 477.
 
 56 The Law of Pledge. 
 
 lished. In a recent case decided by the court of 
 Pennsylvania, it was held that the assignment by 
 deed poll, made by a son to his fathers executors, 
 of all his interest in the estate to secure his debt to 
 the estate, was a valid pledge, though it would not 
 be as an assignment, for want of registry. The estate 
 was composed both of real and personal property. 
 The court said that so far as the interest pledged was 
 personalty, it was a valid and effective assignment. 
 But so far as the interest of the heir was realty, the 
 question was not decided and was deferred to subse- 
 quent proceedings before the master in chancery and 
 the court below. It is remarkable, at the same time, 
 that a doubt is raised in the opinion of the court 
 whether the interest in the realty is separable at all 
 from the blended interest. We may, then, ask, if it 
 is not separable, whether the pledge is still valid upon 
 a compound of personalty and realty. "* 
 
 Can a Lease of Real Estate be Pledged b? 
 
 THE Lessee ? 
 
 56. It seems that this question should be answered 
 in the affirmative. 
 
 Under the Common Law authorities the validity of 
 such a pledge by assignment of the rights of the lease 
 and delivery of the act of lease to the pledgee has 
 often been recognized. f 
 
 * Handy 's Estate, Larned Appeal, 167 Pa. St. 552. 
 t Penney vs. Lynn, 59 N. W. 1043, Minn. 
 
 Am. Digest, 1895, p. 3739. 
 
 Am. Digest, 1894, p. 3750. 
 
 Am. Digest, 1893, p. 4022.
 
 What Things May Be Pledged. 57 
 
 But can it be done in the form of a contract of 
 pledge proper — that is, by dehvery of the lease to the 
 pledgee ? 
 
 The Court of Louisiana decided that it could not 
 be done, and hints in the decision that the onl}^ 
 manner in which the lessee can effectually pledge the 
 lease is by making a transfer of it to the pledgee and 
 notifying the lessor. ■^''" 
 
 57. The question has presented itself before the 
 courts in France. The court of the first instance 
 tliere held that, placing the lease in the hands of the 
 pledgee, under the terms of a written act of pledge, 
 and notifying the lessor, constituted a valid pledge of 
 the lease, though possession of the leased premises 
 was not given to the pledgee. The Court considered 
 tliat giving possession of the real estate to the pledgee 
 (unless it was by the antichresis^ which the lessee 
 could not do) would be no pledge, as this contract 
 only applied to movable or personal property. But 
 the Court thought that the right to occupy the leased 
 premises was an incorporeal thing, susceptible of 
 being pledged, and delivering possession of the title 
 or evidence of that right, to-wit : the act of lease, 
 was, on that point, a sufficient compliance with the 
 law, which provides that possession of incorporeal 
 things may be fictitious or symbolical. 
 
 The Court of Appeals reversed the decision on the 
 ground that there could be no pledge of the lease 
 without possession of the leased oremises. But the 
 
 * Coffin vs. Kirevan, 7 La. An. 221.
 
 58 The LA\y of Pledge. 
 
 Court of Cassation affirmed the judgment of the court 
 of first instance, fixing the jurisprudence of France 
 upon this question, that a lease of real estate may be 
 pledged by the lesree b}'^ an act of pledge proper.'' 
 
 58. Pont expresses a positive opinion on this sub- 
 ject and sa^'S : '^'As a general rule, it can not be 
 doubted that a lease may be the subject of a pledge. 
 Notwithstanding the lively discussions which have 
 taken place about the nature of the lessee's right, it 
 can no lono;er be contended that it is not a movable 
 right. At the same time that he is the debtor of the 
 rent, which makes the lessor the creditor of it, the 
 lessee has clearly a right of use. That right is then, 
 under the terms of Arts. 2072 and 2075, ^ movable 
 right, — of which the lessee is the creditor. It may, 
 consequently, be the object of the contract of pledge ; 
 and this point (if not the one which relates to the 
 dehver}' necessary to make the contract valid as to 
 third persons) has been admitted without difficultv bv 
 jurisprudence." j 
 
 Laurent, the great Civilian, reasons upon this sub- 
 ject with his usual clearness and force, and approves 
 the doctrine established by the Court of Cassation, 
 that a lease may be pledged.! 
 
 59. But, qiK^re: If in the act of lease it were ex- 
 pressly stipulated, as is generally the case in some 
 States, that the lessee shall not have the riorht of either 
 
 * Dalloz, 1859, I, 167. 
 
 Sirey, .59 I, 913. 
 t Pont, Des Petits Contrats, Vol. 2, Sec. 1103. 
 X Laurent, Droit Civil, VoL 28, Sec. 461. 
 
 Baudry-Lacantinerie, Nantissement. p. 19, Sec. 3G1
 
 What Things May Be Pledged. 59 
 
 subleasing the propert}' or transferring the lease, 
 could he pledge it? It would seem not, for the 
 pledge, if foreclosed, would lead to the sale of the 
 lease, or at least to the sale of the right of occupation 
 of the leased premises ; and the lessee would have 
 done thereby indirectly, in violation of the terms and 
 conditions of the lease, what he could not do directly. 
 
 Can the Lessor Pledge the Rent of the Leased 
 Property? 
 
 60. At Common law it has been held that the assisfn- 
 ment of the lease by the lessor, as security for the 
 debt due to the assignee, constitutes a pledge of the 
 rents, and that the assignee has the right to collect 
 them and apply them to his debt. The pledgee, 
 in that case, has a lien upon the rents, though the 
 ownership of the lease remains with the debtor and 
 pledgeor.* 
 
 61. This doctrine would hardly be upheld by the 
 Civil law. Rent is an incorporeal thing. When due, 
 ic becomes a claim or credit belonging to the lessor. 
 Rights can be pledged when they can be delivered 
 symbolically to the pledgee ; that constitutes his 
 possession, the indispensable condition of the pledge. 
 The symbolical delivery is the delivery of the title or 
 instrument which proves the existence of the right 
 or credit. "When a debtor wishes to pawn a claim 
 on another person he must make a transfer of it in 
 
 * Jones, on Fledges, Sec. 19. 
 Dewey vs. Bowman, 8 Cal. 145.
 
 60 The Law of Pledge. 
 
 the act of pledge, and deliver to the creditor to whom 
 it is transferred the note or instrument which proves 
 its existence if it be under private signature, and must 
 endorse it if it be negotiable."* 
 
 If the claim or credit is not proved by a title^ or 
 such instrument, it follows that it can not be pledged. 
 Thus Laurent sa3's : "It results from Art. 2076 that 
 the pledge of a claim is impossible when it is not 
 established by a title '^ in that case it is impossible to 
 put the creditor in possession, and without that con- 
 dition there is no pledge." j 
 
 62. The lessor has no ////e or instrument proving 
 the existence of his credit or claim for the rent. Even 
 in case of a written lease, that document does not 
 establish that the rent is not paid, and that therefore 
 the lessor has a claim for it against the lessee. 
 
 It is only where, as is customary in some States, 
 the lessee gives his promissory notes in representa- 
 tion of the rent, that the lessor could pledge them 
 and thereby pledge the rent, whether due or not. 
 
 Can a Patent of Invention be Pledged .f* 
 
 (S^. This question has been decided affirmatively by 
 the courts of France. The difficulty in such cases was 
 that the patent is an incorporeal right, and for the 
 pledge of such rights or credits, notice of the transfer 
 must be given to the debtor to make the pledge valid. 
 
 * Civil Code of Louisiana, Art. 3156. 
 
 Laurent, Droit Civil, Vol, 28, Sec. 478. 
 t Laurent, Droit Civil, Vol. 28, Sec, 477, 
 
 Troplong, Nantissement, Sec, 278,
 
 What Things May Be Pledged. 61 
 
 There is no debtor of the patent. Hence no notice 
 is possible. The French courts held that in default of 
 a provision of the law on that point, the pledge was 
 valid without notice.* 
 
 But the pledgee has no right in that case to work 
 the patented invention and sell the articles manufact- 
 ured under it. This right remains with the inventor. 
 The pledgee would be infringing upon the patent if 
 he did.f 
 
 Can Works of the Mind, Either Artistic or 
 Literary, be Pledged? 
 
 64. This has also been decided affirmatively b}' the 
 Courts of the Civil law, provided the work of the 
 mind, artistic or literary, has been materialized by 
 writing, printing, engraving and such other ways, 
 and that the manuscript, or printed or engraved article 
 has been put in the possession of the pledgee. It has 
 been held, in such cases, that the right of the repro- 
 duction of the work does not belong to the pledgeor 
 but to the pledgee. The profits accruing to the latter 
 would go to the extinguishment or reduction of the 
 debt.t 
 
 * Laurent, Du Gage, Vol. 28, Sees. 462-465, p. 455. 
 
 Aubry et Kan, Vol. 4, p. 2U5. 
 
 Baudry-Lacantinerie, Xantissement, Vol. 1, p. 19. 
 
 Dalioz, 1865, 2,231. 
 t Pont, Des Petits Contrats, Vol. 2, Sec. 1103. 
 j Baudry-Lacantinerie, Xantissement, Vol. 1, p. 19. 
 
 Laurent, Vol, 28, Sec. 444. 
 
 Dalioz, 1875, 2, 43.
 
 CHAPTER V. 
 
 65. A pledge may be given to secure the fulfilment 
 of any legal obligation, ^r6> ciiaciimque obligatione, as 
 well as the payment of a moneyed debt. Thus, the 
 obligation of a lessee to keep the leased premises in 
 good order, as well as to pay the rent, may be secured 
 or guaranteed by a pledge given to the lessor. The 
 obligation of the vendor to deliv^er the thing sold may 
 be secured or guaranteed by a pledge, as well as the 
 obligation of the purchaser to pay the price of sale. 
 A suret}^ or a warrantor may be secured by a pledge 
 against the consequences of his eventual liability. In a 
 word, pledges may be given for simple or conditional 
 obligations and for all lawful transactions which may be 
 the subject of trade or business. If the principal con- 
 tract is unlawful or void, the pledge given to secure 
 it is clearly null. But if the principal obligation is 
 valid, whatever may be its origin, its subject and its 
 purpose, the fulfilment of it may be secured by pledge. 
 The principle is the same whether the source of the 
 obligation is a contract, a judgment, a statute, or a 
 tort.^ 
 
 66. The definitions of pledge by Sir William Jones 
 and Lord Holt are, therefore, defective. The former 
 said that it is : "A bailment of goods by a debtor to 
 his creditor to be kept till the debt is discharged." And 
 
 * Troplon^, Xantissenient, Sec. 24. 
 Baudry-Lacantinerie, Nantisseinent, Sec. 10. 
 
 63
 
 C4 The Law of Pledge. 
 
 Lord Holt says that the pledge takes place : " When 
 goods and chattels are delivered to another as a pawn 
 to be securit}- for money borrowed of him by the 
 bailor." Judge Story, by the light of Civil law, could 
 not fail to see the deficiency of these definitions, and 
 said: ''The foregoing definitions are sufficiently 
 descriptive of the nature of a pawn or pledge ; but they 
 are in terms limited to cases where a thing is given as a 
 mere security for a debt', but a pawn may well be made 
 as security for any other engagement. The definition 
 of Domat is, therefore, more accurate, because it is 
 more comprehensive, viz. : that it is an appropriation 
 of the thing given for the security of an engagement. 
 And in the Common law it may be defined to be a 
 bailment of personal property as security for some 
 debt or engageinent."* 
 
 67. And again, he asserts the principle in positive 
 terms : "'It matters not what is the nature of the debt 
 or engagement. The contract of pledge is not con- 
 fined to an engagement for the payment of money ; 
 but it is susceptible of being applied to any other 
 lawful contract whatever. "f It is curious enough 
 that in this, as in so many other instances, the great 
 expounder of the Common law of England and of the 
 United States, onl)- supports his position by the au- 
 thority of Domat and Pothier, the pillars of the Civil 
 law in France during the seventeenth and eighteenth 
 centuries. 
 
 * Story, on Bailments. Sec. 286. 
 t Story, Bailments, Sec. 300.
 
 What Things May Be Pledged. 65 
 
 68. Judge Stor}''s remarks condemnatory of the 
 definition of the pledge were made to apply also to 
 that of Pothier, which, he says, is in the following 
 words : A contract by which a debtor gives to his 
 creditor a thing to detain as security for his debt. 
 Judge Story is mistaken in limiting the signification 
 of the word debt.^ so far as the Civilians are concerned, 
 to a moneyed debt. In the Civil law the word has a 
 larger meaning. It signifies the obligation resulting 
 from a contract, whether it is to pay mone}-, or to do 
 something, or not to do something. The party to 
 whom the obligation is due is the creditor ; the party 
 who is to perform the obligation or promise, is the 
 debtor, whether money is to be paid or something 
 else to be done. Payment by the debtor means the 
 fulfilment or performance of the obligation, and not 
 merely the pa3'ment of money. In the language of the 
 Civilians, we pay a things as well as a sum of money. 
 
 69. In the same definition of the pledge, when 
 Pothier says that the debtor gives to the creditor some- 
 thing to detain as security for the debt, he does not 
 mean that a gift is made of the thing. If the owner- 
 ship of the thing was conveyed to the creditor it would 
 be a pledge no longer. To give, in the Civil law, 
 when used on the subject of obligations, means to 
 deliver."^* 
 
 The Civil Code of Louisiana, borrowing its doctrinal 
 part from Pothier, states : "By payment is meant, not 
 only the delivery of a sum of money, when such is 
 the obligation of the contract, but the performance of 
 
 * Pothier, on Obligations, Vol. 2, Sec. 494 et seq.
 
 C6 The Law of Pledge. 
 
 that which the parties respectively undertook, whether 
 it be to give or to do. 
 
 " He who is bound to do, or not to do, or to give, 
 is indifferently called the obligor or the debtor ; and 
 he to whom the obligation is made, is, in like man- 
 ner, without distinction called the obligee or the 
 creditor."* 
 
 70. The Code of Louisiana also states the meaning 
 of the words to give, in the Civil law, on the subject 
 of Obligations. "The term to give, in this division of 
 obligations, is applied only to corporeal objects, that 
 may be actually delivered from one to another ; and 
 it includes the payment of money as well as the 
 delivery of any other article. A covenant respecting an 
 incorporeal right comes under the definition of con- 
 tracts to do or not to do, because some act, besides that 
 of delivery, is necessary for the transfer of such 
 rights." f V 
 
 With this understanding of the Civil law terms, the 
 definition of the contract of pledge in the Code of 
 Louisiana and in the Code Napoleon is correct. The 
 former says : "The pledge is a contract by which one 
 debtor gives something to his creditor as a security 
 for his debt." And the French Code defines the 
 same contract in these words : "The pledge is a con- 
 tract by which a debtor delivers a thing to his credi- 
 tor for security of the debt. "J 
 
 * Civil Code of Louisiana, Arts. 2131, 2132. 
 t Civil Code of Louisiana, Art. 190.5. 
 X Civil Code of Louisiana. Art. 3133. 
 Code XapoleoD, Art. 2071.
 
 What Things May Be Pledged. 67 
 
 7 1 . As we have seen before, the pledge is itself a 
 contract, but it is not limited to contractual obligations, 
 and ma}' secure obligations arising from other sources, 
 and even those arising from torts. The Code of 
 Louisiana enunciates the principle in these terms : 
 " Every lawful obligation may be enforced by the 
 auxiliary obligation of pledge."* 
 
 But it is important to obser\'e that, when a pledge 
 is given to secure the fulfilment of another obligation 
 than a moneyed debt; in other words, when the 
 obligation secured consists in doing something ; the 
 amount for which the pledge is given must be fixed 
 in the contract of pledge. This is as necessar}' as in 
 the case of a mortg-aore. Parties who deal with 
 pledgeors or mortgageors must know to what extent 
 their property is already encumbered. Thus, if a 
 pledge is given to secure the faithful administration of 
 a corporation officer, a sum must be fixed to the ex- 
 tent of which, and no more, the pledge will answer. f 
 
 72. A pledge ma^^ be validly given to secure the 
 debt or obligation of another person than the 
 pledgeor. It is then a mere matter of agreement 
 and assent of the parties, resting upon the general 
 principles of the law of contract. The rule existed 
 in the Roman law; the principle has been adopted 
 by the Common law and it is incorporated in the 
 modern Civil law. The Code Napoleon provides : 
 "The pledge may be given by a third person for the 
 
 * Civil Code of Louisiana, Art. 3136. 
 t Laurent, Du Gage, Sec. 454.
 
 63 The Law of Pledge. 
 
 debtor." * The Civil Code of Louisiana contains the 
 same provision: "A person may give a pledge, not 
 only for his own debt, but for that of another 
 also." t 
 
 Judge Story states that the rule is part of the Com- 
 mon law, and expresses it in these terms: "It is of 
 the essence of the contract that the thing should be 
 delivered as a security for some debt or engagement. 
 But it is of no consequence whether the debt or en- 
 gagement for which the security is given is that of 
 the pledgeor or of any other person ; for if there is 
 an assent by all the parties, it is equally obligator}- in 
 each case." J 
 
 It is in the same manner that a person may giv^e a 
 mortgage on his property to secure the debt of another 
 person. § 
 
 73. In case of a person pledging his property for 
 the debt of another, there intervenes, says Pothier, a 
 double juridical operation, a contract of pledge be- 
 tween the third person and the creditor, with all its 
 proper effects, as if the pledge had been given by the 
 debtor ; and between the third person and the debtor, 
 a contract of mandate, or a ^?/f«5z -con tract of negotio- 
 ru7n gestor^ by virtue of which the third person has a 
 right of action against the debtor if the pledge has 
 served to pay the debt. || 
 
 * Code Napoleon, Art. 2077. 
 
 t Civil Code of Louisiana, Art. 3141. 
 
 i Story, on Bailments, Sec. 300. 
 
 § Civil Code of Louisiana, Art. 3295. 
 
 Pont, Du Nantissenient, Vol. 9, Sec. 1141. 
 !i Potbier. Nantissenient, No lU.
 
 What Things May Be Pledged. 69 
 
 74. There is some analogy between the position of 
 the pledgeor in such case and that of the surety, with 
 this difference, that the surety has bound himself per- 
 sonally for the debt of another, and that the pledgeor 
 has bound his property but not himself. The differ- 
 ence is tersely expressed in the Latin maxim : Res 
 lion persona debet. The pledgeor in that case can 
 not plead the benefit of discussion, or his discharge, 
 on account of indulgence granted to the debtor by the 
 creditor, as the surety has the right to under the law 
 of suretyship. * 
 
 75. But the analogy between the contract of sure- 
 tyship and the contract of pledge, when the pledge is 
 given to secure the debt of another person than the 
 pledgeor, lies also in this, that the surety is and re- 
 mains bound even when the principal debtor is dis- 
 charged for some reason of personal incapacity, such 
 as minority or coverture ; and that the pledge is and 
 remains valid when the debt which it secures is an- 
 nulled for the same reasons of minority or coverture. 
 Both contracts are accessory contracts, and, as a rule, 
 follow the fate of the principal contract, and if the 
 latter falls they fall with it. If the obligation 
 which they are both intended to secure is null for 
 some cause or other, they, the accessory con- 
 tracts, are null also, as they can not support what 
 is set aside. But when the principal obligation is 
 
 Ti'oplong, Xantissement, Sees. 375, 376. 
 
 Pont, Nantiasement, Sec. 1141. 
 
 Baudry-Laoantinerie, Kantissement, Sec. 12. 
 
 Laurent, Du Gage, Sec. 443. 
 
 James vs. Pike, Lapeyre & Brother, 23 La. An. 477.
 
 70 The Law of Pledge. 
 
 only relatively void, or voidable, owing to an ex- 
 ception personal to the debtor, the suret}' can not plead 
 that exception and he remains liable. So the pledgeor 
 can not take advantage ot the incapacity personal to 
 the debtor for w^hom he has given the pledge, and the 
 latter remains valid.* 
 
 76. The contract of pledge being an accessor}- one, 
 intended only to secure a principal obligation, like 
 the contract of mortgage and the contract of suret}'- 
 ship, it is evident that when the principal obligation 
 is null the pledge is necessarily null also, and lapses. 
 Accessor him sequitiir priiicipale. It can not subsist 
 when there is no debt for it to secure. f 
 
 The Civil Code of Louisiana has enacted the prin- 
 ciple in two articles : 
 
 '' If the principal obligation be conditional, that of 
 the pledge is confirmed or extinguished with it." 
 
 " If the obligation is null, so also is the pledge."^ 
 
 Whether the conditional obligation falls by virtue 
 of the condition, or whether the obligation is null 
 from its own nature, it is evident that the pledgeor is 
 entitled to the restitution of the pledge, and that the 
 
 * Troplong, Da Cautionnement, Sees. 73, 75. 76, 82. 
 
 Pont, Du Cautionneinent. Sees. 45, 4G. 
 
 Civil Code of Louisiana, Art. 303G. 
 
 Code Napoleon, Art. 2012. 
 
 Brandt, Suretyship. See. 121. 
 
 Kennedy vs. Bo*si(M-o, 16 La. An. 44S. 
 
 Levy vs. Wise, 15 La. An, 38. 
 
 Burge, on Suretyship, pp. 6 and 7. 
 t Baudry-Laeantinerie, Nantissement, Sec. 9. 
 X Civil Code of Louisiana, Arts. 3137, 3138.
 
 What Things May Be Pledged. 71 
 
 pledgee has no right to retain it the moment there is 
 an end to the principal obligation.* 
 
 77, We must note, however, an important point on 
 this subject. If the pledge has been given to secure 
 an illegal or immoral obligation, the pledgeor has no 
 right of action in court to recover it. It is not, in 
 that case, that the pledgee has the right to retain the 
 thing pledged. It is not that, the principal obligation 
 being null, the pledge is valid. It is simply that the 
 law will not lend its aid to a party who has violated its 
 commands, to recover his property even from the 
 hands of a wrongdoer, or of one who detains it with- 
 out right or authority. In all such cases the courts 
 dismiss both parties and leave them where their own 
 conduct has led them. The rule is inflexible that litigants 
 must come into court with clean hands. The conse- 
 quence is that the party in possession of the property 
 transferred for an illegal purpose shall not be dis- 
 turbed by legal proceedings, f 
 
 78. This principle is part also of the Common law, 
 which, like the modern Civil law, has taken it from 
 
 * Story, on Bailments, Sec. 361. 
 
 Troplong, N^antissenient, Sec. 419. 
 
 Pothier, Pandects, Book 20, Tit. 6, Sec. 1, L. 8. 
 t Civil Code of Louisiana, Art. 1893. 
 
 Code Napoleon, Art. 1133. 
 
 Pothier, Des Obligations, Sec. 45. 
 
 Larombiere, Des Obligations, Vol. 1, Sec. 10. 
 
 Gravier vs. Carroby, 17 La. 118. 
 
 Davis vs. Holbrook, 1 La. An. 178. 
 
 Windham vs. Cerf, 19 La. An. 498. 
 
 Boyd vs. Chaffe, 21 La. An. 476. 
 
 Tanneret vs. Marshall, 21 La. An. 619. 
 
 Leveret vs. Creditors, 22 La. An. 105. 
 
 Dean vs. Martin, 24 La. An. 103. 
 
 Antoine vs. Smith, 40 La. An. 560.
 
 72 The Law of Pledge. 
 
 the Roman law. "The Common law maxim is, says 
 Chitty, ex turpi contractu oritzcr non action The 
 reason of the rule is the same in both S3-stems. 
 It is not to protect the party who has entered into 
 an unlawful agreement and refuses to execute it, 
 that the law will not compel him to fulfil his 
 promise or to return what he has unlawfully re- 
 ceived ; it is to benefit the public and improve the 
 public morals.* 
 
 And, in case of property deposited under an unlaw- 
 ful contract in the hands of a party who refuses to 
 return it, both the Civil and the Common law rest their 
 principle upon the Roman maxim in -pari delicto 
 potior est conditio defendentis et possidentis. 
 
 79. This maxim was applied and commented 
 upon by a Justice of the Court of Queen's Bench in 
 the following words: " The maxim that ' in pari 
 delicto potior est conditio possidentis., is as thoroughly 
 settled as an^^ proposition of law can be. It is a maxim 
 of law established, not for the benefit of plaintiffs or 
 defendants, but is founded on the principles of public 
 polic}', which will not assist a plaintiff who has paid 
 over money or handed over property in pursuance of 
 an illegal or immoral contract, to recover it back, 'for 
 the courts will not assist an illegal transaction in 
 any respect:' per Lord Ellenborough in Edgar vs. 
 Fowler, 3 East 222 ; Collins vs. Blantern, 2 Wils. 
 
 * Chitty, on Contracts, 4th Am. Edit., p. 513. 
 Parsons, on Contracts, Vol. 1, Sec. 45G et seq. 
 Wharton, on Contracts, Vol. 2. Sec. 335 et seq.
 
 What Things May Be Pledged. 73 
 
 341 ; Lord Mansfield in Holman vs. Johnson, Cowp. 
 
 343."* 
 
 In that case the contention was between the pkiin- 
 
 tiff, who had pledged a bank note as security for the 
 payment of wine and victuals, and the defendant, who 
 had furnished them for the use of a house of prostitu- 
 tion. The plaintiff sued for the restitution of the 
 pledge. It does not appear in the report of the case 
 whether the debt was paid or not, when the pledgee 
 demanded the return of the pledge ; and that fact does 
 not seem to have been of any consideration in the con- 
 troversy. The plaintiff tried by every possible tech- 
 nicality of pleading to avoid the issue of immorality 
 in the transaction, but he failed in that; and the 
 Court held that he could not recover the pledge because 
 it was given for an unlawful purpose. 
 
 80. It is worth noticing that one of the justices re- 
 marked on the trial : "If a person lets a house for an 
 immoral purpose, are his enforceable rights gone, so 
 that he can not bring ejectment?" 
 
 This reflection is suggestive of serious difficulties, 
 or rather, of the very grave consequences of the 
 principle that, in -pari delicto -potior est conditio possi- 
 dentis^ and that the courts will not aid a guilty party 
 to recover his property, although the wrongful detainer 
 has no right or authority' to keep it. A house is rented 
 
 ' Taylor vs. Chester, L. R, 4 Q. B. 309. 
 King vs. Green, G Allen, 139. 
 Hall vs. Corcoran, 107 Mass. 251. 
 Morton vs. Gloster, 46 Me. 520. 
 Stewart vs. Davis, 31 Ark. 51 S. 
 Fisher vs. Kyle, 27 Mich. 454.
 
 74 The Law of Pledge. 
 
 for a gambling establishment or to a prostitute, in a 
 State where the law forbids gambling or prostitution. 
 The lessoi is aware of the character and of the pur- 
 pose of the lessee. At the termination of the lease 
 the lessee refuses to surrender the premises. The 
 jessor brings an ejectment suit. Will the courts 
 ■fiend him their aid to obtain possession of his 
 property? We are only repeating the qucere of the 
 English judge. But is it possible to answer it in the 
 negative? Has not the latter handed over his -prop- 
 erty in pursuance of an illegal or immoral contract^ 
 in the words of the decision of the Court of Queen's 
 Bench? Leasing a house for gambling or prostitu- 
 tion, where the same are prohibited, constitutes an 
 illegal and immoral contract, so much so that the 
 rent can not be recovered in court. * 
 
 Can there be any difference in law whether the 
 property thus handed over be a bank note or a house, 
 or any other species of property? But will the wrong- 
 ful detainer keep it forever? As he has no right or 
 title whatever, and the lessor is still the owner, can 
 not the latter take it back by force, or by strata- 
 gem? His creditors could, clearly, treat the property 
 still as his, and reach it by attachment. 
 
 8i. But we must obsen^e, on the other side, that the 
 authorities»are not harmonious as to the degree of com- 
 pUcity of the lessor with the lessee, in the lease of a 
 house for an illegal purpose, which will contaminate the 
 lease itself and deprive the lessor of the aid of the courts 
 
 * Wharton, on Contracts. Sees. 348, 374.
 
 What Things May Be Pledged. 75 
 
 to enforce his rights. In some cases it was decided that 
 the mere knowledge of the lessor that the lessee rents 
 the house for the unlawful purpose does not render 
 him a participant in the illegal and immoral under- 
 taking, and does not, therefore, invalidate the contract. 
 
 " To annul a contract," says Mr. Wharton, *' which 
 promotes an illegal object, not only there must be a 
 knowledge that the object is illegal, but there must be 
 complicity in the performance of an illegal act. * * * 
 There must be a union of purposes between the party 
 supplying and the party supplied in order to infect 
 the former with the latter's criminality."* 
 
 The purpose of the lessee, in the lease in question, 
 is to keep a gambling establishment or the house of 
 prostitution ; but the purpose of the lessor is not the 
 same ; his purpose is to lease his propert}^, and that 
 purpose may not be, and needs not be, and is not 
 ordinarily, that the house should serve for the pro- 
 hibited object. There is not, therefore, presumably, 
 a complicity on the part of the lessor in the perform- 
 ance of the lessee's illegal act. 
 
 82. Finally, it is in this respect of the contract of 
 pledge as it is of all contracts. If the agreement is 
 based upon an unlawful consideration, but the con- 
 tract is yet unexecuted or its purposes or object has 
 not yet been carried out, the pledgeor may repudiate 
 his engagement and demand the restitution of the 
 thing pledged, and the Courts in that case will lend 
 him their aid to recover his property. The reason is 
 
 * Wharton, on Contracts, Sees. 343, 348, 374.
 
 76 The Law of Pledge. 
 
 that in such cases the plaintiff's claim is not to enforce, 
 but on the contrary to repudiate an illegal contract. 
 The object of the suit is not to get paid for something 
 illegally done or to get back property handed over for 
 an unlawful purpose after the purpose has been ful- 
 filled, but to prevent the defendant from using an ille- 
 o-al pretext to retain money or propert}^' unlawfully 
 detained.* 
 
 83. This doctrine is lirmly established. The Su- 
 preme Court of the United States expounded it at 
 length in the case of Spring Company vs. Knowlton, 
 103 U. S. 49, and quoted the following paragraph of 
 the Decision in Taylor vs. Bowers, i Q. B. D. 291, 
 in which Lord Justice Mellish said: "If the illegal 
 transaction had been carried out, the plaintiff himself, 
 in my judgment, could not afterward have recovered 
 the goods. But the illegal transaction was not carried 
 out; it came wholly to an end. To hold that the 
 plaintiff is entitled to recover does not carry out the 
 illegal transaction, but the effect is to put everybody 
 in the same situation as they were before the illegal 
 transaction was determined upon, and before the par- 
 ties took any step to carry it out. That, I apprehend, 
 is the true distinction in point of law. If mone}' is 
 paid, or goods delivered, for an illegal purpose, the 
 person who had so paid the money or delivered the 
 goods may. recover them back before the illegal pur- 
 
 * Wharton, on Contracts. Sees. 352-354. 
 Parsons, on Contracts, Vol. 2, p. 746. 
 Addison, on Contracts, Vol. 2, Sec. 1412. 
 Story, on Contracts, Vol. 2, Sec. G17.
 
 What Things May Be Pledged. 77 
 
 pose is carried out ; but he waits till the illegal pur- 
 pose is carried out, or if he seeks to enforce the illegal 
 transaction, in neither can he maintain an action ; the 
 law will not allow that to be done."* 
 
 Spring Company vs. Knowlton, 103 U. S. 59. 
 Taylor vs. Bowers, 1 Q. B. D. 291.
 
 CHAPTER VI. 
 
 Forms and Essentials of the Pledge. 
 
 84. The pledge being a contract of natural law is 
 formed^ at Common law^ by the mere consent of the 
 parties and delivery of possession of the thing pledged 
 to the pledgee. No written act is necessary as evi- 
 dence of the contract. No registration is necessary 
 as notice to third persons. Possession by the pledgee 
 is notice to the world. But there must be delivery 
 and continued possession in the pledgee. This is of 
 the very essence of the contract of pledge. Without 
 possession there is no valid pledge. The reason of it 
 is, not only to secure the rights of the pledgee^ but 
 also to prevent fraud and imposition by the pledgeor. 
 If the thing given in pledge remained in the hands of 
 the latter, he could pledge it to several persons at the 
 same time, deceiving them all. Besides this, he 
 would preserve a fallacious credit from the property in 
 his possession^ ostensibly answering for his obliga- 
 tions. 
 
 In the emphatic language of Troplong: "" By dis- 
 possessing himself; the debtor announces to third 
 persons who deal with him that he is empoverished 
 by that much. It is necessary for commerce that this 
 should be shown clearly ; it gives the measure of the 
 
 debtor's credit. Where would business be if things 
 79
 
 80 The Law of Pledge. 
 
 were pledged without deliveiy ! what frauds ! what 
 deceptions ! what losses for third persons ! "* 
 
 85. The Code of Louisiana provides in clear terms 
 for the necessit}' of delivery and possession of the 
 pledge as a condition of the validity of the contract. 
 
 " It is essential to the contract of pledge that the 
 creditor be put in possession of the thing given to him 
 in pledge, and consequently that actual deliver}* of it 
 be made to him, unless he has possession of it already 
 by some other right." Art. 3152. 
 
 " But this delivery is only necessary with respect to 
 corporeal things ; as to incorporeal things, such as 
 credits, which are given in pledge, the deliver}' is 
 merely fictitious and symbolical." Art. 3153. 
 
 "In no case does this privilege subsist on the pledge 
 except when the thing pledged, if it be a corporeal 
 movable, or the evidence of the credit if it be a note 
 or other instrument under private signature, has been 
 actually put and remained in the possession of the 
 creditor, or of a third person agreed on by the 
 parties." Art. 3162. 
 
 86. On the principle that, for the validity of the 
 pledge, the pledgee must have possession of the thing 
 pledged, and that the reason of it is to prevent fraud 
 and deception by the pledgeor, there is a perfect ac- 
 cord between the Civil law and the Common law. 
 
 Troplong. Dn Xantissement. Sees. 297. 298. 
 
 Laurent, Droit Civil, Vol. 28, Sees. 469 et seq. 
 
 Code Xapoleon, Art. 2070. 
 
 Civil Code of Louisiana. Art. 3152. 
 
 Casey vs. Cavaroc. 90 U. S. 467.
 
 Forms and Essentials op the Pledge. 81 
 
 jNIr. Jones says in words of the same purport as the 
 articles of the Louisiana Code: "To constitute a 
 pledge the pledgee must take possession ; and to pre- 
 serve it he must retain possession. An actual deliv- 
 ery of property capable of personal possession is 
 essential.'' ^' 
 
 Judge Stor}' says also: "It is of the essence of the 
 contract that there should be an actual deliver}- of 
 the thing." f 
 
 The Supreme Court of the United States, in the 
 leading case of Casey vs. Cavaroc, 96 U. S. 467, 
 speaks in the same sense : "The requirement of pos- 
 session is an inexorable rule of law, adopted to pre- 
 vent fraud and deception ; for, if the debtor remains 
 in possession the law presumes that those who deal 
 with him do so on the faith of his being the unquali- 
 fied owner of the goods." 
 
 87. It is this possession of the pledgee which ordi- 
 narily distinguishes the pledge of personal property 
 from the chattel mortgage of the Common law, and 
 makes it a mode of greater security for the creditor. 
 The agreement between the parties, and the law under 
 which the agreement is to be enforced, provide in 
 both cases that the property is to serve as security of 
 the debt and the creditor to be paid out of the pro- 
 ceeds, by privilege and preference over the other 
 creditors of the debtor. But the mortcrag^ee is not 
 
 * Jones, on Pledges, Sec. 23. 
 
 Kent, Comm., Vol. 2, p. 581, note 1. 
 t Story, Bailments, Sec. 297. 
 
 Am. and Eng. Ency. of Law. Vol. 18, p. 50,5 it seq.
 
 82 The Law of Pledge. 
 
 necessarily, or even ordinarily, like the pledgee, put 
 in possession of the mortgaged propert}-. He has^ 
 therefore^ no control over it, no superintendence of it, 
 until; at least, when the time to foreclose his mortgage 
 has come, and, in the meantime,, a dishonest debtor 
 may carry it off. It is true that his right of prefer- 
 ence is declared and established in a deed or act in 
 writino:, in which the les^al title is transferred to him 
 under condition, which is recorded in the books of the 
 county and is notice to the world. This right of the 
 mortgagee^ though only intended to secure his claim^ 
 extends to a conditional property of the thing more- 
 gaged, and^ in case of the mortgage of real estate, 
 which can not be removed^ the security may be suffi- 
 cient ; but, in the chattel mortgage, it is evident that 
 the creditor has none of the safety of the pledge owing 
 to the want of possession, and for that reason it is 
 comparatively seldom resorted to in purely commer- 
 cial transactions. 
 
 88. Yet, by statute, in some cases of chattel mort- 
 gage, the creditor is put in possession of the thing 
 mortgaged, and, consequently, it has often been held 
 in doubt whether the transaction was a pledge or a 
 mortgage, though whenever the possession passes to 
 the creditor in a contract of securit}', the law favors 
 the conclusion that it is a pledge and not a mortgage.* 
 
 As the chattel mortsjage and the pledge are distinct 
 
 * Bank vs. Marshall. 11 Fed. R. 19. 
 Myer's Fed. Decisions, Vol. Ill, p. 49. 
 Jones, on Pledges, p. 14. 
 Edwards, on Bailments, p. 19G.
 
 Forms and Essentials of the Pledge. 83 
 
 and different contracts governed by different rules and 
 producing different effects, the fact tliat, in some cases, 
 it is doubtful whether the contracting parties intended 
 that their agreement should be a mortgage or a pledge, 
 shows that the Common law, in that respect, is de- 
 fective and unsatisfactory, as every law is which 
 creates confusion. 
 
 89. The advantage of the Civil law on this point 
 is that, inasmuch as personal property can not be 
 the subject of a mortgage, it can never be a question 
 whether the contract is a pledge or a mortgage when 
 possession of the thing is given to secure a debt 
 
 The modern Civil Law, more exact and more exact- 
 mg, more guarded and more solicitous of the rights 
 of third persons in this respect, does not allow the 
 mortgage of personal propert}-, and demands that the 
 contract of pledge should be in writing, except in case 
 of the pledge of commercial paper, stocks, etc. For 
 the pledge of these securities the Civil law is also in 
 accord with the Common law, and permits the pledge 
 of them without any act in writing, and by mere de- 
 livery to the pledgee. There, the necessities of com- 
 merce are paramount.* 
 
 But for the pledge of all other personal property 
 there must be, in the Civil law, an act in writmg 
 passed between the parties, in which the amount of 
 
 * Civil Code of Louisiana, Art 3158. 
 Code Napoleon, Art. 2084. 
 Frencti Code of Commerce, Art. 95. 
 Troplong, Xantissement, Sec. 118 et seq. 
 Goirand, French Code of Commerce, p. 152.
 
 84 The Law of Pledge. 
 
 the debt secured is stated and the thing pledged is 
 described ; the act must also be recorded.* 
 
 90. In Louisiana it is now a question where the 
 act of pledge must be recorded. By the Civil Code 
 of 1825, the registry should have been in the office of 
 a notary public. By the Revised Civil Code of 1S70, 
 which is now the law in that State, the place of reg- 
 istry' is not mentioned, f 
 
 91. The transactions in which personal property, 
 other than commercial paper, is pledged, are not ordi- 
 narily themselves commercial, and there is no reason, 
 where they are concerned, for the prompt and simple 
 mode of the pledge by mere delivery to the pledgee. 
 
 But though the Civil law, as well as the Common 
 law, permits the pledge of commercial paper and 
 stock by simple delivery to the pledgee, without the 
 written act, in order to facilitate commercial or finan- 
 cial transactions, 3-el the written act is necessary and 
 generally used, for the purpose of stipulating in favor 
 of the pledgee the right to sell the pledge at public or 
 private sale, with or without notice to the pledgeor, 
 etc., which right only exists in the contract of pledge 
 if agreed upon by the parties. 
 
 The object of the wise rule of the Civil law provid- 
 ing for a written act for the pledge of all property 
 other than commercial, is entire 1}' to protect third 
 
 * Civil Code of Louisiana. Art. 3158. 
 
 Code Xapoleon, Art. 2074. 
 
 Martin vs. Creditors, 15 La. An. 165. 
 t Civil Code of Louisiana of 1825, Art. 3125. 
 
 Revised Civil Code of Ivouisiana, Art. 3158.
 
 Forms and Essentials of the Pledge. 85 
 
 persons against fraud and collusion between pledgeor 
 and pledgee. 
 
 The date of the written act shows whether at the 
 time the pledge was granted the pledgeor could hon- 
 estly give a right of preference to the pledgee. The 
 statement of the sum secured by the pledge shows 
 for what amount the pledgee was, at that moment, a 
 creditor of the pledgeor. The description of the 
 thing pledged prevents the fraudulent subsequent 
 substitution of other and more valuable property to 
 that originally pledged. 
 
 92, The rule that the thing pledged must be de- 
 scribed in the act of pledge so as to be identified, 
 must be strictly observed. For instance, ihe books in 
 a bookcase were pledged without stating the number 
 of volumes and the titles of the books. There was 
 no sufficient description of the property pledged, and 
 the contract was declared null. The French Courts 
 held that, in such a transaction, the parties could 
 fraudulently substitute some books of little value to 
 others of great value, or vice versa, and thereby de- 
 ceive and defraud other creditors of the pledgeor.* 
 
 A distinguished Civilian, Professor Baudry-Lacanti- 
 nerie, in his recent book on the subject of Pledge, 
 says that the law demands the specialization of the 
 thing pledged in order to prevent fraud by the 
 substitution of an article of little value to a valuable 
 
 '■ Troploag, Nantissenient, Sec. 192. 
 Laurent, Vol. 28. Sec. 455. 
 Dt'Blois vs. Keiss, 32 La. An. 5S3.
 
 8G The Law of Pledc4E. 
 
 one, which the debtor would thereby remove from his 
 creditor's reach. He gives the example of a pledge 
 of oil designated in the act of pledge as seed oil. The 
 Court declared the pledge null for want of sufficient 
 description of the thing pledged to identify it ; the seed 
 might be hemp oil, colza oil or poppy oil.* 
 
 It is also necessary for the validit}^ of the pledge 
 that the amount of the debt secured be stated in the 
 written act. The reason of this is equally to protect 
 third persons, and to prevent collusion and fraud be- 
 tween pledgeor and pledgee. The rule is the same as 
 in the contract of mortgage. But, and also as in 
 mortgages, the pledge may be given to secure a debt 
 or obligation, which at the time of the pledge is not yet 
 fixed or definite. Forinstance, a pledge maybe given to 
 secure a credit. The amount of the credit must be de- 
 termined or fixed. The sums drawn under the credit are 
 secured by the pledge. If the sums drawn exceed the 
 credit, the excess is not secured by the pledge, even if 
 the collaterals exceed the credit and would be suffi- 
 cient to cover the amount drawn. If the sums drawn 
 do not amount to the credit, the pledge lapses for the 
 difference between the amount drawn and that of the 
 credit. f 
 
 As all the property of the debtor is, by legal intent, 
 the common -pledge of his creditors^ the law will not 
 permit a particular pledge which is certain neither as 
 
 * Baudry-Lacanlinerie, Xantissement, Sec. 93. 
 t Baudry-Lacantinerie, Nantisseinent, Sec. 52. 
 Laurent, Droit Civil, Vol. 28, Sec. 454.
 
 Forms and Essentials op the Pledge. 87 
 
 to its date, nor as to the claim which it secures, nor 
 as to the property by which it secures it, and which 
 may, therefore, be a fraudulent imposition upon third 
 persons.* 
 
 94. But the written act prescribed for the validity 
 of a pledge needs not be in any formal or sacramental 
 terms. It is only necessary that it should state the 
 amount of the debt secured, the description of the 
 property pledged and the agreement of the parties to 
 pledge it. The act may be in authentic or notarial 
 form, or simply by private writing. It may be part 
 of the promissory note or instrument itself which the 
 pledge is intended to secure. In fact, this form oipledge 
 note is now in daily use with man}' of the moneyed or 
 banking institutions of this country. In a case coming 
 up from Louisiana, where the Civil law requirement 
 of the written act of pledge prevails, the Supreme 
 Court of the United States had occasion to pass upon 
 the validity of such -pledge notes. The instrument 
 was in these words : 
 
 " New Orleans, October 29, 1883. 
 '' $5000.00. 
 
 ''' Forty days after date I promise to pay to the order 
 of A. Ermann, Esq., five thousand dollars, for value 
 received, with interest at the rate of eight per cent, 
 per annum from maturity until paid. Payable at the 
 
 Troplong. Du Nantissement, Sec. 108 et seq. 
 Laurent, Droit Civil, Vol. 28, Sec. 447, p. 438. 
 Duranton, Droit Civil, Vol. 18, Sec. 510. 
 Baudry-Lacantinerie, Du Nantissement, Sec. 44 et sc/. 
 Pont, Du Nantissement, p. 584 et seq.
 
 88 The Law of Pledge. 
 
 People's Bank of New Orleans. This note is secured 
 by a pledge of the securities mentioned on the reverse 
 hereof, and in case of its non-payment, the holder is 
 hereby authorized to sell the said securities at public 
 or private sale, without recourse to legal proceedings, 
 and to make any transfers that may be required, ap- 
 plying the proceeds of sale toward payment of this 
 note. Margins to be kept good. 
 
 " L. Meyer." 
 
 " Endorsement: Five warehouse receipts, dated 
 October 29, 1883, numbered i, 2, 3, 4 and 5, issued 
 by Meyer, Weill & Co. to L. Meyer, and by him 
 endorsed to A. Ermann, pa;"'ee 
 
 " L. Meyer." 
 
 The warehouse receipts stated with sufficient pre- 
 cision what the goods receipted for were. 
 
 The Court held the pledge in that form valid, and 
 concluded that the note disclosed the amount of the 
 debt as well as the fact of the pledge — and the nature 
 of the property pledged ; and that the delivery of the 
 warehouse receipts was a delivery of the pledge."^ 
 
 This form of pledge, or something analogous, is 
 common in many of the States in commercial or finan- 
 cial transactions. 
 
 95. But it is only in order to produce its effects 
 against third persons, and secure to the pledgee his 
 right of privilege and preference, that the act of pledge 
 
 * Freiburg vs. Dreyfiis, 135 U. S. 478.
 
 Forms and Essentials of the Pledge. 89 
 
 in writing is necessar}-, evt^n in the Civil law. When 
 there are no other creditors of the pledgeor contend- 
 ing with the pledgee — in other words, between the 
 pledgeor and pledgee themsehes, the act in writing is 
 not indispensable, and the pledge is valid without it, 
 provided the thing pledged is delivered to the pledgee 
 and remains in his possession. 
 
 Laurent, in his commentaries on the Civil law, 
 states this principle in the following words : "Are 
 these forms (speaking of the act of pledge) of 
 the essence of the contract of pledge, in such a way 
 that it can not exist unless they are fulfilled? The 
 very text of Art. 2074 (Code Napoleon) proves that 
 the forms which it prescribes concern only third per- 
 sons. After saying that the pledge confers upon the 
 creditor the right to be paid out of the thing pledged 
 by -privilege and -preference over other creditors^ the 
 Code adds : ' This privilege takes place only if there 
 has been a written act,' etc. Therefore it is for the 
 purpose of securing his right of preference that the 
 pledge creditor must fulfil the formalities prescribed 
 by Art. 2074. These formalities are, consequently, 
 foreign to the relations which the pledge establishes 
 between the creditor and the debtor, independently of 
 the privilege."* 
 
 96. The same reasoning should apply to the Loui- 
 
 Laurenr. Droit Civil, Vol. 28, Sees. 446, 447. 
 Troplong, Nantissement, Sec. 114. 
 rothier, Xantissement, No. 17. 
 Merlin, Repertoire, Verho Gage. 
 Baudry-Lacantinerie, Xantissement, Vol. 1. p. 22.
 
 90 The Law of Pledge. 
 
 siana law on this point, for Art. 3158 of its Civil Code 
 is taken almost verbatim from Art. 2074 of the Code 
 Napoleon commented upon by Laurent. 
 
 In fact, the Court of Louisiana has so decided 
 alread}' many -sears ago, and held that a contract of 
 pledge, in which no written act had been passed, was 
 valid and binding between the pledgeor and the 
 pledgee, there being no third persons, or creditors of 
 the pledgeor interested in the matter."^ 
 
 97. It would be well for the Common law States to 
 adopt the rule of the written act of pledge, as they 
 have adopted so many other wise provisions of the 
 Civil law, and to provide by statute that all pledges, 
 except of commercial or negotiable paper, should be 
 b}' written [ict, under penalty of nullity so far as 
 third persons are concerned. Deceptive transactions 
 and fraudulent preferences would be rendered more 
 difficult, and honest creditors better protected. There 
 would then be also a more perfect distinction between 
 the chattel mortgage and the pledge. 
 
 * Matthews, Finley & Co. vs. Rutherford, 7 La. An. il2ri.
 
 CHAPTER VII. 
 Pledge in the Form of Sale. 
 
 98. Though by the Common law the contract of 
 pledge needs not be in writing in an)' case, and though 
 by the Civil law tliere must be a written act in all 
 except cases of commercial pledge, it is of frequent 
 occurrence, both in the countries of the Common law 
 and those of the Civil law, to give to the pledge the 
 form of a sale. The legality of such a transaction has 
 sometimes been contested, but the great preponder- 
 ance of authority is in favor of its validity, especially 
 in the Common law States. This doctrine is based 
 upon the principle that the contracting parties may 
 give to their agreement the form and the name that 
 they choose, provided it is not fraudulent, does not 
 injure third persons, and does not violate any require- 
 ment of the law. 
 
 99. Troplong says on this point: " If the parties, 
 instead of passing a contract of pledge, employed the 
 simulated form of a sale, could third persons contest 
 the validity of the pledge.^ No more, in my opinion, 
 than they could attack, on accoimt of the form, a 
 donation disguised under the form of a sale. The 
 forms of the donation are, however, very solemn. 
 They have been established for a very useful purpose. 
 Yet, it is certain that the forms of an onerous contract, 
 such as a sale, may effectually replace them. Why,
 
 92 The Law of Pledge. 
 
 then, should not an ostensible sale replace the pledge? 
 It is what I can not understand. We will see later on, 
 iiowever, that this point has been contested by sound 
 writers. " 
 
 loo. But Laurent thinks that such a transaction is 
 generally injurious to third persons and therefore null 
 and void. He is of opinion that, on principle, a pledge 
 under the form of a sale is invalid. He says, how- 
 ever, that when the sale is made with all the formal- 
 ities required for the pledge, the pledgee put in pos- 
 session and third persons are not injured, the transac- 
 tion may be valid, and that the jurisprudence of 
 France is settled in that sense. 
 
 Yet, in the two cases that he cites, one of which 
 was decided b}- the Court of Cassation, and in both 
 of which the pledge, disguised in the form of a sale, 
 was declared valid, it is curious to observe that neither 
 the sum to be secured in one case was stated in the 
 act, nor delivery to the pledgee of the thing pledged, 
 in the other case, seemed to have taken place. 
 
 In both cases the pledge was of a vessel. There 
 was no fraud or imposition in the transactions, and 
 third persons were not injured. 
 
 The facts in each case evidentl}^ influenced the court 
 and induced it to depart from the strict principles of 
 the law of pledge. 
 
 loi. Baudry-Lacantinerie says that the pledge of 
 a ship, strictly speaking, is legalty impossible, unless 
 
 * Troplong, Nantissement, Sec. 204, p. 208.
 
 Pledge in the Form of Sale. 93 
 
 the pledgee is put in possession, wliich is seldom 
 practicable, and for that reason the courts have recog- 
 nized the validity of the pledge of the ship in the 
 form of a sale.'^ 
 
 102. Aubry et Ran, who are also Civilians of high 
 authorit}', are of the same opinion as Laurent and 
 condemn the pledge made in the form of a sale.f 
 
 103. Baudry-Lacantinerie is of opinion that the 
 pledge under the form of a sale is valid if all the con- 
 ditions necessary for the pledge exist, and the creditor 
 is put in possession. In such a case he thinks that 
 the latter is entitled to his right of preference over the 
 other creditors of the debtor ; and he approves of the 
 jurisprudence which has recognized the principle. J 
 
 ]Mr. Pont, the continuator of Marcade, and a Justice 
 of the Court of Cassation, and himself a celebrated 
 law writer in France, is also of the opinion that the 
 pledge under the form of a sale is perfectly valid. § 
 
 104. The jurisprudence of Louisiana seems to be 
 settled upon this point, to the effect that the contract 
 of pledge is valid in the form of a sale, when it con- 
 tains all the requirements of the pledge, is not fraudu- 
 lent or injurious to third persons, and possession of the 
 thing pledged is delivered to the pledgee or ostensible 
 vendee.. 
 
 * Baudry-Lacantinerie, Nantissement. Vol. 1, p. 50. 
 t Laurent, Droit Civil, Vol. 28, Sec. 4S8. 
 
 Aubrv et Ilau, Vol. 4, p. 7U3 Sec. 432, n. 13. 
 
 Dalloz, 187(3, I, 347. 
 
 Same, 1852, 2, 8. 
 J Baudry-Lacantinerie, Nantissenient, Sec. 88, 
 
 Duranton, Droit Civil, Vol. 23. Sec. 538. 
 
 Cassation, 1877, July 9; 1879, March 11. 
 § Pont, N'antissement, Sec. 1090.
 
 94 The Law of Pledge. 
 
 In a case in which the pledge was made in the 
 form of a sale, the Court of that State recognized the 
 principle in these words : 
 
 " Neither does it follow because parties have clothed 
 their contract in one form instead of another that it 
 will not avail in either. There is no such pen- 
 alty declared by the lawgiver, and the courts can 
 not supply it. Then, is there anything immoral in 
 using the contract of sale as the security of money 
 advanced or to be advanced in good faith? We think 
 not. The Civil Code has itself traced certain provi- 
 sions of law in regard to sales with a power of redemp- 
 tion. See Art. 2545 e/ 5^^."* 
 
 105. The assignment or transfer of property is 
 necessarily one of two things : either it is merely a 
 contract of security, such as mortgage or pledge, in 
 which the assignor or transferror retains the owner- 
 ship of the property, passing only the legal title, under 
 condition, to the assignee or transferee for the pur- 
 pose of securing a debt ; or the assignment or trans- 
 fer passes, not only the title, without condition, to the 
 assignee or transferee, but also the very ownership 
 of the property, as does a sale, and also, what the 
 French Civilians call a dation en paietnejii, a giving 
 in payment, which is not securing a debt, but pay- 
 ing it. 
 
 If the assignment does not convey the ownership, 
 it is clearly intended and used for the purpose of 
 
 * Wolf vs. Wolf, 12 La. An. 531. 
 
 See also : 
 
 Heber vs. Thompson, 47 La. An. SOS.
 
 Pledge in the Form of Sale. 95 
 
 securing a debt. In that case, if the thing transferred 
 is personal property, the assignment constitutes at 
 Common law either a chattel mortgage or a pledge. 
 If the property is delivered to the assignee, it is a 
 pledge; if it is not delivered, it is a mortgage; pro- 
 vided, of course, that the formalities for that kind of 
 contract have been observed. 
 
 1 06. The assignment to the pledgee is necessary in 
 many cases to enable him to have not only the pos- 
 session, but also the full control of the thing pledged 
 and the legal means to enforce the pledge by fore- 
 closure or otherwise. It is the completion of the 
 pledgee's right of possession. This is the reason why, 
 in the Common law, tliis mode of assignment to the 
 pledgee is often resorted to.'^ It is not necessary in 
 the countries of Civil law, where the use of written 
 acts of pledge is prescribed by law. 
 
 But, in some cases, the Civil law itself prescribes 
 that a pledge be made by the transfer of the thing 
 pledged to the pledgee. That is in the pledge of 
 incorporeal things, such as credits and other rights. 
 We have seen that the Civil Code of Louisiana pro. 
 vides that, when a debtor wishes to pawn a claim 
 on another person, he must make a transfer of it to 
 the [>ledgee in the act of pledge. And we have 
 seen also that the Code Napoleon provides that for the 
 pledge of credits, an act in writing, authentic or pri- 
 
 * Jones, on Pledges, Sec. 9. 
 Casey vs. Cavaroc. 9(3 U. S. 467. 
 Clarke vs. Iselin, 21 Wall. 3(J0. 
 Gay vs. Moss, 34 Cal. 125.
 
 96 The Law of Pledge. 
 
 vate,must be passed, which shall transfer the credits to 
 the pledgees and shall be notified to the debtors of the 
 credits.* 
 
 107. We have on this subject observed the perfect 
 contrast of the Civil law and the Common law, in 
 regard to this notice ; its indispensability in the Civil 
 law and its iinnecessariness in the Common law; that 
 in the Civil law the notice to the debtor constitutes 
 the possession of the credit ; and that in the Common 
 law the right of the assignee of the credit depends only 
 upon the priority of the assignment. f 
 
 108. Inasmuch as the transfer of the incorporeal 
 things is prescribed for the contract of pledge, it is 
 evident that such transfer does not pass the owner- 
 ship to the pledgee but only the possession ; that it is 
 onl)^ a transfer in g-iiarafify^ leaving the pledgeor full 
 owner of the thing pledged, subject only to the con- 
 ditions of the pledge, t 
 
 In Casey vs. Cavaroc, the Supreme Court of the 
 United States said : ^'' in some cases, such constructive 
 delivery can not be effected without doing what 
 amounts to a transfer of the property also. The 
 assignment of a bill of lading is of that kind. Such 
 an assignment is necessary, where a pledge is pro- 
 posed, in order to give the constructive possession 
 required to constitute a pledge ; and yet it formallv 
 transfers the title also. In such a case, there is a 
 union of two distinct forms of security, — that of mort- 
 
 * Ante. Sec. 11 et seq. 
 
 i Ante, Sec. 18. 
 
 t Baudry-Lacantinerie. Xan!issoiiient. p. 44.
 
 Pledge in the Forbi of Sale. 97 
 
 gage and that of pledge : mortgage by virtue of the 
 title, and pledge by virtue of the possession."* 
 
 The remark of the Court about the mortgrage is 
 incorrect so far as the State of Louisiana is con- 
 cerned, because the mortgage of personal property is 
 there unknown. Yet the case in which the remark 
 was made was a case coming up from that State. 
 But the principle is not the less declared by the Court 
 that the transfer of title is only a transfer in guaranty, 
 and that the pledge in that form, which is that of a 
 sale, is valid, and even necessary in certain cases. 
 
 109. The written act of pledge is clearly the better 
 mode of the pledge, as, in it, the parties stipulate all 
 the terms and conditions of the contract, the right of 
 the pledgee to sell at public or private sale, with or 
 without notice to the pledgeor ; the right of the pledgee 
 to purchase the thing pledged, etc. In the same deed 
 the pledgeor may constitute the pledgee himself, or 
 some third person, his agent to transfer the stock 
 pledged, or fulfil any formality necessary to complete 
 the title of the purchaser. 
 
 This agent is the -procurator hi rem suavi of the 
 Civil law, the agent whose procuration is coupled 
 with his own interest and is not revocable by the 
 principal or by his death or bankruptcy, f 
 
 * Casey vs. (yavaroc, 9G U. S. 477. 
 
 Ante, p. 14. 
 t Renshaw vs. Creditors, 40 La. An. 37. 
 
 Allen, Bush & West vs. Nettles, 39 La. An. 791. 
 
 Hunt vs. Rousmanier, 8 Wheat. 174. 
 
 Story, on Agency, See. 1G4 et seq. 
 Troplong, Mandate, Sees. 728, 737.
 
 98 The Law of Pledge. 
 
 no. The pledge in the form of a sale is also objec- 
 tionable because it contains a simulation, therefore a 
 deception, which, on principle, is always objection- 
 able, even when it is not fraudulent. 
 
 III. Under the liberal principle that the contract- 
 ing parties may give to their agreement the form and 
 name that they please, if tliird persons are not 
 thereb}^ injured, and the laws are not violated, the 
 courts of Louisiana have recently recoo-nized the 
 validity of a pledge created in the form of a chattel 
 mortgage, by a deed passed in another State, though 
 the chattel mortgage, as such, is not known in Louisi- 
 ana.* 
 
 But it would not be safe to consider that this point 
 is settled in that State, and the decision is in direct 
 opposition to previous cases. j 
 
 Indeed, the Court of Louisiana, in the case cited 
 of Delop & Co. vs. Windsor & Randolph, said : " As 
 a chattel mortgage is unknown to our law, it can not 
 be enforced in this State. Movables are not suscepti- 
 ble of beino; morts^ao^ed." 
 
 In the other and more recent case alluded to of 
 Bank vs. Janin, speaking of a deed of chattel mort- 
 Q-iXQ-Q executed in the State of New York and the rec- 
 ognition of which was demanded in Louisiana, the 
 Court said : " The act is given effect as a mortgage 
 if it contains the essentials of a mortgage, or of a 
 
 * Bank vs. Janin, 40 La. An. 1001. 
 t Delop & Co. vs. Windsor & Randolph. 2t) La. An. 1S5. 
 Hughes. Hyllested & Co. vs. Klingender Bros.. 14 La. An. S45.
 
 Pledge in the Form of Sale. 99 
 
 pledge if it contains as to form the requirements of an 
 act of pledge." 
 
 This seems to be a new direction given to the juris- 
 prudence of Louisiana on this subject, presumably 
 under the influence of the more modern ideas of 
 enlarging rather than restricting the rule of comit}? 
 between the States. 
 
 112. In accordance with this principle, the Court of the 
 same State very recently decided that a deed executed 
 in Michigan, between citizens of that State, and which, 
 by the parties to the contract, was intended to operate 
 as a morto-acre on real estate situated in Louisiana, 
 should be given effect in the latter State as a conven- 
 tional mortgage affecting third persons after due 
 inscription.'^ 
 
 Previous attempts to have such deeds enforced in 
 Louisiana as mortgages on real estate were generally 
 unsuccessful, the court holding that the Common 
 law forms of mortsao-es could not be recosrnized in 
 
 Oil ZD 
 
 that State. t 
 
 It is well to observe, however, that in recognizing 
 the validity of the common chattel mortgage in Louisi- 
 ana so far as it has the effect of a pledge, the court 
 has not given it the full effect of a chattel mortgage, 
 inasmuch as the constitutional element of this kind of 
 security is foreign to the legislation of that State, and 
 is in direct conflict with the pledge of the Civil 
 
 * Gates vs. Gaither et al., 46 La. An. 286. 
 t Thibodaux vs. Anderson, 34 La. An. 707. 
 
 Miller vs. Shotwell, 3S La. An. 890. 
 
 Howe vs. Austin ct als., 40 La. An. 323.
 
 100 The Law of Pledge. 
 
 law. By the mortgage of the Common law the 
 legal title passes conditionally to the mortgagee, and, 
 if the property is not redeemed at the time stipulated, 
 the title becomes absolute at law, though equity may 
 interfere to compel a redemption. 
 
 But if the mort2rag:eor does not demand the re- 
 demption, and, if the mortgagee is in possession of the 
 thing mortgaged, he becomes the owner of it, to all 
 intents and purposes, by virtue of the stipulations of 
 the mortgage.* 
 
 113. By the Civil law of pledge, on the contrary, 
 no title whatever, either legal or equitable, entire or 
 qualified, general or special, passes to the pledgee. 
 All such tenures or distinctions of property are un- 
 known to, and repelled by. the Civil law. The 
 pledgee has simply a right of retention on the prop- 
 erty and a lien on its proceeds. But the title remains 
 in the pledgeor. Both the Napoleon Code and the 
 Civil Code of Louisiana provide that, until the 
 pledgeor is divested of his property by foreclosure, if 
 it takes place, he remains tlie owner of the thing 
 pledged, which is in the hands of the creditor only as 
 rleposit to secure his lien on it.f 
 
 * Story, on Bailments, Sec. 287. 
 t Civil Code of Louisiana. Art. SIGG. 
 Code Napoleon, Art. 2079.
 
 CHAPTER VIII. 
 
 Contracts of Security, which Are Neither 
 Pledges Nor Mortgages. 
 
 114. There are certain innominate contracts of a 
 pignorative character which are neither pledges nor 
 mortgages, and which are formed under the provisions 
 of the Civil law relative to the pact or right of redemp- 
 tion in the contract of sale. Real estate and not per- 
 sonal property is generally the subject of such con- 
 tracts of security. They have been held to be valid 
 when free from fraud toward third persons and free 
 from usury toward the borrower or debtor in the trans- 
 action. They are not sales because they do not trans- 
 fer the title or fee ; they are not pledges or pawns 
 because they affect real estate ; or antichreses because 
 possession remains in the debtor; and they are not 
 mortofao^es because in the Civil law the title of the 
 property mortgaged remains in the mortgageor, and 
 not even a legal or conditional title passes to the mort- 
 gagee. 
 
 115. The pact or right of redemption in the con- 
 tract of sale of the Civil law is not the same thing as 
 the equity of redemption in the mortgage of the Com- 
 mon law. The Civil Code of Louisiana and the Code 
 Napoleon define it in these terms: "The right of 
 redemption is an agreement or paction by which the 
 vendor reserves to himself the power of taking back 
 
 101
 
 102 The Law of Pledge. 
 
 the thing sold by retaining the price paid for it." The 
 term fixed for the redemption can not exceed ten 
 years in Louisiana and five years in France. The 
 delay once expired, if the vendor has not exercised 
 his right, the purchaser becomes irrevocably the 
 owner of the property. He has not got to put the 
 vendor in default, or to have his title recognized or 
 decreed by any court of justice ; nor has the vendor, 
 after the expiration of the term, any claim or equitv 
 of redemption. The purchaser becomes ipso facto 
 absolute owner. * 
 
 Therefore, though there is some analog}- between 
 the Civil law sale with right of redemption and the 
 Common law mortgage with the equitv of redemp- 
 tion, they are clearly distinct from each other. In 
 the latter case the legal title only passes at first to the 
 mortgagee under a condition, but not the fee^ though 
 it may follow later. In the former case, the fee itself 
 passes to the purchaser at ojice subject to the resolu- 
 tory condition by which it may be returned to the 
 vendor. We have no reasons to follow the effects of 
 this difference between the two systems. My only 
 object is to put the law student on his guard against 
 a natural tendency to confound the two subjects, and 
 show to him the true nature of the Civil law sale with 
 right of redemption, f 
 
 * Civil Code of Louisiana, Arts. 2567-8, 2570. 
 
 Code Xapoleon, Arts. 1659, 1660. 1662. 
 
 Troplong, Vente, Vol. 2. Sec. 713. 
 
 Laurent, Vente, Sees. 396, 397. 
 
 Duranton, Vol. 16, Sees. 401, 402. 
 
 Merlin, Repertoire. Verhn Pignoratif. 
 t Miller vs. Shotwell, 38 La. An. 890.
 
 Contracts of Security. 103 
 
 ii6. It is not uncommon, in countries of the Civil 
 law, for parties to a contract of loan of mone}-, to 
 use the form of a sale with the right of redemption 
 and disguise thereby the loan and pignorativ^e contract. 
 The sale in that case is necessarily a simulation, 
 ostensibly transferring the ownership of the property, 
 but in reality only securing the creditor. Yet, simu- 
 lated conveyances are legal and permissible when not 
 fraudulent. Consequently such contracts of security 
 under the garb of a sale ma}^ be valid, though to be 
 looked upon with suspicion. But the}' can operate, 
 as intended by the parties, to secure the creditor, only 
 so far as the parties themselves are concerned. They 
 can not affect third persons or other creditors ; they 
 can not give or create any right of preference, and act 
 as either pledges or mortgages. 
 
 117. Merlin says of those pignorative contracts: 
 "It is a sort of sale which a debtor makes of his 
 property, with the stipulation that the vendor shall 
 have the right to take it back during a certain time, 
 and that he will retain the possession under a lease, 
 in consideration of a sum of money, which is ordi- 
 narily equal to the interest of the amount loaned and 
 for which the sale has been made."* 
 
 This contract is called ■pignorative^ because it only 
 contains a simulated sale, and that its true object is to 
 give the property in pledge to the creditor, and to 
 procure to him the interest on a loan, in disguising 
 the same under a different name. The modern Civil 
 
 * Merlin, Repertoire, Verho Pignoratif .
 
 104 The Law of Pledge. 
 
 law and the Common law of old equally admit that 
 kind of contracts, provided they are not fraudulent. 
 
 117. Troplong, with his usual precision of language, 
 speaks of the pignorative contract in the following 
 terms: "You must not confound the sale under the 
 right of redemption with the pignorative contract, 
 which is nothing but a disguised contract of loan. It 
 is true that the latter contains a sale with right of 
 ledemption ; but it is complicated with two other aggra- 
 vating circumstances which give it a usurious charac- 
 ter, to-wit : the smallness of the price and the reloca- 
 tion of the property to the vendor for the time fixed 
 for the redemption. The circumstance of relocation 
 is especially significant and decisive. It demonstrates 
 the simulation to which the parties have resorted. It 
 takes away every feature of alienation, and conse- 
 quently of sale, to an agreement by which the pur- 
 chaser is not put in possession, leaves the vendor in 
 the enjoyment of the property and reserves to him a 
 way to resume the ownership of it."* 
 
 118. Inasmuch as the intention of the parties in 
 this contract and the object of the contract itself, when 
 it is a disguised loan, is only to simulate a sale, and, 
 in reality, to leave the ownership in the vendor, their 
 relations are those of debtor and creditor, and not of 
 vendor and purchaser, and are, therefore, governed by 
 the principles of the contract of loan, and not by those 
 of contract of sale. Consequentl}', if the property is 
 destroyed or damaged, whether in the hands of the 
 
 * Troplong, Vente, Vol. 2, Sec. 695.
 
 Contracts op Security. 105 
 
 vendor or the purchaser, the loss is for the account of 
 the borrower and he remains a debtor, as in the case 
 of the pledge or mortgage, when the thing pledged or 
 mortgaged perishes during the existence of the debt. 
 
 Another important consequence of the disguised loan 
 is that the property does not belong to the purchaser 
 at the expiration of the time fixed for the redemption, 
 as it does when the sale with the right of redemption 
 is in reality a sale and not a disguised loan. The 
 pact, in the case of the loan, could not be enforced 
 by the creditor, because it would be nothing else than 
 the lex commissoria in the pledge, the forbidden stip- 
 ulation that the thing pledged will bcome the property 
 of the pledgee in default of paymenf^ 
 
 119. The jurisprudence of Louisiana where the 
 use of the pignorative contract is not of rare occurrence 
 has been fixed in the same sense. The Court there 
 said : " Hence it is that when the price is inadequate 
 and possession has not been delivered to the purchaser, 
 but was retained by the vendor, it has uniformly been 
 considered and held that the transaction was not a 
 sale but a mere security, — indeed, a sort oi pignorative 
 contract upon which the law looks with suspicion, for 
 the protection of the embarrassed and unfortunate 
 debtor against the rapacity of his ravenous creditor 
 Indeed the settled doctrine of this court on this sub- 
 
 * Laurent, Droit Civil, Vol. 28, Sec. 380. 
 Duranton, Droit Civil, Vol. 16, Sees. 391-392. 
 Rogron, Code Civil, Art. 1659, p. 2184. 
 Sirey, 43, II, 32. 
 Id., 74, I. 72. 
 Dalloz, 82, 2, 15S.
 
 106 The Law of Pledge. 
 
 ject is that redeemable sales, unaccompanied by de- 
 livery of the thing sold, of which the considerations 
 are inadequate, will be treated by courts without suffi- 
 cient evidence to the contrar}^, as contracts for which 
 the thing nominally sold stands as security^ and 
 nothing else." * 
 
 1 20. We ma}' conclude from those principles that 
 when the sale with right of redemption is a simula- 
 tion and a disguised loan, the lender acquires thereby, 
 even when the transaction is lawful, no right of prefer- 
 ence, privilege or lien, over the property or its proceeds, 
 against the other creditors of the borrower, and that 
 they can treat the property as still belonging to their 
 debtor, and, therefore, seize or attach it in the hands 
 of the apparent vendor. It seems clear that rights of 
 preference, priority, privilege or lien, over the prop- 
 erty of a common debtor, in favor of one creditor 
 against other creditors, are created either by con- 
 tracts or by the law. The contracts of pledge and 
 mortgage are the only ones, at least under the Civil 
 law, by which a debtor can give such rights of prefer- 
 ence, and we have seen that the simulated sale in 
 question is neither a pledge nor a mortgage. The 
 rights of preference, or liens, created by the law are 
 those specially and specifically designated by statute, 
 
 * Baker vs. Smith, 44 La. An. 929. 
 Howe vs. Powell, 40 La. An. 308. 
 Lawler & Huch vs. Cos^roves, 39 La. An. 488. 
 Miller vs. Shotwell, 38 La. An. 891. 
 Ware vs. Morris, 23 La. An. 665. 
 LeBlanc vs. Bouchereau, 16 La. An. 11. 
 Collins vs. Pellerin, 5 La. An. 99. 
 Jackson vs. Lemle, 35 La. An. 855.
 
 Contracts of Security. 107 
 
 and they are stricti juris. The law clearly gives no 
 lien to the simulated purchaser over the property, as 
 as:ainst the other creditors of the simulated vendor. 
 These remarks do not apply to the Common law and 
 its doctrine of liens in equity. 
 
 121. The contract of security in question, a hybrid 
 transaction, ostensibly translative of property, pignor- 
 ative in reality, suspicious to the courts, savoring of 
 usury, would probably be less resorted to by lenders 
 of money if they realized that it secures them against 
 the just complaints of neither the debtor nor his other 
 creditors. 
 
 There seems to be no question that when the parties, 
 for the purpose of securing a loan, adopt the form of 
 a sale without delivery to the creditor, the latter, even 
 if the contract is free of fraud, acquires no privilege or 
 preference over the property against third persons. "^ 
 
 'Baudry-Lacantinerie, Xaatissement, p. 62. 
 Duranton, Vol. 18, No. 538. 
 Aubry et Ran, Vol. 4, p. 703, Sec. 432. 
 Laurent. Vol. 28, Nos. 488 and 489.
 
 CHAPTER IX. 
 
 Delivery and Possession of the Pledge. 
 
 122. The pledgee must receive and retain possession 
 of the thing pledged in order to render his lien and 
 rights effective against third persons. The object of 
 the law is that, by the possession of the pledgee, third 
 persons dealing w^ith the pledgeor should be informed 
 and warned that they can not look to the thing pledged 
 as being any longer part of the active assets of the 
 pledgeor. That possession must, therefore, be osten- 
 sible, not ambiguous, and must receive a certain 
 publicity or notoriety. 
 
 The Court of Cassation, in France, said on this 
 point : " It is of the essence of the contract of pledge, 
 that the delivery of possession to the creditor should 
 be an ostensible fact, of a sufficient notoriety to warn 
 third persons that the debtor is dispossessed of the 
 thing pledged and that it is no longer part of his 
 unencumbered property.''* 
 
 Troplong says forcibly : " We say then two things : 
 it is that the debtor must dispossess himself, and further- 
 more, he must dispossess himself ostensibly, frankly, 
 without evasion and without deceptive combinations 
 which lead third persons into error as to the real 
 possessor of the thing." f 
 
 * Laurent, Vol. 28, Sec. 471, p. 464. 
 
 t Troplong, Nantissement, Sec. 298, p. 293. 
 
 Dallaz, 1876, 1, 219. 
 
 Baudry-Lacantinerie, Nantissement, Vol. 1, p. 47. 
 
 109
 
 110 The Law of Pledge. 
 
 123. The Court of Louisiana has stated the same 
 principle in emphatic terms. It said: "The privi- 
 lege of pledge is subject to unbending conditions. 
 There must be an actual delivery in order that those 
 who transact with the pledgeor may know that the 
 property is held in pledge. There should be no good 
 reason to consider the thing pledged in the posses- 
 sion of the pledgeor for his account and benefit. 
 The possession of the pledgee should be real and 
 effective at all times. It must be apparent and well 
 known. It is essential to complete a real right to 
 movables. This possession should not be equivocal 
 and so placed as to deceive other creditors and lead 
 thejn to believe that the debtor always continued the 
 possession." "^ 
 
 The facts of this case were briefly as follows : The 
 owner of a steamboat in Louisiana, by a deed of 
 chattel mortgage passed in New York, mortgaged 
 her to a bank of New York. The chattel mortgage 
 is unknown to the Louisiana law, where only real 
 estate may be mortgaged. But the deed of chattel 
 mortgage in this instance containing all the elements 
 of a pledge under the laws of Louisiana, the Court of 
 that State recognized its validity as such. The boat 
 in point of fact had remained in the possession of the 
 owner and mortgageor or pledgeor, who agreed with 
 his creditor, the New York bank, to hold her for its 
 account and as its agent, and to lease her and account 
 
 *Bank vs. Janin, 46 La. An. 1001.
 
 Delivery and Possession op the Pledge. Ill 
 
 for the rent. He did lease her, but did not so inform 
 the bank, nor did he account for the rent money. 
 
 The lessee sublet the boat to a sublessee, who was 
 notified by the bank's counsel that the boat had been 
 in possession of tlie owner and pledgeor as agent of 
 the pledgee, and that the sublessee should thereafter 
 hold her for account of the bank. In the meantime 
 another creditor of the owner, under a judgment for 
 debt, caused the boat to be seized by the sheriff and 
 sold. The New York bank intervened and claimed 
 the proceeds by virtue of its pledge. The sole issue 
 between the contending creditors was that of posses- 
 sion vel lion in the pledg-ee, such as to render the 
 pledge effective against third persons. The court held 
 that, under the circumstances of the case, the bank of 
 New York, the mortgagee or pledgee, did not have 
 such possession. 
 
 124. Another case, also recently decided by the 
 court of Louisiana, shows clearly the necessity of une- 
 quivocal delivery and possession to the pledgee, or to 
 a third person for account of the pledgee, agreed upon 
 by the parties. In this case a commission merchant 
 in New Orleans, by agreement with one of his credi- 
 tors, in order to secure him by a pledge, executed his 
 promissory note in favor of the creditor, attached to it 
 certain bonds and certificates of stock, placed the note 
 and securities in a package with the .creditor's name 
 on it, put the package in his (the merchant's) box in 
 bank, instructed his clerk, who held the key of the 
 box, to deliver the package on demand of the creditor
 
 112 The Law of Pledge. 
 
 whenever called upon to do so, and communicated 
 these instructions to the creditor. The package re- 
 mained in the box in bank until the pledgeor's death. 
 The pledgee then claimed against other creditors of 
 the deceased merchant, that the securities in the 
 package bearing his name were pledged to him accord- 
 ing to law, and that, delivery and possession had 
 been made for his account to the clerk of the mer- 
 chant. It was held, adversely to the contention of the 
 pledgee^ that there had never been such dispossession 
 of the pledgeor, and such delivery and possession in 
 the pledgee, as could affect third persons. The case 
 was hotly contested and was decided by a divided 
 Court, on a rehearing, in which the Court reversed its 
 former judgment, which had been in favor of the 
 pledgee. The decision rested principally on the 
 principle that the clerk of the pledgeor had never had 
 possession of the securities as agent of the pledgee, 
 but had held them altogether as agent of the pledgeor, 
 who never lost his control of them.* 
 
 125. The Supreme Court of the United States, in a 
 leading case coming up from Louisiana, recognized 
 and applied the same principles, and declared the 
 pledge of securities which had remained under the 
 control of the pledgeor of no effect so far as his other 
 creditors were concerned. The rule that the posses- 
 sion of the pledgee must not be ambiguous or equiv- 
 ocal was there very clearly shown. The late Justice 
 Bradley^ in a masterly opinion, expounded in that 
 
 * Succession of Lanaux, 46 La. An. 1036.
 
 Delivery and Possession of the Pledge. 113 
 
 case with great learning and ability the Roman, the 
 French, the Louisianian and the Common law of 
 pledge. Nowhere, perhaps, did that eminent jurist 
 show his knowledge of the Civil law more conspicu- 
 ously. The facts of this case had some analogy with 
 those of the Succession of Lanaux in this, that the 
 securities which formed the subject of the pledge were 
 placed in an envelope by the pledgeor and delivered 
 for safe keepmg to his clerk for account of the pledgee, 
 but remained subject to the control and disposal of 
 the pledgeor. The case turned and was decided upon 
 the same principle that the possession of the pledgee 
 must be certain and not ambiguous and equivocal.* 
 
 1 26. The rule that the possession of the pledgee must 
 not be ambio^uous is so stringent that in a case in 
 which the debtor, for the purpose of securing the pay- 
 ment of a loan of money made by sundry advances, 
 agreed to give his creditor the entire management and 
 control of a steamship, with the right and authority to 
 employ all the officers and crew necessary to run her 
 for six months, and to hold her as security until the 
 loan was reimbursed, the Court of Louisiana decided 
 that the contract did not constitute a pledge, and that 
 the creditor was not entitled to a privilege or prefer- 
 ence in competing with other creditors. The decision 
 is not convincing, and the court was satisfied with the 
 statement that such an agreement could not be con- 
 strued as a pledge. But, evidently, the conclusion 
 
 Casey vs. Cavaroc, OG U. S. 4()7.
 
 114 The Law of Pledge. 
 
 was drawn from the fact that the creditor was not in 
 possession of the vessel though he had control of her.* 
 
 127. Still it is perfectly well established, both in 
 the Civil and the Common law, that deliver}' of the 
 pledge and possession thereof may be given to a third 
 person for account of the pledgee by agreement be- 
 tween the parties and the third person, chosen by both 
 pledgeor and pledgee. We must observe in that case 
 that the third person must accept the charge in order 
 to validate the contract of pledge. There must be 
 between him and the parties to the pledge a juridical 
 obligation, without which there would be no proper 
 delivery to the pledgee, no proper possession by him 
 and, therefore, no legal pledge.f 
 
 And the rule is carried still further and will permit 
 the pledgeor himself to be, to a certain extent, for a 
 special purpose, the possessor or detainer ad hoc of the 
 pledge for account of the pledgee. But in such cases 
 the possession or detention of the thing pledged by the 
 pledgeor must be very clearly for the benefit of the 
 pledgee. 
 
 There must not be any double dealing, or even the 
 suspicion of double dealing, between pledgeor and 
 pledgee, under penalty of nullity of the pledge. The 
 
 * Wickham vs. Levistones. 11 La. An. 702. 
 t Baudry-Lacantinerie, Nantissement, Sec. 85. 
 
 Troplong. Nantissement, Sec. 345. 
 
 Laurent, Nantissement, Sec. 484. 
 
 Code Napoleon, Art. 2076. 
 
 Civil Code of Louisiana, Art. 3162. 
 
 Woodward vs. Railroad Company, 39 La. An. 566. 
 
 Jones, on Pledges, Sec. 34. 
 
 Schouler, on Bailments, p. 181.
 
 Delivery and Possession of the Pledge. 115 
 
 principle is clear and of easy comprehension, but in 
 its application it often presents great difficulties. Each 
 case has to be decided according to its own facts. It 
 is not the understanding of the parties, even in good 
 faith, that will validate a pledge in which the thing 
 pledged remains in possession of the pledgeor, or is 
 placed in that of a third person, for account of the 
 pledgee. In point of fact^ such possession must be 
 for the benefit of the pledgee. 
 
 As the object of the law is to protect other creditors 
 of the pledgeor by dispossessing him as well as by 
 possessing the pledgee, it is evident that the rule would 
 be of no avail if, by mere agreement, and with no 
 benefit to the pledgee, and no deprivation to the 
 pledg'eor, the pledge was left in the latter' s hands. 
 Hence the numerous cases in which pledges were 
 declared null and void on that ground. 
 
 128. We must make, however, a very great differ- 
 ence between the possession of a third person for 
 account of the pledgee and the possession of the 
 pledgeor himself, also for account of the pledgee. 
 
 The possession of the third person may be for the 
 whole time of the pledge and for the sole purpose of 
 holding it for the pledgee. But that of the pledgeor 
 must be for a special purpose and only for the time 
 necessary for that purpose. 
 
 Troplong gives the instance of a pledge of sparkling 
 wines, which required special care and treatment, 
 and which, for that reason, were confided at times to 
 the handling of the pledgeor. This did not affect the
 
 116 The Law of Pledge. 
 
 validity of the pledge. That writer remarks: ''We 
 may even say, in a general way, that whenever the 
 assistance of the pledgeor is necessary for the better- 
 ment of the thing pledged, it must be permitted, on 
 condition, however, that it should not in any manner 
 impair the possession of the pledgee."* 
 
 129. In another instance in which wines of the 
 same kind were pledged with the understanding that 
 they would remain in the stores of the pledgeor for the 
 purpose of being taken care of and treated or nursed 
 hy him, the pledge was declared null by the French 
 courts on the ground that the pledgeor had remained 
 in possession of the wines and that they had not been 
 separated from his other goods. It is clear that the 
 question of possession in all such cases is one of fact 
 to be decided by the court or the jury on the evidence, 
 and for the decision of which no fixed rule can be 
 established, f 
 
 130. Again, it may be stipulated in the contract of 
 pledge that the pledgeor shall have the right to attend 
 himself to the sale of the goods pledged and delivered 
 to the pledgee, or stored for his account in a public 
 warehouse. It is presumable in such cases that the 
 owner and pledgeor can obtain a better price for the 
 goods than the creditor. \ 
 
 * Troplong. Xantissement, Sees. 311, 312, 313. 314. 
 
 Laurent, Vol. 28, Sec. 374. 
 
 Jones, on Pledges, Sec. 44. 
 
 Schouler, on Bailments, p. 181. 
 t Baudry-Lacanlinerie, Nantissement. Sec. 69. 
 i Troplong. Xantisseiuent. p. 307.
 
 Delivery and Possession of the Pledge. 117 
 
 The rule is the same on all this subject in the Civil 
 law and the Common law. * 
 
 131. The Court of Louisiana has established the 
 same jurisprudence, but perhaps carried the principle 
 too far. In a case of the pledge of certain machinery, 
 the clerk of the pledgeor was constituted the agent of 
 the pledgee to hold possession of the machinery. 
 With the consent of the pledgee the pledgeor was per- 
 mitted to use the machinery at times in their busi- 
 ness. It was contended by other creditors of the 
 pledgeor that the pledgee's possession was not such as 
 to make the pledge valid against them. The Court 
 held that it was. It said : "The possession of the 
 property by the pledgee, as shown, was sufficient. 
 C. C. 3162 ; Weems vs. Moss Company, ;^;^ An. 973. 
 In fact^ the property pledged may be left in the pos" 
 session of the debtor himself^ provided his possession 
 is precarious and clearly for account of the creditor. 
 Conger vs. City, 32 An. 1250.'' f 
 
 In the case of Weems vs. Moss Company, cited by 
 the Court, the pledge had been placed also in the 
 hands of an employee of the pledgeor, but for account 
 of the pledgee, and the Court held that the pledgeor 
 was therefore sufficiently dispossessed to render the 
 pledge effective against third persons. 
 
 132. We must observe, however, that, notwithstand- 
 
 * Jones, on Pledges, Sees. 43 and 44. 
 
 Casey vs. Cavaroc, 96 U. S. 467. 
 
 Hilliker vs. Kuhn, 71 Cal. 214. 
 
 Schouler. on Bailments, pp. 181, 182. 
 t Jacquet vs. His Creditors, 38 La. An. 866.
 
 118 The Law of Pledge. 
 
 ins these declarations of the Court of Louisiana that the 
 pledgeor himself ma}' be directly the detainer ad hoc 
 of the pledge for account of the pledgee, there is no 
 case in the Louisiana Reports where this was actuall}- 
 decreed. The only case in which the pledgeor re- 
 mained the possessor, that of Conger vs. City of New 
 Orleans, also cited by the Court in Jacquet vs. His 
 Creditors, was one of a statutory, not contractual^ 
 pledge, and was decided on other grounds. 
 
 In the two cases of Jacquet vs. His Creditors, 
 and Weems vs. Moss Company, in which the Court 
 decreed the validity of pledges in which the clerk of 
 the pledgeor had been the detainer of the property 
 pledged for account of the pledgee, there was clear 1}^ 
 a departure from the principle so well established, 
 that the possession of the pledgee must not be tmcer- 
 taiii or equivocal. The same Court had, in its earlier 
 jurisprudence, applied the rule with rigor in a case 
 in which the pledgeor had kept the goods pledged on 
 storage in his own stores, though for account of the 
 pledgee, to whom he had given his receipt for the 
 goods. The pledge was held invalid on account of 
 the character of the possession.* It is well for the 
 sake of its own jurisprudence that the Court of Louis- 
 iana in its latest decisions, as shown by the two cases 
 cited above, of Bank vs. Janin and Succession of 
 Lanaux, has returned to the sound doctrine on this 
 subject. 
 
 133. As far as we could ascertain it, all the Com- 
 
 * Geddes vs. Bennett, G La. An. 51G.
 
 Delivery and Possession of the Pledge. 119 
 
 raon law cases in which the validity of the pledge was 
 maintained against other creditors, though the pledgeor 
 had possession of the pledge, were cases in which his 
 possession was for a specific purpose and, conse- 
 quently, of limited duration, such as for the collection 
 of promissory notes, bills or other securities, or for 
 purposes of that sort. But I do not think that 
 a pledge was ever recognized valid against third 
 persons by the courts of either the Civil or the 
 Common law, when the pledgeor retained possession 
 of the pledge indefinitely and for no special reason 
 and benefit to pledgee, only holding it for account of 
 the pledgee, even when there was no fraud or impo- 
 sition in the case. Such a rule would clearly be the 
 reversal and destruction of the fundamental principle 
 that the pledgee must have possession of the pledge. 
 It would be, in fact, permitting the parties to make a 
 law of pledge to themselves, leaving the thing pledged 
 altogether in the hands of the debtor and thereby de- 
 ceiving and injuring third persons. As was well said 
 by Justice Bradley, in Casey vs. Cavaroc : '' Bad faith 
 would defeat the pledge though the creditor had pos- 
 session. But want of possession is equally fatal, though 
 both parties may have acted in good faith. Both are 
 necessary' to constitute a good pledge, so as to raise a 
 privilege against third persons" (96 U. S., page 490). 
 134. The fundamental rule of the law of pledge 
 that, for the validity of the contract, there must be a 
 delivery of the thing to the pledgee, and that he 
 must preserve and retain the possession of it as long
 
 120 The Law op Pledge. 
 
 as his debt is not paid and the contract lasts, that rule 
 belongs equally ito the Civil and the Common law, 
 and is of the essence of the pledge under both systems 
 of law.* 
 
 135. In the old Roman law, the pledgee after 
 receiving possession of the pledge, could legally 
 return it to the pledgeor, to be used by him, either 
 for a consideration or as a gratuity ; and that did not 
 impair the validit}' of the pledge. But such is not, 
 clearly, the modern law of either England or the 
 United States, or the countries of the Civil law.f 
 
 * N^isbit vs. Trust Company, 4 Woods, 470. 
 
 Trust Company vs. Trumbull, 137 111. 146, 
 
 Bank vs. Harkness (W. Va.), 24 S. E. 548. 
 
 Abbott vs. Goodwin, 20 Me. 411. 
 
 Sumner vs. Hamlet, J 2 Pick. 76. 
 
 Combs vs. Tutcbelt, 24 Minn. 423. 
 
 Allen vs. Smith, 10 Mass 308. 
 
 Hilliken vs. Kuhn, 71 Cal 214. 
 
 Casey vs. Cavaroc, 96 U. S. 467. 
 
 Caperton vs. McComick (Miss.), 22 S. R. 60. 
 
 Jones, on Pledges, Sec. 23 et seq. 
 
 Storv. on Pledges, Sec. 297. 
 t Pandectes of Pothier, Vol. 7, p. 360.
 
 CHAPTER X. 
 
 136. It is indispensable for the validity of the pledge 
 that the pledgee should have possession of the thing 
 pledged, but the law does not fix or specify the time 
 when such possession should begin. The pledgee 
 may have had possession before the contract of pledge 
 was entered into and, in that case, the possession con- 
 tinues ; or the pledgee may only receive possession 
 some time after the contract and, in that case, the 
 pledge is vivified from the moment of possession.* 
 
 The tie between the«debt and the pledge does not 
 depend upon the time at which possession of the 
 thing pledged was given. Whether the debt is 
 anterior to the pledge, and the latter only given after- 
 ward ; or whether the pledge was given at the same 
 moment that the loan was made ; or whether the pledge 
 was delivered first and the money loaned later ; it is 
 of no consequence. What is to be considered is that 
 the pledge was given in view of the sum paid or to be 
 paid ; and that the parties meant that it should secure 
 it. The Roman law provided that the pledge could 
 be given either for a contract then being entered into, 
 or for one already formed. As said by Marcianus : 
 ^'' Etsiiie in prcssenti contractu, sine etiamprcBcedat.'''''^ 
 
 * Laurent, Droit Civil, Vol. 28, Sees. 480, 467. 
 
 Jones, on Pledges, Sees. 38, 39. 
 
 Baudry-Lacantinerie, Nantissement, Sec. 69. 
 
 Court of Cassation, 23d December, 1879, Journal du Palais, 1881. 
 t Troplong, I^antissement, Sees. 217, 274. 
 121
 
 122 The Law of Pledge. 
 
 137. This principle does not seem to have been 
 acknowledged by the Court of Mississippi in the 
 recent case of Carpenter vs. McCormick, reported in 
 the Southern Reporter, Vol. 22, p. 60. McCormick 
 had loaned to the American Cooperage Company the 
 sum of $10,000, and taken as security therefor a 
 pledge of certain cooperage material upon the grounds 
 of the company. To render the pledge valid and 
 effective, the parties agreed that a portion of the land 
 of the company should be leased to him ; that some 
 $12,000 worth of material should be placed thereon, 
 with some distinctive mark on it, and be left in pos- 
 session of one Hayne as the agent of McCormick ; 
 that said Ha3me was instructed that whenever and as 
 often as any of said property should be used or 
 removed by the company, Hayne should see that an 
 amount of property of the same kind and value 
 should be substituted for the property so taken ; that 
 the substituted property should be placed in the same 
 location and be marked with the same mark as the 
 property removed. The Court decided that the 
 pledge was invalid, owing to the equivocal character 
 of the possession, and reversed the judgment of the 
 Chancellor, who had decreed the pledge valid. 
 
 The decision of the Court of Mississippi seems to 
 rest upon the fact that the pledgeor had the power to 
 substitute other and new articles to those originally 
 pledged. The Court cites several cases to support its 
 position, in which it says there was no substitution. 
 But it does not cite any case in which it is held that
 
 Delivery and Possession op the Pledge. 123 
 
 the substitution of a new thing to that originally 
 pledged invalidates the contract and shows the 
 pledgee's possession to be equivocal. The substitu- 
 tion of the new thing to the old is not prohibited in 
 the contract of pledge. It may create a new pledge, 
 or it may be the delivery of the thing pledged to 
 secure a debt already existing ; or it ma}' be the per- 
 formance of a promise to deliver the thing pledged 
 under the terms of a previous contract. But be it 
 what it may, the moment the new thing is placed in 
 the hands of the pledgee or his agent his right of 
 preference over it attaches and the contract is vivi- 
 fied. There seems to be nothing in such an agree- 
 ment to characterize the pledgee's possession as 
 equivocal. Indeed, it is a common transaction and 
 mode of pledge now ot daily occurrence for bankers 
 or capitalists to make advances or loans of money, or 
 to grant open credits on collateral securities to bor- 
 rowers who stipulate that they mav during the exist- 
 ence of the pledge substitute other or new securities 
 to the original ones to the saJ:isfaction of the pledgees. 
 This agreement clearly does not affect the character 
 of their possession and impair the validity of the 
 pledge. 
 
 138. We should note that in the cases in which the 
 pledge was declared null on account of the substitu- 
 tion, it was because the thing substituted was not in 
 the possession of the pledgee. 
 
 If the pledge was null because the pledgee had not 
 possession of the thing pledged at the moment of the
 
 124 The Law of Pledge. 
 
 substitution, it is the pledge of that thing which was 
 null. The pledge of the thing suhstituted cz.x\ not be 
 null for want oi possession in the pledgee if the thing is 
 then actually in his possession. 
 
 It is not the power of substitution of the thing 
 pledged which could invalidate the pledge. It is the 
 power of disposition of that thing reserved in the con- 
 tract bv the pledgeor. It is of the essence of the 
 pledge that the debtor should be dispossessed of the 
 thing pledged ; that the creditor should be possessed of 
 it, and that the former should have no further control 
 or disposition of it. Consequentl}', if the pledge re- 
 mains in the hands of the pledgeor, though for account 
 of the pledgee, and with the understanding that the 
 former has the right to substitute, in his own hands, 
 other securities to the original ones, it is clear that he 
 has the right and power of disposition of the thing 
 pledged, and, therefore, that the pledge is invalid. 
 This is what was decided by the Supreme Court of 
 the United States in the case already alluded to and 
 so often cited as authority, of Casey vs. Cavaroc, 96 
 U. S. 467. 
 
 139. The Court states the substance of the case in 
 these words: " Was there such a deliver}^ and reten- 
 tion of the collateral securities as to constitute a valid 
 pledge by the law of Louisiana? Clearly thev were 
 never out of the possession of the officers of the bank 
 (the pledgeor) and were never out of the bank for a 
 single moment, but were always subject to its disposal 
 in any mannerwhatever,whether by collection, renewal,
 
 Delivery and Possession of the Pledge. 125 
 
 substitution or exchange ; and collections, when made, 
 were made for the benefit of the bank and not that of 
 the Credit Mobilier (the pledgee)." 
 
 And further: " Whether constructive possession in 
 the creditor can be affirmed, where an article to which 
 his only title is that of pledge is actually re-delivered 
 to the debtor, with general authority to dispose of it 
 and substitute another article of equal value in its place, 
 is the question we have to meet in this case." 
 
 After reviewing both the Civil law and the Common 
 law authorities the Court concludes : ' ' On this ground, 
 therefore, of want of possession in the pledgee, or of 
 a third person agreed upon by the parties, and of act- 
 ual possession and control in the pledgeor, we feel 
 compelled to hold that the Credit Mobilier (the 
 pledgee) had no privilege as to third persons, and that 
 the receiver was entitled to the securities in question." 
 
 140. It is evident that the case was decided adversely 
 to the pledgee onl}^ because the pledgeor had the con- 
 trol and power of disposition of the collateral securi- 
 ties, which had remained in his hands ; and not 
 because he could substitute other securities to the 
 original ones, if those had been in the possession of 
 the pledgee. This distinction is of the greatest impor- 
 tance in the pledges securing open credits, in which 
 the debtor reserves the ri^-ht to make the substitution. 
 Such cases do not come under the ruling of Casey vs. 
 Cavaroc. In these, the thing pledged is in the hands 
 of the creditor when the debtor offers the new securi- 
 ties and makes the substitution. The new securities
 
 126 The Law of Pledge. 
 
 pass at once into the hands of the creditor. The 
 transaction does not, in any manner, affect or impair 
 the validity of the pledge ; because the dispossession 
 of the pledgeor and the possession of the pledgee have 
 never been interrupted, though the thing pledged is 
 changed by the exchange. 
 
 The learned judge of the Circuit Court who decided 
 the case of Case}" vs. Cavaroc said emphatically that 
 the exchange or substitution of the securities could 
 not invalidate the pledge, and remarks " that the case 
 of Clark, Assignee, vs. Iselin, 21 Wall. 360, is a 
 pointed authority to sustain the negative of this propo- 
 sition (the impairment of the pledge by the substitu- 
 tion), and settles this objection to the title of defendant 
 conclusively against complainant." 2 Woods, 87. 
 
 141. In Clark, Assignee, vs. Iselin, the Supreme 
 Court of the United States decided directly that the 
 substitution of securities did not impair the pledge. 
 
 142. The rule that the validity of the pledge does 
 not depend upon the time that possession is given to 
 the pledgee ; that such possession may be given at 
 any time thereafter (except in case of insolvency of the 
 pledgeor), and that the right of preference springs 
 from the possession whenever given ; that rule is part 
 of the Common law as well as of the Civil law. The 
 Court of New York so held in the case of Parshall 
 et al. vs. Eggert, 54 N. Y. 23. The judge said on 
 this point: "I know of no authority denying the 
 right of a party who has a contract of pledge, ineffect- 
 ual for want of delivery, to obtain a deliver}^ at a sub-
 
 Delivery and Possession op the Pledge. 127 
 
 sequent time, and thus to validate the pledge. Upon 
 general principles the only obstacle which can prevent 
 such a transaction from beinsj effectual must be the 
 intervention of fraud."* 
 
 143. If the pledgee had possession of the thing 
 pledged before or at the time that the contract was 
 entered into, there is no necessity of a deliver}* of the 
 pledge by the pledgeor. Such is the case if the 
 pledgee had it by virtue of a loan, or hire, or deposit. 
 The nature of his possession changes necessarily, but 
 the possession continues under the pledge. The prin- 
 ciple applies also to the case of a broker who buys stock 
 for his customer on speculation, pa^dng for it with his 
 own funds. Either b}^ agreement or by the Common 
 law, the relation of pledgeor and pledgee arises in 
 such a case. The possession of the broker is that of a 
 pledgee, though he has not received it from the cus- 
 tomer, who never was put in possession of the stock. f 
 
 144. The delivery and possession of the thing 
 pledged may be symbolical or fictitious in certain 
 cases. And it may be so both in the pledge of incor- 
 poreal and of certain corporeal things. Of the latter 
 class, goods or merchandise deposited in stores or 
 warehouses when pledged are delivered and posesssion 
 
 * Jones, on Pledges, Sec. 39. 
 
 Boynton vs. Payroux, G7 Me. 587. 
 
 Fenby vs. Pritchard, 2 Sandf. (N. Y.) 151. 
 
 Hilton vs. Tucker, L. R. Chancery Division, ISSS, p. 669. 
 
 Storj', on Pledges, Sec. 300. 
 t Civil Code of touieiana, Art. 3152, 
 
 Jones, on Pledges, Sec. 25. 
 
 Edwards, on Bsiilinentp, Sec. 210, p. 170. 
 
 Baudry-Lacantinerie, !Niintisfi<*nient, Sec. Gi), p. 4S. 
 
 Maikham vs. Jaudon, -il N. Y 235. 
 
 Baker vs. Drake. 53 N. Y. An.-211. 
 
 Gruman vs. Smith, 81 K. Y. 25. 
 
 Gillet vs. Whitney, 120 N. Y. 402.
 
 128 The Law of Pledge. 
 
 of them given to the pledgee by dehver}- to him of 
 the keys of the store, if the goods are in a private 
 store, or by assignment of the warehouse receipt, if 
 the goods are deposited in a pubHc warehouse. In 
 the same manner the delivery of merchandise on board 
 ship, when pledged, is made by the transfer or assign- 
 ment of the bill of ladinof which covers them.* 
 
 145. Under a statute by virtue of which a pledge 
 of ofoods is created in favor of the consignee for 
 money due him by the consignor, the moment the 
 bill of lading is deposited in the postoffice, or handed 
 to the common carrier for transmission, it was held 
 that the unpaid vendor of the goods could not com- 
 pete with such consignee, and that the latter' s privi- 
 lege was paramount to the vendor's lien. The deliv- 
 ery of the pledge is made by the special provisions of 
 the statute to consist in the mailingr of the bill of 
 lading, or the placing of it in the hands of the com- 
 mon carrier for transmission to the consignee, f 
 
 146. Some writers say that, in such cases, the keys 
 of the store, the warehouse receipts and the bills of 
 lading are the symbols of the goods, and that, by 
 delivering the symbols of the pledge, the pledge itself 
 is delivered and possession of the goods thereby given 
 to the pledgee. J 
 
 Mr. Jones says in this respect : '' Such bills or 
 receipts represent the goods themselves, and the 
 delivery of such bills or receipts as collateral security 
 
 * Baudry-Lacantinerie, Nantissement, p. 47. 
 
 Pont, Nantissement, No. 1125. 
 t Florsheim Bros. vs. Howell, Phelps & Co.. 33 La. An. 11S4. 
 t Jones, on Pledges, Sees. 36, 37, "227, 228, 229,
 
 Delivery and Possession of the Pledge. 129 
 
 generally amounts to a S3'mbolical delivery in pledge 
 of the goods themselves."" 
 
 147. Troplong does not concur in this view of the 
 subject and gives a more logical and philosophical 
 reason for the principle. He speaks in these terms : 
 
 " In possessing the keys, one possesses the goods, 
 not because the keys represent the goods and are a sym- 
 bol of them, but because the keys place the goods in the 
 hands of the possessor, in such a way that he alone 
 can dispose of them, and that anybody else could only 
 do so burglariously. Such is equally the part that n 
 bill of lading plays. It puts the goods at the disposi- 
 tion of the consignee ; it gives to him alone the right 
 to receive them ; it causes him to hold them if not 
 corporeally, at least virtually."* 
 
 Ducaurroy criticises also the idea of the symbolical 
 delivery by delivery of the keys of a store in which 
 the goods sold or pledged are contained, and he 
 remarks that a ke}' does not represent wine, or wheat, 
 or other merchandise. f 
 
 148. But the principle that, for the pledge of 
 goods in a store or warehouse, the delivery of the keys 
 of the building to the pledgee is a legal and sufficient 
 delivery and possession of the goods, has been adopted 
 bv the Common law and the Civil law.;|; 
 
 * Troplong, Nantissement, Sees. 323, 324. 
 
 Baudry-Lacantinerie, Nantissement, p, 47. 
 t Ducaurroy, Instituts Expliques, Vol. 1, Sec. 4(»H. 
 X Story, oa Bailments, Sec. 297. 
 
 Schouler, on Bailments, Sec. 189. 
 
 Am, and Eng. Ency. of Law, Verba Pledoje, p. .59.5. 
 
 Hilton vs. Tucker, L. R. Chancery Divi?ibn, 1888, p. ttfJft. 
 
 Baudry-Lacantinerie, Nantissement. p. 47. 
 
 Troplong, Nantissement, Sees, 323, 324. 
 
 Duranton, Nantissement, Sec. 531 . 
 
 Pont, Nantissement, p. G17.
 
 130 The Law of Pledge. 
 
 Yet this doctrine is subject to contestation, and 
 some writers say that this principle, if well established, 
 in theory, presents difficulties in its application. The 
 possession of the pledgee must be exclusive^ whether 
 it is actual or constructive. What then if the pledgeor 
 has a double key, or a double set of ke3's of the store? 
 He is then himself as well in possession of the goods 
 as the pledgee, and can dispose of them. If the latter 
 has knowledge of this, or consents to it, the pledge is 
 clearly invalid. Furthermore, the possession of the 
 pledgee and dispossession of the pledgeor must be 
 ostensibly visible to third parties dealing with the 
 latter. It is not so when the goods are still in the 
 store of the pledgeor, though the keys may be in the 
 hands of the creditor. Third persons are not neces- 
 sarily aware of this fact. 
 
 149. Laurent does not favor the doctrine and 
 argues strongly against it, as follows: "According 
 to Art. 1606 the delivery of movable property is 
 effected by the delivery of the ke^-s of the building 
 which contains it. Does this suffice for the pledgee 
 to be put in possession, and, consequentlv, that he 
 should be privileged against third persons? The 
 authors say so. Is not this doctrine too absolute? 
 The delivery of the keys by itself indicates no change 
 of possession ; it has no notoriety ; it does not warn 
 third persons ; consequently there has been no putting 
 in possession in the sense of Art. 2076. These are 
 decisions in the adverse sense. The Court of Aix has 
 recognized the privilege of the pledgee to whom the 
 keys of the store had been delivered. But we can
 
 Delivery and Possession of the Pledge. 131 
 
 see by the facts of the case how easy fraud may be 
 committed in such cases. The debtor had ojranted a 
 second pledge on the same goods in deUvering the 
 keys to the second pledgee, who thereby was de- 
 ceived. Does not this facility to deceive third persons 
 by delivering the keys to them prove that this fact 
 alone is not sufficient to constitute possession in favor 
 of the pledgee? In our opinion it would be neces- 
 sary that other facts should accompany the delivery of 
 the keys in order to give to the possession a public 
 character.'- * 
 
 150. Laurent might have cited in support of his 
 opinion the case of the Bank of Martinique vs. 
 Thomas, Lachanibre & Co., in which the French 
 Court of Appeal held exactly the same po&ition and 
 decided that a pledge of goods was invalid because 
 they had remained in the store of the pledgeor, 
 though the ke3's of the store were delivered to the 
 pledgee. The Court expressed the same views as 
 Laurent and said that such a contract is occult ; that 
 third persons are not thereby put on their guard in 
 dealing with the pledgeor, whilst the law demands 
 that the dispossession of the debtor should be osten- 
 sible, f 
 
 151. The delivery and possession of corporeal prop- 
 erty to the pledgee may be constructiv^e, and thereby 
 sufficient, in some cases where the thing pledged is 
 not contained in a building, or is of too great size 
 
 * Laurfint, Dii Gasje, Sec. 473. 
 t Journal du Palais, 1871. p. 1-15.
 
 132 The Law op Pledge. 
 
 and weight to be moved without trouble and expense. 
 Thus, it was held by American courts that logs in a 
 boom, or timber or lumber in a pile, may be jiledged 
 by the pledgeor's pointing them out to the pledgee 
 and declaring that he gives him possession of them.* 
 
 This principle was equally acknowledged by the 
 French courts in cases of the pledge of lumber, but in 
 those cases the pledgee had put his mark upon the 
 lumber in taking possession.f 
 
 The rule is the same under the Civil and the Com- 
 mon law. 
 
 152. The same rule should ripply to such articles 
 as bales of cotton, hogsheads of sugar, casks of wine, 
 barrels of flour, etc., when lying on the quays, or 
 levees, or streets, before shipment, or after delivery 
 and before storing. Such goods could be pledged, 
 whilst thus 13'ing out, and possession given to the 
 pledgee by the pledgeor's pointing them out and 
 declaring that he delivers them to the pledgee. But 
 it would be safer for the latter to put his mark upon 
 them and thus perfect his constructive possession, as 
 was done in the cases in which the French Courts 
 acknowledged the legality of the pledge of lumber 
 under analogous circumstances. t 
 
 * Jones, on Pledges. Hec. 3(j. 
 
 Am. and Eng. Encyc. of Law, Verba Pledge, p. 595. 
 
 Jewett vs. Warren. 12 Mass. 300. 
 
 Nevan vs. Roup. 8 Iowa, 207. 
 
 Whitney vs. Tibbetts, 17 Wis. 359. 
 t Pont. Xantisseiuent, ^3ec. 1130. 
 
 Dalloz. 2S, 1,00. 
 + Lawson, on Bailments, Sec. 51.
 
 CHAPTER XI. 
 
 153. We have seen already how the dehvery of in- 
 corporeal things is made and possession of them given 
 to the pledgee ; and we have noted, on this point, the 
 contrast between the Civil law and the Common law. 
 In both systems the delivery is made by delivery of 
 the title, or muniment of title, of the incorporeal 
 thing or right, to the pledgee. In the Common law 
 this alone constitutes the possession of the pledgee, 
 even against third persons ; and in case the pledgeor 
 has made a transfer of the same things to two or more 
 persons, the first transferee in point of date is con- 
 sidered entitled to the thing pledged.'^ 
 
 In the Civil law, so far as third persons are con- 
 cerned, the transfer of the right and delivery of the 
 deed or title are not sufficient to entitle the pledgee to 
 the thing or credit pledged : the pledgee must more- 
 over notify the debtor of the credit, of the transfer. 
 It is this notification which constitutes the possession 
 of the pledgee. So that, if the pledgeor makes a second 
 transfer to another creditor before the first pledgee has 
 given notice to the debtor of the credit, and the second 
 transferee does give the notice first, he is entitled to 
 the credit given in pledge, and the pledge of the first 
 pledgee is fruitless. f 
 
 * Ante, Sees. 11, 18. 
 t ^H<e, Sec. 11 et seq. 
 
 Lee vs. Bradley. 8 La. M. 57. 
 
 Winchester vs. Ory, 17 La. 428, 
 
 Deloach vs. Jones, 18 La. 4.53. 
 
 Lallande vs. Ingram, 19 La. An. 304. 
 
 Troplong, Nantissement, Sec. 266. 
 
 133
 
 134 The Law of Pledge. 
 
 The difference between the two systems of law is 
 also remarkable in this, that in the Civil law, if the 
 right or credit transferred is not evidenced by title, 
 and it is transferred successivel}- to two or more per- 
 sons, it is the last transferee who is considered en- 
 titled to the right or credit transferred.* 
 
 154. This rule applies only to the transfer and 
 pledge of claims and credits. There can be no notice 
 of transfer of incorporeal things which are not credits, 
 as, for instance, patents for invention. And this is the 
 reason for which the pledge of such things has been 
 declared valid, as of incorporeal things, without notice 
 of the same to anybodv.f 
 
 A consequence of the principle that in the pledge of 
 rights or claims, the title or muniment of title must 
 be delivered to the pledgee, is that such rights or 
 claims as are not evidenced or represented by title 
 can not be pledged, inasmuch as the delivery of the 
 title in such cases constitutes the dispossession of the 
 pledgeor and the possession of the pledgee. '"When 
 a credit is without muniment of title, it can not be the 
 object of a legal pledge. How could the delivery of it 
 be made.? And when there is neither delivery nor 
 possibility of delivery, how could the pledge be 
 made?" t 
 
 * Potbier, De la Yente, Xo. 55S. 
 t Laurent, Dii Gage, 8ec. 462. 
 
 Baudry-Lacantinerie, Du Gage, p. 55. 
 J Troplong, Nantisseiiient, Sec. 278. 
 
 Laurent, Du Gage, Sec. 477. 
 
 Aubry et Rau, VoL 4, p. 705, Sec. 432. 
 
 Pont, Du Nantissement, Sec. 1132. 
 
 Baudry-Lacantinerie. Du Nantissement, Sees.
 
 Delivery and Possession of the Pledge. 135 
 
 155. Yet, a law writer of no insignificant author- 
 ity in France, Colmet de Santerre, has upheld the 
 theory that credits or claims may be pledged with- 
 out delivery of the muniment of title to the 
 ])ledgee ; and, consequently, that even such credits 
 or claims as are not evidenced by title may legally 
 be the subject of the contract of pledge. He bases his 
 opinion substantially upon the fact that the Code 
 Napoleon prescribes the necessity of possession for the 
 validity of the pledge, when that possession is corpo- 
 real ; that it does not provide for the fictitious posses- 
 sion of an incorporeal right ; that the possession of 
 the title is not in reality the possession of the credit or 
 claim ; and that the Code did not intend to impose 
 upon the pledge of an incorporeal right more numerous 
 and difficult formalities than for the sale or transfer of 
 such rights."^'" 
 
 This author seems to be isolated in his position on 
 this subject, and the great majority, if not the uni- 
 versality, of French authorities are opposed to this 
 doctrine. 
 
 156. Baudiy-Lacantinerie combats it victoriously 
 and says that it is in opposition to the traditions 
 of the Roman law and of the old jurisprudence of 
 France, which did not allow of a pledge without dis- 
 possession of the debtor. The pledge without such 
 dispossession is in reality a mortgage. This security 
 may have existed in Rome under the name of -pigmis 
 oppositum and been subsequently transformed into a 
 
 * Colmet de Santerre, VIII, Sec. 302.
 
 136 The Law of Pledge. 
 
 mortsfase, bv which movable as well as immovable 
 property could be affected. But the pledge properly 
 speaking, the pignus depositmn^ has never taken 
 place without the change of possession from pledgeor 
 to pledgee, either in the Roman law or the ancient 
 jurisprudence of France. It would be surprising that 
 the framers of the Code should have admitted this 
 new conception without its being mentioned in their 
 preparatory work. On the contrary, the text of Art. 
 2076 demands formally the putting in possession of 
 the creditors in all cases, as well when the object 
 of the pledge is a corporeal thing, as provided for in 
 Art. 2074, as when its object is an incorporeal one, 
 such as a credit, as provided for in Art. 2075 • '^^^ 
 only difference is that the putting of the creditor in 
 possession shall be effected differently for the credits 
 and for the corporeal things. For the credits, it will 
 result, conformably with Arts. 1607 and 1689, from 
 the delivery of the title. Furthermore, this putting 
 in possession is a useful complement of the publicity 
 given by the notification of the pledge to the debtor of 
 the credit. It dispossesses the pledgee and takes 
 away from hiin the detention of the title, which is 
 the material and external sign of his right to the 
 credit, and thus contributes in a great measure in 
 warning third persons It results, therefore, from 
 Art. 2076 that credits which are not evidenced by title 
 can not be pledged. It is, indeed, impossible in such 
 cases to put the creditor in possession as the law re- 
 quires. Third persons could not be informed of the
 
 Delivery and Possession of the Pledge. 137 
 
 change which has taken place, and the debtor would 
 not be dispossessed.* 
 
 157. The reasoning of Colmet de Santerre, that 
 the pledge of incorporeal things is valid without de- 
 livery of the title, because the sale of such things is valid 
 without the transfer of the muniments of title, when 
 there are no muniments of title attached to them, and 
 that the possession of the title is not in reality the posses- 
 sion of the credit or claim ; such reasoning suggests the 
 idea that the pledge of rights, credits or claims, which 
 are not evidenced by title, may perhaps be effected 
 in the form of a sale. We have seen before that, 
 not only in the Common law, but also in the Civil 
 law, according to the majority of the commentators 
 of the Code Napoleon, and the jurisprudence of 
 Louisiana, a pledge is valid if made in the form of a 
 sale, if all the requirements for the contract of pledge 
 are observed — that is, if a written act is passed and 
 possession given to the pledgee, and the transaction 
 is free of fraud. 
 
 158. A sale may be made of credits which have 
 no muniments of title, because the delivery and pos- 
 session to the purchaser are not an essential element 
 of that contract, as they, are of that of pledge. But, 
 if the pledge in the form of a sale, in order to be 
 valid as to third persons, must fulfil all the require- 
 ments of the contract of pledge, it is clear that the 
 ostensible vendee, in reality the disguised pledgee, 
 must be put in possession of the thing pledged under 
 
 * Baudry-Lacantinerie, Du Gage, Sees. 74 and 75.
 
 138 The Law of Pledge. 
 
 the garb of a sale, and that his possession must be 
 ostensible, notorious and such as to warn third persons. 
 When the thing pledged is a credit without muniment 
 of title, it is evident that the pledge of it in the form 
 of a sale can have no effect as regards third persons. 
 The contract is an innominate one ; it is a pignora- 
 tive transaction, not forbidden by law, binding upon 
 the parties themselves, enforceable accordingly, but 
 giving the creditor no lien, privilege or right of 
 preference.* 
 
 159. There can be no question on this point so far 
 as the Civil law is concerned. But what of the Common 
 law? Contracts of security of a pignorative charac- 
 ter by transfer of the right, or credit, or claim by 
 the debtor to the creditor are of frequent use in the 
 Common law States. The object of such agreements 
 is to guarantee the payment of an obligation, not to 
 pay and extinguish an obligation. They convey an 
 apparent property, not the ownership itself. They 
 2i.Te -puYeXy pignorative m their nature. The parties 
 call them pledges. The courts have in a number of 
 cases held that the}' were pledges. Are they so in 
 reality when the rights transferred are not evidenced 
 by any muniment of title and when, consequently, the 
 transferees are not put in ostensible possession, even 
 fictitiously or symbolically, and there are no possible 
 external signs or indications of that possession.? 
 
 Baiidry-Lacantinerie, Xantissement, p. 62. 
 Pont, Nantissement, Sec. 1090. 
 Duranton, Nantissement, Sec. 538. 
 Ante, Sec. 121.
 
 Delivery and Possession of the Pledge. 139 
 
 1 60. In the Civil law possession is a fact, but it is a 
 fact which is not necessarily rendered manifest or evi- 
 denced either by the physical holding or detention of 
 the thing, or constructively in the manner prescribed 
 by law. The mere enjoyment of a right may con- 
 stitute the possession of it. The Civil Code of Louis- 
 iana defines possession in these words : '' Possession 
 is the detention or enjoymejtt of a thing, which we 
 hold or exercise by ourselves, or by another who keeps 
 or exercises it in our name."* 
 
 The Napoleon Code defines it: " Possession is the 
 detention or the enjoyment of a thing or a right which 
 we hold or exercise by ourselves, or b}' another per- 
 son who holds it or exercises it in our name." f 
 
 161. Thus the legal usufructuary has the possession 
 of his right because he has the enjoyment of it ; but 
 that right is not necessarily evidenced by title, and his 
 possession may not be manifested by an external 
 
 . "Where a credit is concerned the possession does 
 not belong to the person who holds the title, but to 
 the one who possesses the credit — that is, who has the 
 enjoyment of it. It is in this sense that the Court of 
 Cassation says that the possession is not the simple 
 detention of the title, but the enjoyment itself of the 
 thing. Thus the one who receives the interest and 
 
 * Civil Code of JiOuisiana, Art. 3426. 
 tCode Napoleon, Art. 2228. 
 
 Pothier, De la Possession, No. 2. 
 
 Troplong, De la Possession, Sees. 217, 218. 
 
 Marcade, De la Possession, p. 57 et sitj. 
 JKogron, Code Civil Espli(iui', Art. 2228.
 
 140 The Law op Pledge. 
 
 the dividends of corporate stock has the possession of 
 the stock . * 
 
 162. The subject is well explained also by Trop- 
 long: "Let us see for the delivery of incorporeal 
 rights. By the Roman law incorporeal rights were 
 not susceptible of possession. According to Juriscon- 
 sult Paulus we could only possess corporeal things, 
 ■possideri auteni possunt qucE stmt corporalia, and an 
 incorporeal right escaped possession, (/nia 7tec possi- 
 deri iutelligitur jus incorpomle. However, as those 
 rights had a real value, the enjoyment or use of them 
 was called a quasi-possession. In the French law we 
 do not care for those subtleties, and we think that we 
 can possess an incorporeal right as well as a thing. 
 (Art. 2228, Civil Code.) We possess a servitude, a 
 usufruct, a right of use, and there is a delivery of such 
 rights when the person for whose benefit they are 
 transferred has, in point of fact, the enjoyment of 
 them by the consent of the owner. Ego puto usum 
 hujus juris pro traditione possessionis accipiendum 
 esse. 
 
 " It is the same thing: for a credit. The use of the 
 right which it gives, exercised with the consent of the 
 owner and of the debtor, is a positive and palpable 
 delivery." f 
 
 These principles of the law of possession are cer- 
 tainly true in both the Civil and Common law, though 
 in the former they are consecrated by statute. 
 
 * Laurent. Prescription, Vol. 32, Sec. 557. 
 
 Dalloz, Prescription, No. 270, 12th March, 1824. 
 t Troplong, De la Vente, Vol. 1, pp. 380, 387.
 
 Delivery and Possession of the Pledge. 141 
 
 163. But, when we come to the possession of the 
 pledgee, the Civil law demands more. His posses- 
 sion must be ostensible j there must be external signs 
 of it ; the dispossession of the pledgeor must be such 
 that third persons dealing with him may be able to 
 see or know that the thing pledged is no longer in 
 his hands or under his control. 
 
 In the words of the Court of Cassation : " It is of 
 the essence of the contract of pledge that the deliver}^ 
 of possession to the creditor should be an ostensible 
 fact, of a sufficient notoriety to warn third persons 
 that the debtor is dispossessed of the thing pledged, 
 and that it is no longer part of his unencumbered 
 property."* 
 
 And, in the words of the Court of Louisiana : ''The 
 possession of , the pledgee should be real and effective 
 at all times. It must be apparent and well known. "f 
 
 164. The reason of this imperative provision of 
 the law is that, if the possession of the pledgee was 
 not "rendered ostensible and notorious^ third persons 
 could easily be deceived and defrauded by the 
 debtor, inasmuch as the pledge of commercial 
 things, at least, is not registered like the mort- 
 gage, in the books of the parish or county, and the 
 public has no other notice of it than by the posses- 
 sion of the pledgee. In the words of Troplong : 
 " But where would we be if the pledge of movable 
 things could be made without delivery.^ What frauds ! 
 
 * Atitp., Sec. 122. 
 t AnU, See. 123.
 
 142 The Law of Pledge. 
 
 What deceptions I I low third persons would be im- 
 posed upon !"'" Such being the motive of the law in 
 making the possession of the pledgee an essential 
 condition of the legality of a pledge, and the condition 
 being part of the Common law as well as of the 
 Civil law, it would seem clear that the validity of a 
 pledge in that respect should be tested, under both 
 systems, by the same criterion, to-wit : the publicity 
 or external signs of the pledgee's possession. In that 
 case, the pledges of credits or claims, or rights, b}- 
 transfer, as in the form of a sale, when no muniments 
 of title are, or can be, transferred to the pledgee or 
 apparent vendee — such transactions, even if valid and 
 binding upon the parties, should not produce the 
 effects of the contract of pledge and give the credi- 
 tor a right of priorit}' or preference over third per- 
 sons, in the Common law any more than in the Civil 
 law. 
 
 165. But neither the courts nor the law writers of 
 the Common law seem to acknowledge or recognize 
 the difference between the possession which is suffi- 
 cient for the validity of a sale and that which is neces- 
 sary for the validity of a pledge ; and they ignore 
 also, consequently; the distinction between the trans- 
 fer for the purpose of a pledge of an incorporeal 
 thing, such as a credit, accompanied with the deliv- 
 ery of muniments of title or vouchers, and the trans- 
 fer and pledge of a credit to which there is no muni- 
 ment of title or voucher. 
 
 Troplong. Dvi Gage, Soc. 298. 
 Ante, Sec. 84.
 
 Delivery and Possession of the Pledge. 143 
 
 i66. Mr. Schouler says: '^That which is incapable 
 of delivery can not, logically speaking, be the subject 
 matter of a pledge ; but since money rights, not ne- 
 gotiable, or mere choses in action, may at least be 
 assigned, so that delivery of the muniment or voucher 
 shall answer the purpose of a bailment, this reserva- 
 tion is unimportant in modern practice. The modern 
 Civil law here agrees with us in substance ; and to 
 the same purport, apparently^ was the Roman law, 
 notwithstanding some equivocal expressions in the 
 Digest."* 
 
 The distinguished writer is not logically speaking. 
 First, in the Roman law there was no legal possession 
 of incorporeal things, and, therefore, none could be 
 delivered, and^ for that reason, such things could not 
 be pledged. In the modern Civil law, the transfer 
 or delivery of possession of incorporeal things is made 
 by delivery of the vouchers or muniments of title ;'\ 
 and it is expressly provided that such things may be 
 pledged by such delivery. But there can be no pledge 
 of them when they are not evidenced by title or 
 voucher. Does Mr. Schouler imply, under the 
 maxim Expr&ssio 2inius est excliisio alteriiis, that the 
 uo7i-delivery of the muniment or voucher shall not 
 answer the purpose of a bailment.^ 
 
 If so, he is right, and his opinion would agree with 
 that of the Civilians. But a subsequent paragraph 
 
 * Schouler, on Bailments, p. 167. 
 
 Troplong, De la Vente, Vol. 1, pp. 38(), 387. 
 
 Law 3, Digest, De, aai. punaesa. 
 t Ante, Sec. 10. 
 J Ante, Sec. 8.
 
 144 The Law of Pledge. 
 
 shows that he makes no such distinction. Speaking 
 of the pledge of things /;/ fidti?'0, he says : " The case 
 of a thing not yet come into being presents some dif- 
 ficulty, for equity has much diluted the strength of 
 the Common law rule in this respect. Granting the 
 rule, it yet appears that the chattel product i?i future 
 of that to which one holds a right in esse, like the 
 prospective earnings of a voyage, or of some existing 
 contract of service, the year's wool on one's sheep, 
 the milk from one's cow, the severed crops from one's 
 land, a reversionary right as heir, are all decreed 
 assignable interests at this day, and capable of sale ; 
 and, if capable of sale, they must be capable of pledge 
 or mortc^ao-e." ^ 
 
 167. This is clearly a mistake^ and a very serious 
 one. First, things /// futuro can not be pledged 
 because they can not be delivered. f And, secondly, 
 all that may be sold may be vi07'igaged, because 
 there is no necessity of delivery of possession in mort- 
 gage, any more than in sale. But all that may be 
 sold may not be pledged, because the sale may be 
 without delivery and possession, whilst there is no 
 pledge without possession.^ 
 
 We find no enlightenment in the words of this writer 
 for the question which occupies us, to-wit : whether 
 there is the same necessity in the Common law as in 
 the Civil law of an ostensible or apparent possession 
 
 * Scbouler, on Bailments, p. 168. 
 
 t Ante. (Sec. 28. 
 
 i .Fones, on Pledges, Sec. 30. 
 
 Laurent, Du Gage. Sec. 472. 
 
 Baudry-Lacantinerie, Du Gage. Sec. SS.
 
 Delivery and Possession of the Pledge. 145 
 
 in the pledgee to validate the pledge ; and hence, 
 whether the transfer of incorporeal things or rights 
 without muniments of title or vouchers is insufficient 
 to constitute a pledge in the Common law as in the 
 Civil law. 
 
 1 68. Neither Judge Story nor Mr. Jones are more 
 explicit on this point, and the latter falls into the same 
 error as Schouler when he says : "An actual delivery 
 of property capable of personal possession is essential. 
 The delivery must be such as would be requisite to 
 transfer the property in the same chattels in case of a 
 sale of them." "* The delivery might be such as to 
 transfer the property in case of a sale, and yet be in- 
 sufficient to validate a pledge, inasmuch as a sale 
 without delivery at all is legal and a pledge is not. 
 
 There again the question is left untouched. Unap- 
 parent possession in the vendee is valid. Is it so in 
 the Common law pledgee? 
 
 Judge Story's high authority is of no avail either. 
 All that he says on this subject is : " It is of the 
 essence of the contract that there should be an 
 actual delivery of the thing. Until the delivery 
 of the thing, the whole rests in an executory con- 
 tract, however strong may be the engagement to 
 deliver ; and the pledgee acquires no right of 
 property in the thing. What will amount to a de- 
 livery of the thing is matter of law. There need 
 not be an actual delivery, manual delivery of the 
 thing. It is sufficient, if there are any of those acts 
 
 * Jones, on Pledges, Sec. 23.
 
 146 The Law of Pledge. 
 
 or circumstances which, in construction of law, are 
 sufficient to pass the possession of the property. Thus 
 goods at sea may be passed in pledge by a transfer 
 of the muniments of title, as by a transfer of the bill 
 of lading, an assignment, etc. So, goods in a ware- 
 house may be transferred by a symbolical Jeliyery of 
 the key thereof. So, if the pledgee has the thing 
 already in possession, as a deposit, etc., then the yery 
 contract transfers to him by operation of law a virtual 
 possession, as a pledge, the moment the contract is 
 completed."* 
 
 There is nothing: in those remarks to inform us 
 whether the unapparent possession is sufficient to ren- 
 der a pledge yalid ; and, hence, whether incorporeal 
 things or rights without muniments of title can be 
 pledged at all under the Common law. 
 
 169. Yet it would seem as if in the Common law 
 States the written transfer of a right or credit was of 
 itself the delivery of possession to the pledgee, suffi- 
 cient for the validity of the pledge, even without the 
 muniment of title. In such cases, the possession is 
 not ostensible or notorious, and there is nothing in the 
 transaction b}' which third persons are put on their 
 guard in their dealing with the debtor and pledgeor. 
 It is clearly against the principles of the law of pledge, 
 and in direct opposition to the rules laid down by the 
 Civilians ; but the point does not appear to have 
 impressed the minds of either the courts or the text 
 writers of the Common law. 
 
 * Story, on Bailments, Sec. 297.
 
 Delivery and Possession of the Pledge. 147 
 
 170. The Court of New York has said: "■ But it 
 is true that possession must uniformly accompany a 
 pledge. The right of the pledgee can not otherwise 
 be consummated. And on this ground it has been 
 doubted whether incorporeal things like debts, money 
 in stocks, etc., which can not be manually delivered, 
 was the proper subject of a pledge. It is now held 
 that they are so ; and there seems to be no reason 
 why any legal or equitable interest whatever in per- 
 sonal property may not be pledged ; provided the 
 interest can be put, by actual delivery or by written 
 transfer, into the hands or within the power of the 
 pledgee, so as to be made available to him for the 
 satisfaction of the debt. Goods at sea may be passed 
 in pledge by a transfer of the muniments of title^ as 
 by a written assignment of the bill of lading. This 
 is equivalent to actual possession, because it is a 
 delivery of the means of obtaining possession. And 
 debts and choses in action are capable, by means of 
 a written assignment, of being conveyed in pledge."'^ 
 
 171. The Court of California used the same 
 language on this subject. ''' Incorporeal property 
 being incapable of manual delivery, can not be 
 pledged without a written transfer of the title. Debts, 
 negotiable instruments, stock in incorporated com- 
 panies, and choses in action generallv, are pledged 
 in that mode. Such transfer of the title per- 
 forms the same office that the delivery of posses- 
 sion does in case of a pledge of corporeal property. 
 
 * Wilson vs. Little, 2 X. Y. 446.
 
 148 The Law of Pledge. 
 
 The transfer of the title, like the deUvery of pos^eu 
 sion, constitutes the evidence of the pledgee's right oi 
 property in the thing pledged." ^'' 
 
 172. But in these two cases, in which the pledge 
 was of stocks, there were the muniments of title, the 
 certificates of shares, and the language of the Court 
 was therefore broader than the point there at issue 
 demanded. The question can not be considered by 
 an}^ means as satisfactorily decided. Yet it would 
 seem as if the mere written transfer of a right, with- 
 out the muniments of title when none exist, would be 
 in the Common law States a suflScient delivery of 
 possession to uphold the contract of pledge. 
 
 ♦Brewster vs. Hartley, 37 Cal. 25.
 
 CHAPTER XII. 
 
 173. In the Civil law, the possession of the pledgee 
 being precarious^ as he does not possess as owner of 
 the thing, but merely as a contractual detainer of 
 another person's propert}', he never can acquire by 
 occupation, or usucapio^ through the longest prescrip- 
 tion, or statute of limitations, the ownership of the 
 thing pledged. But he has against the pledgeor the 
 correlative ris^ht, that his claim is not extins^uished bv 
 the longest prescription which discharges a debt, 
 because the thing pledged, remaining in the hands of 
 the creditor, is a continuous acknowledgment of the 
 debt by the pledgeor, which stops the course of pre- 
 scription. 
 
 The first of these two principles is enacted in an 
 article of the Civil Code of Louisiana. 
 
 The second principle is firmly established by juris- 
 prudence founded upon the Roman law. 
 
 The article of the Louisiana Code is in these words : 
 " The creditor can not acquire the pledge by prescrip- 
 tion, whatever maybe the time of his possession."* 
 
 The Code Napoleon contains no such provision, 
 presumably because the principle is not absolute in 
 France, either as to the prescript io acquirendi causa ^ 
 in favor of the pledgee, or as to the prescriptio liber- 
 andi causa in favor of the pledgeor. The French 
 
 * Civil Code of Louisiana, Art. 3175. 
 
 149
 
 150 The Law of Pledge. 
 
 jurisprudence is meagre on this subject, and the law 
 writers are divided in their exposition of the doctrine. 
 The substance of their discussions amounts to this, 
 that as long as the debt is not paid, whatever may be 
 the length of time that the pledgee has had the pledge 
 in his possession, inasmuch as he possesses -precari- 
 ously in the name of the pledgeor, he can not acquire 
 the ownership of the tiling. The rule is acknowledged 
 by all the French commentators. But, after the debt 
 has been paid, if the pledgeor leaves his property in 
 the hands of the pledgee, the latter then possesses no 
 longer as such, and not even as a depositary, but sim- 
 pl}' as an ordinary possessor, according to some of the 
 most distinguished writers ; and from that moment 
 the -prescriptio acqiiirendi causa begins to run in his 
 favor, and the prescriptio liberandi causa against the 
 pledgeor, who is creditor of the claim against the 
 pledgee for the restitution of the pledge ; and b}' 
 the prescription of thirty years under the French 
 law, the pledgee acquires the ownership of the thing, 
 and the pledgeor is debarred of the right of demand- 
 ing the restitution of it. Such is the opinion of Du- 
 ranton, of Troplong, of Baudry-Lacantinerie, of 
 Laurent, of Aubry et Rau, and of Pont. * 
 
 174. The two prescriptions, acquirendi causa and 
 liberandi causa, are blended in one article of the Code 
 
 *Duranton, Droit Civil, Nantissement, Vol. 18, Sees. 551, 552, 553. 
 Troplong, Xantissement, Sees. 476, 477. 
 Baudry-Lacantinerie. Xantissement, Sees. 93. 142. 
 Laurent, Nantissement, Sees. 417 and 525. 
 Aubry et Rau, Vol. 4, p. 714, Sec. 435. 
 Pont, Connaissement. Sec. 1166.
 
 Delivery and Possession op the Pledge. 151 
 
 Napoleon, for the prescription of thirty years, or 
 rather, the Code Napoleon contains no provision for 
 the prescription acquirendi causa of thirty years 
 directly as it does for the prescription of ten years, 
 but obtains the same object indirectly by providing 
 that all real actions — that is, actions to claim property, 
 movable or immovable, are prescribed by thirty years. 
 The possessor of thirty years, therefore, acquires the 
 ownership of property by tisucapio^ inasmuch as all 
 actions to impugn his rights of possession and occu- 
 pancy are barred. 
 
 The article of the Napoleon Code is in these words : 
 ^ ' All actions, as ivell the real ones as the personal ones^ 
 are prescribed by thirty years, and the party who 
 pleads that prescription is not obliged to show any 
 title^ nor can the exception of bad faith be opposed to 
 im. " 
 
 175. The Code of Louisiana, on the contrary, provides 
 specifically for the acquisition of property by the pre- 
 scriptio acquirendi causa. It enacts that: "The 
 ownership of immovables is prescribed for by thirty 
 years, without need of title or possession in good 
 faith." And, also: " When the possessor of any 
 movable whatever has possessed it for ten 3'ears with- 
 out interruption, he shall acquire the ownership of it, 
 without being obliged to produce a title, or to prove 
 that he did not act in bad faith." f 
 
 176. But a very serious and interesting question 
 
 * Code ISTapoleon, Art. 2262. 
 
 t Civil Code of Louisiana, Arts. 3499 and 3509.
 
 152 The Law of Pledge. 
 
 on this subject has occupied the commentators 
 of the Napoleon Code and divided them. The 
 action of the pledgeor against the pledgee for 
 the restitutio7i o^ the thing pledged being pre- 
 scribed by thirty years from the time that 
 the debt was paid, an a, as in consequence thereof the 
 pledgee was no longer in precarious possession as 
 such, can the pledgeor still claim his property from 
 the former pledgee if it is still in his hands, b}' virtue of 
 the action of revendication, which is not prescriptible 
 by any length of time, because it is brought against a 
 precarious possessor who can not plead an}' prescrip- 
 tion at all? 
 
 177. Pont is of the opinion that this last re- 
 source is still available to the pledgeor. He says : 
 '' But there remains 3'et to the debtor the action in 
 revendication as long as the pledge is still in the hands 
 of the creditor, if, notwithstanding the payment of the 
 debt, he has not ceased to possess the thing ; and as 
 to that action, it is imprescriptible on account of the 
 character of the possession." * 
 
 178. Baudr^'-Lacantinerie, after considering both 
 sides of the question, sa3?s that he inclines toward 
 the theory which allows the revendication of the 
 pledgeor. f 
 
 179. Duranton ignores the doctrine of the change 
 in the character of the pledgee's possession by the 
 fact of payment of the debt, and therefore considering 
 
 ' Pont. Xantissement, Sec. 1166. 
 
 t Baudry-Lacantinerie, Nantissement, Sec. 93.
 
 Delivery and Possession op the Pledge. 1.33 
 
 the possession as still precarious, recognizes the right 
 of the pledgeor to the action in revendication. * 
 
 780. Laurent is strongly opposed to the right of 
 revendication, which, he says, does uot exist in the 
 premises, as the possession of the pledgee is no longer 
 precarious after pa3aiient of the debt, and he can, 
 therefore, plead the prescription of thirty }ears.t 
 
 181. The importance of the question is less of a 
 practical ttian doctrinal nature, for the case would 
 rarely present itself in France, no debtor being likely 
 to leave his property in the hands of his creditor 
 during thirty years after paying the debt for which the 
 pledge was given. 
 
 182. Could the same question be raised in Louis- 
 iana, where the law provides that the creditor can not 
 acquire t\\Q pledge by prescription, whatever may be 
 the time of his possession.^ After the pledgee is paid, 
 he is nolongera creditor j and the thing leftinhis hands 
 by the debtor is no longer a pledge. It would seem 
 that the reasoning of the French commentators would 
 be equally applicable to the law of Louisiana. The 
 point does not appear to have presented itself in that 
 State ; but such a case is more likely to arise there, as 
 the prescription for the ownership of movables is only 
 of ten years. 
 
 183. As long as the pledge remains in the hands of 
 the creditor, the debt which he secures can not be 
 extinguished by prescription, because the pledge, in 
 
 * Duranton, aSTantissement, Sec. 552. 
 t Laurent, Nantissement, Sec. 525.
 
 154 The Law of Pledge. 
 
 that case, is an acknowledgment of the existence of 
 the debt, which produces a continuous interruption of 
 the course of prescription. The acknowledgment of 
 the debt by the debtor is one of the modes by which 
 prescription is interrupted. By leaving the thing 
 pledged in the possession of the creditor, the pledgee 
 is presumed not to have been able to withdraw it for 
 want of payment, and he, therefore, tacitly acknowl- 
 edges that the debt is unpaid and is still due. This 
 principle was part of the Roman law, and is now part 
 of the modern Civil law. With one exception, that 
 of Colmet de Santerre, all the French commentators 
 agree upon the subject. And, in the jurisprudence of 
 the State of Louisiana, the rule has become axiomatic. 
 In a recent case, the Court of that State said : " The 
 proposition advanced by plaintiff, that prescription 
 docs not run during the existence of the pledge, is 
 indeed too firmly established to be attacked."*. 
 
 Mr. Pont says, in that respect: " The debtor who 
 leaves the thing pledged in the hands of the creditor 
 acknowledges by that fact, and in a continuous 
 manner, both his obligation and the right of the 
 creditor, "f 
 
 * Conger vs. Xew Orleans, 32 La. An. 1253. 
 
 Wilson vs. Bannen, 1 Rob. (La.) 556. 
 
 Citizens Bank vs. Knapp, 22 La. An. 107. 
 
 Blanc vs. Hertzog, 23 La. An. 190. 
 t Pont, Xantissement, Sec. 1107. 
 
 Troplong, Nantissement, See. 474. 
 
 Duranton, >Jantissement, Sec. 553. 
 
 Aubry etEau, Vol. 3, p. 520. 
 
 Bairiry-Lacantinerie, Nantissement, Sec. 102. 
 
 Marcade, Prescription, p. 14G. 
 
 Codex, Lex 7, Sec. 5, De Prescript. 
 
 Colmet de Santerre, VlII, Sec. 312.
 
 CHAPTER XIII. 
 
 184. The Common law differs altogether in the 
 matter of prescription, or the statute of limitations, as 
 applicable to the contract of pledge, from the Civil 
 law. Under the rules of the Common law there is no 
 limitation to the right of the pledgeor to demand and 
 recover the thing pledged on payment of the debt ; in 
 other words, the right to redeem the pledge is never 
 barred by any lapse of time ; or, in other words again, 
 there is no prescription acquirendi causa in favor of 
 the pledgee. The special property remains in him as 
 long as he detains the pledge, but the absolute prop- 
 erty, or ownership, never passes to him without fore- 
 closure or transfer and by the mere effect of time, 
 even- when the term of payment was stipulated in the 
 contract. Such is Judge Story's statement of the prin- 
 ciple of the Common law on this subject. But after 
 saying that "prescription, or the statute of limitations, 
 does not run against it" (the pledgeor' s right to re- 
 deem), he adds: "However, after a long lapse of 
 time, if no claim for a redemption is made, the right 
 will be deemed to be extinguished ; and the property 
 will be held to belong absolutely to the pawnee. 
 Under such circumstances a Court of Equity will de- 
 cline to entertain any suit for the purpose of a re- 
 demption."* 
 
 * Story, on Bailments. Sec. 34G. 
 
 155
 
 156 The Law of Pledge. 
 
 185. The more modern jurisprudence of the Com- 
 mon law does not seem to have made much progress 
 in that direction, and the later writers do not throw 
 more light on the subject. Mr. Jones repeats, in sub- 
 stance, the rather indetinite doctrine of Judge Stor}', 
 that after a long lapse of time without any claim on 
 the part of the pledgeor to redeem, his right might be 
 deemed to be extinguished and the title absolute in the 
 pledgee.* 
 
 And Mr. Schouler tells us that, strictly speak- 
 mg, the statute of limitations does not run against a 
 pledge ; but inasmuch as it runs against a pledgee's 
 enforcement of the secured debt or engagement, so 
 will equity decline to entertain the pledgeor's bill for 
 redemption, if he or his representatives bring it 
 unreasonably late* for the property will then be con- 
 clusively presumed to have vested in the pledgee. f 
 
 186. What measure or standard of measure has the 
 Court of Equity to fix the lapse of time which will bar 
 the pledgeor in the absence of legislative limitations.^ 
 Will not the decision be an arbitrary one, depending 
 upon the peculiar idiosyncrasy of the chancellor, 
 however disposed he may be to do justice in the 
 premises.^ 
 
 Well has Mr. Schouler remarked in closing the chap- 
 ter of his Book on Pledge : " This whole doctrine of 
 pledge is one which has unevenly developed at the 
 Common law ; and our rules are frequently derived 
 
 * .fones, on Pledges, Sec. 581. 
 t .Schouler, on Bailments, p. 225.
 
 Delivery and Possession of the Pledge. 157 
 
 from the Roman law of pledge, which, however, in 
 many points differs from our own ; or else we borrow 
 from the analogies of the chattel mortgage." * 
 
 It is worthy of note in connection with this remark 
 of Mr. Schouler, that Judge Story^ in his treatise on 
 Pledge, cites oftener in support of his views Pothier 
 and Domat, the great Civilians, than the Common law 
 authorities. 
 
 1 87. The Common law differs also completely from 
 the Civil law on the question of the extinguishment 
 by prescription, or the statute of limitations, of the 
 debt secured by the pledge, whilst the thing pledged 
 remains in the hands of the pledgee. What is the 
 rule at Common law in this respect would be a legal 
 anomaly in the Civil law, first, as to the pledge re- 
 maining in existence after the debt is barred by the 
 limitation, and, secondlv, as to the debt running out 
 of existence, also by limitation, whilst the pledge is 
 alive in the hands of the pledgee. 
 
 188. The fundamental principle of the law of con- 
 tracts in the Civil law, and particularly of the pledge, 
 mortgage and suretyship, is that these three contracts 
 being merely accessory to a principal contract, cease 
 to exist when the latter ceases to exist. They are in- 
 tended to secure the payment of an obligation ; when 
 that obligation goes out of existence by payment or 
 for any other reason, the accessory contract necessa- 
 rily goes out of existence also ; it dies with the cause 
 for which it was created ; it has no longer any office 
 
 * Schouler, on Bailments, p. 233.
 
 158 The Law of Pledge. 
 
 to fulfil and therefore no reason to be. The principle 
 is derived from the Roman law, Cunt causa ■princi- 
 palis lion consistet^ ne eaqiiidemqiice sequtinttir locum 
 liabent. * 
 
 At Common law the debt may be barred by the 
 statute of limitations, but the pledge remains alive in 
 the hands of the creditor and his lien upon it survives 
 the personal obligation of the debtor. In the words 
 of the Court of Massachusetts : " The pledgeor might 
 avail himself of the statute of limitations as a defence 
 to a suit upon the note. But the statute affects merely 
 the remedy on the note, and does not, on the one 
 hand, defeat the lien of the pledge upon the property 
 pledged, nor, on the other, enlarge that lien to an 
 absolute title to the property." f 
 
 In that case it was contended by the pledgeor that 
 the note representing the debt secured, being out- 
 lawed by the statute of limitations, the pledgee, who 
 had received after the note was barred the amount of 
 the bonds pledged., should account for them in full. 
 The Couit held on the contrary that the pledge still 
 subsisting, according to the principle stated above, 
 after the right to sue on the debt was barred, the 
 
 * Pothier, Des Obligations, Sec. 367. 
 
 Civil Code of Louisiana, Arts. 3137, 313S. 
 
 Code Napoleon, Art. 2012. 
 t Hancock vs. Franklin Insurance Company, 114 Mass. 156. 
 
 Siaw^ vs. Silloway, 145 Mass. 503. 
 
 Lewis vs. Hawkins, 23 Wall. 119. 
 
 Hardin vs. Boyd, 118 U. S. 756. 
 
 Joy vs. Adams, 26 Me. 330. 
 
 Belknap vs. Gleason, 11 Conn. 160. 
 
 Coldcleugh vs. Johnson, 34 Ark. 312. 
 
 Hulbert vs. Clark et al., 128 X. Y. 295.
 
 Delivery and Possession of the Pledge. 159 
 
 pledgee could set off the amount due him and was 
 only compelled to return the surplus to the pledgeor. 
 
 190. Mr. Jones adopts the doctrine declared by the 
 Court of Massachusetts; and repeats after it, that the 
 statute affects merely the personal remedy against the 
 pledgeor, and does not either defeat the pledge and 
 the lien it creates, or enlarge that lien to an absolute 
 title to the property. 
 
 And the same writer continues the statement of the 
 rule, and sa3^s that, on the other hand, a debtor can 
 not by reason of his debt becoming barred by the 
 statute recover back the security pledged ; that nothing 
 short of payment or tender of the debt will discharge 
 the lien and entitle the debtor to its return ; and that 
 the statute of limitations does not extinguish the debt, 
 but only the remedy to enforce it.* 
 
 191. Judge Story seeks his way, on this subject, 
 by meandering between the Common and the Civil 
 law, showing his ordinary partiality to the latter. He 
 treats the question hypotheticall}^ and says : 
 
 " If the right to the debt is barred by prescription, 
 it is said in the Civil law, that the right to the pledge 
 is gone also. This would be true in the Common 
 law also, when from the length of time there arises a 
 prescription of the payment of the debt. But, it there 
 is merely a positive bar by the statute of limitations 
 
 * Jones, on Pledges, Sec. 5S1 and 582. 
 Lawson, on Bailments, Sec. 70, No. 5. 
 Am. and Eng. Ency. of Law, Verba Pledge, p. 734. 
 •fones, on Mortgages, Sec. 1204 et seq. 
 Edwards, on Bailments, Sees. 249 and. 323. 
 Chitty, on Contracts, 4th Am. Edition, p. 427. 
 Parsons, on Contracts, 6th Edition, p. 108.
 
 160 The Law of Pledge. 
 
 against a personal action for the debt, it may deserve 
 consideration, how far this will oust the party of his 
 right to retain the pledge toward satisfaction of the 
 debt : for the possession of the pledge may be the 
 very reason wh}- the pledgee has omitted to bring a 
 personal suit for the debt within the prescribed time. 
 The pledger is not ordinarily barred of his right to 
 redeem the pledge, so long as the pledgee may be 
 presumed to hold it as a pledge. And the continued 
 possession of the pledgee, under such circumstances, 
 affords proof of the non-extinguishment of the debt, 
 although the statute of limitations may present a bar 
 to a mere personal action. On the other hand, if a 
 very long period has elapsed, and the pledge has con- 
 tinued in the possession of the pledgee, it affords a 
 presumption of an abandonment of it b}- the pledger, 
 and if any presumption of an extinguishment arises 
 in such a case, it is an extinguishment by receiving the 
 pledge in satisfaction. If, then, the statute of limi- 
 tations has run against the debt, as a personal claim, 
 and the pledger seeks to recover back the pledge, 
 why mav not the pledgee avail himself of the pro- 
 tection of the same statute to bar such suit.^ 
 And if the pledger insists that it is still a 
 pledge, why may not the other part}' avail himself 
 of all the fair presumptions arising in the case, that 
 the debt has not been in fact paid, or that the pledge 
 has been deemed a satisfaction of it.-* Some of the 
 adjudged cases seem silently to admit the existence of 
 a right in the pledgee over the pledge notwithstand- 
 ing the lapse of a period exceeding that of the statute
 
 Delivery and Possession of the Pledge. TGI 
 
 of limitations for personal recoveries. This however 
 must be considered, in the absence of direct authorit}-, 
 as a point merely propounded for further considera- 
 tion. But if the pledger admits the existence of a 
 debt, and brings a bill to redeem, he can do so only 
 upon payment of the debt, although the statute of lim- 
 itations might otherwise be pleaded as a bar to it."* 
 
 192. The doubt thus expressed by Judge Story as 
 to the continued existence of the pledge when the 
 personal right of action on the debt is barred by the 
 statute of limitations, has been solved by the subse- 
 quent adjudications, as we have seen. 
 
 193. However different the Civil and the Common 
 law are on this point, they each have their logic and 
 their rationale^ and the difference comes from the 
 difference in their law of prescription, or limitation. 
 The Civil law prescription libera?idi causa is based 
 upon the presumption of payment. The presump- 
 tion is juris et de jure. It is not rebuttable by proof 
 to the contrary. The law presuming pa3'ment ex- 
 tinguishes the debt itself. It does not merely destroy 
 the right of suing upon it. There being no principal 
 obligation left, when the debt is prescribed, clearly the 
 pledge, the only purpose of which was to secure the 
 obligation, can not outlive it and must go with it. f 
 
 *Sforj', on Bailments, Sec. 362. 
 
 t Doniat, 2 Vol., I)es Prescriptions, p. 208. 
 
 Pothier, Des Obligations, 2 Vol., pp. 149, 15(3. 
 
 Marcade, Prescription, p. 178. 
 
 Troplong, Prescription, 2 Vol., pp. 387 et seq. 
 
 Laurent, Prescription, Sec. 372. 
 
 Code Napoleon, Art. 2262. 
 
 Civil Code of Louisiana, Arts. 3528, 3530. 
 
 Brown vs. Insurance Co., 3 La. An. 183.
 
 1G2 The Law of Pledge, 
 
 The statute of limitations, on the contrary, only takes 
 away from the creditor the right and the power to sue 
 his debtor for payment of the debt. The debtor is 
 personally put beyond the reach of his creditor so far 
 as suit and judgment against him are concerned. But 
 the obligation itself is not extinguished, because the 
 statute is not based upon a presumption of payment, 
 and does not discharge the debt. Both the Civil law 
 and the Common law statutes are statutes of repose 
 in this, that they are intended to quiet persons and 
 settle titles ; but their reasons are not the same and 
 their effects are not the same. The Civil law remedy 
 goes much farther than that of the Common law. 
 
 194. As to the principle of the law of contract, 
 that the accessory falls with the principal, and that the 
 pledge, mortgage or suretyship falls with the princi- 
 pal obligation which it secures, there can be no differ- 
 ence between the two great S3-stems of law, because 
 both are founded upon the same rules of reason. It 
 is clear, therefore, that, at Common law as well as in 
 the Civil law, when the debt secured is absolutelv ex- 
 tinguished, either by pa3'ment or otherwise, the pledge 
 itself is extinguished, and the pledgee is bound to return 
 the thing pledged. On this point. Judge Story is posi- 
 tive. ''So, whatever by operation of law extinguishes 
 the debt, extinguishes the right to the pledge. There- 
 fore, if in a suit for the debt the pledger has a judg- 
 ment in his favor, which bars anv future recovery of 
 the debt, that extinguishes the right to the pledge.''* 
 
 * Story, on Bailments, Sec. 361. 
 Schouler, on Bailments, p. 233. 
 Edwards, on Bailments. Sec. 309.
 
 Delivery and Possession of the Pledge. 163 
 
 195. We must now consider the further difference 
 between the Civil and Common law as to the lesral 
 consequence of the thing pledged remaining in the 
 hands of the pledgee after the debt secured has matured 
 and been unpaid, and the effect of this fact on the pre- 
 scription of the obligation. We have already seen 
 before, that in the Civil law the presence of the pledge 
 in the hands of the pledgee is an acknowledgment by 
 the pledgeor that the debt is not paid, sufficient to 
 produce a continuous interruption of the prescription.* 
 
 196. It is not so at Common law. There, the con- 
 tinued possession of the pledgee does not interrupt or 
 2:0 counter to the bar of the statute of limitations. The 
 reason of this is that, in order to take the case out of 
 the statute, there must be a new promise on the part 
 of the debtor to pay the old debt, or at all events an 
 acknowledgment which is equivalent and amounts to 
 a new promise. And such acknowledgment or new 
 promise must be in writing and must be expressed 
 and positively declaratory of the intention of the debtor 
 to pay the debt. Such was the law of England under 
 the statute 9 George IV, C. 14 ; and a similar require- 
 ment is made in most of the States of the Union. f 
 
 It is evident that these conditions necessary to 
 remove the bar of the statute of limitations do not 
 exist by the mere possession of the pledgee after the 
 maturity of the debt. J 
 
 * Ante, Sec. 183. 
 
 t Parsons, on Contracts, Vol. 3, 6th edit., p. 73. 
 
 Chirtj', on Contracts, 4th Am, edit., p. 639. 
 X Edwards, on Bailments, Sec. 32:-5.
 
 164 The Law of Pledge. 
 
 197. By the Civil law, the bar being based on the 
 presumption of payment, any acknowledgment, express 
 or tacit, from the debtor that the debt is not paid is 
 sufficient to interrupt the course of prescription. The 
 acknowledgment may not be accompanied by a prom- 
 ise or even an intention to pav the debt. 
 
 198. By the Common law the bar being entirelv a 
 statute of repose, intended to relieve the debtor 
 whether the debt is paid or not, and, therefore, not 
 based upon the presumption of payment, the acknowl- 
 edgment of the existence of the debt, whether express 
 or tacit, unless it contains the intention to pay, pro- 
 duces no effect asfainst the course of the statute.
 
 CHAPTER XIV. 
 Rights and Obligations of the Pledgee. 
 
 199. The contract of pledge is an accessory one, as 
 it only takes place to secure a principal obligation ; 
 but it is at the same time what the Civilians call a 
 unilateral contract ; that is, a contract in which one 
 part}'^ alone binds himself to the performance of the 
 obligation. In the contract of pledge, it is the pledgee 
 who binds himself ; the pledgeor does not. The 
 latter is already bound to the payment of his debt ; 
 but he does not bind himself any more or further in 
 securing it by the pledge ; he only binds his prop- 
 erty, the thing pledged ; he incurs no additional per- 
 sonal obligation. It is the pledgee who binds himself 
 to return the pledge on payment of his claim, and, in 
 the meantime, to take proper care of it. Such is the 
 opinion of Laurent.* 
 
 But Pothier, Troplong, Baudry-Lacantinerie, and 
 generally the other French law writers, do not agree 
 with Laurent on this point, and think that the con- 
 tract of pledge is an imperfect synallagmatic contract, 
 because the pledgeor is also interested in it to the ex- 
 tent of obtaining credit, and is bound by. the obliga- 
 tion of refunding to the pledgee the necessary expenses 
 for the preservation of the thing pledged, like the de- 
 
 * Laurent. Xantissemeat, Sec. 487. 
 
 165
 
 166 The Law of Pledge. 
 
 positor in the contract of deposit. * The question is, 
 at all events, purely doctrinal and of no practical im- 
 portance. 
 
 200. The pledgee has, therefore, duties and obliga- 
 tions as well as rights in the contract of pledge. Let 
 us see what those rights and those obligations are. 
 
 The object of the pledge is to secure the creditor 
 and to give him a right of priority and preference 
 over the other creditors of the pledgeor in the pro- 
 ceeds of the thing pledged. This privilege or prefer- 
 ence is therefore the first right of the pledgee. But 
 he has it against those other creditors only if he has 
 possession of the pledge, and under the rule of the 
 Civil law, when a written act of pledge is necessary, 
 only if such act has been passed and recorded. This 
 lien, called -privilege by the Civilians, is a real right, 
 which does not result from the nature of the debt, as 
 privileges generally do, but arises from the contract of 
 pledge itself and the fact of delivery and possession 
 combined. Moreover, it is not, as in the Common law 
 mortgage, a right of property in the thing pledged, 
 but only a right of preference in its proceeds. 
 
 Between the pledgee and the other creditors, pos- 
 session, and the written act in the Civil law countries 
 except in commercial pledges, are indispensable to 
 create the lien or privilege ; but not so between 
 the pledgee and pledgeor. As to them the mere 
 
 * Pothier, Xantisseiiient, Sees. 14, 15. 
 Troplong, Nantissement, Sees. 31, 32. 
 Baudrv-Laeaiitinerie, Xantissement, Sec. 7. 
 Pout, is'antissement, Sec. 1067.
 
 Rights and Obligations of the Pledgee. 167 
 
 agreement makes a valid pledge if accompanied 
 by delivery. If the pledgee has been put in pos- 
 session, he may retain it until he is paid ; if he 
 has not been put in possession, he has an action 
 to compel the debtor to comply with the terms of the 
 agreement and to deliver the pledge. But this has 
 been considered and declared to be a promise of 
 pledge, but not a pledge. The promise is enforceable 
 by law, either by specific performance, or by a claim 
 for damages ; but the creditor has no lien or right of 
 preference in the meantime on the thing which 
 formed the subject of the promise of pledge. 
 
 The constitutive elements of the contract of pledge 
 being the same in the Civil and in the Common law, 
 the two systems are in harmony upon this point.* 
 
 201. Yet, the promise to affect some specific prop- 
 erty to the payment of a specific debt may give to the 
 creditor a right to an equitable lien under the rules of 
 the Common law. Such equitable lien is unknown to 
 the Civil law. This will be the subject of a subse- 
 quent chapter. 
 
 202. The thing -pledged being -put in the possession 
 of the pledgee, is in his hands in the nature of a 
 deposit. He must take care of it and preserve it as a 
 depositary must do of the thing deposited. Has he 
 the riffht to make use of it? Here the Civil law and 
 
 Troplong, Nantissement, Sees. 2, 237. 
 
 Jones, on Pledges, Sees. 27, 28, 29. 
 
 Succession of D'Meza, 26 La. An. 35. 
 
 Baudry-Lacantinerie, Nantissement, Sec. 7. 
 
 Pothier, Nantissement, See. 9. 
 
 Am. and Eng. Encyc. of Law, Pledge, p. 596, Notes.
 
 168 The Law of Pledge. 
 
 the Common law disagree. On principle, and under 
 the unanimous authorit}- of the Civilians, we should 
 say that the pledgee has no more right to use the 
 pledge than the depositary has the right to make use 
 of the thing deposited. 
 
 203. The French Code provides that: " Until the 
 expropriation of the debtor, if it take place^ he 
 remains the owner of the thing pledged^ which is in 
 the hands of the creditor only a deposit securing the 
 privilege of the latter."'"^ 
 
 The Code of Louisiana contains the same provision 
 and in the same words. f 
 
 Laurent, on this point, remarks very conclusively : 
 " If the law says that the pledgee only has the thing 
 on deposit, it is to show that he can not make use of 
 it though it is in his possession. In this respect, the 
 right of the pledgee differs from the other real rights 
 which are accompanied by possession : usufruct, servi- 
 tude (easements), emphyteusis, superficies, give a 
 right in the thing which implies the facult)^ to use and 
 enjo}^ it. If it is otherwise with the pledgee, it is 
 because his possession has only one object, and that 
 is to guarantee the payment of his debt."";;!] 
 
 204. Troplong says on this subject, commenting 
 upon the same article of the Code Napoleon, which 
 assimilates the pledgee to a depositary as to the pos- 
 session of the thing: "If he (the pledgee) possess 
 the thing, it is onh' for a restricted and limited purpose, 
 
 * Code Napoleon, Art. 2079. 
 t Civil Code of Louisiana, Art. 3160. 
 1 Laurent, Nantissement, Sec. 493. 
 F. Herman, Code Civil. Art. 2079. No. n.
 
 Rights and Obligations of the Pledgee. 169 
 
 and that is only to secure his right of preference. His 
 possession is precarious ; it only gives him the right 
 to keep, retain and preserve the thing. It follows 
 hence that he can not make use of it." And he cites 
 the Institutes of Justinian: Si creditor -pignore lUa- 
 tur, furtum comtnittit* 
 
 But Troplong is very positive also that the pledgee 
 may subpledge to his own creditor for commercial 
 -pur-poses and in commercial trajisactions^ as we will 
 see later on. 
 
 205. It is evident that if the object of the law in 
 placing the pledgee in possession of the pledge is only 
 to secure his lien and to protect third persons against 
 deception and fraud, he has no right to use the thing 
 for his own pleasure or benefit without the consent of 
 the pledgeor. Such use is undoubtedly an abuse of 
 his right of possession. It is violative of the spirit 
 and nature of his contract. It is a breach of trust in 
 realit}'. Any other doctrine on this point is a depart- 
 ure from the true principles of the law of pledge. In 
 reality, if the pledgee makes use of the thing pledged 
 for his own advantage he is combining the effects of 
 the contract of pledge and those of the contract of loan, 
 and for this there is no warrant of law whatever. 
 
 206. Baudry-Lacantinerie is equally of opinion that 
 the law, in placing the pledge in the hands of the 
 debtor, has had in view, it is true, to secure his right of 
 priority and preference ; but that it is the only advan- 
 tage that he is entitled to, and that, in reality, the law 
 
 * Troplong, Nantissement, Sees. 420, 421.
 
 170 The Law of Pledge. 
 
 has intended in dispossessing the pledgeor rather to 
 protect third persons than to favor the pledgee, and 
 he adds : " From the principle enacted in Art. 2079, 
 as we have shown it, it results that the pledgee can 
 neither make use of the thing pledged, nor have the 
 enjoyment of it, nor receive any profit from it, with- 
 out the consent express or tacit of the pledgeor. * 
 
 The same views on this point are entertained by all 
 the commentators of the French Code and expound- 
 ers of the Roman law^ its source and origin. f 
 
 This principle prevails also generally in the coun- 
 tries of continental Europe, which derived it from the 
 Roman law. J 
 
 207. The principle that the pledgee has no right to 
 use the pledge for his own purposes is so well estab- 
 lished in the modern Civil law that in the pledge of 
 negotiable paper, such as bonds payable to bearer, he 
 is bound to return to the pledgeor, on payment of the 
 debt, the identical bonds pledged, and can not, unless 
 by agreement, substitute to them other bonds of same 
 quality, value and kind. And, if it is agreed between 
 pledgeor and pledgee that the latter shall have such 
 right, the Civilians consider the convention perfectly 
 valid, but that it is no longer a pledge, inasmuch as, 
 in the nature of this contract, the identical thing 
 pledged must be returned if the pledge is redeemed. 
 Yet it seems customary, in commercial or financial 
 
 * Baudry-Lacantinerie, Xantissement, Sec. 90. 
 t Duranton, Nantissement, Sec. 543. 
 
 Font, Nantissement, Sec. 1165. 
 
 Pothier, Nantissement, p. 250. 
 X De St. Joseph, Concordance Des Codes Civils, p. 109.
 
 Rights and Obligations of the Pledgee. 171 
 
 dealings, for bankers who take on pledge such negoti- 
 able paper, to consider themselves the owners thereof, 
 in this sense, that they have the right to dispose of 
 them and owe the pledgees only paper or bonds of the 
 same kind in return."^ 
 
 208. Such contention is well founded even in coun- 
 tries of the Civil law, if it is shown that the cus- 
 tom of the locality is so well established that the 
 pledgeor is presumed to have acted under it, and 
 thereby agreed to it. A memorable instance of this 
 contention arose in France in the case of the banker 
 Mires. The corporation of which he was the managing 
 director loaned money on the pledge of stock. He sold 
 the stock at a time when it had arisen in the market 
 and accounted to the pledgees for the proceeds, pretend- 
 ing that it had been sold when depreciated. He was 
 prosecuted for breach of trust and larceny, and was 
 sued also in a civil action for damages. His defence 
 was mainly that, b}- the terms of the pledge, as tacitly 
 understood between the parties, he was only bound 
 to return to the pledgeor stock of the same kind, value 
 and quantity, which he was willing to do. He sup- 
 ported his defence by the fact that the receipt given to 
 the pledgeor for the stock only designated and de- 
 scribed the stock as such^ but did not give the numbers 
 of the shares, or identify them individually in any man- 
 ner. He contended further that he acted, in selling 
 the stock, under a well-established custom of bankers 
 in similar circumstances. The Courts held that the 
 
 Laurent, Du Gage, Sec. 494.
 
 172 The Law of Pledge. 
 
 pledgeors could not be bound by a custom of which 
 they had no knowledge ; and that, even if the custom 
 did exist, as claimed by Mir^s^ it would be no warrant 
 or defence for committing a fraud. The Criminal 
 Court of the first instance convicted him. He appealed 
 to the liigher court, which confirmed the judgment. 
 On a further appeal to the Court of Cassation the 
 judgment was reversed for want of form, and the case 
 remanded to the Court of the first appeal. The 
 original judginent of conviction was then reversed. 
 The Minister of Justice, considering the matter as of 
 the greatest public order and interest, ordered that 
 the case be carried to the Court of Cassation. There 
 the guilt of Mires was finallv decreed, and he was sen- 
 tenced to fiv^e years' imprisonment That judgment 
 was the highest consecration of the principle of the 
 modern Civil law that the pledgee has no right to 
 make use of the pledge without the consent of the 
 pledgeor.'" 
 
 209. There are exceptions to this rule, and there 
 are certain cases in which the use of the thing pledged 
 is legitimate and implied in the contract, such as in 
 the pledge of working cattle, but in such cases the 
 pledgee must account for the use or services of the 
 cattle and credit the pledgeor with the same. The 
 like rule applied to the pledge of slaves in the Roman 
 law.f 
 
 The pledge of a horse authorizes, na}-, compels the 
 
 * Laurent. Du Gage. Sec. 494. 
 
 Journal du Palais, 1862, p. 785. 
 t Troplong. Xantissement, See. 420 p,t seq.
 
 Rights and Obligations of the Pledgee. 173 
 
 pledgee to use him for the purpose of exercise, with- 
 out which he would suffer and possibly die. This rule 
 is the same in the Civil and the Common law.* 
 
 2IO. There is also an exception to the principle that 
 the pledgee can not make use of the thing pledged, 
 when that thins; is a claim or chose in action bearintj 
 interest, or stock on which dividends are declared. 
 The pledgee is entitled to the interest or dividends, 
 but he should also in such cases credit the pledgeor 
 with the amounts thus received by him. This rule is 
 also common to the Civil and Common law.f 
 
 2 11. The Code of Louisiana provides for the right 
 of the pledgee to receive the fruits of the pledge, but 
 he must account for them or deduct them from his 
 claims. "The. fruits of the pledge are deemed to 
 make part of it, and therefore thev remain, like the 
 pledge, in the hands of the creditor ; but he can not 
 appropriate them to his own use. He is bound, on 
 the contrary-, to give an account of them to the debtor, 
 or to deduct them from what may be due to him.'' J 
 
 This is not properly expressed, for the pledgee does 
 appropriate the fruits to his own use when he deducts 
 them from what is due him. 
 
 The next article provides for that. " If it is a credit 
 which has been given in pledge, and if this credit 
 
 * Story, on Bailments, Sec. 89. 
 
 Jones, on Pledges, Sees. 81. 82. 
 t Laurent, Droit Civil. Vol. 28, Sec. 490. 
 
 Pothier, Nantissement, Sec. 24. 
 
 Merlin, Rep., verbo Gage. 
 
 Am. and Eng. Ency. of Law. Vol. IS, p. 703. 
 
 .Fones, on Pledges, Sec. 398. 
 X Civil Code of Louisiana, Art. 31 GS.
 
 174 The Law of Pledge. 
 
 brings interest, the creditor shall deduct this interest 
 from those which may be due him ; but if the debt, 
 for the securit}' of which the claim has been given, 
 brings no interest itself, the deduction shall be made 
 on the principal of the debt/' ^' 
 
 This article is taken from the Napoleon Code.f 
 The previous one is not ; but the principle exists in 
 the French law and is derived also from the Roman 
 law. t It is evident that the fruits of the thing pledged 
 can not belong to the pledgee, if the}^ are natural fruits, 
 for the reason that the thing is put in his hands only 
 to secure his debt and not to benefit him in any other 
 way. If the fruits are the interest of a debt or the 
 dividends of corporate stock, or money produced in 
 some manner, then the pledgee receives the interest, 
 dividends or money, by virtue of the pledge, but on 
 account and in deduction of his claim against the 
 pledgeor. § 
 
 212. As to the capital of a claim pledged, under the 
 rule of the Civil law, the pledgee has no right to 
 receive it from the debtor of the claim. And it seems 
 doubtful whether a clause in the act of pledge stipu- 
 lating such a right in favor of the pledgee would be 
 valid, because it would enable him to appropriate the 
 thing pledged to himself, which the law forbids. || 
 Yet, some of the commentators of the French Code 
 express the opinion that, with the consent of the 
 
 * Civil Code of Louisiana. Art. 3169. 
 
 t Code Napoleon, Art. 8109. 
 
 X Pothier, Nantissement. fSee. 23. 
 
 § Baudry-Lacantinerie. Nantissement. Sec. %. 
 
 !j Laurent, Nantissement. p. 494.
 
 Rights and Obligations of the Pledgee. 175 
 
 pledgeor the pledgee may receive payment of the 
 claims pledged directly from the debtor of the claim.* 
 But, in France, under the provisions of its Code of 
 Commerce, the pledgee of a commercial pledge has 
 the right to collect and recover the claims or securities 
 pledged to him. f 
 
 213. The Common law and the jurisprudence of 
 Louisiana are in accord in this and differ from this 
 rule of the Civil law, and have established the prin- 
 ciple, that the pledgee of a chose in action can bring 
 suit on the same in his own name, and recover and 
 receive the amount in payment of his debt, being 
 bound, of course, to return the surplus, if an}-, to his 
 pledgeor.J 
 
 Indeed the law of Louisiana specially provides 
 that if the credit which has been given in pledge 
 becomes due before it is redeemed by the person 
 pawning it, the creditor, by virtue of the transfer 
 which has been made to him, shall be justitied in 
 receiving the amount and in taking measures to re- 
 cover it. When the amount is received he must apply 
 it to the payment of the debt due to himself, and restore 
 the surplus, should there be am-, to the person from 
 whom he held it in pledge. " If the credit which has 
 
 * Baudry-Lacantinerie, Xantissement, Sec. 98. 
 
 Duranton, Nantissement, Sec. 538. 
 
 Pont, Nantissement, Sec. 1180. 
 t Baudry-Lacantinerie, Nantissement, Sec. 155. 
 
 Code de Commerce, Art. 91. 
 X Succession of Dolhonde, 21 La. An. 5. 
 
 Diicasse vs. McKenna, 28 La. An. 419. 
 
 Ciaaffe & Sons vs. DuBose, 3G La. 257. 
 
 Story, Bailments, Sec. 321.
 
 176 The Law of Pledge. 
 
 been given in pledge becomes due before it is redeemed 
 by the person pawning it, the creditor, by virtue 
 of the transfer which has been made to him, shall 
 be justified in receiving the amount, and in taking 
 measures to recover it. When received, he must 
 apply it to the payment of the debt due to himself, 
 and restore the surplus^ should there be any, to the 
 person from whom he held it in pledge.'-* 
 
 214. But we must make a distinction in the Civil 
 law between the general use of the pledge and that 
 particular use of it which consists in subpledging or 
 rcpledging it by the pledgee. And we must also 
 distinguish between the act of the pledgee subpledg- 
 ing or repledging the thing and the act b}' which 
 he transfers his claims and rights as pledgee to a 
 third person. As to the right to subpledge or re- 
 pledge, there seems to be a diversity of opinion among 
 the Civilians, and some writers express the opinion 
 that the pledgee has such right. And as to his right 
 to transfer his claim against the pledgeor together 
 with the pledge attached to it, the Civilians are gen- 
 erally of the opinion that it may be done without vio- 
 lating the contract of pledge. But these points will 
 form the subject of the following chapter. 
 
 * Civil Code of Louisiana, Art. 3170.
 
 CHAPTER XV. 
 
 SUBPI.EDGE OR RePI.KDGE BY PlkDGEE. 
 
 215. Has the pledgee the right to subpledge or 
 repledge to secure his own obHgation,the thing pledged 
 to him by his debtor? From the principle of the Civil 
 law that he has no right to use the pledge, it follows 
 that he has no right to pledge his pledge, or make a sub- 
 pledge of it, because that is clearly making use of the 
 thing pledged. It is what Laurent afRrms. " From 
 the principle that the pledgee has the thing pledged 
 only on deposit, it follows that he can not subpledge 
 it."-" 
 
 Baudry-Lacantinerie says the same thing. " From 
 the principle that the pledgee is not the owner of the 
 thing pledged, it results that he can not subpledge 
 
 it."t 
 
 216. Pont, on the contrary, remarks: " But the 
 pledgee is not forbidden, as we have explained it, to sub- 
 pledge the thing." J But when we come to the explan- 
 ation he alludes to, we find that he does not show that 
 the^pledgee is not forbidden to subpledge. He sim- 
 ply explains that, if the subpledgee is in good faith 
 and in ignorance of the fact that the pledgee is not 
 the owner of the thing, but simply the pledgee of it, 
 
 * Laurent, Xantissement, Sec. 49G. 
 
 t Baudiy-Lacantinerie, Nantissement, Sec. 05. 
 
 See I'othier, Nantissement, Sec. 27. 
 % Pont, Nantissement, Sec. 11G5, p. 649.
 
 178 The IjAW of Pledge. 
 
 such subpledgee is protected by the rule of the French 
 law that the possessor of movable property is presumed 
 to be the owner and can convey the \\\XQ:\.0 2.hona fide 
 purchaser or pledgee. Pont says further that the sub - 
 pledgeor in that case would be estopped from den^-ing 
 that the thing is his property, after holding out to the 
 subpledgee that it was. 
 
 217. Troplong occupies the same position on this 
 question, not pretending that the pledgee, as a matter 
 of right, is permitted to subpledge, but that the sub- 
 pledgee, if in good faith and in ignorance of the real 
 title of the subpledgeor, will be protected and the sub- 
 pledge maintained by virtue of the same rule of the 
 French law, that for movable property possession is 
 equivalent to title. Troplong, also like Pont, after 
 saying that the pledgee can not sell or abuse the 
 pledge, asserts that " he ma}', however, pledge it.'' 
 His reasoning, like that of Pont, shows rather that 
 the pledgee has no right to subpledge, but that lie can 
 do it, as a matter of fact.* 
 
 Wheii he comes to the illustration of the rule in 
 commercial affairs, Troplong is ver^^ positive about 
 the faculty of the pledgee to subpledge. Wo will 
 give his own words : 
 
 " Sometimes the pledgee, consignee of the mer- 
 chandise, subconsigns it in consideration of advances 
 made to him. For instance, a commission merchant 
 who has no money to inake the advances which his 
 correspondent demands of b.im on the goods whicii he 
 
 * Troplong, Xantisseinent, Sees. 82, S3, 422, 423.
 
 SUBPLEDGE OR KePLEDGE BY PLEDGEE. 179 
 
 ships to him, borrows from a third person the funds 
 which he needs. Can he assign to the latter his privi- 
 lege by putting the bill of lading in his hands? Has 
 the assignee a privilege on the goods thus subcon- 
 signed to him? The affirmative seems to me unde- 
 niable, as well as to Delamare and Lepoitevin ; and 
 if reference is made to the decision of the Court of 
 Cassation of 23d April, 1816, which I have cited 
 above, it will be seen that this mode of action is cus- 
 tomary in commerce. 
 
 "It extends credit; it facilitates negotiations; it 
 puts in motion capital and the shipping of merchan- 
 dise."* 
 
 It is difficult to reconcile these views with the 
 opinion of Laurent and that of Baudry-Lacantinerie, 
 quoted above. 
 
 218. Judge Story thinks that the Civil law gives 
 the right to the pledgee to subpledge and to transfer 
 the pledge. But we must bear in mind that when 
 he speaks of the Civil law he means the Roman law. 
 Of the modern Civil law as enacted in the Code Napo- 
 leon, he does not seem to be well informed. His fre- 
 quent confusion of the Civil law of modern times with 
 the institutions of the old Roman law is apt to lead 
 his readers into error. In the instance of the rigfht 
 of the pledgee to subpledge and transfer the pledge, 
 he cites Domat and the Codex. But Domat was im- 
 bued with the Roman law and preceded the Napo- 
 leon Code and its great commentators by nearl}^ two 
 
 * Troplong, Nantissement, Sec. 2.51.
 
 180 The Law of Pledge. 
 
 centuries. The Roman law did allow the pledgee to 
 subpledge to his own creditor. But we must note the 
 distinction which it made between the subpledge and 
 the use of the pledge by the pledgee. The latter, as 
 we have seen, was prohibited."^ Troplong professes 
 the same doctrine, as he contends that the pledgee may 
 subpledge, but can not use the pledge. f 
 
 219. We will see that the reasoning of the Com- 
 mon law writer leads to the same conclusion, and 
 the pledgee may subpledge though he has not the 
 right to do so. The sum total of it is, that the 
 common assent, based upon the wants of the com- 
 mercial world, is stronger than an abstract principle 
 of law ; and that a few civilians and most, if not all, 
 the jurisconsults of the Common law countries, have 
 departed from the true nature of the contract of pledge 
 and admitted, if not consecrated, the popular rule of 
 the subpledge by the pledgee. 
 
 220. If in certain commercial or financial transac- 
 tions, it is established by usage or custom that a bank 
 or other moneyed institution has the right to sub- 
 pledge the collateral securities in its hands, it is because 
 the pledgeor knows, or is presumed to know such 
 custom, acts under the established rule and, therefore, 
 tacitly consents that his pledgee should make such use 
 of the pledge, and subpledge it, or transfer his pledge, 
 at his own risk and peril. But, as this is only done 
 
 ' Troplong, Nantissement, Sec. 82. 
 
 Digest, Lex 1. C, Si pignus pignori. 
 
 Ante, Sees. 204. 
 t Ante, Sec. 210.
 
 SUBPLED(4K OR KePLEDGP: BY PLEDGEE. 181 
 
 by the implied consent of the pledgeor, it only con- I 
 firms the rule that, without his consent, the pledgee \ 
 can not subpledge.'"' 
 
 22 1. Either in the use of the pledge, or in the sub- 
 pledge, it will not do to say that, if the pledge is not 
 damaged or injured by use, there is no objection in 
 the pledgee using it. The same mis^ht be said of the 
 thing deposited, and yet it is not doubtful that the 
 depositary has no right to use the thing deposited. 
 
 222. As a distinct question from the right to sub- 
 pledge, has the pledgee the right to transfer his claim 
 against the pledgeor together with the pledge attached 
 thereto? To this Baudry-Lacantinerie sees no objec- 
 tion and thinks such transfer may be made, provided 
 that the formalities necessary for the pledge itself 
 should be obtained. But then, he says, the security 
 will only be relative, because the original owner of 
 the thing pledged, the original pledgeor, has only 
 to pay his debt to compel the restitution of the 
 pledge, f 
 
 In reality, there is no difference as to the right of 
 the pledgee to subpledge and his right to transfer the 
 pledge with the claim that it secures. In both cases 
 the pledgee is making use of the pledge. If it is done 
 without the consent of the pledgeor, it is clearly ille- ^ 
 gal. If done with the consent of the pledgeor, there 
 can be no question. That consent inay be express or 
 it may be simply taeit ; and it may be implied either 
 
 * Laurent, Xantissement, Sec. 494. 
 
 t Baudiy-Lacantinerio, Xantissement, Sec. 95.
 
 182 The Law of Pledge. 
 
 from the nature of the thing pledged or from the cus- 
 tom of the place where the contract is formed. 
 
 2 2T,. According to the strict rule of the Civilians, 
 any use of the pledge, if unauthorized expressly or 
 tacitly by the pledgeor, is an abuse of the pledgee's 
 possession, and entitles the pledgeor to the restitution 
 of the thing pledged. * 
 
 Code Napoleon, Art. 2082. 
 Laurent, Kanlissement, Sec. 40S. 
 ].ocre, Vol. VllI, p. ]0G. 
 Pont, Nantissenient, Sec. IISO. 
 Baudry-Lacantinerie, Xantissenient, Sec. 141,
 
 CHAPTER XVI. 
 The Right of the Pledgee to Use the Pledge 
 
 AND TO SuBPLEDGE OR RePLEDGE UNDER THE 
 
 Common Law. 
 
 224. Although the source and the nature of the con- 
 tract of pledge are the same under the Civil and the 
 Common law, and in both systems the thing pledged 
 is deposited with the pledgee only to secure the debt 
 of the pledgeor ; yet the two laws have diverged widely 
 from each other in their understanding of the rights of 
 the pledgee over the thing pledged. We have seen 
 that under the Civil law the pledgee has no right to 
 use the pledge without the consent of the pledgeor, 
 express or tacit, and that such consent will not be 
 easily presumed by the courts, on the principle that 
 nobody is presumed to give away a right.* 
 
 225. The rule is the other way at Common law, 
 and it is there pretty well established that the pledgee 
 can use the pledge for his own advantage, can sub- 
 pledge or repledge it to secure his own debt, and can 
 transfer the pledge together with the claim which it 
 secures. This seems to be decidedly the rule both 
 in England and in the United States. And the Com- 
 mon law authorities put the principle upon the ground 
 of the right of the pledgee so to do, as a consequence 
 of the pledge, without sa^nng whether the right is 
 
 * Ante, Sec. 215 
 183
 
 184 . The Law of Pledge. 
 
 based upon the presumed consent of the pledgeor. It 
 is evidently a departure from the nature and the ori- 
 ginal object of the pledge. It is in contradiction to 
 the various definitions of the pledge, which all amount 
 to this : that a pledge is a bailment, or a trust, or a 
 deposit, of personal property, as sectirity of the 
 ■pledgeor'' s debf.'^ 
 
 The law-writers may not agree on the right of the 
 pledgee to use the pledge. Judge Story qualifies that 
 right by stating the exceptional cases in which it can 
 be exercised. It would follow that, out of those ex- 
 ceptional cases, the right does not exist. And he 
 says: "But; if the use will be without any injury, 
 and yet the pawn will thereby be exposed to extraor- 
 dinary perils, there the use is impliedly interdicted. ""f 
 
 Let us observe the contrast with the Civil law. 
 There, the use may be impliedly ^erw/Z/etfy otherwise 
 it is interdicted naturall}'. 
 
 Mr. Jones' statement of the rule is also a negative 
 pregnant with an affirmative. His opinion is^ that a 
 pledgee has no right to use the pledged chattel if his 
 use of it will wear or injure it, so as to lessen its value. 
 This is declaring indirectly that the pledgee may 
 ordinarily use the pledge for his own advantage. [j; 
 Mr. Schouler states that the only rational doc- 
 trine as to use of the pledge appears to be this : 
 that the profits of the bailment belong to the 
 
 * Jones, on Pledges. Sec. 1 . 
 
 Story, on Bailments, Sees. 329, 330. 
 t Story, on Bailments. Sec. 330. 
 \ Jones, on Pledges, Sec. 394.
 
 Right of Pledgee to Subpledge or Repledge. 185 
 
 pledgeor, while the expenses swell his indebted- 
 ness to the pledgee on their mutual reckoning ; that 
 the pledgee has no right to a personal use^ without 
 permission, beyond what is incidental to the exercise 
 of ordinary care in preserving the thing; but that this 
 incidental use and the charge of keeping may, in 
 trifling instances, be taken as intended for a mutual 
 offset.* 
 
 These views of Mr. Schouler show a more faithful 
 adherence to the true doctrine of the law of pledge, 
 and a nearer approach to the Civil law. 
 
 226. Chancellor Kent adopts the early doctrine laid 
 down by Lord Holt, for which he expresses great 
 admiration, and thinks that the pledgee may use the 
 pledge, if it is not injured by the use.f 
 
 The very reasoning of Lord Holt thus praised by 
 Chancellor Kent, is condemned by Judge Story, t 
 
 The doctrine supported by Lord Holt is that: " If 
 the pawn be such as will be worse for using, the 
 pawnee can not use it, as clothes, etc. But, if it be 
 such as it will never be worse, as, if jewels for the 
 purpose were pawned to a lady, she might use them. 
 But then she must do it at her otun -peril. For, where- 
 as, if she keeps them locked up in her cabinet, if her 
 cabinet is broken open and the jewels taken from 
 thence, she would be excused. If she wears them 
 abroad and is there robbed, she will be answerable. 
 
 * Schouler, on Bailments, p. 198. 
 t Kent's Comin., '2 Vol., Sec. 578. 
 ;; Story, on Bailments, Sec. 329.
 
 186 The Law of Pledge. 
 
 And the reason is, because the pawn is in the nature 
 of a deposit, and^ as such, is not liable to l)e used.^ 
 
 To this Judge Story says : " Now, the reason here 
 g-iven, so far from proving that the pledgee may law- 
 fully use the jewels, expressly negatives any such 
 right." f 
 
 Sir William Jones and Justice Buller both affirm 
 the doctrine that the pledgee, even if there is peril in 
 the use of the thing pledged, may lawfully use it, but at 
 his 01071 peril. Judge Stor}' thinks that it may well 
 be doubted whether there is an}- foundation for that 
 doctrine. ;|^ 
 
 227. The theory of the English judges is clearly- 
 fallacious and pervertible of the true principles of the 
 law of pledge. The question is not what the pledgee 
 or depositary may do even at his -peril, under certain 
 circumstances, but what he has the rigid to do under 
 the terms of the contract, which is the law of his case. 
 It is curious to observe that those English judges should 
 have enunciated as a principle of law what is in reality 
 the exclusion of such principle. Why should it be at 
 his peril that the pledgee may use the thing pledged.^ 
 Because he has no right to do so, holding it only as a 
 depositary. And he has still less than the depositary 
 the right to use the pledge, because the contract of 
 deposit is formed for the benefit of the depositor, not 
 of the depositary, whilst the contract of pledge is 
 
 * Coggs vs. Bernard, 2 Ld. Ray, 909, 916. 
 t Story, on Bailments, See. 330. 
 j/d., ibid.
 
 Right of Pledgee to Subpledge or Repledge. 187 
 
 formed, so far as the security is concerned, for the 
 benefit of the pledgee. 
 
 The doctrine advocated by the EngHsh judges ap- 
 phed to the pledge of jewelry used by the pledgee, 
 and it could not be pretended that the nature of the 
 thing pledged warranted the use of it. Nor was there 
 any contention that the pledgeor had consented that 
 it shiould be used by the pledgee. The decisions were, 
 therefore, the direct and clear announceinent that, by 
 the nature of the contract of pledge, the pledgee has 
 the right to use the pledge. 
 
 228. But Judge Story himself, who disagreed with 
 them, does not seem to have been imbued with the 
 true principle of the law of pledge on that point, for 
 he said : ' ' But, if the pledgee should undertake to 
 pledge the property (not being negotiable securities) 
 for a debt beyond hiz orvn, or to make a transfer 
 thereof to his own creditor, as if he was absolute 
 owner ; it is clear that In such a case he would be 
 guilt}' of a breach of trust, and his creditor would 
 acquire no title beyond that held by the pawnee."* 
 
 This is an acknowledgment of the rig-ht of the 
 pledgee to use the pledge, by subpledging, to the 
 extent of his claim. And why make the distinction 
 as to negotiable securities, when the question is one 
 of right or abuse of right, not of power to abuse the 
 right, with or without peril.? The subpledgee of 
 negotiable securities, if a holder in good faith, will be 
 clearly protected against the true owner, as holders in 
 
 * story, on Bailments. Sec. 324.
 
 188 The Law of Pledge. 
 
 good faith of negotiable paper always arc, whatever 
 the source from which they hold. But the pledgee 
 has no more right (if he has the power) to use the 
 negotiable securities than any other property pledged, 
 and he is fully as guilty of the breach of trust when 
 he uses the negotiable securities without the consent 
 of the pledgeor as when he uses any other property 
 pledged to him. 
 
 The dominant idea in the Common law on that 
 subject has been and is still, not what the pledgee has 
 the right to do, but what the pledgeor can or can not 
 do, when the thing pledged is used without his per- 
 mission or consent, to recover it from the subpledgee. 
 
 229. The preponderance of authority in the United 
 States is clearly that the pledgee may subpledge or 
 repledge the thing he holds in pledge, to secure his 
 own debt, which is a corollary of the rule that he may 
 make use of it. 
 
 The cases in which it has been so decided do not 
 seem to discriminate between the right of the pledgee 
 to use the pledge, or to subpledge, and his -power to 
 do so, having in his hands the disposition of the thing 
 pledged. On principle it is clearly against the nature 
 and principles of the contract of pledge, and the 
 pledgee can only subpledge at his own peril. * 
 
 The pledgee may not have the right to subpledge, 
 and yet the pledgeor may not have the power to 
 
 Talty vs. Savings and Trust Company, 3 Otto, 321. 
 
 Jarvis' Adm., vs. Rodders, 15 Mass. 369. 
 
 Lewis vs. Mott, 36 X. Y. 39.5. 
 
 Donald vs. JSuckling, Law Rep.. 1 (J. B. .')8.'>.
 
 Right of Pledgee to Subpledge or Repledge. 189 
 
 attack the subpledge, so that the rights of the sub- 
 pledgee may be good against him. 
 
 230. In the pledge of negotiable paper, the law 
 merchant is paramount, as it is in the purchase or 
 discount of such paper, and this is as much so in the 
 countries of Civil law as in those of Common law. 
 The pledgee who has taken negotiable paper before 
 maturity, in the usual course of business, that is, with- 
 out notice of an adverse right, and for a valuable con- 
 sideration, can hold it against ihe true owner. But 
 this rule will form the subject of a separate chapter.
 
 CHAPTER XVII 
 Tortious Pledge of Another Person's Property. 
 
 231. As to the pledge of personal property, other 
 than negotiable paper, by any other person than the 
 true owner, and without the latter's consent^ the law 
 is the same in the United States, including the State 
 of Louisiana, in England and in some countries 
 of Europe. Under the principle that nobody can 
 transfer a right that he does not himself possess, the 
 fraudulent or unauthorized pledge does not affect the 
 true owner. He can recover his property against the 
 pledgee, even when the latter is in good faith, is 
 without notice of the adverse right, and has given full 
 value for the pledge.* 
 
 232. But in France, and in Belgium, Holland and 
 Italy, which have followed the French law in that 
 respect, the rule is that, for personal or movable prop- 
 erty, possession is equivalent to title. " En fait de 
 meubles^ possessiojz vaut titre,-'' says the Napoleon 
 Code. The maxim of the Roman law on this point is 
 Mobilia non liahent seqitellaiii. Consequentl}^, in 
 France, Belgium, Holland and Italy the pledgee or 
 purchaser in good faith of personal property fraudu- 
 
 ♦lentlv disposed of has a valid title against the true 
 
 » Stern Bros. vs. Bank, 34 La. An. 1119. 
 Bird vs. Cockrem, 28 La. An. 70. 
 Henderson vs. Case, 31 La. An. 215. 
 .Tones, on Pledges, Sees. 54, 55, 56. 
 Benjamin, on Sales, Sec. (5 et seq. 
 Tiedman, on Sales, Sec. 310 et seq. 
 
 191
 
 192 The Law of Pledge. 
 
 owner. The French did not take this rule concerning 
 personal property from the Romans, with whom it 
 was not well established, but from the Germanic cus- 
 toms of the Franks, who invaded the Gauls.* Curi- 
 ous enough, the modern Germans have not adopted 
 or retained the principle, and it does not exist in 
 Prussia, except in the sale or pledge made by a 
 merchant in the course of his business, f as we will 
 see hereafter. In this as in other matters, the Gauls 
 abandoned the Roman law, whilst Germany retained 
 
 it4 
 
 233. In Louisiana the framers of the Civil Code 
 refused to follow the French law on this subject, by 
 suppressing the maxim En fait de meiibhs -posses- 
 sion vaut titre from Art. 2279 of the Code Napoleon, 
 in adopting the remainder of the article. The juris- 
 prudence of that State has firmly established the rule 
 that the true owner can recover his property fraudu- 
 lently pledged to a pledgee in good faith. § 
 
 234. Thus, a citizen of the United States, having 
 personal property in the hands of an agent in France, 
 would have no recourse against the pledgee of the 
 same in good faith, if it were fraudulently pledged 
 by the agent for his own account. And a citizen of 
 France having personal property in this countr}', in 
 the hands of an a^ent, could recover it from the 
 
 * Troplong. Prescription, Vol. 2, Sec. 1040 et seq. 
 
 t De St. Josepli. Concordance de tons les Codes, p. 1'2A et seq. 
 
 X Montesquieu, Esprit des Lois, Vol. 3, p. 6(3. 
 
 § Louisiana Code, Art. 3506. 
 
 Code Napoleon, Art. 2279. 
 
 Stern Bros. vs. Bank, 34 La. An. 1119.
 
 Tortious Pledge of Another Person's Property. 193 
 
 pledgee in good faith of the agent, who would have 
 fraudulently pledged it for his own account. I speak, 
 of course, of personal property in this case, other than 
 negotiable paper. 
 
 235. Let us see now the reasons given in support 
 of the different systems by their respective promoters. 
 
 Troplong sa3's : " In such cases the true owner has 
 only himself to blame for having misplaced his confi- 
 dence. He has no right of action against the third 
 person in good faith who has acquired the movable 
 property. Otherwise there would be no safety in 
 business." 
 
 And again : " But if the thing pledged has been 
 subpledged b}^ the creditor, it is established that the 
 subpledgee has all the rights of a pledgee. The doc- 
 trine is founded on the wise and protecting principle 
 of the French law : movables .have no following.'^'' ^ 
 
 236. Laurent expresses a similar opinion: "It is 
 true to say that movables pass rapidly from hand to 
 hand. The possessor of a movable effect sells it; in 
 a few weeks it may be transferred to ten different 
 purchasers. If the true owner could claim it against 
 the last purchaser, ten lawsuits would follow. Public 
 order requires that this should be avoided. It is a 
 necessity of commerce." f 
 
 237. It is proper to note that such is clearly the 
 law in France only since the promulgation of the 
 Code Napoleon. 
 
 * Troplong, Nantissement, p. 74 and p. 392. 
 t Laurent, Droit Civil, Vol. 32, p. 553.
 
 194 The Law of Pledge. 
 
 It is also well to observe that the rule only applies 
 to corporeal movables, and to choses in action trans- 
 ferable by delivery ; and, further, that in case such 
 property was lost or stolen, the true owner can claim 
 it from the vendee or pledgee in good faith during 
 three years from the time of the loss or theft.* 
 
 The Common Law^ View of the Subject. 
 
 238. Mr. Jones, in his excellent work on the Law 
 of Pledges, says: "Mere possession of a chattel, 
 though indicative of title, is not title ; and one taking 
 a pledge of it is bound to satisfy himself that the 
 pledgeor is the owner ; and if he relies solely upon 
 the pledgeor's possession, he takes the risk of having 
 to surrender the property to the true owner. * ''^ ^ 
 If one holding goods for safekeeping pledges them 
 with intent to convert the proceeds to his own use, 
 he, in effect, commits a larceny, and the pledgee ac- 
 quires no title as against the owner, although he deals 
 with the pledgeor in good faith. "f 
 
 239. Mr. J. P. Benjamin, in his book on the sale 
 of personal property, says : 
 
 " In general no man can sell goods and convey a 
 valid title to them unless he be the owner. Nemo dat 
 quod lion habet. A person, therefore, however inno- 
 cent, who buys goods from one not the owner, obtains 
 no property in them whatever (except in some special 
 
 * Code Napoleon, Art. 2279. 
 
 Baudry-Lacantinerie. Xantissement. Sees. 30, 31. 
 t Jones, on Pledges, Sec 54.
 
 ToRTioi'S Pledge of Another Person's Property. 195 
 
 cases presently to be noticed) ; and even if in ignorance 
 of the fact that the goods were lost or stolen, he resell 
 them to a third person in good faith, he remains 
 liable in trover to the original owner, who may main- 
 tain his action without prosecuting the felon."* 
 
 Benjamin, on Sales, etc., Sec. 6. 
 Agnew vs. Johnson, 22 Pa. St. 471. 
 Gottlieb vs. Hartman, 3 Colo. 53. 
 Vermilye vs. Adams, 21 Wall. 143. 
 Texas vs White, 7 Wall. 700.
 
 CHAPTER XVIII. 
 
 Right of Pledgeor to Demand the Rescission 
 OF THE Contract and Restitution of the 
 Pledge if Pledgee Makes Use of the Thing 
 Pledged Without His Consent. 
 
 240. The contract of the pledge contains, like all 
 contracts in the Civil law, the implied, if not expressed, 
 understanding, and resolutory condition, that the vio- 
 lation of the agreement by one of the parties entitles 
 the other party to the rescission of the contract. It 
 follows hence that, if the pledgee^ without the 
 pledgeor' s consent, makes use of the pledge for his 
 own pleasure or benefit, whether the thing pledged is 
 thereby damaged or not, the pledgeor, under the 
 Civil law, has the right to annul the contract and 
 demand the return of the pledge, because the use 
 made of it by the pledgee is a violation of the agree- 
 ment. The unauthorized use is an abuse, even if no 
 damage follows. Laurent is emphatic in his opinion 
 on that point. The Napoleon Code provides that 
 "The debtor can not^ tiuless the creditor abuses 
 the pledge^ demand the restitution of it before he has 
 entirely paid, principal and interest, the debt for 
 which the pledge has been given. ''^ 
 
 241. Commenting upon this article^ Laurent says: 
 '' Art. 2082 consecrates a consequence of that princi- 
 
 *Code Napoleon, Art. 2282. 
 197
 
 198 The Law of Pledge. 
 
 pie (that the pledgee has no right of use). In gen- 
 eral, the debtor can not command the restitution of 
 the pledge before he has paid the debt. There is an 
 exception, says Art. 2082, when the pledgee abuses 
 the thing pledged. AVhat is understood here by abuse? 
 ^ * * The sole fact to use the thing is an abuse, 
 inasmuch as the creditor does what he has no right to 
 do."* 
 
 \nd again, the same writer says: "That has 
 nothing in common with the undue use which the 
 pledgee makes of the thing. If he used it with all the 
 care of a good administrator, he would not the less 
 be guilty of abuse, for it is abusing to do what one 
 has no right to do." f 
 
 242. Other commentators of the Napoleon Code do 
 not take this extreme view of its Art. 2082. Pont, 
 at the same time that he recognizes in the article the 
 consecration of the principle of the resolutory condi- 
 tion in contracts, says as to the abuse of the pledge 
 by the pledgee : ' ' ThuS; the law does not anticipate 
 only the case in which the creditor would make an 
 excessive use of the thing ; it extends to all cases 
 where he would imperil the thing, and to all cases in 
 which he would make of it a use contrary to the law, 
 to honesty and to good morals. In other words the 
 abuse of the thing in any manner whatever affects the 
 resolutory condition and takes away from the creditor 
 the benefit of the right of retention.'*' \ 
 
 * Laurent, Nantissement, p. 492. 
 
 t Id.. Ibid. 
 
 X Pont. Nantissement, Sees. 1189, 1190.
 
 Right of Pledgeor to Demand Rescission. 199 
 
 This language implies evidently that, in the opinion 
 of the writer, a moderate and uninjurious use of the 
 thing pledged does not give to the pledgeor, under the 
 terms of the article, the right to demand the restitu- 
 tion of the pledge. 
 
 243. But Baudry-Lacantinerie, the most recent of 
 tlie French commentators, seems to side with Laurent, 
 for he says, on this article: ''By this expression /c> 
 abuse we must understand at the same time the 
 case when the creditor makes use of the pledge 
 without being authorized, and that when he exceeds 
 the limits of his authority and makes an abusive use 
 of the thing."* 
 
 244. The right of the pledgeor to demand the 
 return of the pledge in case the pledgee makes an 
 illegal use of it, is in the nature itself of the contract, 
 as it is in the nature of the contract of lease or hire, 
 that the lessor has the right to demand the surrender 
 of the leased premises if the lessee makes an improper 
 or unwarranted use of them. It is found in the French 
 law preceding the Code Napoleon as well as in that 
 Code, and it is found in the Roman law, from which 
 the modern Civil law has received it. 
 
 Pothier stated both the law of France of his time 
 and the Roman law from which it came. " There is 
 a case to which the -pignoratitia action is opened and 
 may be brought for the restitution of the thing given 
 in pledge, though the creditor is not yet paid or satis- 
 fied : it is that in which he would abuse the thing 
 
 * Baudry-Lacantinerie, Du Gage, p. G9.
 
 200 The Law of Pledge. 
 
 pledged. Ulpian gives us this example of it: Si pros- 
 tituit a7icillam^ vel aliud improhatum facere coegit^ 
 illius pignus ancillcB solvitur. L. 2^^ Sec. j, ^. d. 
 tit.'''' Under the Roman law a slave could be given 
 in pledge, and, if a woman, the prostitution of her 
 was an abuse of the pledge. 
 
 It is evident that under the general principles of the 
 law of contracts, even in default of special statutory 
 provisions^ the abuse of the pledge by the pledgee 
 entitles the pledgeor to the restitution of the thing 
 pledged. The nature and extent of the abuse is a mat- 
 ter for the appreciation of the court or jury, according 
 to the more or less stringent rules of the Civil law, 
 which governs the contract of pledge. 
 
 245. Mr. Pont states, in connection with the right 
 of the pledgeor to demand the restitution of the thing 
 pledged if the pledgee abuses it, that the article of the 
 French Code is only the special application of that 
 general principle which extends to all onerous con- 
 tracts, that the resolutory condition is always under- 
 stood in the synallagmatic contracts whenever one of 
 the parties does not fulfil his engagement.'^ 
 
 246. The Civil Code of Louisiana, like the Napo- 
 leon Code, provides for the resolutory condition in 
 these terms: ''A resolutory condition is implied in 
 all commutative contracts, to take effect in case 
 either of the parties do not comply with his engage- 
 ments ; in this case, the contract is not dissolved of 
 right ; the party complaining of a breach of the con- 
 
 * Pont, Nantissement, Sec. 1189.
 
 Right op Pledgeor to Demand Rescission. 201 
 
 tract may either sue for its dissolution with damages^ 
 or, if the circumstances of the case permit, demand a 
 specific performance."* 
 
 247 . The same principle forms part of the Common 
 law. Although the Civilians have perhaps expounded 
 the law of contracts more elaborately and more scien- 
 tifically than the English and American jurists have 
 done it, yet the same rules of reason and justice 
 govern both systems. A breach of the contract, or 
 the failure to perform his engagement by one of the 
 contracting parties entitles the other party to the 
 rescission of the contract under the Common law as 
 well as under the Civil law. This right if not ex- 
 pressed in the agreement is implied in the under- 
 standing of the parties, and the principle may be 
 invoked by the complaining party. The resolutory 
 condition of the Civilians is nothing else. It is, under 
 different terms, the breach or failure of the condition 
 precedent in the Common law.f 
 
 248. Such being the case, how should we under- 
 stand the words of Chief Justice Cockburn in the 
 case of Donald vs. Suckling, in which the question 
 was, whether the transfer of the pledge by the pledgee 
 without the pledgeor' s consent^ entitled the latter to 
 the rescission of the contract, and, consequently, to 
 the restitution of the thing pledged. The Chief Jus- 
 tice said : " I think it unnecessary to the decision in 
 
 * Civil Code of Louisiana, Art. 2046. 
 
 Code Napoleon, Art. 1184. 
 t Chitty, on Contracts, 4th Am. Edition, p. 572. 
 
 Parsons, on Contracts, 6th Edition, Sees. 677, 678. 
 
 Wharton, on Contracts, Sec. 919.
 
 202 The Law of Pledge. 
 
 the present case to determine whether a party, with 
 Avhom an article has been pledged as a security for 
 the payment of money, has a right to transfer his 
 interest in the thing pledged (subject to the right of 
 redemption in the pawnor) to a third party. I should 
 <:ertainly hesitate to lay down the affirmative of that 
 proposition. Such a right in the pawnee seems quite 
 inconsistent with the undoubted right of the pledgeor 
 to have the thing pledged returned to him imme- 
 diatel}' on the tender of the amount for which the 
 pledge was given. In some instances it may well be 
 inferred from the nature of the thing pledged^, as in the 
 case of a valuable work of art, that the pawnor, though 
 perfectly willing that the article should be intrusted 
 to the custody of the pawnee, would not have parted 
 with it on the terms that it should be passed on to 
 others and committed to the custody of strangers. 
 It is not, however, necessary to decide this question 
 in the present case. 
 
 "The question here is, whether the transfer of the 
 pledge is not only a breach of the contract on the 
 part of the pawnee, but operates to put an end to the 
 contract altogether, so as to entitle the pawnor to have 
 back the thing pledged without payment of the debt. 
 I am of opinion that the transfer of the pledge does 
 not put an end to the contract, but amounts only to a 
 breach of contract, upon which the owner may bring 
 an action, — for nominal damages if he has sustained 
 no substantial damages ; for substantial, if the thing 
 pledged is damaged in the hands of the third party,
 
 Right of Pledgeor to Demand Rescission. 203 
 
 or the owner is prejudiced by dela}- in not having the 
 thing deHvered to him on tendering the amount for 
 which it was pledged. We are not deahng with a 
 case of Hen^ which is merely the right to retain pos- 
 session of the chattel, and which right is immediately 
 lost on the possession being parted with, unless to a 
 person who may be considered as the agent of the party 
 having the lien, for the purpose of its custody. In 
 the contract of pledge, the pawnor invests the pawnee 
 with much more than the mere right of possession. 
 He invests him with a rio^ht to deal with the things 
 pledged as his own, if the debt be not paid and the 
 thing redeemed at the appointed time. It seems to 
 me that the contract continues in force, and with it the 
 special property created by it, until the thing pledged 
 is redeemed or sold at the time specified. The 
 pawnor can not treat the contract as at an end until 
 he has done that which alone enables him to divest 
 the pawnee of the inchoate right of property in the 
 thing pledged, which the contract has conferred on 
 him."* 
 
 249. With all the respect due the high authority of 
 the English judge, we can not tamely submit to his 
 doctrine. It is a denial of the risfht of oblisfations. It 
 is a departure from the sanctity of engagements. Had 
 it been said in the opinion that, by the established 
 jurisprudence of the Common law, the pledgee had 
 the right to use the pledge, to subpledge or repledge 
 
 * Donald vs. Suckling, L. R. 1 Q. B.. p. 617, 
 Jones, on Pledges, Sec. 420.
 
 204 The Law of Pledge. 
 
 it, and to transfer it to another party, criticism would 
 have been out of place. But, to hold that the pledgee 
 has violated the contract by the transfer and that the 
 pledgeor has yet no right to demand the rescission, 
 and, as a legal consequence thereof, to claim the res- 
 titution of the pledge, is subversive of the fundamental 
 principles of the law of contract. Those principles 
 govern alike all contracts, the contract of pledge as 
 well as the contract of hire. Would it be said, if a 
 person liires my horse with the understanding that 
 he shall only ride him two hours a day, and he rides 
 him eight hours a day, there being thereby a breach 
 of the agreement, I can not demand the rescission of 
 the contract and the return of the horse ; and that I 
 am relegated to a suit for damages? Or that, if I 
 grant a lease of a house as a residence for a family, 
 the lessee may turn it into a brothel ; and that I have 
 no right to rescind the lease ; but must be satisfied 
 with a demand for damages. The very doctrine of 
 the right of rescission on account of the breach of con- 
 tract repels such a theory. 
 
 250. The views of Justice Mellor in the same case, 
 on the right of the pledgee to use the pledge, are also 
 remarkable. After holding that the pledgeor is not 
 entitled to the restitution of the thing pledged on 
 account of the unauthorized transfer made by the 
 pledgee, and that he can recover in an action for any 
 special damage which he may have sustained b}" rea- 
 son of the act of the pawnee in repledging the goods, 
 the English judge says: "And I think that such is
 
 Right of Pledgeor to Demand Rescission. 205 
 
 the true effect of Lord Holt's definition of a ' vadium 
 or pawn,' in Coggs vs. Bernard ; although he was oi 
 opinion that the pawnee could in no case use the 
 pledge if it would thereby be damaged, and must use 
 due diligence in the keeping of it, and says that the 
 creditor is bound to restore the pledge upon payment 
 of the debt, because, by detaining it after the tender 
 of the money, he is a wrongdoer, his special property 
 being determined ; yet he nowhere says that the mis- 
 use or abuse of the pledge before payment or tender 
 annihilates the contract upon which the deposit took 
 place." * 
 
 251. Are we to understand from this that the Eng- 
 lish law of pledge is, and has been from the time of 
 Lord Holt, that the pledgee may not only use, but also 
 misuse or abiisz the pledge, before payment, without 
 the pledgeor having the right to demand the rescis- 
 sion of the contract ; and that his only remedy is a 
 claim for damages? 
 
 252. Justice Blackburn, in the same case of Donald 
 vs. Suckling, lays his opinion upon the principle that 
 the contract of pledge, creating an interest in the 
 pledge, which may be assigned, the subpledging is 
 not in general so inconsistent with the contract as to 
 amount to a renunciation of that contract. "f 
 
 253. Justice Shee, in the same case, dissented, and 
 denying the right to transfer the pledge, or to sub- 
 pledge, said very pointedly : 
 
 * Donald vs. Suckling, L- R. Q. B., p. 610. 
 
 t Donald vs. Suckling, 1 L. R. Q. B.. pp. 010 el seq.
 
 206 The Law op Pledge. 
 
 " If the pawnee ma}^ repledge the pawn the sub- 
 pledgee may do the same, and so on ad infijiitum. To 
 whom then is the original pawnor to apply? The rela- 
 tion between the pawnor and the pawnee is of a fidu- 
 ciary and personal character, and until the time for 
 redeeming the pledge has elapsed the pawnee is bound 
 to keep the pawn.''* 
 
 254. We may conclude from the English and 
 American authorities that the common jurisprudence 
 has established the rule that the pledgee ma}' use 
 (not abuse), repledge or subpledge, and transfer the 
 pledge, without the consent, express or implied, of 
 the pledgeor. And it is curious to observe that the 
 fundamental principle of the Civil law on this subject, 
 that the thing pledged being put in the hands of the 
 pledgee only as a deposit and for the sole purpose of 
 securing his debt, he can not draw any other advan- 
 tage or benefit from his possession ; it is curious to 
 observe, we say, that this principle, which is of the 
 nature of the contract of pledge, does not seem to 
 have been of any weight or consideration with the 
 courts of the Common law.f 
 
 * Donald vs. Suckling. 1 L. R. Q. B.. p. 589. 
 t Coggs vs. Bernard, 2 Ld. Ray, 909 ft seq. 
 
 Halliday vs. Holgate, Exchequer, Vol. 3, 297. 
 
 Donald vs. Suckling. L. R. 1 Q. B. 5S.5. 
 
 .lohnson vs. Stear, 15 C. B. X. S. 330. 
 
 Ogden vs. Lathrop. (55 N. Y. 185. 
 
 Lawrence vs. Maxwell, 53 N. Y. 19. 
 
 Whitaker vs. Sumner, 20 Pick. (Mass.) 399. 
 
 Cooper vs. Bay, 47 111. 53.
 
 CHAPTER XIX. 
 
 Right of Other Creditors of the Pledgeor to 
 Seize the Pledge. 
 
 255. The thing pledo;ed is put in the possession of the 
 pledgee to secure his claims and to create his privilege 
 or lien against other creditors of the pledgeor. By 
 the terms of the contract of pledge and by the law, 
 the pledgee has the ris^ht to retain this possession 
 until his debt is paid. But, here again, we find a 
 great difference between the Civil law and the Com- 
 mon law. 
 
 In the Civil law, this right of retention only exists 
 between the pledgee and the pledgeor. It does not 
 bind other creditors of the latter to the extent that 
 they can not demand that the thing pledged, if it is 
 of a value more than sufficient to pay the pledgee, 
 should not be surrendered by him and be judicially 
 sold, subject to his right of preference over the pro- 
 ceeds. 
 
 Troplong states the French law on this point in 
 these words : " But, shall this right of retention of 
 the pledgee be applicable to third persons in good 
 faith, who have executory rights and have an interest 
 in the sale of the thing pledged? Can thepledg.ee 
 oppose his right of retention to them and send them 
 off to be paid as they can ? Not at all ! 
 
 " From the principle that the right of retention can 
 be opposed only to the pledgeor and not to third per- 
 
 207
 
 208 The Law of Pledge. 
 
 sons, it follows that though the pledgee is in posses- 
 sion of the pledge, the other creditors with executory 
 rights can seize the thing pledged in his hands, cause 
 it to be sold agfainst his will and convert it into 
 money, reserving his right of preference over the pro- 
 ceeds."* 
 
 256. Laurent expresses the same opinion on the 
 right of the other creditors of the pledgeor to cause 
 the pledge to be seized and sold, subject to the lien of 
 the pledgee. 
 
 And he explains it as follows : Can the pledgee 
 oppose his right to retain the pledge until payment to 
 the other creditors? Clearl}- not. The right of re- 
 tention is foreign to the creditors, because there is no 
 conflict between them and the pledgee until the latter 
 claims his privilege and asks to be paid by preference 
 over the other creditors of the common debtor. Now, 
 the right of retention is distinct and different from the 
 privilege ; therefore the pledgee can not avail him- 
 self of it against the other creditors ; and these may 
 exercise their rights resfardless of the rio;ht of reten- 
 tion. Which is the right of the creditors? They 
 may seize the property- of their debtor ; they may, 
 therefore, seize also the thing which he has pledged 
 because he remains the owner of it. This right of 
 seizure, and the forced sale which is the consequence 
 of it, can not be impeded by the right of retention of 
 the pledgee ; all that this one can demand when there 
 is a conflict between him and other creditors, is to be 
 
 * Troplong, Xantissement, Sees. 458. 459.
 
 Right of Other Creditors to Seize Pledge. 209 
 
 paid by preference ; but the privilege does not pre- 
 vent the creditors from seizing the pledge, because the 
 seizure does not impair the rights of the pledgee. 
 When the thing is sold, a concourse takes place in 
 Court between the creditors for the distribution of the 
 price, and the pledgee is paid first and in full, as it is 
 over the price of the pledge that he exercises his right 
 of preference. This right, then, far from being 
 ignored, is realized. It is the same thing of all 
 privilege or mortgage creditors. The real rights 
 which are attached to the property affected by the 
 privilege or the mortgage do not prevent ordinary 
 creditors from acting ; they can proceed to the expro- 
 priation of the common debtor; but when it will come 
 to the distribution of the proceeds, then a concourse 
 will be opened and the mortgage and privilege credi- 
 tors will be paid by preference over the rest.* 
 
 257. Pont expresses the same views on this sub- 
 ject. The contract of pledge, from which the reten- 
 tion arises, is personal to the pledgeor and the 
 pledgee. The other creditors are not parties to it. 
 They can not be bound by it further than b}' the 
 privilege the law gives the pledgee. No person can 
 put his property beyond the reach of his creditors by 
 encumbering it with any right or cause of preference 
 in favor of any particular creditor. The right of 
 preference, if legal, should be respected, but that is all 
 that the preferred creditor can demand. The prop- 
 ert}" itself is answerable for all the debts of the owner, 
 and is subject to the action of all his creditors. 
 
 * Laurent, Nantissement, Sec. r)02.
 
 210 The Law op Pledge. 
 
 But this right of the other creditors can only be 
 exercised when, from the circumstances of the case, 
 the nature of the thing pledged, its value and the 
 amount of the debt secured, the seizure and sale de- 
 manded by the creditors could not in any manner 
 impair or destroy the rights of the pledgee. If, for 
 instance, the value of the pledge is manifestly less than 
 the debt, or if the very offer of the pledge at the public 
 sale would diminish its value beyond the amount of 
 the debt; in fact, under any circumstances, which 
 would impair or affect the pledge to the prejudice of 
 the pledgee, the other creditors would not be entitled 
 to the seizure and sale. ^ 
 
 258. In the jurisprudence of Louisiana this princi- 
 ple has become axiomatic, and has been firmly estab- 
 lished b}^ an unbroken line of decisions. f 
 
 This jurisprudence is based upon the principle, as 
 shown b}' the commentators of the Code Napoleon, 
 that the contract between pledgeor and pledgee se- 
 cures the right of retention only against the pledgeor, 
 but not against his other creditors ; and that the debtor 
 has no power to take his property out of the reach of 
 all his creditors, which is, in a broader sense, //lei'r 
 common pledge. All that the pledgee can demand is 
 
 * Pont, Nantissement, Sec. 1186. 
 
 Baudry-Lacantinerie, Nantissement, See. 248. 
 t Kirkpatrick & Co. vs. Oldham, 38 La. An. 553. 
 
 Hornor vs. Sheriff, 34 La. An. 389. 
 
 Ange vs. Variol, 31 La. An. 865. 
 
 White vs. Blanchard, 19 La. An. 02. 
 
 James vs. Breaux, 26 La. An. 265. 
 
 Marot vs. Husband, 18 La. An. 665. 
 
 Wallis vs. Boove, 14 La. An. 104. 
 
 Fisher vs. Gordey, 11 La. An. 275.
 
 Right of Other Creditors to Seize Pledge. 211 
 
 that his lien, or privilege, or right of preference over 
 the proceeds of the pledge, should be and remain 
 unimpaired ; and that is done when the full amount 
 of his claim is satisfied from the seizure and sale of 
 the thing pledged. It follows from this rule that no 
 adjudication can be made at the judicial sale of the 
 pledge if the amount bid does not cover the debt of 
 the pledgee and the costs of the proceedings. This 
 is clearly doing justice to all, to the pledgee as well as 
 to the other creditors. The law is therefore wiser and 
 better than the contrary rule of the right of absolute 
 retention in the pledgee. 
 
 In one of the cases cited above, the Court of Louis- 
 iana says: "It is now well settled in our jurispru- 
 dence that the propert}- of any nature held in pledge 
 by a creditor ma}" be seized from his possession bv 
 another creditor of the common debtor and sold sub- 
 ject to the pledgee's claims. The only right w^hich 
 the law secures to the pledgee is to satisfy his debt 
 ' by privilege and in preference to other creditors of 
 his debtor out of the product of the movable, corpo- 
 real or incorporeal, which has been thus burdened.' 
 Nothing in the nature of the contract can authorize 
 the pledgee to hold indefinitely the property pledged, 
 which is usually far in excess of the amount thereby 
 secured, and to thus deprive other creditors of their 
 recourse on the debtor's property." " 
 
 * Hornor vs. Sheriff et als., 34 La. An. 889.
 
 212 The Law of Pledge. 
 
 At Common Law Other Creditors Can Not 
 Seize the Pledge. 
 
 259. By the Common law, the thing pledged is 
 beyond the reach of other creditors of the pledgeor. 
 The right of retention of the pledgee is absolute, as 
 well against third persons as against the pledgeor. 
 The pledgeor having, by the contract, only the right 
 to redeem, his creditors are bound b}' the terms of the 
 pledge. They can neither seize nor attach the thing 
 pledged, nor garnishee the pledgee. They are bound 
 and made to suffer by an agreement between pledgeor 
 and pledgee, to which they were no parties, and by 
 which the property of their debtor, their comfnofi 
 pledge, may be forever taken away from them, though 
 there might be left a surplus to pay them, after seizure 
 and sale of the pledge and satisfaction of the pledgee's 
 claim.* 
 
 How far superior and more equitable is the rule of 
 the Civil law in this respect, which, at the same time, 
 maintains the rights of the pledgee intact and unim- 
 paired and protects those of third persons ! 
 
 The proof of that superiority lies in the fact that in 
 several States of the Union statutes have been passed 
 on that subject granting to the creditors of the pledgeor 
 the right to seize or attach the pledge, subject to the 
 lien of the pledgee, departing, in that respect, from 
 the Common law, and adopting the principle of the 
 Civil law. f 
 
 * Jones, on Pledges, Sec. 372. 
 
 t Jones, on Pledges, Sees. 372 et seq.
 
 Right of Other Creditors to Seize Pledge. 213 
 
 Pledgee is not bound to Surrender the Pledge 
 TO Assignee or Syndic of Pledgeor. 
 
 260. It is a condition precedent of the right of the 
 other creditors to cause the pledge to be seized and 
 sold, that a showing be made by them of the surplus 
 value of it over the debt of the pledgee. 
 
 The rule is not changed by the assignment in bank- 
 ruptcy, or surrender of his property by the pledgeor 
 subsequently to the pledge. His assignee, or the 
 syndic of the creditors, has no right to take the pledge 
 out of the hands of the pledgee and include it in the 
 assets of the insolvent for the purpose of winding up 
 the concern. * 
 
 This was declared by the Supreme Court of the 
 United States to be the Common law as well as the 
 law of Louisiana, f 
 
 The pledgee has, even after the assignment or sur- 
 render of his property by the pledgeor, the right to 
 foreclose the pledge under the terms of his contract. 
 All that the assignee or syndic of the creditors can do 
 is to act against him in court and demand that he 
 should foreclose his pledge and turn over the surplus 
 of the proceeds to the representative of the creditors. 
 
 The principle that the pledgee's right of retention 
 is not impaired by the pledgeor's assignment in bank- 
 ruptcy is expressed by the Supreme Court of the United 
 
 * Renshaw vs. Creditors, 40 La. An. 37. 
 
 t Yeatman vs. Savings Institution, 95 U. S. 766. 
 
 Jerome vs. McCarter, 94 U. S. 734. 
 
 Donaldson vs. Farwell, 93 U. S. 631.
 
 214 The Law of Pledge. 
 
 Stales in the following words : " The assignee takes 
 the title subject to all equities, liens or incumbrances, 
 whether created by operation of law or by act of the 
 bankrupt. He takes the property in the same ' plight 
 and condition ' that the bankrupt held it. The assignee 
 takes only the bankrupt's interest in the property. 
 He has no right or title to the interest which other 
 parties have therein, nor any control over the same 
 further than is expressly given to him by the Bank- 
 rupt Act, as auxiliary to the preservation of the bank- 
 rupt estate for the benefit of his creditors. It would 
 be absurd to contend that the assignee in bankruptcy 
 became ipso facto seized and possessed in entirety, as 
 trustee, of every article of property in which the bank- 
 rupt has any interest or share.'' * 
 
 261. In a case arising under the State Insolvency 
 laws of Louisiana, in which the syndic of creditors 
 demanded the surrender of the pledge as part of the 
 assets of the insolvent, the Court said : " This right 
 of retention is an essential constituent of the 
 jus ■pignoris. It has been held that this right is 
 not operative, as against creditors of the pledgeor, to 
 prevent them from seizing and selling the pledged 
 property so as to liquidate the debt and secure any 
 possible surplus. No doubt the syndic of an insolvent 
 pledgeor might, on proper showing and by proper 
 proceeding, force a similar liquidation, so as to secure 
 any possible residuum for the creditors, as was done 
 by the decree of the Court in the case of Brother vs. 
 
 * Yeatman vs. Savings Institution, 95 U. S. 766.
 
 Right of Other Creditors to Seize Pledge. 215 
 
 Saul, II An. 225. But it is entirely inconsistent with 
 the pledgee's right of retention, and has never been 
 held in this State that, by mere virtue of the cession, 
 the S3'ndic acquires the right to demand the surrender 
 of pledged property to be officially administered by 
 him and subjected to the costs and burdens of such 
 adininistration."* 
 
 262. From the principle that the assignee in bank- 
 ruptc}', or syndic in insolvency, succeeds to the rights 
 of the debtor, such as they were before his surrender 
 or cession, and subject to all the equities which 
 existed against him, it follows that, generally where 
 the pledgeor could not have attacked the legality of 
 the pledge for mere want of forms or formalities, or 
 on account of irregularities, the assignee or syndic is 
 equally without right or authorit)^ to do so. This is 
 the doctrine of the Civil law, as established by the 
 Court of Louisiana. For instance, the requirement 
 of a written act of pledge is not indispensable so far as 
 the parties themselves to the contract are concerned. 
 The pledge is valid without such written act quoad 
 the pledgeor, who is estopped from pleading its nullity 
 on that ground. t 
 
 Hence it was held that the pledgeor's syndic can 
 not set up that ground of invalidity either, against the 
 pledgee. ;|; 
 
 * Renshaw vs. His Creditors, 40 La. An. 41. 
 t Matthews vs. Rutherford, 7 La. An. 225. 
 X Brother vs. Saul, 11 La. An. 225. 
 
 Portee vs. Corning, 9 La. An. 539. 
 
 Campbell vs. Slidell, 5 La. An. 274.
 
 216 The Law of Pledge. 
 
 263. The rule obtains equally in the Common law, 
 and the authorities are numerous and imposing, which 
 declare that an assignment in bankruptcy, like an}- 
 other assignment by operation of law, passes the 
 rights of the bankrupt precisely in the same plight and 
 condition as he possessed them, subject to all equities ; 
 that the assignee, in such cases, stands in the place 
 of the bankrupt ; that the rights of the latter are the 
 rights of the former; and hence, that the mortgages or 
 the pledges, or other contracts of the bankrupt which 
 he could not have attacked, the assignee can not 
 attack, provided that, in all such contracts or acts of 
 the bankrupt, there was no fraud or dishonesty.* 
 
 264. But the doctrine, under either system of law, 
 is not without its difficulties. Justice Bradley in the 
 often cited case of Casey vs. Cavaroc, shows those 
 difficulties and indicates clearly how the rale should 
 be appHed. He says: "Whilst it is generally true 
 that an assignee for the benefit of creditors holds the 
 property assigned subject to the same equities as the 
 debtor or assignor held it, it is not universally true. 
 Many transactions would be binding on the latter 
 which would not be binding on the assignee. All 
 sales and securities made for the actual purpose of 
 defrauding creditors are of this class. By the law of 
 Louisiana, a pledge, in order to be effective against 
 
 * Cook vs. Tiillis. IS Wall. 332. 
 Gibson vs. Warden. 14 Wall, 244. 
 Casey vs. Credit Mobilier, 2 Woods, 77. 
 Mitford vs. Mitford, 9 Ves. Jr. 87. 
 Mitchell vs. Winslow, 2 Story, 630. 
 Jones, on Pledges, See. 585.
 
 Right of Other Creditors to Seize Pledge 217 
 
 third persons, must be accompanied by a privilege. 
 It may be valid as a contract between the parties 
 without this quahty, as held both in the French law 
 (as already shown), and in Louisiana, in the case of 
 Matthews vs. Rutherford, 7 La. An. 225. But Art. 
 3162 expressly declares that the privilege arising from 
 a pledge does not subsist except when the thing 
 pledged has been actually put and remained in the 
 possession of the creditor, or of a third person 
 agreed on by the parties. Without the privilege, 
 or right of preference, the Credit Mobilier has 
 no claim to hold the securities in question as 
 against the other creditors. How, then, can it 
 set up such a claim against the receiver? The 
 receiver does not represent the bank alone ; he repre- 
 sents all the parties. He represents the law, which 
 takes charge of the property for the benefit of all cred- 
 itors according to their respective and mutual rights. 
 Suppose no receiver had been appointed, and, when 
 the bank failed, it had called the creditors together and 
 laid all its assets on a table, could the Credit Mobilier 
 in presence of the other creditors have laid its 
 hands on the securities in question and claimed them 
 by right of any privilege or preference,^ It certainly 
 could not have done so if it had no privilege as against 
 them. And yet this is precisely the relation in which 
 the parties stood. The existence of a receiver, as 
 trustee for all, did not change it. That one essential 
 thing which the law requires for the subsistence of 
 the privilege, namely, possession, was wanting. Other
 
 218 The Law of Pledge. 
 
 formalities might have been dispensed with. But, pos- 
 session is essential — made so by the express terms of 
 the law. Nearly all the cases in France, where this 
 question has arisen, have been contests between cred- 
 itors claiming by way of pledge and the syndics of the 
 failing debtor, who stand in the place occupied by the 
 receiver here. If there is any distinction between 
 them it is in favor of a firmer right on the part of the 
 i"eceiverto protect the interests of the general creditors. 
 He is not made receiver by a voluntary assignment of 
 the bank, but is appointed by the magistrate in invi- 
 tum the bank, for the very purpose of securing equal 
 justice to all its creditors and under a law which 
 sternly forbids preferences. Surely such an officer, 
 whatever may be the rule in the case of voluntary 
 assignments, may assert those rights of the general cred- 
 itors which the law itself creates, without being subject 
 to all the disabilities under which the bank would labor 
 in combating its private engagements with favored 
 creditor.s. If the law sa3^s * there shall be no privilege, 
 as to third persons, by a pledge without possession,' 
 there will be no need of a judgment and execution 
 in order to oppose such a pledge, if only a creditor, 
 or one who represents creditors, has a proper stand- 
 ing in court. Insolvency of the debtor, if a bank^ and 
 the appointment of a receiver thereof, will force the 
 pledgee into concurrence with the general creditors ; 
 and the receiver's power will be fully adequate to the 
 protection of their interests as established by law. The 
 case of Bank of Alexandria vs. Herbert (8 Cranch,
 
 Right op Other Creditors to Seize Pledge. 219 
 
 36), presents a state of things almost precisely analo- 
 gous to this. There, the trustee of an insolvent debtor 
 recovered the proceeds of property which the latter 
 had mortgaged to the bank. The recovery was had 
 on the ground that the mortgage had not been re- 
 corded in proper time under the law of Virginia, 
 which declared that all deeds and mortgages, though 
 good between the parties, should be void as to cred- 
 itors and subsequent purchasers without notice, unless 
 recorded within eight months from date. 'To set up 
 this deed against the creditors,' said Mr. Chief Jus- 
 tice Marshall, 'would be to defeat the very object for 
 which the law was made.' 
 
 " Indeed, it may be laid down as a general rule, 
 as well at the Common law as at the Civil law, that 
 a trustee, assignee or syndic, having the powers and 
 occupying the relations which are sustained by a 
 receiver under the National Banking Act, or an 
 assignee in bankruptc}-, may well oppose any privi- 
 lege or preference which the law itself, unaided by a 
 bona fide purchase or judgment, would regard as void 
 against the general creditors in a direct contest between 
 them and the parties claiming such privilege or prefer- 
 ence ; even though the debtor himself, on account of 
 some personal disability arising from his own acts or 
 en2;a2:ements, could not resist the claim. That an 
 assignee in bankruptcy has this power can not well be 
 doubted ; and since a national bank can not be put in 
 bankruptcy, but can only be wound up under the 
 peculiar provisions of the banking act^ the receiver
 
 220 The Law of Pledge. 
 
 appointed by virtue thereof must have the same power, 
 or the absurd consequence would follow, that the 
 property of a bank disposed of by voluntary convey- 
 ances, or pledges not good as to third persons, would 
 be beyond the reach of creditors. 
 
 " Where the legal or equitable property in a security 
 passes, and there is no express law invalidating the 
 transfer, the creditor will be entitled to hold it as well 
 against the assignee or receiver as against the debtor ; 
 because the assignee only takes such title as the debtor 
 has at the time of the assignment or insolvency. In 
 that case, however, the question of fraud would be 
 admissible as a question of fact to invalidate the trans- 
 action," * 
 
 265. Justice Bradley* took no notice in this case of 
 a decision of the Court of Louisiana, alluded to above, 
 and which was cited by counsel as authority in favor 
 of the pledgee against the doctrine so well advocated 
 by the distinguished justice of the Supreme Court 
 of the United States. That was the case of Brother, 
 Syndic, vs. Saul, 11 La. An. 225, in which the 
 Court of Louisiana held that the syndic could not 
 contest the validity of a pledge on the ground that no 
 act in writing had been passed as demanded by the 
 Civil law, and particularly by the statute law of Louis- 
 iana. f The case was decided by a divided Court, which 
 could hardly- not have been divided on the question 
 at issue, as tlie law of that* State expressly provides 
 
 * Casey vs. Cavaroc, 90 U. S. 487. 
 t Civil Code of Louisiana, Art. 3158.
 
 Right of Other Creditors to Seize Pledge. 221 
 
 that the contract of pledge unless evidenced by an act 
 in writing, does not give a privilege to the pledgee, 
 and can not affect other creditors The reasoning of 
 Justice Bradley on this point may be considered as a 
 complete refutation of the ruling of the Louisiana Court. 
 That Court based its judgment upon the ground 
 that the want of the written act was a mere infor- 
 mality which did not invalidate the pledge. But, so 
 far as other creditors were concerned, this was not an 
 informality ; it was the absence of an indispensable 
 condition of the pledge, of a condition without which 
 the pledgee was not entitled to a preference, and was 
 placed on a level with the other creditors. If the 
 pledgeor had not gone into insolvency, every one of 
 those other creditors could have demanded the invali- 
 dation of the pledge for want of the written act. Is 
 it not clear that the syndic, who is their agent under 
 the law, to protect their rights, has the power to do 
 for them collectively what they could have done 
 themselves individually before the insolvency.^ If the 
 syndic had not demanded the invalidation of the 
 pledge for their account, and had, in the proposed 
 distribution of the insolvent's assets, recognized the 
 pledgee as a preferred creditor, can there be any 
 doubt that the other creditors could have opposed the 
 distribution and pleaded the nullity of the pledge on 
 the ground that the absence of the written act deprived 
 the pledgee of any right of preference.^
 
 CHAPTER XX. 
 
 The Pledgee Must Take Proper Care of the 
 
 Pledge 
 
 266. The pledgee is under the obligation to take 
 proper care of the pledge, according to the nature of 
 the thing pledged. If it is damaged or lost through 
 his fault, he is responsible for the value of it to the 
 pledgeor. He may even be held liable for not causing 
 the thing pledged to produce the fruits or income 
 which it is susceptible of producing. The Codes of 
 France and Louisiana provide for this obligation of 
 the pledgee in the following terms : " The creditor is 
 answerable agreeably to the rules which have been 
 established under the title : Of Conventional Obliga- 
 tions, for the loss or decay of the pledge, which may 
 happen through his fault." * 
 
 The care which the pledgee is thus to take of the 
 thing pledged as an implied condition of the contract, 
 is the same which a prudent man takes of his own 
 property; but, as this may be too indefinite, for all 
 men, even if prudent in the administration of their 
 own affairs, may not be so in the same degree, the 
 law fixes the extent of the pledgee's responsibility by 
 rendering him liable for even a light fault, but not for 
 the lightest fault. The principle comes from the 
 Roman law, and is stated by Pothier in these words : 
 
 * Code Napoleon, Art. 2080. 
 Civil Code of Louisiana, Art. 3](i7. 
 223
 
 224 The Law of Pledge. 
 
 "• The care to which the creditor is bound, is only the 
 ordinary care which prudent men usually bring into 
 their own affairs. It is not demanded of him that he 
 should use exactissiniaui diligeniiam^ of which few 
 persons are capable ; and he is onl}- liable for the fault 
 they call the light faulty de levi culpa', he is not liable 
 delevissiina culpa. It is what is very clearly decided 
 by the law 5, Sec. 2, Jf. Commod.^ where the 
 contract of pledge is expressly reported among 
 the contracts which are for the mutual benefit 
 of the contracting parties, in which the debtor is liable 
 for the ordinary fault ; and they are distinguished in 
 that from the loan, commodatum^ which being for the 
 sole benefit of the one who receives the loan, demands 
 of him a orreater care than the ordinarv care which 
 those contracts demand which are for the mutual ben- 
 efit of the contracting parties."' ^ 
 
 267 . The rule of the Common law is the same on this 
 subject. Judge Story says in similar terms: " Hav- 
 ing considered the rights, the next inquiry is as to the 
 duties of the pawnee. And here the question natur- 
 ally presents itself, What is the degree of diligence 
 imposed upon the pawnee, in respect to the preserva- 
 tion thereof? As the bailment is for the mutual ben- 
 efit and interest of both parties^ the law requires, upon 
 the principles already stated, that the pawnee should 
 use ordinar}' diligence in the care of the pawn ; and 
 
 * Pothier, Nantissement, Sec. 34. 
 Laurent, Xantissement, Sec. 524. 
 Pont, Xantissement, Sec. 1170 et seq. 
 Baudry-Lacantinerie, Xantissement, Sec. 96.
 
 Pledgee Must Take Proper Care of Pledge. 225 
 
 consequently he is liable for ordinary neglect in keep- 
 ing the pawn."* 
 
 268. Owing to the principle that, at Common law, 
 the pledgee has a right of property in the pledge, 
 Lord Coke had declared that, if the thing pledged 
 were stolen from the pledgee, he was not responsible 
 to the pledgeor because he had not to keep the thing 
 otherwise than his own This doctrine was rejected 
 and criticised by Sir William Jones. But neither the 
 reasoning of Lord Coke nor that of Sir William Jones 
 seem to have been accepted by Chancellor Kent and 
 Judge Story. The true doctrine is clearly expressed 
 by the latter in the following manner: "The true 
 principle supported by the authorities seems to be, 
 that theft, pe?' se, establishes neither responsibility 
 nor irresponsibility in the bailee. If the theft is occa 
 sibned by any negligence, the bailee is responsible ; 
 if without any negligence, he is discharged. Ordinary 
 diligence is not disproved, even presumptively, b/ 
 mere theft ; but the proper conclusion must be drawn 
 from weighing all the circumstances of the particular 
 case. This is the just doctrine, to which the learned 
 mind of Mr. Chancellor Kent has arrived after a large 
 survey of the authorities, and it seems at once rational 
 and convenient." f 
 
 269. The opinion of Judge Story, that the liability 
 of the pledgee in the preservation and care of the 
 
 * Story, on Bailments, Sec. 332. 
 
 .lones, on Pledges, Sec. 403 et seq. 
 t Story, Bailments, Sec. 338. 
 
 Kent, Comm., Vol. 2, 581. 
 
 Schouler, Bailments, p. 190.
 
 226 The Law of Pledge. 
 
 pledge, must be measured from all the circumstances 
 of the particular case, coincides with that of the Civil- 
 ians. Mr. Pont says : "As to knowing how far his 
 responsibility may go, it is a question of fact which 
 must be left to the appreciation of the judges, who, in 
 this matter, fulfil the office of jurors. We will not, 
 therefore, enquire, with our ancient authors, what 
 must be understood by the light faulty for which, 
 according to the Digest, the pledgee is liable. The 
 judges will have to decide, on this point, according 
 to circumstances, the nature of the thing pledged, the 
 character of the injurious acts ; and they will pro- 
 nounce in last resort if the facts proved against the 
 pledgee render him responsible or not." * 
 
 270. From the nature of the thing pledged the 
 pledgee would be clearly responsible if he neglected 
 to have a promissory note, the subject of the pledge, 
 protested for non-payment, and the endorser was dis- 
 charged in consequence. f Or, if he neglected to have 
 the mortgage, which is pledged to him, reinscribed 
 or reregistered in proper time, and it lost its rank or 
 effect. J Or, if he neglected to have a policy of insur- 
 ance, taken in his name, renewed when requested by 
 the pledgeor to do it. But there are acts of adminis- 
 tration or preservation of the thing pledged, which, 
 from its nature, the pledgee is not expected to do. 
 
 * Pont, Xantissement, Sec. 1172. 
 t Schouler, Bailments, p. 193. 
 
 Whitteu vs. AVright, 34 Mich. 92. 
 
 Russell vs. Hester, 10 Ala. 535. 
 J Baudry-Lacantinerie. Xantissement. Sec. 137. p. 104 
 
 Court of Cassation, 21 November, 1S94.
 
 Pledgee Must Take Proper Care of Pledge. 227 
 
 and for the abstention from which he can not be held 
 liable, when such acts demand special skill or knowl- 
 edge. For instance when wine, which must be treated 
 and nursed '\r\ a special manner, is pledged, the pledgee 
 is not expected to have it done, unless in case of spe- 
 cial agreement with the pledgeor.'" 
 
 Pledgeor is Obliged to Refund Pledgee's 
 Expenses in Preserving the Pledge. 
 
 271. The pledgeor, on his part, is obliged to refund 
 to the pledgee all the necessary expenses which he 
 has incurred to preserve the pledge. The principle is 
 enacted in the Napoleon Code and the Civil Code of 
 Louisiana. '*^ On his part, the debtor is bound to pay 
 to the creditor all the useful and necessary expenses 
 which the latter has made for the preservation of the 
 
 pledge." t 
 
 The commentators of the French Code are unani- 
 mous in their criticism of the phraseology of this 
 article, and are of the opinion that, so far as the 
 necessary expenses incurred by the pledgee are con- 
 cerned, they must be refunded to him ; but that for the 
 expenses which are merely useful^ a distinction must 
 be drawn, a distinction taken from the Roman law 
 and founded upon the very nature of things. The 
 necessary expenses, those without which the thing 
 pledged would have perished or suffered a great loss 
 
 * Baudry-Lacantinerie, Xantissement, Sec. 139, p. 105. 
 
 Pont, Nantissement, Sec. 117.5. 
 t Code Napoleon, Art. 2080. 
 
 Civil Code of Louisiana, Art. 31 07.
 
 228 The Law of Pledge. 
 
 of value, must be paid back to the pledgee in full ; 
 because the pledgeor would have made them himself 
 if he had remained in possession of the pledge. But, 
 as to the expenses which were only useful, those which, 
 though adding to the value of the thing, were not 
 indispensable, the pledgeor owes only to the pledgee 
 the amount corresponding to the additional value of 
 the pledge. If the pledgee has spent more than such 
 additional value, the excess of expenses remains at his 
 charge. The question of the additional value pro- 
 duced by the useful expenses is a question of fact, 
 which is necessarily left to the appreciation of the 
 judge^ to be decided from the evidence.* 
 
 273. We should note that the pledgee has, for the 
 payment of the necessary expejises incurred for the 
 preservation of the pledge, the same privilege and 
 right of preference over the proceeds of the thing 
 pledged that he has for the payment of his debt itself. 
 Such expenses are added to the debt and become part 
 of it, and, therefore, are secured in the same manner, 
 b}- the terms of Art. 2102 of the Napoleon Code, and 
 Art. 3217 of the Civil Code of Louisiana. But this 
 privilege, it seems, does not extend to the expenses 
 incurred b}' the pledgee, which were merely useful, 
 and not indispensable, and have, however, added to 
 the value of the thing pledged. For the additional 
 
 * Troplong, Xantissement, See. 434. 
 Pont, Nantissement, 8ec. 1170. 
 Duranton, Nantissenient. Sec. M'2. 
 Laurent, Nantissenient, Sec. 526. 
 Baudry-Lacantinerie, Nantissement, Sec. 143. 
 Aubry et Ran. Nantisseinent, Vol. 3, p. 10. 
 Fothier, Nantissenient, Sec. 01.
 
 Pledgee Must Take Proper Care of Pledge. 229 
 
 value, as we have just seen, the pledgeor is indebted 
 to the pledgee, but this obligation is not secured b}- 
 the pledge. Such is the opinion of Laurent and of 
 Baudr}'-Lacantinerie.'^ 
 
 273. -The correlative obligation of the pledgeor to 
 refund to the pledgee the expenses incurred in the 
 administration or for the preservation of the thing 
 pledged, does not seem to have been either estab- 
 lished or properly understood in the Common law 
 at the time that Judge Story wrote his treatise on 
 Bailments, for he says : "Another obligation of the 
 pawner by the Civil law is to reimburse to the pawnee 
 all expenses and charges which have been necessarily 
 incurred by the latter in the preservation of the pawn, 
 even though by some subsequent accident these ex- 
 penses and charges may not have secured any perma- 
 nent benefit to the pawner. No decision has been 
 found in the Common law upon this point. If there 
 is an express contract to pay such expenses, that would 
 doubtless gov^ern the case. And where the circum- 
 stances of the case would naturally lead to an implied 
 agreement to the same effect, it would be equivalent 
 to an express declaration. But whatever might be 
 the rule as to ordinary expenses and charges in case 
 of mutual silence, it would seem reasonable to pre- 
 sume that extraordinary expenses and charges, which 
 could not have been foreseen, should be at the charge 
 of the pawner. If, for instance, a horse is pawned 
 
 * Laurent, Nantissement, Sec. 520. 
 Baudry-Lacantinerie, Nantissement, Sec. 145. 
 ./d., Des Privileges et Hypotheques, Sec. 478.
 
 230 The Law of Pledge. 
 
 and he meets with an injury b}- accident, the expense 
 of his cure might be justly deemed to be borne by the 
 pawner, as they would be for his ultimate profit. 
 So, if goods pawned, as, for instance, a ship, be in- 
 jured ill a storm, and expenses are necessary to pre- 
 serve her from absolute foundering, such expenses 
 would seem properly to fall on the owner. 
 
 "In respect to expenses not necessary, but still use- 
 ful to the thing pawned, the Civil law pursued a middle 
 course, and left them to be allowed or disallowed by 
 the proper judicial tribunal, according to circum- 
 stances. If moderate and beneficial, they might be 
 allowed at its discretion. The Common law is not 
 supposed to invest any courts of justice with any such 
 discretion, or to allow to the pawnee any such latitude 
 of expenditure without the approbation of the pawner^ 
 either express or implied,"* 
 
 274. Since Judge Stor3''s time, the Common law 
 has advanced in this respect, and Mr. Jones tells us 
 that a pledgee is entitled to all necessarj^ expenses 
 incurred in keeping and caring for the pledge ; that 
 he is also entitled to be i^eimbursed for all pay- 
 ments made to protect the property from prior 
 liens or incumbrances, and for all necessary paj^- 
 ments made in any other way to preserve or pro- 
 tect the security. Thus, if a pledgee of a policy 
 of insurance advances money for the payment of 
 premiums during the continuance of the pledge, he 
 is entitled to be credited the amount of such payments 
 
 * story, on Bailments, Sees. 357, 358.
 
 Pledgee Must Take Proper Care of Pledge. 231 
 
 in his account with his debtor. And assessments 
 rightfully paid by a creditor upon stock pledged to 
 him as collateral security are charges in the nature 
 of expenses, and must be refunded by the debtor, as 
 a condition precedent to reclaiming the pledge. In 
 support of this doctrine several cases are cited by 
 the same writer.* 
 
 Mr. Schouler entertains the same views on this 
 subject, and cites the same authorities. f 
 
 Right of Pledgee to Demand Another Pledge. 
 
 275. If the pledgee has been deceived in the nature 
 of the thing pledged; and thereby as to the sufficiency 
 of the security, he may demand of the pledgeor another 
 pledge instead, or claim the immediate payment of 
 the debt, though it has been contracted on terms of 
 credit which have not 3^et matured. The Civil Code 
 of Louisiana has expressly enacted the principle. 
 *' When the creditor has been deceived on the sub- 
 stance or quality of the thing given in pledge, he may 
 claim another thing in its stead, or demand imme- 
 diately his payment, though the debtor be solvable. "J 
 
 The Code Napoleon contains no provision of the sort 
 bearing expressly upon the contract of pledge. But the 
 same rule, as derived from the Roman law, is recognized 
 
 * Jones, on Pledges, Sec. 400. 
 
 Starrett vs. Barber, 20 Me. 457. 
 
 Hills vs. Smith, 28 N. H. 309. 
 
 Railey vs. Ross, 59 Ga. 862. 
 
 Rowan vs. State Bank, 45 Vt. IGO. 
 
 McCalla vs. Clark, 55 Ga. 53. 
 t Schouler, Bailments, p. 199. 
 X Civil Code of Louisiana, Art. 3174.
 
 232 The Law of Pledge. 
 
 in the French jurisprudence, and the commentators 
 support it by Article 1188 of the Napoleon Code, 
 which provides that : " The debtor can no longer claim 
 the benefit of the term (of payment), when he has. 
 failed^ or when, by his own act^ he has diminished 
 the securities which he had given by the contract to 
 his creditor."^ 
 
 The source of this principle is the actio pignoratitia 
 contraria^ given to the creditor against the debtor to 
 compel the fulfilment cf the latter's obligations, the 
 converse of the actio ■pignoratitia directa^ given to 
 the debtor against the creditor to compel the fulfil- 
 ment of his obligations. f 
 
 276. Under this rule if the pledgeor has given in 
 pledge a thing which does not belong to him, with- 
 out the authority of the owner, and the pledgee was 
 unaware of the fact, he may rescind the contract and 
 demand immediate payment, or accept some other 
 pledge instead. The security is evidently insufficient 
 if he is exposed to the risk of losing it by the action 
 of the true owner demanding his property. And, 
 even in France, where the true owner can not recover 
 his property wrongfully pledged, under the principle 
 that the possession of personal property, or movables, 
 is equivalent to title, it has been held that the pledgee 
 in such cases has the right to repudiate the pledge on 
 the ground that it is against his conscience to retain 
 property not belonging to his pledgeor; and the 
 
 * Code Napoleon. Art. 1188. 
 t Ulpian, L. 1, Sec. 2, D., D". ingnovatitia actione. 
 Troplong, Xantissement, Sees. 29, 30.
 
 Pledgee Must Take Proper Care of Pledge. 233 
 
 latter can not impose upon him the obHgation of 
 retaining the pledge on the ground that he is secured 
 because the true owner can not recover asainst him 
 his property even though wrongfully pledged. But 
 in all such cases if the creditor had knowledge of the 
 vice or defect in the thing pledged, or if he himself 
 was in bad faith in the transaction, he would be 
 debarred of the right of demanding a new pledge, or 
 of claiming immediate payment of his debt. ''^ 
 
 277. The Common law does not seem to contain 
 the principle by virtue of which the pledgee, deceived 
 in the nature or quality of the pledge, can demand 
 another pledge in its stead or the immediate payment 
 of his debt. Under that system the pledgee is simply 
 relegated in such cases to an action for damages. 
 Judge Story lays down the doctrine in these words: 
 " If the pawn has a defect, unknown to the pawnee, 
 which destroys its value, the Civil law gives him a 
 right of action for another pawn in its stead. This 
 seems highly reasonable ; the Common law, however, 
 gives no such right. But, in such a case, if there is 
 any fraud practised by the pawner, an action for dam- 
 ages will doubtless lie against him, and perhaps, also, 
 the whole contract may, at the option of the pawnee, 
 be rescinded." f 
 
 The later writers of the Common law do not show 
 that the rule has changed since Judge Story's time. 
 
 * Pont, Nantissement, Sec. 1074. 
 
 Laurent, Nantissement, Sec. 440. 
 
 Baudry-Lacantinerie, Nantissement, Sec. 32. 
 
 Pothier, Nantissement, Sees. 57, 58. 
 t Story, Bailments, Sec. 355.
 
 234 The Law of Pledge. 
 
 The sole remedy of the pledgee when fraud has been 
 practised by the pledgeor, is yet to claim damages if 
 he suffers any. But the only damage that the pledgee 
 can suffer from the deficienc}- of his securit}-, is 
 the loss of the money loaned to the pledgeor. His 
 suit for damages amounts, therefore, simpl}' to a suit 
 for the recovery of his debt. If the debtor is solvent, 
 the creditor recovers his mone}- and suffers no dam- 
 age. If the debtor is insolvent, the creditor obtains a 
 judgment for damages, but does not recover his 
 money. The remedy is therefore purely illusive. 
 And if the pledgeor has not been guilty of fraud in 
 giving the pledge, which yet is defective and insuffi- 
 cient, or worthless^ the pledgee has no action for 
 damages. In that case he can only demand the 
 return of the loan when the same becomes due. The 
 position, right and remedy of the pledgee are there- 
 fore the same so far as the security is concerned, 
 whether the pledgeor has been guilty of fraud or not 
 in inducing the pledgee to accept a worthless pledge.
 
 CHAPTER XXI. 
 
 PowER-OF- Attorney to Sell the Pledge not 
 Revoked or Annulled by the Bankruptcy or 
 Death of Pledgeor. 
 
 278. In the event of the bankruptcy or death of 
 the pledgeor, the power of attorne}- given by him to 
 the pledgee, or to some third person in the interest of 
 the pledgee, to sell the pledge, when in default, and 
 satisfy the debt from the proceeds, is not revoked or 
 annulled by the bankruptcy or death of the pledgeor, 
 under the principles of the law of agenc3\ The 
 power of attorney in that case is of the kind known in 
 the Common law as "coupled with an interest," 
 and in the Roman law as that of the procurator' in 
 rem siia?n. It is not under the rule which we have 
 just considered, that the pledgee is not bound to sur- 
 render the pledge to the assignee of the pledgeor. It 
 is under an exception to the rule of the law of agency 
 that the bankruptcy or death of the mandator puts an 
 end to the mandate. 
 
 The procuration, in such case, being given in the 
 interest of the pledgee and for a consideration, forms 
 part of the contract, enters into its obligation, and is 
 no more revocable by the bankruptcy of the man- 
 dator than at his will. In the contract of pledge, 
 when the pledgeor appoints either the pledgee himself 
 or a third person his agent to sell the thing pledged 
 in default of payment, it is precisely in view of the 
 
 235
 
 236 The Law of Pledge. 
 
 pledgeor's insolvency or bankruptcy, or death, that 
 such power of attorney is stipulated for by the pledgee 
 as a consideration for the loan, in order to save him 
 from the consequences of its revocation. 
 
 279. In case of bankruptcy, the Supreme Court of 
 the United States said on this subject : " The position 
 that the pledgee could not sell the pledge after the 
 adjudication in bankruptcy, is quite untenabl-e. It is 
 sustained by nothing in the Bankrupt Act. The bonds 
 were negotiable instruments. They passed by deliv- 
 ery, and even were there no expressed stipulation in 
 the contracts of pledge, that the pledgee might sell 
 on default of the pledgeor, such a right is presumable 
 from the nature of the transaction. Certainly the 
 Bankrupt Act has taken away no right from the 
 pledgee secured to him by his contract." * 
 
 280. The Court of Louisiana, commenting upon 
 the article of the Civil Code of that State which pro- 
 vides that a power of attorney is revoked by the death 
 or insolvency of the mandator, says: "The article 
 was copied from the Code Napoleon and was a prin- 
 ciple equally of the Roman law and of universal juris- 
 prudence. It has been universally held that it did 
 not apply to what, at Common law, are known as 
 powers coupled with an interest, corresponding to 
 those which, in the terminology of the Roman law, 
 made the mandatory a '' ■procurator in rem suam.'' 
 Thus the French Court of Cassation held that a man- 
 date conferred in the interest of the agent as well as 
 
 * Jerome vs. McCarter, 94 U. S. 739.
 
 Power-of-Attorney to Sell Pledge. 237 
 
 of the principal, and as a condition of a contract passed 
 between them, is essentially irrevocable, and is not 
 revoked by the failure of the principal/' * 
 
 And the Court cites in support of its opinion 
 authorities taken equally from the Civil and the Com- 
 mon law, showing the perfect accord of the two great 
 systems on this subject, f so far as the bankruptcy of 
 the pledgeor is concerned. But in case of the death 
 of the pledgeor or mandator, we will see that they are 
 wide apart, on the principle of the kind of 27iterest 
 coupled with the power of attorney, which renders it 
 irrevocable. 
 
 281. As far back as the year 1823, the Supreme 
 Court of the United States, in the well-known case of 
 Hunt vs. Rousmanier's Administrators, said that the 
 power of attorney given by a mortgageor to the mort- 
 gagee to sell the property- mortgaged, for the purpose 
 of paying himself, was not revoked by the death of 
 the mortgageor, because such power of attorney was 
 coupled with an interest. 
 
 In that case Chief Justice Marshall, who delivered 
 the opinion of the Court, drew a very fine distinction, 
 perhaps more subtle than real, between the "interest 
 in the subject on which the power is to be exercised 
 and the interest in that which is produced by the 
 exercise of the power." The substance of the very 
 learned and metaphysical dissertation of the great 
 Chief Justice on that subject is that the power to sell, 
 
 * Renshaw vs. Creditors. 40 La. An. 40. 
 t Allen, Bush & West vs. Nettles, 39 La. An. 791. 
 Jacquet vs. His Creditors, 38 La. An. 863.
 
 238 The Law of Pledge. 
 
 coupled with an interest is only irrevocable by the 
 death of the principal if his title to the property'' had 
 been conveyed to the agent, as in the case of a mort- 
 gage ; but that, if the power of attorney was given as 
 security of the debt^ without conveyance of the title, 
 the interest of the creditor with which the power of 
 attorney is coupled is not such as to survive the 
 mandator. In other words, the conveyance to be 
 made by virtue of the power, if the title is 
 still in the principal, must be in his name, 
 and that can not be done by his ao;ent if he is dead. 
 "The title," says the opinion, " can regularly pass 
 out of the person in whom it is vested only b}' a con- 
 veyance in his own name ; and this can not be 
 executed b}- another for him^ when it could not in law 
 be executed b}' himself. A conveyance in the name 
 of a person who was dead at the time would be a 
 manifest absurdity.' '* 
 
 In that case, the power of attorney was given by the 
 debtor to secure the creditor for sums of money loaned 
 by him. He was authorized to sell two vessels of the 
 debtor and pay himself ; but the vessels were not 
 mortgaged or conveyed to him. In the meantime the 
 debtor died. The Court held that the power died with 
 him, tlie interest of the creditor in it not being such as 
 to render the power irrevocable. 
 
 282. The great authority of Chief Justice Marshall 
 seems tohavebeen the foundation of the American juris- 
 prudence on this point. But there does not seem to be a 
 
 * Hunt vs. Rousnianier's Adm., S Wheaton, 382.
 
 Po\ver-of-Attorney to Sell Pledge. 239 
 
 perfect harmony in that jurisprudence, and there are 
 decisions which dissent from the doctrine estabHshed in 
 the case of Hunt vs. Rousmanier's Administrators, in 
 respect to the kind of interest coupled with the power 
 of attorney necessary to its irrevocabihty. The sub- 
 ject, at all events, is far from being free of confusion 
 and embarrassment. The opinion of the Court in 
 Hunt vs. Rousmanier's Administrators lays down the 
 absolute rule that the interest of the agent must be in 
 the subject itself, not in its proceeds, and that the 
 power to sell must have been preceded or accompa- 
 nied by a conveyance or assignment of the property 
 to the agent; in other words, that unless the legal 
 title is in the agent at the time of the principal's death, 
 the power of attorne}^ is not coupled with such an in- 
 terest as makes it irrevocable. 
 
 283. Judge Story has adopted this doctrine without 
 qualification. Speaking of the revocation of the power 
 of attorney b}- the death of the principal, he says : 
 " The only admitted exception in our law, if, indeed, 
 that properly constitutes an exception, is the case 
 where the power or authority is coupled with an in- 
 terest in the thing actually vested in the agent. The 
 reason of this exception is entirely compatible with 
 the general ground on which the rule is founded. It 
 IS, that the agent, having the legal title in the prop- 
 erty is capable of transferring it in his own name, not- 
 withstanding the death of the principal ; and the death 
 of the principal, therefore, has no operation upon his 
 act. The power given by the principal is, under such
 
 240 The Law of Pledge. 
 
 circumstances, rather an assent or agreement that the 
 agent may transfer the property vested in him free 
 from any equities of the principal, than strictly a power 
 of attorney."' * 
 
 284. It is therefore easy to understand and apply 
 the rule in all cases of pledge where the contract has 
 taken the form of a sale, or where the thing pledged 
 has been assigned to the pledgee, as in the pledge of 
 choses in action, or in the pledge of promissory notes 
 endorsed and delivered by the payee. In all such 
 cases the legal title being in the pledgee, it is evident 
 that the death of the pledgeor will not revoke the 
 power of attorney to sell. But what of the cases in 
 which there is no conveyance or assignment to the 
 pledgee? As a rule he has no legal title or qualified 
 property in the pledge. He has possession, a right of 
 treention and a lien^ but the title remains in the 
 pledgeor. This is elementary. Under the authority 
 of Hunt vs. Rousmanier's Administrators, would his 
 interest, as coupled with his power of attorney to 
 sell, be insufficient to prevent its revocation bv the 
 pledgeor" s death? It may be said that he has an in- 
 terest in the subject itself, the thing pledged, to-w4t : 
 possession, retention and lien ; but the authorities 
 demand more. According to them, he must liave 
 the title in himself, or he can not sell the propert}' of 
 the dead man. It would seem that the dicta in the 
 opinion of Hunt vs. Rousmanier's Administrators 
 have gone too far and should not be taken to the let- 
 
 * Story, Agency, Sec. 4&9.
 
 PowER-OF- Attorney to Sell Pledge. 241 
 
 ter. And it is well to observe that, in that case, the 
 creditor was not in possession of the property which 
 he was empowered to sell, and that the contract with 
 his debtor was one of security, but not a pledge. 
 
 However, the words of Chief Justice Marshall have 
 lost none of their authority and are quoted up to the 
 present day on that subject. * 
 
 285. But the courts have in some cases departed 
 from the rigid rule thus established, that the power 
 of attorney to sell is revoked by the death of the prin- 
 cipal unless the legal title was beforehand in the agent ; 
 and they have held such power irrevocable by death 
 when it had been given for a consideration, in the 
 interest of the agent, even when he had neither the 
 legal title nor the possession, f 
 
 286. The rule of the Civil law is different on this 
 point, and under its principles the power of attorney 
 is not revocable even by the death of the principal, 
 the moment it is given in the interest of the agent and 
 enters into the consideration of the contract. It is in 
 no manner necessary that the legal title of the prop- 
 erty to be sold by the agent be conveyed to him 
 before the death of the principal. The fact is that 
 the Common law tenure of property by legal or 
 equitable title is unknown to the Civil law. The title 
 may be simulated, lawfully or unlawfully, for a legal 
 or illegal purpose, but it is not subject to the distinc- 
 tion created by the Common law. The pledgee, 
 
 * Walker vs. Walker, 125 U. S. 342. 
 t Mechem, Agency, Sec. 241 et seq. 
 Am. and Eng, Ency. of Law, Agency, pp. 445-(i.
 
 242 The Law of Pledge. 
 
 therefore, who holds the pledgeor's power of attorney 
 to sell the pledge in default of payment, is in no 
 way impeded or prevented from doing so by the death 
 of the pledgeor, as his mandate is irrevocable to all 
 intents and purposes. And even the creditor who has 
 no pledge, or possession, or lien, if he hold the power 
 of attorney to sell by virtue of a single contract of 
 security, but for a consideration, may sell after the 
 debtor's death, the mandate being irrevocable in that 
 case also. The question of lien, or preference over 
 creditors is, of course, pretermitted under such cir- 
 cumstances. 
 
 287. Troplong states the principle in these terms: 
 " There are powers of attorney which are irrevocable. 
 Such is the case of the procurator in rem suain.'''' 
 And he cites the words of Casaregis : ' ' Tale ina)i- 
 datiitn revocari no n potest nee tacite per mortem^ uec 
 per expressani revocationeniy * 
 
 And again : " It is not always necessary that there 
 should be an agreement to the effect that the mandate 
 should survive the mandator. For instance, if Peter 
 empowers you to collect certain sums of money due 
 him, with the stipulation that you employ those sums 
 to pay yourself the debt he owes you, this mandate 
 shall not be revoked by the death of Peter ; and his 
 heirs shall be bound to allow its continuation. And 
 such is the case whenever the mandate is the condi- 
 tion of a contract, or the means of executing an 
 obligation. "f 
 
 * Troplong, Du Mandat, Sec. 718. 
 t Id., Ibid., Sec. 737.
 
 PowER-OF- Attorney to Sell Pledge. 243 
 
 288. The French courts have appUed the rule in 
 several instances, whether the mandate was to collect 
 sums of money, or to sell property of the mandator 
 and with the proceeds to pay the debt due by him to 
 the mandatary.* This is the very case of the creditor 
 in a contract of security in which the Court in Hunt 
 vs. Rousmanier's v-^dministrators decided that the 
 interest of the creditor as coupled with the power of 
 attorney was not such as to render it irrevocable. 
 
 289. The Court of Louisiana has also applied the 
 rule of irrevocability of the power to sell the pledge 
 after the death of the pledgeor, in a case where the 
 pledge was created by statute in favor of the con- 
 signee by bill of lading. The Court said : '' Here 
 we have an explicit provision that the mere fact of 
 consignment evidenced by bill of lading shall operate 
 a perfect and instantaneous pledge, with the absolute 
 right in the consignee to sell and pay his debt with 
 the proceeds, subject to no limitation except in favor 
 of existing privileges, which means privileges existing 
 prior to the consignment- It is impossible to conceive 
 how the death of the consig-nor after the consignment 
 could defeat such clear and perfect vested rights con- 
 ferred by the law itself. The proposition is really not 
 worthy of further consideration. "f 
 
 * Sirey, 50, II, IGl. 
 
 Rogron, Code Civil, Art. 2003, p. 2610. 
 t Allen, West & Bush vs. Nettles, 39 La. An. 791-2.
 
 CHAPTER XXII. 
 The Pledge is by Its Nature Indivisible. 
 
 290. The pledge, like the mortgage, is indivisible. 
 Every portion of the thing pledged secures every 
 portion of the debt. The pledgeor, therefore, can 
 not, after paying part of the debt, demand the return 
 of part of the securities^ even if what would remain 
 in the hands of the creditor would be more than suffi- 
 cient to pay the balance of the debt. The conse- 
 quence of such indivisibility is that, if the pledgeor 
 dies during the existence of the pledge, and one of 
 his heirs pay his proportionate share of the debt, he 
 is not entitled to the surrender of a corresponding 
 part of the pledge. The whole pledge, in that case, 
 will still secure the balance of the debt due by the co- 
 heirs. This is provided for by the Code Napoleon, 
 the various Civil Codes of the countries of continental 
 Europe and the Civil Code of Louisiana."^ 
 
 291. In the latter State the statute prescribes that, 
 when several things have been pawned, the owner can 
 not retake one of these without satisfying the whole 
 debt, thougli he offers to pa}- a certain amount of it 
 in proportion to the thing which he wishes to get. 
 And the provisions of the Civil Code carry the rule 
 still farther and state that the pawn can not be divided 
 
 * Code Napoleon, Art. 2083. 
 Civil Code of Louisiana, Arts. 3163, 317L 
 Concordance des Codes, by De St. Joseph, p. 2083. 
 :!45
 
 246 The Law of Pledge. 
 
 notwithstanding the divisibilit}- of the debt between 
 the heirs of the debtor and those of the creditor. The 
 debtor's heir, who has paid his share of the debt, can 
 not demand the restitution of his share in the pledge 
 so long as the debt is not fully satisfied. And respec- 
 tively the heir of the creditor, who has received his 
 share of the debt, can not return the pledge to the 
 prejudice of those of his co-heirs who are not satis- 
 fied.^ 
 
 292. This principle being of the nature but not of 
 the essence of the contract of pledge, the parties may 
 provide differently by the agreement. f 
 
 293 . The principle of the indivisibility of the pledge, 
 so well established by the Civil law, has been recog- 
 nized by courts of Common law in maintaining the 
 right of the pledgee to refuse to return some of the 
 collateral securities to the pledgeor until the whole 
 debt was paid. But the subject does not seem to 
 have been of much interest to the law writers of 
 this country, and the American jurisprudence is 
 meagre in regard to it.]t Yet the matter is of great 
 importance. The contrary rule would impair the 
 rights of the pledgee very seriously. It would vio- 
 late the very letter of the law of pledge in countries of 
 Civil law, and its very spirit in countries of Com- 
 mon law. 
 
 * Morris vs. Sheriff, 30 La. ^Vn. 1314. 
 
 Bagley vs. Sheriff, 10 Rob. La. 45. 
 
 Pepper vs. Dunlap, 16 La. 103. 
 t Laurent, Droit Civil, Vol. 28, p. 499, Sec. 503. 
 
 Troplong, Nantissement, Sees. 480, 481. 
 t Bank vs. Laird, 2 Wheat. 390. 
 
 Elder vs. Rouse, 1.5 Wind. 218. 
 
 Baldwin vs. Bradlev, (39 111. 32.
 
 CHAPTER XXIII. 
 
 What Debt is Secured by the Pledge. 
 
 294. In the contract of pledge, as in all contracts, 
 it is the consent of the parties, their intention as to 
 the subject of the agreement, which makes the con- 
 tract. The pledge, therefore, only secures the partic- 
 ular debt of the pledgeor which he and the pledgee 
 together intend to secure. In consequence of this 
 principle, if during the existence of the pledge, the 
 pledgeor becomes indebted to the pledgee on some 
 other account, the latter has no right to retain the 
 securities after the first debt is paid, or affect the same 
 securities to the payment of the new debt. This is 
 firmly established by the Common law jurisprudence 
 in the United States and by the Civil law jurispru- 
 dence of the State of Louisiana. In such case the 
 pledgee has no lien or right of retention originally 
 created by the pledge, left to him, and his further 
 detention of the security is unwarranted and unlaw- 
 ful. At the same time, as it is a matter of contract 
 between the parties, they may agree that the securi- 
 ties in the hands of the pledgee will be a continuous 
 pledge ; that they will secure any balance of account 
 due by the pledgeor ; that they will secure future in- 
 debtedness of the latter. In all such stipulations there 
 may not be any disturbance, or removal and replace-
 
 248 The Law of Pledge. 
 
 ment of the pledge in the hands of the pledgee. The 
 a<£reement suffices. * 
 
 295. Again, the parties may have contracted under 
 the dominion of certain tegislaticn or certain custom, 
 by which the pledge is made to secure other debts 
 than the particular one for which the pledge was first 
 given, such as the case of a balance of account due a 
 banker. In all such instances, the consent of the 
 pledgeor to the extension of the pledge is either ex- 
 pressed or presumed. The statute in that case is read 
 into the contract, or the custom implied into the 
 agreement between the pledgeor and pledgee. The 
 intention of the contracting parties is then, in case of 
 contestation, either proved or presumed. 
 
 Such principles are common to contracts in gen- 
 eral.f 
 
 296. The retention of the pledge after payment of 
 the original debt, for the purpose of securing a subse- 
 quent debt, without the consent, expressed or implied, 
 of the pledgeor, would be so clearly a gross violation 
 
 * Union National Bank vs. Siocoinb, 34 La. An. 927. 
 
 Billet vs. Woods, 24 La. An. 193. 
 
 Marcade, Explication of Code Napoleon, Vol. 4, Xo. 77S. 
 t County vs. Huchburger, 46 111. App. 518. 
 
 Searigtit vs. Bank, Pa. Sup., 29 An. 783. 
 
 Bank vs. Harris, 26 Md. An. 523. 
 
 Bank vs. Hanson, 51 Neb. N. W. 1035. 
 
 Hardie vs. Wright, 18 Tex. S. W. 615. 
 
 .Tarvis vs. Rogers, 15 Mass. 389. 
 
 .Schiffer vs. Feagin, 51 Ala. 335. 
 
 Woolley vs. Banking Co., 81 Kv. 527. 
 
 Loyd vs. Bank, 86 Va. 690. 
 
 •Bank vs. Loeb, 27 La. An. 110. 
 
 Burnap vs. Bank, 96 N. Y. 125. 
 
 Adams vs. Sturges, 55 111. 468. 
 
 Laloire vs. Wiltz, 31 La. An. 436 
 
 Bank vs. AViltz, 31 La. An. 244. 
 
 .Jones, on Fledges, Sec. 354 et seq.
 
 What Debt is ^Secured by the Pledge. 249 
 
 of the ng"hts of the latter that it -would give rise to a 
 claim for damages against the pledgee.* 
 
 297. In France and in the other countries of con- 
 tinental Europe which followed its legislation after 
 the promulgation of the Code Napoleon, the rule is 
 different, and the security in the hands of the pledgee 
 will secure a subsequent debt of the pledgeor, under 
 certain circumstances, without any agreement or 
 understanding to that effect. The agreement or 
 understanding, on the contrar}', would be necessary 
 to prevent it from being so. The article of the Code 
 Napoleon which provides for diis continuing effect 
 of the pledge in favor of the pledgee makes it a 
 condition of it that the second debt should be con- 
 tracted posteriorly, and be due anteriorh*, to the first 
 debt. The Code Napoleon states that if there existed 
 from the same debtor in favor of the same creditor, 
 another debt contracted subsequently to the pledge 
 and exigible before the payment of the first debt, the 
 creditor would not be obliged to surrender the pledge 
 before being fully paid the amount of both debts ^ 
 even if there had been no stipulation to affect 
 the pledge to the payment of the second debt.f 
 But the subtle reasoning of the Civilians has 
 raised a very nice and curious question on this point. 
 The Code Napoleon, as we see, provides that if it 
 exists from the same debtor to the same creditor 
 another debt contracted after the pledge and exigible 
 
 * Bank vs. Loeb, 27 La. An. 110. 
 
 Romero & Bayard vs. Newman, 50 La. An. SO. 
 
 .Tarvis vs. Rogers, 15 Mass. 389. 
 
 Baldwin vs. Bradley, 69 111 32.. 
 
 Jones, on Pledges, Sec. 3.5(). , 
 
 Senecal vs. Bauze, House of Lords, Appeal cases, 1888-89, p. G37. 
 t Code Napoleon, Art. 2082.
 
 250 The Law of Pledge. 
 
 before the first debt, the creditor shall not be obliged 
 to ■part with the secttrity before beiiig fully paid both 
 debts. Does this mean that the pledgee has against 
 the other creditors both the hen and the right of re- 
 tention, or either of them only, or neither of them at 
 all? Laurent is of the opinion that the article gives 
 the pledgee no lien or right of preference for the 
 second debt, and he denounces the opposite doctrine 
 as destructive of the principles of the Code. Mour- 
 lon, a more recent commentator, on the contrary, 
 supports the theor\' that the pledgee has, by virtue of 
 the article, the same lien for the second debt that he 
 has for the first. But Troplong is of the opinion 
 that the right of retention to secure the second debt 
 can not affect the other creditors of the pledgeor.* 
 
 298. This feature of the French and modern Civil 
 law is taken from the Roman law, as established by 
 an edict of Emperor Gordian. But the Roman law 
 went even farther than the French law, which in that 
 respect did not follow its guide to the end. The 
 edict of Gordian orranted the right of retention to the 
 pledgee without regard to the origin of the second 
 debt, and whether it was contracted after or before 
 the pledge. The reason giv'en for such a rule is that 
 the pledgeor, still owing the second debt, could not, 
 without bad faith, demand the return of the pledge. 
 Propter exceptionem doli niali, says Gordian. Cujas, 
 
 * Laurent, Droit Civil, Vol. 28, Sec. .508. 
 Mourlon, Examen Critique, No. 227. 
 Troplong, Nantissement, Sec. 4G1. 
 <„^ode Napoleon, Art. 2082.
 
 What Debt is yECUEED by the Pledge. 251 
 
 the great oracle of French jurisprudence of the six- 
 teenth century, adopted this doctrine and joined in 
 words of severe condemnation of the pledgeor who 
 would have his property returned to him under such 
 circumstances.'^ 
 
 The reason of the French law is given in the report 
 of the discussions of the framers of the Code Napoleon. 
 That reason is principally based upon the presuniptio)! 
 that the pledgee consented to the second debt on con- 
 dition that it would be secured b}' the pledge, and that 
 the pledgeor agreed to it. This is why a debt of the 
 pledgeor contracted before the pledge does not enter 
 into the provision of the law. And again, the second 
 debt must be exigible before the payment of the first, 
 because the parties are also presumed to have con- 
 tracted in view of the return of the pledge on payment 
 of the debt first contracted. The law is, therefore, 
 based upon the presumed consent of both parties that 
 the pledge should secure the second debt ; which is 
 the fundamental principle governing all contracts. So 
 much so, that the parties may, by agreement, provide 
 differently, and stipulate that the second debt shall not 
 be secured by the pledge. In default of such stipula- 
 tion, they contract under the dominium of the article 
 of the Code, which, in case of their silence, is read 
 into the contract. f 
 
 * Code of Justinian, Vol. 3, Title XXVIL 
 
 Troplong, Xantissement, Sec. 462. 
 
 /d., Des Hypotheques, Vol. 1, Sec. 250. 
 
 Grenier, Des Hypotheques, Vol. 1. Sees. 298, 314. 
 t Laurent, Droit Civil, Sees. 504, 505.
 
 CHAPTER XXIV. 
 
 The Pledgee Can Not, Even by Previous Agree- 
 ment, Appropriate the Pledge to Himself. 
 
 299. It is a fundamental principle of the Civil law, 
 well established in the old Roman jurisprudence and 
 introduced in the modern legislation of Continental 
 Europe, that no agreement between pledgeor and 
 pledgee, by which the latter would, for non-payment 
 of the debt, become the owner of the thing pledged, 
 is valid and enforceable in law. The forbidding pro- 
 vision is found in Art, 2078 of the Code Napoleon, 
 and in Art. 3165 of the Civil Code of Louisiana. 
 
 The clause in question, which the French law 
 writers speak of as the pacte co'niniissoire of the 
 Rom-ans, is commented upon b}- them with great 
 severity. Troplong says of it: "This pact is marked 
 by excessive harshness. Almost ever the thing given 
 in pledge is of superior value to the debt, and it is 
 only in yielding to the moral constraint of necessity 
 that the debtor consents to submit to the rigorous 
 obligation of abandoning to the creditor that thing 
 which is worth more than he owes. Such a clause is 
 immoral : contra bonos mores. It is oppressive ; it is 
 the abuse of the strong party over the weak one ; it 
 is an odious speculation by the person who has money 
 over the one who needs it.'' * 
 
 * Troplong, Nantissement, Sec. 379. 
 
 253
 
 254 The Law of Pledge. 
 
 300. It was known in the Roman law as the lex 
 co7nmissoria. That was the pact or clause inserted in 
 the contract of pledge, by virtue of which the thing 
 pledged, in case of non-payment by the debtor, 
 became the property of the pledgee. Constantine 
 prohibited it when he contrived with great solicitude 
 to improve the morals of tiis people, considering this 
 stipulation in the pledge as cojitra boiios mores, 
 because it facilitated usury and placed the borrower 
 at the mercy of the creditor. This prohibition has 
 been introduced generally into the countries of modern 
 Civil law. The Code Napoleon provides for It in 
 these terms: "The creditor can not, in default of 
 payment, dispose of the pledge ; reserving to him to 
 have it ordered by the Court that the thing will remain 
 with him in payment and up to the amount of the 
 debt, by an appraisement made by experts ; or that 
 it will be sold at public auction. 
 
 "Any clause which would authorize the creditor to 
 appropriate the pledge to himself, or to dispose of it 
 without the aforesaid formalities, is null." 
 
 The countries of Continental Europe have adopted 
 the same rule of prohibition."^ 
 
 301. As to the State of Louisiana, it may now be 
 doubtful whether the clause in question is still for- 
 bidden by its statute. The prohibitive article of its 
 
 * Code Napoleon, Art. 207S. 
 Pothier, Nantissement, Sec. 18. 
 Troplong, Nantissement, See. 377 et seq. 
 De St. Joseph, Concordance des Codes Civiles, p. 109. showing 
 
 uniformity of the taw of Continental Europe on this point. 
 Merlin. Repertoire, verbo Gage.
 
 Pledgee Can Not Appropriate the Pledge. 255 
 
 Civil Code, enacted in the year 1870^ is in the same 
 words as that of the Napoleon Code from which it 
 was taken. The last parao^raph of the article reads 
 thus: "Any clause which should authorize the 
 creditor to appropriate the pledge to himself, or dis- 
 pose thereof without the aforesaid formalities, shall be 
 null." 
 
 But^ in 1872, a law was passed, amending the 
 article in these terms : " But in all pledges of movable 
 property, or rights, or credits, stocks, bonds, or other 
 movable property, it shall be lawful for the pledger to 
 authorize the sale or other disposition of the property 
 pledged^ in such manner as may be agreed upon by 
 the parties, without the intervention of the courts of 
 justice ; -provided^ that all existing pledges shall 
 remain in force and be subject to the provisions of 
 this act."* 
 
 Under the provisions of this law, it is the common 
 practice now in Louisiana, to stipulate in all acts of 
 pledge that the pledgee shall have the right, in case 
 of non-payment, to sell the pledge at public or pri- 
 vate sale, with or without notice, to buy it in, and so 
 forth. The validity of such stipulations has never 
 been doubted. But could the pledgee, by virtue 
 of the law which makes it lawful for the pledgeor 
 to authorize the sale or other disposition of the 
 thing pledged, stipulate that it shall become his prop- 
 erty without sale and without appraisement, though 
 its value vi\,\y be greater than the amount of the debt, 
 
 * Civil Code of Louisiana, Art. 31G5. 
 Acts of the Legislature of Louisiana of 1872, p. 3G.
 
 266 The Law of Pledge. 
 
 as is ordinarily the case? This question has yet to be 
 answered. It is likely to be answered in the negative. 
 The prohibition contained in the article of the Civil 
 Code of Louisiana is one of public order, as we have 
 seen. The Act of 1872 can not be presumed to have 
 been leveled at it, in providing that it shall be lawful 
 for the pledgeor to authorize the sale or other dis- 
 position of the property pledged in such manner as 
 may be agreed upon by the parties without the inter- 
 vention of courts of justice. Such an indirect and 
 implied re-establishment of the obnoxious pact or 
 lex commissoria would be against all the rules of 
 legislation. 
 
 302. The Common law has adopted from the Civil 
 law the wise and humane principles of the edict of 
 Constantine prohibiting the lex commissoria, the stipu- 
 lation in the contract of pledge by which, in default 
 of payment, the thing pledged shall become ipso 
 facto 'the property of the pledgee, and that the 
 pledgeor shall not have the right to redeem. 
 
 In this respect, the two systems seem to be on a 
 par. Judge Story says: " If a clause is inserted in 
 the original contract providing that, if the terms of 
 the contract are not strictly fulfilled at the time 
 and in the mode prescribed, the pledge shall be irre- 
 deemable, it will be of no avail. For the Common 
 law deems such a stipulation unconscionable and void 
 upon the ground of public policy, as tending to the 
 oppression of debtors. "^^ 
 
 * Story, on Bailments, Sec. 345.
 
 Pledgee Can Not Appropriate the Pledge. 257 
 
 Chancellor Kent expresses the same views and says : 
 ■" Every agreement preventing the right of redemption 
 in mortgage of chattels, as of lands, w^ould no doubt 
 be equally condemned in the English law." He says 
 so in speaking of the contract of pledge and of the 
 abolishment of the lex commissoria by Constantine. '^ 
 
 Mr. Jones is more positive in his opinion on the 
 subject, and expresses it authoritatively in these 
 words: "A right of redemption attaches to every 
 pledge. This right is a part of the contract, whether 
 it be express or implied, and the parties can make no 
 valid agreement that there shall be no redemption 
 after default. ' Once a mortgage always a mort- 
 gage,' is one of the most important maxims in the 
 law of mortgages. With a change of terms it is 
 equall}' applicable in the law of pledges. ' The right 
 of redemption attaches equally to both^ and it is as 
 difficult to transmute the one as the other into a sale 
 by the operation of the original contract. Though 
 anciently at Rome the creditor and debtor were per- 
 mitted by the lex commissoria to make an agreement 
 at the date of the pledge whereby it would, on a pre- 
 scribed contingency, become the absolute property of 
 the pawnee ; such a power was not indulged, even at 
 Rome, since the days of Constantine^ who abolished 
 the law by which it had been sanctioned. Every 
 agreement for preventing redemption of pawns is 
 proscribed by the Common law as emphatically as 
 are similar aj^reements in mortora2res of real estate.' 
 
 * Kent, Comm., Vol. 2, Sec. 5S3.
 
 258 The Law of Pledge. 
 
 Therefore, if in a, written or verbal contract of pledge 
 it is stipulated that the property shall be absolutely 
 the property of the pledgee if the debt be not paid 
 at a time stipulated, the right to redeem exists not- 
 withstanding the agreement of the parties. The law 
 recognizes no agreement to prevent a redemption of 
 the pledge. Any contract which is a pledge in the 
 beginning continues a pledge until the debt is paid, 
 or the right of redemption is foreclosed.''* 
 
 303. It is to be observed, however, that both by 
 the Civil and the Common law, the pledgeor can val- 
 idly agree after the debt has become due^ that the 
 pledgee may keep the property as his own in pay- 
 
 ' ment of the debt. The transfer of property in such 
 cases takes place by virtue of an agreement subsequent 
 to and independent of the original contract of pledge. 
 The debtor is then no longer under the pressure of 
 necessity and constrained to submit to the exacting 
 conditions of the creditor in apph'ing for a loan of 
 monc}'. He is acting freely and presumed to be mak- 
 ing no sacrifice of his property. f 
 
 304. The doctrine established by the abolishment 
 of the lex coiiimissoria of the Roman law, and by 
 the prohibition of the modern Civil law of any agree- 
 ment in the contract of pledge by which, in default of 
 payment, the pledge would become the property of 
 the pledgee, has been declared to be part of the Com- 
 
 * Jones, on Pledge?. See. 553. 
 
 t Troplong, Xantissenient. Sec. 403. 
 
 Laurent, Vol. 28. Sec. 520. 
 
 Story, Bailments, Sec. 345. 
 
 Jones, on Pledges, Sec. 555.
 
 Pledgee Can Not Appropriate the Pledge. 259 
 
 mon law, in the same manner, on the same princi- 
 ples and for the same reasons. The Supreme Court 
 of the United States has said on this subject: " It is 
 also an established doctrine that an equity of redemp- 
 tion is inseparably connected with a mortgage ; that is 
 to say, so long as the instrument is one of security, 
 the borrower has, in a court of equity, a right to 
 redeem the property upon payment of the loan. This 
 right can not be waived or abandoned by any stipula- 
 tion of the parties made at the time, even if embodied 
 in the mortofasfe. This is a doctrine from which a 
 court of equity never deviates. Its maintenance is 
 deemed essential to the protection of the debtor, who, 
 under pressing necessities, will often submit to ruinous 
 conditions, expecting or hoping to be able to repay 
 the loan at its maturity, and thus prevent the condi- 
 tions from being enforced and the property sacri- 
 ficed." 
 
 305. The Court in the same case recognized also 
 the corollary of the rule, which is that the debtor may, 
 by a subsequent transaction, under certain circum- 
 stances and for a proper consideration, transfer the 
 property to the creditor in payment of the debt. The 
 Court said on this point : 
 
 "A subsequent release of the equity of redemption 
 may undoubtedly be made to the mortgagee. There 
 is nothing in the policy of the law which forbids the 
 transfer to him of the debtor's interest. The transac- 
 tion will, however, be closely scrutinized, so as to 
 prevent any oppression of the debtor. Especially is
 
 260 The Law of Pledge. 
 
 this necessar}', as was said on one occasion by this 
 Court, when the creditor had shown himself read}' 
 and skilful to take advantage of the necessities of the 
 borrower (^Russell vs. Southard,, supra). Without 
 citing the authorities, it may be stated as conclusions 
 from them that a release to the mortgagee will not be 
 inferred from equivocal circumstances and loose ex- 
 pressions. It must appear bv a writing importing in 
 terms a transfer of the mortgagor's interest, or such 
 facts must be shown as will operate to estop him from 
 asserting any interest in the premises. The release 
 must also be for an adequate consideration ; that is to 
 say, it must be for a consideration which would be 
 deemed reasonable if the transaction were between 
 other parties dealing in similar property in its vicinity. 
 Any marked undervaluation of the property in the 
 price paid will vitiate the proceeding." * 
 
 This doctrine is carried so far that the subsequent 
 release by the mortgagor of his equity of redemption 
 is always looked upon with suspicion by the courts, f 
 
 * Peugh vs. Davis, 9t} U. S. 337. 
 
 Russell vs. Southard, 12 How. l.SO. 
 t Pritchard vs. Elton, 38 Conu. 434. 
 
 Jones, on Mortija^es. Vol. 1, Sec. '
 
 CHAPTER XXV. 
 
 Right of the Pledgee to Cause the Pledge to 
 BE Sold, or to Sell it Himself. 
 
 306. The ultimate object and purpose of the con- 
 tract of pledge are that, in default of payment by the 
 pledgeor, the thing pledged should be sold to pay the 
 creditor. The sale is necessary because, by default 
 of payment or redemption, the pledge does not 
 become the property of the pledgee. He has only a 
 lien on it. There must be a foreclosure of the pledge 
 to pass the ownership of the thing, either to the 
 pledgee himself or to any other purchaser. 
 
 When and where legislation does not prescribe the 
 mode of sale, the parties may, by their agreement, tix 
 the manner, terms and conditions of the sale. 
 
 In France and in the Civil law countries of Conti- 
 nental Europe, which have followed the legislation of 
 the Napoleon Code, the foreclosure of the pledge 
 must be by judicial sale, and it must be preceded by 
 a judgment in favor of the pledgee. But the pledgee 
 is not compelled, in proceeding against the pledgeor, 
 to demand the sale ; he may choose to demand that 
 the pledge should become his property by decree of 
 Court, on an appraisement made by experts appointed 
 by the judge, the surplus value, if any, in that case to 
 be paid by the pledgee to the pledgeor.'^ 
 
 * Napoleon Code. Art. 2678. 
 Troplong, Nantisseuient, Sec. 400. 
 
 261
 
 2G2 The Law of Pledge. 
 
 Such is the law of those countries for the pledge 
 securing ordinary obligations, outside of commercial 
 transactions. But for the sale or foreclosure of com- 
 mercial pledges it is not necessary for the pledgee to 
 proceed by suit and judgment against the pledgeor. 
 The codes of commerce of those countries provide for 
 a speedy sale of the securities without judicial pro- 
 ceeding. This will be the subject of a subsequent 
 chapter. 
 
 307. In the State of Louisiana the parties may 
 agree in the act or deed of pledge that the creditor 
 on default of payment shall have the right to sell the 
 pledge, or cause it to be sold, at private or public 
 sale, with or without notice to the pledgeor ; that the 
 pledgee may be, for that purpose and to that effect, 
 appointed by the pledgeor his agent to sell, and that 
 the pledgee may himself buy the pledge for his own 
 account. The orreatest latitude is ^iven to the riorht of 
 the parties to fix their own terms of the agreement. In 
 that case, as we said before, the power of attorney 
 given the pledgee, being coupled with an interest, is 
 not revocable. It is that of the procAirator in rem 
 suamJ^ 
 
 308. Mr. Jones, in his book on Pledges, has com- 
 mitted a great mistake in saying that, in Louisiana, 
 the pledgee is compelled to obtain judgment against 
 the pledgeor before selling the pledge, and that then 
 it must be sold as in cases and with the formalities of 
 judicial sales, f 
 
 * Kenshaw vs. Creditors, 40 La. An. 37. 
 t Jones, on Pledges, Sec. G21.
 
 Right of Pledgee to Sell Pledge. 263 
 
 Such was the law in that State b}^ the Civil Code 
 of the year 1870, cited by that distinguished writer. 
 And this shows the danger of stating in treatises the 
 statutory law of a State without verification of the 
 latest amendments. The book of Mr. Jones was pub- 
 lished in 1883. The article of the Louisiana Civil 
 Code 1870, cited by him, was amended in 1872 by an 
 act of the Legislature making it ' ' lawful for the pledgeor 
 to authorize the sale or other disposition of the prop- 
 erty pledged, in such manner as may be agreed upon 
 by the parties without the intervention of courts of 
 justice." * It is the common practice now in Louisi- 
 ana for the pledgee to sell the pledge, under the pro- 
 visions of the law of 1872, without having recourse to 
 the courts and without getting a judgment against the 
 pledgeor. f 
 
 309. Mr. Edwards, in the third edition of his 
 treatise on Bailments, published in 1893, commits the 
 same error and states that, in Louisiana, " the pawnee 
 can not, on failure of payment, dispose of the pledge ; 
 but must apply to a judge to order that the thing shall 
 remain to him in payment for as much as it shall be 
 valued at by two appraisers, or that it shall be sold at 
 public auction, at the choice of the debtor; and ever)- 
 agreement authorizing the creditor to appropriate the 
 pledge to himself, or to dispose of it without such for- 
 malities, is void. In the other States, where the 
 Common law prevails, the pawnee is allowed to sell 
 at his discretion, being held responsible, at his peril, 
 
 * Acts of Legislature of Louisiana of 1872, p. 36. 
 t Union Bank vs. Forsyth, So. Rep., Vol. 23, p. 917.
 
 264 The Law of Pledge. 
 
 to deal fairly and justl}^ with the pledge. The differ- 
 ence between the Civil and the Common law in this 
 respect is modal ; it barely touches the essential 
 rights of the parties under the contract. The Civil 
 law assumes the direction of the proceeding, working 
 a foreclosure ; and the Common law gives a remedy' 
 for any violation of its principles, in a like proceed- 
 mg. ^ 
 
 Mr. Edwards, in this statement of the law of Lou- 
 isana, is guilty of a double mistake. First, he cites, 
 and we might say quotes, an article of the Civil Code 
 of that State, promulgated in the year 1825, and 
 which was superseded bv the Revised Civil Code of 
 1870. In the law of 1870, the pledgee could not 
 demand that the thing pledged should remain to him 
 in payment for as much as it should be valued at by 
 two appraisers ; but was limited to the right of demand- 
 ing that the thing be sold at public auction. The law 
 of 1870 itself was amended, as we have just shown, 
 by a statute of 1872, which puts the law of Louisiana 
 on this point upon the same level as the statutory law 
 of most of the States of the Union, to-wit : That the 
 parties in the contract of pledge may stipulate that the 
 thing pledged may, on default of payment, be sold or 
 disposed of in any manner and on any terms chosen 
 by themselves. It is true that the Civil law prevails 
 in Louisiana in what concerns persons, things, suc- 
 cessions, donations, conventions, obligations or con- 
 tracts, privileges, mortgages and prescriptions. But 
 
 * Edwards, on Bailments, Sec. 280.
 
 Right of Pledgee to Sell Pledge. 205 
 
 its Commercial law is substantially the same as the 
 Common law of England, as adopted in this countiy, 
 and is mostly unwritten and established by custom. 
 And in its law of pledge, in particular, at the same 
 time that it has retained the most important and con- 
 servative provisions of the Civil law, it has set aside all 
 such restrictions as could impede the course and prog- 
 ress of commercial transactions. 
 
 Such unguarded statements of the statutory law of 
 a State as are made by both Mr. Jones and Mr. 
 Edwards necessarily lead their readers into fatal errors, 
 and are a blemish upon their works, the more to be 
 regretted that these writers have displayed in their 
 books considerable learning and taken very great 
 pains in the discussion and exposition of their subject. 
 
 310. At Common law, and in the absence of an 
 agreement of the parties for a private sale, where 
 such an agreement is permissible, the modern rule is 
 that, on default of payment, the pledgee has the right 
 to cause the pledge to be sold at public auction, with- 
 out judicial process or decree, after giving the pledgeor 
 proper and reasonable notice of the intended sale. 
 This right of the pledgee to sell is inherent in him, 
 as the same right to foreclose the mortgage is inhe- 
 rent in the mortgagee. The law will presume that such 
 was the understanding of the parties at the time of the 
 formation of the contract of pledge, in default of an 
 express agreement.* 
 
 Am. and Eng. Ency. of Law, A^ol. 18, p. 668. 
 Jerome vs. McCarter, 94 U. S. 734.
 
 CHAPTER XXVI. 
 
 Right of the Pledgee to Buy the Pledge at 
 Pdblic or Private Sale. 
 
 311. The pledgee ma}- be the purchaser of the 
 thing pledged, either at public or private sale. If the 
 sale is made by order of Court, at public auction, by 
 foreclosure of the pledge, the pledgee has the same 
 right to bid and buy in the pledge as the mortgagee, 
 in the same circumstances, has the right to bid and 
 buy in the mortgaged property. In such judicial 
 sales the Court is the vendor. If the pledge is sold 
 at private sale the pledgeor is the vendor. In that 
 case, for the purpose of effecting the sale, he may em- 
 ploy an agent, and he may^ in the act of pledge, ap- 
 point the pledgee himself his agent to sell on default 
 of payment. Such is now the custom in the United 
 States in commercial transactions of pledge ; the 
 pledgeor constitutes and appoints the pledgee his agent 
 for the purpose of selling the pledge if the debt is not 
 paid at maturity ; and, in many acts or deeds of pledge, 
 it is specially provided that the pledgee shall have the 
 right to buy the securities himself, at the market rate, 
 even at private sale. In that case we have the anom- 
 alous fact of one person acting in the double capacity 
 of vendor and vendee. There is, therefore, in the 
 transaction apparently no union of two minds, no 
 aggregatio uientijuii, necessary' to form a contract. 
 But the sale and purchase in that case are only the
 
 268 The Law of Pledge. 
 
 execution of the contract of pledge, in which the 
 minds of the contracting parties have met before. 
 The subsequent fact of the sale has been anticipated 
 i« that contract and the terms and conditions of the 
 sale have been agreed upon and fixed in advance. 
 The contract of pledge then is, at the same time, a 
 contract of conditional sale. 
 
 312. When the pledgee is the agent of the pledgeor 
 to sell, he comes clearly under the rule that the agent 
 appointed to sell- can not purchase the propert}' of 
 his principal, without the latter' s consent. To enable 
 the pledgee, therefore, to become himself the pur- 
 chaser of the securities, at public or private sale, it is 
 necessary that the pledgeor should have consented to 
 it. When tlie pledgee has, in the act of pledge, 
 stipulated for the right to buy the pledge, even if it is 
 sold by himself, there is no question that such agree- 
 ment is valid and binding upon the pledgeor.* 
 
 313. When the sale is made through an agent of 
 the pledgeor, appointed in the act of pledge as the 
 agent of both parties, the objection may be raised 
 that the same person can not be the agent of parties 
 having a conflicting interest. The biblical precept 
 may be quoted in that case, that no one should serve 
 two masters at the same time. Under that rule it 
 has been held that the vendor and the purchaser can 
 
 * Mechem, on Agency, Sees. 461. 4156. 
 Wharton, Agency, Sees. 232, 235. 
 Marsh vs. Whitniore, 21 Wall. 178. 
 Bain vs. Brown, .56 X. Y. 285. 
 Tewsbury vs. Sprirance, 75 111. 187. 
 Am. and Eng. Ency. of Law, Vol. 1, pp. 375-6.
 
 Right of the Pledgee to Buy the Pledge. 269 
 
 not be represented by the same agent, nor the insurer 
 and the insured, nor the co-heirs in a partition suit or 
 licitation. 
 
 But the objection to the same agent for two princi- 
 pals having conflicting interests only exists when they 
 do not know that they have the same agent. If they 
 appoint the agent jointly, knowingly and for purposes 
 of their own, neither of them can afterward complain 
 of the joint or double agency, nor of the acts of the 
 common agent legall}^ done.* 
 
 * Mecheni, Agency, Sec. 67. 
 Rice vs. Wood, 113 Mass. 133. 
 Fitzsimmons vs. Exp. Co., 40 Ga. 330. 
 Joslin vs. Cowee, 56 N. Y. 626. 
 Robinson vs. Jarvis, 25 Mo. App. 421.
 
 CHAPTER XXVII. 
 Commercial Pledges. 
 
 314. Properly speaking there is no specific commer- 
 cial pledge either in the Civil or in the Common law. 
 The Common law makes no distinction between the 
 pledge of commercial effects and that of any other kind 
 of property, or between the pledge securing a com- 
 mercial transaction and the pledge securing a non- 
 commercial transaction ; and the commercial pledge 
 is no part of the Civil law. But, in some countries of 
 the Civil law there are statutes providing for the spe- 
 cial government of commercial pledges, as contradis- 
 tinguished from other and ordinary pledges. 
 
 The general rule is that in the pledge, as well as in 
 the discount or purchase of negotiable paper, the law 
 merchant prevails in countries of either the Common 
 or the Civil law. Both systems yield to it in that 
 respect. The necessities of commerce, which are 
 the necessities of the world, demand it. The impor- 
 tance of commerce is such at the present time in the 
 civilized world, and it is so necessary that the com- 
 mercial relations of the different countries should be 
 governed by the same rules, that the law merchant 
 may be considered as part of the law of nations. 
 
 315. In France and in Louisiana the commercial 
 law governs the pledge of negotiable and quasi-nego- 
 tiable paper by virtue of special statutes. The Code 
 Napoleon, after establishing very precisely the rules
 
 272 The Law of Pledge. 
 
 which govern the contract of pledge, enacts that " the 
 above provisions are not apphcable either to com- 
 mercial matters or to Ucensed pawnbrokers, estab- 
 Hshments, in regard lo which the laws and regulations 
 relative to them should be observed."* 
 
 316. In Louisiana, a statute, now incorporated in 
 the Civil Code, provides that: *'When a debtor 
 wishes to pawn promissory notes, bills of exchange, 
 stocks, obligations or claims upon other persons, he 
 shall deliver to the creditor the notes, bills of 
 exchange, certificates of stock or other evidences of 
 the claims or rights so pawned ; and such pawn so 
 made, without further formalities, shall be valid as 
 well against third persons as against the pledgeors 
 thereof, if made in good faith. 
 
 " All pledges of movable property may be made 
 by private writing, accompanied b}- actual delivery ; 
 and the delivery of property on deposit in a ware- 
 house shall pass by the private assignment of the 
 warehouse receipt, so as to authorize the owner to 
 pledge such property ; and such pledge so made, 
 without further formalities, shall be valid as well 
 against third persons as against the pledgeors thereof, 
 if made in good faith. 
 
 *' If a credit not negotiable be given in pledge, 
 notice of the same must be given to the debtor. "f 
 
 317. The requirement of the Civil law that an act 
 of pledge in writing, stating the amount of the debt 
 and describing the thing pledged, should be passed 
 
 * Code Xapoleon. Art. 2084. 
 
 t Civil Code of Louisiana, Art. iU'tS.
 
 Commercial Pledges. 273 
 
 between the parties, is therefore not necessary for the 
 pledge of negotiable paper or other commercial secu- 
 rities. Simple delivery and possession are sufficient, 
 as in the Common law pledge. But it is well to 
 observe that, as the pledgee can not sell or cause the 
 pledge to be sold at private sale without the consent 
 of the pledgeor, the written act of pledge is necessary, 
 after all, even for commercial pledges, for the pur- 
 pose of showing the consent of the pledgeor for the 
 sale, the terms and conditions thereof, and so forth. 
 
 The Pledgee of Negotiable Paper a Holder 
 
 FOR Value 
 
 318. As partly under statutory law and partly by 
 the Common law, it is the law merchant which gov- 
 erns the pledge of negotiable paper, it follows that in 
 the pledge, as in the discount or purchase of such 
 paper, the pledgee is in the position of a holder for 
 value when the pledge consists in negotiable paper, 
 unmatured and taken on pledge by the pledgee with- 
 out notice of any equities and for a valuable cansider- 
 ation. The principle of the French law, that the 
 possession of personal propert}' is equivalent to title, 
 because such property has no following, applies here 
 to the contract of pledge as part of the law merchant. 
 The true owner, therefore, has no claim against the 
 pledgee as holder for value, even when the property 
 has been misappropriated, or purloined by an unfaith- 
 ful agent. * 
 
 * Tucker vs. Savings Bank, 58 X. IL S3. 
 Greenwell vs. llaydon, 78 Ky. 332.
 
 274 The Law of Pledge. 
 
 319. This principle has become axiomatic in Amer- 
 ican jurisprudence, and the proposition that the 
 pledgee of negotiable paper is a holder for value 
 wherever, under the same circumstances, a purchaser 
 would be, is too clear to admit of doubt or discussion, 
 both upon principle and upon authority. The reason 
 is that, if the essence of the valuable consideration 
 consists in parting with mone}^, property^ or other 
 valuable thing, it can make no difference upon the 
 question of consideration, whether the paper sought 
 to be enforced is to be deemed the principal or only 
 the collateral security. The holder parts with his 
 money or property upon the faith of both, and not 
 upon the faith of one of them. If he is a holder for 
 value of the principal obligation, so he is of collateral 
 security • the two, in regard to the element of consid- 
 eration, are inseparable.* 
 
 And even in case of a factor pledging without 
 authority and feloionusly the negotiable paper of his 
 principal, to secure his own debt, the law merchant 
 now prevails, and protects the honest pledgee against 
 the true owner. For a while, under the strong press- 
 ure of the Common law principle that the factor can 
 not pledge, tliough he can sell the property of his 
 piincipal, the law merchant was checked in that 
 respect, even in regard to negotiable paper, and the 
 pledgee of such paper was sacrificed to the true owner. 
 But this doctrine had ultimately to yield to the interest 
 
 * Bank of Xew York y>;. Vanderborst. S2 N. Y. r>:,7.
 
 Commercial Pledges. 275 
 
 of trade and finance, and the contrary rule, as stated 
 above, was established.* 
 
 320. However well established the principle is with 
 us that the pledgee of negotiable paper is a holder for 
 value wherever the purchaser would be so under the 
 same circumstances, the rule has in a recent case been 
 again the subject of the full consideration of the House 
 of Lords. A broker in London pledged to a bank, to 
 secure loans of money for his own account, certain 
 bonds belonging to his principal. The pledge was 
 without authority from the owner of the bonds. 
 These were negotiable instruments. The question was 
 whether the bank as pledgee had a good title against 
 the true owner and could be considered a holder in 
 good faith, not having made inquiries under the cir- 
 cumstances, as to the power of the broker to pledge 
 the bonds. 
 
 Lord Herschell said: " The question, then, which 
 presents itself is, whether the appellants (the bank), 
 who are in possession of negotiable instruments which 
 were deUvered to them, I will assume, in fraud of the 
 plaintiff, the true owner, can make good their title to 
 ihem.^ That they became holders for value is not 
 disputed ; nor is it disputed that they took with 
 full honesty of purpose. The allegation in the state 
 ment of claims is as follows : • The bank knew, and 
 had notice, not only from the general course of busi- 
 ness hereinbefore referred to, but from the particular 
 transactions between them and the plaintiffs brokers, 
 
 Kent's Com 111.. Vol. 2, p. 027. . 
 Story, on Bailments, Sec. 32G.
 
 276 The Law of Pledge. 
 
 that the securities deposited with them by the plain- 
 tiff's brokers were the securities of the customers of 
 such brokers, and in the belief that the brokers who 
 brought them had made sufficient advances on them 
 to justify them in obtaining the amounts which they 
 from time to time obtained from the bank, and 
 relymg on the integrity of the brokers the defend- 
 ant's bank from time to time made and continued 
 advances to the brokers on such securities as 
 the brokers from time to time deposited with 
 them.' Applying this allegation to the transaction 
 under consideration, it would be impossible to con- 
 ceive a more unequivocal admission that the appellants 
 acted in complete good faith in taking the bonds in 
 question. But the statement of claim goes on to 
 allege that the bank ' made no specific inquiries as to 
 the ownership of the said securities, or the authority 
 (if any) which the brokers had to deposit the same, or 
 the interest (if any) which the brokei-s had therein by 
 reason of advances on such securities or otherwise.' It 
 is upon this allegation that the bank had notice that Del- 
 mar held these bonds in the capa'^ity of an agent that 
 reliance is placed. I defer entering upon the inquiry 
 whether it has been proved that the bank had either 
 notice or knowledge that Delmar's title to the 
 bonds was that of an agent only. Assuming 
 for the moment that this was proved, what is its 
 effect.^ It is contended on behalf of the respondent, 
 as I understand, that it put the bank upon inquiring 
 as to the title of the person with whom they dealt.
 
 Commercial Pledges. 277 
 
 and as to the authority which he possessed ; and that 
 having made no such inquiry, they obtained as against 
 his principal no better title than he had. It was ad- 
 mitted that any one buying from Delmar would have 
 obtained an unimpeachable title, notwithstanding his 
 knowledge that Delmar was a broker, and that the 
 bonds were the property of his principal. What 
 ground is there for the position that in regard to a 
 pledge the case is different, that one may safel}- take 
 a negotiable instrument by way of sale from an agent 
 without inquiry, but can not so take it by way of 
 pledge? It is surely of the very essence of a nego- 
 tiable instrument that you ma}^ treat the person 
 in possession of it as having authority to deal 
 with it, be he agent or otherwise, unless you know to 
 the contrary, and are not compelled in order to secure 
 a good title to yourself, to inquire into the nature of 
 his title or the extent of his authority. The Factors 
 Act (6 Geo. 4, c. 94), which gives validity to sales and 
 pledges by persons entrusted with the documents of 
 title to goods, contained a proviso ' that the pur- 
 chaser or pledgee had not notice by the documents or 
 otherwise, that the seller or pledgeor was not the act- 
 ual and bona fide owner of the goods sold or pledged 
 — a proviso which, especially after the decision in 
 Fletcher vs. Heath, rendered it unsafe to make 
 advances on goods or documents to persons known "-.o 
 have possession thereof as agents only ' (per Black- 
 burn J. in Cole vs. Northwestern Bank). Accordingly 
 the Legislature intervened and altered the law by
 
 278 The Law of Pledge. 
 
 the 5 and 6 Vict., c. 39. The recital is noteworthy, 
 that ' advances on the security of goods and mer- 
 chandise have become an usual and ordinar}' course 
 of business, and it is expedient and necessary that 
 reasonable and safe facilities should be afforded 
 thereto/ Under this act a document of title to goods 
 may safely be taken by way of pledge from one 
 known to be an agent without inquiry as to his 
 authority. It would be strange, indeed, if a nego- 
 tiable instrument mio;ht not as safely be taken. Ad- 
 vances on the security of negotiable instruments are 
 as usual and ordinary a course of business as advances 
 on the security of goods and merchandise, and it is 
 surely just as 'expedient and necessary that reasonable 
 and safe facilities should be afforded thereto.' It 
 was truly said that it was due to the act of the 
 Legislature that documents of title to goods may 
 safely be taken by wa}- of pledge from an agent, and 
 that there had been no such legislation in relation to 
 negotiable instruments. Butwhynot.'^ The answer, 
 to my mind, is plain — because it never was supposed 
 to be necessary in order to give validity to such a 
 transaction in the case of negotiable instruments. It 
 is admitted that, in the case of a sale, legislation was 
 not requisite ; that the fact that the instruments were 
 negotiable sufficed ; why not, then, in the case of 
 pledge? If the contention of the respondent is to 
 prevail, a negotiable instrument will be less negotia- 
 ble than a bill of lading or a dock warrant — a strange 
 conclusion, surely. The truth is, in my opinion, that
 
 Commercial Pledges. 279 
 
 what the Factors Acts have done is to attach some 
 of the elements of negotiabiHty to documents of title 
 to goods, render the mere possession of them evidence 
 of authorit}' to deal with them in the ordinary course 
 of business, and to preclude the necessity of any 
 further inquiry.'"^ 
 
 321. But it follows also from the rule that the 
 pledge of negotiable paper is entirely governed by 
 the law merchant — that, like the discount and pur- 
 chase of the same, the pledge is subject to the same 
 diversity of opinion as to what constitutes the pledgee 
 a holder for value in certain cases. For instance, a 
 valuable consideration for a pledge may or may not 
 be a pre-existing debt of the pledgeor, according as 
 we follow the jurisprudence of the State of New York 
 or that of other States of the Union, or that of the 
 courts of the United States. Therefore, the true owner 
 of a bill of exchange might recover it, as his prop- 
 ertv, in New York, against a pledgee in good faith, 
 whose debt, secured by the pledge of the bill, was a 
 pre-existing one of the pledgeor. The pledgee there 
 would not be a holder for value. But, under the same 
 circumstances, the pledgee in Louisiana, or some other 
 State of the Union, would be a holder for value, 
 because there, a pre-existing debt is a sufficient con- 
 sideration for negotiable paper, and brings it under 
 the rule of the law merchant. We must observe that 
 
 * London Joint Stock Bank vs. Simmons, Law Reports Appeal 
 Cases 1892, p. 21(j. 
 Earl of Sheffield vs. London Joint Stock Bank. 13 Appeal Cases. 
 333.
 
 280 The Law of Pledge. 
 
 it is not in the law of pledge that the difference lies, 
 but in the law merchant. 
 
 The same equities would exist, or not, in favor of 
 the drawer, or maker, of the negotiable paper, 
 according; to the same rule of the law merchant in 
 some States.* 
 
 322. The converse of the rule is equally true, to- 
 wit : that, as the law merchant governs the contract of 
 pledge, negotiable paper which is past due and, there- 
 fore, is subject to the equities of third persons, is sub- 
 ject in the hands of the pledgee to the rights of the 
 true owner when it has been pledged without his con- 
 sent. The rule is precisely the same whether the 
 negotiable paper, which has lost its character of nego- 
 tiability, has been purchased by the third holder or 
 received by him on pledge. And the rule is not in 
 any manner affected by the fact that the negotiable 
 paper consists in bonds or interest coupons of the 
 States or of the United States. f 
 
 323. The Court of New York has stated the prin- 
 ciple clearly when it said that the rights of a trans- 
 
 * Coddington vs. Bay. 20 Johns, G37. 
 
 Swift vs. Tyson, IG Peters. ] . 
 
 Givanovich vs. Citizens Bank 26 La. An. 15. 
 
 Conislock vs. Hier, 73 N. Y. 2G9. 
 
 Gates vs. National Bank. 100 U. S. 239. 
 
 iiailroad Company vs. National Bank, 102 U. S. 14. 
 
 Goodwin vs. Loan Oompan}-, 152 Mass. 199. 
 
 8ee Jones, on Pledges, Hec. 89 et seq.. where the subject is con- 
 sidered at length. 
 t Stern vs. Bank. 84 La. An. 1119. 
 
 Bird vs. Cochifm. 28 La. An. 70. 
 
 Parsons vs. Jackson, 99 U. S. 434. 
 
 Verniilye vs. Adams, 21 Wall. 143. 
 
 Texas vs. White, 7 Wall. 700. 
 
 Henderson vs. Case, 31 La. An. 215. 
 
 Cowdrey vs. Vandenberg, 101 U. S. 571.
 
 Commercial Pledges. 281 
 
 feree, whether by purchase or pledge, were those ofc 
 p bona fide holder for value of negotiable paper, when- 
 the transfer was made in the usual mode and in the 
 ordinary course of business and without notice of any 
 defects in the title. Those rights are protected by the- 
 law merchant against all latent equities, whether oi 
 third persons or of parties to the instrument The title- 
 of such pledgee or transferee is perfect, and his right 
 to enforce the obligation is absolute. But if any of the 
 circumstances are wanting which go to make up a per- 
 fect title, a purchaser or pledgee of commercial paper 
 takes it subject to the same rules which control in the 
 case of a transfer, assignment or pledge of non-nego- 
 tiable instruments. 
 
 In the case of a pledge of negotiable paper, even 
 in the ordinary course of business, before maturity, 
 and for value, delivery and possession of the thing" 
 pledged is as essential and indispensable as in the 
 pledge of any other kind of property. And there is 
 no such thing as a symbolical delivery of negotiable 
 instruments. The law does not recognize, for com- 
 mercial purposes, a right of possession as distinct 
 from the actual possession. The evidence of owner- 
 ship of negotiable bills is their possession, properly 
 endorsed, so as to pass the title to the holder."^' 
 
 324. From the fact that in the pledge of negotiable 
 paper for a valuable consideration before maturity 
 and in the usual course of business, the law mer- 
 chant, and not the law of pledge, governs (or rather 
 
 * IMuIIer vs. Pondir, 55 X. Y. 325.
 
 282 The Law of Pledge. 
 
 because the law of pledge is in such cases merged 
 into the law merchant), it follows that the pledgee of 
 such paper can validly^ if not rightly^ subpledge, or 
 transfer the pledge, to secure his own indebtedness. 
 We say validly, because his transferee will have a 
 good title against the true owner; but not rightly, 
 because without the consent of the owner, the pledgee 
 has no right to make use of the pledge for his own 
 benefit, and therefore has no right to use it for the 
 purpose of obtaining credit and securing his own 
 creditor. "^ 
 
 Matthews vs. Rutherford, 7 La. An. 225. 
 Building Association vs. Ferguson, 29 La. An. 548. 
 Tucker vs. Savings Bank, 58 N. \\. 83. 
 Bank of New York vs. Vanderhorst, 32 X. Y. 557. 
 Story, on Pledges, Sec. 322.
 
 CHAPTER XXVIII. 
 
 Commercial Pledge Under the Law of France 
 AND Other Countries of the Civil Law. 
 
 325. The French Code of Commerce, as modified 
 and completed by a law of the year 1863, is probably 
 the most perfect work of legislation which governs 
 the Commercial Pledge. As far as human prevision 
 can go, it clears up the uncertainties and supplies the 
 deficiencies of the Common law on this subject and 
 releases this important branch of the Commercial law 
 from the obstructive formalities of the Civil law. In 
 not more than three articles this instrument of legal 
 wisdom establishes what the Commercial pledge is, 
 between what persons it may take place, what can be 
 the subject of it, under what form it may be made, 
 what the rights of the contracting parties are. It 
 fixes the difference between the Commercial pledge 
 and the pledge of the Civil law. It facilitates, en- 
 courages and secures commercial transactions. The 
 whole subject is provided for in the following words : 
 
 "Article 91. The pledge, constituted either by a 
 trader or by a person who is not a trader, for a com- 
 mercial transaction, is proved in reference to third 
 persons, as well as to contracting parties, conformably 
 to the provisions of Art. 109 of the Code of Com- 
 merce. The pledge in respect to negotiable effects 
 may also be established by a regular endorsement 
 indicating that these effects have been delivered as 
 
 283
 
 284 The Law of Pledge. 
 
 security. In respect to shares of stock, shares of 
 interest and of nominative obhgations of financial, 
 industrial, commercial or civil partnerships, the con- 
 veyance of which is made by a transfer on the books 
 of the company, the pledge may equally be estab- 
 lished by a transfer, by way of securit}', registered on 
 the said records. The provisions of Art. 2075 °^ ^^^ 
 Civil Code concerning movable credits, in the posses- 
 sion of which the assignee can only be put, in respect 
 to third persons, by notice of the transfer given to the 
 debtor, are not hereby affected. Commercial effects 
 given in pledge may be collected and appropriated bv 
 the pledgee." 
 
 " Article 92. In all cases, the privilege of the 
 pledgee subsists only when the pledge has been 
 put and remained in his possession, or in that of a 
 third person agreed upon by the parties. The creditor 
 is considered as having the goods in his possession, 
 when they are at his disposal in his stores or ships, at 
 the custom-house or in public warehouse, or if, before 
 they arrive, he has possession by means of a bill of 
 lading." 
 
 '•Article 93. In default of payment when the 
 same is due, the creditor may, eight days after notice 
 to the debtor or pledgeor, cause the things pledged to 
 be sold at public sale. The sales, other than those of 
 which the stockbrokers alone have charore, are made 
 through commercial brokers. However, at the 
 request of the parties, the president of the Court of 
 Commerce may designate another class of public
 
 Commercial Pledge Under the Law of France. 285 
 
 officers to make the sale. In that case, the pubHc 
 officer, whoever he may be, who has charge of the 
 sale, is subjected to the rules which govern the brokers 
 in relation to the forms, tariffs and responsibilities. 
 The provisions of Articles 2 and 7 inclusively of the 
 law of the 28th of May, 1858, on public sales, are 
 applicable to the sales provided for in the preceding 
 paragraph. Any clause which would authorize the 
 creditor to appropriate the pledge to himself, or to dis- 
 pose of it without the formalities herein prescribed, 
 is void.'' 
 
 ^26. In providing that the Commercial pledge is 
 established, both in regard to third persons and to the 
 parties themselves, according to the requirements of 
 Art. 109 of the Code of Commerce, the French law 
 relieves that contract of the necessity of the written act 
 demanded by the Civil law, and permits the verbal 
 pledge in commercial transactions. Article 109 reads 
 thus : " The purchases and sales (of goods and com- 
 mercial effects) are established : by public acts ; by 
 acts under private signature ; by the memorandum of 
 a stockbroker or a commercial broker, duly signed by 
 the parties ; by an invoice accepted ; by the correspon- 
 dence ; by the books of the parties ; by the verbal proof 
 in cases where the Court will think proper to admit 
 it." 
 
 327. Where it is not incompatible with these pro- 
 visions of the Code of Commerce, the Commercial 
 pledge is still governed by the rules established by the 
 Code Napoleon. Thus, the parties to the contract so
 
 286 The Law op Pledge. 
 
 far as their competency is concerned, must be such as 
 designated by the Civil Code ; and the things which 
 may be given in pledge are equally those which are 
 there declared to be susceptible of being pledged. 
 
 By the French law, the Commercial pledge takes 
 place as well between traders as between persons who 
 are not traders on both sides, in this, that the creditor 
 needs not be a trader ; but the debtor or pledgeor must 
 be one, because the Commercial pledge must be given 
 for a /I act of commerce^ says the article, and such acts 
 or transactions necessarily take place in the affairs of 
 traders or commercial men. 
 
 Nor needs the thing given in pledge be a commer- 
 cial effect. The debtor and pledgeor may validly 
 pledge any property susceptible of being pledged in 
 the Civil law, and such security shall be governed by 
 the law of the Commercial pledge, provided the obli- 
 gation to be thereby secured arises from a commercial 
 transaction. But it is proper to observe that, when 
 negotiable effects are pledged, it is necessary that the 
 endorsement by which the transfer is made should 
 state that they have been delivered as security. 
 
 328. There is the same essential necessity in the 
 Civil law and the Commercial pledge that the pledgee 
 should have possession of the thing pledged. That 
 possession ma}^, in both cases, be only symbolical or 
 constructive. If a credit is pledged, notice of the 
 pledge to the debtor of the credit is equally necessary 
 in the Commercial pledge to constitute the possession 
 of the pledgee.
 
 Commercial Pledge Under the Law of Prance. 287 
 
 Hence it follows that, when possession of a thing 
 can not be delivered, as in the case of things infiduro^ 
 or of claims, or credits, or other rights to which there 
 is no title attached, the pledge of such things can not 
 be legally made. 
 
 In the Commercial pledge of shares of stock, if they 
 are to bearer^ the mere delivery of the certificate or 
 title to the pledgee operates as a pledge. If the shares 
 of stock are nominative, the pledge must be notified 
 to the company and a transfer made on its books.* 
 
 And we see, also, by the article of the French Code 
 of Commerce that the factum commissorium, or the 
 clause by which the pledgee would stipulate that the 
 thing pledged should become his property in default 
 of payment of the debt, is equally prohibited in the 
 Commercial pledge. 
 
 329. The two great distinctive features of the 
 French law of pledge are that the Commercial pledge 
 needs not be evidenced by a written act, and that the 
 creditor is not submitted to the necessity of bringing 
 suit against the pledgeor for the purpose of selling 
 the pledge, but has the right to put it up for sale after 
 a notice of eight days to the debtor. f 
 
 We see in this again the constant solicitude of the 
 law, common to all countries, for the interests of com- 
 
 * Laurent, Nantissement, Sec. 441. 
 
 Troplong, Nantissement, Sees. 292, 286. 
 t French Code of Commerce, Arts. 91. 92, 93 and 109. 
 
 Goiraud, French Code of Commerce, p. 152 et seq. 
 
 Baudry-Lacantinerie, Nantissement, Sec. 147 ct seq. 
 
 Troplong, Nantissement, Sec 110 et passim. 
 
 Laurent, Nantissement, Sec. 490. 
 
 Pont, Nantissement, p. 070 pt seq.
 
 '288 The Law of Pledge. 
 
 merce. Commercial transactions brook no delays 
 •or formalities which cause dehiy. Therefore none 
 rshould be incurred in preparing written acts of pledge 
 in the affairs of merchants. Nor should these be hin- 
 dered by legal proceedings in the recovery of their 
 claims and realization of their securities when they 
 have immediate need of their capital. The French 
 Code of Commerce and the Common law have joined 
 hands in this matter. 
 
 330. The general march of modern and recent 
 legislation in the countries of Civil law is toward the 
 protection of the pledgee in commercial transactions, 
 even to the prejudice of the true owner when his 
 property has been disposed of without his consent by 
 an unfaithful agent. 
 
 Thus the Code of Commerce of the German Em- 
 pire provides : " When merchandise or other mov- 
 .ables of a merchant are alienated and delivered in the 
 course of his business, the purchaser in good faith 
 acquires the ownership thereof, even when the seller 
 was not the owner. 
 
 " The original ownership is extinguished. Any prior 
 right of pledge or other real right, if unknown to the 
 purchaser, is extinguished. If merchandise or other 
 movables are pledged and delivered bv a merchant in 
 the course of his business, no prior ownership, pledge 
 •or other real right on such merchandise or movables 
 <:an prevail to the detriment of the pledgee in good 
 iaith or his assigrnee. 
 
 ^' The statutory pledge of a commissioner, consignee
 
 Commercial Pledge Under the Law of France. 289 
 
 or carrier rests upon the same basis as the right of con- 
 tractual pledge. This article has no application when 
 the things were lost or stolen."* 
 
 We find also in the Code of Commerce of the 
 Netherlands that, if goods sold and unpaid for are 
 claimed by the vendor when they have been pledged 
 by the purchaser to a pledgee in good faith, the latter 
 can not be compelled to surrender them without being 
 paid the amount of his debt ; and that such is the law, 
 even when the goods have been pledged by a com- 
 missioner or a factor. f 
 
 And this is the constantly appearing contrast of the 
 Common law and the Civil law in the disposition of 
 personal propert}^ by an unfaithful agent ; the Common 
 law ever shielding the true owner against even an 
 honest vendee or pledgee ; the Civil law always pro- 
 tecting the honest vendee or pledgee against even the 
 true owner. 
 
 * Code of Commerce of the German Empire, Art. 306. 
 
 t Code of Commerce of the Netherlands, Arts. 237 and 241.
 
 CHAPTER XXIX. 
 
 Pledge of Bills of Lading. 
 
 331. The bill of lading is every day in commer- 
 cial affairs the subject of the contract of pledge. 
 More properly speaking, and with a better under- 
 standing of the matter, it is not the bill of lading 
 itself which is pledged, but the goods or merchandise 
 for which it is a receipt given b^ the common carrier, 
 and which it may be said that it represents. From the 
 time that bills of lading were first used, in the early 
 days of modern trade, usage, which is the basis of 
 commercial law, established the rule that the holder 
 of the bill, whether the original one or a subsequent 
 transferee, was apparently the owner of the goods, 
 and therefore entitled to the delivery and possession of 
 them. Until he has delivered them the common car- 
 rier is the agent of the holder of the bill, whoever he 
 may be, and his possession is that of the said holder. 
 The pledgee has, therefore, possession of the goods 
 through the common carrier, the moment the bill of 
 lading is transferred to him, as the owner or shipper 
 had before the transfer. The bill is not the symbol of 
 the goods, as said by some writers, but more properly 
 the title to them. The possession of the pledgee by 
 means of the bill is not merely symbolical or ficti- 
 tious, but corporeal, though vicarious, as the com- 
 
 291
 
 292 The Law of Pledge. 
 
 moil carrier is holding the goods for him until de- 
 livery.^ 
 
 It is not, therefore, because the bill of lading repre- 
 sents the goods that the transfer of it makes a valid 
 pledge of them. It is because the transfer of the bill 
 transfers also the possession of the goods to the pledgee, 
 and thereby fulfils in that respect that essential condi- 
 tion of the contract of pledge. 
 
 The same thing may be said of the pledge of goods 
 deposited in a warehouse or store. The delivery of 
 the ke^'s of a store to the pledgee constitutes the deliv- 
 ery and possession of the goods, not because the keys 
 are symbolical of the goods, but because the pledgeor 
 thereb}' loses his possession and control of them, and 
 transfers thereby the same control and possession to 
 the pledgee. t 
 
 It is only in the pledge of incorporeal things, such 
 as credits or claims, that the delivery and possession are 
 symbolical or fictitious, and made by the transfer of 
 the title or evidence of the rights to the pledgee and 
 by notice to the debtor of the claim. J 
 
 332. If the transferee of the bill of lading was not, 
 apparently at least, the owner of the goods and 
 entitled to the delivery- and possession of them, and 
 if the pledgee could not be put in possession until 
 actual and corporeal delivery, on arrival of the vessel. 
 
 * Jones, on Pledges, Sec. 227. 
 
 Troplong, Nantissement, Sec. 324. 
 t Troplong, Xantissement, Sec. 324 
 
 Porter, on Bills of Lading, Sec. 496. 
 X Civil Code of Louisiana, Art. 3153.
 
 Pledge of Bills of Lading. 293 
 
 it is evident that the pledge of the bill of lading itself 
 would be no security to the creditor, and bills of 
 lading would not play the all-important part that 
 they now play in the immense commercial and finan- 
 cial affairs of the world. Nor would, in that case, 
 the goods and merchandises themselves be the subject 
 of the enormous commerce of the world. 
 
 We say that the pledgee of the bill of lading is 
 apparently the owner of the goods, and so he is to 
 the extent of the debt secured by the pledge. But 
 we must not forget that the transfer of the bill to him 
 is only the execution of a contract of security, and 
 consequently that the absolute ownership of the bill 
 or of the goods is not conveyed to him. The transfer 
 is intended to sectcre the payme?it of the debt, not to 
 effect payment. If the bill of lading were to be inval- 
 idated for some reason or other, or if the oroods were 
 destroyed by some accident, the security would be 
 gone, but the debt would still subsist. If the transfer 
 of the bill were intended to eff'ect payment, it is evi- 
 dent that from that moment the transferee would 
 become absolute owner of the goods, but the relation 
 of debtor and creditor would cease between the 
 pledgeor and the pledgee. 
 
 333. The writer of the opinion of the Court in the 
 case of Mearns vs. Bank of Randall, 146 U. S. 627, 
 expressed himself, therefore, erroneously when he 
 said : " As to the four car loads named in the bill of 
 lading, that instrument represented the cattle ; and 
 the transfer of the ownership, as well as of the right
 
 294 The Law of Pledge. 
 
 of possession, was made as effectually by the transfer 
 of the bill as it could have been by a physical deliv- 
 ery of the cattle." The case was one of a pledge to 
 secure a loan of money. Had the security failed for 
 one reason or the other, the lender would clearly have 
 been a creditor still. 
 
 It is evident that the Court did not mean that the 
 absolute ownership was conveyed to the pledgee in 
 the sense which the word ownership has in law and 
 under the definition which the Institutes of Justinian 
 give of it : '"'' yus utendi^ friiendi et abuteiidi.'''' 
 
 The next paragraph in the opinion expresses the 
 real meaning of the Court: "When the bill of lad- 
 mg was transferred and delivered as collateral security, 
 the rights of the pledgee under it were the same as 
 those of an actual purchaser so far as the exercise of 
 those rights was necessary to protect the holder." 
 
 The use of the word ownership in speaking of the 
 transfer of a bill of lading to a pledgee is a deplora- 
 ble confusion of terms in jurisprudence, especially 
 where it is found in the decisions of the highest Court 
 of the land. 
 
 334. The cases cited in the opinion in support of 
 the principle that the pledgee, as transferee of a bill 
 of lading, is a qualified owner of the same have not 
 been more guarded or more correct in their language 
 in this particular. In the case of Dows et al. vs. 
 National Exchange Bank^ 91 U. S. R. 632, the 
 Court said: "When, therefore, the drafts against the 
 wheat were discounted by that bank, and the bills of
 
 Pledge of Bills of Lading. 295 
 
 lading were handed over with the drafts as security, 
 the bank became the owner of the wheat and had a 
 complete right to maintain it until payment. The 
 ownership of McLaren & Co. was transmitted to it, 
 and it succeeded to their power of disposition. That 
 the bank never consented to part with its ownership 
 thus acquired so long as the drafts it had discounted 
 remain unpaid is rendered certain by the uncontra- 
 dicted written evidence." 
 
 We see in those cases, words placed in juxtaposi- 
 tion, which are incompatible together when applied at 
 the same time to the same person, to-wit : security 
 and oivnershi-p. A person can not have a lien or 
 security on propert}^ of which he is the owner. 
 
 335. The term property used to designate the right 
 of a pledgee, or of a mortgagee, over the personal 
 property affected by his lien and transferred to him 
 for the purpose of securit}' only, has been that of 
 special or qualified propei'ty. To pass from that to 
 the words oivtier and ownership without qualification 
 is a looseness of language which is prejudicial to the 
 understanding of jurisprudence. The Civilians are 
 more exact and more careful of their expressions in 
 the discussion of legal subjects. 
 
 336. Though the pledgee of the bill of lading is 
 not the absolute owner of the goods which it covers, 
 he is fully entitled to the delivery and possession of 
 them, and this is what makes the importance of it. 
 The pledgee's right is, therefore, superior to that of 
 the unpaid vendor of the goods. The latter could not
 
 296 The Law ob^ Pledge. 
 
 exercise against him the right of stoppage in transitu. 
 And in the Civil law countries the vendor's privilege 
 or lien for the unpaid price would yield to the higher 
 lien of the pledge. And it is so whether the bill of 
 lading is negotiable or not, as it is in some States 
 and not in others. The rule is based upon the prin- 
 ciple that the shipper or original holder of the bill of 
 lading has parted with his right of possession of the 
 goods and transferred the same to the pledgee by 
 endorsing the bill to the latter.'^ 
 
 337. There has been a great diversity of opinion in 
 France on the question whether, in case of a bill of 
 lading, not to order, not to bearer, but to a designated 
 person, the pledgee of the bill by simple endorsement 
 from the latter was entitled to possession of the goods 
 against an unpaid vendor ; in other words, whether 
 such endorsement would constitute a valid pledge 
 without a transfer of the goods by a deed of pledge. 
 The courts and the commentators of the Code Napo- 
 
 * Troplong, Nantisseiiient. Sec. 327. 
 Jones, on Pledges, Sec. 200. 
 Porter, on Bills of Lading. Sec. 510 et seq. 
 Benjamin, on Sales, Sec. 8(i4 and notes. 
 Dows vs. Bank, 91 U. S. 618. 
 Bank vs. Dearborn, 115 Mass. 219. 
 Holmes vs. Bank, 87 Penn. St. 52.5. 
 Emery vs. Bank, 25 Oliio, 3b0. 
 Bank vs. Mej'er & Co., 43 La. An. 1. 
 Halsey vs. Warden, 25 Kansas, 128. 
 Bank vs. Homeyer, 45 Mo. l45. 
 Richardson vs. Bank, A. R., Vol. 31, p. 140. 
 Gumbel vs. Beer, 36 La. An. 491. 
 Delgado vs. Wilbur, 25 La. An. 84. 
 Colgate & Co. vs. Penn. Co., 102 N. Y. 120. 
 Bank vs. Logan, 74 N. Y. 568. 
 Bank vs. Kelly, 57 N . Y. 34. 
 Bank vs. Fiske, 71 N. Y. 353. 
 
 Sewell vs. Burdick et als.. House of Lords, Appeal Cases, 1884-86, 
 p. 74.
 
 Pledge of Bills of Lading. 297 
 
 leon are divided on the subject. The Court of Cassa- 
 tion held that such pledge by endorsement of a non- 
 negotiable bill of lading was not valid. Troplong 
 sides in the discussion with the Court of Cassation, 
 He says very rightly : " When the bill of lading is to 
 a designated person it does not belong to him to make 
 it, of his own authority, negotiable b}' endorsement. 
 The originator of the bill of ladin^ not having; made 
 it negotiable ab initio^ it is not allowed to the person 
 specially named in the instrument to render it such 
 by his sole will. It would be transforming the con- 
 tract and changing its nature. In such case the 
 endorsement creates simply a power of attorney and 
 the holder of the bill of lading is subject to all equi- 
 ties. This is what the Court of Cassation hasdecided."* 
 
 Such a case is governed by the rules of the Civil 
 Law, and not by those of the law merchant, from 
 which the parties have departed by making an uncom- 
 mercial bill of lading. 
 
 338. The Court of Louisiana has maintained the 
 same principle in a recent case, though the decision is 
 subject to criticism on other grounds. In that case 
 the factor of a cotton planter pledged, to secure his 
 personal debt, a bill of lading covering a number of 
 bales of cotton of his principal. By the law of Lou- 
 isiana, factors have no right to pledge the property of 
 their principals for their own debts. The bill of lad- 
 
 * Troplong, Nantissement, Sees. 330 and 337. 
 
 Court of Cassation, 13 August, 1879, .Journal du Palais, 1891. 
 t Troplong, Nantissement, Sec. 330. 
 
 Court of Cassation, 13 i^ugust, 1879, Journal du Palais, 1881.
 
 298 The Law of Pledge. 
 
 ins: was issued to the factor eo ?iomine as consio^nee 
 of the cotton, but not to his order. The owner claimed 
 the cotton against the pledgee, pleading the invahdity 
 -of the pledge. The pledgee contended that, under the 
 statute of Louisiana, the bill of lading was negotiable 
 in the same manner and to the same extent as a bill 
 of exchange, and that he was therefore to be consid- 
 ered as a holder for value and in good faith. 
 
 The Court held that the bill of lading was not trans- 
 ferable by the consignee, nor the goods deliverable to 
 his order ; that his endorsement only operated as an 
 assignment to the pledgee, subject to the higher rights 
 of the owner. '^ 
 
 But the Court went on and passed upon the statute 
 of Louisiana which assimilates bills of lading to bills 
 of exchange in their negotiability, and construed the 
 statute in a manner which seems to destroy it alto- 
 gether. And this brings us to the consideration of the 
 question full of importance and of actuality, to-wit : 
 to what extent are bills of lading neo:otiable? 
 
 339. By the Commercial law, bills of lading are 
 transferable by endorsement and delivery, and, there- 
 by, either the special property or the full ownership 
 of the goods they cover passes to the transferee 
 according to circumstances. In that way and to that 
 extent, bills of lading are negotiable, or they are, as 
 commonly said, quasi-nQ^o\i2ih\e securities. But they 
 are not negotiable to the extent of making the trans- 
 feree a holder for value, as in the transfer of nego- 
 
 * Lallande vs. Creditors, 42 La. An. 711,
 
 Pledge of Bills of Lading. 299 
 
 tiable paper, and of cutting off the equities of third 
 persons. Such is the law of England and of the 
 United States generally.* 
 
 340. Mr. Jones states the rule clearly in the follow- 
 ing words : " The rights of a pledgee to a bill of lad- 
 ing by indorsement or delivery are the rights of the 
 pledgee of the property itself by a delivery of it. A 
 bill of lading, though negotiable in form, is not a 
 negotiable instrument, like a bill of exchange, but a 
 symbol or representative of the goods to which it 
 relates ; and the rights arising from a transfer of a bill 
 of lading correspond, not to those arising from the 
 transfer of a negotiable instrument^ but to those aris- 
 ing from a delivery of the property under like circum- 
 stances." 
 
 And he illustrates the principle in a forcible man- 
 ner : " One making advances upon a bill of lading to 
 one who is not the owner of the property therein 
 described, acquires no right of property therein. Al- 
 though possession is prima facie evidence of owner- 
 ship, 3'et that alone does not deprive the true owner 
 of his title. Taking possession of the property, 
 shipping it, obtaining bills of lading from the carriers, 
 indorsing away the bills of lading, or even selling the 
 property and obtaining a full price for it, can have no 
 effect upon the rights of the owner. Even a bona 
 fide purchaser obtains no right by a purchase from 
 one who is not the owner, or not authorized to sell. 
 
 * Benjamin, on Sales, Sec. 804 and notes. 
 Pollard vs. Vinton, 105 U. S , p 7.
 
 300 The Law op Pledge. 
 
 Therefore, if an owner of cotton authorized another 
 person to ship it, but gives the agent no authority to 
 ship it in his own name, the latter, by shipping in his 
 own name, and taking a bill of lading accordingly, 
 can not, by negotiating this, charge the cotton with the 
 payment of advances made on the faith of such bill of 
 lading.''"^ 
 
 341. The pledgee of a bill of lading, like the pur- 
 chaser, has, therefore, the same right to the goods 
 that he would have if they were actually and corpo- 
 really transferred to him ; but he has no more rights 
 than the transferee in such a case against the true 
 owner. f 
 
 We find consequently in the bill of lading what we 
 find in numerous contracts affecting personal or 
 movable property, the great difference between the 
 Common law and the Civil law, to-wit : In the 
 former, that no title can be conveyed to such property 
 by a person who has no right to it ; and, in the latter, 
 that possession of such property is equivalent to title, 
 
 * Jones, on Pledges, Sees. 242. 244. 
 
 t Porter, on Bills of Lading. Sees. 510, 401. 
 
 Means vs. Bank. 146 U. S. 627. 
 
 Sewell vs. Burdick et als.. House of Lords, Appeal Cases, 1SS4- 
 85, p. 74. 
 
 Richardsottvs. Atlas National Bank (La.), A. R. 
 
 Bank vs. Meyer & Co., 43 La. An. 1. 
 
 Turner vs. Israel (Ark.) 41 S. W. 806, 
 
 Lewis vs. Springtield 'Banking Company (111.). 46 N. E. 743. 
 
 Ayres, Weatherwax & Reed Company vs. Dorsey Produce Com- 
 pany (Iowa), 70 N. W. 111. 
 
 Union Trust Company vs. Trumbull (111.), 27 X. E. 24. 
 
 Gil) vs. Kymer, 5 Moore, 503. 
 
 Fielding vs. Kymer, 2 B and B. 639. 
 
 Newsoni vs, Thornton, 6 East, 17; 2 Smith, 207. 
 
 Guiehard vs. Morgan, 4 Moore, 36. 
 
 Martini vs. Coles, 1 M. and S, 140. 
 
 Colgate & Co. vs. Penn, Co . 120 N. Y. 120.
 
 Pledge of Bills of Lading. 301 
 
 and, therefore, that the possessor may convey rights 
 that he himself has not. 
 
 342. But in some of the States statutes have been 
 passed changing the commercial law in that respect 
 and extending more or less the negotiability of bills of 
 lading. 
 
 We find in the excellent work entitled "American 
 and English Encyclopedia of Law," the following 
 paragraph : 
 
 " Title of Pledgee. /;/ General. In England 
 and in many of the States of the Union, by statute, 
 bills of lading are made negotiable and placed on the 
 same footing as bills of exchange. In such States there 
 is no doubt that the pledgee, holding for value and in 
 good faith in the usual course of business, gets an 
 indefeasible title to the property represented by the 
 bill of lading. But leavingr out of view these statu- 
 tory enactments, where the bill of lading is regarded 
 strictly as the symbol of the goods, it naturally follows 
 that the pledgee of the bill of lading has no more title 
 in the goods than he would if the goods themselves 
 were delivered : that is, he gets only the title that the 
 assignee had." * 
 
 343. Except in Maryland, it may be doubtful that 
 any of the statutes alluded to above have rendered 
 bills of lading negotiable to the extent of bills of 
 exchange, and to the effect of rendering an assignee 
 or pledgee a liolder for value ; and the Courts have 
 
 * Am. and Eng. Ency. of Law, Vol. 18, p. 62^).
 
 302 The Law op Pledge. 
 
 been very loath to declare bills of lading negotiable 
 to the full extent. 
 
 344. As to England, the authors of the Encyclope- 
 dia of Law do not seem to be as accurate in their state- 
 ment as the}' are generally. Mr. Benjamin, in his treaty 
 on the sale of personal property, a high authority in 
 English law, though originally a citizen and lawyer 
 of Louisiana, says, in commenting upon bills of lading 
 in England as affected by the Victoria statutes : 
 
 " The first point to be noticed is that a bill of lading 
 is not negotiable in the same sense as a bill of ex- 
 change, and that therefore the mere honest possession 
 of a bill of lading endorsed in blank, or in which the 
 goods are made deliverable to the bearer, is not such 
 a title to the goods as the like possession of a bill of 
 exchange would be to the money promised to be paid 
 by the acceptor. Tlie endorsefnent of a bill ofladijig 
 gives no better rigid to the goods than the endorser 
 himself had (except in cases where an agent eiitrusted 
 with it may transfer it to a bona Jide holder under the 
 factors' act) , so that if the owner should lose or have 
 stolen from him a bill of lading endorsed in blank, 
 the finder or the thief could confer no title upon an 
 innocent third person." * 
 
 In Louisiana the statute which renders bills of 
 lading negotiable reads thus : 
 
 "Sec. 6. Any bill of lading given by any forwarder, 
 boat, vessel, railroad, transportation or transfer com- 
 pany, may be transferred by endorsement therein, 
 
 * Benjamin, Sale of Personal Property, Sec. 864. 
 Potter, on Bills of Lading, Sec. 442.
 
 Pledge of Bills of Lading. 303 
 
 and any person to whom the same may be transferred 
 shall be deemed and taken to be the owner of the 
 goods, wares, merchandise, grain, tlour or other pro- 
 duce or commodity therein specified, so far as to give 
 vaHdity to any pledge, lien or transfer made or created 
 by such person or persons." 
 
 And Sec. 9 of the same law says that— 
 " All receipts, bills of lading, vouchers or other 
 documents issued by any cotton press, wharfinger, 
 forwarder or other person^ boat, vessel, railroad, 
 transportation or transfer company, as by this act 
 provided, shall be negotiable by endorsement in 
 blank, or by special endorsement, in the same man- 
 ner and to the same extent as bills of exchange and 
 -promissory notes now are.''"' 
 
 The intention of the lawgiver in framing this stat- 
 ute seems clearly to assimilate, almost to identify, 
 bills of lading to bills of exchange in their negotia- 
 bility. The statute says /;/ the same manner and to 
 the same extent as bills of exchange. With such 
 words of assimilation, what can differentiate them.^ 
 An assignee or a pledgee in good faith of a bill of 
 lading under the provisions of such a law ought to be 
 considered a holder for value and be protected 
 against the equities of third persons. Yet the 
 Court of Louisiana has decided otherwise in the 
 case which we have referred to above of Lal- 
 lande vs. His Creditors. It rested its judgment 
 partly upon the authority of the case of Shaw vs. Rail- 
 road Company, loi U. S. 557. But the decision of
 
 304 The Law of Pledge. 
 
 the Supreme Court of the United States rested upon a 
 different statute, which made bills of lading negotiable 
 in the same manner as bills of exchange and promissory 
 notes, but not to the same extent, as does the Louisiana 
 law. The Supreme Court of the United States in that 
 case said, speaking of the effects of the negotiability 
 of bills of exchange: '^ If these were intended surely 
 the statute would have said something more than 
 merely make them negotiable by endorsement. No 
 statute is to be construed as making an innovation 
 upon the common law which it does not fairly express. 
 Especially is so great an innovation as would be plac- 
 ing bills of lading on the same footing in all respects 
 with bills of exchange, not to be inferred from words 
 that can be fully satisfied without it." 
 
 346. The words of the Louisiana, as those of the 
 Mar3-land statute, clearly show the intention of the 
 Legislature that the transferee in good faith of a bill 
 of lading should be held a holder for value, free from 
 equities, just as the holder of a bill of exchange. It 
 is clearly intended for the greater protection and pro- 
 motion of commerce. Such was the early law of some 
 of the countries of continental Europe, when commerce 
 first dawned out of the darkness of barbarism, and so 
 has the law remained in those countries up to the 
 present day. But of this later. 
 
 347. The Court, in the Louisiana case of Lallande 
 vs. His Creditors, was evidently influenced in its 
 judgment by the fact that the pledgeor of the bill of 
 lading was a factor pledging his principal's property
 
 Pledge of Bills of Lading. 305 
 
 to secure his own debt, in violation of the law of the 
 State. But the real question was wliether the bill of 
 lading was, or not, negotiable paper. If it were, the 
 quality of factor in the pledgeor disappeared in the 
 case. If, instead of a bill of lading, the factor has 
 pledged for his own debt and fraudulently a bill of 
 exchange or a promissory note, belonging to his prin- 
 cipal, and the pledgee had taken it in good faith, 
 before maturity, for value and in the usual course of 
 business, would not such pledgee have a good title 
 against the true owner? Clearly so.* In a previous 
 case, in which the bill of lading was not transferred 
 by a factor, the Court recognized its negotiability 
 under the same statute. f 
 
 348. The Court of Louisiana, in deciding the Lal- 
 lande case and relymg upon the judgment of the 
 Supreme Court of the United States in Shaw vs. 
 Railroad Company, says: " In the case of Shaw vs. 
 Railroad Compan}-, loi U. S. 557, the Supreme 
 Court considered the effect of an endorsement of a 
 bill of lading which was made U7ider a similai' act to 
 that of 1868, and they said : ' It does not necessarily 
 follow, therefore, that because a statute has made bills 
 of lading negotiable by endorsement and delivery, all 
 the consequences of an endorsement and delivery of 
 bills and notes before maturity ensue, or are intended 
 to result from such negotiation.' " The Court of Lou- 
 
 ' Kent, Comtn., VoL 2. Sec. 627. 
 + Delgado & Co. vs. Wilbur & Co., 25 La. An. 82. 
 London Joint Bank vs. Simmons, House of Lords, Appeal Cases, 
 1892. p. 201.
 
 306 The Law of Pledge. 
 
 isiana was clearly in error in stating that the statute of 
 Louisiana was similar to that of Missouri, under which 
 the bill of ladinof in the Shaw case was made. The 
 Missouri statute simply provided that " bills of lading 
 shall be negotiable by written endorsement thereon 
 and delivery, in the same manner as bills of exchange 
 and promissory notes." The Louisiana statute goes 
 much farther and says that they " shall be negotia- 
 ble by endorsement in blank or by special endorse- 
 ment in the same manner and to the same extent as 
 bills of exchange and promissory notes now are." The 
 words /<? the sa?ne extent cert^xnly destroys the similarity 
 between the two laws. Had the Missouri statute 
 contained those words the decision of the Supreme 
 Court of the United States might have been different. 
 But even under the Missouri law the dicta in the 
 Shaw case seems to have taken a wider range than 
 the question demanded. The opinion says : " Bills of 
 lading are regarded as so much cotton, grain, iron or 
 other articles of merchandise. The merchandise is 
 very often sold or pledged by the transfer of the bills 
 which cover it. They are, in commerce, a very differ- 
 ent thing from bills of exchange and promissory notes, 
 answering a different purpose and performing differ- 
 ent functions. It can not be, therefore, that the statute 
 which made them negotiable by endorsement and deliv- 
 ery or negotiable in the same manner as bills of ex- 
 change and promissory notes are negotiable, intended 
 to change totally their character, put them in all respects 
 on the footing of instruments which are the represen-
 
 Pledge op Bills of Lading. 307 
 
 tatives of money, and change the negotiation of them 
 with all the consequences which usually attend or fol- 
 low the negotiation of bills and notes. Some of these 
 consequenceswouldbevery strange, if notimpossible."* 
 
 349. But the object of such a law is simply to 
 make of the transferee of a bill of lading a holder for 
 value and cut off the equities of the true owner, just 
 as in the case of a transferee of a bill of exchange or 
 promissory note ; in other words, to render bills of 
 lading negotiable paper. Can not the statutory law 
 do, in that respect, for bills of lading what the Com- 
 mon law, the mere law of custom, has done for the 
 ordinary negotiable paper? The statute of Maryland 
 has rendered bills of lading fully negotiable, as we 
 will see presently. It is the law in France and other 
 continental countries of Europe, under a different 
 system. It is the old commercial law of the oldest 
 commercial states of Europe. The reason of such a 
 rule, where it exists, is the same as the reason of the 
 negotiability of bills of exchange and promissory 
 notes, to promote commerce by facilitating tinancial 
 operations. 
 
 350. In an important case in Louisiana, arising 
 under the statute which made bills of lading nego- 
 tiable and the bona fide transferee a holder for value, 
 there were dissenting opinions of two Justices out of 
 five, who contended that the law should be given its 
 full effect. One of them said : " Nor am I disposed 
 to perplex myself with the long discussions and subtle 
 
 ♦ Shaw vs. Railroad Co., 101 U. S.. 56.5.
 
 308 The Law of Pledge. 
 
 distinctions of the writers on this subject. I think the 
 statutes of our own State indicate with clearness the 
 line of decision for us. The act of 1868, No. 150, 
 after forbidding the execution of warehouse receipts or 
 bills of lading- for goods or merchandise, unless the 
 same shall have been actually delivered or shipped, 
 and denouncing heavy penalties for violation of the 
 prohibition, extending even to punishment for five 
 years in the penitentiar}^, proceeds in its sixth section 
 to provide that the holder of such receipts or bills of 
 lading shall be deemed and taken to be the owner of 
 the merchandise described therein. Section 9 pro- 
 vides that * all receipts, bills of lading, vouchers or 
 documents issued by any * * * boat, vessel or 
 uailroad * * * ^ as by this act provided, shall be 
 negotiable by endorsement in blank, or by special 
 endorsement, in the same manner and to the same 
 extent as bills of exchange and promissory notes now 
 are.' The animus of this statute is unmistakable. It 
 was intended to protect both the carriers and the pub- 
 lic — the former by punishing any persons in their em- 
 plo}^ for issuing false bills of lading or receipts, and 
 the latter by putting such bills or receipts upon the 
 same footing as commercial paper, and protecting the 
 holder in goodfaith with all the privileges and immu- 
 nities given to bills of exchange and promissory notes." 
 351. The other dissenting Justice in that case said 
 of the same statute : ' ' To decide the question pre- 
 sented it is useless, it seems, to refer to the jurispru- 
 dence of other States ; we have but to open and read
 
 Pledge of Bills op Lading. 309 
 
 the statute of 1868. It was enacted for the express 
 purpose of fixing, in and for Louisiana, the legal 
 value of a bill of lading. With the provisions of that 
 law planters and merchants are now conversant. The 
 bill of lading has the value of a sale, the stipulation of 
 which can not be changed, can not be limited, except 
 in one way, that indicated in the statute ; that is, 
 by the words '''not negotiable'''' plainly written or 
 stamped on its face. The law of 1868 was enacted 
 in the interest of commerce ; it created one of the 
 most important branches of our credit ; it secures the 
 most legitimate transactions ; it sanctioned, legalized 
 and protected a fair but imperfect custom which pre- 
 vailed before its adoption, and it is by far wiser and 
 more equitable than the vacillating and doubtful juris- 
 prudence of other States." * 
 
 Between the decision of the Court in that case 
 which virtually nullified the law as to the negotia- 
 bility of bills of lading, and the dissenting Opinions, 
 we would say that the better judgment is sometimes 
 with the minority. 
 
 352. The Maryland statute is framed in the follow- 
 ing words : " All bills of lading and all receipts, vouch- 
 ers or acknowledgments whatsoever, in writing, in the 
 nature or stead of bills of lading for goods, chattels or 
 commodities of any kind, to be transported on land or 
 water, or on both, which shall be executed in this 
 State, or being executed elsewhere, shall provide for 
 
 * Hunt & Macauley vs. Railroad Co., 29 La. An. 4(>2 and 4G4.
 
 310 The Law of Pledge. 
 
 the delivery of goods, chattels or commodities of any 
 kind within this State ; and all warehouse, elevator or 
 storage receipts whatever for goods, chattels or com- 
 modities of an}'' kind stored or deposited, or in said 
 receipts stated or acknowledged to be stored or depos- 
 ited for any purpose in any warehouse^ elevator or 
 other place of storage or deposit in this State, shall be 
 and they are hereby constituted and declared to be 
 negotiable instruments and securities, unless it be pro- 
 vided in express terms to the contrary on the face 
 thereof, in the same sense as bills of exchange or prom- 
 issory notes, and full and complete title to the prop- 
 erty in said instruments mentioned or described, and 
 all rights and remedies incident to such title or arising 
 under or derivable from the said instruments, shall 
 inure to, and be vested in, each and every bona fide 
 holder thereof for value, altogether unaffected by any 
 rights or equities whatsoever of or between the original 
 or any other prior holder of or parties to the same, 
 of which such bona fide holder for value shall not 
 have had actual notice at the time he became 
 such."* 
 
 This law was construed b}- the Court of Maryland, 
 as it must necessarily be, to mean that bills of lading 
 in the cases provided for are negotiable paper in the 
 fullest sense of the law merchant, and that the" holder 
 thereof for value and without notice of existing 
 equities, is entitled to the goods the bills of lading 
 
 * Maryland"? Rev. Code 1878, p, 298.
 
 Pledge of Bills op Lading, 311 
 
 cover, even against the true owner. In that case, the 
 bills of lading were drawn in St. Louis, covering 
 goods to be delivered in Baltimore, and were held by 
 a holder in good faith, though they were fraudulently 
 pledged by the agent of the owner of the goods. 
 The Court recognized the full negotiability of the 
 bills of lading under the statutes of Maryland. The 
 Court held also that an antecedent debt of the pledgeor 
 was a valid consideration for the pledge under the 
 terms of the statute, contrarily to the rule of some of 
 the States.* 
 
 It may well be said that Mar3'land is so far the onl}' 
 State of the Union in which bills of lading are nego- 
 tiable paper to the fullest extent. 
 
 353. The California statute is in these words: 
 " All the title to the freight which the first holder of 
 a bill of lading had when he received it, passes to 
 every subsequent endorsee thereof in good faith and 
 for value, in the ordinary course of business, with 
 like effect and in like manner as in the case of a bill 
 of exchange, "f 
 
 This law does not make a bill of lading as fully 
 negotiable as a bill of exchange, because the trans- 
 feree or pledgee only gets such title as the original 
 holder of the bill himself had to the goods ; and the 
 true owner's equities are not cut off by the transfer. 
 
 The Wisconsin statute has not established either 
 
 * Tiedman vs. Knox, 53 Md, 612. 
 
 Parsons, Maritime Law, Vol. 1, p. 133. 
 t California Civil Code, Art. 2127.
 
 312 The Law of Pledge. 
 
 the full negotiability of bills of lading, as shown by 
 the Court of that State.* 
 
 354. It is a necessary consequence of such absolute 
 negotiability of bills of lading and of the fact that 
 their transferees in good faith are holders for value, 
 free from all equities, that such holders are entitled to 
 the goods covered by the bills of lading even against 
 the true owners. . And the rule obtains whether the 
 transferees are purchasers and therefore owners of the 
 bills, or simpl}' pledgees. 
 
 355. It seems clear from the foregoing authorities 
 that, in England and in the United States, excepting 
 the State of Maryland, the endorsee of a bill of lading 
 has no other ri^ht to the goods than his endorser 
 had ; and that he is not a holder for value, free from 
 the equities of the true owner. It follows, therefore, 
 that the pledgee of a bill of lading has no claim, as 
 such, over the goods, when his pledgeor is not the 
 true owner, or had no right to pledge the bill of 
 lading. 
 
 There are exceptions to the rule both in England 
 and in the United States, such, for instance, as when 
 the true owner has put on his agent, or some other 
 person, the indicia of ownership, thereby enabling 
 him to deceive third persons dealing with him on the 
 faith of such marks of ownership. 
 
 In such cases, the pledgee in good faith of the bill 
 of lading is entitled to the goods even against the 
 
 Wisconsin, Rev. Stat. Sec. 4425. 
 Rice vs. Cutter, 17 Wis. 351, 358.
 
 Pledge of Bills of Lading. 313 
 
 true owner, who must suffer the consequences of his 
 ill-placed confidence, as in all dispositions of property 
 by an unfaithful but authorized asent.* 
 
 Benjamin, on Sales, 3d Am. Ed. p. 19 and notes. 
 Am. and Eng. Ency. of Ijaw, Vol, 18, p. 634. 
 Conner vs. Crengham, 77 X. Y. 391. 
 Daws vs. Kidder, 84 N. Y. 121. 
 rotter, on Bills of Lading, Sec. 470. 
 HoQold vs. Meyer et al., 3G La. An. 58.5. 
 Conner vs. Hill, La. An. 8. 
 Moore vs. Lambeth, 5 La. An. 73.
 
 CHAPTER XXX. 
 Bills of Lading in the Civil Law. 
 
 356. The law is different on this subject in France, 
 Italy, Belgium and other Civil law countries of con- 
 tinental Europe. From the early dawn of the Com- 
 mercial law in those countries, during the middle 
 ages, a bill of lading represented both the title and 
 the possession of the goods it covered, and the en- 
 dorsement and delivery of it effected the transfer of 
 the title and of the possession. The transfer of the 
 bill of lading for value to a party in good faith defeated 
 the rights of even the true owner of the goods. The 
 bill of lading had then and there, consequently, the 
 elements of full negotiability. This was the rule 
 without any legislation to that effect and from the 
 mere force of usage, Troplong says that this prin- 
 ciple is fundamental and innate in the interest of com- 
 merce, which has, from the beginning, subsisted upon 
 it, and he cites in support of this assertion Casaregis 
 and Valin, the great oracles of the early Commercial 
 law. " 
 
 357. As to the claim of the true owner of goods 
 pledged fraudulently by the consignee to a pledgee 
 in good faith, Troplong says also, supporting himself 
 by the great names of Casaregis and Deluca : " And, 
 indeed, where would commerce be when it is so nec- 
 
 * Troplong, Nantissement, Sees. 323 and 324. 
 
 315
 
 316 The Law of Pledge. 
 
 essary that business should be transacted rapidly, 
 when negotiations once commenced can not be put in 
 question ; how would matters stand if it were permit- 
 ted to contend that such goods which have been sold, 
 delivered, pledged, do not belong to him who has 
 disposed of them?'' * 
 
 And he continues: " The concordance of the Civil 
 law and the Commercial law is manifest here. They 
 fortify and enlighten each other." f 
 
 About the principle that the law should protect the 
 owner of goods fraudulently pledged a non domino^ 
 even to a third person in good faith, Troplong 
 remarks again: " But, says Casaregis, the usages of 
 commerce can not accede to those ideas. ' Hcec 
 nullatemis -procedere iJiter mercatores , quia de eorum 
 universali stylo aut consetuedine, contrarium ser- 
 vatur.'' This custom is certified to by Marquardus ; 
 it is consecrated by several local statutes in Europe ; 
 Cardinal Deluca recognizes its existence and approves 
 of it. Commercial faith thus demands it. When the 
 possessor of movable property which he holds from 
 his correspondent sells it against, the will of the 
 latter, or without his knowledge, or delivers it to a 
 third person in good faith for a valuable consideration, 
 he who receives it from the jxjssessor has the right to 
 retain it. ' Et similiter^ ob earn rationem non tur- 
 banda libertatis cominercii, in diibitabitio7iibus ter- 
 minis, nempe mercatoris^ vel ^na^istrl navis, vel 
 
 * Troplong Nantissement, Sec. 76. 
 t m.. Ibid., Sec. 78.
 
 Bills of Lading in Civil Law. 317 
 
 vectoris, mala fide alienantis^ vel distrahentis^ seu dis- 
 ponentis de rebus aut mercibtis seu respective corre- 
 sponsoris principalis^ contra illius mentem^ seu or di- 
 xies: quod alter mercator illorum emptor^ seu acquis- 
 itor ex aliquo titulo 07ieroso, non tenetur domino illos 
 restituerCy nisi sibi persoluto tali pretio, firmat car'- 
 di7ialis Deluca; Deregalib. decis. 115, No. 5 and 6.' 
 It is otherwise,-of course, when the purchaser is in bad 
 faith. But if he is in good faith, the commercial law 
 is in his favor." * 
 
 The pledgee is in that respect exactly in the same 
 position as the purchaser. f 
 
 358. This principle, established first by usage for 
 the necessities of commerce, has passed into the leg- 
 islation and the jurisprudence of those same countries. 
 The French Code of Commerce, amended by a law 
 of 1872, provides that: " In all cases the lien subsists 
 on the pledge only if the pledge has been placed and 
 has remained in the possession of the creditor or of a 
 third person agreed upon between the parties. The 
 creditor is reputed having the goods in his possession 
 when they are at his disposition in his stores or on his 
 ships, at the custom house or in a public warehouse, or 
 if, before they have arrived^ he has the possession 0/ 
 them by a bill of lading.'''' J 
 
 * Troplong, Nantissement. Sec. 76. 
 t Id., Ibid., Sec. 74. 
 
 Baudry-Lacantinerie, Nantissement, Sec. 31. 
 
 Laurent, Nantissement, Sees. 440, 441. 
 
 Pont, Nantissement, Sec. 1073. 
 + French Code of Commerce. Art. 92.
 
 318 The Law of Pledge. 
 
 359. The holder of the bill of lading is entitled to 
 the possession and ownership of the goods. Let 
 us cite Toplong again : 
 
 '* The holder of the bill of lading has the right to 
 demand that the goods be delivered to him, and it is 
 not allowed to raise against him the question of oxvn- 
 ershi-p. He alone is the legal consignee. It is what 
 Casaregis establishes admirably. And it is because 
 the bill of lading gives the holder the exclusive right 
 to receive the goods ; it is because the bill of lading 
 is the only document by virtue of which the goods 
 can be delivered, that the law considers the possession 
 of the bill of lading as the possession of the goods." * 
 
 An important case, directly in point, was decided 
 by the Court of Cassation since the da^'s of Troplong, 
 in which the pledgee in good faith of a bill of lading 
 was decreed to be entitled to the goods against the true 
 owner, though they were pledged against his will by 
 a dishonest agent, f 
 
 360. The Commercial law of these countries agrees 
 perfectl}' on this subject as we see with the principle 
 of the French law, of which we have already spoken, 
 to-wit : that personal or movable property has no 
 following — ATobilia non habent sequellam '^ and that, 
 therefore, the possession of such property is equiva- 
 lent to title. The bill of lading- constitutins^ incon- 
 
 * Troplong, Xantissement, Sec. 323. 
 
 t Court of Cassation, 1871, p. 148, Banque de Martinique vs. 
 Thomas and others. The Reporter of the Decision remarks 
 that the Court proclaimed with great energy the principle that 
 the pledgee in good faith of a bill of lading must be protected 
 against the claim of the true owner defrauded by an unfaith- 
 ful agent.
 
 Bills of Lading in Civil Law. 319 
 
 testable possession of the goods, and possession being 
 equivalent to title under the French law, the pledgee 
 of the bill has a right paramount to that of the true 
 owner. 
 
 There is, therefore, on this point of the negotiabil- 
 ity of a bill of lading and of the legal effect of the 
 transfer to a bona fide holder for value, the widest 
 difference between the law of the United States and 
 England, on one side, and of France, Italy, Belgium 
 and Holland, as well as of Maryland, on the other. 
 
 361. The consequences of this difference in case of 
 a bill of lading issued in France of goods to be deliv- 
 ered in New York, or vice versa, may be of great im- 
 portance. And here the question would present itself, 
 which, in the case of Shaw vs. Railroad Company, 
 loi U. S., p. 557, the Supreme Court of the United 
 States said it was useless to examine, because the 
 laws of the two States, Missouri and Pennsylvania, 
 from which and to which the bill of lading was issued, 
 were the same on that subject.* That question would 
 be, in one of its phases, whether a bill of lading, so 
 far as the transferee is concerned, is to be governed 
 in its negotiability by the law of the place where it is 
 issued or made, or by the law of the place where the 
 goods that it covers are to be delivered ; in other 
 words, whether the bona fide holder of a French bill 
 of lading would be recognized in New York as enti- 
 tied to the goods against the true owner, if they were 
 fraudulently pledged by a factor ; and whether the 
 
 * Shaw vs. Railroad Company, 101 U. S. SO'i.
 
 320 The Law of Pledge. 
 
 bona fide holder of an American bill of lading would 
 be recognized in France as entitled to the goods 
 against the true owner under similar circumstances. 
 
 362, The Court of Louisiana also said that it was 
 useless to examine that question in a case where the 
 bill of lading was made in one State and the goods 
 were to be delivered in another State, for the like 
 reason that the laws of the two States were the same 
 on that subject. The Court used similar language to 
 that of Shaw vs. Railroad Company, and said : " The 
 bill of lading was signed in the State of Mississippi and 
 the cotton was to be delivered at the city of New Or- 
 leans. We are not troubled with any question of the 
 conflict of laws ; because we are not advised that the 
 law of Mississippi differs from our own, and the legal 
 presumption is, and we must act upon it, that the law 
 of that State is like our own in any given case where 
 the controversy is not shown."* 
 
 363. In both cases it is, therefore, clearly acknowl- 
 edged that there would be a question as to which law 
 should govern, if the law of the State where the bill 
 of lading is made and the law of the State where the 
 goods are to be delivered were not the same. Having 
 shown how different in that respect the law of France 
 and other countries in Europe, as well as the law of 
 Maryland, is from the law of the several States of the 
 Union and of England, let us now look into that ques- 
 tion. We have no pretensions to solve it. We will 
 hardly do more than indicate it. 
 
 * Hunt it McCaulaj' vs. Railroad Company, 29 La. An. 45S.
 
 CHAPTER XXXI. 
 
 364. A bill of lading is, at the same time, a receipt 
 for the goods and a promise to carry and deUver 
 them ; consequently, it is a contract as well as a 
 receipt ; a contract entered into at one place and to 
 be executed or performed at another place.* The 
 rule is, in such cases, that it is the law of the place of 
 performance which is to govern the rights of the par- 
 ties under the contract. f 
 
 In the contract of the bill of lading the place of 
 performance would seem to be clearly where the 
 goods are to be delivered. The contract is entered 
 into where the bill is drawn, but the obligation of the 
 carrier is to deliver tliem to the consignee at the place 
 where the latter resides ; the place of delivery is pre- 
 sumably, therefore, the place of performance. As the 
 contract is to be construed and executed under the law 
 of the place of performance, the lex loci solutionis^ 
 it would seem clear then that a bill of lading issued in 
 New York for goods to be carried and delivered in 
 France should be governed, as to the rights of the 
 holder of the bill, by the French law, and that the 
 
 * The Thames, 14 Wall. 98. 
 
 The Delaware, Ibid. 579. 
 
 Pollard vs. Vinton, 15 U. S, 7. 
 
 Porter, on Bills of Lading, Sec. ()3. 
 t Story, Conflict of Laws, Sec. 280 et seq. 
 
 Wharton, Conflict of Laws, Sec. 398 et seq. 
 
 Savigny, Roman Law, Vol. 8, p. 203 et seq. 
 
 Cox vs. U. S., G Pet. 172. 
 
 Andrews vs. Pond. 13 Pet. G5. 
 
 Scudder vs. Bank. 91 U. S. 40G. 
 
 321
 
 322 The Law of Pledge. 
 
 bona fide transferee and holder of the bill would be 
 entitled to the goods, even against the true owner, 
 in case the bill was fraudulently disposed of by his 
 agent. 
 
 For the same reason a bill of lading issued in France 
 for goods to be delivered in New York should be gov- 
 erned in respect to the holder by the law of the State 
 of New York ; and the true owner of ihe goods ought 
 to defeat the claims of a holder for value and in good 
 faith of the bill of lading, if the latter was disposed 
 of contrarily to the owner's orders. And the same 
 principle and rule should apph' to bills of lading 
 issued in Baltimore on New York, or issued in New 
 York on Baltimore. 
 
 365. If we are mistaken in this view of the ques- 
 tion and a contrary opinion should prevail, the con- 
 flict of law would still exist, but in a contrary sense, 
 in the supposed cases in which the bills of lading are 
 issued under a law different from that of the country 
 where the goods are to be delivered. Then the bill 
 issued in France for goods to be delivered in New 
 York would be governed by the law of France, the 
 lex loci co?tiractiiSj and again the true owner of the 
 goods would yield to the claims of the bona Jide 
 pledgee. And the bill of lading issued in New York 
 for goods to be delivered in France should be gov- 
 erned also by the lex loci contractus^ and the true 
 owner then would defeat the pledgee. 
 
 366. It has been held in some cases that a bill of 
 lading is a contract of the place where it is issued,
 
 Bills of Lading in Civil Law. 323 
 
 and not of the place where the goods are to be deHv- 
 ered, and that the rights of the holder or transferee 
 are to be governed, in consequence, by the law of the 
 former place. The reasons of this doctrine are sub- 
 stantially, that the bills in the cases in question were 
 transferred as security for advances made at the domicil 
 of the parties, to be refunded there, and that the bills 
 were, therefore, only a mode of reimbursement. The 
 intention of the parties was to vest the title in the 
 goods in the pledgees or transferees of the bills, under 
 the law of their domicil ; and the Courts held that 
 this principle disposed of the cases. ■^'' 
 
 It is true also that it has been generally decided that 
 contracts with common carriers for the shipment of 
 goods from one State or country to another are gov- 
 erned by the lex loci contractus^ unless the intention 
 of the parties was that the reverse should be the rule 
 between them. The jurisprudence in question has 
 simply established that in the case alluded to, presum- 
 ably the parties intended that their agreement should 
 be according to the law of the place where they 
 entered into the contract, f 
 
 367. The Supreme Court of the United States has 
 stated the rule in these words: " This review of the 
 principal cases demonstrates that, according to the 
 great preponderance if not the uniform concurrence 
 
 * Bank of Toledo vs. Shaw ct «/., Gl X. Y. 293. 
 
 Bank of Rochester vs. Jones, 4 N. Y. 497. 
 
 Allen vs. Williams, 12 Tick. 297. 
 
 City Bank vs. R. R. Co., 44 N. Y. 13(3. 
 
 Rawls vs. Deshler, 3 Keyes, 572. 
 t Dicey, Contlict of Laws, with Am. notes, p. 581. 
 
 Wharton, Conllict of Laws, Sec. 471.
 
 324 The Law of Pledge. 
 
 of authority, the general rule that the nature, the 
 obligation and the interpetation of a contract are to 
 be governed by the law of the place where it is made, 
 unless the parties at the time of making it have some 
 other law in view, requires a contract of affreightment, 
 made in one country between citizens or residents 
 thereof, and the performance of which begins there, 
 to be governed bv the law of that country, unless the 
 parties when entering into the contract clearly mani- 
 fest a mutual intention that it shall be governed by the 
 law of some other countrs'/'^ 
 
 368. Wharton on this point says: " When goods 
 are given to a carrier for safe carriage, by what law is 
 the contract, so far as its intrinsic conditions are con- 
 cerned, to be mterpreted? To this question a common 
 answer has been, '' the Jex loci contractus.''' If we 
 examme the cases, however, appearing to sanction 
 this answer we wdl find that in all of them the place 
 of contract was the place of the carrier's principal 
 of^ce.-' t 
 
 369. We need go farther, however, in the considera- 
 tion of this subject, because the question which occu- 
 pies us is not only that of the relative rights and obli- 
 gations of the shipper and common carrier as 
 arising from the original contract between them, but 
 
 * Liverpool Steain Co. vs. Phoenix Insurance Company, 129 U. S. 458. 
 
 Peninsular & O. Co. vs. Shand, 3 31oore. P. C (X. S.) 272, 290. 
 
 Lloyd vs. Guibert, 6 B. & S. 100; S. C. L. R. 1 Q. B. 115. 
 
 Pope vs. Nickerson, 3 Story, 465. 
 
 Jacobs vs. Credit Lyonnais, 12 Q. B. D. 589. 
 
 Brockway vs. Express Company, 47 X. E. S7 (Mass.). 
 t Wharton, CJonflict of Laws, Sec. 471.
 
 Bills of Lading in Civil Law. 825 
 
 that of the relativ^e rights also of the transferee or 
 pledgee of the bill of lading and of the owner of the 
 goods. It is not, therefore, only the original contract 
 contained in the bill of lading which we have to con- 
 sider in this investigation, but also the subsequent 
 transfer or pledge of the bill, and the consequent 
 rights of the transferee or pledgee as affected by the 
 law under which the transfer or pledge has been 
 made. 
 
 The two questions may be merged into one, and 
 that is : under what law did the owner of the goods, 
 or the original holder of the bill of lading, and the 
 common carrier intend to contract : under the lex loci 
 contractus or the lex loci solutionis? If under the 
 former, the subsequent contract of pledge must be 
 governed b}' the same law ; and, vice vei'sa^ if the 
 original shipper and the carrier intended to submit to 
 the law of the place of performance it is that law 
 which must govern the subsequent pledge of the bill 
 of lading. It is evident, for instance, that if the 
 owner of the goods did not intend to accept the rule of 
 the French law, that possession of movable property is 
 equivalent to title, when he shipped his goods and re- 
 ceived the bill of lading, the subsequent pledge of the 
 bill by his agent fraudulently or without authority can 
 not afifect him. The converse of the rule is equally 
 true. If the original shipper intended to be governed 
 by the American law, the subsequent pledgee in good 
 faith of the bill of lading would have no valid right 
 against the true owner of the goods if they were 
 pledged against his will. The intention of the origi-
 
 326 The Law of Pledge. 
 
 nal shipper and of the common carrier as to the two 
 jaws of the place of the contract and of that of per- 
 formance is, therefore, the first question to consider 
 on this subject. 
 
 370. That the lex loci solutionis must orovern as to 
 the nature of the contract is stated by Judge Story in 
 these words : " The rules already considered suppose 
 that the performance of the contract is to be in the 
 place where it is made, either expressly or by tacit 
 implication. But where the contract is either 
 expressly or tacitly to be performed in any other 
 place, there the general rule is, in conformity to the 
 presumed intention of the parties, that the contract as 
 to its validity, nature, obligation and interpretation, is 
 to be governed by the law of the place of perform- 
 ance. This would seem to be the result of natural 
 justice ; and the Roman law has adopted it as a 
 maxim : ' Contraxisse nnusquisque in eo loco intelle- 
 gitur^ in quo ut solver et^ se ohligavit.'' "* 
 
 371. The later writers on the conflict of laws concur 
 with Judge Story on this point. Mr. Dicey, the dis- 
 tinguished English lawyer, even quotes in full the 
 passage of Judge Story's book which we transcribe 
 here ; and Doctor Wharton, with his usual learning 
 and knowledge of the Roman law, expresses the same 
 opinion .f 
 
 * Story, Conflict of Laws, Sec. 2S0. 
 t Dicey, Conflict of Laws, p. 571. 
 
 Wharton, Conflict of Laws, Sec. 401. 
 
 Cox vs. United States, 6 Pet. 172. 
 
 Scudder vs. Union Bank, 91 U. S. 40G. 
 
 rritchard vs. Norton, 106 U. S. 124. 
 
 Lamar vs. Micou, 114 U. S. 218. 
 
 Watts vs. Camors, 115 U. S. 353.
 
 Bills of Lading in Civil Law. 327 
 
 Mr. Dice}' quotes also the words of Lord Esher, 
 which are emphatic on this subject : " The business 
 sense of all business men has come to this conclusion, 
 that, if a contract is made in one country to be car- 
 ried out between the parties in another country, either 
 in whole or in part, unless there appears something 
 to the contrary, it is to be concluded that the parties 
 must have intended that it should be carried out 
 according to the law of that other country. There- 
 fore the law has said, that if the contract is to be car- 
 ried out in whole in another country, it is to be carried 
 out wholly according to the law of that country, and 
 that must have been the meaning of the parties. But 
 if it is to be carried out partly in another country 
 than that in which it is made, that part of it which is 
 to be carried out in that other country, unless some- 
 thing appears to the contrary, is taken to have been 
 intended to be carried out according to the laws of 
 that countr}'."* 
 
 372. The Civilians are fully as positive on this sub- 
 ject, in declaring that it is the law of the ])lace of per- 
 formance which governs the rights and obligations of 
 the contracting parties, unless something in the con- 
 tract shovjs that such is not their intention. The great 
 Savigny, whose very name sounds as high authority 
 in the countries of Civil law, has examined this ques- 
 tion from the standpoint both of the jurisconsult and 
 the philosopher, and says that in order to determine 
 the seat of the obligation and the special jurisdiction 
 
 * Dicey, Conflict of Laws, with Am. notes, p. 571.
 
 328 The Law of Pledge. 
 
 under which it should fall, we have to choose between 
 the place where the contract is entered into and the 
 place where it is performed, between its beginning 
 and its end. For which of the two places shall we 
 decide? Not for the first, which is, in itself, a mere 
 accidental fact, of momentary existence, foreign to 
 the essence of the contract, as well as to its develop- 
 ment and to its ulterior efficacy. But it is not so of 
 the performance of the obligation. This is of the 
 essence of the agreement. As long as the obligation 
 is not performed, it is uncertanr and depends upon 
 the will of the debtor ; it is its performance which 
 renders it certain ; // is therefore upon its perform- 
 ance that tJie attefition of the contracting parties 
 has bee?i Jixed. It is, consequentl}', the place where 
 the obligation is to be performed which will deter- 
 mine the law to which the parties have intended to 
 submit themselves. * 
 
 373. Savign}' is also of opinion, which is of 
 great importance in the particular question which 
 now occupies us, that in the contract for delivery of 
 goods, the place of delivery is the pjace of perform- 
 ance, as delivery is performance in such contracts. 
 
 Whether the delivery is in execution of the contract 
 of sale, or in execution of the contract of carriage, as 
 evidenced by bills of lading, there can be no possible 
 distinction, so far as the principle is concerned. 
 
 Savigny, Treatise of Roman Law, Vol. S. pp. 203 at seq. 
 Laurent, Droit Civil. Vol. 1. p. 165, Sec. 104. 
 Pasicrisie, 1849, II, 107.
 
 Bills of Lading in Civil Law. 329 
 
 One of the reasons given by Savigny to support 
 his views is taken from the Roman law, and rests 
 upon the fact that the execution of a contract for the 
 delivery of movables can only be compelled at the 
 place where the goods lie.* 
 
 314. It results clearly from those authorities that 
 when the law of the place of performance governs 
 the rights and obligations of the parties to a contract 
 it is simply because they have intended, either ex- 
 pressly or by implication, that it should be so. By 
 their consent, therefore, the lex loci solutionis is an 
 element of contract in the premises. That law is not 
 imposed upon them ; they have chosen it themselves 
 as the arbiter of their agreement. The Courts, con- 
 sequently, should not be loath to apply it, whether 
 the Courts are those of the country where the contract 
 was entered into or those of the country where it is to 
 be performed ; whether the Courts are appl3'ing their 
 home law or a foreign law. 
 
 375. It is clearly under the principle that the express 
 or tacit agreement of the contracting parties fixes the 
 law, either loci con&actiis or loci solutionis^ by which 
 they shall be governed, that the law of the place of 
 acceptance of a bill of exchange regulates the questions 
 of demand, days of grace, protest, etc. The place 
 of acceptance and pa}ment is the place of perform- 
 ance, as acceptance and payment are the performance 
 
 Savigny, Treatise of Roman Law, VoL S, Sec. 390. 
 Wharton, Contlict of Laws, Sec. 416. 
 Finch vs. Manstield, 98 Mass. 149. 
 Suit vs. Woodhall, 113 Mass. 39L
 
 330 The Law ob' Pledge. 
 
 of the contract of bills of exchange. It is for the same 
 reason that the law of the place of payment of a note 
 or bond fixes the rate of interest, payment being the 
 performance of the obligation to pay the note or bond. 
 The principle has become a rule of the Common law 
 simply because the understanding and consent of the 
 parties have established the custom. 
 
 The payment or performance of the obligation is 
 the same thing. Payment, in its legal sense, is the 
 fulfilment of the promise of the debtor of the obliga- 
 tion. In the contract of carriage, the carrier is the 
 debtor of the promise to deliver the goods. Delivery 
 is the performance of his promise. The place of deliv- 
 ery is the place of performance. In default of a con- 
 trary agreement, the law of that place should govern 
 the rights and obligations of the shipper and the car- 
 rier and of their transferees or assignees. 
 
 376. In the case of contracts by bill of lading, the 
 relative facts of the shipper and carrier being or not 
 <:itizens of the same country ; being or not at the 
 place of their common domicil in making the con- 
 tract, etc., are only circumstances to be consulted in 
 -considering the question of the intention of the par- 
 ties to submit their rights and obligations to the law 
 of one country or the other. Such circumstances are 
 of no importance except so far as they may help in 
 discovering the intention of the parties, * 
 
 Is there in the mere fact of goods being shipped to 
 
 * Story, Conflict of Laws, Sec. 279.
 
 Bills of Lading in Civil Law. 331 
 
 a foreign port an indication that the shipper and the 
 carrier intend to choose the law of the foreign 
 port as the law of performance of their contract, 
 and to be bound by it, when the bills of lading con- 
 tain nothintjf indicative of such an intention? This 
 question was presented for the first time to the Su- 
 preme Court of the United States in the important 
 case of Liverpool Steam Company vs. Phcenix In- 
 surance Company, 129 U. S. 397. Goods in that 
 case were shipped in New York to Liverpool on an 
 English vessel, with bills of lading which exempted 
 the carrier from liability for the loss caused by strand- 
 ing, and exempted also his responsibility for the loss 
 caused by the negligence of his servants. By the law 
 of England the clause in the bills of lading was legal 
 and valid. By the American law and jurisprudence 
 such exceptive clause and restriction of responsibility 
 are not legal and valid. The goods were lost or dam- 
 aged by stranding of the vessel, proved to have 
 been caused by the negligence of the master and offi- 
 cers. If the case was to be decided under the law of 
 England the shipper could not recover from the com- 
 mon carrier. Otherwise, if the law of the United 
 States was to apply. 
 
 After a full review and recognition of the law loci 
 solutionis and of the principle that it should govern 
 the case if it were shown that it had been the inten- 
 tion of the contracting parties to submit to it, the 
 Supreme Court said: ''There does not appear to us 
 to be anything in either of the bills of lading in the
 
 332 The Law of Tledge. 
 
 present case tending to show that the contracting 
 parties looked to the law of England, or to any other 
 law than that of the place where the contract was 
 made." 
 
 It seems difficult to understand how an English 
 common carrier, issuing English bills of lading and 
 undertakmg to carry the goods on an English vessel and 
 deliver them to an English port under the terms and 
 conditions of the said English documents, did not look 
 to the law of England in the matter and did not think 
 that he was contracting under it. The remark of the 
 Court might properly apply to the American shipper, 
 but hardly to the English carrier. 
 
 377. Further on the Court said: ''The contract 
 being made at New York, the ship owner having a 
 place of business there, and the shipper being an 
 American, both parties must be presumed to have 
 submitted themselves to the law there prevailing, and 
 to have agreed to its action upon their contract. The 
 contract is a single one, and its principal object, the 
 transportation of the goods, is one continuous act, to 
 begin in the port of New York, to be chiefly per- 
 formed on the high seas, and to end at the port of 
 Liverpool. The facts that the goods are to be deliv- 
 ered at Liverpool, and the freight and primage, there- 
 fore, payable there in sterling currency, do not make 
 the contract an English contract, or refer to the Eng- 
 lish law the question of the liability of the carrier for 
 the negligence of the master and crew in the course 
 of the voyage. Peninsular and Oriental Company vs.
 
 Bills of Lading in Civil Law. 333 
 
 Shand; Lloyd vs. Guibert, and Chartered Bank of 
 India vs. Netherlands Steam Navigation Company, 
 before cited." * 
 
 378. What might have been the judgment of the 
 Court if the shipment had taken place in England, 
 under the same bill of lading, and the goods destined 
 for, and on their way to the port of New York, had 
 been lost b}- stranding caused by the negligence of 
 the officers of the vessel? Would the Court have 
 applied the lex loci contractus and given effect to the 
 exceptive clauses of the bills of lading? Bv a parity 
 of reasoning and under the same principles by which 
 it applied the American law to what it called an 
 American contract, it should clearly have applied the 
 English law to what it would then have been com- 
 pelled to call an English contract. 
 
 379. When the Supreme Court, in that case, saj^s 
 that the facts that the goods are to be delivered at Liver- 
 pool, and the freight and primage, therefore, payable 
 there in sterling currency, do not make the contract an 
 English contract — how far we are from the rule stated 
 by Savigny, that the place where the contract is 
 entered into is a mere accident, foreign to the essence 
 of the contract as well as to its ulterior efficac}' ; and 
 that it is the place of performance which is of the 
 essence of the contract, and upon which the attention 
 of the contracting -parties has been fixed. Upon 
 what place and upon what law, therefore, has the 
 
 Liverpool Steam Company vs. Phcenix Insurance Company, 
 129 U. S. 458, 450.
 
 334 The Law of Pledge. 
 
 attention of the shipper been fixed, when he sent his 
 goods to a foreign port, on a foreign vessel and with 
 foreign bills of lading? Can it be upon any other 
 place than that where he, or his agent or consignee, 
 is to receive the goods? Where he is to demand 
 delivery and possession of them, by legal proceedings, 
 if necessary? 
 
 380. But it is evident that, in such cases, the Courts 
 prefer their home laws. In the words of Mr. Dicey: 
 " The distinct and still strong preference, however, of 
 Enoflish courts for the lex loci contractus must never 
 be forgotten. This preference leads to the result that, 
 in all cases of doubt, and especially where a contract 
 is made in England, our courts hold that the proper 
 law of the contract is the law of the country where the 
 contract is made." * 
 
 The same thing may be said of the American courts, 
 of the French courts and probably of the courts of all 
 countries. f 
 
 381. The case of the Liverpool Steam Company 
 against the Phcenix Insurance Company only decides 
 one phase of the question which we are investigating, 
 to-wit : that the lex loci contractus^ and not the lex 
 loci solutionis should govern the contract of carriage 
 when the bills of lading do not expressly show that the 
 contracting parties intended that the place of delivery 
 of the goods should be held to be the place of per- 
 
 * Dicey, Conflict of Laws, p. 571. 
 t Merlin, Repertoire, verho Lol. Sec. G, No. 2. 
 Laurent, Droit Civil, Vol. 1, Sec. 104.
 
 Bills of Lading in Civil Law. 335 
 
 formance, and that its law should be the law of the 
 contract. The other phase of the question, more 
 directly connected with our subject, is whether the 
 pledge of bills of lading should be governed by the 
 law of the place where the contract of carriage is. 
 entered into, or by the law of the place of delivery 
 of the goods, or by the law of the place where the 
 contract of pledge is entered into. 
 
 382. We may premise the investigation with the 
 reflection that the pledgeor of the bills of lading can 
 only transfer to the pledgee such rights in the bills, 
 and, therefore, to the goods they cover, which he 
 himself has, under the rule of the Common law and of 
 the statutory law of England and of the States of the 
 Union, except Maryland; and that, on the contrarj^, 
 in the latter State, under the law which makes bills 
 of lading negotiable to the same extent as bills of 
 exchange, and promissory notes ; and in France and 
 other European States, under the principles of the 
 Commercial law which protect the honest vendee or 
 pledgee against all claims ; a dishonest agent, or factor, 
 or possessor of personal or movable property covered 
 by bills of lading made to his order, can actually 
 transfer to a bona Jide pledgee rights which he him- 
 self has not to the bills and, consequently, to the goods 
 which they cover ; and that the rights thus acquired 
 by the pledgee are paramount to those of the true 
 owner of the goods, even when these were disposed 
 of without his consent. 
 
 382. The contract of pledge being an accessory one,
 
 336 The Law of Pledge. 
 
 should be governed by the same law which governs 
 the principal obligation, as the existence of the former 
 depends upon that of the latter. It must be pre- 
 sumed that, in that respect, the pledgeor and 
 the pledgee intended, in entering into the contract of 
 pledge, that it should thus be governed by the law by 
 which their principal obligation was to be governed. 
 But this reflection will hardly afford us any assist- 
 ance in the solution of our question, for the same dif- 
 ficulty remains : What law is to govern the principal 
 obligation, that of the place of the contract or that of the 
 place of performance, when the principal obligation is 
 the contract of carriage evidenced by bills of lading? 
 
 383, If the case of the Liverpool Steam Compan}' 
 vs. the Phoenix Insurance Company has fixed the law 
 and established the principle that, in bills of lading, 
 the lex loci contractus ^ov\di govern the contract, and 
 not the lex loci solutionis^ then the pledge of bills of 
 lading should be recognized and governed according 
 to the law of the country where they were issued. In 
 such a case the courts of America should apply the 
 law of France to the pledge of bills issued in France 
 on goods delivered in America, and uphold the honest 
 pledgee against the true owner of the goods. And 
 for the same reason the courts of France should apply 
 the law of America to the pledge of bills of lading 
 issued in America on goods delivered in France and 
 uphold the true owner against the honest pledgee. 
 
 384. In either case we think that the courts would 
 be but little inclined to apply laws so entirely foreign
 
 Bills of Lading in Civil Law. 337 
 
 to their own and opposed to its spirit. We can hardly 
 conceive of the American courts applying the rule 
 that the possession of movable property is equivalent 
 to title, or of the French courts applying the principle 
 that the ovv^ner of goods has a better right than the 
 honest pledgee in a commercial transaction. The 
 discussing of theoretical questions of law and of ab- 
 stract principles by law writers is one thing, and the 
 deciding of the actual rights of litigants by the courts 
 is another thing. The great Savigny may say that 
 the place where parties enter mto the contract is 
 but an accident, and that it is the place where the 
 contract is to be performed which occupies their 
 minds ; but a great Court will decide in the case of 
 bills of lading that the contracting parties in entering 
 into the contract of carriage had in view the law of 
 the place where they were at the time, and not that 
 of the place where the goods were to be delivered. 
 
 385. The question whether a bill of lading as a 
 contract should be governed by the lex loci contractus 
 or b}^ the lex loci solutionis^ in its construction, valid- 
 ity and effects, has been well examined and discussed, 
 and the Common law authorities bearing upon the 
 doctrine have been fully reviewed by Mr. Porter in 
 his recent work on the Law of Bills of Ladins-* 
 
 Porter, on Bills of Lading, Sees, 89 et seq.
 
 CHAPTER XXXII. 
 Pledge of Warehouse Receipts. 
 
 386. When merchandise is traveling, the pledge ot 
 it is effected by endorsement and delivery of the bill 
 of lading to the pledgee, not because the bill of lading 
 is the symbol of merchandise, as we have seen, but 
 because by the transfer of it to the pledgee, possession 
 is constructively given to him, and he is entitled to 
 delivery of the goods 
 
 When the merchandise is not traveling but is de- 
 posited and lying in a warehouse, the pledge of it is 
 effected by transfer of the warehouse receipt to the 
 pledgee, for the same reason and with the same effect. 
 The warehouse receipt is like the bill of lading, the 
 title or muniment of title to the goods it covers, and 
 the transfer of it, transfers also the possession of them 
 to the pledgee. It transfers the possession of the 
 goods because the warehouse receipt, like the bill of 
 lading, entitles the holder, and him alone, to the 
 delivery of the goods. The warehouse man has pos • 
 session vicariously for account of whomsoever is the 
 holder of the receipt, and, therefore, the pledgee of 
 the goods gets the constructive possession of them by 
 the transfer of the warehouse, which is sufficient for 
 the validity of the pledge. 
 
 Merchandise forms the whole subject and object of 
 commerce. Whether traveling or lying at home, its 
 
 339
 
 340 The Law op Pledge. 
 
 transfer and delivery are constantly a matter of very 
 great importance. When lying at home it is necessa- 
 rily placed in warehouses, and the transfer of it for 
 purposes either of sale or pledge, taking place a num- 
 ber of times possibly in a single day, can not practi- 
 cally be made, when on a large scale, by actual and 
 corporeal delivery. Necessity, the foundation of com- 
 mercial law, has, therefore, established the rule that 
 the transfer of merchandise in warehouses is made by 
 transfer and deliver}- of the warehouse receipt, and 
 that such transfer and delivery constitute the transfer 
 and delivery of the merchandise itself. 
 
 387 . The warehouse receipt has been for that reason 
 made ^^/(^^^/-negotiable and transferable by endorse- 
 ment and delivery at Common law in the same man- 
 ner as bills of lading, but subject like bills of lading 
 to the claims or equities of the true owner of the 
 goods. The same rules govern to a certain extent 
 both subjects, and in several States the same statutes 
 control both. The Court of Wisconsin has stated the 
 principle in the following words : 
 
 '' The receipt of a warehouseman or wharfinger, and 
 the receipt or bill of lading of a common carrier, are 
 contracts of precisely the same general nature and 
 effect, and should obviously be governed by the same 
 rules and principles as to the application of the doc- 
 trine of estoppel or negotiability, which with respect 
 to such contracts mean one and the same thing. They 
 are, or may be said to be^ negotiable or conclusive in 
 the hands of a bo7ia fide assignee or holder for value,
 
 Pledge of Warehouse Receiits. 341 
 
 so far as the party executing them, warehouseman or 
 carrier, has made or is bound by the representations 
 contained in them. They are negotiable, or conclu- 
 sive and valid in the hands of such a holder because 
 the signer, or party by whom they are executed, is 
 estopped, or not permitted to deny the existence of 
 the facts represented in or by them, and which are 
 presumed to have been within his knowledge at the 
 time of their execution." * 
 
 388. The pledgee of a warehouse receipt is the 
 apparent owner of the goods it covers, as the pledgee 
 of a bill of lading is the apparent owner of the goods 
 which it covers. But such pledgee has, in the one 
 case as in the other, only the rights to the goods 
 which the transferror himself had. If the transferror 
 of the warehouse receipt was not the owner of the 
 goods, or had no power or right to make the transfer, 
 the true owner can recover them from the pledgee. f 
 
 * Hale vs. Milwaukee Dock Company, 29 Wis. 486. 
 
 t Commercial Bank vs. Hurt (Ala.), 12 Southern Rep. 56S. 
 
 Farmers' Bank vs. Blevins, 46 Kansas, 536. 
 
 Greenbaum vs. Burnes, 13 Ky. LawR. 267. 
 
 Conrad vs. Fisher, 37 Mo. App. 352. 
 
 Hanchett vs. Buckley, 27 111. App. 159. 
 
 Hazard vs. Fiske, S3 N. Y. 287. 
 
 Bank vs. Galley, 92 Penn. St. 518. 
 
 First National Bank vs. Boyce. 78 Ky. 42. 
 
 Gibson vs. Stevens, 8 How. 384. 
 
 McCullough vs. Roots, 19 How. 349. 
 
 Insurance Company vs. Kiger, 103 U. S. 352. 
 
 Martin vs. His Creditors, 14 La. An. 392. 
 
 Same vs. Same, 15 La. An. 165. 
 
 Carter vs Merrill & Co., 14 La. An., 375. 
 
 Burham vs. C. V. S. Co., 142 X. Y. 169. 
 
 Bank vs. Dean et ah, 137 N. Y. 110. 
 
 Hanover National Bank vs. Am. D. and T. Co.. 148 N. Y. 612. 
 
 Corn Ex. Bank vs. Am. I), and T. Co., 149 N. Y. 174. 
 
 State Nat. Bank vs. Bryant, 49 La. An. 467. 
 
 Young vs. Lambert, 3 Privy Council Report, p. 142.
 
 342 The Law of Pledge. 
 
 389. The law of almost all the States of this Union 
 as well as of England^ and differently from that of 
 France and other countries of Europe, to-wit: that 
 the possession of personal property is presumptive of 
 but not equivalent to title, applies therefore to ware- 
 house receipts and to the goods they cover. But this 
 must be understood with the qualification that when 
 or where the warehouse receipts are made bv statute, 
 as in the State of Mar3-land, and possibly in Louisi- 
 ana, absolutely negotiable, or negotiable in the same 
 manner and to the same extent as bills of exchange and 
 promissory notes, they are then transformed into nego- 
 tiable paper and are governed by the principles of 
 the law merchant. In that case the goods the}^ cover 
 pass to the transferee or pledgee of the warehouse 
 receipt, even against the true owner. * 
 
 390. We have just said that possibly in Louisiana, 
 as in Maryland, the warehouse receipts were identi- 
 fied by statute with negotiable paper. We used the 
 dubitative form of expression because the Court of 
 Louisiana has not construed the statute in that sense, 
 but the words of the law do not seem to admit of any 
 doubt as to its object on the question of negotiability. 
 The statute of Louisiana provides that : " The receipt 
 issued against propert}- stored in public warehouses, 
 as herein provided for, shall be negotiable and trans- 
 ferable by endorsement in blank or by special 
 endorsement and deliver)-, {71 tJie same maimer and to 
 the same extent as bills of exchange and promissory 
 
 * Tiednian vs. Knox, 53 Maryland, 612.
 
 Pledge op Warehouse Receipts. 343 
 
 notes noiv are^ without other formahty, and the trans- 
 feree or holder of such pubUc warehouse receipt 
 shall be considered and held as the actual and exclu- 
 sive owner, to all intents and pu-rposes, of the prop- 
 ert}- therein described, subject ©nl}^ to the lien and 
 privilege of the public warehouseman for storage or 
 other warehouse charges."* 
 
 This law makes a distinction between public and 
 private warehouses, a distinction which did not exist 
 under the previous law of Louisiana. 
 
 But, even under the previous law the rights of the 
 holder of warehouse receipts had been recognized by 
 the Court of Louisiana as paramount to those of the 
 vendor of the goods in the warehouse.*!* 
 
 We should be disposed, therefore, to consider that, 
 under the statute of 1888, the law in Louisiana makes 
 the pledgee in good faith of a public warehouse receipt 
 a holder for value, and^ consequently, entitled to the 
 goods even as^ainst the true owner, if that statute had 
 not been modified by one of 1890, which puts the 
 transferee of the warehouse receipt behind the seller 
 of agricultural products in certain cases. In every 
 agricultural State the interest of the farmer or planter 
 is evidently one of the principal objects of the law. 
 The statute of Louisiana of 1890, therefore, provides 
 that the vendor of agricultural products of the United 
 States in any town in Louisiana shall have a lien 
 upon them for the price during five days after delivery, 
 and that such lien and preference shall outrank all 
 
 * Acts of Louisiana, of 1868, p. 218, 'Sec. 7. 
 
 t Harris, Pairker & Co. vs. Nicolopoulo, 38 La. An. 12.
 
 344 The Law of Pledge. 
 
 other claims, and especially the rights of the holders 
 of warehouse receipts.* 
 
 391. The intention of the lawgiver in Louisiana 
 seems clearl)- to have been, ever since the year 1876, 
 to render warehouse receipts fully negotiable. It is 
 only in 1890, by the law enacted in that year, that 
 such negotiability has been restricted by rendering 
 the lien of the vendor of agricultural products, during 
 five days, paramount to the rights of a bona fide 
 holder of the warehouse receipts. 
 
 The law of 1876 provides in its fourth section: 
 "That parties who may borrow mone}'' on the faith 
 of warehouse receipts representing property- in store 
 shall file their affidavit with the pledgees that such 
 property is theirs, the pledger's personal property, or 
 that it is the propert}^ of some party for whom the 
 pledger is acting as agent, factor, commission mer- 
 chant, or in any other tiduciar}- capacity, and that said 
 party is justly and truly indebted to the pledger in an 
 amount equal in value to the value of the property 
 pledged, as specified in the warehouse receipt for 
 moneys paid to him, or paid by his order and for his 
 account by the party or consignee making the pledge. 
 The cashier of a bank or the secretary of any insur- 
 ance company incorporated or working under any law 
 in the United States, or of this State, is hereby 
 authorized to administer the oath contemplated under 
 the provisions of this act. Any deviation therefrom 
 shall render the party or parties so deviating liable 
 
 * statute of Louisiana. 1890. p. 51.
 
 Pledge of Warehouse Receipts. 345 
 
 for the value of the property, or any excess in value 
 over and above the amount for which it may have 
 been pledged in any manner specified in Sec. i of 
 this act, and to the prosecution for perjury and also 
 for obtaining money under false pretenses." 
 
 Section 5 of the same law provides : " That the 
 vendor's lien of five days' privilege, now allowed in 
 commercial transactions for the payment of the pur- 
 chase price, shall not be affected by the provisions of 
 this act, except in case in which a warehouse receipt 
 has been pledged as collateral for money borrowed. 
 The holder of the warehouse receipt shall be consid- 
 ered and held as the actual owner of the property 
 described in the receipt, and no clause of this act shall 
 operate to the detriment or injury of the holder of a 
 warehouse receipt, to the extent of the value of the 
 property specified, made and issued in accordance 
 with and under the provisions of this act ; provided^ 
 that where the factor, agent or pledger may have 
 wrongfull}'- pledged, in violation of this act, any prop- 
 perty, the lien of the owner shall be valid even against 
 the third owner of the warehouse receipt." 
 
 And Sec. 8 provides : " That all warehouse receipts, 
 as by this act provided, shall be negotiable by en- 
 dorsement in blank, or by special endorsement, in the 
 same manner and to tlie same exte?it as bills of ex- 
 change and promissory notes now are." * 
 
 392. This renewed attempt of the Legislature of 
 
 * Laws of 187(3, p. 113.
 
 346 The Law of Pledge. 
 
 Louisiana to render warehouse receipts as fully nego- 
 tiable as bills and notes was also checked by the 
 courts. The Supreme Court of the United States in 
 construing this statute ignored the question of nego- 
 1 lability, and considering only the power of the factor 
 to pledge the property of the principal, said : " Before 
 the act of i8y6 it was settled by unanimous decisions 
 in Louisiana that a factor could not pledge for his 
 own debts the property of his principal. (Authorities.) 
 The act of 1876 does not, as it seems to us, materially 
 enlarge this power so far as the facts of this case are 
 concerned. It makes warehouse receipts the repre- 
 sentatives of property in store, and provides for their 
 use to borrow money on ; but the implication is clear 
 that their use in that way by a factor for more than 
 the value of his interest in the property would be 
 wronsfful and invalid ao^ainst the owner." "^ 
 
 And the Court decided that the pledgee had no 
 right ao;ainst the owner because the latter was not in- 
 debted to the pledgeor, who was his factor 
 
 393. But the Court of Louisiana took once a dif- 
 ferent view of this law of 1876 and remarked, in an 
 obiter dictum^ it is true, that: "The act of 1S76 
 has impressed upon it throughout the intention to 
 give this priority to a paraphed warehouse receipt and 
 nothing else, and instead of the halting language of 
 the act of 1868, when it says the transferee of a bill 
 of lading shall be deemed to be the owner of the 
 goods so far as to give validity to liis pledge, etc., the 
 
 * Insurance Co. vs. Kiger, 103 U. S. 355.
 
 Pledge of Warehouse Receipts. 347 
 
 act of 1876 says outright, the holder of the warehouse 
 receipt shall be considered and held as the actual 
 owner of the property described in the receipt. Sec. 
 
 394. In 1888 a law was passed under which public 
 
 warehouses are to be established, with a kind of quasi- 
 official character, and the Legislature of Louisiana 
 
 again enacted in emphatic language that the ware- 
 house receipts are negotiable instruments as fully as 
 bills and notes ; and the Court of Louisiana again 
 decided that they are not. 
 
 The statute reads. Sec. 7 : " That the receipts 
 issued against property stored in public warehouses, as 
 herein provided for, shall be negotiable and transfera- 
 ble byendorsement in blankor by special endorsement 
 and delivery in thesameinanner and io the same extent 
 as bills of exchange and protnissory notesnow are^iJjith- 
 out other formality^ and the transferee or holder of 
 such public warehouse receipt shall be considered and 
 held as the actual and exclusive owner, to all intents 
 and purposes, of the propert}' therein described, sub- 
 ject onlv to the lien and privilege of the public ware- 
 houseman for storage or other warehouse charges ; 
 provided, however, all such public warehouse receipts 
 as shall have the words "not negotiable" plainly 
 written or stamped on the face thereof shall be exempt 
 from the provisions of this section." f 
 
 395. Commenting and adjudicating upon that law, 
 
 * Harris, Parker & Co., vs. Xicolopoulo. 38 La. An. 14. 
 
 t Acts of 1888, p. 218.
 
 348 The Law op Pledge. 
 
 in a recent case in which warehouse receipts, issued 
 in compUance with its provisions, had been given in 
 pledge by a factor to a tliird holder in good faith, the 
 Court of Louisiana held once more that a factor could 
 not validly pledge the goods of his principal, even 
 under the statute in question, and through such ware- 
 house receipts ; and the court again construed ad- 
 versely to the principle of negotiability the provision 
 of the law so emphatically expressed and so often 
 repeated, that the warehouse receipts were nego- 
 tiable and transferable by efidorsenient and deliv- 
 ery^ in the same maimer and to the same exteiit 
 that hills of exchange and promissory notes ivere.^ 
 
 In that case the Court reviewed the whole legislation 
 of Louisiana on the subject, from its incipiency, quot- 
 ing the terms used by each successive statute as to the 
 negotiability of warehouse receipts in the saine ma?iner 
 and to the same extent as bills of excha?ige and promis- 
 sory notes, and quoting also the words of the law^ that 
 the transferee or holder of such ivarehouse receipt shall 
 be considered a7id held as the actual and exclusive 
 otvner to all intents and purposes of the property 
 therein described. And from these clear and emphatic 
 terms of the statute, the Court drew the conclusion 
 that the warehouse receipt pledged by the factor is not 
 valid in the hands of the innocent pledgee against the 
 true owner of the goods, because a factor has no righ^ 
 to pledge the property of his principal. It is proper to 
 observe that in that case there was no question of the 
 
 * Holton & Winn vs. Hubbard & Co., 40 La. An. 71;1.
 
 Pledge op Warehouse Receipts. 349 
 
 superior lien of the vendor of agricultural products, 
 under the law of 1890, the sole exception made by 
 that statute to the complete negotiability of warehouse 
 receipts. The case in question arose under the previ- 
 ous statute of 1888, which made no exception what- 
 ever to the rule of negotiability of warehouse 
 receipts. Where, therefore, the law made no distinc- 
 tion the Court has made one, contrary to the estab- 
 lished rule of jurisprudence. 
 
 396. And, where the statute constitutes the trans- 
 feree of such receipt " the actual and exclusive 
 owner to all intents and purposes of the property 
 therein described," the Court modifies this provision 
 and reduces the rig^ht of the transferee to that of a 
 relative and eventual owner; and that, again, because 
 the Common law principle is opposed to the pledge 
 by the factor. But is not the object of the statute 
 clearly to change in that respect the Common law.'' 
 If the Common law clashes with a subsequent statute 
 the latter should prevail. Evidence of the custom, 
 or Common law, is not even admissible against the 
 written law. 
 
 397. If the warehouse receipt is rendered nego- 
 tiable by the statute, a factor's pledge of it should be 
 valid against his principal, just as the pledge of any 
 negotiable effects of the principal by the unauthorized 
 factor or agent is valid in the hands of an innocent 
 pledgee. Upon this last point, there can be no differ- 
 ence of opinion.* 
 
 * Kent, Comm., Vol. 2, p. 627. 
 Saloy vs. Bank, 39 La. An. 90. 
 Givanovich vs. Bank, 26 La. An. 15.
 
 350 The Law op Pledge. 
 
 398. The Court concludes in its reasoning of the 
 case that it can not for an instant beHeve that the 
 Legislature would enact a law which would enable 
 parties to perpetrate fraud. But by the laws of the 
 largest part of the civilized world, at this moment, if 
 bills of lading, warehouse receipts, and commercial 
 property generally, are pledged by a factor without 
 the consent of the true owner, and, therefore, illegally, 
 the innocent pledgee is protected, not that the laws 
 of those countries are intended to enable parties to 
 perpetrate fraud, but because they can not prevent 
 the fraud. The law is simply impotent in that respect. 
 Fraud may be committed in almost every contract, 
 and yet such contracts, but not the fraud, are formed 
 under the sanction of the law. The commercial in- 
 terest, which is the public interest, is what the law 
 considers, and not the cases of fraud, which are excep- 
 tional cases. 
 
 It might be said with equal reason that the laws 
 which create the full negotiability of bills of exchange 
 and promissory notes should not have been estab- 
 lished, because they enable parties to commit fraud. 
 And, indeed, what laws could enable factors and other 
 agents more easily to defraud their principals than 
 those which protect the holder for value of nego- 
 tiable paper feloniously transferred by such dishonest 
 agents? 
 
 399. Not by virtue of the principle that the posses- 
 sion of inovables is equivalent to title, but under the 
 provisions of their Commercial Codes, which prevail
 
 Pledge op Warehouse Receipts. -j^I 
 
 in that respect over their Civil Codes, in France, in 
 Holland, in Belgium, in Italy, in the German 
 Empire, as well as by statutes in Maryland, in Mas- 
 sachusetts, and in England, the honest pledgee in 
 commercial transactions is protected against even the 
 true owner of the property fraudulently pledged by a 
 dishonest factor or agent. "^ 
 
 The rule is clearly in line with the advance of mod- 
 ern civilization, and it should not be impeded by legis- 
 lating judiciaries. The interference of the latter has 
 been condemned by Judge Story and by English 
 judges, such as Lords Elden and Ellenborough.f 
 
 400. The repeated checks of the courts on the 
 attempts of the legislative power to legalize the pledges 
 of factors by rendering bills of lading and warehouse 
 receipts negotiable instruments has been the subject 
 of remarks by law writers. Mr. Jones says very 
 pointedly: " In great commercial communities the 
 rules of the Common law with reference to pledges 
 by factors have gradually yielded to the necess- 
 ities of modern trade and new methods of conduct- 
 ing business. But legislation has been necessary 
 to effect a change of the law, and so strong has been 
 the judicial preference for the rules of the Common 
 law that the le^rislation intended to change them has 
 sometimes been construed so as to defeat the object 
 intended to be accomplished by it. But in England, 
 and in several of the more important commercial 
 
 * Post: Sec. 498 et seq., 4S2, 487, 352. 
 f Post: Sec. 512.
 
 352 The Law of Pledge. 
 
 States of our own country, legislation has effected an 
 important change in respect to the powers of factors 
 in favor of persons dealing with them in good faith. 
 The rule has become quite generally established that 
 a factor intrusted with the insignia of title, may sell 
 or pledge the property and effectually bind his prin- 
 cipal. In reference to warehouse receipts, legislation 
 has, in several States, in another way protected bona 
 fide holders of such receipts, and this by making 
 them negotiable with the qualities of negotiable 
 paper." ^ 
 
 401. We have seen the uselessness of this provision 
 of the law in Louisiana, resulting from the preference 
 of the Court for the rule of non-negotiability of ware- 
 house receipts of the Common law. 
 
 We must be permitted to add that all such inter- 
 ference of the judiciary with the legislative will is to 
 be seriously regretted. The wants of the people are 
 better known by their representatives in the Legisla- 
 tures, especially those of a commercial community. 
 It is neither wise nor proper for judges to check the 
 tendency of legislation, or to impede the course of 
 law by interpreting them too narrowly. Such action 
 of the courts has a nefarious effect upon the com- 
 merce of the country, and often interferes with its 
 prosperity. 
 
 402. The Factors' Act of the State of New York, 
 intended to protect innocent parties dealing with fac- 
 tors or other agents, and taking from them pledges of 
 
 * Jones, on Pledges, Sec. 343.
 
 Pledge of Warehouse JKeceipts. 353 
 
 warehouse receipts, has been variously construed by 
 the courts, and in most cases was held to protect 
 rather the true owner than the pledgee. 
 
 In the case of Cartwright vs. Wilmerding, 24 N. 
 Y. 526, the court compared the act with the English 
 statute, and decided that the innocent pledgee of 
 warehouse receipts fraudulently disposed of by its 
 agents had a better right under the law than the true 
 owner. The court said : "Since the passage of the 
 statute there is no legal need of saj'ing that any of 
 the documents named in the acts give the holder con- 
 structive possession of the property ; for the statute, 
 when it calls them ' documentary evidence of title,' 
 makes them equal in validity to possession, and leaves 
 us to call them what they are, with the same legal 
 effect as if we gave to the facts the former des- 
 ignation^ which is descriptive of their legal effect. In 
 brief, the effect of the statute seems to be that he who 
 has such documentary evidence of title as gives him 
 the exclusive control of the possession shall be held 
 the true owner of the property for certain purposes, 
 provided the true owner has entrusted him with such 
 evidence for the purpose of disposing of the prop- 
 erty. A factor so situated can sell or pledge the whole 
 or any part of the property, or give upon it any lien 
 or security for advances, or, in short, treat it as his 
 own. Entrusted with the disposing control, he can 
 exercise that control ; and if he misappropriates the 
 property or its avails his principal must suffer — not 
 the person who has dealt with the factor ' on the
 
 354 The Law of Pledge. 
 
 faith ' of the position in which the principal has 
 placed him." 
 
 And again: "But our statute departed entirely 
 from the Common law, and by making a factor's 
 possession such evidence of ownership as to enable 
 him to do all acts which the true owner might, mani- 
 fested a totally different intent from that of the Eng- 
 lish act. Substantially, it left an owner to use his 
 precautions when he selected his factor, thereafter 
 leaving him to be responsible for the acts of his agent 
 and protecting a bona fide third person in an}- trans- 
 action fairly effected with the apparent owner. And, 
 for the benefit of trade, the statute said that the delays 
 incident to following up the line of title, and the ex- 
 tent of authorit}^, might be dispensed with, except so 
 far as the statute itself retained them ; that is, as to 
 bailees receiving goods for carriage. 
 
 " That the course of trade reall}' called for such an 
 act as ours is, upon this construction, is made clear by 
 the course of English legislation on the same sub- 
 ject. Immediately upon the decision in INIeeson & 
 Welsby (above cited). Parliament passed an act (5 and 
 6 Vic, C. 89), giving the same effect to a factor's 
 actual possession as our act gives. And in the same 
 spirit, and as it were for the very purpose of prevent- 
 ing the force of the prior decisions on the point of 
 " intrusting'''' documents, etc., a section of that act pro- 
 vides that an agent possessed of any of the documents of 
 title mentioned in the act, " whether derived immedi- 
 ately from the owner of such goods, or obtained by
 
 Pledge of Warehouse Receipts. 355 
 
 reason of suck agenf s having been intrusted with the 
 possession of the goods represented by such documents 
 of title as aforesaid, or of any other documents of title 
 thereto, shall be deemed and taken to have been 
 entrusted with the possession of the goods represented 
 by such documents of title as aforesaid ; and all con- 
 tracts pledging, or giving a lien upon, such document 
 of title as aforesaid, shall be deemed and taken to be, 
 respectively, pledges of and liens upon the goods to 
 which the same relates," etc. ; " and an agent in pos- 
 session as aforesaid of such goods or documents shall 
 be taken^ for the purposes of this act, to have been 
 intrusted therewith by the owner thereof, unless the 
 contrary can be shown in evidence " (9 Mees. & 
 Welsh. 650, note). This act not only comes up to 
 ours, but overrules (by the Legislature) the decisions, 
 then seen to be inconsistent with the fundamental 
 principle of this new act. Of necessity, these decis- 
 ions have no force under our act."* 
 
 In that case the goods had been consigned from 
 England by the owners to parties in New York, who 
 were instructed to pay the duties on them, but not to 
 deposit them in warehouses. The consignees, hold- 
 ing the invoices, warehoused the goods contrary- to 
 orders, and pledged the warehouse receipts to secure 
 advances made to them on the same. 
 
 The Court held that the warehouse receipts were 
 sufficient evidence of possession and authority in the 
 
 * Cartwrlght vs. Wilinerdin, 24 N. Y. .530 and 532.
 
 356 The Law of Pledge. 
 
 pledgeors to validate the pledge under the New York 
 Factors' Act. 
 
 403. But in the more recent case of Soltau vs. Ger- 
 dau, 119 N. Y. 380, in which the facts strongly re- 
 sembled those of Cartwright vs. Wilmerding, the de- 
 cision went the other way, and the honest pledgee of 
 the warehouse receipts was defeated b}' the true 
 owner, whose goods had been fraudulently pledged 
 by the agent. The owner in that case had given his 
 agent a delivery order to enable him to receive, sell 
 and deliver the goods. Thus having possession of 
 them the agent deposited them in a warehouse in his 
 own name and pledged the warehouse receipts to 
 secure his own debt. He therefore had obtained the 
 documents of title, the warehouse receipts, clearly 
 from having been entrusted by the o~u?ter with the 
 possession of the goods ^ in the words of the statute. 
 
 The owner of the goods claimed them from the 
 pledgee. The Court held that the Factor's Act did 
 not protect the pledgee, though he was in good faith 
 and innocent of the factor's fraud, because the factor 
 could not be said to have been entrusted ivith the pos- 
 session of the goods \\\\hQ sense of the statute. Said the 
 Court in speaking of the larceny committed by the 
 agent : 
 
 " An owner who is deprived of his property by 
 theft is guilty of no act upon which another has the 
 right to rely, and can not in law be said to intrust the 
 thief with his property.'' The reflection is illogical.
 
 Pledge op Warehouse Receipts. 357 
 
 The master who is robbed by a confidential servant 
 has clearly entrusted a thief with his property.* 
 
 404. It is difficult to reconcile those two cases arising 
 under the same law, under similar circumstances, and 
 in both of which the owner of the goods had entrusted 
 his property and the evidence of his owners^hip to a 
 dishonest agent. The decision in the latter case 
 makes no mention of the former one, in which, how- 
 ever, the reasoning of the court seems to be the more 
 forcible and convincing of the two. It is well to 
 observe also that, in the latter case, three of the judges, 
 and not the least distinguished of the court, dissented. 
 
 The decision in Cartwright vs. Wilmerding gives 
 to the statute a more progressive and enlightened 
 intention than that of Soltau vs. Gerdau. In the 
 former case, the Court said: " The English statute, 
 and our own, were manifestly passed for the purpose 
 of increasing the facilities of trade, by legalizing and 
 explaining the cases in which a party could sell, or 
 pledge, property at sea, in the ship at dock, or lying 
 in the warehouse subject to the payment of duties. 
 Historically, the ifecessities of trade and the custom 
 of merchants had, in both countries, anticipated the 
 statutes. And the benefits of the statutes and the 
 custom are too evident, and too great, to allow us to 
 narrow the construction of the law. And there is no 
 sound principle which would oppose a liberal view, 
 
 * Soltau vs. Gerdau, 119 N". Y. 380, 392. 
 Rowland vs. Woodruff, 60 N. Y. 73. 
 Collins vs. Kalli et ah, 85 N. Y. 637. 
 Uentz vs. Miller, 94 N. Y. 64.
 
 358 The Law of Pledge. 
 
 tending to enlarge the facilities of transfer; since 
 these acts but follow out the general rule, that every 
 man is bound to take care not to select an agent who 
 will do acts to injure other persons." * 
 
 405. Warehouse receipts and bills of lading as rep- 
 resentatives of property, and as means of security in 
 commercial transactions, being closely connected and 
 made the subject of the same legislation, where they 
 are governed by statutes, it is difficult to separate 
 them in the examination of the authorities bearing 
 upon them. They relate also to the pledges by fac- 
 tors, and we shall therefore continue the considera- 
 tion of the subject in subsequent chapter on Pledges 
 b}^ Factors. 
 
 406. In the meantime we may observe that there 
 is another exception to the rule that warehouse receipts 
 are not by the Common law negotiable to the extent 
 of protecting the pledgee against the true owner of 
 the goods, and that is, when the true owner has him- 
 self put the hidicia of ownership on his agent and 
 has thereby enabled him to deceive third persons. In 
 that case the true owner is estopped from contesting 
 the rights of the pledgee, f 
 
 This principle applies equally to bills of lading and 
 to all cases in which the owner of personal property 
 has put on another person the indicia of ownership. 
 
 * Cartwright vs. Wilmerding, 24 N. Y. 529. 
 t Moore vs. Kidder, 106 N. Y. 32. 
 
 Gibson vs. Stevens, 8 How. 384. 
 
 Chicago Dock Co. vs. Foster, 48 III. 507. 
 
 Ditson vs. Randall. 33 Me. 202. 
 
 Hazard vs. Fiske, 83 N. Y. 287.
 
 Pledge op Warehouse Receipts. 359 
 
 407. The rule has become axiomatic by repeated 
 adjudications. It is plainly stated by Lord Herschell 
 in a recent case. " The general rule of the law is, 
 that where a person has obtained the property of 
 another from one who is dealing with it without the 
 authority- of the true owner, no title is acquired as 
 against that owner, even though full value be given, 
 and the property be taken in the belief that an 
 unquestionable title thereto is being obtained, unless 
 the person taking it can show that the true owner has 
 so acted as to mislead him into the belief that the per- 
 son with the propertv had authority to do so. If this 
 can be shown, a good title is acquired by personal 
 estoppel against the true owner."* 
 
 We have chosen this authority among so many on 
 the same subject because it shows that the principle is 
 not limited to cases in which the owner has actually 
 clothed his agent with documents of title or other evi- 
 dence or hidicia of ownership ; but that any act or 
 conduct on the part of the owner by which a third 
 person is misled as to the real ownership of the prop- 
 erty in the hands of an agent will estop the owner 
 from denying the power of the agent to dispose of the 
 property. 
 
 London Joint Stock Bank vs. Simmons, Law Reports, Appeal 
 Cases, 1892, p. 215.
 
 CHAPTER XXXIII. 
 
 408. We must note that the legislation alluded to 
 of several States of the Union and of England by 
 which the pledgees of warehouse receipts are to be 
 protected, when in good faith, even against the true 
 owner of the goods, under certain circumstances, is 
 analogous to that of France on the same subject. 
 There, the person who deposits merchandise in a 
 general warehouse can demand of t?ie warehouseman 
 both a receipt and a warrant (so called in the French 
 statute), annexed to the receipt. These documents 
 state the names, profession and domicile of the de- 
 positor, the nature of the merchandise and all neces- 
 sary indications to establish their identity and deter- 
 mine their value. 
 
 The ivarrant enables the depositor of the goods to 
 pledge them without removing them from the ware- 
 house and without any trouble. The pledge is effected 
 by the endorsement of the warrant indicating the date 
 of the transaction, the amount of the principal and 
 interest of the debt secured, the time of its maturity, 
 the names, profession and domicile of the creditor. 
 The possession of the goods, without which the pledge 
 would be invalid, is then transferred constructively to 
 the pledgee by delivery of the warrant and held 
 vicariously by the warehouseman for account of the 
 pledgee. This constructive possession is provided
 
 362 The Law of Pledge. 
 
 for by Art. 92 of the Code de Commerce, which 
 states that the creditor is reputed to have the goods 
 in his possession when they are at his disposition in 
 his stores, or ships, in the custom house, or i?i a 
 public warehouse ^ or if, before they arrive, they are 
 transferred to him by a bill of lading. * 
 
 The same law prescribes that the first assignee of 
 the warrant should have the endorsement on it re- 
 corded on the books of the warehouse, with all the 
 particulars stated in the endorsement, and that the 
 warrant should bear upon itself the certificate of its 
 having thus been recorded on the books of the ware- 
 house. The object of the registration is, as in all 
 cases of registry, to give ^ notice of the pledge to third 
 persons. In default of such registration the creditors 
 of the depositor of the goods in the warehouse could 
 validly attach them and defeat the lien of the pledgee. 
 The registration of the warrant prevents also the de- 
 positor from selling the goods or withdrawing them 
 from the warehouse, which he could otherwise do, as 
 he still retained the warehouse receipt after parting 
 with the warrant. 
 
 The pledgee of the warrant, who is naturally the 
 pledgee of the goods, can have those sold under the 
 terms provided by the Code de Commerce, after a 
 notice of eight days to the debtor and in the mode 
 prescribed by Art. 93 of the same Code de Commerce, 
 as we have seen before. 
 
 The warrant is negotiable and passes by subse- 
 
 * Code de Commerce, Art. 92.
 
 Pledge of Warehouse Receipts. 363 
 
 quent endorsements, which need not be registered as 
 the first one. And in case the sale of the goods does 
 not produce enough to satisfy the debt, the pledgee 
 has a right of action against the endorsers personally, 
 beginning with the depositor, who is the first endorser 
 of the warrant.* 
 
 We see, therefore, that the French law of ware- 
 house receipts is substantially the same as that of this 
 country, but more definite and precise, and giving 
 more complete rights to the pledgee of them 
 
 We see also that the warrant which accompanies 
 the warehouse receipt is, to all intents and purposes, 
 a commercial and negotiable paper. And we see 
 finally that the French commercial law concords in 
 this matter with the general and fundamental prin- 
 ple of the law of France and some other countries of 
 continental Europe, relative to movable or personal 
 property, that the possession of such property is 
 equivalent to title, as expressed in the maxim Mobilia 
 nofi habe7it sequellani. 
 
 ♦ Loi du 28 Mai. 1S58. 
 Baudry-Laeantinerie, Nantissement, Sec. 100 el seq. 
 Pont. Nantissement, fcjec.l'ill.
 
 CHAPTER XXXIV. 
 
 Pledge of Corporate Stock. 
 
 409. It is now settled, both by the jurisprudence of 
 the Common law States and by the statutes of the 
 Civil law countries, that shares of corporate stocks 
 may be the subject of a pledge. But, formerly and 
 for a long time, it was doubtful whether stocks could 
 be pledged at all, and there was a great diversity of 
 opinions and adjudications of the courts in that respect. 
 It seems strange at the present day that there should 
 ever have been a question on that subject ; and the 
 uncertainty of the former jurisprudence in regard to 
 it can only be accounted for by the fact that private 
 corporations and joint stock companies did not have 
 then, either in this country or in Europe, the impor- 
 tance which they have acquired within the last 
 fifty 3'ears. There ma}- still be questions as to the 
 modes and effects of the pledge of stock ; but there 
 are none as to the principle that that kind of property 
 may legally be pledged. Both in the Civil and Com- 
 mon law countries, all personal or movable property 
 may be pledged, if possession of it can be transferred to 
 the pledgee, either actually or symbolically. The 
 symbolical possession of corporeal property consists 
 in holding the title of it or its muniment of title. 
 The title to corporate stock is the certificate of shares 
 of the stockholder. The transfer of the certificate is
 
 366 The Law op Pledge. 
 
 equivalent, therefore, to the deUvery of possession of 
 the stock. That was the cause of so much doubt, in 
 former days, as to the legal possibility of pledging 
 stocks. It was thought that, inasmuch as possession 
 could not be given to the pledgee without transferring 
 the stock to him in writing on the books of the com- 
 pany, and such transfer having for its effect to pass 
 the title or general property to the transferee, the 
 transaction might constitute a mortgage but not a 
 pledge. In none of its various branches has the law 
 of pledge taken such a long stride in its modern 
 development as in the mode of assignment of the 
 pledgeor's rights to the pledgee, for the purpose of 
 securing a debt, by means of a pledge, without trans- 
 ferring the ownership, or passing the general prop- 
 erty of the thing pledged. Such an assignment to 
 the pledgee is, in reality, the most common mode of 
 pledge of choses in action and incorporeal things, at 
 the present hour, in this country. 
 
 410. The assignment or transfer of the legal title 
 of choses in action and incorporeal things is not only 
 necessary to put the pledgee in symbolical possession 
 of the pledge, but it is also necessary to give him full 
 control of it, and to enable him to enforce the contract 
 and realize its benefit by sale or otherwise. The 
 same object is had in view, and the same result is 
 obtained, by the adoption of the form of a sale for 
 the purpose of a pledge, as we have seen before. 
 This is equally permissible and valid under the rules 
 of the Civil and Common law, so far as the parties to
 
 Pledge of Corporate !Stock. 367 
 
 the contract are themselves concerned, whatever rights 
 third persons, or creditors of the pledgeor, may have 
 to dispute with the pledgee his lien on the property 
 pledged. In all such transactions, there is clearly a 
 simulated sale, in this, that the ownership of the 
 property remains in the pledgeor, and that the contract 
 is, in reality, one of security. But, when the parties 
 resort to this process without fraud, or injury to others, 
 it is not unlawful. There is nothing more or less in 
 the assignment of stock to the pledgee. 
 
 411. It is curious to observe in connection with the 
 progress of jurisprudence on this subject the complete 
 revulsion of legal authorities from the original ideas 
 that stocks could be mortgaged, but could not be 
 pledged. Nowhere can we find the fact so well 
 shown as in the following paragraph, which I tran- 
 scribe from the excellent treatise of Mr. Cook on stock 
 and stockholders : " Shares of stock may be the sub- 
 ject of a mortgage or pledge. A mortgage of stock, 
 however, is not often made, and unless there is a clear 
 intent to the contrary the courts will treat the transac- 
 tion as a pledge rather than a mortgage. In fact, it 
 is difficult to ascertain from the cases how shares of 
 stock may be mortgaged, and certain transactions 
 which in a few early decisions were held to be mortgages, 
 would to-day be held to be pledges. There are 
 but few clear cases of a mortgage of stock to be 
 found. It seems that a formal instrument of 
 chattel mortgage of stock, duly executed and regis- 
 tered at the municipal clerk's office as required by
 
 368 The Law of Pledge. 
 
 law i»n case of chattel mortgages, would not constitute 
 an effectual mortgage of stock, and the mortgagee 
 would not be protected where he does not receive the 
 certificate of stock from the mortgagor, or does not 
 obtain a registry of transfer on the corporate books. 
 Where, on the other hand, the certificate of stock is 
 delivered to the creditor as security, it is evident 
 that possession of the property is given to the creditor, 
 but that the debtor still considers the stock to be his. 
 Such a transaction is a pledge, and not a mortgage, 
 and consequently, since the giving of stock certificates 
 as security is almost invariably effected by a delivery 
 of the certificate, a mortgage of stock may be said to 
 be possible, but not probable, or even sensible. The 
 delivery of a certificate of stock with a blank power of 
 attorney, as collateral security, constitutes a pledge 
 and not a mortgage, and the same rule pro- 
 vides even though an absolute transfer or registry is 
 made on the corporate books." ^ 
 
 412. Whether it is necessary for the validity of a 
 pledge of stock that the transfer should be made or 
 recorded on the books of the corporation, independ- 
 ently of the delivery of the certificate of choses to the 
 pledgee, with or without an endorsement in blank 
 upon it, seems to be yet a very doubtful question in 
 the Common law States, in the absence of statutory 
 provisions. A judge of great learning and legal acu- 
 men, in passing upon this point still recently said 
 that there is no doubt that, to constitute a valid pledge 
 
 * Cook, on tUe Law of Stock and Stockholders, Sec. 464.
 
 Pledge of Corporate Stock. 369 
 
 of stock, there must be some written transfer or con- 
 tract, necessary as against third parties in the absence 
 of statutory provisions ; that the mere handing of the 
 certificate is not sufficient ; that there must be a trans- 
 fer on the books of the company, or a power of 
 attorney, or some assignment or contract in writing, 
 by which the holder may assert title and compel the 
 transfer ; and thatthe only State where, he is informed, 
 delivery of the certificate of stock is sufficient, is 
 Louisiana, and there only by express provisions of the 
 Code.* 
 
 413. A writer of high authority, Mr. Waterman, 
 is of the same opinion, and thinks that no pledge of 
 stock is valid, at least as against creditors, without 
 such delivery as will be shown by clothing the pledge 
 with the usual indicia of ownership ; and that until a 
 transfer is recorded or is entered of record, there is 
 no such change of possession as will prevail against 
 an attaching creditor, unless in cases where due dili- 
 gence has been used to make the record, and the at- 
 tachment has intervened. f 
 
 414. Mr. Cook expresses a different opinion and 
 states that a pledge of stock is generally made by a 
 delivery of the certificate of shares, endorsed in blank 
 to the pledgee, and a memorandum in writing to the 
 effect that the stock is held in pledge is generally 
 issued and given to the pledgeor, and a copy thereof 
 
 * Nesbit vs. Macon Bank and Trust Company, 12 Fed. Rep. 686, 
 
 Pardee, J. 
 t Waterman on Corporations, Vol. If, j). 141.
 
 370 The Law of Pledge. 
 
 attached to the certificates of stock. But he says also 
 that, howev^er, a mere dehvery of the certificate of 
 stock endorsed in blank is sufficient to constitute a 
 pledge without any memorandum in writing to that 
 effect, and without a registr}^ of the same being made 
 on the corporate book. * 
 
 415. The pledgee, therefore, who does not have 
 the stock transferred in his name on the books of the 
 corporation, may be exposed to the successful seizure 
 of another creditor, and to the loss of his pledge. 
 .\nd on the other hand, the pledgee who causes such 
 transfer to be made in his name, is exposed to the 
 danger of succeeding to the liability of his transferrer 
 for unpaid stock, or, under the national banking law, 
 to the obligations of the stockholders for an amount 
 equal to that of their stock. The liability of such 
 transferee, even when he is only a pledgee of the 
 stock, is no longer an open question. It has been so 
 decided by the highest Court of this country in several 
 instances.f 
 
 416. In the case of National Bank vs. Case, 99 U. 
 S. 628, the court held that, when the pledgee causes 
 the stock to be transferred on the books of the cor- 
 poration in the name of an irresponsible party, but in 
 reality for the benefit of the pledgee, the latter is 
 responsible as a stockholder. The court remarked 
 
 * Cook, Stock and Stockholders See. 465. 
 t Putnam vs. Upton, 96 U. S. 328. 
 
 Webster vs. Upton, 91 U. S. 65. 
 
 Sanger vs. Upton, 91 U. S. 56. 
 
 Upton vs. Trebllcock, 91 U. S. 45. 
 
 National Bank vs. Case, 99 U. S. 628.
 
 Pledge op Corporate Stock. 371 
 
 that, even In the EngUsh cases cited, it is held that, 
 if the transfer is merely colorable, or, as sometimes 
 coarsely denominated, a sham — if, in fact, the trans- 
 feree is a mere tool in nominee of the transferrer, so 
 that, as between themselves, there has been no real 
 transfer, "but in the event of the company becoming 
 prosperous the transferrer would become interested in 
 the profits, the transfer will be held for naught, and 
 the transferrer will be put on the list of contributories." 
 The court cited from Thompson, on the Liability of 
 Stockholders, the following paragraph: " A transfer 
 of shares in a failing corporation, made by the trans- 
 ferrer with the purpose of escaping his liability as a 
 shareholder, to a person who from any cause is inca- 
 pable of responding in respect to such liability, is 
 void as to the creditors of the company and as to 
 other shareholders, although as between the transfer- 
 rer and the transferee it was out and out.'' 
 
 417. This principle is certainly sound and equita- 
 ble and prevents injustice being done to the creditors 
 of the corporation and the other stockholders. Yet 
 the Supreme Court of the United States has overruled 
 it in a later case, and decided that the pledgee of stock 
 who had the stock transferred on the books of the 
 company, in the name of his own employee, an irre- 
 sponsible party, for the avowed purpose of avoiding 
 liability as a stockholder, could not be held as such. 
 In that case the pledgee had not received the dividends 
 on the stock during the existence of the pledge, and 
 had allowed the pledgeor to receive them. Further-
 
 372 The Law of Pledge. 
 
 more, the officers of the company knew at the mo- 
 ment of the transfer to the employee that he was a mere 
 nominee of the pledgee and an irresponsible person. 
 These considerations must have had some weight on 
 the mind of the court. But was there any the less 
 an injustice done by the transaction to the creditors 
 and other stockholders? * 
 
 418. Whether the apparent owner of the stock is a 
 pledgee or not, is of no consequence under the law of 
 Conc^ress creating: the national banks so far as his lia- 
 bility is concerned. The moment a man appears on 
 the books of the corporation as a shareholder, whether 
 for the purpose of qualifying as a director or for some 
 other reason, even if he does not own the stock 
 which stands in his name, he is liable as a share- 
 holder.f 
 
 419. In a case arising in Louisiana where, by stat- 
 ute, delivery of the certificate of stock to the pledgee, 
 without assignment, constitutes-a valid pledge even as 
 against third parties and creditors, the pledgee, who had 
 had the transfer of the stock made in his name on the 
 books of the corporation, pleaded in defence of the 
 suit of the receiver holding him responsible as a stock- 
 holder, that he had caused such transfer to be made, 
 in error of his legal rights under the law of the State. 
 The defence was decided to be unavailable, the Court 
 declaring that it is well settled that one to whom 
 stock has been transferred in pledge or as collat- 
 
 * Anderson vs. Warehouse Company, 111 U. S. 479. 
 t Finn vs. Brown, 142 U. S. 5U.
 
 Pledge op Corporate Stock. 373 
 
 eral security for money loaned, and who appears on 
 the register of the corporation as the owner of the 
 stock, is, in the event of the insolvency of the corpora- 
 tion, chargeable as a stockholder for the benefit of 
 creditors.* 
 
 420. There are statutes, however, in some of the 
 States by which the pledgees of stock do not incur 
 the liability of stockholders by having the stock trans- 
 ferred in their names, or by which that liability is 
 limited or modified. f 
 
 421. It has been also established by jurisprudence 
 that the parties to the contract of pledge may by 
 agreement save the pledgee of corporate stock from 
 liability as a shareholder, in having it declared, either 
 on the certificate of shares or on the books of the 
 corporation, that the transfer made in his name is 
 only for the purpose of the pledge, and that the 
 transferee is only a pledgee, and not the owner of the 
 stock. In such cases, the pledgeor remains liable as 
 shareholder. ;][ 
 
 422. The curious question was once raised, whether 
 the pledgee of corporate stock pledged by the corpo- 
 ration itself could be held liable as a shareholder, 
 under the statute of Missouri, which provided that 
 the stockholders of a corporation, at its dissolution, 
 were liable for its debts ; but that executors, trustees 
 and persons holding the stock as collateral security. 
 
 * Moore & Janney vs. Jones. 3 Woods, C. C. 53. 
 t Am. and Eng. Ency. of Law, Vol. 18, p. 701. 
 X Bank vs. Hingham Company, 127 Mass. 5G3. 
 Matthews vs. Albert, 24 Md. .^27.
 
 374 The Law of Pledge. 
 
 were exempted from the liability ; and that the 
 pledgeors remained liable as shareholders. 
 
 423. The Court of Missouri held that the pledgee 
 of the stock pledged by the corporation itself was not 
 included in the exemption, and had by transfer of the 
 stock to him incurred the liability of a shareholder. 
 The Supreme Court of the United States reversed the 
 judgment and decided that the pledgee in such case 
 came within the exemption of the statute. This was 
 one of the instances in which the Court declared it 
 was not bound to follow the decisions of the State 
 courts. ''" 
 
 424. The doctrine of the liability of pledgees of 
 stock of national banks, to whom the stock is trans- 
 ferred on the books of the corporation, seems to have 
 been very recently modified by the Supreme Court of 
 the United States in a case of great importance. At 
 all events, the Court therein lays down in its own 
 words the following rules, which may hereafter serve 
 for the guidance of the parties in transactions of the 
 sort, to-wit : 
 
 That the real owner of the shares of the capital 
 stock of a national banking association may in every 
 case be treated as a shareholder within the meaning 
 of Sec. 5151 ; that if the owner transfers his shares to 
 another person as collateral security for a debt due to 
 the latter from such owner, and if by the direction or 
 
 Burgess vs. Seligman. 107 U. S. 20. 
 Fisher vs. Seligman. 75 Mo. 13. 
 Griswold vs. Seligman, 72 Mo. 110.
 
 Pledge of Corporate Stock. 375 
 
 with the knowledge of the pledgee, the shares are 
 placed on the books of the association in such way as 
 to imply that the pledgee is the real owner, then the 
 pledgee may be treated as a shareholder within the 
 meaning of Sec. 5151 of the Revised Statutes of the 
 United States, and therefore liable upon the basis 
 prescribed by that section for the contracts, debts and 
 eno;ascements of the association ; 
 
 That if the real owner of the shares transfers them 
 to another person, or causes them to be placed on the 
 books of the association in the name of another per- 
 son, with the intent simply to evade the responsibility 
 imposed by Sec. 515 1 on shareholders of national 
 banking associations, such owner may be treated, 
 for the purposes of that section, as a shareholder, and 
 liable as therein prescribed ; 
 
 That if one receives shares of the stock of a national 
 banking association as collateral security to him for a 
 debt due him for the owner, with power of attorney 
 authorizing him to transfer the same on the books of 
 the association^ and being unwilling to incur the re- 
 sponsibilities of a shareholder as prescribed by the 
 statute, causes the shares to be transferred on such 
 books to another, under an agreement that they are 
 to be held as security for the debt due from the real 
 owner to his creditor — the latter acting in good faith 
 and for the purpose only of securing the payment of 
 that debt without incurring the responsibility of a share- 
 holder — he, the creditor, will not, although the real 
 owner may, be treated as a shareholder within the 
 meaning of Sec. 5151 ; and
 
 376 The Law of Pledge. 
 
 That the pledgee of personal property occupies 
 toward the pledgeor somewhat of a fiduciary relation, 
 by virtue of which, he being a trustee to sell, it 
 becomes his duty to exercise his right of sale for the 
 benefit of the pledgeor.* 
 
 425. Independently of these general principles thus 
 stated by the Court, it recognized in that case the 
 right of the pledgee of the stock, for the purpose of 
 avoiding the liability of a shareholder, to surrender the 
 certificates transferred to him by the pledgeor and real 
 owner, and to have new certificates issued to him by 
 the corporation in his own name, but as -pledgee. 
 
 426. The decision is clearly of great importance in 
 financial and commercial transactions in rendering the 
 use of corporate stock easier and safer for the purposes 
 of pledge. There is no reason why the rule should 
 not apply to the pledge of all corporate stocks besides 
 that of the national banks, unless restricted or pre- 
 vented by statute in particular cases. 
 
 427. The law of Louisiana is clear on the subject 
 of the pledge of stock. It is contained in Art. 
 3158 of its Civil Code, which is in these words: 
 "When a debtor wishes to pawn promissory notes, 
 bills of exchange, stocks, obligations or claims upon 
 other persons, he shall deliver to the creditor the 
 notes, bills of exchange, certificates of stock, or other 
 evidences of the claims or rights so pawned ; and 
 such pawn so made, without further formalities, shall 
 
 * Fauly vs. Loan and Trust Company, 165 U. S.[.619.
 
 Pledge of Corporate Stock. 377 
 
 be valid as well against third persons as against the 
 pledgers thereof, if made in good faith." 
 
 The words of the statute are too plain to admit of 
 any doubt. When a debtor wishes to pledge stock, 
 he shall deliver to the creditor the certificate of the 
 stocky and such pledge, without further formalities, 
 shall be valid as well against third persons as against 
 the pledgeor. 
 
 It is evident that, under the law, no writing is nec- 
 essary and no registry or transfer of the stock on the 
 books of the corporation is required to affect third par- 
 ties and secure the benefit of his lien to the pledgee. 
 The statute puts stocks on the same footing as negotia- 
 ble paper in regard to the pledge of them. This is 
 another instance of the advance of the law of pledge 
 in modern or rather recent times for the purpose of 
 facilitating commercial transactions and promoting 
 commerce, and thereby the general prosperity. 
 
 The Court of Louisiana has never failed to apply the 
 rule, and, after several adjudications, said that it was 
 time for it to declare that it rested its decision on the 
 principle of stare decisis. 
 
 428. In the case then under consideration and in 
 the previous cases there were two questions raised by 
 other creditors of the pledgeor, claiming that they were 
 not affected by the pledge of the stock, because it stood 
 yet on the books of the corporation in the name of 
 their debtor, the pledgeor, no transfer of the stock or 
 registry of the pledge having been made. 
 
 * Pitot vs. Johnson et al., 33 La. An, 128G.
 
 378 The Law of Pledge. 
 
 429. The first question was raised by the corpora- 
 tion itself, contending that, under a provision of its 
 charter, its stock could not be transferred while a 
 matured indebtedness to the company existed on the 
 part of the stockholder ; and that third persons had 
 notice of the provision by the publication of the 
 charter. 
 
 430. The second question was raised by attaching 
 creditors of the pledgeor, who clainied that the stock 
 being still in the name of their debtor and in his pos- 
 session, as it was not transferred to the pledgee, they 
 had acquired the first lien upon it by their seizure 
 under the rule of law governing movable or personal 
 property. 
 
 431. In answer to both questions the court held 
 that by virtue of the aforesaid article of the Civil 
 Code the sale or pledge of the stock of an incor- 
 porated company is complete, even as to third per- 
 sons, by the delivery to the vendee or pledgee of the 
 certificates of stock, and that notice to the corpora- 
 tion is not necessary to the perfection of the sale or 
 pledge, or to protect the stock from seizure by the 
 vendor's creditors, or from other rights of third per- 
 sons, arising subsequently to the sale or pledge.* 
 
 431 . In a more recent case the same Court declared 
 that a clause of a like nature in the charter providing 
 that no sale of the stock should be made without 
 
 Pitot vs. Johnson, 33 La. An. 1286. 
 
 Insurance Company vs. Dry Dock Company, 31 La. An. 149. 
 
 ^mith vs. Slaughterhoiise Company, 30 La. An. 1378.
 
 Pledge op Corporatje Stock. 379 
 
 notice to the company could not affect the rights of 
 the pledgee.* 
 
 432. The contrary doctrine seems to obtain in other 
 States of the Union and the preponderance of author- 
 ities on this subject are to the effect that the liens 
 allowed by statute to corporations on their stock, for 
 debts due them by the stockholders in whose names 
 the shares stand on their books, will prevail over tlie 
 claims of the pledgees of the stock, who demand a 
 transfer in their names. Such is the rule, at all 
 events, for debts due the corporation before the 
 pledge. But a debt created after notice of the pledge 
 would not be secured by the lien on the stock of the 
 debtor, for then the corporation is put on its guard 
 and is informed of the adverse right of the pledgee. 
 It is also established that a mere by-law of the cor- 
 poration which ■ provides that a stockholder can not 
 transfer his shares without the consent of the com- 
 pany, when he is indebted to it, can not affect a 
 pledgee in good faith. f 
 
 * Mineral Water Co. vs. Deblieux et al., 40 La. An. 155. 
 t Am. and Eng. Ency. of Law, Vol. IS, pp. 704, 705, 706.
 
 CHAPTER XXXV. 
 
 433. The pledgee of corporate stock is entitled to 
 the dividends declared upon the same, on the princi- 
 ple that the fruits or accretions of the thing pledged 
 are part of the pledge itself. If those fruits consist 
 in money, as the dividends of stock, or the interest 
 on bonds or promissory notes, the pledgee having the 
 right to receive them, has equally the right to retain 
 them, but he must credit the pledgeor with the amount 
 received. In that respect, such fruits belong to the 
 pledgee, because they operate as a payment of the 
 pledgeor' s debt pro tanto at its maturity. If the fruits 
 do not consist in money, interest or income, then they 
 remain the property of the pledgeor, to be surrendered 
 to him by the pledgee on redemption of the pledge. 
 
 434. In order to entitle the pledgee to the collection 
 or recovery of the dividends, the corporation must be 
 notified of the pledge, and proper evidence thereof 
 submitted to it. But it is not necessary that the trans- 
 fer of the stock should be made in the pledgee's name 
 on the books of the company. The right to receive 
 the fruits of the pledge belongs to the pledgee by vir- 
 tue of the contract of pledge. So much so that, if the 
 pledgeor collects the dividends from the corporation in 
 absence of notice of the pledge, the pledgee can com- 
 pel him to turn them over to him. The pledgeor in 
 that case is guilty of the violation of the contract of 
 pledge. The pledgee has not only the right to receive 
 
 3S1
 
 382 The Law of Pledge. 
 
 the dividends of the pledged stock, but it is his duty 
 to do so and part of his obHgation to take care of and 
 preserve the pledge whilst it is in his hands. 
 
 435. These principles are lirmly established in the 
 jurisprudence of the Common law.* 
 
 Under the Civil law, the same rules are definitely 
 fixed by statute. The Civil Code of Louisiana is 
 particularly precise on the subject. Its enactments 
 are as follows : 
 
 Article 3168. "The fruits of the pledge are 
 deemed to make a part of it, and therefore they 
 remain, like the pledge, in the hands of the creditor; 
 but he can not appropriate them to his own use ; he 
 is bound, on the contrary, to give an account of them 
 to the debtor, or to deduct them from what may be 
 due him." 
 
 Article 3169. "If it is a credit which has been 
 given in pledge, and if his credit brings interest, the 
 creditor shall deduct this interest from those which 
 may be due to him ; but if the debt for the security 
 of which the claim has been given brings no interest 
 itself, the deduction shall be made on the principal 
 of the debt." 
 
 Article 3170. " If the credit which has been given 
 in pledge becomes due before it is redeemed by the 
 person pawning it, the creditor, by virtue of the trans- 
 fer which has been made to him, shall be justified in 
 receiving the amount and in taking measures to re- 
 cover it. When received he must apply it to the pay- 
 
 * Am. and Eng. Ency. of Law, Vol. IS, p. 703.
 
 Pledge of Corporate Stock. 383 
 
 ment of the debt due to himself, and restore the 
 surplus, should there be any, to the person from whom 
 he held it in pledge." 
 
 The reason of this is that the object of the pledge is 
 only to secure the creditor, and not to benefit him or 
 enrich him in any manner.* 
 
 436. The pledgee of stocks has the same right as 
 the pledgee of any other property to sell the pledge 
 without notice and at private sale if it is so stipulated 
 between the parties. It is even the general practice in 
 commercial affairs, and all attempts to treat the sale 
 in such cases as a conversion b}' the pledgee have failed. 
 It is only in cases where the pledgee, in default of an 
 express agreement and rel3ang exclusively upon the 
 usages of the locality, sold the stock without notice to 
 the pledgeor, that the Courts held him guilty of con- 
 version. f 
 
 437. A certain doctrine has been established by 
 some courts and accepted by the law writers, to the 
 effect that the pledgee of stocks is not bound to retain 
 the specific shares belonging to the pledgeor ; and 
 that, provided he keeps in hand a corresponding 
 number of shares of the same stock, his pledge is not 
 impaired. The theory of this rule has been curiously 
 stated by the Court of Connecticut in the following 
 words : 
 
 " Shares of stock have no individuality, no ease- 
 
 * Code Napoleon, Art. 2081. 
 
 Troplong, Nantissement, Sec. 437. 
 t Le Merchant vs. Moore, 150 N. Y. 209. 
 
 Williams vs. Trust Company, 133 N. Y. <}<30. 
 
 Thompson vs. Bank, 113 N. Y. S25. 
 
 France va. Clark, L. R. Chancery Division, 1879-1880, p. 830.
 
 384 The Law of Pledge. 
 
 ments. One share does not differ from another share 
 of like stock in form, characteristic or value. Each 
 share represents simply an undivided proportionate 
 interest in the ownership of the corporation. It en- 
 titles the owner to a certain right in the management, 
 profits and ultimate assets of the corporation, precisely 
 like that which every other share owner enjoys. Cer- 
 tificates of stock, which have earmarks, are not the 
 stocks. They are only the evidence of the ownership 
 of the stocks. They are muniments of title, like title 
 deeds. They have no value save as evidence of the 
 thing owned, which has nothing individual, dis- 
 tinguishable or peculiar about it. Courts have there- 
 fore said that no good reason existed for requiring 
 that a pledgee of stock should at all times preserve a 
 careful separation of distinguishable certificates con- 
 nected with each transaction of pledge, and maintain 
 the identity of each certificate distinct and unbroken. 
 They have said that the essential thing was that he 
 hold at all times the required shares of stock ready to 
 be delivered when called for, and in recognition of this 
 fact and of the right enjoyed by the pledgee to transfer 
 t*he stocks held by him in pledge into his own name, 
 they Irave held that a pledgee fully preserv^es the rights 
 of the pledgeor if he at all times until the termina- 
 tion of the pledge retains similar stock in amount 
 equal to that pledged. This has been held of pledges 
 in their ordinary forms as well as of those incidental 
 to margin transactions. Nourse vs. Prince, 4 Johns. 
 Ch. 490; Horton vs. Morgan, 19 N. Y. 170; Gilpin
 
 Pledge of Corporate Stock. 385 
 
 vs. Howell, 5 Pa. St. 41 ; Price vs. Gover, 40 Md. 
 102; Hubbell vs. Drexel, 11 Fed. Rep. 115' Cook 
 on Stock and Stockholders, Sec. 469."* 
 
 438. The origin and the substance of this jurispru- 
 dence are accurately stated by Mr. Dos Pasos in his 
 book on Stock Brokers. f It appears to be well 
 established both in this country and in England. ;|; 
 
 439. But itisclearly a wide departure from the prin- 
 ciples of the law of pledge ; and the reasons of the court 
 of Connecticut, like those of the previous decisions, are 
 more reasons of convenience than anything else. 
 Shares of stock have an individuality and a very dis- 
 tinct one ; they are numbered and bear the name of 
 the owner, and consequently have an earmark. That 
 they represent simply an undivided interest in the 
 assets of the corporation does not affect their own 
 individual existence ; nor does the fact that they are 
 of the same value as other shares of the same stock. 
 If they were not susceptible of identification and of in- 
 dividualization the consequence would be that they 
 would not be susceptible of being pledged. The 
 thing pledged must be a thing certain, distinct, defi- 
 nite, identifiable and describable. 
 
 * Skiff vs. Stoddard, 63 Conn. 218. 
 
 t Dos Pasos, on Stock Brokers, p. 141 et seq. 
 
 t Langton vs. Waite, 6 L. R. Eq. 165. 
 
 LeCroy vs. Eastman, 10 Mod. 499. 
 
 Price vs. Gover, 40 Md. 115. 
 
 Gilpin vs. Howell, 5 Pa. St. 41. 
 
 Horton vs. Morgan, 19 X. Y. 170. 
 
 Stewart vs. Drake, 4G N. Y. 449. 
 
 Taussig vs. Hart, 58 N. Y. 425. 
 
 Thompson vs. Toland, 48 Cal. 100. 
 
 Wood vs. Hayes, 81 Mass. 375. 
 
 Worthington vs. Torney, 34 Md. 193. 
 
 Colebrook, on Collateral Securities, Sec. 306 et seq.
 
 386 The Law of Pledge. 
 
 That particular thing must remain in the possession 
 of the pledgee during the existence of the pledge. No 
 substitution of another thing, even alike and of the 
 same value, can be made to it. These are elementary 
 principles. Furthermore, the thing pledged is in the 
 hands of the pledgee only to secure him. It is there 
 as a deposit. The pledgee has no more right to sell 
 and replace it than to sell and replace the deposit. 
 Where is there any law or principle of law to make a 
 difference in the pledge of stock? Even if, under the 
 doubtful jurisprudence of the Common law, the pledgee 
 has the right to use the pledge for his own benefit, he 
 certainly can not sell it in view of replacing it* 
 
 440. The only plausible reason for the ruling which 
 recognizes the right of the pledgee of stock to sell it 
 and replace it, is that it is thus tacitly agreed upon 
 between the parties ; in other words, that, considering 
 the established usage of brokers In similar cases, 
 there is an implied authority from the customer to the 
 broker to sell or pledge the stock to raise money to 
 meet his advances in respect to the transaction with 
 the customer, and that the latter only reserved to him- 
 self a right to call for a retransfer to him of a similar 
 number of shares on payment of the advances. 
 
 441. Such was the principal reason of Chancellor 
 Kent's judgment in the early case of Nourse vs. Prime, 
 which has been the foundation of that doctrine in the 
 United States f 
 
 From the case of the broker and customer, the rule 
 
 * Cook, on Stock, Sec. 471. 
 
 t Nourse vs. Prime, 4 Johns. Cb. 4n0 and 7 Id. 61).
 
 Pledge of Corporate !Stock. 387 
 
 has drifted down to all cases of pledges of stock. The 
 same reason, but only that reason, may validate the 
 acts of the pledgee in those cases, to-wit : That the 
 custom or usage of the locality establishes the right 
 of the pledgee to sell and replace the stock, and that 
 the custom enters into and forms part of the contract. 
 If there is no such implied agreement between the 
 pledgeor and the pledgee of stock, how far has this 
 contract departed from its original principle, which 
 prohibited the use of the pledge by the pledgee and 
 assimilated such use to a theft ; in the words of Jus- 
 tinian : SI creditor -pignore utatur furtum coniniittit. 
 
 442. The same question of the right of the pledgee 
 of stock to sell and replace pledged shares by others of 
 the same kind was raised in France in a celebrated 
 case, to which we have already referred, and was 
 decided adversely to the pledgee by the Court of Cas- 
 sation. It was there held, in substance, that, in default 
 of an agreement to that effect between the parties, the 
 pledgee was guilty of a breach of trust, and that the 
 pledgeor was not presumed to know of the custom 
 which would authorize such disposition of the stock 
 even if the custom existed.* 
 
 443. It is not amiss to observe here that some of 
 the Civilians are of opinion that the pledgeor may con- 
 sent to the substitution of the stock by the pledgee 
 and that such an agreement is valid between the par- 
 ties, but that, in such case, the contract is no longer 
 that of pledge, properly speaking. f 
 
 * Ante, Sec. 208. 
 
 t Laurent, Du Gage, Sec. 494.
 
 CHAPTER XXXVI. 
 
 Pledge of Policies of Insurance. 
 
 444. Policies of insurance may be plediJjed, whether 
 they are of insurance against fire, or on hfe, or of 
 marine insurance. The pledge of policies of insur- 
 ance on life, especially, is of frequent use in the 
 United States. Persons who have no other property 
 to pledge may insure their lives and pledge the poli- 
 cies. It is in many cases the last resort of the needy 
 borrower. The policy of insurance being a chose in 
 action may be pledged at Common law by the simple 
 delivery of it into the hands of the pledgee. It has 
 been decided that such pledges are valid even without 
 endorsement, or written transfer or assignment. The 
 Court of Massachusetts in a recent case has again 
 stated the rule. It said: "It is well settled that 
 the deliv^ery of such a chose in action as an insur- 
 ance policy for a valuable consideration, with the in- 
 tent to vest the title in the assignee, operates as a 
 valid transfer, and that the equitable interest thus 
 acquired by the assignee will be protected and en- 
 forced in the courts of law."* 
 
 445. But such is the rule only when the policy is not 
 payable to any particular person named in the policy ; 
 otherwise the endorsement by the payee as well as 
 
 * Hewins vs. Baker, 161 Mass. 324, 
 Ellis vs. Kreutzinger. 27 Mo. 311. 
 Grant vs. Kline, 115 Pa. St. 618. 
 
 389
 
 390 The Law of Pledge. 
 
 delivery to the pledgee is indispensable for the validity of 
 the pledge. There seems to be no doubt on this point. 
 It is in that case of the policy of insurance, as it is of 
 any other chose in action payable to a person named 
 in the instrument.'^ 
 
 446. But however simple and legal the pledge of 
 insurance policies in this form may be, and however 
 generally adopted it has been in the United States, it 
 is more common in England to mortgage than to 
 pledge life insurance policies ; and creditors there are 
 better satisfied with the latter mode of security. f 
 
 447. Under the rule of the Civil law that no pledge 
 is valid against third persons unless it is evidenced by 
 an act in writing, stating the amount of the debt 
 secured, and describing the property pledged, is the 
 pledge of a policy of insurance legally effected by 
 simple endorsement and delivery? 
 
 * Jones, on Pledges, Sees. 145 and 147. 
 
 Colebrooke, on Collat. Securities, Sec. 426. 
 
 Am. and Eng. Ency. of Law, verbo Pledge, p. G.ol. 
 
 Collins vs. Dawley, 4 Colo. 138. 
 
 ^Norwood vs. Guerdon, GO 111. 253. 
 
 Stout vs. Yaeger Milling Company, 13 Fed. Rep. S02 (Mo.). 
 
 Sherman vs. Fire Insurance Company, 46 N". Y. 526. 
 
 Merrifield vs. Baker, 11 Allen, 43. 
 
 City Bauk vs. Ass. Company, 32 W. R. 658. 
 
 Crossley vs. Insurance Company, 4 Ch. D. 421. 
 
 Webster vs. Insurance Companj^ 15 Ibid. 169. 
 
 Soule vs. Bank, 45 Barb. 111. 
 
 Chapman vs. Mcllrath, 77 Mo. 39. 
 
 West vs. Insurance Com pan v, 31 Ark. 476. 
 
 Latham vs. Bank, L. R., 17 Eq. 205. 
 
 Bruce vs. Gardner, L. R., 5 Ch. 32. 
 
 *Bart vs. Forbes, 60 Miss. 29. 
 
 Grain vs. Paine, 4 Cush.483. 
 
 State vs. Tomlinson, 45 N. E. 1116 (Ind.) . 
 
 Insurance Company vs. Grant, 33 A. 1060 (X. J.). 
 
 Palmer vs. Merrill, 6 Gush. 286. 
 
 Currier vs. Howard, 14 Gray, 511. 
 
 Norton vs. Bistacagua Insurance Company, 111 Mass. 582. 
 t Salt vs. Northampton, L. R. Appeal Cases 1892, p. 1. 
 
 Deering vs. Bank, L. R. Appeal Cases 1886, p. 20.
 
 Pledge of Policies op Insuranxe. 391 
 
 The question is certainly not free from doubt. The 
 pledge of commercial effects is excepted from the 
 requirement of the written act, as we have seen before, 
 and simple delivery of the thing pledged, in such 
 cases, is sufficient according to the various Codes of 
 Commerce of the countries of continental Europe. 
 But is a policy of insurance a commercial effect? 
 Nothing in the provisions of those Codes indicates it 
 to be such. 
 
 448. In the State of Louisiana the law provides 
 that: '' When a debtor wishes to pawn promissory 
 notes, bills of exchange, stocks, obligations or claims 
 upon other persons, he shall deliver to the cred- 
 itors the notes, bills of exchange, certificates of stock 
 or other evidences of the claims or rights so pawned ; 
 and such pawn so made, without further formalities, 
 shall be valid as well against third persons as against 
 the pledgers thereof, if made in good faith."* 
 
 A policy of insurance does not come within the 
 category of either promissory notes, bills of exchange 
 or stocks. Is it an obligation or a claim upon another 
 person? It is an aleatory obligation, and at best an 
 eventual or contingent claim upon the insurer. Yet 
 such a right may be the subject of the contract of 
 pledge. 
 
 But is it the kind of right which may be pledged, 
 under the article of the Code, by a simple delivery of 
 the evidence of the right? What is the right of the 
 
 * Civil Code of Louisiana, Art. 3158.
 
 ^92 The Law of Pledge. 
 
 insured under the polic}' of insurance? — to recover 
 the insurance mone}^ in case of loss of the subject 
 insured. The poHcy is only evidence of the contract, 
 but not of the loss. 
 
 We may find an analogous case in the contract of 
 an architect to build a house. It creates on the part 
 of the owner an obligation to pay the architect when 
 the house is built. The latter could pledge his right 
 under the contract. But would the simple deliverv of 
 the contract be sufficient to effect the pledge? The 
 contract is evidence of his right to be paid if he builds 
 the house, but it is not evidence that he has built it. 
 A written act of pledge would clearly be necessary to 
 pledge the contract in that case. 
 
 Is the claim of the insured a credit ? Clearly not 
 before the loss. Is it a credit after the loss? It would 
 seem so. But it is not a credit negotiable in the sense 
 of the law. In that case it would look as if the policy 
 of insurance could not be pledged without the written 
 act. Article 3160 of the same Code provides that: 
 "When the thing given in pledge consists of a credit 
 not negotiable, to enable the creditors to enjoy the 
 privilege above mentioned it is necessary not only 
 that the proof of the pledge be made by authentic act 
 or by act under private signature, dul}' recorded, but 
 that a copy of this act shall have been duly served on 
 the debtor of the credit given in pledge." 
 
 449. The question so far does not seem to have 
 drawn the attention of the lawyers of Louisiana, 
 though the pledge of policies of insurance in that State
 
 Pledge of Policies of Insurance. 393 
 
 is of frequent use. The validity of such pledges by 
 written assignment, but not by an act stating the 
 amount of tlie debt secured, has never been contested 
 on the ground that the form of assignment was not 
 sufficient. The form of such assignment is usually in 
 words endorsed on the policy to the effect that, " for 
 value received," the insured transfers the polic}- to the 
 assignee. The statement of value received, in case of 
 a sale of the policy would be sufficient, because the 
 price needs not be declared in the transfer. But in 
 the case of a pledge, the amount of the debt secured 
 must be stated under penalty of nullit}-. The terms 
 assignment or traiisfer are generic. They may be ap- 
 plied equally to a sale, exchange, gift or pledge of the 
 thing. When the transfer is for the purpose of a pledge, 
 unless it contains all the requirements of that kind 
 of contract, under the rule of the Civil law, it is clearly 
 not sufficient. We should bear in mind that, when 
 the policy or any evidence of a right is transferred to 
 the creditor for the purpose of security only, the trans- 
 ferror still retains the o-vnership of the thing trans- 
 ferred. If the ownership itself were transferred^ clearly 
 there would be no pledge or any other contract of 
 security. The transferee could not have a lien on his 
 own proper t}'. 
 
 450. In all policies of insurance there is a clause by 
 which the underwriter stipulates the forfeiture of the 
 insurance in case the insured transfers the policy with- 
 out the consent of the insurer. The contract of insur- 
 ance is a personal one. The insured has no more
 
 ^94 The Law of Pledge. 
 
 right to substitute another .insured to himself than the 
 insurer has the right to substitute another insurer to 
 himself. The reason of this clause is manifest. 
 
 The transfer of the policy is equivalent to the sub- 
 stitution of a new insured to the one with whom the 
 insurer has contracted and whom he accepted for the 
 purposes of the insurance. His consent to the change 
 • evidently should be first obtained before he is bound 
 by the transfer. 
 
 4:^1. Therefore, when for the purpose of a pledge, 
 the policy is transferred or assigned to the pledgee 
 without the consent of the insurer, the latter can 
 demand the forfeiture of the insurance, and, in case of 
 loss, if he has not waived the stipulation of the clause, 
 lie may refuse payment of the indemnity both to the 
 pledgee and the insured. 
 
 452. But it is only the insurer who can avail himself 
 of the clause of forfeiture. Neither the pledgeor nor 
 his other creditors can demand the nullity either of the 
 pledge or of the policy. And the insurer himself can 
 ■claim the forfeiture of the policy, but not the nullity of 
 the pledge. The pledgee in that case is at the mercy 
 of the insurer, but of him alone, so far as the recov- 
 ery of the insurance money is concerned. 
 
 It is expressly said in Merill vs. New England 
 Insurance Company, 103 Mass. 245, 252, of a provi- 
 sion that the policy should be null and void if assigned 
 without the written consent of the company, that it 
 ^' does not prevent the transferor pledge of the policy. 
 It reserves to the companv the right to give or to re-
 
 Pledge of Policies of Insurance. 395 
 
 fuse its consent to such transfer ; and, if made without 
 its consent, to avoid its contract altogether. The effect 
 of the condition is to defeat the policy ; not to defeat 
 the transfer. " * 
 
 * Heevins vs. Batner, 161 Mass. 325. 
 Lynde vs. Ins. Co., 130 Mass. 57. 
 Ellis vs. Kreutzinger. 27 Mo. 311.
 
 CHAPTER XXXVII. 
 
 453. In relation to life insurance policies, there is a 
 great diversity of opinion on the subject of the pledge 
 and transfer of the policy to a person who has no inter- 
 est in the life of the insured. It may be considered as 
 a settled principle that no policy can be validly issued 
 in favor of a person who has no such interest. But 
 when the policy has been originally issued to a person 
 having the insurable interest, can it be subsequently 
 transferred to one who has no interest in the life of the 
 insured? On that question the Courts of this country 
 are divided and wide apart. 
 
 Life insurance was at first unpopular. It had to 
 overcome strong prejudice in its incipiency. In France 
 and various countries of Europe it was for a long time 
 prohibited by statute. Whether the beneficiary had 
 an interest or not in the life of the insured, the con- 
 tract was considered a wager and a speculation on 
 human life. It is still held immoral, and, therefore, 
 void, by some Courts, and reprobated by some law 
 writers whenever the beneficiary has no insurable 
 interest in the life of the insured. 
 
 454. One of the law writers says : " All the objec- 
 tions that exist against issuing a polic\' to one upon 
 the life of another, in whose life the former has no insur- 
 able interest, exist against his holding such policy by 
 mere purchase and assignment from another. In either 
 
 case the holder of such policy is interested in the death 
 
 397
 
 398 Thc Law of Pledge. 
 
 rather than the Hfe of tne insured. The poHcv of the 
 law forbids such speculations based on the continuance 
 of human hfe. It will not uphold a practice which 
 incites danger to life, and it substantially declares that 
 no one shall have any claims under a policy upon the 
 life of another in whose life he had no insurable inter- 
 estatthe time he acquired the policy, whether the policy 
 be issued to him directly from the insurer, or whether 
 he acquired the policy by purchase and assignment 
 from another. He may purchase a policy on the life 
 of another in whose life he has no interest, as a mere 
 speculation ; the door is open to the same practice of 
 gambling, and the same temptation is held out to the 
 purchaser of the policy to bring about the event insured 
 against, as if the policy had been issued directly."* 
 
 455. In France, where the popular prejudice 
 against life insurance lasted longer than in this coun- 
 try, the same views are entertained by some of the 
 writers on that subject. One of them expressed his 
 opinion in these words: "If the one who takes an 
 insurance on the life of another has no interest in the 
 existence of the latter, the contract he enters into will 
 give him a contrary interest ; that is, an interest in 
 the abridgment of the life of the insured. It is no 
 longer a question of social advantage, it is public 
 morality which rises against such a combination. The 
 insurance under such circumstances contains a votum 
 mortis. It is a speculation, a wager on human life, 
 
 * May. on Insurance, !Sec. 398.
 
 Pledgr of Policies of Insurance. 39^ 
 
 speculation in wliich the desire of an early death of the 
 insured is implied." '" 
 
 456. In Belgium legislation has fixed the prohibi- 
 tion absolutely. The law provides that : " The in- 
 surance on the life of a third person is null if it is 
 proved that the beneticiarv had no interest in the life 
 of the insured." f 
 
 457. But, reverting to the question of the validity 
 of the assignment to a person having no insurable 
 interest, of a life policy originally issued to one 
 having the requii-ed interest in the life of the insured, 
 we see that the Supreme Court of the United States" 
 has adopted the prohibitive doctrine and established 
 the rule that, under its jurisprudence, no one can 
 have any right in a life insurance, if lie has no inter- 
 est in the life of the insured, whether he is the 
 original holder of the policy or the subsequent 
 assignee of it. The Court stated the doctrine in the 
 following terms, basing its judgment upon grounds of. 
 morality and public policy : 
 
 "The policy executed on the life of the deceased, 
 was a valid contract, and as such was assignable by 
 the assured to the association as security for any sums 
 lent to him, or advanced for the premiums and 
 assessments upon it. But it was not assignable tO' 
 the association for any other purpose. The associa- 
 tion had no insurable interest in the life of the 
 deceased, and could not have taken out a policy in 
 
 * Note in Journal dn Palais. ISSO, p. 1121, eb seq. 
 t J.aws of the 11th June, 187-1.
 
 400 The Law of Pledge. 
 
 its own name. Such a policy would constitute what 
 is termed a wager policy, or a speculative contract 
 upon the life of the insured, with a direct interest in 
 its early termination. 
 
 ■•It is not easy to define with precision what 
 will in all cases constitute an insurable inter- 
 est, so as to take the contract out of the class of 
 wager policies. It mav be stated generally, how- 
 ever, to be such an interest, arising from the rela- 
 tion of the party obtaining the insurance, either as 
 a creditor of or surety for the assured, or from 
 the ties of blood or marriage to him as will justify a 
 reasonable expectation of advantage or benefit from 
 the continuance of his life. It is not necessary that the 
 expectation of advantage or benefit should be always 
 capable of pecuniary estimation ; for a parent has an 
 insurable interest in the life of his child, and the child 
 in the life of his parent ; a husband in the life of his 
 wife, and a wife in the life of her husband The nat- 
 ural affection in cases of this kind is considered as 
 more powerful — as operating more efKcaciously — to 
 protect the life of the insured than any other consider- 
 ation. But in all cases there must be a reasonable 
 ground, founded upon the relations of the parties to 
 each other, either pecuniary or of blood or afBnit)', 
 to expect some benefit or advantage from the continu- 
 ance of the life of the assured. 
 
 "Otherwise the contract is a mere wager by which 
 the party taking the policv is directly interested in 
 the early death of the assured. Such policies have a
 
 Pledge of Policies of Insurance. 401 
 
 tendency to create a desire for the event. They are, 
 therefore, independently of any statute on the subject, 
 condemned as being against pubHc pohcy. 
 
 " The assignment of a pohcy to a party not having 
 an insurable interest is as objectionable as the taking 
 out of a policy in his name. Nor is its character 
 changed because it is for a portion merely of the in- 
 surance money. To the extent in which the assignee 
 stipulates for the proceeds of the policy beyond the 
 sums advanced by him, he stands in the position of 
 one holding a wager policy. The law might be read- 
 ily evaded if the policy, or an interest in it, could in 
 consideration of paying the premiums and assessments 
 upon it, and the promise to pay upon the death of the 
 assured a portion of its proceeds to his representatives, 
 be transferred so as to entitle the assignee to retain 
 the whole insurance money." * 
 
 45S. The opposite doctrine is established in the 
 State of New York, and it is interesting to observe 
 the contrast of the reasoning of its court with that of 
 the Supreme Court of the United States, contrast 
 which is all the more curious that both decisions are 
 based upon principles of morality and public order. 
 The Court of New York says: "This policy was 
 
 * Warnock vs. Davis, 104 U. S. 778. 
 See also Insurance Company vs. Lucks, lOS V. S. 503. 
 Cammack vs. Armstrong, 117 U. S. 597. 
 Hayes vs. Lapeyre, 48 La. An. 754. 
 Life Insurance Company vs. Hazzard, 41 Ind. ll(i. 
 Stevens vs. Warren, 101 Mass. 504. 
 Bombach vs. Insurance Company, 35 La. An. 233. 
 Stokell vs. Kimbal, 59 N. H. 13. 
 Johnson vs. Van Epps, 14 Brad. '201.
 
 402 The Law of Pledge. 
 
 taken out by Lester, for the benetit of liis wife. It 
 was an insurance upon his own hfe for her benefit. 
 While one can not insure hfe in which he has no 
 interest, every person can insure his own hfe for any 
 sum upon which he can agree with an insurance 
 company. A hfe insurance is not hke fire insurance, 
 a contract of indemnity, but a mere contract to pay a 
 certain sum of money on the death of a person in 
 consideration of the due payment of a certain annuity 
 for his life. (Delby vs. The India and London Life 
 Insurance Company, 28 Eng. Law and Eq. 312 ; 
 Rawls vs. American Life Insurance Company, 36 
 Barb. 357; S. C, 27 N. Y. 282; Insurance Com- 
 pany vs. Bailey, 13 Wall. 616.) Like every other 
 contract to pay money such a policy is a chose in 
 action with all the ordinary incidents of every other 
 chose in action. It is abundantly settled in this State, 
 that one who takes an insurance upon his own life 
 may make the policy payable to any person whom he 
 may name in the policy, and that such person need 
 have no interest in the life insured, and that if the 
 policy be valid in its inception, the party taking it 
 may assign it to any person as he could assign any 
 other chose in action, and that the policy will con- 
 tinue valid in the hands of the assignee, although he 
 has no interest whatever in the life insured. So 
 a creditor may take out a policy on the life of his 
 debtor, and the policy will contmue valid although 
 the creditor has been paid and has thus ceased to have 
 an interest in the life of the insured. In Ashley vs»
 
 Pledge of Policies of Insurance. 403 
 
 Ashley (3 Simons, 149), A insured his Hfe and after- 
 ward assigned the poHcy to B, for a nominal con- 
 sideration ; B's executors then sold and assigned the 
 policy to D for a nominal consideration, and then D's 
 executors sold it to E ; and it was held that they could 
 make a good title to the policy, and that E was bound 
 to complete his purchase. This case was cited and 
 approved in 3 Kent's Coms. 370, note, and has since 
 been cited with approval in several reported cases in 
 this State. In St. John vs. The American Mutual 
 Life Ins. Co. (2 Duer, 419), Duer, J., a judge very 
 learned in the law of insurance, writing the opinion, 
 held that an assignment of an insurance policy to one 
 having no interest in the life insured was valid, and 
 he said : ' The objection to the recovery in this case 
 assumes, and such was the argument, that there can 
 be no absolute sale of a subsisting policy, and that its 
 assignment is only valid when as collateral security 
 for an antecedent debt ; but, as we understand the 
 law, a written promise to pay a sum of money is just 
 as properly a subject of transfer, for value, where it 
 depends upon a condition, as where it is absolute ; and 
 we can, therefore, make no distinction between tlie 
 rights of a bona fide assignee of a policy and those of 
 an assicrnee of a mortgratre.' He then cited Ashley 
 VS. Ashley, and further said: ' This case, therefore, 
 proves not only that the absolute sale of a 
 life policy does not affect the validity of the 
 contract, but that the assignee for value, in the 
 event of the death of the assured, is entitled to the
 
 404 The Law of Pledge. 
 
 same remedies as his personal representative when the 
 title to the policy is unchanged.' This case was 
 affirmed in this Court (13 N. Y. 31), and the doc- 
 trine was there again announced that a valid policy 
 of insurance effected by a person upon his own life is 
 assignable, like an ordinar}' chose in action. Crip- 
 pen, J., writing the opinion of the Court, said : 'I 
 am not aware of any principle of law that distin- 
 guishes contracts of insurance upon lives from other 
 ordinary contracts, or that takes them out of the 
 operation of the same legal rules which applied to and 
 govern such contracts. Policies of insurance are choses 
 in action, and are governed by the same principles 
 applicable to other agreements involving pecuniary 
 oblis^ations.' And he further said : ' I do not agree 
 with the counsel for the defendant, that the assignee 
 must have an insurable interest in the life of the 
 assured in order to entitle him to recover the amount 
 of the assurance. If the policies were valid in their 
 inception, the assignment of them to the plaintiff did 
 not change the liability of the compan}^' In Valton 
 vs. The National Fund Life Assurance Company (20 N. 
 Y. 32), it was held that one who has obtained a valid 
 insurance upon his own life may dispose of it as he 
 seems fit, and that it is immaterial that the assignee 
 has no interest in the life. In Rowls vs. American 
 Life Insurance Company (^sf/pra) it was held that it 
 is not necessar}' that a party holding a policy on the 
 life of another should have an insurable interest in such 
 life at the time of the death to make the polic}' valid
 
 Pledge ob^ Policies of Insurance. 405 
 
 if it was valid in its inception. (See also Clark vs. 
 Allen, II R. 1. 493 ; Law of Assignments of Life Poli- 
 cies, b}' Hine & Nichols, 73, 75, 81; Bliss on Life Ins. 
 (2d ed.) Sees. 23, 26, 30. 
 
 " The rule, as gathered from these authorities, is 
 that where one takes out a policy upon his own life as 
 an honest and bona fide transaction, and the amount 
 insured is made payable to a person having no inter- 
 est in the life, or where such a policy is assigned to- 
 one having no interest in the life, the beneficiary in 
 the one case and the assignee in the other may hold 
 and enforce the policy if it was valid in its inception, 
 and the policy was not procured or the assignment 
 made as a contrivance to circumvent the law against 
 betting, gaming and wagering policies. It follows, 
 therefore, that one may, with the consent of the in- 
 surer, deal with a valid life polic}- as he could with 
 any other chose in action, selling it, assigning it, dis- 
 posing of it and bequeathing it by will, and it has 
 been well said that if he could not do this, life policies 
 would be deprived of a large share of their utility and 
 value." * 
 
 459. The same doctrine has been adopted in sev- 
 eral of the States of the Union, as shown by the cases 
 which we cite below. f 
 
 * Olmstead vs. Keyes et al., 85 N. Y. 598, 
 
 t Dixon vs. National Life Insurance Company (Mass.), 46 N. E. 430, 
 
 United States Mutual Association, vs. Hodgkin, 4 App. D. C. 510. 
 
 Meyers vs. Schumann, 54 N. J. Eq. 414. 
 
 Mutual CkjBipany vs. Allen, 138 Mass. 24, 
 
 Eckel vs. Renos, 41 Ohio St, 232. 
 
 Martin vs. Stebbins, 120 111. 387. 
 
 Fitzpatrick vs. Insurance Company, 50 Conn, 116. 
 
 Ritter vs. Smith, 70 Md. 201. 
 
 Murphy vs. Red (Miss.). 14 So. Rep. 701,
 
 406 The Law of Pledge. 
 
 460. The principle underlying this doctrine is that 
 the contract of life insurance is not, like that of fire 
 or marine insurance, a contract of indemnity, but is 
 an ordinary agreement to pay a certain sum of money, 
 under certain circumstances, and for a certain consid- 
 eration. Were it a contract of indemnit}-, when the 
 policy is transferred as collateral security, it is clear 
 that, if the debt thus intended to be secui-ed were paid 
 before the death of tlic insured, or maturity of the 
 policy, the pledgee could haye no right to the insur- 
 ance money; there being no damage suffered by him 
 from the death of the insured, there would be no 
 ground for an indemnity. 
 
 461. For a long time in England the prevailing 
 doctrine was, that life insurance was nothing else but 
 a contract of indemnity, and, therefore, that when 
 the insurance was taken by a creditor on the life of 
 his debtor, payment of the debt by the representa- 
 tives of the debtor caused the policy to lapse, and 
 extinguished the right or cause of action against the 
 insurer. The principle was supported b}' no less an 
 authority than Lord Ellenborough, who said in the 
 then leading case of Godsall vs. Boldero, that, if the 
 damage which was at first supposed likel}- to result 
 to the creditor from the death of his debtor, the 
 insured, was wholly obviated by payment of the debt, 
 the foundation of any action on the gronnd of such 
 insurance failed.* 
 
 462. But this decision has been expressly overruled 
 
 * Godsall vs. Boldero, 9 East, 72.
 
 Pledge of Policies of Insurance. 407 
 
 by the well known and important case of Dalby vs. 
 India and London Life Insurance Company, and the 
 jurisprudence on this subject seems to be now settled 
 in England to the effect that a policy of life insurance 
 is not a contract of indemnity, and that, if it was valid 
 at its inception the transferee needs not have an inter- 
 est in the life of the insured. The language of the 
 Court in this case is very positive. It says : " The 
 contract commonly called life insurance, when prop- 
 erly considered, is a mere contract to pay a certain 
 sum of money on the death of a person in considera- 
 tion of the due payment of a certain annuity for his 
 life, the amount of the annuity being calculated in the 
 first instance according to the probable duration of the 
 life; and when once fixed it is constant and invariable. 
 The stipulated amount of annuit}^ is to be uniformly 
 paid on one side, and the sum to be paid in the event 
 of death is always, except when bonuses have been 
 given by prosperous oflfices, the same on the other. 
 This species of insurance in no way resembles a con- 
 tract of indemnity. '"* * 
 
 463. The jurisprudence of England on this subject 
 is consequently in perfect accordance with that of 
 New York and the other States whose decisions we 
 have cited above. Under that jurisprudence, a credi- 
 tor who insures the life of his debtor, paying the pre- 
 mium himself, is entitled to the insurance money at 
 
 " Dalby vs. India and London Life Ins. Co., 28 Eng. Law and Eq. 
 
 312. 
 See Joyce on Insurance, Vol. 1, Sec. 26, and notes.
 
 408 The Law op Pledge. 
 
 the death of the insured, even if the debt has been 
 paid b}^ the latter. The creditor, in such a case, holds 
 the policy ' of insurance as an}' chose in action for 
 which he has given value, and for the payment of 
 which he has his right of action against the debtor of 
 the chose in action. 
 
 464. The same principle has been recognized in 
 France, although both the legislation and jurispru- 
 dence of that country are 3-et meagre on the subject of 
 life insurance. The Court of Cassation onl}- some 
 years ago decided that a creditor who had insured for 
 his own benefit the life of his debtor, with the latter's 
 consent, and paid the premiums, the debtor refusing 
 to pay the same, was entitled to the insurance mone}', 
 although the debt had been paid by the debtor's exec- 
 utors after his death. This was clearly a recognition 
 of the doctrine that the life insurance is not a contract 
 of indemnity, but a simple contract to pay money 
 under certain conditions and for a legal consideration. 
 The French jurists call it very expressivel}' " a com- 
 mutative and aleatory contract of capitalization." 
 There is still, however, a strong opposition in France 
 to this theory amons^ the law writers.* 
 
 * Court of Cassation, 1880. p. 1121, Che\alier C. Chayer. 
 Fuzier-Herman. Code Civil. Art. 2071, Xos. 11, 12, 13.
 
 CHAPTER XXXVIII. 
 
 465. Under the jurisprudence of the Supreme 
 Court of the United States and of the courts of the 
 States which concord with it, as we have shown in 
 the cases cited, the creditor having only an insurable 
 interest in the life of his debtor to the extent of his 
 debt, is only entitled to the insurance mone}' to the 
 same extent ; and the excess, if an}', of the same 
 insurance should be paid over to the heirs or repre- 
 sentatives of the insured. And such is the rule even 
 when the creditor has paid the premiums. In such 
 case he is entitled to the reimbursement of what sums 
 he has paid to the insurer ; but the final balance goes 
 to the heirs or representatives of his debtor 
 
 It is what was decided in Cammack vs. Lewis, 
 15 Wall. 643, and affirmed in Warnock vs. Davis, 
 104 U. S. 775, the court holding in both cases that the 
 insurance on the life of the debtor, so far as the cred- 
 itor was concerned, for the excess beyond the debt 
 owing to him, was a wagering policy, and that the 
 creditor, in equity and good conscience, should hold 
 it only as security for what the debtor owed him when 
 it was assigned, and for such advances as he might 
 have afterward made on account of it ; and that the 
 assignment was valid only to that extent. 
 
 466. The court might have given another reason 
 for its ruling, a reason to be found in the law of 
 pledge, as valid and forcible at least as the reason said 
 
 i09
 
 410 The Law of Pledge. 
 
 in the decisions to be founded on equity and good con- 
 science. The moment the pohcy of insurance is 
 assigned to the creditor as security of the debt, the 
 assignment necessarily covers the contract of pledge 
 between the creditor and the debtor. In the nature 
 of things it can not be anything else : any more than 
 when other choses in action are pledged, or when 
 promissory notes or bills of exchange are pledged. 
 We now come again to the constant distinction which 
 must be made between the assig^nment or transfer 
 of such things for the purpose of security only and 
 the assig^nment or transfer of the same thingrs for the 
 purpose of conveying not only the legal title, but also 
 the ownership of them, as in cases of sale, or ex- 
 change, or donation, or any such transactions as have 
 not for their object the securing of an obligation. In 
 the pledge the pledgeor remains the real owner of the 
 thing pledged ; the pledgee is onl}- the apparent 
 owner. When the debt is paid the pledgeor is entitled 
 to the return of the thing pledged, whether the pledge 
 has been effected b}' actual delivery of a corporeal 
 thing, under the garb of a sale, or by means of an 
 assignment. When a promissory note is pledged, and 
 the pledgee recovers its full amount, if it exceeds that 
 of the debt clearly the pledgee is bound to turn over 
 the excess to the pledgeor. Why should there be any 
 difference in the assignment of a policy of life insur- 
 ance made only to secure a debt? 
 
 467. Whether, therefore, life insurance is or is not 
 a contract of indemnitv, it seems evident that, when
 
 Pledge of Policies of Insurance. 411 
 
 the policy is the property of a debtor who assigns it 
 to his creditor as a pledge, the latter, after receiving 
 payment from either the debtor or his heirs or repre- 
 sentatives, is bound both in law and in equity to re- 
 assign the policy to them. 
 
 468. But when it is the creditor himself who in- 
 sures the life of the debtor for his own benefit, and 
 when he takes the policy in his own name, payable 
 to himself, pays the premium and does not charge 
 them to the debtor, can it be said that he is then the 
 owner of the policy, and, in that case, can he recover 
 both the debt from the debtor and the insurance 
 money from the insurer? It was so decided by the 
 Court of Cassation in France, in the case which we 
 have cited above. The decision was based upon the 
 principle that the transaction was exclusively between 
 the creditor and the insurance company, in which the 
 debtor had no interest, and in which the creditor had 
 contracted for his own benefit, the contract being one 
 simply for the payment of money and not one of 
 indemnity. 
 
 469. In such a case, however, would the converse 
 of the rule be equally applicable, and if the creditor 
 had first received payment of the policy could he still 
 demand payment of the debt from the debtor or his 
 representatives? There does not seem to be any good 
 reason why he should not, if the insurance and the 
 debt had no connection together ; but the subject is 
 still an imperfectly explored region of the law of life 
 insurance as applied to the security of debts.
 
 CHAPTER XXXIX. 
 
 Pledge of Margins. 
 
 470. The purchase of shares of capital stock is 
 generally done through a stock broker, who purchases 
 in his own name and carries the stock for account of 
 the customer. The latter deposits a sum of money, 
 comparatively small, in the hands of the broker, as 
 security of the price of sale, for which he is respon- 
 sible. The sum deposited is called a margin. The 
 Common law jurisprudence in this country has estab- 
 lished the principle, that the contract of pledge is 
 formed in that case, tacitly if not expressly, between 
 the broker and the customer, the former being the 
 pledgee and the latter the pledgeor of the money 
 deposited. And when, in the purchase of the stock, 
 delivery is made by the vendor to the broker, the 
 pledge extends to the stock delivered as well as to the 
 juoney deposited. The contract of pledge arises, in 
 such cases, by implication of the intention of the 
 parties and of the consent of the customer, combined 
 with the fact that the money and the stock are in the 
 possession of the broker. The implication of the 
 agreement of the parties results from the usages of 
 the place where the transaction takes place. The 
 broker is presumed to rely upon the tacit* pledge for 
 his security, and the customer is presumed to grant 
 the security, without which the broker would not 
 
 413
 
 il-l The Law of Pledge. 
 
 buy and carry the stock at his own risk. This double 
 presumption is based upon the fact that such is the 
 custom in transactions of that kind in the locahty 
 where the}^ take place. It is evident that if there is 
 a pledge in that case, and none by express agree- 
 ment, it must be implied in the manner that we indi- 
 cate. The contract being implied from the custom, 
 all that is customary under similar circumstances 
 should be considered as entering into and forming 
 part of the contract. "^ 
 
 471. The Court of New York has been prominent 
 in settling the principle that the relation of pledgee 
 and pledgeor is tacitly created between the broker 
 and the customer when the former purchases stock 
 and carries it for account of the latter. The subject 
 was thoroughly examined and expounded in the 
 leading case of Markham vs. Jandon, where the 
 Court said : " The broker undertakes and agrees : 
 
 ' ' I . At once to buy for the customer the stocks 
 indicated. 
 
 "2. To advance all the money required for the pur- 
 chase beyond the 10 per cent, furnished by the cus- 
 tomer. 
 
 "3. To carry or hold such stocks for the benefit of 
 the customer so long as the margin of 10 per cent, is 
 kept good, or until notice is given by either party that 
 
 * Cook, on Stock, Sec. 457 et seq. 
 Jones, on Pledge, See. 495 et seq. 
 Colebrooke, CoUat. Securities, pp. 527, 528. 
 Dos Passos, Stock Bi'okers, 112. 
 Overton, on Liens. 205. 
 Am. and Eng. Ency. of I>aw, Vol. IS, p. 707.
 
 Pledge of Margins. 415 
 
 the transaction must be closed. An appreciation in 
 the value of the stocks is the gain of the customer, 
 and not of the broker. 
 
 "4. At all times to have in his name or under his 
 control, ready for delivery, the shares purchased, or 
 an equal amount of other shares of the same stock. 
 
 "5. To deliver such shares to the customer when 
 required by him upon receipt of the advances and 
 commissions accruing to the broker ; or, 
 
 " 6. To sell such shares upon the order of the cus- 
 tomer, upon payment of the like sums to him, and 
 account to the customer for the proceeds of such sale. 
 *' Under this contract, the purchaser undertakes — 
 "i. To pay a margin of ten percent, on the current 
 market value of the shares. 
 
 "2. To keep good such margin according to the 
 fluctuations of the market. 
 
 "3. To take the shares so purchased on his order, 
 whenever required by the broker, and to pay the 
 difference between the percentage advanced by him 
 and the amount paid therefor by the broker. 
 
 " The position of the broker is twofold. Upon 
 the order of the customer, he purchases the shares of 
 stocks desired by him. This is a clear case of agency. 
 To complete the purchase he advances from his own 
 funds, for the benefit of the customer, ninety per 
 cent of the purchase money. Quite as clearly, he 
 does not in this act as an agent, but assumes a new 
 position. He also holds, or carries the stocks for the 
 benefit of the purchaser, until a sale is made by the
 
 416 The Law of Pledge. 
 
 order of the purchaser, or upon his own action. In 
 thus holding or carrying, he stands upon a different 
 ground from that of a broker or agent, whose office 
 is simpl}^ to bu}^ and sell. To advance money for the 
 purchase, and to hold and carr}' stocks, is not the act 
 of a broker as such. In so doing, he enters upon a 
 new dut}', obtains other rights, and is subject to addi- 
 tional responsibilities. 
 
 "• The plaintiff insists that the relations between the 
 parties is, first, that of principal and agent, or broker, 
 when the shares are ordered to be purchased for the 
 account of the customer, and were so purchased ; that 
 in advancing the money to complete the purchase, the 
 relation of debtor and creditor is created, and that 
 thereupon the broker becomes a pledgee of the stock 
 for the money advanced in its purchase. 
 
 *' The defendants, on the other hand, insist that the 
 relation of the parties is wholly by force of a mutual 
 and dependent contract ; that defendant's agreement 
 to hold or carry the stock was dependent on the plain- 
 tiff to furnish them with the means to do so, and that 
 when the plaintiff failed in that respect^ the obligation 
 to hold the stock ceased, and the right to sell it was 
 complete. 
 
 "In the case of a pledge it is well settled that, 
 upon default by the debtor, the property in the sub- 
 ject of the pledge does not thereby become absolutely 
 vested in the creditor, but that the general property 
 still remains in the debtor. To cut off this claim, the 
 creditor may resort to judicial process, or he may sell
 
 Pledge of Margins. 417 
 
 without judicial process, upon giving notice to redeem 
 and giving notice of the time and phice of sale. 
 (Wilson vs. Little, 2 Comst. 443 ; 2 Kent Com. 581, 
 582; Story, on Bailments, Sec. 287, 308, 310). 
 Until those of these modes is resorted to the right to 
 redeem remains. (A/.) 
 
 " If the theory of the defendants is correct, the 
 plaintiff being himself in default in the performance 
 of the contract on his part, can maintain no action ; 
 and if the defendants jrave notice to file the marsfin, 
 they had the right on failure so to file to sell without 
 further notice. 
 
 "A pledge is a delivery of goods by a debtor to his 
 creditor to be kept till the debt is discharged ; or, 
 again, it is a bailment of personal property as secur- 
 ity for some debt or engagement (2 Kent, 577 ; Story, 
 on Bail., Sec. 286). Ordinarily, all goods and chat- 
 tels may be the subject of a pledge, including money, 
 debts, negotiable instruments and choses in action 
 (Story, Sec. 289) . While the terms of a pledge require 
 that there should be a delivery of the article, it is not 
 necessary that there be an actual manual delivery. It 
 is sufficient if there be any of those circumstances 
 which, in construction of law, are deemed sufficient 
 to pass the possession of the property. Thus, goods 
 at sea ma}^ be passed in pledge by a transfer of muni- 
 ments of title, or goods in a warehouse b}' the deliv- 
 ery of the key. ^ So if the pledgee has the thing 
 already in possession, as by a deposit or loan, the 
 very contract transfers to him, bv operation of law, a
 
 418 The Law op Pledge. 
 
 virtual possession tliereof, as a pledge, the moment 
 the contract is conipletecr (Stor\-, Bail., 297, and 
 Auth., supra). Possession may also be temporarily 
 parted with, as between pledger and pledgee, with- 
 out destroying this relation, as where so delivered for 
 and with an agreement for redelivering ; or where it 
 is delivered to the owner as special bailee or agent 
 (/<r/., Sec. 299 . 
 
 " While it is true that the dealer, in the present 
 case, never had actual possession of the propert}'', 
 which he claims to have pledged, he had it sufficiently 
 to bring his case within the principles of the law of 
 pledge. The substance of the first branch of the 
 transaction is this : The plaintiff calls upon the 
 defendants, who are brokers, to purchase for him 
 certain shares of railroad stock, and furnishes him 
 with $1000 for that purpose, agreeing to pay interest 
 on advances he shall make in the purchase, and com- 
 missions. The defendants make the purchase^ having 
 themselves advanced ninety per cent, of the purchase 
 mone}-. They bring to the plaintiff the certificates of 
 the stock thus purchased by him and for him, and 
 deliver them to him as the owner thereof. He there- 
 upon hands them back to the defendants, to hold as 
 securit}^ for their advance on the purchase, with inter- 
 est and commissions. If these precise forms had been 
 observed, no one would deny that the delivery of the 
 certificates would have constituted a strict, formal 
 pledge. In my opinion, the transaction as it took 
 place amounted to the same thing. To have deliv-
 
 Pledge of Margins. 419 
 
 ered the certificates to the plaintiff, and that the plain- 
 tiff should then have returned them to the defendants, 
 to be held by them as security for the advance, in 
 their purchase, would leave the parties in precisely 
 the same situation as if the defendants had retained 
 them for that purpose ; the form of a delivery to the 
 plaintiff, and a redelivery by him to the defendants, 
 being waived by agreement of the parties. It comes 
 fully within the principle I have already quoted from 
 wStory on Bailments, that where the pledgee has the 
 thing in his possession, the contract of pledge operates 
 as a delivery, the moment the interest is completed 
 (Story, Bailments, Sec. 297). Thecertificatesare appro- 
 priated as security for an engagement, to wit : the pay- 
 mentof the advance, withinterestandcommissions. The 
 possession and the delivery are complete in the abbre- 
 viated manner I have described. The riirht of re- 
 demption, in other words, the ultimate ownership of 
 the property in the plaintiff was clearly provided for 
 and was the prominent idea in his mind. There is 
 no evidence here that the plaintiff necessarily intended 
 a sale of the stock purchased. He bought it for the 
 purpose of making money. If he could make more 
 money by holding it permanently than by selling, no 
 doubt he would continue to hold. But I do not find 
 that the intention to have or to suffer a sale, or the 
 reverse, forms an element in the definition of a pledge. 
 Nor do I see how the fluctuating value of the property 
 can be invoked to determine the character of the trans- 
 action. It can not be doubted, upon the authorities
 
 420 The Law of Pledge. 
 
 cited, that shares of stock in an incorporated company, 
 however unsubstantiated may be its character, or 
 however fluctuating their value, may form the sub- 
 ject of a pledge equally with a cargo of wheat, a ves- 
 sel, or any other specific article. In my judgment, 
 the contract between the parties was, in spirit and in 
 effect, if not technically and in form, a contract of 
 pledge. To authorize the defendants to sell the stock 
 purchased, they were bound first to call upon the plain- 
 tiff to make good his margin ; and failing in that, he was 
 entitled, secondl}', to notice of the time and place where 
 the stock would be sold ; which time and place, thirdly, 
 must be reasonable. (See Auth. supra.y * 
 
 472. We have quoted so extensively from the deci- 
 sion because it is, in realit}', the foundation of the 
 jurisprudence which establishes that there is a tacit 
 pledge between the customer and the broker who 
 purchases and carries the stock. But this doctrine 
 was not adopted with unanimity even by the Court 
 of New York, and its dissenting judges combated it 
 with forcible reasons, contending that the contract of 
 pledge does not arise impliedly in such cases, but that 
 the transaction between the broker and the customer 
 is simply one of agency and remains such to the end. 
 
 It must also be observed that the Court refused to 
 hear evidence of the custom of the stock brokers in 
 similar transactions. It would seem that if the pledge 
 only arose by tacit understanding of the parties from 
 the usages of the place, the proof of such usages 
 
 * Markhani vs. .Taudon, 41 N. Y. 239.
 
 Pleixje of Margins. 421 
 
 should have been received to show what the tacit 
 understanding was. Even if the rules of the brokers 
 were contrary to the Common law principles of the 
 pledge, unless those rules were unlawful, they ought 
 to have governed the transaction, which was pre- 
 sumed to have been formed under them. 
 
 It is substantially what one of the judges said in 
 his dissenting opinion. He stated that the mutual 
 understanding and intent of the contracting parties 
 not being expressed in the agreement as to the rights 
 of the broker to sell the stock under the circumstances 
 of the case, they should have been gathered from the 
 usages and customs well known and established in 
 the business. There is some difficulty in the inter- 
 pretation and legal effect of an agreement to buy stock 
 on a margin in the usual wa}', and to carry the same 
 on such marsjin. Usage and custom are not admis- 
 sible to control the settled legal force and effect of a 
 contract that is not ambiguous or couched in terms 
 of technical, doubtful or unsettled meaning. But 
 usage and custom give meaning to terms that to one 
 who is ignorant of the usage are wholly novel or even 
 unintelligible. In such case evidence of usage and 
 custom is received, not for the purpose of varying 
 and altering a contract, as overriding rules of law 
 prescribing its effect, but for the purpose of ascertain- 
 ing and settling what the contract was ; what, in point 
 of fact, was the mutual understanding and intent of 
 the parties.* It is difficult indeed to understand how 
 
 * Markham vs. Jaudon, 41 N. Y. 254.
 
 422 The Law of Pledge. 
 
 the Court could find that the relation of pledgeor and 
 pledgee arises impliedly from a transaction which is 
 governed by custom, without holding that the custom 
 itself enters into and forms part of the agreement, and 
 therefore should be proved if necessary' to show the 
 meaning of the contract and the intention of the 
 parties.
 
 CHAPTER XL. 
 
 473. This theory of the admissibiHty of the proof of 
 usage for the purpose of ascertaining the intention of 
 tlie contracting parties under certain circumstances, 
 was acknowledged and apphed by the Court of Con- 
 necticut in a case in which it agreed with the Court 
 of New York as to the principle that the relation of 
 pledgeor and pledgee springs from the agreement of 
 the broker to purchase and carry stock for his cus- 
 tomer. The question in Connecticut was not, as in 
 New York, whether the usage could be proved under 
 which a broker sells the stock if the margin is not 
 made good, without an express authority from the 
 customer to sell in such case. The question was 
 whether the usage could be proved under which the 
 broker, as pledgee, can repledge, against the rule of 
 the Common law, without express authority from the 
 customer. The principle is clearl}' the same in both 
 cases. In both the question is whether, by a tacit 
 ngreement, the usage becomes part of the contract. 
 
 474. The Court of Connecticut said: " The right 
 to repledge for his own debt is clearl}?^ one not en- 
 joyed by a Common law pledgee. Bunnell & Scran- 
 ton undoubtedly exercised it over the stocks and 
 securities in their hands for the purpose of obtaining 
 the capital requisite to carry their customers' pur- 
 chases. They even went so far as to pledge the 
 stocks and securities of one customer en bloc with 
 
 42S
 
 424 The Law of Pledge. 
 
 those of other customers. This course of deahng^ 
 however, was in conformity with the estabHshed cus- 
 tom and usage in the stock market in Connecticut 
 and New York. When the plaintiffs gave their 
 orders to Bunnell & Scranton they understood that 
 the orders were for execution in the New York Stock 
 Exchange. They knew the relation of Bunnell & 
 Scranton to this exchange and their mode of trans- 
 acting- business therein throuijh New York houses, 
 members thereof. The}' must, therefore, be held to 
 have contemplated and authorized a course of deal- 
 ino; in accordance with the rules and customs of that 
 market. The authorities are not uniform as to the 
 effect of trade usages upon the contractual obligations 
 of parties. We think, however, that the better author- 
 ity goes to this extent, at least, that when one em- 
 ploys another to deal in a particular market, he will 
 be held as intending that the mode of performance 
 should be in accordance with the established customs 
 and usages of that market, as long as the custom or 
 usage is neither immoral, unlawful, unreasonable, 
 contrary to the express agreement of the parties, nor 
 such as to chancre the intrinsic character of the under- 
 taking. Robinson vs. Mollett, L. R.^ 7 PI. L., 802 ; 
 Naurse vs. Prime, 4 Johns. Ch. 490; Lawrence vs. 
 Maxwell, 58 N. Y. 19; Samuels vs. Oliver, 130 
 111. 73. 
 
 " In view of the character and necessities of the 
 business undertaken by brokers in carr^'ing for their 
 customers stocks bought upon a margin, and for the
 
 Pledge of Margins. 425 
 
 purposes which the custom of repledging was intended 
 to serve, we are not prepared to say that it is open to 
 any of the enumerated objections. Courts have com- 
 monly sanctioned it. Nourse vs. Prime, 4 Johns. 
 Ch. 490; Lawrence vs. Maxwell, 53 N. Y. 19; Ore- 
 gon Company vs. Hillmers, 20 Fed. Rep. 717 ; Dos 
 Passos, on Stock Brokers, 357 ; 18 Am. and Eng. 
 Ency. of Law. 707. 
 
 " This custom therefore became part of the contract 
 between Bunnell & Scranton and their customers. 
 The contract thus gave to Bunnell & Scranton the 
 implied authority to repledge. Such authority it has 
 long been recognized could be given by a pledgeor. 
 Ogden vs. Lathrop, 65 N. Y. 158; Price vs. Gover, 
 40 Md. 102 ; Dos Passos, on Stock Brokers, 662 ; 
 Story, on Agency, Sec. 118."* 
 
 475. The authority of the case of Markham vs. 
 Jaudon has been repeatedly followed in the State of 
 New York in subsequent adjudications and may be 
 considered as firmly established. But as late as the 
 year 1876, in the case of Baker vs. Drake et al., the 
 Court was still divided both on the question of the 
 pledge, as arising impliedly between the broker and 
 the customer, and on the question of the admissibility 
 of evidence to show the usages of stock brokers who 
 purchase on a margin and carry the stock. f In 
 the case of Gillet et al, vs. Whiting, however, decided 
 in 1890, the Court was unanimous in holding that the 
 
 * Skiff vs. Stoddard, 03 Conn. 218, 219. 
 t Baker vs. Drake ct a?., CO N. Y. 518.
 
 42G The Law of Pledge. 
 
 relation existing between the customer and the broker 
 who buys and carries the stock, is that of pledgeor 
 and pledgee ; but the question of admissibility of evi- 
 dence of the customs of stock brokers was not raised. 
 The main point in the case was as to the qiiaiiimn of 
 damages that the pledgeors were entitled to \)\ reason 
 of the conversion of the pledges.* 
 
 476, The Court of Connecticut has in the same 
 case of Skiff vs. Stoddard adopted the doctrine of the 
 tacit formation of the contract of pledge between a 
 broker and his customer, and carried it even farther 
 than the previous decisions. 
 
 The Court cited Markham vs. Jaudon as the lead- 
 ing case in New York on that subject and quoted 
 chietlv from it in declaring that the relation of 
 pledgeor and pledgee springs from the transaction 
 between the customer and the broker, in which the 
 latter purchases and carries stock. In the Connecti- 
 cut case, the defendant contended for the contraiy 
 principle. The Court said in that respect: ''If we 
 look for judicial sanction for the proposition of the 
 defendant we find none outside of the Supreme Court 
 of Massachusetts, and no present authority there for 
 the precise interpretation here contended for. In 
 Hayes vso Wood, 15 Gray. 375, which was decided 
 in i860, before the stock broker was as familiar a 
 figure as he is to-day and before the law govern- 
 ing his calling was as well established, that court 
 devoted a few lines only to this subject, but gave 
 
 * Gillet et al. vs. Whiting, 120 X. Y. 402.
 
 Pledge of Margins. 427 
 
 countenance to the defendanTs claim in that it 
 said of a margin-purchasing contract that it was 
 strictly a conditional one, to deliver so many shares 
 upon the payment of so much money, and that until 
 the money was paid the right to have performance 
 did not accrue. 
 
 '•Ill the latter case of Covell vs. Loud, 135 Mass. 
 41, the Court made it clear that it did not regard the 
 statement of the contract in Hayes vs. Wood exhaust- 
 ive, but simply expressive of its distinct feature. It 
 apparently did not intend to adopt a new position as 
 respects what was the distinctive feature of the con- 
 tract, since it cited approvingly the language of the 
 former case ; but it did, in plain terms, state that 
 there was incorporated into the contract an agreement 
 on the part of the broker "'to purchase and hold or 
 carrv " for the customer. In neither of these cases 
 is the matter under consideration treated at any 
 length, and it is not altogether easy to gather from 
 them just what the Court's construction of the under- 
 taking of the parties in its full scope was. If we 
 interpret their language aright, their doctrine is, sub- 
 stantially, that the broker in margin-purchasing con- 
 tracts like those under consideration agrees, in con- 
 sideration of the customer's payments, to purchase 
 certain stocks or securities and hold or carry them, or 
 an equal number of like shares or securities^ ready to 
 be delivered to the customer when required by him, 
 and upon demand and payment therefor to deliver 
 the same to him.
 
 428 The Law of Pledge. 
 
 " Tills enlarged construction oi the contract, in so 
 tar as it brings within its scope what by established 
 usage is done in its execution, obviates to that extent, 
 of course, the inconsistencies which we have coin- 
 mented upon as existing between the obligation and 
 performance. Doubtless the construction might be 
 so far elaborated as to embrace within the terms of 
 the contract all the features which characterize the 
 course of dealing under it. The result, however, 
 would not then be to remove the difficulties attendinor 
 the situation. The inconsistencies and incongruities^ to 
 be sure, would no longer arise from without, but they 
 would still continue to exist within the contract and 
 be as inexplicable as ever. The contract would become 
 one inharmonious and inconsistent in its parts. So 
 long as the interpretation of the contract preserves as 
 its distinctive feature the principal proposition that the 
 customer purchases merely the right to have delivery 
 to him in the future, at his option, of stocks or securi- 
 ties at the price of the day of agreement, and its cor- 
 ollary that the customer derives no right, title or 
 interest in the stocks or securities until final perform- 
 ance, the difficulties in the way of harmonizing the 
 situation are bound to exist. The fundamental diffi- 
 culty grows out of necessary attempt in some way to 
 transform the customer, who enjoys all the incidents 
 and assumes all the risks of ownership, into a person 
 who in fact has no right, title or interest, and to 
 create out of the broker, who enjoys none of the inci- 
 dents of ownership and assumes not a particle of its
 
 Pledge of Margins. 429 
 
 responsibility, a person clpthed with a full title and an 
 absolute ownership."'^ But the court was not unani- 
 mous in this decision, an'd- a ver}- strong dissenting 
 opinion was presented by one of the judges, contend- 
 ing that the contract of pledge does not arise im- 
 pliedly between the broker and the customer when the 
 former purchases stock and carries it for the latter on a 
 marijin. 
 
 477. We said that the court of Connecticut had 
 gone even farther than that hi New York in the doc- 
 trine that the relation of pledgeor and pledgee arises 
 impliedly between the customer and the broker who 
 purchases and carries. In the same case of Skiff vs. 
 Stoddard it was held that the pledge exists in such 
 circumstances whether the broker holds for account of 
 his customer the identical and specific stock which he 
 purchased for him, or whether he disposes of it in the 
 course of his business and replaces it by other stock of 
 the same kind. And by the same principle the court 
 decided that the fact that the identical shares origi- 
 nallv bought for each customer were not kept separ- 
 ate and apart from other like shares by the broker did 
 not destroy the pledge 
 
 This doctrine is based upon the theory that shares 
 of stock have no individualit}-, no earmarks ; that 
 they only represent undivided proportionate interests 
 in the ownership of the corporation ; and that they 
 are, therefore, of unnecessary or impossible identifi- 
 cation. f 
 
 * Hfaeriff vs. Stoddard. OH Ct. 214, 215, 21(5. 
 t tikiff vs. btoddard, 03 Ct. 218.
 
 430 The Law of Pledge. 
 
 478. The theory is supported by high authority, 
 both from the courts and the law writers of this 
 country. But it seems doubtful that it is fully estab- 
 lished and consecrated by the jurisprudence of the 
 Common law. It is on its face contrary to the funda- 
 mental principles of the contract and the law of 
 pledge, which prescribe that only a specific thing, 
 susceptible of delivery and specification, can be the 
 subject of a pledge, and that the pledgee loses all his 
 rights as such the moment he abandons the possession 
 of the thing pledged. Under the rules of the Civil 
 law, by which the nature of the pledge is better 
 understood, better defined and better established, it 
 could not be held for a moment that the pledgee of 
 stock who disposes of it and replaces it by other 
 stock of the same kind still remains a pledgee of the 
 substituted stock. 
 
 478. We have so far only considered the question 
 of the broker's pledge when it is stocks that he pur- 
 chases and carries on a margin for his customer, and 
 when the stock is actually delivered by the seller. In 
 such cases, under the authority of the decisions of the 
 courts of New York and Connecticut, both the money 
 deposited as a margin by the customer and the stock 
 are pledged by implication to the broker. The pledge 
 extends to the stock because it is delivered to the 
 broker and, therefore, in his possession. But, in the 
 transactions known as the purchases of futures^ it is 
 clear that there can be no pledge of the stock, inas-
 
 Pledge op Margins. 431 
 
 much as it is not delivered ; or rather, the pledge only 
 arises when deUvery is made by the seller at the stipu- 
 lated time. 
 
 The rule is evidently the same in the cases of pur- 
 chase of produce and other articles of merchandise 
 as in the purchase of stocks. There can be no pledge 
 of the same if there is no delivery to the broker. 
 This was decided by the Court of Illinois in a case of 
 the purchase of grain for future delivery.* 
 
 479. In closing this subject it may be proper to say, 
 however clear it is that the broker holds as a pledge 
 the margin deposited in his hands by the customer 
 for the purpose of securing him, that the question 
 whether the stocks or merchandise, even when deliv- 
 ered, are also pledged to him by implication, is not 
 solved with sufficient certainty to be considered as a 
 settled point of American jurisprudence. There is 
 no unanimity in the decisions of the courts of the 
 two States which have passed upon it. The court of 
 Massachusetts is clearly opposed to it. The Supreme 
 Court of the United States has not yet been called upon 
 to decide it, nor have the various courts of the other 
 States of the Union. 
 
 * Corbet vs. Underwood, 83 111. 324.
 
 CHAPTER XLI. 
 
 Pi.EDGE BY Factor. 
 
 480. It is well known that at Common law a factor 
 can not pledge the property of the consignor without 
 his consent. The reason of this is obvious. 
 If he pledges it for his own debt, he commits 
 a breach of trust. If he pledges it for the debt of 
 the consignor, he does an unwarranted act by ex- 
 ceeding his authority. The property is consigned 
 to the factor, or placed in his hands, to be sold for 
 account of the owner. Any other disposition than the 
 sale of it is in violation of the factor's mandate. The 
 owner wants his property sold for purposes of his 
 own, and does not want it pledged. This is what 
 was said in a still recent case decided by the House of 
 Lords and quoted by the Supreme Court of the United 
 States, in Allen vs. St, Louis Bank, 130 U. 8. 32. 
 
 Lord Chancellor Selborne said in the case alluded 
 to : " It is manifest that when a man is dealinof with 
 other people's goods, the difference between an au- 
 thority to sell and an authority to mortgage or 
 pledge is one which may go to the root of all the 
 motives and purposes of the transaction. The object 
 of a person who has goods to sell is to turn them into 
 money ; but when the goods are deposited b}' way of 
 security for money borrowed, it is a transaction of a 
 totally different character. If the owner of the goods
 
 434 The Law of Pledge. 
 
 does not get the mone}-, his object and purpose are 
 simply defeated ; and if, on the other hand, he does 
 get the money, a different object and different pur- 
 pose are substituted for the first, namel}', that of bor- 
 rowing money and contracting the relation of debtor 
 with a creditor while retaining a redeemable title to 
 the goods, instead of exchanging the title to the goods 
 for a title unaccompanied by any indebtedness, to 
 their full equivalent in money." City Bank vs. Bar- 
 row, 5 App. Cas. 664, 670. 
 
 In that case the English court said : 
 
 "When there is a power by law to sell, a purchaser 
 may obtain from the vendor, even as against the true 
 owner, a good title, but that can not extend b}- impli- 
 cation to a pledge. 
 
 "Barrow was a leather merchant in London. Bon- 
 nell was a tanner in Canada. Barrow agreed to pay 
 Bonnell i)^d. per pound for every hide tanned by 
 Bonnell in the mode of the country, and Bonnell was 
 to procure freight and send back the hides. ]]arrow 
 sent out a large number of the hides ; they were 
 tanned and freight was procured for them, but in the 
 meantime Bonnell had obtained from the Toronto 
 Bank advances on his own account on bills and hy- 
 pothecated the hides to the bankers as security for 
 such advances, engaging to hand over to them the bills 
 of lading if his bills of exchange were not duly hon- 
 ored. They were not duly honored, and the bankers 
 (who had acted in entire ignorance of the transac- 
 tions between Barrow and Bonnell) claimed to retain
 
 Pledge by Factor. 435 
 
 the bills of lading and the hides until their demands 
 were satisfied." 
 
 It was held that under the circumstances of the case 
 Bonnell could not, under an}- law, English or Cana- 
 dian, claim to be a factor or agent of Barrow, entitled 
 to pledge Barrow's goods, and that consequently the 
 bankers could not set up an}- title to the goods as de- 
 rived from him against the real owner.* 
 
 481. It is evident that we fall here under the gen- 
 eral principles of the law of mandate or agency. The 
 factor is a mere agent, with a limited and specified 
 authority. His acts beyond that authorit}' are illegal, 
 as all unauthorized acts of an agent. AVhen and 
 where the Common law is changed by statute, and 
 the factor is permitted to pledge the property of 
 the consignor or owner, then and there the con- 
 tract of mandate between the factor and the principal 
 is entered into by them with the understanding that 
 the statute will govern their relations, and the factor 
 will have the power to pledge as well as to sell. 
 The law, then, is read into their agreement. It is, 
 therefore, still by the consent and authority of the 
 owner of the goods that the factor may pledge them. 
 But a usage of trade for banks to take from factors, 
 as security of loans or other indebtedness, pledges of 
 
 * Gill vs. Kymer, 5 Moore, 503. 
 Fielding vs. Kymer, 2 B. & B. 639. 
 Newsom vs. Thornton, 6 East. 17, 2 Smith, 207. 
 Guichard vs. Morgan, 4 Moore, 3(5. 
 Martini vs. Coles, 1 M. & S. 140. 
 Delauney vs. Barker, 2 Stark, 539. 
 Boyson vs. Coles, 6 M. & S. 14. 
 Daubigny vs. Duval, 5 T. R. 604. 
 McCombie vs. Davies, 7 East. 5, 3 Smith, 3.
 
 436 The Law of Pledge. 
 
 goods known to be held by them as factors is unlaw- 
 ful and does not protect the pledgees against the true 
 owner.''' 
 
 482. The Common law was changed in that respect 
 by statute in England in the earl}- part of this cen- 
 tury. The necessity of permitting factors in certain 
 cases to pledge the goods in their possession, for the 
 improvement of commerce, b^' affording security 
 to persons dealing with them, was felt and provided 
 for as early as at that time bv acts of Parliament 
 known as the Factors' Act, namely : the 4 Geo. 4, 
 C. S3 ; 6 Geo. 4, C. 94, and 5 and 6 Vict., C. 39. 
 
 The first section of the last mentioned act, which is 
 still in force, provides in substance that any agent 
 with the possession of goods, or of the documents of 
 title to goods, shall be deemed and taken to be the 
 owner of such goods and documents, so far as to give 
 validity to any contract or agreement by way of 
 pledge, lien or securit}', do/m /ide ma.de by any person 
 with such agent so entrusted as aforesaid, as well as for 
 an}' original loan, advance or pavment made upon 
 the security of such goods or documents, as also for 
 any further or continuing advance in respect thereof, 
 and that such contract or agreement shall be binding 
 upon and good against the owner of such goods, and 
 all persons interested therein, not-withstanding the per- 
 son claiming such -pledge or lien may have had notice 
 that the persoti ivith ivhom such contract or agree?nent 
 is 7nade is only an age?it. 
 
 * Allen vs. St. Louis Bank, 120 U. S. 20.
 
 Pledge by Factor. 437 
 
 483. The act provides further that such pledge by 
 the factor is only valid if the pledgee had no notice 
 that the factor was not authorized by his principal to 
 pledge the goods ; or that the factor was acting in 
 bad faith ; or that the debt secured by the pledge 
 was an antecedent obligation of the factor to the 
 pledgee. Consequently, the pledge by a factor to a 
 pledgee in good faith, who knows that he is dealing 
 with a factor, is valid, in England, even against the 
 owner of the goods, who has not authorized the 
 pledge of them if the pledgee is not aware of the 
 want of authority in the factor.'^ 
 
 It has been held, under the provisions of that 
 statute, by the highest authorities, that knowledge 
 that the agent making the pledge is a factor, without 
 further notice that he is acting mala fide and beyond 
 his authority, does not deprive the pledgee of the 
 protection of the statute. f 
 
 484. The State of New York soon followed the 
 example of England in setting aside the old principle 
 of the Common law, that factors could not pledge the 
 property of their principals ; and in the ^-ear 1830 the 
 New York Factor's Act was passed, based upon the 
 English statute. It provides that every factor or other 
 agent, entrusted with the possession of any bill of 
 lading, custom-house permit or warehouse-keeper's 
 
 * Benjamin, on Sales, Sec. 809. 
 
 t Allen vs. St. Louis Bank, 130 U. S. 37. 
 
 Navulshaw vs. Brownrigg, 1 Sim. N. S. 573, and 2 I). M. and G 
 441. 
 
 Vickers vs. Hertz, L. R. 2 H. L. Sc. 113. 
 
 Kaltenback vs. Lewis, 10 App. Cas. G17.
 
 438 The Law of Pledge. 
 
 receipt for the delivery of merchandise, and every 
 such factor or agent, not having the documentary evi- 
 dence of title, but entrusted with the possession of 
 any merchandise for the purpose of sale, or as security 
 for any advances to be made or obtained thereon, 
 should be deemed to be the true owner thereof, so far 
 as to give validity to any contract made by him with 
 any other person for the sale or disposition of the 
 merchandise, for any advances made by such other 
 person upon the faith thereof. 
 
 485. But the statute of New York does not appear 
 to have afforded complete security to the pledgee in 
 good faith dealing with a factor; and it does not 
 seem to be more than the first progressive step of 
 departure from the rule of the Common law. Under 
 the provisions of the statute alluded to, the pledgee is 
 only protected against the claim of the true owner of 
 the goods, if he had no knowledge that he was deal^ 
 ing with a factor. Thus, in a case decided by the. 
 Supreme Court of New York and quoted approvingly 
 by the Supreme Court of the United States, it is said : 
 " The obvious meaning is, that the factor or other 
 agent who has been entrusted with certain docu- 
 mentary evidence of title, or with the possession and 
 ostensible ownership of the property shall be deemed 
 the true owner so far as may be necessary to protect 
 those who have dealt with him upon the faith thereof, 
 that is, upon the faith induced by the usual indicia 
 of title, that he was the true owner of the property. 
 The second section of the British statute, which
 
 Pledge by Factor. 439 
 
 answers vei)- nearly to the third section of our own, 
 contains a proviso which expressly saves the rights of 
 the true owner where the pledgee had notice that he 
 was dealing with an agent ; and our statute, though 
 framed in a different manner, was evidently designed 
 to produce the same result. It is impossible to 
 suppose that the Legislature intended to enable the 
 factor to commit a fraud upon his principal, by pledg- 
 ing or obtaining advances upon the goods for his own 
 purposes, when the pledgee or person making the 
 advances knew that he was not dealing with the true 
 owner. * 
 
 486. The statute purports to protect the pledgee 
 who deals with a factor or other agent entrusted with 
 the possession of any bill of lading or warehouse 
 receipt for the delivery of merchandise, or with a 
 factor or other agent, ?iot having the documentary 
 evidence of title ^ but entrusted with the -possession of 
 any merchandise for the purpose of sale or as secur- 
 ity for any advances to be made thereon. But the 
 court of New York has several times decided in con- 
 struing this law that the factor or other agent must 
 have come honestly to the possession of the goods of 
 his principal in order that the pledgee should be pro- 
 tected, however innocent he might be of the fraud 
 committed by the agent in obtaining the possession. 
 In other words, the court held that the owner could 
 
 * Stevens vs. Wilson (1S44), G Hill 512, 514. 
 Allen vs. St. Louis Bank, 120 U. S. 34. 
 Cartwright vs. Wilmerding, 24 X. Y. 534. 
 Howland et al. vs. Woodruff et «/., 60 N. Y, 73.
 
 440 The Law of Pledge. 
 
 not be said to have entrusted his agent with the pos- 
 session of the goods when the agent had induced the 
 principal by fraudulent means to place him in such 
 possession and had defrauded him. It is equivalent 
 to saving that he who commits a breach of trust had 
 not been trusted. The converse is the logical propo- 
 sition. He has not committed a breach of trust who 
 was not trusted. The factor or agent, with the inten- 
 tion of defrauding his principal, and by means of false 
 representations, induces him to put the goods in the 
 agent's possession. How can it be said that the 
 owner has not entrusted his agent with the possession 
 of the goods .-* It is clear that he has done nothing 
 else. 
 
 487. The State of ^Massachusetts has taken a more 
 decided position in this matter, and its statute gives the 
 pledgee dealing with a factor a more ample protection. 
 Among other provisions on the subject, it enacts that, 
 when a consignee or factor having possession of 
 merchandise with authority to sell the same, or having 
 possession of a bill of lading, permit, certificate, or 
 order, for the delivery of merchandise, with like 
 authority deposits or pledges such m,erchandise or any 
 part thereof, or such document, with any other person 
 as a security for money or merchandise advanced, or 
 a negotiable instrument given by him upon the credit 
 thereof, such other person, if he makes such loans, 
 advances and exchanges, in good faith and with 
 probable cause to believe that the agent, making the 
 deposit or pledge, had authorit}- so to do, and was
 
 Pledge hy Factor. 441 
 
 not acting fraudulently against the owner of such 
 merchandise, shall acquire the same interest in, and 
 authority over, such merchandise and documents as 
 he would have acquired thereby if the agent had been 
 the actual owner thereof, notwithstanding he had 
 notice of such agency.'^ 
 
 488. But, where the pledgee knew that the factor 
 was not authorized by his principal to pledge the 
 goods, it has been held that he was not a holder for 
 value and had no right against the true owner. In 
 such a case, the statute does not protect the third per- 
 son dealing with the factor. f 
 
 It was also decided that the pledgee receiving the 
 goods from the factor in security of an antecedent debt 
 of the latter was not a holder for value. ^ 
 
 489. The State of Louisiana has retained the rule 
 of the Common law, that the factor can not validly 
 pledge the property of his principal without the latter's 
 consent to secure the factor's debt. The jurisprudence 
 of that State has carried the principle to its extreme 
 limit, notwithstanding the efforts of its Legislature to 
 change it. The latest decision on this subject declares 
 in the words of Chancellor Kent, which it quotes, 
 that: " Though a factor may sell and bind his prin- 
 cipal, he can not pledge the goods as a security for his 
 own debt, even though there be the formality of a bill 
 of parcels and a receipt. The principal may recover 
 the goods of the pawnee, and his ignorance that the 
 
 * G. S. I860, C. 34; P. S. 1882, C. 7]. 
 
 t Goodwin vs. Loan Company, 152 Mass. 100. 
 
 X Ibid.
 
 442 The Law of Pledge. 
 
 factor held the goods in the character of factor is no 
 excuse. "' '" * 
 
 "■' The doctrine that a factor can not pledge is sus- 
 tained so strictly that it is admitted he can not do it by 
 endorsement and delivery of the bill of lading any more 
 than b)- delivery of the goods themselves. To pledge 
 the goods of the principal is beyond the scope of the 
 factor's powder; and every attempt to do it under the 
 color of a sale is tortious and void/'"^'* 
 
 490. The State of Louisiana is governed bv the 
 Civil law, which it has taken principally from the 
 French law, and its Civil Code is very nearly a tran- 
 scription from the Code Napoleon. But in all mat- 
 ters of Commercial law, in the absence of legislation, 
 it follows the general American jurisprudence. This 
 accounts for the fact that, in the case alluded to, the 
 court rested its decision upon the Common law au- 
 thorities. 
 
 491. It is curious, however, to observe in passing, 
 on the subject of those two Civil Codes, that that of 
 Louisiana contains numerous definitions, for which it 
 has been criticised by law writers, and that the Code 
 Napoleon, on the contrary, contains no definitions at 
 all, for which it has been equallv criticised. f 
 
 492. The court in the case just cited of Lallande vs. 
 His Creditors, quotes also in support of its judgment 
 an article on the Civil Code of Louisiana, which is 
 
 * 2 Kent, p. 626. 
 
 Lallande vs. His Creditors, 42 La. An. 710, 
 t De St. Joseph, Concordance des Codes.
 
 Fledge by Factor. 443 
 
 more doctrinal than statutory, to- wit : " One person 
 may pledge the property of another, provided it be 
 with the express or tacit consent of the owner. 
 
 " But this tacit consent must be inferred from cir- 
 cumstances, so strong as to leave no doubt of the 
 owner's intention ; as if he were present at the mak- 
 ing of the contract, or if he himself delivered to the 
 creditor the thing pawned."* 
 
 493. Yet, as far back as in the year 1868, the 
 Legislature of Louisiana has attempted to modify, at 
 least, the Common law in its rigid rule, and to enable 
 factors to pledge the property of their principals to a 
 certain extent and under certain circumstances. A 
 statute of that year provides: ''That cotton press 
 receipts given for any goods, wares, merchandise, 
 grain, flour, or other produce or commodity stored 
 or deposited with any cotton press, wharfinger, or 
 other person, or any bill of lading given by any for- 
 warder, boat, vessel, railroad, transportation or trans- 
 fer company, may be transferred by endorsement 
 therein, and any person to whom the same may be 
 transferred shall be deemed and taken to be the owner 
 of the goods, wares, merchandise, grain, flour, or 
 other produce or commodity therein specified, so far 
 as to give validity to any pledge^ Iie?i or transfer 
 made or created by such person or persons', but no 
 property shall be delivered except on surrender and 
 cancellation of said original receipt or bill of lading, 
 of the endorsement of such delivery thereon in case 
 
 Civil Code, Arts. 3145 and 31 4G.
 
 444 The Law of PLEDae. 
 
 of partial delivery. All cotton press receipts or bills 
 of lading, however, wbic^h shall have the w^ords ' Not 
 Negotiable ' plainly written or stamped on the face 
 thereof, shall be exempt from the provisions of this 
 section . 
 
 * * * * 
 
 " That all receipts, bills of lading, vouchers or 
 other documents issued by any cotton press, wharfin- 
 ger, forwarder, or other person^ boat, vessel, railroad, 
 transportation or transfer company, as by act provided, 
 shall be negotiable by endorsement in blank or by 
 special eiidorseinent^ in the same manner and to the 
 same extent as bills of exchano-e and promissory notes 
 now rt'rg."* 
 
 494. It would seem clear that the Legislature bv 
 that law intended to enable factors to pledge the goods 
 in their possession, and to protect the pledgees against 
 the true owner* but the Court, in the same case of 
 Lallande vs. His Creditors, held that the bill of lading 
 was not made to Lallande, or order or assigns^ but 
 to him alone, and that, therefore, he could not trans- 
 fer it by endorsement. Whatever may be the merits 
 of this ruling, the court does not stop at that princi- 
 ple, but strikes at the statute in full, and says : 
 " But in any event, an endorsement of a bill of lading 
 has not a like effect as the endorsement of bills and 
 notes." And the court cites, in support of this prin- 
 ciple, the case of Shaw vs. Railroad Company, loi 
 U. S. 557, in which the Supreme Court of the United 
 
 * Acts of IS6S, p. ]93.
 
 Pledge by Factor. 445 
 
 States passing upon tlie statute of Missouri decided 
 that bills of lading were not, under its provisions, 
 negotiable like bills of exchange and promissor}^ notes. 
 The decision of the Supreme Court is no authority for 
 that of the court of Louisiana. The statute of Mis- 
 souri provides that: " Bills of lading shall be nego- 
 tiable by written endorsement thereon and deliver}', 
 hi the same manner as bills of exhange and promis- 
 sory notes." Passing upon this provision of the 
 statute, the Supreme Court said: " If these (the con- 
 sequences of full negotiability) were intended, surely 
 the statute would have said something more than 
 merely make them negotiable by endorsement. 
 No statute is to be construed as altering the Common 
 law farther than its words import. It is not to be con- 
 strued as making an}' innovation upon the Common 
 law which it does not fairly express. Especially is so 
 great an innovation as would be placing bills of lading 
 on the same footing in all respects with bills of ex- 
 change not to be inferred from words that can be fully 
 satisfied without it."* 
 
 495. These words of the Supreme Court militate 
 against the ruling of the Court of Louisiana, because 
 the statute of the latter State fairly expresses the in- 
 tention of making the innovation upon the Common 
 law. This statute says more than that of Missouri ; 
 it provides not only that bills of lading shall be nego- 
 tiable in Ihe same manner as bills of exchange and 
 promissory notes, but shall be so to the same extent as 
 
 * Shaw vs. Railroad Company, 101 U. S. 505,
 
 446 The Law of Pledge. 
 
 those negotiable instruments. The words io the same 
 extent mean clearly fully as negotiable as bills of ex- 
 change and promissory notes. There is no ambi- 
 guity in those terms ; they mean what the}' say. 
 With the intention to render bills of lading as com- 
 pletely negotiable as any other negotiable instru- 
 ments, the Legislature could not have used words 
 more expressive of its will. And it is well to observe 
 in that respect, that the first Missouri statute, of the 
 year 1868, contained also the words to the same extent^ 
 but was amended b}' the statute of 1869, which re- 
 pealed the section containing those words and ren- 
 dered bills of lading negotiable onl}- /;; the same 
 manner as bills and notes. The statute of 1869 is the 
 one passed upon h\ the Supreme Court of the United 
 States in Shaw vs. Railroad Company. Tliis case 
 was decided in 1879. Later on, in the year 1886, 
 the Supreme Court of the United States had again 
 occasion to pass upon the Missouri statute of 1869, 
 and held that the holder of a bill of lading, under its 
 provisions, was not a holder for value if the .endorse- 
 ment on the bill was not /;; ivi'itlng.^ 
 
 496. Returning now to the statute of Louisiana of 
 1868, we may reasonably conclude that the question 
 of the full negotiability of a bill of lading, and of the 
 validity of the pledge b}' a factor, and of the rights 
 of the pledgee in good faith against the true owner, 
 is not settled b}' the decision in Lallande vs. His 
 Creditors, because the judgment in that case rested 
 
 * Allen vs. St. Louis Bank. 120 V. S. 20.
 
 Pledge by Factor. 447 
 
 upon the fact that the bill of lading was not made to 
 the order of the consignee ; the other reasons in the 
 decision being mere dicta, unsupported by authority. 
 497. This is the only statute of Louisiana which 
 provides for the pledge of bills of lading by factors ; 
 but there are other laws in that State, passed subse- 
 quently, which provide for the pledge of warehouse 
 receipts by factors, a subject which has occupied both 
 the Legislature and the courts very considerably, and 
 which we have examined in a different chapter.
 
 CHAPTER XLII. 
 Pledge by the Factor in the Civil Law. 
 
 49S. There is no distinction in the Civil law to be 
 made between pledges by factors, depositories, com- 
 mon carriers, agents, trustees or other possessors of 
 movable or personal property. The pledgee in good 
 faith, for value, and without notice of adverse rights, 
 is protected against the true owner. Such was the 
 rule of the old commercial Common law of the few 
 countries of continental Europe where commerce was 
 already blooming when in England the nation was 
 wasting its energies in civil or foreign wars, and trade 
 was yet in its infancy. In Italy, which may be con- 
 sidered as the cradle of European commerce, when it 
 emerojed from the icrnorance and barbarism of the 
 Middle Ages, the principle of protection to the honest 
 pledgee of goods pledged by a factor was soon recog- 
 nized and firmly established as a rule of the Common 
 law, based upon the necessities of trade. Casaregis, 
 the early oracle of Commercial law in Italy, writing 
 in the latter part of the sixteenth century, and citing 
 the paramount authority of Cardinal Deluca, sa^'s 
 with great positiveness : 
 
 " Et similiter, ob eam rationem non turbandcE 
 libertatis commercii, in dubitabilioribus terminis, 
 nempe mercatoris, vel magistri navis, vel vectoris, 
 mala fide alienantis, vel distrahentis, sen disponentis
 
 450 The JjAW of Pledge. 
 
 de rebus uut mercibus sui respective corresponsoris 
 principalis contra illius mentem, seu ordines ; quod 
 alter mercator illorum emptor, seu acquisitor ex aliquo 
 titulo oneroso, non tenetur domino illas restituere, 
 nisi sibi persoluto tali pretio, firmat Cardinalis De- 
 luca."* 
 
 499. The principle and the reason of it are thus 
 forcibly stated. The merchant who has given value 
 for the goods fraudulently disposed of by an agent, 
 in whatsoever quality the latter represents his princi- 
 pal, is not bound to surrender them to the owner 
 unless the consideration he gave for them is returned 
 to him. And this, because the liberty of commej'ce 
 7nust not be disturbed . 
 
 500. Troplong, over two centuries later, himself 
 the greatest expounder of the Civil law of pledge, 
 says with emphasis, after quoting the words of 
 Casaregis : 
 
 " And, indeed, where would commerce be, when 
 it is so necessary that its business should be rapidl}- 
 ofone throuofh, when adverse claims disturb the entries 
 made in the books of merchants, when negotiations 
 once entered into can not be questioned without im- 
 mense danger; where would commerce be if it were 
 permitted to any one to come and pretend that such 
 goods as have been sold, delivered, pledged, do not 
 belong to the person who has disposed of them ? " f 
 
 '* Casaregis. Be credito. Disc. 22. Xo. ]0. 
 t Troplong, Nantissement. p. 77.
 
 Pledge by the Factor in the Civil Law. 451 
 
 And he gives some striking instances, cited by 
 Casaregis, of pledges by factors in which the pledgee 
 was protected against the claim of the true owner. 
 
 One of these cases is that of Berzino and Minuti, 
 merchants of Florence, who had received from Cav- 
 aglieri, a merchant of Ferrara, a consignment of silks, 
 with instructions to sell them. Berzino and Minuti 
 pledged the silks to Vanni, contrary to orders, to 
 secure a loan of money they obtained from him for 
 their own account. Later, Berzino and Minuti sold 
 the silks to Chiavitelli, with the understanding that 
 he should pay Vanni the amount of the loan. Ber- 
 zino and Minuti subsequently went into bankruptcy, 
 and Cavaglieri, the original owner of the silks, de- 
 manded that Chiavitelli should pay to him the price 
 of the sale. Vanni opposed this demand, contending 
 that his right as pledgee was superior to that of the 
 owner. 
 
 Cavaglieri insisted upon his right of ownership, con- 
 tending that his factors had no power to pledge his 
 goods without his consent, and that he should be pro- 
 tected against the transferee a no7i do?nino of a thing- 
 fraudulently disposed of. The Court upheld the claim 
 of Vanni, and decreed the validity of his pledge. This 
 case is directly in point of the doctrine of the Civil 
 Law that, even if the factor has no power to pledge 
 the property of his principal without the latter's con- 
 sent, the pledgee in good faith can not be disturbed 
 by the owner.* 
 
 Troplong, Nantissement, p. 75. 
 Ibid., pp. 72 and 78.
 
 452 Thi: Jjaw of Pledge. 
 
 501. Troplong relates another instance of the same 
 kind cited by Casaregis, and says that the latter 
 extends the rule to all cases in which the third person 
 is in good faith. Whether the possessor, guilt}- of 
 breach of trust, is a ship's captain, a common carrier, 
 a factor, an agent, an overseer, a depositary, a pledgee, 
 is of no consequence. No doubt he has committed a 
 breach of trust, but third persons should not be made 
 to suffer. The owner must blame himself for having 
 misplaced his confidence. Troplong gives also several 
 cases in which the French courts applied the like rule 
 in the early jurisprudence of France, though there had 
 been at that time conflicting decisions on that subject. 
 
 502. There is no longer in France or in the coun- 
 tries which followed its legislation any doubt that the 
 pledge made by the possessor of movable property to 
 a third person without notice is valid against the true 
 owner, whether the pledgeor is a factor or not and 
 Avheth^jr he acts against orders. 
 
 No doubt there may be fraud or abuse of authorit}' 
 in such cases, but innocent third persons should not 
 be made to suffer for it. It is the oiviier of the prop- 
 erty "duho should bear the consequences of his otvn ill- 
 placed confdence. Such is the rule of the Civil 
 law." 
 
 503. It is only when the owner has not placed his 
 confidence in an agent, but when his property has been 
 stolen or been lost, that he can recover it from the 
 vendee or pledgee in good faith. Then the principle 
 
 * Troplong, Xantissement, Sec. 77, p. 79; Sec. 73, p. 74.
 
 Pledge by the Factor in the Civil Law. 453 
 
 that the possession of movables is equivalent to title 
 does not prevail,'" 
 
 504. Troplong concludes, after citing the law and 
 the decisions in France, by these words: " Such is 
 the Commercial law. Such is the jurisprudence. We 
 see how much our Art. 2279 is favorable to the com- 
 mercial interests. The harmony between the Civil 
 law and the Commercial law is manifest here : one 
 fortifies and enlightens itself by the other. "f 
 
 Art. 2279 of the Code Napoleon is the one which 
 consecrates the principle of the French law that the 
 possession of movable or personal property is equiva- 
 lent to title. 
 
 505. The Code of Commerce of France defines 
 the factor as '' one who acts in his oivn name, or 
 under a firm name, for account of a principal."^ 
 
 Commenting upon the words of this article, in his 
 owji namej Mr. Rogron says that there is again there 
 an essential difference between the ordinary agent and 
 the factor : the factor acts /;/ Iiis own 7iame for 
 account of the principal, whilst the agent acts 
 in the name of the principal. Celerity and secrec}-, 
 so necessary to the prosperity of commerce, demanded 
 this modification of the common law. Third persons 
 who deal with the factor, and to whom he is directl}' 
 liable, are not in the necessit}- of losing their time to 
 seek information of the persons for whom the factor 
 
 * Laurent, Xantisseinent. Sec. 441 . 
 
 Pont, Nantissement, Sec. 1073. pp. .")7.^). r)7<;. 
 t Troplong, Nantissement, p. 79. 
 j Code de Connuerce, Art. 94.
 
 454 The Law of Pledge. 
 
 is acting, and the secret which those persons may 
 wish to keep is thereby respected. It has been de- 
 cided in consequence of this that the factor, author- 
 ized by his principal to act in his own name, is, for 
 that very reason, invested with the right to dispose of 
 the things which the principal has placed in his pos- 
 session, and, for instance, /6> -pledge them j in which case 
 the principal has no right to inquire, so far as third 
 persons are concerned, if the factor has disposed of 
 the things conformably to his instructions. The prin- 
 cipal, in eliminating himself, and showing the factor 
 alone to the world, has renounced all claims against 
 third persons, and for the same reason the third per- 
 sons have no claims against the principal. The latter 
 has any rights against the former, only if they have 
 been in bad faith and knew that the factor was ex- 
 ceeding his authority and disposing of his principal's 
 property in his own interest. * 
 
 506. The question presented itself again and 
 squarely before the Court of Cassation in the year 
 1 87 1, and was again emphatically decided in the 
 sense that the pledgee in good faith is protected 
 against the true owner, whose factor has fraudulently 
 pledged the goods of his principal contrary to orders 
 and for his own benefit. The case is that of the 
 Bank of Martinique vs. Thomas and others, reported 
 in the Journal du Palais, 3'^ear 1871, p. 148. 
 
 The reporters of the case state the substance of the 
 decision in these words : "But the question is com- 
 
 * Rogron, Code de Commerce, explique, p. 219.
 
 Pledge by the Factor jn the Civh. Law. 455 
 
 plicated when the factor has disposed of things 
 belonging to the principal. The latter would then 
 be interested in opposing to third persons the restric- 
 tive conditions of the power of attorney which he has 
 given, if the disposition of the property has been 
 made against those conditions, if, for instance, the 
 factor, instructed to sell the goods, has pledged them 
 to secure a loan contracted in his own interest. But 
 has the principal any right to oppose the terms of his 
 mandate to third persons. -* The Court of Cassation 
 proclaims with great energy, in this case, that, when 
 the goods have been placed at the disposal of a factor 
 by the endorsement of a bill of lading, or by actual 
 delivery, the factor, authorized to act in his own name, 
 may consent all kinds of alienation or conveyance 
 which are consistent with the trade of such goods. 
 He can act as owner, at least for an onerous considera- 
 tion. He can do so validly in regard to third persons. 
 If he exceeds his authority and violates the instruc- 
 tions he has received, he is responsible toward his 
 principal ; but the disposition of the property is 
 effective in favor of third persons. In other words, 
 the distinction which is made, in regard to the ordi- 
 nary agent^ between the unauthorized act from which 
 third persons have to suffer, and the abuse of the 
 mandate from which the principal must suffer, is not 
 applicable to the factor who acts in his own name. 
 The reason of it is evident : third persons have not 
 got to concern themselves with the limits of a power 
 of attorney which is not submitted to them. The
 
 45G The Law of Pledge. 
 
 factor has all authority, because the act which empowers 
 him remains entirely unknown to third persons. 
 The omnipotence of the factor receives no other 
 restriction, so far as third persons are concerned, than 
 that which results from fraud and bad faith. The 
 third person who would have connived with the factor 
 to injure the principal, and would knowingly and 
 fraudulently have profited bv a violation of the 
 restrictive instructions given to the factor, would be 
 responsible toward the principal, and consequenth^ 
 could not avail himself of the transfer consented by 
 the factor."* 
 
 507. We see, therefore, on one hand that the whole 
 tendency of the Common law and of its jurisprudence 
 is to protect the owner of personal property against 
 even an honest transferee, whethor vendee or pledgee, 
 if the owner has been fraudulently deprived of his prop- 
 erty by his agents. And we see, on the other hand, 
 that the legislation and jurisprudence of the Civil 
 law, on the contrar}', are equally bent upon protect- 
 ing the honest vendee or pledgee, without notice, even 
 against the true owner of the property, who has been 
 fraudulently deprived of it by his agent. 
 
 508. The reason of the Common law is twofold: 
 first, it is, that nobody can transfer a right which he 
 himself has not, or is not authorized by the owner to 
 transfer; and, secondly, that the transferee must at his 
 peril ascertain if the transferror is the true owner of the 
 property or is authorized bv the true owner to trans- 
 
 * Journal du Palais, 1871, p. 14.^.
 
 Pledge hy the Factor in the Civil Law. 457 
 
 fer it. If he does not ascertain this fact, he can only 
 blame himself and must suffer in consequence. The 
 vendee or pledgee takes the property at his peril, and 
 must inquire as to the title before he takes it. 
 
 Both the law writers and the courts have proclaimed 
 these principles with no little positiveness. Mr. Jones, 
 quoting from adjudicated cases, says that at Common 
 law a person in possession of goods can not confer on 
 another, either by sale or by pledge, any better title 
 than himself has/" 
 
 509, In a recent case in which a dishonest agent 
 was in possession of goods by means of warehouse 
 receipts taken in his own name, and pledged them to 
 an innocent third person, the Court of New York said : 
 " While mere possession of goods is frequently ^r/w^ 
 /tide evidence of title, it is merely prima facie. 
 Whoever deals with the possessor does it at his peril, 
 and a purchaser from one having no other apparent 
 title to goods than the possession thereof must see to 
 it that the seller has the title ; and if his title fails and 
 he is obliged to respond to the true owner of the 
 goods his loss is due to his own misplaced confidence 
 and not to that of the owner. Owners of goods for 
 commercial and other purposes must frequently entrust 
 others with possession of them, and the affairs of men 
 could not be conducted unless they could do so with 
 safety." f 
 
 510. The Supreme Court of the United States, in 
 
 * Jones, on Pledge, See. 328. 
 
 t Soltau vs. Gerdau, 119 \. Y. Hi)?
 
 458 The Law of Pledge. 
 
 the case of Shaw vs. Raihoad Company, loi U.S., 
 p. 565, remarks that the law has most carefully pro- 
 tected the ownership of personal property, other than 
 jnoney, against misappropriation by others than the 
 owner, even when it is out of his possession ; and 
 •this protection would be largely withdrawn if the mis- 
 appropriation of its symbol or representative could 
 avail to defeat the ownership, even when the person 
 who claims' under a misappropriation had reason to 
 believe that the person from whom he took the prop- 
 erty had no right to it. 
 
 This shows and expresses the true spirit of the Com- 
 mon law on this subject, and confirms what we have 
 just said, that the whole tendency of the Common 
 law and its jurisprudence is to protect the owner of 
 personal property, even against an innocent trans- 
 feree, in direct opposition and full contrast to the Civil 
 law. 
 
 511. But personal or movable property has no fol- 
 lowing or apparent title. Mobilia non habent sequel- 
 lam. How is the ascertainment of the true ownership 
 to be made.^ The questioning of a dishonest agent for 
 information is desultory. If he is capable of defrauding 
 his principal he is likely to deceive the third person. 
 Then how can the pledgee or vendee of commercial 
 effects or merchandise afford to consume any length of 
 time in pursuit of the information, when commercial 
 business demands immediate action .? An all-important 
 exception has been made to the rule of the Common 
 law in favor of negotiable paper. A dishonest holder
 
 Pledge bv the K\ctok ix the Civil Law.. 459 
 
 of such paper transfers to a bona Jide taker for value a 
 right which he does not himself have. The true 
 owner has no claim or right against this vendee or 
 })ledgee of his stolen or purloined property. Why? 
 Because the necessities of commerce demanded it. 
 The necessities of commerce, then, are the supreme 
 law. The right of the true owner, sacred ns it is, 
 and protected as it is, must yield to the 
 public interest. Is there not the same reason for 
 bending the rigor of the Common law in the case of 
 other commercial effects or merchandise? And ought 
 not the pledgee who receives bills of lading, ware- 
 house receipts, the representatives of personal com- 
 mercial property, or the merchandise itself, from a 
 factor, be equall}- protected, and the true owner 
 equally sacrificed to the public interest? Do not the 
 necessities of commerce demand this also? Clearly, 
 they do. And hence the legislation in England and 
 in some States of the Union which changed the Com- 
 mon law in that respect, and even made, or attempted 
 to render bills of lading and warehouse receipts 
 fiegotiable in the same manner and to the same exteiit 
 as bills of exchange and promissory notes. Such 
 legislation is evidently a stride, and a long stride, of 
 progress, and is very likely to be followed in ail com- 
 mercial centres. 
 
 512. Judge Stor}', speaking of the inconvenience 
 and harshness of the doctrine of the Common law, 
 by which the pledge by the factor to an innocent third 
 person is invalid, makes a very curious and interesting 
 remark. He observes that the general denial of the
 
 460 The Law of Pledue. 
 
 right to pledge b}- factors does not appear to have 
 approved itself to the minds of Lord Eldon and Lord 
 Ellenborough ; and that it has been suggested by 
 Mr. Bell, that it probably had its origin in viistake. 
 Parliament, however, he says further, has at length 
 interfered, and placed the doctrine on this subject 
 upon a far more rational foundation than it was placed 
 by the decisions of Westminster Hall. And, finally, 
 he makes the following reflection, which is of a most 
 significant import in the mouth of the great judge : 
 " Considering the present state of the English law on 
 this point, and the unsatisfactory principle on which 
 the former doctrine rests, it would perhaps be a mat- 
 ter of regret if the American courts should feel 
 themselves constrained, by the pressure of authorit}', 
 to yield to it."'" 
 
 :^i3. The doctrine of the Common law was at first 
 so absolute that it was even contended that factors 
 could not validly pledge the negotiable paper of their 
 principals, and that the claims of the true owner 
 would defeat, in such cases, the rights of a holder for 
 value. But this contention has been abandoned, and 
 it is now established be^^ond dispute that the pledgee 
 or transferee of negotiable paper in good faith is pro- 
 tected against the world, whether the transferror is a 
 fraudulent factor or any other purloiner of such prop- 
 ert}- . 
 
 514. Chancellor Kent, who wrote before any of the 
 innovations either in England or in this country had 
 
 * Story, on Bailments, Sees. 325 and 32(>.
 
 Pledge by the Factor in the Civil Law. 461 
 been made to the Common law in relation to factors. 
 
 and who, therefore, supported the old doctrine unre- 
 servedly^ says, as to negotiable paper: "There is an 
 exception to the rule in the case of negotiable paper, 
 for their possession and property go together, and 
 carr}' with them a disposing power. A factor ma}' 
 pledge the negotiable paper of his principal as security 
 for his own debt, and it will bind the principal unless 
 he can charge the party with notice of the fraud, or 
 of want of title in the agent."^'" 
 
 515. It is true that the Common law will protect the 
 innocent vendee or pledgee of personal property even 
 against the true owner, if the latter has put the indicia 
 of ownership upon the agent with whom the third per- 
 son has dealt upon the faith of the indicia. But here 
 we find a good deal of confusion in the decisions of the 
 courts. What constitutes the indicia of ownership of 
 personal property? It is often difficult to sa}-. A bill 
 of lading in the name of the factor is an indicium of 
 ownership ; and so is a warehouse receipt. Should any 
 distinction be made between the owner of goods who 
 puts the indicia of property upon his factor or agent 
 and the one who enables the factor to put them on 
 himself and therebv to deceive innocent parties? f 
 
 * Kent, Comm., Vol. 2, p. 627. 
 
 Saloy vs. Bank, 39 La. An. 90. 
 
 Givanovich vs. Bank, 26 La. An. 15. 
 t Adams vs. Bowerraan, lOJ X. Y. 23. 
 
 I'arker vs. Baxter, 86 N. Y. 586. 
 
 Barnard vs. Campbell, 58 N. Y. 78. 
 
 Honold vs. Meyer, 36 La. An. 585. 
 
 Baldwin vs. Ely, 9 How. 580. 
 
 Crowley vs. Savings Bank, 34 La. An. 74. 
 
 Am. and Eng. Ency, of Law. Vol. 18. p. 634
 
 462 The Law of Pledge. 
 
 516. Nothing shows more strikingly the diversity 
 of the human mind and the uncertainty of its wis- 
 dom than the fact that the Common law and the Civil 
 law give the same reason, in the government of per- 
 sonal or movable property, for rules which are in 
 direct opposition and conflict with each other. Sa3-s 
 the Common law : The loss of the pledgee dealing 
 with an unfaithful agent is due to his own misplaced 
 confidence, and not to that of the owner. The affairs 
 of men could not prosper unless the\' could with safety 
 entrust their agents with their property for commercial 
 purposes.* 
 
 The Civil law says : The loss of the owner whose 
 property is fraudulently pledged by an agent is due 
 to his own misplaced confidence. He can only 
 blame himself. The honest pledgee must be pro- 
 tected, or credit would be destroyed, and commerce 
 greatly obstructed and injured. f 
 
 517. The rule of the Civil law seems to be the 
 more equitable, and its motive the more rational. It 
 is the owner of the property and not the pledgee, 
 who has misplaced his confidence if the factor proves 
 dishonest. It is between the owner and the factor 
 that the confidential relation exists, not between the 
 factor and the pledgee, who is a third person in regard 
 to the agency. Between the pledgee and the factor 
 there is no confidential relation ; the former reposes, 
 or need repose, no confidence in the factor. He may 
 
 * Soltau vs. Gerdau, 1U> X. Y. :\97. 
 t Troplong, lor. cit.
 
 Pledge hv the Factor in the Civil Law. 463 
 
 not know that he is deahng with a factor, for the 
 latter exhibits no credentials. If the pledgee is aware 
 that the pledgeor is acting in the capacity of a 
 factor, he has the right to presume that the lat- 
 ter is acting within the limits of his authority and 
 he should not suffer because a mandate which is 
 not submitted to him has been violated. As stated by 
 Mr. Rogron, the principal by eliminating himself and 
 showing the factor alone to the world as possessor of 
 the property, has renounced all claims against third 
 persons; and, for the same reason, third persons have 
 no claims against the principal for the acts of his 
 factor. 
 
 The owner is presumed to know the factor to whom 
 he confides his property and to have ascertained 
 whether or not that agent is worthy of his confidence. 
 The pledgee and the factor are strangers to each other 
 and meet only for the purpose of bargaining in a com- 
 mercial transaction. The owner deals with one factor 
 alone. The pledgee deals with any number of factors. 
 The owner looks to the character of the factor. The 
 pledgee looks to the quality of the propertv. 
 
 The factor commits a breach of trust if he disposes 
 fraudulently of the property- entrusted to him and may 
 be prosecuted for it. He commits no breach of trust 
 in deceiving the pledgee by transferring'to him prop- 
 erty which he has no right to transfer. 
 
 518. And now, which of the two laws is more 
 likel}' to obstruct and impede commerce ; the one 
 which permits commercial inen to buy commercial
 
 4G4: The Law of Pledge. 
 
 propert}' or take it on pledge, with safet\- from the 
 parties in whose hands it is found, and who ap- 
 parently are the owners of it ; or the one which ex- 
 poses purchasers to danger and loss if they deal with 
 parties whom they do not know with absolute cer- 
 tainty to be the true owners of the goods which they 
 offer for sale or pledge, or the duly authorized agents 
 of the true owners? The one rule naturally creates 
 confidence, and consequently multiplies commercial 
 relations and business transactions ; the other rule, as 
 naturally, is bound to create distrust, and, as conse- 
 quently, is likely to restrict commercial and financial 
 operations. We believe that, both as a principle of 
 justice and a matter of public interest, the Civil law is 
 ^superior on this subject to the Common law.
 
 CHAPTER XLIII. 
 
 Liens at Common Law aiNd Tacit Pledges of 
 THE Civil Law. 
 
 518. These two subjects, though not identical, at 
 least present many points of analogy and even of affinity 
 between them. In both of them the creditor has a 
 right of priority and preference over the proceeds 
 of the security, and this right rests upon his posses- 
 sion of the thing pledged or affected by the lien. In 
 both of them the pledge or the lien is lost if the cred- 
 itor parts with that possession. In neither of them 
 the creditor has any right in the thing, or to the thing, 
 in re or ad rem. In neither of them the creditor has 
 any right, general or special, of property. As to the 
 tacit pledge of the Civil law, no legal title, not even 
 a special or qualified property, passes to the pledgee, 
 because the theory or doctrine of such titles is un- 
 known and repulsive to the Civil law. And as to the 
 liens at Common law, it is well established that the 
 general title which passes to the mortgagee, and possi- 
 bly the special title, which passes to the pledgee when 
 the thing* pledged is assigned or transferred to him ; 
 it is well established, we say, that no such title, and 
 no title at all, passes to the lien creditor. 
 
 519. In many instances the same thing which, at 
 Civil law, is termed a tacit pledge, at Common law 
 is called a lien, such as the right of priority or pref- 
 
 465
 
 46C The Law of Pledge. 
 
 erence and power of retention given by the law to a 
 workman over the article w^hich he has repaired, for 
 the price of his labor ; to an innkeeper over the effects 
 of a traveler for the price of his board or lodging • to 
 the lessor over the furniture or chattels of the lessee 
 for the rent 5 to the factor for his advances over the 
 goods of his principal ; to the common carrier for 
 his freight over the merchandise which he carries, and 
 so forth. 
 
 Properl}' speaking, the pledge is only conventional 
 or contractual ; it is a contract by which the pledgeor 
 puts the thing pledged in the hands of the pledgee to 
 secure an indebtedness according to certain terms and 
 conditions agreed upon between them. Under the 
 rules of the Civil law this contract, except in the case 
 of commercial pledges, must be clothed with some 
 indispensable formalities and evidenced by a written 
 act. 
 
 520. The denomination of tacit pledge, therefore, 
 to designate the lien or right of preference and reten- 
 tion of the credit under certain circumstances, is hardly 
 a correct one. Still less so is the term statutory pledge 
 sometimes used by the courts and the law writers. 
 The law permits parties to contract with one another, 
 but it does not contract for them. It does not there- 
 fore itself -pledge the property of the debtor to the 
 creditor. It only submits it to the power of the latter, 
 in certain cases and for certain purposes ; and that is 
 precisely what constitutes the lien at Common law. 
 
 521. The -privileges of the Civil law {privilegia
 
 IjIKNs at Common Law. -467 
 
 of the Roman law) are a totally different thing, 
 though in the jurisprudence and the practice of 
 Louisiana, the two words — lien and privilege — are 
 used indifferently to mean the same thing. The 
 -privileges of the Civil law correspond to the equitable 
 liens of the Common law to a certain extent, and 
 differ from them in many respects, as we will see 
 later on. 
 
 522. Mr, Jones says that there may be a statutory 
 pledge in the same way that there may be a statutory 
 mortgage, and he illustrates his idea in the following 
 words : " Thus a statute which provides that a rail- 
 road company, which is to receive bonds of a city to 
 aid its construction, shall issue to the city certificates 
 of stock of the company for an amount equal to the 
 amount of the bonds received, and that the stock 
 should remain forever pledged for the redemption of 
 the bonds, creates a pledge of the stock to the city." 
 And he cites the case of United States vs. New Or- 
 leans, 98 U. S. 381.* 
 
 But this is clearly not a statutory pledge. The 
 statute in that case authorized the city of New Or- 
 leans to subscribe to the capital stock of the railroad 
 company, and, to that effect, to issue its bonds, on 
 condition that an amount of stock equal to the 
 amount of bonds issued should be delivered and 
 pledged by the company to the city. The authoriza- 
 tion to issue the bonds was statutory, but the pledge 
 
 * Jones, on Pledges, Sec. 22.
 
 468 The Law of Pledge. 
 
 of the stock was conventional, though the law made 
 it a condition to the issuing of the bonds. 
 
 A statute authorizing tlie Governor of a State to 
 issue bonds in aid of a bank, and providing that all 
 the mortgages belonging to the bank should consti- 
 tute a pledge in favor of the State and of the bond- 
 holders, to secure the payment of the bonds, presents 
 a similar instance of the statutor}^ authorization to 
 issue the bonds and of the contractual pledge to secure 
 the same.* 
 
 523. A law authorizing a married woman, under 
 certain circumstances and conditions, to borrow money 
 and mortgage her property to secure the debt, is of the 
 same kind. The authorization to borrow is statutory, 
 but the mortgage is conventional. f 
 
 In fact, I doubt that there is, properly speaking, 
 such a thing in the legislation of either Civil or Com- 
 mon law countries, as s^a^u/ory pledges. If the pledge 
 is statutory because it is inade under a statute which 
 permits it, the same may be said of all pledges in the 
 Civil law, as they arc allowed by virtue of statutory 
 provisions. But the Roman law and the modern 
 Civil law as well see a tacit pledge in certain contracts, 
 as inherent in the same, in which the law gives to the 
 creditor the right of retefition of the thing over which 
 he has a lien and of which he has the possession. The 
 contracting parties in such cases are presumed to have 
 
 *Forstall vs. Consolidated Association, 34 La. An. 770. 
 
 Citizens Bank of Louisiana vs. Cotton Press Co., 7 La. An. 2SG. 
 
 Same vs. Heirs of Gray, 47 La. An. 5f)L 
 t Civil Code of Louisiana, Arts. 12G. 127. 12S.
 
 Liens at CoMxMon Law. 469 
 
 tacitly agreed as to the exiete-^ioe of the pledge, having 
 contracted under a law which gives the creditor the 
 right of retaining possession of the debtor's property. 
 
 524. I will, for the understanding of this subject, 
 again follow Mr. Troplong. He tells us that the Civil 
 Code provides only for the conventional pledge ; but 
 that there is a tacit pledge in numerous transactions. 
 For instance, in the contract of lease. The fruits of 
 the crop and the furniture and in<6truments of hus- 
 bandry in the rented house or farm are a tacit pledge, 
 inherent in the contract of lease, and give the lessor 
 the right to be paid by preference from the proceeds of 
 those things. It is as a tacit pledge that the right of 
 the landlord is considered by the Roman law. And 
 Troplong cites the Digest : " Eo jure utiniur ut qucc 
 in -prcBdia urbana inducta illata sunt^ pignori esse 
 credantur, quasi id tacite convenerity This conclu- 
 sion, he adds, is natural. The things in question 
 are contained in the leased premises ; the lessor, there- 
 fore, detains them in some sort in detaining and pos- 
 sessing the premises which contain them.* 
 
 525. The Civil Code of Louisiana provides more 
 explicitly for the right of pledge of the lessor than the 
 Code Napoleon, and under the terms of the former 
 the pledge can hardly be said to be merely tacit. 
 
 The Code of Louisiana enacts on that subject as 
 follows : 
 
 Article 2705. '' The lessor has for the payment of 
 his rent, and other obligations of the lease, a right of 
 
 * Troplong, Nantissement, Sec. 40.
 
 470 The Law of Pledge. 
 
 pledge on the movable effects of the lessee which are 
 found on the property leased. 
 
 " In the case of predial estates this right embraces 
 everything that serves for the labor of the farm, the 
 furniture of the lessee's house and the fruits produced 
 during the lease of the land ; and in the case of houses 
 and other edifices it includes the furniture of the les- 
 see and the merchandise contained in the house or 
 apartment, if it be a store or shop, 
 
 " But the lessee shall be entitled to retain out of 
 the property subjected by law to the lessor's privilege, 
 his clothes and linen and those of his wife and family, 
 his bed, bedding and bedstead and those of his wife 
 and family ; his arms, military accoutrements, and the 
 tools and instruments necessary for the exercise of the 
 trade or profession by which he gains his living and 
 that of his family." 
 
 Article 2706. " This right of pledge includes not 
 only the effects of the principal lessee or tenant, but 
 those of the under-tenant, so far as the latter is in- 
 debted to the principal lessee at the time when the 
 proprietor chooses to exercise his right. A payment 
 made in anticipation by the under-tenant to his prin- 
 cipal does not release him from the owner's claim." 
 
 Article 2707. "• This right of pledge affects not only 
 the movables of the lessee and under-lessee, but also 
 those belonging to third persons, when their goods 
 are contained in the house or store, by their own con- 
 sent, express or'implied" * 
 
 * Publishing Company vs. Piffet et als., 34 La. An. 602. 
 Goodrich vs. Bodley, 35 La. An, 52').
 
 Liens at Common Law. 471 
 
 Article 2708. " Movables are not subject to this 
 right, when they are only transiently or accidentally 
 in the house, store or shop, such as the baggage of a 
 traveler in an inn, merchandise sent to a workman to 
 be made up or repaired, and effects lodged in the 
 store of an auctioneer to be sold." 
 
 Article 2709. "In the exercise of this right the 
 lessor may seize the objects, which are subject to it, 
 before the lessee takes them away, or within fifteen 
 days after they are taken away, if they continue to be 
 the property of the lessee, and can be identified." 
 
 And Article 3218 provides for the right of retention 
 of the lessor. " The right which the lessor has over 
 the products of the estate, and on the movables which 
 are found on the place leased, for his rent, is of a 
 higher nature than a mere privilege. The latter is 
 only enforced on the price arising from the sale of 
 movables to which it applies. It does not enable the 
 creditor to take or keep the effects themselves specially. 
 The lessor, on the contrary, may take the effects them- 
 selves and retain them until he is paid. 
 
 This right of the lessor to take the effects of the 
 lessee and retain them until he is paid, corresponds, 
 in a certain manner, to the law of Distress of the old 
 Common law of England and to the statutory law of 
 some of the States of the Union on the same subject. 
 Of that we shall see more further on. 
 
 526. The Code Napoleon does not contain provi- 
 sions similar to those of Louisiana, and it treats the 
 lessor's right over the property of the lessee as a mere
 
 472 TiJF, Law of Pledge. 
 
 privilege or lien ; but it gives the lessor the power to 
 seize the property of the lessee for rent by a proceed- 
 ing called saisie-gagerie, and it gives him also the 
 right of revendication of that propert}- within a cer- 
 tain number of days, that is, to follow it in the hands 
 of third persons and seize it there when the lessor has 
 removed it from the leased premises.'* 
 
 527. The framers of the Code of Louisiana have 
 evidently taken the substance of the articles cited 
 above, except the exemption of the tools and other 
 effects, from Pothier, the source of legal wisdom and 
 learning from which they principally drew their pro- 
 visions, when they departed from their ordinary 
 model, the Code Napoleon. But we must observe 
 that Pothier, who preceded the Code Napoleon and 
 adhered more closely to the Roman law than did the 
 framers of the French code, calls the tacit pledge of 
 the landlord over the lessee's property a tacit mort- 
 gage, line hypotheque tacite. Pothier use* this term 
 as he finds it in the Roman law, where the mortgage 
 affected personal as well as real property. Further- 
 more, as we have seen before, the distinction between 
 the pledge and the mortgage in the Roman law was 
 often ignored, the only difference being in fact that 
 the pledgee had possession of the property, and the 
 mortgagee had not. 
 
 We find, therefore, from the Roman law, from 
 Pothier, from Troplong, that the right of priority of 
 
 * Code Napoleon, Art. 2102.
 
 . Liens at Common Ijaw. 473 
 
 the lessor over the lessee's property for the rent arises 
 from a tacit or implied pledge.* 
 
 528. Let us observe, on the lessor's privilege, a 
 remarkable difference between the jurisprudence of 
 Louisiana and the French law, from which it is 
 derived, as to the kind of property of the lessee upon 
 which the privilege rests. Pothier and the commen- 
 tators of the Code Napoleon are unanimously of the 
 opinion that the choses in action^ bills and promissory 
 notes which are found on the leased premises are not 
 affected by the lessor's privilege. 
 
 Pothier says: " In regard to promissory notes and 
 obligations which are found in the house, it is not 
 doubtful that they are not subject to the pledge of the 
 landlord, for they are only evidences of credits belong- 
 ing to the lessee ; and those credits being incorporeal 
 things which, by their nature nullo coiitinentur loco^. 
 it can not be said that xSx^y furnish the house." f 
 
 Pont savs in the same manner: ''Evidences of 
 credits and obligations, being incorporeal things, quce 
 in solo jure co7isisiunt, reside, in reality, in no place,, 
 nulla circu7nscribu?ihir loco. Hence we must con- 
 clude that it would be folly to consider that they 
 furnish the leased premises."! 
 
 The Court of Louisiana has decided differently, and 
 held that promissory notes, bills of exchange and 
 
 * Pothier. Du Louage, p. 197. 
 t Pothier, Dn Lonage, p. 203, Xo. 45. 
 X Pont, Des Privileges, 1 Vol., p. 70. 
 See also: Troplong, Des Privileges,! Vol. 221. 222: Laurent. 
 
 Des Privileges, Vol. 29, p. 448, Xo. 413; Aubry etRati, Vol. 
 
 III. p. 139, Sec 261.
 
 474 The Law of Pledge. 
 
 choses in action generally were part of the movable 
 effects of the lessee upon which the privilege and 
 pledge of the lessor was established by law.* 
 
 I think that we may say of those decisions of the 
 Court of Louisiana what Mr. Bell says in his Com- 
 mentaries, speaking of the early English decisions on 
 the right of factors' right to pledge their principaFs 
 property, that the}' probably had their origin i?i mis- 
 take.^ 
 
 529. The right of the lessor to retain or detain the 
 property of the lessee until the rent is paid being con- 
 sidered A tacit pledge, and yet there being between 
 the parties no written act of pledge, as required by 
 the Civil law, it is well to see what Troplong says on 
 this point. He remarks that the formalities required 
 bv the article of the Napoleon Code (2074) are only 
 indispensable when there is a contract of pledge en- 
 tered into as a principal matter. But if the pledge 
 is only the necessarv and accessory consequence of 
 another contract, which includes it impliedly, a strict 
 and rigorous application of Art. 2074 is not demanded. 
 He gives as an example the contract of lease. The 
 right of pledge that the lessor has on the property 
 deposited in the leased premises does not result from 
 the principal clauses of the contract ; it is implied in 
 the lease. Thus, it has been seen that the landlord 
 can seize the goods deposited with the lessee, even by 
 
 * Succession of Stone, 31 La. An. 311. 
 
 Matthew & Finley vs. Their Creditors, 10 La. An. 718. 
 t Story, Bailments, 325.
 
 Liens at Common Law. 475 
 
 virtue of a verbal lease. And the same thing may be 
 said of a workman or artisan who would seize the 
 article repaired by him, of the factor in possession of 
 goods which he holds for sale, etc. All these are in 
 the same position when they have in their hands the 
 property of their debtor, as if they had stipulated a 
 regular pledge of it.* 
 
 The idea of a tacit pledge is expressed also by 
 Cujacius in the case of the common carrier over the 
 goods in his possession. He says: ''''' Merces -pro 
 vectura tacite pigiioratce sunt.'''' \ 
 
 And again, as to the law of Louisiana, the 
 rights of those privileged creditors can not alto- 
 gether be said to arise from a tacit or implied pledge, 
 because their privilege is declared by the statute. 
 Thus, of the depositary who has incurred any expenses 
 for the preservation of the thing deposited, it is said : 
 " Against the owner of the thing his right is in the 
 nature of that of pledge, by virtue of which he may re- 
 tain the thing until the expenses which he has incurred 
 are repaid. He possesses this qualified right of pledge 
 against the creditors of the owner if they seek to have 
 the thing sold. He may refuse to restore it unless 
 they either refund his advance or give him security 
 that the thing shall fetch a sufficient price for that pur- 
 pose. "J 
 
 530. For the innkeeper, the law of the same State 
 provides: "Innkeepers have a privilege, or more 
 
 * Troplong, Des Privileges, Vol. 1, p. 259. 
 t Troplong, Du Nantissement, p. 42. 
 X Civil Code of Louisiana, Art. 3225.
 
 476 The Law of Pledge. 
 
 properly a right of pledge, on the property- of travel- 
 ers who take their board or lodging with them, by 
 virtue of which they ma\- retain the propert}- and 
 have it sold, to obtain payment of what such travelers 
 ma)' sue them on either of the accounts above men- 
 tioned.* 
 
 531. There is also a tacit pledge recognized bv the 
 Civilians as resulting in favor of the creditor from the 
 judicial seizure of the property of the debtor. That 
 seizure, which is made in spite of the debtor, and puts 
 his property in the hands of justice, for account of the 
 creditor, operates as a compulsory pledge, known to 
 the Romans as the pigiius coactivum. The law, 
 through its judicial officers, enters the premises of the 
 debtor, takes possession of his personal property for 
 the benefit of the creditor, and after dispossessing the 
 debtor, constitutes a legal pledge of it. In this, the 
 law protects both the creditor and the debtor. It 
 takes charge of the rights of the former, and it saves 
 the latter from personal violence and rigor. f 
 
 This tacit pledge and privilege of the seizing 
 creditor is provided for by the legislation of Louis- 
 iana, and it is established both in cases of seizure in 
 execution of judgments, and of seizure by mesne 
 process of attachment. " The creditor, by the mere 
 act of seizure, is invested with a privilege on the 
 inovable and immovable property thus seized, which 
 
 * Civil Code of Louisiana, Art. 3233. 
 
 Laws of 1896, Nos. 29, 35, 28. 
 t Troplong, Du Nantissement, No. -16.
 
 Liens at Common Law. 477 
 
 entitles him to a preference over other creditors, unless 
 the debtor has become bankrupt previous to the 
 seizure,'''^ 
 
 It is the mere act of seizure, equally, in attachments 
 which creates the right of priorit}', as the Court has 
 declared: " An attachment enables the creditor to 
 obtain payment out of the property attached in pref- 
 erence to others, not on the ground that he has 
 acquired a lien upon it, but because he has first used 
 the process of the Court to seize and put it into the 
 possession of the sheriff for the purpose of obtaining 
 his payment. The law and the courts will not, there- 
 fore, allow other ordinary creditors or other process to 
 interfere with him."'f 
 
 532. But it is only the possession, actual and cor- 
 poreal, or constructive or symbolical, which the sheriff 
 takes of the debtor's property, which gives the cred- 
 itor the right of preference, that possession being con- 
 sidered as the tacit compulsory pledge, the pignus 
 coactiviiiu. Therefore, when the attachment is dis- 
 solved before the sale of the property seized by the 
 bankruptcy of the debtor, or for some other reason, 
 the possession of the sheriff ceases, the compulsory 
 pledge is defeated and the creditor loses his right of 
 preference.! 
 
 * Code of Practice, Art. 722. 
 
 t Beck & Co. vs. Brady et al., G I.a. An. 445. 
 
 X Nelson & Co. vs. Simpson, 9 La. An. 311. 
 
 Hanna vs. Creditors, 12 I.a. M. 32. 
 
 Edson vs. Freret, 11 La. An. 710. 
 
 Stockton vs. Hyde, 5 La. An. 3U0. 
 
 Tiia vs. Carrierc, 117 U. S. 201. 
 
 Peck v«. .Fcnness. 7 How. (U. S.) 012.
 
 CHAPTER XLIV. 
 
 533. The same right of preference of the seizing 
 creditor arising from the fact of the seizure itself, and 
 which the CiviHans call a tacit pledge, exists in the 
 same manner in the Common law as a lien at law, 
 with the same advantages and under the same condi- 
 tions. As the pignus coaciivum, this lien at law 
 springs into existence by the possession of the sheriff 
 or other executive officer of the court, and goes out of 
 existence if that possession ceases before the sale of 
 the property seized. By statute in some States the 
 mere putting of the writ of seizure into the hands of 
 the sheriff amounts to a constructive possession of the 
 debtor's property and operates as the question at law 
 in question. 
 
 The seizure creates the lien, whether it is in execu- 
 tion of judgments or by mesne process of attachment.* 
 
 In Louisiana and other Civil law countries the 
 seizure of credits is only effected by the notice given 
 by the sheriff to the debtor of the credit, not to the 
 debtor or defendant in the suit. It is this notice 
 to the debtor of the credit which constitutes the con- 
 structive possession of the credit, f 
 
 * Poche vs. James, 7 How. 612. 
 
 Waller vs. Best, 3 How. 111. 
 
 Kiltridge vs. Warren, 14 N. Uamp. .509. 
 
 Arnold vs. Brown, 24 Pick. 95. 
 
 Drake, on Atiachment, Sec. 224. 
 t Ante: Sec. 11 ct seq.
 
 480 The Law op 1*ledge. 
 
 In the United States and in England the seiz- 
 ure is effected as a transfer or assignment of the credit 
 would be, without such notice. * 
 
 534 This doctrine or theory of the tacit pledge is 
 the product of the philosophy and ingenuity of the 
 Roman jurists. It is unknown to the Common law, 
 at least under that name. But the same principles 
 and rules which govern it are to be found in the liens 
 at law of the American and English jurisprudence. 
 
 In the lien at law, as in the tacit pledge, the prop- 
 erty upon which it bears must be in the possession of 
 the creditor ; but it is not the fact of possession which 
 creates the right of preference, though the right is 
 inseparable from possession. That right arises from 
 the nature of the creditor's claim and is created b}' or 
 under the law. The fact of possession supports, viv- 
 ifies and preserves the right, and is a condition prece- 
 dent of its ver}^ existence. Thus it is the law that 
 gives the lien, or right of preference, to the lessor, 
 the artisan, the innkeeper, the common carrier, etc. ; 
 but it is possession that makes the lien available. 
 Without possession the preference would not exist ; 
 but possession itself, where the law, or the parties 
 under the law, have created no lien, would be no 
 cause of preference. 
 
 The lien is a right over the property, when it is in 
 the hands of the creditor. It is not a ris^ht in the 
 thing or to it, in re or ad rem, as we said before. It 
 is not inherent in it in any manner, as in the mort- 
 
 * Ante: Sec. 19 et seq.
 
 Liens at Common Law. 481 
 
 gage. And when we say that it is a right over the 
 property we mean over the proceeds of it when it is 
 sold and the price reahzed. The word lie^i expresses 
 clearly what it is, and it is remarkable that the law 
 writers have not thought proper to give the origin of 
 it. The term is taken from the French word lien^ 
 which means a tie^ that which attaches something to 
 something else. The lien, in law, is the tie which 
 attaches the property to the claim of the creditor, or 
 the claim to the property. 
 
 535. At the same time that we assimilate the lien at 
 law with the tacit pledge, we should bear in mind that 
 the latter is one of the fewer privileges of the Civil 
 law depending upon possession, but that generally the 
 privileges of the Civil law are not accompanied by pos- 
 session, and have been created by the Roman law for 
 the very purpose of securing the creditor without 
 depriving the debtor of his propert}', at least until the 
 debt becomes executory and the property is seized and 
 sold to satisf}' the debt. It is one of the charac- 
 teristics of the Civil law privileges, when possession is 
 not necessary to their existence, that they follow the 
 property into the hands of third persons, like the mort- 
 gage, and it is that which makes them effective as a 
 means of preference over other or ordinary creditors. 
 
 536. There is also this difference between the liens 
 at law of the Common law and the tacit pledges of the 
 Civil law, that, though they produce the same effects, 
 and both necessitate the creditor's possession of 
 the debtor's property, the sources of their existence
 
 482 The Law of Pledge. 
 
 are not the same. The tacit pledges result from priv- 
 ileges established in favor of the creditors. Now, the 
 privileges of the Civil law are all created by statute, 
 and they are of stricti juris. They can not arise from 
 contract, or from usage or custom, or by implication 
 of law. There are, therefore, no privileges at Common 
 law in the Civil law countries. Whether thev exist 
 with or without the creditor's possession of the prop- 
 erty they are the creatures of statutory law. The con- 
 tracting parties have no power to grant, on one side, 
 and to accept, on the other, a privilege on the prop- 
 erty of the debtor in favor of the creditor, as is done in 
 case of a mortgage. Any stipulation of that sort is 
 absolutely nugatory and produces no legal effect what- 
 ever. The Civil Code of Louisiana states the rule in 
 these words : " Privilege can be claimed only for those 
 debts to which it is expresslv granted in this Code.'"'^ 
 
 In his work on Privileges and Mortgages, Mr. Pont, 
 the continuator of Marcade', the celebrated commen- 
 tator of the Code Napoleon, expounds the law on this 
 subject as follows: '' We must even say, again with 
 Domat, that, if the debt is not by itself privileged, 
 it can not be rendered such by means of an agree- 
 ment. The Court of Cassation has precisely decided 
 in this sense that all privileges must be restricted to 
 
 Civil Code of Louisiana, Art. 318.^. 
 Succession of Rousseau, 23 La. An. 3. 
 Hoss ei al. vs. Williams, 24 La. An. 5G8. 
 Gause vs. Bullard, 16 La. An. 107. 
 Citizens Bank vs. Maureau, 37 La. An. 8.57, 
 State vs. Bank, 33 La. An. 70.5.
 
 Liens at Common Law. 483 
 
 the cases expressly specified in the statutes which 
 have established them."* 
 
 537. The Hens at law, on the contrary, in the sys- 
 tem of the Common law of England and of the States 
 of the Union, excepting Louisiana, are formed by, or 
 arise from, either a stipulation or contract between 
 the creditor and debtor, or usage or custom of trade, 
 or implication of law, orstatute. And, in case of specific 
 or particular liens, which means liens on a particu- 
 lar piece of property to secure a particular debt, thev 
 are liberally construed in favor of the creditor. The 
 personal liens, on the contrary, founded on custom to 
 satisfy a general balance of accounts, are not favored, 
 and are looked at with jealousy and strictly construed. f 
 
 538. But, although springing from different 
 sources, the liens at law and the tacit pledges have 
 analogous purposes and effects and cover the same 
 classes of claims. For instance, the workman or 
 artisan has the same right under the Civil law and 
 the Common law to detain in his hands until his 
 claim is satisfied the property of the debtor that he 
 has repaired, or improved, or constructed. This 
 right is founded in the Common law upon the lien at 
 law, whether established by agreement, custom or 
 statute; and it is founded in the Civil law upon the 
 
 * Pont, Des Privileges, Vol. I. p. 17. 
 
 Court of Cassation, 18th Mav, 1831; ]2lb December, 1831; 3d 
 August, 1837. 
 t Kent, Comm., Vol. 2, pp. 634, 635, 63G, 637. 
 
 Am. and Eng. Ency. of Law. Vol. 13. p. r)76.
 
 484 The Law of Pledge. 
 
 tacit pledge and privilege exclusively created by 
 statute. * 
 
 The same thing may be said of the liens at law 
 and tacit pledges, with power of retention, which 
 secures the rights of the innkeeper for boarding and 
 lodging on the effects of travelers ; of the factors for 
 advances on the goods or funds of their principals in 
 their hands ; of the common carriers for their freight 
 on the merchandise in their possession ; of the attor- 
 neys at law on the amount recovered for their clients ; 
 of the lessor for his rent on the property of the lessee 
 placed on the leased premises. 
 
 The purposes, the instrumentalities and the effects 
 of the Common law and the Civil law in all such 
 cases are the same. The purpose is to specially pro- 
 tect the creditor ; the instrumentality is the power 
 given to him to retain the property of the debtor until 
 he is paid ; the effect is the security of his debt thereby 
 obtained by him. 
 
 539. In both systems of the Common law and the 
 Civil law, the lessor's right of possession and detention 
 of the lessee's property for the security of the rent is 
 highly protected, and harsh means of obtaining pay- 
 ment are put in the hands of the creditor. But those 
 means differ in their mode of execution, though they 
 
 Story, Bailments, Sec. 440. 
 
 Kent, Comin., Vol. 2, p. 634. 
 
 Am. and Enoj. Ency. of Law, Vol. 13, p. 590. 
 
 Civil Code of Louisiana, Art. 3217, Xo. 2. 
 
 Pothier, Procedure Civile, p. 197. 
 
 Troplong, Des Privileges, Vol. — , Nos. 170. 177. 
 
 Gayarre vs. Tunnard, La. An. 254. 
 
 Fields vs. Creditors, 11 La. An. 545.
 
 Liens at Common Law. 485 
 
 are analogous in substance. B}- the Common law of 
 Distress, the landlord has the right on default of pay- 
 ment of rent to enter the leased premises and take 
 hold of whatever property is distrainable. He may 
 act in person or by an agent, and in either case he has 
 the sanction of the law, but not the official aid of the 
 courts, if he does not seek it. If he employs a con- 
 stable to act for him, the latter is his private agent, but 
 not the officer of the court. After the required notices 
 and formalities, the distrained property is sold without 
 order or decree of court. It may be said that the law 
 in that case .allows the lessor to take the law in his 
 own hands to a certain extent. It is true that in sev- 
 eral States the Common law of Distress has been con- 
 siderably amended and restricted, if not altogether 
 abolished. It has become in a great measure unpop- 
 ular in this country, as giving the landlord an undue 
 advantage over the other creditors of the lessee, and 
 enabling him to act with too much severity against the 
 latter. In some States the mesne process of attach- 
 ment lias been substituted to the power of Distress of 
 the Common law, thereby placing the rights of both 
 the lessor and the lessee in the hands of justice.* 
 
 540. Under the Civil law, the right of retention of 
 the lessee's property by the lessor, for the payment of 
 rent, does not go the extent of enabling or allowing 
 him to enter, in person or through an agent, on the 
 leased premises, vl ei anuls, and take hold of the 
 
 Am. and En<r. Ency. of Law, Vol. 5, pp. 50G ct sei/. 
 Bouvier, Law Dictionary, verba Distress.
 
 486 The Law of Pledge. 
 
 things upon which his privilege bears, and sell them 
 without an order or decree of court. He must invoke 
 the aid of the law for that purpose, and act through 
 its officers. When the Code Napoleon says that the 
 lessor can seize the property of the lessee for rent it 
 means that he caii cause if to be seized hy a judicial 
 proceeding. And when the Civil Code of Louisiana 
 sa3's that the lessor may take the ejects of the lessee 
 and retaiii them untit he is paid, it means that 
 he can have them seized and taken hold of for his 
 account b}' the sheriff or other officer of the court. 
 Neither article of either Code would be a leg^al war- 
 rant or authority for the lessor to take the law into his 
 own hands against a defaulting lessee, and enter his 
 premises and take, in person, possession of his prop- 
 erty. The right of taking and retaining the effects of 
 the lessee is clearh' a ris^ht to be exercised throu2fh the 
 ininistrv of justice. 
 
 541. In Louisiana the lessor causes the property of 
 the lessee upon which he has the privilege for his 
 rent, to be seized by means of the writ of provisional 
 seizure, for which the Code of Practice provides spe- 
 cifically as follows : ''When a lessor sues for rent, 
 whether the same be due or not, he may obtain the 
 provisional seizure of such furniture or property as 
 may be found in the house or attached to the land 
 leased by him; and in all cases it shall be sufficient 
 to entitle a lessor to said writ to swear to the amount 
 which he claims, whether due or not due, and that he 
 has good reasons to believe that said lessee will
 
 Liens at Common Law. 487 
 
 remove tlie furniture or property on which he has a 
 lien or privilege, out of the premises, and that he maj' 
 be thereby deprived of his lien ; provided, that in case 
 the rent be paid when it falls due the costs of seizure 
 shall be paid by the lessor, unless he prove that the 
 lessee did actually remove, or attempt or intend to 
 remove, the property out of the premises ; provided, 
 that in all cases of provisional seizure of furniture or 
 other property at the instance of lessors, the lessee 
 shall be permitted to have the seizure released upon 
 executing a forthcoming bond or obligation, with a 
 good, solvent security for the value of the property to 
 be left in his possession, or for the amount of the 
 claim, with interest and costs 5 provided, further, that 
 the value of the propert}' shall be fixed by the sheriff 
 or one of his deputies, with the assistance of two 
 appraisers selected by the parties, twenty-four hours' 
 notice being previously given to the lessor or his 
 counsel to select an appraiser."* 
 
 The provisions of this law show clearly that the 
 landlord can not himself and without the aid of jus- 
 tice take hold of the property of the lessee. Further- 
 more, it has been several times decided that the right 
 of the lessor to retain the effects upon which he has 
 his lien until his rent is -paid^ is only good against 
 the lessee, but can not avail the lessor against third 
 persons, f 
 
 The Court of Louisiana has, however, said on sev- 
 
 * Code of Practice of Louisiana, Art. 287. 
 t Case vs. Kloppenburg, 27 La. An. 482. 
 Pickens vs. Sheriff, 31 La. An. 870.
 
 488 The Law of Pledge. 
 
 eral occasions that the hmdlord had the right, in the 
 very words of the law, to tale and retain the lessee's 
 property ; but the fact of actual and forcible taking 
 of possession b}- the landlord himself without legal 
 proceedings was not a factor in those cases. * 
 
 It has been decided, under this law, by the Court 
 of Louisiana, that the mere fact that the lessee was in 
 default of paj-ment of the rent was a sufficient cause 
 or reason for the lessor- to swear, for the purpose of 
 the seizure, that he had good reasons to believe that 
 the lessee will remove his property from the leased 
 premises and defeat the privilege or lien, r 
 
 542. But, as we have seen, the law of that State 
 exempts from even the lessor's lien the lessee's clothes 
 and linen, and those of his wife and family, his bed, 
 bedding and bedstead, and those of his wife and family ; 
 his arms, military accoutrements and the tools and 
 instruments necessary for the exercise of his trade or 
 profession by which he gains his living and that of his 
 family. \ 
 
 It is to be noted that the exemptions from seizure 
 for debt other than the rent under the lessor's lien are 
 carried still further by the later law of Louisiana, and 
 carried to an extent which borders on the ridiculous if 
 not on injustice. By an act of Its Legislature, 1876, 
 amending the Code of Practice, it Is provided that: 
 
 * Cooper vs. Capel, 29 La. An. 213. 
 
 Arick vs. Walsh, 23 La. An. 605. 
 
 Robb vs. Wagner, 5 La. An. 112. 
 t Dillon vs. Poirier, 34 La. An. 1100. 
 
 Schiff vs. Ezekiel, 23 La. An. 383. 
 
 Lalaurie vs. Woods, 8 La. An. 36G. 
 ; Civil Code of Louisiana. Art. 2705.
 
 Liens at Common Law. 489 
 
 " The sheriff or constable can not seize the Hnen and 
 clothes belonging to the debtor or his wife, nor his bed, 
 bedding or bedstead, nor those of his family, nor his 
 arms and military accoutrements, nor the tools and 
 instruments and books and sewing machines necessary 
 for the exercise of his or her calling, trade or profes- 
 sion by which he or she makes a living ; nor shall he 
 in any case seize the rights of personal servitude, of 
 use and habitation, of usufruct to the estate of a minor 
 child, nor the income of dotal property^ nor money 
 due for the salary of an officer, nor laborers' w^ages, 
 nor the cooking stove and utensils of said stove, nor 
 the plates, dishes, knives and forks and spoons, nor 
 the dining table and dining chairs, nor wash tubs, nor 
 smoothing irons and ironing furnaces, nor family por- 
 traits belonging to the debtor, nor the musical instru- 
 ments played on or -practiced 071 by any mendyer of the 
 family y 
 
 And it took a decision of the Supreme Court of the 
 State to say that the act of 1876 did not apply to the 
 lessor's lien. "^ 
 
 Between the humane law which saves the clothes 
 and bed of the poor debtor and his tools from the 
 reach of a grasping creditor, and the communistic 
 enactment which guards his musical instruments, 
 possibly of great value, against seizure for an honest 
 debt, there is a wide margin. Such principles, if 
 they are principles, do not do honor to American 
 legislation. 
 
 * Stewart vs. Lacombe, 30 La. An. 350.
 
 490 The Law of Pledge. 
 
 In most of the States the law exempts from distre-s 
 certain chattels of the lessee, such as his tools, some 
 instruments of husbandry, cattle of a certain denomi- 
 nation and used for certain purposes, all of which are 
 necessary for the liveHhood of the lessee and his fam- 
 ily.* 
 
 We have seen before, that exemptions of the same 
 kind from seizure were provided for by the Roman 
 law and the early laws of France, f 
 
 The present French Code of Procedure contains 
 also provisions of the same nature, t 
 
 * Am. and Eng. Ency. of Law, Vol. 5, p. 709. 
 
 ■t Ante, p. 2. 
 
 i Code de Procedure Civile, Art. 592.
 
 CHAPTER XLV. 
 
 EqlTITABLE LlKNS OF THE COMMON LaW. 
 PRIVir.EGES OF THE CiVII. LaW. 
 
 543. We have seen the great analogy between the 
 liens at Common law and the tacit pledges of the 
 Civil law. We propose now to look into the double 
 subject of the Equitable liens of the Common law and 
 the Privileges of the Civil law. There are between 
 the two subjects some points of great similarity and 
 others of fundamental difference. 
 
 The first point of similarity is that, in either case, 
 the creditor has neither possession nor any right of 
 propertv, but onlv a right of ])reference over the 
 property, or rather the proceeds of the debtor's prop- 
 erty. But, as in the case of the mortgage, this right 
 of preference attaches itself to the propertv and fol- 
 lows it into the hands of third persons : hence the 
 means of rendering the preference effective. When, 
 in two different systems of law, governing different 
 countries, we find the creditor, in analogous cases, 
 given the same preference and the same means of 
 effecting that preference over other creditors of the 
 same debtor, the similarity necessarily strikes us and 
 we are disposed to conclude that the two systems in 
 that respect, at least, must have a common origin. 
 Although the principles of right, justice and morality 
 are the same everywhere, rules of law which are 
 
 <91
 
 492 The Law of Pledge. 
 
 merely arbitrary do not frequently coincide in differ- 
 ent countries. The Equitable Liens of the Common 
 law of England have their source in the Roman law, 
 so far, at least, as their fundamental principles are 
 concerned. 
 
 544. In his learned explanation of the Equitable 
 Liens, Mr. Pomeroy, who seems to have expounded 
 this subject more fully and more clearly than any oi 
 the previous writers, says in a note which we take 
 pleasure in transcribing here, and which should have 
 occupied a more conspicuous position in his work : 
 
 " The equitable lien is strictly analogous to and is 
 undoubtedly derived from the hypotheca of the Roman 
 law. Ilypotheca was the right given to a creditor over a 
 thing belonging to another, in order to secure the pav- 
 ment of a debt while the propertv and possession 
 remained in the debtor. It was thus distinguished 
 from pignus^ in which the possession w^as delivered to 
 the creditor, and he thus acquired a special property. 
 Hypotheca was generally created by agreement, ex- 
 pressed or implied, between the parties ; but in some 
 cases it was created by operation of law, and then 
 called hypotheca tacita, as over the ]iroperty of a tutor 
 in favor of his ward and in favor of a ^^'ife over her 
 dowry in the hands of the husband.'"" 
 
 545. The Equitable Liens of the Common law are. 
 indeed, derived from the Roman law, as most of the 
 equity jurisprudence of England comes from the Civil 
 law. We may go still farther and repeat the words 
 
 Pomeroy, Equity Jurisprudence. Vol. 3, p. 230, note 3.
 
 Equitabi.e Liens of the Common Law. 493 
 
 of Sir William Jones, one of England's great law- 
 yers : "With all its imperfections, the Digest is a 
 most valuable mine of judicial knowledge. It gives 
 law at this hour to the greatest part of Europe, and, 
 though few English lawyers dare make such an ac- 
 knowledgment, it is the true source of nearly all our 
 English laws that are not of feudal origin.'""^ 
 
 546. England took from the hypotheca of the 
 Romans the principles of its Equitable Liens, as the 
 Romans themselves took the hypotheca from the 
 Greeks, because it was the only mode of security then 
 known between debtors and creditors by which both 
 the title or ownership and the possession remained 
 with the debtor. The hypotheca^ or mortgage of the 
 Civil law, by which name it was adopted in Rome 
 and is still known, and in force in the modern coun- 
 tries of Latin origin, did not deprive the debtor of 
 either the full ownership or the possession of his 
 property. 
 
 The Romans had, at first, only two modes of real 
 security ; the pledge, pig7ius^ which left the owner- 
 ship with the debtor, but transferred the possession to 
 the creditor ; and the fiducia^ which transferred both 
 the ownership and possession to the creditor, but with 
 the juridical and binding promise of the latter to 
 reconvey and retransfer both ownership and possession 
 to the debtor, on payment of the debt. In some 
 cases, the creditor would leave the possession of the 
 
 * Irving, Civil Law, p, 9G.
 
 494 The Law of Pledge. 
 
 property with the debtor by agreement to that effect* 
 The jiducia which, historically, belongs to the legal 
 antiquities of Rome, and which the compilations of 
 Justinian swept away altogether, bore a remarkable 
 resemblance to the mortgage of the Common law. 
 with its equity of redemption. 
 
 The transfer of both the title and the possession to 
 the creditor w^as, in many ways, unnecessarily injur- 
 ious to the debtor. The properly being in the hands 
 of the creditor only temporarily and conditionally, did 
 not receive from him the care and fruitful manage- 
 ment and improvement which the owner would 
 bestow upon it himself. The debtor was also de- 
 prived of the use and enjoyment of his property, and 
 sometimes of the means of obtaining additional credit 
 from it. The Greeks had, by means of the hypotheca^ 
 resolved the question of giving to the creditor all the 
 desired security by putting upon tlie debtor's property 
 a right in favor of the creditor which attached to it and 
 followed it into the hands of third persons, without de- 
 priving the debtor of its use and enjoyment. This sys- 
 tem was so superior to the -pigtms and \\\^ Jiihicia that 
 the Romans adopted it. The pigniis was the spon- 
 taneous production of natural law. The Jiducia was 
 the creature of the formular and sacramental Civil 
 law. The hypotheca was neither, and came to Rome 
 as an institution of foreign extraction. It fell, there- 
 fore, under the authority and the protection of the 
 praetor, and became an important branch of the prse-
 
 Equitable Liens of the Common Law. 495 
 
 torian law, to which the equity system of England 
 corresponds and from which it drew largely. * 
 
 547. The equitable liens of the Common law pro- 
 duce the same effects as the h3-pothecation of specific 
 property resulting from contracts express or implied. 
 Thev are intended to secure the creditor by giving 
 him a right of preference over the proceeds of the 
 debtor's property, which attaches itself to the property 
 and follows it into the hands of third persons ; that 
 is to say, that subsequent transferees or assignees 
 with notice of the lien take the property subject to 
 the claim of the creditor. But the possession must 
 remain with the debtor. If the possession is trans- 
 ferred to the creditor, there is, or may be, a lien at 
 law, but no equitable lien. The debtor, by agree- 
 ment, express or implied, must have intended that the 
 creditor should be secured by the equitable lien ; and 
 the lien must have been intended to bear upon some 
 particidar property. 
 
 The mere promise of the debtor to secure the 
 creditor by mortgage or pledge of some specific prop- 
 ert}', will not of itself create the mortgage or pledge; 
 but, if the promise is not fulfilled, it will gi\'e rise to 
 an equitable lien on the property, and entitle the 
 creditor to be paid out of its proceeds, by preference 
 over other creditors, as if the debtor had, in reality, 
 granted the mortgage or the pledge. This is of the 
 very essence of the doctrine of equitable liens, as the 
 
 Troplong, Dcs ll5'pothL'(iues, Vol. 1. pp. G <'l seq. 
 Troplong, Dii XaQtisgement, pp. at seq.
 
 496 The Ijaw op Pledge. 
 
 i7itention of the debtor to secure tlie creditor by a 
 charge or encumbrance upon some particular property 
 enters largely into that doctrine. 
 
 In the transaction from which the equitable lien 
 arises, the form of the contract, whether express or im- 
 plied, is immaterial, provided the intention of thedebtor 
 to secure the creditor is not doubtful, and provided also 
 that the property by means of which the security is 
 given is clearly identified.'^^ 
 
 548. These principles have received their applica- 
 tion from the Supreme Court of the Ignited States in 
 numerous cases up to the present day. The uniformity 
 of its jurisprudence on this subject has been but sel- 
 dom disturbed. In a verv recent case the court held 
 that every express executorv agreement in writing, 
 whereby the contracting partv sufficiently indicates an 
 intention to make some particular property, real or 
 personal, or fund, therein described or identified, a 
 security for a debt or other obligation ; or whereby 
 the party promises to convey, or a.ssign, or transfer 
 the propert}' as securitv, creates an equitable lien upon 
 the property so indicated, which is enforceable against 
 the property' in the hands not only of the original 
 contractor, but of his heirs, administrators, executors, 
 voluntary assignees and purchasers, or encumbrancers 
 with notice. And the syllabus of the opinion shows, 
 further, that to dedicate property to a particular pur- 
 pose, to provide that a specified creditor, and that 
 
 Ponierov. Equitv Juiispnidem-e, Vol. 3. Sees. 1235. 1237. 
 Flagg vs. Mann." 2 Suinn. (U. S.) 486. 533.
 
 Equitable IjIP^xs of the Common Law. 497 
 
 creditor alone, shall be authorized to seek payment 
 from it or its value, is to create an equitable lien 
 upon it. 
 
 In that case Walker & Co. were dealing in business 
 with Lloyd & Co., who held certain bonds belonging 
 to Brown, loaned by him to them to aid them in their 
 affairs. Brown wrote to Walker& Co. a letter in these 
 words : "I beg to advise you that the loan of fifteen 
 thousand dollars, Memphis bonds, made by me to 
 Mr. J. C. Lloyd for the use of Messrs. Lloyd & Co., 
 Ellensburg, Wash. Ter., is with the understanding 
 that any indebtedness that they may be owing you at 
 any time shall be paid before the return to me of these 
 bonds, or the value thereof, and that these bonds, or 
 the value thereof, are at the risk of the business of 
 Lloyd & Co., so far as an^- claim you may have 
 against said Lloyd & Co. is concerned." 
 
 On the faith of that letter Walker & Co. sold goods 
 on credit to Lloyd & Co. In the meantime, Lloyd 
 & Co., who had pledged the bonds to the Union Na- 
 tional Bank of Chicago, redeemed the pledge and 
 returned the bonds to Brown. Subsequently he died, 
 after having given the bonds to his wife. Walker & 
 Co. claimed an equitable lien on the bonds against 
 the administrators of Brown and his wife. The court 
 decided that the lang^uage of Brown's letter clearlv 
 desiojnated the bonds as security for the debt due 
 Walker & Co., and declared the express intention of 
 Brown to create an equitable lien upon them in favor 
 of Walker & Co.* 
 
 * Walker vs. Brown. 1G5 U. S. 654.
 
 498 The Law of Pledge. 
 
 549. In the same year in which that case was de- 
 cided, the Supreme Court held that there was an equi- 
 table assignment, equivalent to an equitable lien, in a 
 transaction, in which a check drawn upon a bank was 
 to be paid out of a particular fund, with the under- 
 standins: between the drawer and the drawee that the 
 particular fund drawn from was intended by the 
 drawer to be the security of the drawee for the sums 
 loaned by the former to the latter. The court made 
 the distinction between a check drawn in ordinary 
 circumstances, which creates no equitable assignment 
 and entitles the holder to no priority of payment over 
 the general creditors of the drawer, and a check drawn 
 under circumstances which indicate the intention of 
 the drawer to constitute an assignment of the fund in 
 favor of the creditor for the purpose of securing him. 
 
 The Court said in that case : " Whilst an equitable 
 assignment or lien will not arise against a deposit 
 account soleh' by reason of a check drawn against the 
 same, yet the authorities establish that, if in the 
 transaction connected with the delivery of the check, 
 it was the understanding and agreement of the parties 
 that an advance about to be made should be a charge 
 on, and be satisfied out of a specified fund, a court of 
 equity will lend its aid to carry such agreement into 
 effect as against the drawer of the check, mere volun- 
 teers and parties charged with notice. This is but an 
 application of the general doctrine of equitable 
 assignments or liens announced b}' this Court in 
 Ketchum vs. St. Louis, loi U. S. 306. where it was
 
 Equitable Liens ok the Common Law. 499 
 
 held, citing various authorities and text writers, that: 
 ' A part}' niay, by agreement, create a charge or 
 claim in the nature of a lien on real as well as on 
 personal property whereof he is the owner or in pos- 
 session, which a court of equity will enforce against 
 him, and volunteers or claimants under him with 
 notice of the agreement/ It is immaterial, for the 
 purposes of this case, to draw a line of distinction 
 between equitable assignments and equitable liens or 
 charges."* 
 
 550. There seems to be no difficulty in the estab- 
 lishment of an equitable lien when it results from the 
 express terms of an agreement between the debtor 
 and the creditor* but when the intention to create the 
 lien is only implied in the transaction, and to be 
 inferred from the circumstances of the case, the ques- 
 tion then is by no means of easy solution, and may give 
 rise to the most diversified opinions. We find a re- 
 markable instance of it in the well-known case of 
 Ketchum vs. St. Louis. The issue involved was 
 whether an act of the General Assembly of Missouri, 
 under which the county of St. Louis loaned its bonds 
 to the Pacific Railroad Company, created, on its accept- 
 ance by the company and the county, an equitable 
 lien or charge, in favor of the county, upon the earn- 
 ings of the road, to the extent necessary to meet the 
 interest upon the bonds as it accrued. The act from 
 which it was contended that the lien arose was in 
 these words : 
 
 * Fourth street Bank vs. Yardley, 10.") U. S. 634.
 
 500 Thk Ijaw ok Pledge. 
 
 " Section i. The county court of St. Louis county 
 is hereby authorized to issue seven hundred county 
 bonds of the denomination of $1000 each, having 
 twenty years to run and bearing interest at the rate 
 of 7 per cent, per annum, payable semi-annuall}', the 
 principal and interest payable in the city of New York, 
 and loan said bonds to the Pacific Railroad Company 
 for the completion of said road ; said bonds to be 
 issued under such conditions as may be agreed upon 
 between said county court and the board of directors 
 ofthePacitic Railroad Company, such conditions to 
 be binding on the parties, but shall not impair or 
 affect the \alidity of the bonds after they are issued. 
 
 ' *• Sec. 2 . The fund commissioner of the Pacific Rail- 
 road, or such person as may at any time hereafter have 
 the custody of the funds of said railroad company, 
 shall, every month after said bonds are issued, 
 pay into the count}' treasury of St. Louis county, out 
 of the earnings of said Pacific Railroad, $4000, and 
 $1000 additional in each month of December, to meet 
 the interest on the said seven hundred bonds ; said 
 payments to continue until said bonds are paid off by 
 the Pacific Railroad. 
 
 *' This Act to take effect and be in force from and 
 after its passage.'' 
 
 The Court lield that this act, being accepted by the 
 parties, constituted an equitable assignment of the 
 earnings of the railroad company and created an 
 equitable lien upon them in favor of the count}'. The 
 majorit\' of the Supreme Court sa~v nothing doubtful
 
 Equitable Liens of the Common Law. 501 
 
 in the implied intention of tlic parties to create the 
 Jien-y but the two dissenting Justices ^^ ere equally 
 positi\e that there is nothing in the transactioit 
 imptying such an intention. The Court said : 
 
 '' That the Legislature intended by the Act of 1865 
 to make a specific appropriation of the earnings for 
 that purpose ; that the prior lien of the State was, to 
 that extent, waived in favor of the countv : and that 
 such appropriation and waiver were, by agreement of 
 all the parties then interested in the property and the 
 disposition of its income, to continue until the bonds 
 themselves were paid or the county discharged from 
 liability thereon, we entertain no doubt. It was not 
 a simple, naked covenant to pay out of a particular 
 fund ; but the Act, being accepted by the parties 
 interested, operated as an equitable assignment of a 
 fixed portion of that fund — an assignment which 
 became effectual without any further intervention 
 upon the part of the debtor, and which the part}' 
 holding the funds of the company, whether the fund 
 commissioner or some other person, could respect 
 without liability to the debtor for so doing. It was 
 an arrangement, based upon a valuable consideration, 
 which neither the State nor the compan}-, nor both, 
 nor parties claiming under either, with notice, could 
 disregard without the assent of the county, expressed 
 by those who had authority to bind it. It was an 
 engagement to pay out of a specially designated fund, 
 accompanied by express authority to Its custodian to 
 apply a specific part thereof to a definite object, in
 
 502 The Law of Pledge. 
 
 the accomplishment of which all the parties to the 
 arrangement were directly interested/"' 
 
 Two of the Justices of the court, on the contrary, 
 declared that they were unable to discover in the con- 
 tract between the company and the county, or in the 
 act of the Legislature, or in either, anything that 
 created an equitable lien upon the earnings of the 
 railroad company, or upon any of its property ; and 
 that nothing more was expressed between the parties 
 than a confident expectation that the earnings would 
 prove sufficient to pay the interest on the county loan * 
 
 We see therefore that there is in the understanding 
 of equitable liens arising from an implied intention of 
 the debtor the same difficulty and the same diversity 
 of opinion that there is in the interpretation of all 
 ambiguous agreements, an interpretation which is all 
 the more difficult that the parties to the agreement 
 themselves may not have had any clear or definite 
 intention or understanding. f 
 
 • Ketchum vs. St. Louis, 101 U. S., pp. 306, 314, 319. 
 t Wniiams et al. vs. Ingersoll et al., 89 N. Y. 508.
 
 CHAPTER XLVI. 
 
 551. I find nowhere, either in treatises or in adju- 
 dicated cases, the nature and theory of the equitable 
 lien so well explained as in the following words of 
 Professor Pomeroy : ''When equit}' has jurisdiction 
 to enforce rights and obligations growing out of an 
 executory contract, this equitable theory of remedies 
 can not be carried out, unless the notion is admitted 
 that the contract create some rig-ht or interest in or 
 over specific property, which the decree of the court 
 can lay hold of, and by means of which the 
 equitable relief can be made efficient. The doctrine 
 of equitable liens supplies this necessary element ; and 
 it was introduced for the sole purpose of furnishing a 
 ground for the specific remedies which equity confers, 
 operating upon particular identified propert}^, instead 
 of the general pecuniary recoveries granted by courts 
 of law. It follows, therefore, that in a large class of 
 executory contracts, express and implied, which the 
 law regards as creating no property right, nor interest 
 analogous to property, but only a mere personal right 
 and obligation, equity recognizes, i7i addition to the 
 personal obligation^ a particular right over the thing 
 concerning which the contract deals, which it calls a 
 ' lien,' and which, though not property, is analo- 
 gous to property, and by means of which the plaintiff 
 is enabled to follow the identical thing, and to enforce 
 the defendant's obligation by a remedy which operates 
 
 503
 
 004 The Law of Pleuge. 
 
 directly on that thinoj. The theory of equitable Hens 
 has its ultimate foundation, therefore, in contracts, 
 express or implied, which either deal with, or in some 
 manner relate to, specific property, such as a tract of 
 land, particular chattels, or securities, a certain fund, 
 and the like. It is necessary to divest one's self of 
 the purely legal notion concerning the effect of such 
 contracts, and to recognize the fact that equity regards 
 them as creating a charge upon, or hypothecation of 
 the specific thing, by means of which the personal 
 obligation arising from the agreement may be more 
 effectively enforced than by a mere pecuniary recovery 
 at law."* 
 
 552. The hypotheca of the Romans was a mode of 
 contractual security ; the right of preference arose from 
 a stipulation between the creditor and the debtor; the 
 nature or quality of the debt was no condition of the 
 encumbrance upon the debtor's propert}-, any more 
 than in the modern mortgage of either the Civil or the 
 Common law. But the Romans had also the -privi- 
 les^ia as a mode of real security attaching to the res, 
 the property of the debtor, in favor of the creditor, and 
 giving to the latter a right of priority over the other 
 creditors of the former. The privilegiiim^ like the 
 hypotheca^ left the possession of the property with the 
 debtor, but fixed upon it the legal tie or lien which fol- 
 lowed it into the hands of third persons and secured the 
 creditor's right of preference. Such are the privileges 
 of the modern Civil law. They have, in common with 
 
 * Pomeroy, Equity Jurisprudence, Vol. H. pp. 232. 23.S.
 
 Equitable Liens of the Common Ijaw. 505 
 
 the equitable liens of the Common law. the principle 
 that they do not deprive the debtor of the use and en- 
 joyment of his property, and that they follow it and 
 remain attached to it. But they differ from the equi- 
 table liens in two fundamental principles : first, they 
 are not and can not be created by contract, but arise 
 solely from the law ; and secondly, they may bear, at 
 the same time, upon several pieces of property, and 
 are not always limited in their action to any particu- 
 lar or specific one. Inasmuch, therefore, as the equi- 
 table lien is created by the consent and intent, ex- 
 press or implied, of the debtor, and the -privilege is 
 created by the law only, without the consent of the 
 debtor, we ma}' say that the Civil law has no equitable 
 liens and repels them. 
 
 553. The privileges are established by reason of the 
 nature and quality of the debt, and, therefore, arc 
 made to affect either the debtor's property generally, 
 or some particular one. And, as the law deems cer- 
 tain obligations to be of a higher order than others 
 and should, therefore, be satisfied first out of the debt- 
 or's property, it follows, first, that privileges are supe- 
 rior to mortorasfes and rank them in the distribution 
 of an insolvent's assets ; and, secondly, that among 
 the privileges themselves some are of a higher order 
 than others and are the first to be satisfied. 
 
 Domat defines them in a clear and terse manner : 
 "The privilege of a creditor is the superior right 
 which the quality of his claim gives him and for
 
 506 The Law ok Pledge. 
 
 which he is preferred to other creditors, even to the 
 raortgaoje creditors." ^^ 
 
 554. The general principles of the law of privileges 
 are well stated in the following articles of the Civil 
 Code of Louisiana, which have been taken verbatim 
 from the Code Napoleon : 
 
 Article 3182. ""Whoever has bound himself per- 
 sonally is obliged to fulfil his engagements out of all 
 his property, movable and immovable, present and 
 future." 
 
 Article 3183. "The property of the debtor is the 
 common pledge of his creditors and the proceeds of 
 its sale must be distributed among them ratably, 
 unless there exist among the creditors some lawful 
 causes of preference." 
 
 Article 3184. "Lawful causes of preference are 
 privileges and mortgages." 
 
 Article 3185. "Privileges can be claimed onl}' for 
 those debts in which it is expressly granted in this 
 Code." 
 
 Article 3186. ''''Privilege is a right which the nature 
 of a debt gives to a creditor, and which entitles him 
 to be preferred before other creditors, even those who 
 have mortgages." 
 
 Article 3187. "Among creditors who are privi- 
 leged, the preference is settled by the different nature 
 of their privileges." 
 
 * Droit, Lois Civiles, See. 5, p. 35. 
 l*ont, Di'S Privilej^ps, Vol. 1, pp. 10 et seq. 
 Battur, Des Privileges, Vol. 1, p. 1. 
 Troplong, Des Privileges, Vol. 1, pp. 13 and 28.
 
 Equitable Liens of the Common Law. 507 
 
 Article 3188. "The creditors who are in the same 
 rank of privileges are paid in concurrence, that is, on 
 an equal footing-." 
 
 Article 3189. " Privileges may exist either on mov- 
 ables or immovables, or on both at once." 
 
 Article 3190. " Privileges are either general or 
 special on certain movables." * 
 
 555. It follows from these principles that, not only 
 privileges can not be stipulated between the debtor 
 and the creditor, but, furthermore, they can not be 
 extended by implication from the letter of the law 
 which establishes them. They are strictissifnce inter- 
 pretationis. Where they are not specifically estab- 
 lished by statute, they do not exist at all, and can not 
 be brought into existence by custom. The rule has 
 so often been declared and applied by the Court of 
 Louisiana that it has become a trite subject in the 
 jurisprudence of that State. f 
 
 556. Yet, in two cases, the equitable lien, as such, 
 but not eo notnine. has been recog^nized by the Court 
 of Louisiana. It was evidently a departure from the 
 true doctrine of the Civil law and a submission to the 
 pressure of the Common law and equity jurispru- 
 
 * Code Napoleon, Arts. 2092, 2093, 2094, 2095, 2096, 2097. 
 t Landry vs. Blanchard, 16 La. An. 173. 
 
 Martin vs. Casey, 15 La. An. 165. 
 
 Shaw & Co. vs. Grant. 13 La. An. 52. 
 
 Svvasey &, Co. vs. ►'^teamer, 12 La. An. 800. 
 
 Cochran & Co. vs. Walker, 10 La. An. 431. 
 
 Shropshire vs. Russell, 2 La. An. 962. 
 
 Labouisse vs. Rope Company, 43 La. An. 245. 
 
 State vs. Bank, 3;^ La. An. 706. 
 
 Bank vs. Korean, 37 La. An. 861. 
 
 Morris ef «i, vs. Lalaurie tt als.. 39 La. An. 53.
 
 508 The Law of Pledge. 
 
 dence. For instance, when the scrip certificates of a 
 mutual insurance company were transferable on the 
 books of the company only by the scripholder or his 
 agent, and, in case the scripholder was indebted to 
 the company, the amount of the scrip was, by the 
 charter of the company, to set off the indebtedness, 
 the administrator of the deceased scripholder' s estate 
 having sold the scrip, and demanding that the com- 
 pany should be ordered to make the transfer on its 
 books to the purchaser, the court recognized the right 
 of the company to be paid the proceeds of the scrip 
 by preference over the other creditors of the decedent. 
 The court clearly recognized the equitable lien in this 
 case when it said: ""It ma}- be conceded that the 
 company is not entitled to a priiiilege upon the fund 
 in dispute, using the term in its technical sense. But 
 we think the equity of the company to receive this 
 fund bv reason of the peculiar terms of their contract 
 with Walsh and the circumstances of the case is 
 clear.'' '" 
 
 It would not be possible to acknowledge and apply 
 the equitable lien more distinctly, however incom- 
 patible it may be with the doctrine of the Civil law 
 privilege. 
 
 557. In another remarkable case, the Court recog- 
 nized again the principle of the equitable lien and 
 applied it. A planter and sugar manufacturer had 
 agreed with his commission merchant that, for the 
 purpose of more completely securing the latter for his 
 
 * Succession of Walsh, 9 La. An. 543.
 
 Equitable Liens of the Common Law. 509 
 
 advances, the merchant would apply in his own name 
 to the United States Government for a license as pro- 
 ducer of sugar, under the bounty law of Congress : 
 and that the amount of bounty received b}- the mer- 
 chant would be retained by him in pa3ment, or part 
 payment, of his advances to the planter. It was so 
 done. The planter subsequently failed, and his 
 creditors contested the right of the commission mer- 
 chant to retain the amount of bounty received by 
 him, on the ground that he had neither a pledge nor 
 a privilege under the law of Louisiana. The Court 
 said: " The contract between the parties in reference 
 to the license may be an innominate one, possibly it 
 may not be strictly classed as a pledge, but be it 
 what it may, it was legal and vested the legal title to 
 and control over the bounty, and authorized its appli- 
 cation in a manner and to a purpose whicli neither 
 Lacaze (the planter) nor his syndic can disregard."* 
 The motive of the decision, rather than the reason 
 of it, was clearly the equity of the case, and a sub- 
 mission to the principle which constitutes the equitable 
 lien of the Common law, to-wit : the intention of the 
 debtor, expressed in the contract, to secure the cred- 
 itor out of a particular fund. The decision could rea- 
 sonably stand upon no other ground ; there was in 
 the case neither a pledge nor a privilege under the 
 Civil law, nor a chattel mortgage under the Common 
 law. The legal title, as distinguished from the equi- 
 table title, is unknown to the Civil law as a tenure of 
 
 * Webre, Syndic, vs. Beltran & Co., 47 La. An. 203.
 
 510 The Law of Pledge. 
 
 property. There was in the case only one principle 
 or rule of law, and that was the equitable lien. The 
 judgment was, therefore, in opposition to the law of 
 Louisiana, inasmuch as, in that State, the pledge and 
 the privilege are the only two legal modes in which 
 personal or movable property can be used as security 
 of a debt. 
 
 The statutory or codal law of that State is clear, 
 positive and exclusive of any common law, in matters 
 of privileges. It is even expressly and specifically 
 prohibitive of any extension by the courts, of the class 
 of privileges established by the Code. Art. 3185 pro- 
 vides that: " Privilege can be claimed only for those 
 debts to which it is expressly granted in this Code." 
 
 558. The jurisprudence of the State has been 
 emphatic on this point in a long line of decisions. 
 Such expressions as the following arc found in ever}' 
 one of them : '' The stipulation in an act of sale, that 
 the amount paid b}' the vendor to insure the property 
 sold, in case he neglects to do it, shall be secured by 
 privilege on the property-, has no legal effect whatever, 
 as privileges can only be created by lavo^ and not by 
 the agreement of par ties.'' "^^ 
 
 The fact that, in the case quoted from, the license 
 for the bounty was applied for and obtained in the 
 name of the merchant, was a matter between the 
 government and him ; but that did not make the 
 bounty money his own, for, by his very agreement 
 
 * State vs. Bank, 33 La. An. 705 (Syllabus). 
 Bank vs. Maureau et als.. 37 La. An. SGI.
 
 Equitabli: Liens op the Common Law. 511 
 
 with the planter, and as recognized by the Court, it 
 was to act as security of the debt. 
 
 559. The same Court decided, the year after, that 
 the bounty, under the same law of Congress, could 
 not be the subject of a pledge under the following 
 circumstances. It was agreed between the planter 
 and the commission merchant, in order to secure the 
 latter for his advances, that the planter would pay the 
 bounty to the creditor immediately after receipt of the 
 amount, ''justasif the bounty had been a portion of the 
 proceeds of the crops of the plantation." The Court 
 said: '''It is hardly necessary to cite authority in 
 support of the proposition that delivery is an essential 
 in order to secure a pledge (save in statutory pledges, 
 not the case here). The bounty was not a portion 
 of the proceeds of the crop ; it was no part of the 
 crop. We know of no principle of interpretation 
 under which it is possible to hold that the bounty was 
 delivered as required, and came within the provisions 
 of the statute relative to pledge as security."* 
 
 \r\ this case, the Court properly disregarded, under 
 the principles of the Civil law of Louisiana, the 
 equitable lien which, at Common law, would have 
 sprung, in favor of the creditor, from the debtor's 
 express intention to secure him out of a particular 
 fund. 
 
 560. In another instance the Louisiana Court re- 
 jected also what would be under the Common law 
 very clearly an equitable lien, if not an equitable 
 
 * Delogny vs. Creditors, 48 La. An. 493.
 
 512 The Law of Pledge. 
 
 mortgage. In that case Benjamin obtained from 
 Aldige the loan of a sum of money to enable him to 
 pay the price of real estate purchased by him. He 
 gave the lender his note of hand for the same amount 
 payable to the order of the lender and declaring in 
 the note that the amount had been advanced to him 
 by Aldig^ to pay for the property. Benjamin then 
 w^ent before a notary public and made the sworn 
 declaration, written on the back of the note, that he 
 was indebted to Aldige in the sum stated in the note, 
 and that the money was advanced to him by Aldige 
 to pay for certain property which was described and 
 identified in said declaration. He stated further, in 
 the same writing, on the back of the note: "That, 
 in order to secure the pa3'ment or reimbursement of 
 the said sum to the said Aldige, he, the affiant, does 
 hereby recognize and acknowledge in favor of the 
 said Aldige a privilege and lien on the above de- 
 scribed property, and he does also authorize the re- 
 cording of the said lien and privilege in the office of 
 the recorder of mortgages for the parish of Orleans." 
 The document was recorded. The question arose 
 as to the right of preference or priority of Aldige 
 under the terms of the agreement, over the proceeds 
 of the property. By the law of Louisiana it is neces- 
 sar}' for the validity of a mortgage that the contract 
 be in writing, private or authentic, that the amount 
 secured be stated and that the propert}* mortgaged be 
 described and identified. The court held that the 
 document in question did not establish a privilege or
 
 Equitable Liens of the Common Law. 513 
 
 lien because such can not be created by contract, and 
 that it did not establish a mortgage because the inten- 
 tion of the parties was to establish a privilege or lien. 
 
 The chief justice of the court dissented on the 
 ground that the fact that the parties used the words 
 privilege and lien did not invalidate the transaction, 
 when, in reality, they intended to establish a mort- 
 gage on the property to secure the loan ; and that, 
 besides, the term lien was generic and could be used 
 to mean mortgage^ and had on many occasions been 
 used in that sense by the courts of Louisiana.* 
 
 561. These questions of equitable liens, established 
 and enforceable under the Common law, and denied 
 and repelled by the Civil law, present great difficul- 
 ties and are fraught with very serious consequences 
 when they are raised in tlie State of Louisiana, in the 
 Federal Courts sitting in that State. Then arise the 
 anomalies, the inconsistencies, the contradictions, 
 amounting to injustice, or its equivalent, the want of 
 equal justice, of a dual system of jurisdiction and of 
 jurisprudence in the same State. Under the law of 
 Louisiana no preference or priority is afforded to 
 creditors over the proceeds of the movable or per- 
 sonal property of the debtor^ unless it'.is by virtue of 
 statutory privilege or contractual pledge. Under the 
 principles of equity jurisprudence the mere consent 
 and intention of the debtor to grant such preference 
 or priority creates an equitable lien. Under one sys- 
 tem of law, an inchoate pledge, lacking the essential 
 
 * Succession of Benjamin, 89 La. An. 612.
 
 514 The Law of Pledge. 
 
 elements of that kind of contract, but showing the 
 intention and promise of the debtor to make a vahd 
 one, is perfected by the court of equity and given full 
 effect to. Under the other system, the imperfect 
 pledge, on the contrary, produces no effect whatever, 
 and the court of law, far from validating the incom- 
 plete contract, sets it aside altogether. If, in a case 
 of this kind, the Federal Court will apply the statutory 
 law of Louisiana, there is no conflict or antagonism 
 between its judgment and that of the State Court in a 
 corresponding case. But if the Federal Court, on the 
 contrary, will ignore the statutory law of Louisiana 
 and apply the principles of equity jurisprudence, then 
 there are, in similar cases, two opposite judgments. 
 The alien is decreed in one court to be a privileged 
 creditor; the citizen of Louisiana is decreed in the 
 State Court to have no privilege. Two laws, there- 
 fore, which are in direct conflict with each other and 
 are destructive of one another are found to coexist in 
 the same State, and to be administered by different 
 tribunals upon different classes of persons. The for- 
 eigner is declared to possess valuable rights which the 
 citizen of the State in similar cases is declared not to 
 possess, under the same municipal law, which should 
 apply to both equally and in the same manner. 
 
 562. But the question of the power of the Federal 
 Courts to recognize the validit}' of equitable liens in 
 Louisiana when the law of the State forbids them is 
 far from being settled. In one case only did the 
 Supreme Court of the United States declare that an
 
 Equitable Liens of the Common Law. 515 
 
 equitable lien could be found in Louisiana. But the 
 case turned upon the law of insurance and the right of 
 the mortgagee to receive the insurance money under a 
 policy taken by the mortgageor. There was no com- 
 petitor, or other creditor, claiming an equal distribu- 
 tion. There was no question of the right of prefer- 
 ence or priority arising from the equitable lien. The 
 authorities cited by the Court from the jurisprudence 
 of Louisiana only showed that the doctrine of equity 
 obtained in that State ; but not as a cause of prefer- 
 ence or privilege or priority. The question whether 
 the Federal Court, in its equity jurisdiction, could 
 ignore the municipal law of the State when the latter 
 was not in conflict with the Constitution or laws of 
 the United States, was not, even remotely, considered 
 in the case."*^ 
 
 563. In the well-known case of Casey vs. Cavaroc, 
 there was a promise of pledge on the part of the 
 debtor, and an informal and insufficient execution of 
 the contract. It was a clear case for a court of equity, 
 out of the State of Louisiana, where its municipal 
 law would not allow it, to recognize the equitable lien 
 arising from the agreement of the parties, and to 
 enforce it, however defective the pledge. But the 
 Supreme Court of the United States would not recog- 
 nize the validity of the pledge and rejected the claim 
 of the creditor for a preference over the property which 
 was intended to serve as security of his claim ; the 
 court deciding that, under the law of Louisiana, he 
 
 * Wheeler vs. Insurance Company, 101 U. S. 439.
 
 516 The Law of Pledge. 
 
 was entitled to no privilege or priority the moment 
 his pledge was null/" 
 
 564. In a very recent case, the parties to a contract 
 had stipulated in favor of the creditor, for an equitable 
 lien over the sugar bounty money to be paid to the 
 producer, who was the debtor in the case. There, the 
 question was squarel}- presented, whether the equitable 
 lien could be recognized by the Federal Court not- 
 withstanding the law of Louisiana which prohibited 
 it. The Circuit Court of the United States held that, 
 under its equity jurisdiction, it was not controlled bv 
 the State law, and decreed the validity of the equita- 
 ble lien. The Circuit Court of Appeals would not 
 decide the point and certified it to the Supreme Court, 
 which disposed of the case on a different ground, but 
 would not express an opinion on the point in question. 
 The Supreme Court said : 
 
 " The right to collect the bounty having arisen 
 from a law of the United States, and the provisions 
 of the law creating a necessary relation between the 
 grower and the manufacturer, making them in effect 
 joint producers of the sugar, the right to the equitable 
 lien stipulated b}- the contract was not controlled bv 
 the provisions of the local law of Louisiana, even 
 although, as a general rule and in regard to this we 
 express no opinion, the effect of that law would be to 
 deprive contrncting parties, except when expressly 
 allowed, of the right to contract for an equitable 
 
 * Casev vs. Cavaroc. 06 U. S. 4(57.
 
 Equitable Liens op the Common Law. 517 
 
 lien ; and to deny to courts of equity the power to 
 enforce the same.""^' 
 
 The question, therefore, whether equitable liens can 
 exist and be enforced in Louisiana by the Federal 
 Courts, notwithstanding its restrictive law of privileges, 
 is still an open one. 
 
 This question of the jurisdictional power of the 
 Federal Courts to recognize and apply the liens in 
 equity in cases where the statutory law of the States 
 forbids the recognition of them is of such paramount 
 importance in this country that I think proper to pro- 
 duce at the end. of the bookf the argument and 
 authorities presented in the Louisiana case referred to 
 above, by the Counsel on both sides, who discussed 
 the question with remarkable ability. 
 
 * Burdon Sugar Refining Co. vs. Payne, 167 U. S. 127. 
 t See page 529.
 
 CHAPTER XLVII. 
 
 564. It must not be supposed from what precedes 
 that the courts of Louisiana have no equity jurisdic- 
 tion, and that the doctrine of equity is not recog- 
 nized in that State, although it is not S3'stematized 
 there as it is in the Common law States and in England. 
 The Supreme Court of the United States has said in 
 that respect : *' The equitable doctrine upon which 
 the appellant's claim is founded undoubtedly obtains 
 in Louisiana. It is derived from the principles 
 of the Civil law, which is the basis of the Civil Code 
 of that State, and it is supported by the authorities 
 cited from the Louisiana Reports." ^ 
 
 The articles of the Civil Code of Louisiana relative 
 to the doctrine of equity are the following : 
 
 Article 21. " In all civil matters, where there is no 
 express law, the judge is bound to proceed and de- 
 cide according to equity. To decide equitably an 
 appeal is to be made to natural law and reason, or 
 received usages, where positive law is silent." 
 
 From the terms of this article it is evident that no 
 equitable lien should be recognized in Louisiana, as 
 there is an express law which imperatively limits the 
 existence of privileges to those established by the 
 statute. 
 
 Article 1903. "The obligation of contracts extends 
 not only to what is expressly stipulated, but also to 
 
 * Wheeler vs. Insurance Company, 101 U. S. 443 
 
 519
 
 520 The Law of Pledge. 
 
 ever}"thing that by law, equity, or custom is consid- 
 ered as incidental to the particular contract or neces- 
 sary to carry it into effect/' 
 
 Article 1964. " Equity, usage and law supply such 
 incidents only as the parties may reasonably be sup- 
 posed to have been silent upon Irom a knowledge 
 that they would be supplied from one of these 
 sources.'' 
 
 Article 1965. '• The equity intended by this rule is 
 founded on the Christian principle not to do unto 
 others that which we would not wish others should 
 do unto us, and on the moral maxim of the law that 
 no one ought to enrich himself at the expense of 
 another. When the law of the land and that which 
 the parties have made for themselves by their contract 
 are silent, courts must apply these principles to de- 
 termine what ought to be incidents to a contract, 
 which are required by equity." 
 
 Those articles of the Civil Code of Louisiana are 
 not taken from the Code Napoleon, which is silent on 
 the subject of Equity, or from Pothier's great work 
 on Obligations, the source from which the framers of 
 the Louisiana Code have largely drawn, when they 
 did not follow the French Code. The principles thus 
 codified seem to be the production of indigenous 
 legislation. The lawgivers of that State, at the same 
 time that they meant to establish, or rather maintain, 
 the Civil law, must have wished to infuse into it the 
 doctrine of equity, without adopting the English sys- 
 tem.
 
 Equitable Liens of the Common Law. 521 
 
 565. The peculiar admixtion of law and equity in 
 Louisiana has been well explained by Mr. Hennen in 
 his Digest. He states it in the following terms : 
 
 " In the jurisprudence of this State no distinction 
 is made between legal rights and equitable rights, 
 between legal injuries and equitable injuries ; and in 
 the administration of remedial justice, except so far 
 as relates to the Federal Courts sitting within the 
 State, the modes of proceeding and granting relief 
 under the two systems are blended in one, and our 
 courts are at once courts of equity and courts of law. 
 Thus they will grant injunctions to prevent waste or 
 irreparable injury ; to prohibit the unauthorized pub- 
 lication of private letters ; to suppress public or private 
 nuisances, as well in cases of actual injury as in those 
 of impending or probable mischief or inconvenience ; 
 to restrain the undue exercise of a right against con- 
 science and equity ; and in general to prevent any act 
 which, if consummated, would afford ground for 
 a claim for damages. They allow a resort to the 
 conscience of a party, and will compel him to discover 
 on his own oath facts within his knowledge material to 
 any of the issues pending. They will compel the surren- 
 der of securities improperly retained, and grant relief in 
 cases of lost instruments, upon such conditions as to 
 operate a perfect indemnity, by protecting the obligor 
 with adequate security. They will prevent a party 
 from setting up a claim or title that would be against 
 conscience, and will bind him by an equitable estop- 
 pel. They will suppl}' the imperfect execution of 
 instruments, and shape them to the true intent and
 
 522 The Law of Pledge. 
 
 meaning of the parties. They afford full relief in 
 matters of account, and are invested with a discre- 
 tionary power ex officio to appoint auditors or experts, 
 whenever it becomes necessary in the investigation of 
 long and intricate accounts ; and in implicated partner- 
 ship concerns, though the right to exercise such an 
 authority was, in some former decisions, questioned, 
 yet the doctrine seems now settled, that under the 
 class of those incidental powers necessar}- to the 
 exercise of their jurisdiction, although not expressly 
 given by law, they will appoint receivers for the 
 settlement and liquidation of partnership matters. 
 And in the adjustment of these matters they will 
 compel the production of books of account, vouchers 
 and other instruments whenever, in their investiga- 
 tion, such documents are discovered to be necessary, 
 and even when in possession of third persons not par- 
 ties to the suit. In the imputation of payments they 
 will, in the silence of both parties, determine the mode 
 of appropriation ; and, when such imputation has 
 been made by the creditor, the debtor will always be 
 protected against surprise as well as fraud. In the 
 relations of principal and agent they will generally 
 regard the latter, not as the debtor, but as the trustee 
 of the former, and, treating the mandate as a trust, 
 they will not permit the trustee to take an}- profit to 
 himself from the concerns of his trust, but will compel 
 him to hold on to any advantage he may have acquired 
 for the principal and to carry out the object of the 
 mandate which he has undertaken ; and in the set- 
 tlement of their accounts relief will be given from
 
 Equitable Liens of the Common Law. 523 
 
 fraud, error or omission. They will enforce the pay- 
 ment of legacies, effect the partition of estates held in 
 common and adjust disputes arising out of the confusion 
 of boundaries. They will apportion contracts. They 
 proceed upon the maxim that Equality is Equity, and 
 will compel a contribution toward the discharge of a 
 common burden, as in cases of general average. So 
 they will abate legacies. They will open a dividend in 
 the distribution of the assets of a succession in favor 
 of creditors who have not been paid. In like manner 
 they will compel a contribution between co- 
 sureties, and subrogate the surety to the benefit 
 of all the collateral securities of the creditor 
 upon payment to the latter, which is regarded as 
 the sale of the debt itself; and, if the creditor 
 have impaired this right of subrogation, they 
 will release the surety. They will marshal secur- 
 ities and determine priority as to contributions, 
 and the rank of different claimants, holding liens on 
 the same fund or estate. They will decree an account 
 of assets and a due settlement of the estates of per- 
 sons deceased or bankrupt ; arrest the creditors in 
 their race of diligence, and force them into the court, 
 where the settlement of the estate is to be made, to 
 litigate their claims together ; they regard the prop- 
 erty of the debtor, under a textual provision of the 
 law, as the common pledge of his creditors, and view 
 with jealousy all causes of preference or privilege, 
 holding them to be strictissimcE interpretationis j and 
 in all matters relating to the administration of such 
 estates, they proceed according to the principles of
 
 524 The Law of Pledge. 
 
 equity. They enforce contracts in favor of third per- 
 sons, beneficially interested therein, and uphold 
 equitable rights arisinis^ in the other States. They 
 will decree a specific performance of contracts respect- 
 ing real estate, and, when called upon to enforce 
 a right respecting it, will avail themselves of their 
 jurisdiction over the persons, to do justice relative to 
 the subject matter, though beyond their jurisdiction. 
 They will protect parties from vexatious litigation by 
 proceedings analogous to those of bills of interpleader ; 
 they will provide for the safety' of property in dispute 
 pending litigation, and whenever it becomes necessary 
 to protect the interests of a number of creditors con- 
 cerned, to avoid a multiplicity of suits, they resort to 
 proceedings analogous to those by which courts in 
 other States have reached the equity of such cases ; 
 and, accordingl}-, they will decree a general adminis- 
 tration of the funds, appoint a receiver if necessary, 
 and make such further order as the exigency of the 
 case may require. They in all cases compel him 
 who seeks equity to do equity; and, in general, they 
 will extend to parties litigant in the redress of their 
 wrongs, and in the vindication of their rights, reme- 
 dies, plain, adequate and complete. But the equi- 
 table powers of the court can be called forth only to 
 enforce clear and well defined rights. And, though 
 the fusion of law and equity in Louisiana be com- 
 plete, 3'et, as we remarked, it is true only in this 
 sense, that our courts are generally competent to 
 afford such relief to parties, and in cases properly 
 before them, as may be obtained in a judicial pro-
 
 EQuiTAjjLi: Liens of the Common Law. 525 
 
 ceeding, either at law or in chancery, in those States 
 which recognize the English division of remedies. But 
 it does not follow that all the prerogatives claimed by 
 courts of Common law and courts of chancery and all 
 their artificial rules and peculiar dogmas are to be 
 usurped in this State. Our people have always 
 resisted the encroachments of foreign modes of pro- 
 cedure, and especially the doctrines and forms of 
 chancery, the exercise of which was reluctantly con- 
 ceded to the Federal Courts sitting in Louisiana, 
 by a divided opinion of the Supreme Court of the 
 United States. The popular and professional aver- 
 sion to " English fictions and the complicated and 
 artificial modes of proceeding called the chancery 
 practice" will be found reflected in a resolution of 
 the General Assembly instructing the Senators and 
 Representatives of the State in Congress to procure 
 an amendment to the act of 1824. That aversion 
 dates from the cession of Louisiana to the United 
 States, and whilst her constitutional and criminal 
 law, her commercial law and her law of evi- 
 dence have been assimilated to those of her sister 
 States, the English system of equity has found 
 no foothold in her jurisprudence ; and its exclu- 
 sion — not entrusted to ordinary legislation, but 
 guaranteed by the organic law — has been industriously 
 secured by the successive constitutions of 181 2, and 
 1845 ^"^^ ^^52- Nor has this policy of the State 
 received from her judiciary a reluctant support; and, 
 in preserving our law relative to real property and its 
 tenures in its simplicity, public order has been firmly
 
 526 The Law of Pledge. 
 
 maintained by the courts against every attempt to 
 introduce, within our Hmits, the involved jurispru- 
 dence of the Common law States.* 
 
 566. Merlin, one of the greatest jurisconsults of 
 France, made a pithy remark on the subject of Equity 
 when it exceeds its legitimate limits. He said: "In 
 civil matters, where the law is clear and precise, in 
 certain cases, it would be impairing Equity itself to 
 depart from the law on the pretence of softening or 
 modifying its provisions by the peculiar principles of 
 a greater Equity. The law, then, which is given to 
 the judges to be the immutable rule of their conduct, 
 would have nothing certain, and the people would be- 
 lieve in vain that the}' can safely rely upon it. It is true 
 that we must, in everything, consider Equity particu- 
 larly. /;/ omnibus equitas maxinie spectanda . But 
 this rule of law has no application, as we have said, 
 except in the particular cases for which the law has 
 not provided. When we have to decide in embarrass- 
 ing difficulties, in order to be just, we must be equi- 
 table ; but, except in such cases, the Equity of the 
 law is necessarily paramount. "f 
 
 567. Chief Justice Hale has expressed the same 
 idea in fewer words, and said: " B}- the growth of 
 equity on equity, the heart of the Common law is 
 eaten out, and legal settlements destroyed." '1 
 
 These wise reflections of the great Civilian Merlin 
 and of the eminent Chief Justice Hale are of them- 
 
 * Hennen's Digest, Vol. 1, p. 479. 
 
 t Merlin, Repertoire, verho Equite. 
 
 X Koscarrick vs. Barton, 1 Ca. in Ch. 217.
 
 Equitable Liens of the Common Law. 527 
 
 selves strong arguments against the encroachments of 
 the equity practice, and are condemnatory of the 
 doctrine by which Hens in equity would be recognized 
 and enforced in a State from which the statutory law 
 expels them.
 
 %■ 
 
 SUPREME COURT oK THE UNITED S'1"ATE!S. 
 
 OcTOBKU Term. 1806. 
 
 No. 722. 
 
 "I'HE BvuuoN Centkal Slgar Refimn<t Company et aJ..'\ 
 
 Appellants. [ 
 
 versus f 
 
 Jacob U. Payne r« o?., Appellees. ! 
 
 ■On a Certiricate from Die United States Circuit Covrt of Ajiji<-til.-< for the 
 
 Fifth Circuit. 
 
 BuiEE Foii John H. Mukphy, Intervenok and Appellant. 
 
 Statement op the Case. 
 
 n. M. Payne. J. U. Payne and J. U. Payne & Co. were the owners 
 •of three contiguous plantation.s iu St. Landry parish. La., known as 
 Barbreck, St. Peters and Anchorage, and, on June iU, I892, they 
 entered into a written contract with L. Murray Ferris and Wm. 
 L. Ferris, of Poughkeepsie, New York, in which it was recited that the 
 Messrs. Ferris proposed to lease the sugar house on tlie Barbreck 
 plantation and to pnrdiase the crops of sugar cane to be grown on the 
 three said plantations by the said owners thereof. This dual purpose 
 was effected by the contract, which is printed in full in the record. 
 Some of the articles of said contract refer to the lease of the said sugar 
 house, others to the purchase by the Messrs. Ferris of the said sugar 
 cane; and in farther recognition of the fact, as shown in the recital, 
 that two distinct contracts— one of lease, the other of sale— were con- 
 tained in said instrument and contemplated by the parties, the last 
 article, in order to fuse the two conti'acts into one, provided that said 
 contract was an entire contract, and that each stipulation and obliga- 
 tion therein were a part of the consideration for every otlior. 
 
 The eleventh article of said contract fixed the price of the cane 
 to be delivered, thereunder, and the thirteenth article is as follows: 
 
 "The price of cane, as above determined, shall be paid as follows : 
 $2.75 per ton shall be paid, every Monday, for the cane delivered, dur- 
 529
 
 530 The Law of Pledge. 
 
 ing the preceding week, until the delivery is completed. The balance^ 
 if any, per ton, shall operate as a lien and privilege to the full extent 
 of such balance on the first bounty money received by the parties of 
 the second part on sugar produced from cane ground at the Barbreck 
 sugar house, and the said parties of the second part covenant and agree 
 to consecrate solely to the payment of such balance all bounty pay- 
 ments so received by them, until the whole of the said balance shall have 
 been paid." 
 
 Under article twenty-four (24) of said contract the said L. Murray 
 Ferris and Wm. L. Ferris transferred all their rights and liabilities 
 under said contract to the Ferris Sugar Manufacturing Company, 
 Limited, a corporation organized under the laws of Louisiana. 
 
 The McKinley tariff act, passed October 1, 1890, which provided for 
 a bounty to sugar producers, was repealed, on August 28, 1894, and, on 
 Septembers, 1894, it was stipulated between the parties to said contract 
 that the provisions of Arts. 11 and 13 thereof should be extended so as 
 to apply to any bounty that might, thereafter, be granted by CoHgress to 
 sugars produced from the crop of 1894. 
 
 The Ferris Sugar Manufacturing Company, Limited, operated 
 the Barbreck sugar house under the terms of said contract from 
 October, 1894, to January 4, 1895, and the said patties of the first 
 part, J. U. Payne & Co. et als., sold and delivered to the 
 said Ferris Sugar Manufacturing Company during the season 
 under said contract ten thousand three hundred and seventy-seven 
 (10,377) tons of cane gi'own upon premises other than those leased to 
 said Ferris Company, for which the said Ferris Company owed a 
 balance on the purchase price of four thousand five hundred and sixty- 
 four 73-100 dollars ($4564.73), on the contract basis of $2.75 a ton, and a 
 further sum of six thousand tive hundred and seventy-nine and 30-100 
 dollars ($0579.30), in the event that the bounty should be collected. 
 
 In the fall of 1894, the Ferris Sugar Manufacturing Company, 
 Limited, became heavily involved, and, prior to this, a number of cred- 
 itors, among them the Reading Iron Company and John H. Murphy. 
 recorded vendor's privileges upon machinery sold by them to the said 
 Ferris Sugar Manufacturing Company, Limited, and erected by it in the 
 said Barbreck sugar house. 
 
 On January 4, 1895, upon application of the Burdon Central Sugar 
 Eefining Company, Limited, a corporation organized under the laws of 
 Xew York, and an unsecured creditor of the Ferris Company to the 
 extent of $40,404.74, to the Circuit Court of the United States for the 
 Eastern District of Louisiana, the Ferris Company was placed in the 
 hands of a receiver. On March 25, 1895, H. M. Payne, J. U. Payne 
 and J. \J. Payne & Co. filed a petit on of intervention in this suit, 
 claiming the said balance of $4564.73, and of $6579.30, due them for cane 
 sold and delivered to the said Ferris Company under said contract, and 
 further claiming that both said sums were secured by a lessor's privilege
 
 The Law of Pledge. 531 
 
 on the property of the said Ferris Company at the said Barbreck sugar 
 house, and that the said latter sum, namelj-, $6579.30, was also secured 
 by an equitable lien on any bountj- that might, thereafter, be collected 
 by the receiver. 
 
 The court decided that the said intervenors were entitled to a les- 
 sor's privilege upon the movable effects of the said Ferris Company and 
 of third persons upon the said leased premises to secure both said sums 
 due for the impaid price of the sugar cane, in addition to an equitable 
 lien on the bounty which might be collected on sugars made from cane, 
 sold by the said interveners, to secure the said sum of $0579.30. in pref- 
 erence to all other creditors of the said Ferris Company. 
 
 From this decree the said Burdon Central Sugar Refining Company, 
 complainant, the said Reading Iron Company and John H. Murphy, 
 intervenors in this suit, as creditors of the said Ferris Company for 
 large amounts, took an appeal and made the followin;^ assignment of 
 errors : 
 
 '• 1st. Said court erred in decreeing that said intervenors, J. U. i'ayne 
 et al.. are entitled to a privilege and right of pledge as lessors upon the 
 movable effects of the defendant on the leased premises to secure the 
 sums due said intervenors for cane sold and delivered by them to said 
 defendant, amounting to $4504.73 and $6579.30. 
 
 " 2. Said court erred in decreeing that said intervenors are entitled to 
 an equitable lien on the bounties which may be collected on sugars 
 made from cane belonging to said intervenors and taken off by the 
 defendant, or its receiver." 
 
 The case was twice argued in the circuit court of appeals, the latter 
 time upon the request of the court, and the court, thereupon, certified 
 the following questions : 
 
 " 1. It being shown that the cane sold by appellees, J. U. Payne & 
 Co. et als., lo the Ferris Sugar Manufacturing Company, Limited, pur- 
 suant to the contract between the parties, was grown on lands not 
 embraced within the limits of the premises leased to the Ferris Sugar 
 Manufaciuring Company, Limited, are appellees, under the laws of 
 Louisiana, considered, in connection with the jirovisions of the con- 
 tract, entitled to the lessor's privilege to secure the payment of the pur- 
 chase price of such cane? 
 
 "2. Lender the terms of the 13th article of the contract between the 
 Paynes and the Ferrises, and to secure the payment of the price of the 
 .sugar cane, sold and delivered under said contract, have the appellees, 
 H. M. Payne, J. U. Payne and the members of the firm of J. U. Payne 
 & Co., an equitable lien upon the bounty money collected from the 
 United States by the receiver in this suit? 
 
 "3. If the second question shall be answered in the atiirmalivc. can 
 such equitable lien, under the laws of Louisiana, be so enforced in the 
 present suit as to apiirojiriatc tlic bounty money to the payment of the
 
 532 ' Thk Law of Pledge. 
 
 claim of the Paynes to the exclusion of the general creditors of the 
 Ferris Sugar Manufacturing Company?" " 
 
 Third (Question. 
 
 We sluill reverse the order of discussion of the second and third 
 questions because it can make no difference whether, according to the 
 general principles of equity jurisprudence, the Paynes have an equi- 
 table lien on the bounty money or not, under the thirteenth article of 
 the contract, if such a lien is denied by the statute laws of Louisiana, 
 by which law the federal court must be governed in this case. The nat- 
 ural, necessary and primarj' in(^uiry is, what is the Louisiana law? We 
 are prepared to show that, even under the general principles of equity 
 jurisprudence, the Paynes have no equitable lien on the bounty money, 
 but we shall now address ourselves to the proposition that an equitable 
 lien, such as is claimed by the Paynes in this case, is forbidden by the 
 laws of Louisiana, and expressly denied by a recent decision of the 
 Supreme Court of Louisiana, and to the further proposition tliat a 
 federal court of equity must in this case follow the Louisiana statute 
 law, granting for the sake of the argument, that the equitable lien, 
 contended for in this case, is allowed by the general principles of equity 
 jurisprudence. 
 
 Firi<t. 
 
 I. 
 
 The Revised Civil Code of Louisiana contains the four following con- 
 secutive articles : 
 
 * The Supreme Court answered the lirst question in the negative, deny- 
 ing the asserted lessor's privilege, and the second and third in the 
 affirmative, on the ground that the language used created an equitable 
 lien on the bounty collected, under the general principles of equity 
 jurisprudence; that the sugar bounty arose from an act of Congress, 
 which created a link between the manufacturer of the sugar and the 
 grower of the cane from which it was manufactured; and i hat in this 
 case State laws could not operate upon the transaction to the extent of 
 destroying the statutory link and thus nullify the intention of Con- 
 gress. As to whether or not, as a general proposition, federal courts of 
 equity, in matters of substantive law, where their jurisdiction is con- 
 current with State courts, and where no federal question is involved, 
 are bound by State laws, the court reserved its opinion. An elaborate 
 statement of the facts will be found in 1G7 U. S. 127, where the case is 
 reported. The portion of the brief discussing the lessor's privilege, (he 
 first certified question, is omitted, as is also that portion of the discus- 
 sion which attempted to show that under the general principles of 
 equity jurisprudence no equitable lien existed in this case. The above 
 statement of facts is reprinted from the brief, and there follows that 
 pait of it which undertakes to prove that a lien such as was claimed in 
 this case, is forbidden by the Louisiana law, and that a federal court of 
 equily, sitting in Louisiana, is bound by the Louisiana law, even if 
 under the general principles of equity jurisiirudence an equitable lien 
 would have been allowed rAvTiiou.]
 
 The J.aw of Pledge. 533 
 
 Ari. 3183 (3150). The property of the debtor is tlie coininoa pled^-e 
 of his creditors, and the proceeds of its sale must be distributed among 
 them ratably, unless there exist among the creditors some lawful cause 
 of i)reference. 
 
 Art. 3184 (31.51). Lawful causes of preference are privilege an i mort- 
 gage. 
 
 Art. 3185 (3152). Privilege can be claimed only for thos- debts to 
 which it is expressly granted in this Code. 
 
 Art. 3186 (31.53). Privilege is a right, whii-h the nature of a debt gives 
 to a creditor, and whi(!h entitles liim to be preferred before other cred- 
 itors, even those who have mortgages. 
 
 Tiiese four articles follow in logical order. The first announces the 
 principle that there must be a ratable distribution of a debtor's prop- 
 erty among his creditors, imless there are lawful causes of preference; 
 the second defines lawful causes of preference to be privilege and mort- 
 gage; the third restricts privileges to those debts to which the Coic 
 expressly grants them; the fourth excludes the idea of a conventional 
 privilege. These articles have been repeatedly applied by the courts 
 of Louisiana, and they are as well established as a uniform interpreta- 
 tion for many years can make them. 
 
 Privileges can not be extended by implication or analogy ; they are 
 never allowed except when expressly granted by law, and then only by 
 virtue of an exact compliance with the legal requisites essential to their 
 creation and existence. Privileges can not be created hy convention 
 between the parties and must derive their existence from the nature of 
 the contract and from the law applicable thereto. PrivUcfiia sunt 
 strictissimoi intcrpretationis. 
 
 Grant vs. Fiol et al., 17 La. 1(12. 
 
 Whatley v?. Austin, Adm.. 1 Rob. 22. 
 
 Fish vs. Moores, 11 Rob. 2S0. 
 
 The First Municipality vs. Hall. 2 An. 54'.). 
 
 Lee vs. Creditors, 2 An. 602. 
 
 Fontenot et al. vs. Soileau, 2 An. 774. 
 
 Friend vs. Fenner et al., 2 An. 790. 
 
 Shropshire vs. Russell, 2 An. 902. 
 
 Stevens et al. vs. Sawyer et al., 3 An. 42'.i. 
 
 riarned vs. Churchman et al., 4 An. 313. 
 
 Cochran & Co. vs. Walker, 10 An. 431 . 
 
 ."Swasey & Co. vs. Steamer Montgomery. 12 An. 800. 
 
 Shaw & Co. vs. Grant, 13 An. 52. 
 
 Martin vs. Casey, 15 An. 105. 
 
 Ganse vs. Bullard, 16 An. 107. 
 
 Landry vs. Blanchard. 10 An. 173. 
 
 ••If privileges be stricti juris, there is still greater reason so to con- 
 sider them when advanced against innocent third persons."' Shaw vs. 
 Grant, 13 An. 52.
 
 534 The Law of Pledge. 
 
 ••Privileges are s tried juris, and as against tliird persons must be 
 clearly and conclusively established." Rochford vs. Geraghty. 10 
 An. 429. 
 
 The foUoAVing extracts from two decisions, applying Art. 3183, may 
 be given : 
 
 "The propertv of the debtor is the common pledge of his creditors, 
 and the right of the creditors to sell it. and to cause the proceeds to be 
 distributed ratably among them, unless there exist some lawful cause 
 of preference, is a necessary consequence of this principle. Civil Code, 
 Art. 3150 (R. C. C. 3183)." Larthet vs. Hogan et al. 1 An. 330. 
 
 " It is urged by the appellants that the property of the debtor is the 
 common pledge of his creditors. C. C. 3150 (R. C. C. 3183). And 
 that privileges are to be allowed only when expressly granted by the 
 Code. lb. 3152 (R. C. C. 3185). The position is correct." * * * 
 
 Stevens vs. Sawyer, 3 An. 420; also see Owens vs. Davis, 15 An. '24. 
 and Southern Dry Dock Company vs. Bayou Sara Packet Co.. '^4 
 An. 217. 
 
 II. 
 
 The agreement between J. U. Payne & Co. and the Messrs. Ferris 
 was, in substance, that a future debt of indeterminate amount should 
 operate as a lien and privilege on a fund to be, thereafter, created. 
 There was no assignment of this fund by the debtor to the creditor; 
 there was no attempt nor intention to assign it, either in whole or in 
 part. The creditor was to have a lien or privilege on it, but he was 
 not to own it. The debtor was to earn, represent and collect the 
 bounty, notwithstanding the supposed creation of a lien on it. 
 
 That such an arrangement constitutes no pledge and gives rise to no 
 legal privilege under the law of Louisiana is unreservedly admitted by 
 the learned judge a quo in his written opinion in this case (reported in 
 78 F. R., p. 417), and is not seriously denied by the counsel for J. U. 
 Payne & Co., and in view of this fact it is not necessary to discuss at 
 any great length the requisites of a pledge. 
 
 Under the Civil Code a debtor can not pledge a claim unless •• he mak- 
 a transfer of it in the act of pledge " ("Art. 315o), and unless further the 
 act mentions '• the amount of the debt " secured (Art. 3158). 
 
 ]^o transfer of the anticipated claim against the United States was 
 made, and the amount of the claim intended to be secured was not 
 stated, even by giving a maximum amount. There was no delivery of 
 the bounty, or of the evidence of the right to claim it. Every essential 
 element in the contract of pledge was wanting. The agreement did 
 not, therefore, give J. U. Payne & Co., as pledgees, any right of pref- 
 erence over other creditors. The Supreme Court of Louisiana has 
 expressly decided that an attempt, in every particular like this, t«> 
 pledge the bounty was ineffectual and null. 
 
 " As relates to the pledge, the facts are that the mortgagor bound
 
 The Law of 1*ledue. 535 
 
 herself to ]ia>j the boimty of the fjovernmcnt to the creditor immedidleUj after 
 the receipt of the amount, 'just as if the bounty had been a portion of 
 the proceeds of the crops of the i^lantation.' The bounty was not deliv- 
 ered at the time the attempt was made to pledge it as an additional 
 security for the debt. It was collected from the government by the 
 syndic, some time after the act of mortgage had been executed. It is 
 hardly necessary to cite authoritj- in support of the proposition that 
 delivery is an essential in order to secure a pledge (save in statutorv 
 pledges, not the case here). The bounty was not a portion of the pro- 
 ceeds of the crop; it was no part of the crop. We know of no princi- 
 ple of interpretation under which it is possible to hold that the bounty 
 was delivered as required, and came within the provisions of the statutes 
 relative to pledge as a security." Delngny vs. Her Creditors, iS An. 
 402-93. 
 
 The Delogny case is identical with the present, and establishes be- 
 yond any possibility of a controversy, that no j)ledge was constituted 
 by the agreement now under consideration. It is even stronger, because 
 the mortgagor bound herself to pay over the bounty to the creditor 
 Just as if the bounty had been a portion of the proceeds of the crops of 
 the plantation, in order to malve the obligation in the strongest possi- 
 ble form. 
 
 In an earlier case the Supreme Court held: •• That the bare agreement 
 of the parties is not equivalent in any case to a fictitious or sipnboUcal de- 
 livery "within the meaning of the article requiring delivery to consti- 
 tute a pledge. Caffin vs. Kincan, 7 An. 221. 
 
 That parties can not create a, privilege on any particular property by 
 contracting that a privilege shall exist on it, is well settled. In a recent 
 case the Supreme Court of Louisiana, commentingon a written stipula- 
 tion that insurance premiums should operate as a privilege on certain 
 property, say : 
 
 * * * " Privileges being creatures of the law, and not of conven- 
 tions, the mere declarations in the act that the insurance premiums 
 should hear a privilege on the propertj^ are without effect." State vs. 
 Bank, 33 An. 706, opinion by Mr. Justice Fenner of counsel for appellees 
 in this case. 
 
 And in a later case the same court say : 
 
 " It needs no argument to dispose of his pretensions to a privilege 
 on the buildings and improvements as a security for his advances, 
 although such a privilege loas stipulated in his act of pledge with Logan. 
 The law'confers no such privilege, and none can be enforced. A privi- 
 lege can not be created by convention between the ptai'ties; it must derive 
 its existence^from the nature of the contract and from the law applica- 
 ble thereto." Citizens Bank vs. Maureaii, 37 An. 861. Mr. Justice Fenner 
 concurring. 
 
 It is true that K. C. C. 1338 employs the phrase, '• the mortgages, 
 liens and privileges," but it is fair to assume that the mortgages, liens
 
 53() The Law ok Pledge. 
 
 and privileges, recognized and established by that Code alone, were ic 
 contemplation of it. 
 
 They are merely securities for debts and accessories to principal con- 
 tracts (R. C. C. 3278, 32S4). They " can be claimed only for those 
 debts to which they are expressly granted in this Code (R. (.'. C. 3185). 
 
 " Their effect can not be extended to any cases not therein enumerated^ 
 b'j inference or comparison." 
 
 Morris et al. vs. Lalaurie et als.. 3'.) An. .")3: Mr. .Justice Fenner con- 
 curring. 
 
 While the decision in Delogny vs. Her Creditors no longer leaves the 
 question of the asserted equitable lien in this case an open one, and, 
 while it is perfectly apparent that the creditor in that case would have 
 been in no better position if he had claimed an equitable lien, still appel- 
 lees' learned counsel argue that the equitable lien here asserted would 
 be allowed by the Supreme Court of Louisiana, and in support of this 
 l)rophecy cite two Louisiana cases, prior to the Delogny case. They 
 seem to regard an equitable lien in a federal court as a magic device 
 for evading the IjOtiisiana law and as a means of accomplishing by in- 
 direction that which the Code expressly forbids. It is idle for both 
 courts and lawyers to speculate as to how a case would have been de- 
 cided, had it been differently presented, and the only guide is not the 
 law as it might have been, but as it is. We assert that equitable liens, 
 either express or implied, have never been recognized in Louisi.ana, 
 since, the Louisiana law is purely statutory., and therefore all liens and 
 privileges must be founded upon statute. But whether this broad pi'op- 
 osition is correct or not, and of it there can not be the slightest doubt, 
 certain it is, that the Delogny case establishes be^'ond the peradventure 
 of a doubt that the eipiitable lien, or imperfect pledge, or whatnot, 
 asserted in this case, can not be maintained, and that is all with which 
 we are at present concerned. 
 
 The two cases relied upon by appellees" learned counsel to support 
 the contention that equitable liens give privileges in Louisiana are 
 Succession of Walsh, 9 An. 543, and Webre. Syndic, vs. Beltran & Co., 
 47 An. 195. 
 
 In the Walsh case the facts were that Walsh left at his death two 
 scrip certificates in an insurance compan}', upon which he owed the 
 company a considerable sum for premiums. These certificates, by an 
 express clause written in them, were not transferable upon the com- 
 pany's books, except by its consent, and under this restriction and under 
 its charter the companj' held the certificates as collateral for any amount 
 that might be due it upon them for premiums. The assured reallj- 
 made a contract by which the company was authorized to set off 
 against him on the amount due him under the certificates, any amount 
 that he might owe the company on these certificates for premiums. 
 The court held, as it was bound to hold under these facts, that the 
 insurance company could not bo compelled to pay the amount of its
 
 The Law of Pledge. 537 
 
 certificates, unless it were allowed to deduct the amount due it for 
 premiums upon them. 
 
 In the case of Webre, Syndic, vs. Beltran & Co., A. J. Lacaze made 
 a contract with Beltran & Co. to furnisli tiim with money and supplies 
 to the extent of $8000 during the season of 1892, in order to maiie a 
 crop of sugar and molasses on his Good Will plantation, and he 
 pledged his crop and mortgaged his plantation to secure said advances. 
 During 1892 R. Beltran, of the firm of Beltran & Co., and as a part of 
 the agreement with Lacaze, applied to the United States authorities 
 (under the act of Congress granting a bounty to the sugar producers) 
 for a license as a producer of the crop of that year upon the Good 
 Will plantation. The license was issued to R. Beltran, who thereby 
 became the only person to whom the bounty could be paid, since the 
 entire legal title was vested in him. After the cession of Lacaze, Bel- 
 tran collected the bounty and paid it over to Beltran & Co., to be 
 applied on the debt due them by Lacaze, pursuant to a verbal contract 
 between them made in 1892. Upon suit brought by the syndic of 
 Lacaze to recover this bounty from Beltran & Co., the court held that 
 the legal title to the bounty was vested in Beltran by virtue of the fact 
 that the license was in his name; that the contract was completely 
 executed between Beltran and the government by the payment of the 
 bounty to him ; that in order to obtain the benefit of the license 
 Lacaze and his syndic would have as plaintiffs to attack it and its 
 results; and that the contract between Beltran & Co. and Lacaze 
 authorized the application of the bounty to the debt of Beltran & Co. 
 
 These cases are not authority for the maintenance of an equitable 
 lien in Louisiana, and, in passing, it may seem strange that, if equita- 
 ble liens obtain in Louisiana, no instances of their enforcement can be 
 found in the course of nearly one hundred years. It has been urged 
 that privileges and mortgages are subordinate to legal rights existing 
 on the property before the creation of the privilege or mortgage, and 
 this is perfectly true; but it must be remembered that this subordina- 
 tion is only to legal rights, and that the specific equitable lien claimed 
 in this case gave no legal right (Delogny vs. Her Creditors, ante). 
 
 Appellees' learned counsel concede, as well they might, that the thir- 
 teenth article of the contract gives no legal privilege under the law of 
 Louisiana, but argue that there is no reason why the contract should not 
 be specifically enforced under Arts. 1926 and 1927 of the Code. This 
 same reasoning would apply to any imperfect pledge or mortgage, and 
 the result would be that, as soon as a fatal legal defect is discovered in 
 the attempted security, specific execution would be invoked. This 
 might be convenient to the man with the defective security, but is 
 hardly law. It is urged that Arts. 21, 1903, 1904 and 1965 of the Code 
 establish a broad system of equity, but, even if this be true, it does not 
 follow that a broad system of equitable liens obtains in Louisiana. 
 Article 21 declares : -^ In all civil matters, where there is no express law
 
 538 The Law of Pledge. 
 
 the judge is bound to proceed and decide according to eqiiitj-."" Does 
 any one suppose that privileges in liOuisiana are not regulated by the 
 most minute provisions ; which are rigidly scrutinized by the courts? 
 
 Second. 
 I. 
 
 The stipulation contained In the 13th article of the agreement be- 
 tween Payne & Co. and the Messrs. Ferris did not establish either a 
 pledge ov privilege in favor of Payne & Co. If the parties were in the 
 Louisiana State courts, Payne & Co. would not be entitled to any prefer- 
 ence, or priority, over other creditors in the distribution of the bountj' 
 money, which the receiver has collected. It would be held in these 
 courts that the stipulations In the 13th article created neither a pledge 
 nor a privilege, and that Payne & Co. would be without any legal 
 right of preference over other creditors. The fund would, therefore, be 
 prorated among all the creditors 
 
 Notwithstanding that this Avould be the admitted and certain result 
 of a suit on this contract in the iState court, the learned judge a quo 
 reached the conclusion that Payne Sc Co. would be entitled by virtue of 
 the stipulations in the 13th article to a preference in the federal court, 
 sitting as a court of equity. 
 
 In other words, an agreement which, under the laws of Louisiana, 
 neither creates a pledge nor gives rise to a privilege, will be given the 
 same effect by the federal chancellor as if it did create a pledge or give 
 rise to a privilege. Accordingly the creditor, under this agreement, 
 will have no preference, if his suit is decided by a State court, but w^ill 
 have a preference, if his suit is tried by a federal court; that is, the rule 
 of law, which determines the extent of the creditor's rights with reference 
 to the common debtor, is different in the federal court from what it is in 
 the State court. In the State courts the rule is that the wish, the inten - 
 tion, or the attempt to create a pledge, amounts to nothing, if any of the 
 essential requisites to the contract of pledge are actually lacking in the 
 transaction. But, according to the learned judge a quo, in the federal 
 equity courts the mere expectation, or attempt to create a pledge, will 
 be regarded as actually creating a pledge, not only between the parties, 
 but as to third persons, although the transaction presents none of the 
 essential requisites of the contract of pledge, except the bare consent to 
 create it on the one side and to accept it on the other. 
 
 Under this view, an intended and inchoate contract of pledge is 
 worthless as a pledge in the State courts, but in the federal courts it is 
 as valid and binding as the most complete and perfect pledge would be. 
 
 If we rightly understand it, the process of reasoning by which th<' 
 learned judge a quo reaches the conclusion that a federal equity court 
 ■can hold that an inchoate and imperfect attempt to create a pledge.
 
 The Law of Pledge. 539 
 
 though absolutely void under the State laws, is absolutelv valid in the 
 federal court, is, in substance, as follows : 
 
 1. The equity powers of the federal courts can not be limited or varied 
 by State legislation. For these powers were conferred bij the constitu- 
 tion of the United States, and nuist, therefore, still exist and be enforced 
 precisely as they were conferred, in 178!), unaffected and undiminished 
 by either State or Congressional legislation. 
 
 2. It was one of the powers of courts of equity, in 1789, to recognize 
 and enforce under the designation of equitable liens, any inchoate and 
 imperfect attempt to create a pledge, and to give the intended pledgee 
 all the rights of preference, which would belong to the pledgee under a 
 regular and valid ])ledgo. 
 
 3. Therefore, in determining, at the present day, whether a given trans- 
 action does or does not create a pledge, the federal equit}' courts are in 
 no manner controlled by the laws of the States, in which they sit, but 
 may recognize and enforce as a pledge, lien, or privilege, a contract 
 which the State laws distinctly declare to be neither pledge, lien, nor 
 privilege. 
 
 The foregoing propositions are necessarily involved in the reasoning 
 by which the learned judge a quo considered that he was warranted and 
 required to disregard the laws and jurisprudence of the State of Louis- 
 iana in passing upon the question whether the agreement in controversy 
 gave rise to a pledge or lien of any kind. This conclusion is fraught with 
 tremendous and f;>.r- reaching consequences to the States of this Cnion, 
 and it is beyond the power of any man to magnify or exaggerate them. 
 This case, involving as it does the question as to whether there is a uni- 
 form system of federal equity jurisprudence superior to State statutes, is 
 fully as important as the first case, in which it was decided that there 
 was no common law of the United States. 
 
 We believe that none of the propositions stated are true in such a 
 sense as to susta'.n the conclusion based on them, and that the Supreme 
 Court of the United States has frequently so decided. 
 
 Before discussing this question, it is necessary to make some general 
 observations upon the nature of the federal government and its rela- 
 tions to the State governments, and thus determine their respective 
 powers. 
 
 It is a familar proposition that the confederated character of the 
 United States government makes each citizen of every State a citizen of 
 two distinct sovereignties, and that there exists an important concurrent 
 jurisdiction in the federal and State courts. From the existence of this 
 concurrent jurisdiction, it might be inferred that the same rights were 
 differently adjudicated in the two courts, and it becomes a question of 
 the gravest importance to determine the points of similarity and diverg- 
 ence between their decisions, both at equity and common law. and both 
 upon matters of practice and substantive law. This involves a more 
 comprehensive survey of the subject than is necessary to sustain our
 
 540 The Law of Pledge. 
 
 position, and we shall limit the argument almost exL-lusively to matters 
 of substantive law in courts of equity, which necessarily includes 
 matters of substantive law in courts of common law, because the reason 
 and extent of the rule are the same in both cases. 
 
 The federal government is one of enumerated powers, formed by con- 
 cessions of the sovereign States which compose it, embodied in the 
 federal constitution, and by the tenth amendment, it is provided that the 
 powers not delegated to the United States by the Constitution, nor pro- 
 hibited by it to the States, are reserved to the States respectively, or to 
 the people. It has no authority whatever save as to its delegated 
 powers, and as to these it is supreme. In the States there resides an 
 absolute power of legislation, subject to two restrictions — first, the limi- 
 tations of the federal constitution; second, of the State constitutions; 
 and the theory of the reserved powers of the States is the groundwork of 
 our dual form of government. Cooley's Con. Lim. (Gth ed.), pp. 102 rt 
 seq.; Hare's Amer. Con. Law, pp. 94 et seq. If it be once conceded that 
 the powers of the federal government are unlimited, then Congress may 
 legislate on all subjects, and, being supreme, may annul any State law. 
 Congress has, however, no such power, and, b}' the very terms of the 
 federal constitution, from which its powers of legislation are derived, 
 must recognize the supremacy of constitutional State laws. The federal 
 courts can have no higher authority than Congress, and if Congress can 
 not alter or repeal the laws of a State upon some particular subject 
 within its legislative province, it follows, as a matter of course, that the 
 courts are bound to respect such laws. 
 
 The question in this case simply boils down to this: Are the provis- 
 ions of the Civil Code, annulling such a contract as that sought to be set 
 up by the appellees, in conflict with the federal constitution or laws? If 
 they are, the federal courts can disregard them; if they are not, Con- 
 gress could not alter them, much less the federal courts, and any 
 attempt to do so would be in direct contravention of the tenth amend- 
 ment. 
 
 Some unnecessary confusion has arisen in the consideration of the 
 powers of federal courts of equity, by reason of the fact that their 
 practice, save when changed by federal statute, or by the rules of the 
 federal courts, is required to conform to the rules and usages of courts^ 
 of equity ( U. S. Ji. S., Sec. 913, and cases cited), which has beeninter- 
 preted to mean the procedure of the English High Court of Chancery, 
 in 1789, and, hence, is necessarily uniform in all the States. Because 
 their practice must be uniform and can not be affected by State legisla- 
 tion, the rule has been occasionally so loosely stated by text-writers as 
 to apply to questions of substantive law, though the federal decisions 
 are to the contrary. Thus, in the case of N'ooiian vs. Lee, 2 Black, 501 . 
 it was held that a decree could not be taken in a federal court for the 
 deficiency against the debtor after selling the mortgaged property, no 
 matter what the State equity practice might be. The learned judge a
 
 The Law of Pledge. 541 
 
 quo quotes this case in his opinion as authority for the proposition that 
 the equity jurisdiction of the federal courts is derived from the consti- 
 tution and laws of the United States, and that their power and rules of 
 decisions are the same in all the States. 
 
 In this particular case, the expression, equity jurisdiction, refers to a. 
 pure matter ot practice, not of substantive law, and in every case it must 
 be determined whether it relates to practice or rules of substantive law. 
 
 There is no federal statute regulating the decisions of the federal 
 courts of equity upon matters of substantive law, and the fact that, at 
 the time of the adoption of the federal constitution, a statute was enacted, 
 requiring uniformity in federal equity practice, is a strong argument to 
 show that it was never contemplated that the rules of the substantive 
 law in each State, to which that practice would attach, were to be uni- 
 form throughout the Union. 
 
 On the other hand, it is argued that the adoption, at the same time, 
 of a section of the judiciary act (U. S. Rev. Stats. 721), declaring " the 
 laws of the several States shall be regarded as rules of decision in trials 
 at common law in the courts of the United States,'' shows that it was 
 never intended that federal courts of equity should be bound by State 
 laws. This section of the judiciary act, declaring the binding effect of 
 State laws upon federal courts of common law, was simply declaratory 
 of a fact, that would have existed to the same extent without this dec- 
 laration, namely that federal courts, by virtue of their constitution 
 under an instrument of limited powers, are bound to follow State laws 
 in matters of concurrent jurisdiction, involving no federal question. 
 There is no process of reasoning by which the obligation of federal 
 courts of equity to follow State laws can be differentiated from the 
 obligation of federal courts of common law to follow State laws. The 
 Supreme Court, from an early date, has qualified its obligation to follow 
 State laws by announcing that in matters of general jurisprudence 
 either at common law or equity, not covered by local statutes, e. g. 
 general commercial law, it will, under no circumstances, follow State 
 courts into error, since both reason from the same premises (Swift vs. 
 Tyson, 16 Pet. 1) ; and, hence, the result has been in a good many cases 
 of this class, as set forth in Holt on Concurrent Jurisdiction, that there 
 is one justice in the federal, another in the State courts. "It was in 
 maintaining the validity and enforcing the obligation of a negotiable 
 instrument that the United States Supreme Court said : ' We will never 
 immolate truth, justice and the law because a State tribunal has erected 
 the altar and decreed the sacrifice.' " Dan. on Xeg. Insts., Sec. 1800. 
 
 The question, how far State laws and decisions, not in conflict with 
 the federal constitution or laws, are binding upon the federal courts, 
 has been settled by a long series of United States Supreme Court deci- 
 sions, which are a necessary consequence of the limited powers of the 
 federal government. (See infra, Biinjess vs. Seligman, 107 U. S., p. 25). 
 
 The fallacy, into which the learned judge a quo fell, would never
 
 54:: The Law of Pledge. 
 
 have been entertained for one minute, had not the term "uniform 
 equity jurisdiction" been misconstrued, and it is, therefore, necessary 
 to critically examine its meaning, and thus see whether his conclusions 
 can be legitimately deduced from his premise, that federal equity jur- 
 isdiction (meaning jurisprudence, must be uniform in all the States. 
 At the outset, it must be remembered that equity consists of two things: 
 A jurisdiction, a power to hear and determine causes, and a jurispru- 
 dence, the substantive rules of law enforced. It consists of a form, its 
 pleading, and a body, its principles. The skeleton, the procedure, is the 
 same in all the States; but the body, the substance, necessarily varies 
 with the statutes of each State. 
 
 Prior to the adoption of the federal constitution, in 1789, all suits, 
 both in the thirteen colonies and in England, were classitied as either 
 common law or equity (eliminating admiralty causes from the discus- 
 sion), and the nature of the demand determined the forum in which the 
 right must be litigated. Thus, an action on a promissory note, or for dam- 
 ages arising from a tort, was a matter of common law cognizance, while 
 a suit for the specific performance of a contract, or for the enforcement 
 of a trust, was of equitable cognizance. The two systems covered the 
 entire field of juridical rights and remedies, but generally radically dif- 
 fered, both in the nature of the rights enforced and the remedies applied. 
 
 It is well to repeat that it is provided by the tenth amendment that 
 the powers not delegated to the United States by the constitution, nor 
 prohibited by it to the States, are reserved to the States respectively, 
 or to the people, and it necessarily follows from this provision that the 
 States are supreme in all those matters which involve no federal ques- 
 tion, and have the power to enact such statutes in matters of State law 
 and local policy as may seem to them best. Cooley's Con. Lim.. Sixth 
 Edition, pp. 20, 21 and notes. 
 
 The constitution provides that the judicial power of the federal 
 courts shall extend to all cases in law and equit}- arising in all the 
 classes of cases in which they have jurisdiction, enumerating them in 
 detail (Art. 3, Sec. 2) ; and this provision is construed by the learned 
 judge a quo to mean that the rules of equity jurisprudence then pre- 
 vailing, have been stereotyped by the constitution and are insuscept- 
 ible of change save by an amendment of that instrument. This doc- 
 trine must be deduced from this section of the constitution, since 
 there is no other source from which it can spring. The manifest mean- 
 ing of this provision is, that the litigant shall have complete relief in 
 all cases of federal cognizance, whether his rights are at law or equity, 
 and this is the interpretation given to it by Hamilton, as shown by the 
 following extract from the Federalist, paper No. SO: 
 
 "It has also been asked, what need of the word '0(iuity?' What 
 equitable causes can grow out of the constitution and laws of the 
 United States? There is hardlj^ a subject of litigation between indi- 
 viduals which may not involve those ingredients of fraud, accident.
 
 The Law of Pledge. 543 
 
 tni.st, or hardship, which would render the matter an object of equi- 
 table, rather than of legal jurisdiction, as the distinction is known and 
 established in several of the States. It is the peculiar province, for 
 instance, of a court of equity to relieve against what are called hard 
 bargains; these are contracts in which, though there may have been 
 no direct fraud or deceit sufficient to invalidate them in a court of law, 
 yet there maj- have been some imdue and unconscionable advantage 
 taken of the necessities or misfortunes of one of the parties, which a 
 court of equity would not tolerate. In such cases, where foreigners 
 were concerned on either side, it would be impossible for the federal 
 judicatories to do justice without an equitable as well as a legal juris- 
 diction. Agreements to convey lands, claimed under the grants of 
 different States, may afford another example of the necessity of an 
 equitable jurisdiction in the federal courts. This reasoning may not 
 be so palpable in those States where the formal and technical distinc- 
 tion between law and equity is not maintained, as in this State, where 
 it is exemplified by every day's practice.'" 
 
 If it be true that the then existing system of equity jurisprudence 
 was adopted, why is it not equally true that the then existing system 
 of law was also adopted, because the provision extends to all cases at 
 Jaw and e'luitj, and if this be so, instead of a government of enumerated 
 powers, there is one, the power of which extends to every subject of 
 jurisprudence, and supreme to each State included in the Union. This 
 construction would nullify the tenth amendment and violate the well- 
 known rule of interpretation, that effect must be given to each clause 
 of an instrument. It has been repeatedly decided by the Supreme 
 Court of the United States that there is no common law of the United 
 States (Cooley Con. Lim. [Gth ed.], p. 30, note 3, and cases there 
 cited), and exactly the same arguments prove that there is no uniform 
 federal equity jurisprudence. 
 
 But there is another conclusive objection to this construction. At the 
 time of the adoption of the federal constitution, there were thirteen dis- 
 tinct colonies, with a distinct system of law and equity in each. In each 
 colony both law and equity had been modified by colonial statutes and 
 by colonial courts, and in no two colonies were they the same. There- 
 fore, to which one of these thirteen distinct systems does the expression, 
 "all cases at law and equity," refer? It manifestly can not refer to 
 them all, for in that event there could be no uniform federal equity 
 jurisprudence. It is equally obvious that this expression can not refer 
 to the English syistems of law and equity; for it is preposterous to sup- 
 pose that the colonies, forming a national government, just after they 
 had achieved their independence in a war caused by the unjust laws of 
 the mother country, wished to irrevocably adopt both her common law 
 and equity systems, or either. It is true that the common law is the 
 basis of the law in every State save Louisiana, but this does not prove 
 that the United States has the same substratum of jurisprudence as the 
 various States.
 
 544 The Law of Pledge. 
 
 Certain powers are conferred upon the federal courts wilb the rigltt 
 to administer complete relief in all those cases, and it was never con- 
 templated that in matters of State law and local policy there should be 
 a uniform system of federal jurisprudence, either at law or equity. If 
 this were so, the enumeration of granted powers has no effect, for the 
 term, all cases in equity, extends to a large and indefinite class of cases, 
 embracing the entire field of the then existing equity jurisprudence. 
 To give such a construction to this clause would convert what was 
 intended to be a limitation upon the power of the federal government 
 into an extension of its power. 
 
 On the law side there would be a supreme and a concurrent jurisdic- 
 tion, but on the equity side there would only be a supreme jurisdiction 
 — supreme in the sense that in the matters commonly called concurrent, 
 none of the equity rights, as existing in 1789, can be changed by the 
 States, and, as to matters of exclusive federal jurisdiction, all cases in 
 equity are necessarily supreme. 
 
 Whenever, according to this novel view, a man gets into a federal 
 court of equity, he can insist upon bis rights being adjudicated exactly as 
 they would have been in equity, in 1789; but the question at once arises: 
 In what equity — in which one of the thirteen distinct colonial sj^stems? 
 
 Xo federal decision has ever held that there must be a uniform 
 equity jurisprudence in the federal courts throughout the United States, 
 and, had it not been that the meaning of jurisdiction has been unfort- 
 unately confounded with the meaning of jurisprudence, this question 
 would never have perplexed any one. 
 
 The term jurisdiction, in its etymological signification, means the 
 power to declare the law, and this signification corresponds closely to 
 its accepted legal meaning. It has been defined briefly and clearly by 
 the U. S. Supreme Court in the following words: ''The power to hear 
 and determine a case is jurisdiction." TJ. S. vs. Arredondo et al., 
 Peters, G^l, 709. 
 
 In this case the question was as to the power of a federal court of 
 equity to take cognizance of a land claim arising in Florida, and to pass 
 upon rights in reference thereto, which accrued under the laws of the 
 Spanish government in force, prior to the acquisition of Florida by the 
 United States. It was held that the court had jurisdiction — i. e.. the 
 power to hear and determine this cause, but that the substantive rights 
 in controversy must be controlled by the Spanish law. 
 
 Both the federal and State laws fix the jurisdiction of their respective 
 courts, and, from thne to time, change the jurisdiction of those courts. 
 The power to hear and determine causes does not mean that the causes 
 must always be determined in the same way, but simply that an ade- 
 quate machinery has been provided to dispose of those causes. A 
 criminal court would have the same jurisdiction though the statutes 
 .should prescribe that the same state of facts should, at one time, be 
 murder, at another time, manslaughter, and. ;it another time, justifiable
 
 The Law ov Pledge. 545 
 
 homicide. A court of probate would have (be same jurisdiction, though, 
 at one time, the statute should require a will to be executed in the pres- 
 ence of five witnesses, and, at another time, in the presence of only two. 
 A court of equity would have the same jurisdiction, though, at one time, 
 the statute of registry should prescribe that a second mortgagee, with 
 actual notice of a prior unrecorded mortgage, should take subject to that 
 mortgage, and, at another time, that a second mortgagee, even with 
 actual linowledgeof a prior unrecorded mortgage, should not be affected 
 thereby; though the law of assignments should, at one time, allow 
 preferences, and, at another time, forbid them; though, at one time, 
 the statute of frauds and perjuries should allow the specific performance 
 •of verbal contracts for the sale of real estate, and at another time, 
 annul them; though, at one time, alimony should be allowed as an 
 incident to a suit for separation from bed and board, and, at another 
 time, forbidden; and though, at one time, a trust in favor of an 
 unincorporated religious body should be denied (e. g. Mr. Minor's famous 
 example, *•' The Baptist Association, that for common meets in Phila- 
 delphia '"), and, at another time, enforced. 
 
 The Supreme Court of the United States has held repeatedly that in 
 the assignment of a cause in a federal court to the law or the equity 
 side thereof, the uniform test to be applied is: How would the cause 
 have been allotted, in 1789? Whether it goes to the law or equity side 
 is to be determined by the same criterion that obtained, in 1789, viz. : Was 
 it then a matter of common law or equitable cognizance (Mississippi 
 Mills vs. Cohn, 150 U. S. 202) ; but after the allotment has been made, 
 the substantive rights are to be adjudicated according to the existing 
 law of the State in which the case arose, when no federal question or 
 question of general law is involved. The phrase, uniform equit}^ jurisdic- 
 tion, means neither more nor less than this, and no federal court has 
 yet held that there must be a uniform equity jurisprudence in all the 
 States, nor will there ever be such a decision under present con- 
 stitutional restrictions. 
 
 If. 
 1. 
 
 It is now necessary to examine the authorities and see how far the 
 principles, which we have attempted to deduce from the limited 
 powers of the federal government, have been borne out in practice. 
 
 Pomeroy, in his great work on Equity Jurisprudence, says, in Vol. 1 
 Sec. 297, in discussmg the substantive rules of law, applied by the 
 federal equity courts in the various States: 
 
 '• In order to prevent a misconception of the foregoing rules con- 
 cerning the equitable jurisdiction of the national courts, there is one 
 limitation which must be constantly borne in mind. Since the original 
 jurisdiction of the United States courts, especially of the circuit courts, 
 in large m(;asure depends upon the State citizenship of the litigant 
 parties as its sole basis, it follows that in some cases of ordinary con-
 
 54G The Law of Pledge. 
 
 troversies— in all those which do not directly arise under statutes of 
 Congress or provisions of the United States Constitution — the subject 
 matter of the suit, the primary rights, interests or estates to be main- 
 tained and protected are created and regulated by State laws alone. 
 While, therefore, it is correctly held that the equitable jurisdiction of 
 the national courts, their i^ower to entertain and decide equitable suits 
 and to grant the remedies properly belonging to a court of equity, is 
 wholly derived from the constitution and laws of the United States, and 
 is utterly unabridged by any State legislation, yet, on the other hand, the 
 primary rights, interests and estates lohich are dealt loith in such suits, and 
 are protected by such remedies, a,re within the scope of State authority, 
 and may he altered, enlarged or restricted by State laics. The equitable 
 jurisdiction of the national courts is not directly affected by the State 
 statutes, but what may be finally accomplished by the exercise of that 
 jurisdiction, what estates, property rights and other interests of the 
 litigants may be maintained, enforced or enjoyed by its means, must 
 depend to a great extent upon the policy of legislation adopted in each 
 individual State."' 
 
 This is a true exposition of the rule, and the one upon which the 
 federal courts have consistently acted. Pick up any volume of United 
 States Supreme Court Reports and glance at the cases where the juris- 
 diction of the State and federal courts is concurrent, and not involv- 
 ing a matter of commercial law or of general jurisprudence. The 
 first question in substantially every case is : What is the State 
 law? A matter ceases to be a matter of general commercial law, or 
 of general jurisprudence, just as soon as a State legislates upon that 
 particular subject, and the federal courts, no matter whether, prior to 
 the enactment of the statute, their view of the law agreed or disagreed 
 with that of the State courts, are bound, thereafter, to follow the 
 authoritative exposition of the State statute by its highest court. Xor 
 does it follow that a matter is a matter of general jurisprudence simply 
 because there is no State statute on that subject. In its nature it may 
 be a matter of local policy, which can and must be regulated by the 
 decisions of each State, and then the federal courts must follow the 
 State decisions. 
 
 The effect of State laws and decisions upon the federal courts was 
 carefully considered in the leading case of Burgess vs. Seligman, 107 U. 
 S., p. 20, a common law case, and the rule upon this subject was 
 restated after the review of fifty United States Supreme Court decisions, 
 many of which were equity cases. The sources ot the rule, the irresist- 
 ible logic of in consimili casii of law un.d equity in the federal courts so 
 far as obedience to State laws is concerned, and its applications by the 
 federal courts, make it certain that it was intended to be a guide, both 
 iu common law and equity cases. 
 On pp. 33 and 34, the Court say : 
 " The existence of two co-ordinate jurisdictions in the same territory
 
 The Law of Pledge. 547 
 
 is peculiar, and the results would be anomalous and inconvenient but 
 for the exercise of mutual respect and deference. Since the ordinary 
 administration of the law is carried on by the State courts, it necessarily 
 happens that by the course of their decisions certain rules are estab- 
 lished which become rules of property and action in the State, and have 
 all the effect of law, and which it would be wrong to disturb. This is 
 especially true with regard to the law of real estate and the construc- 
 tion of State constitutions and statutes. Such established rules are 
 always regarded by the federal courts, no less than by the State courts 
 themselves, as authoritative declarations of what the law is. But 
 where the law has not been thus settled, it is the right and duty of the 
 federal courts to exercise their own judgment; as they also always do 
 in reference to the doctrines of commercial law and general jurispru- 
 dence. * * * As this matter has received our special consideration, 
 we have endeavored thus briefly to state our views with distinctness, in 
 order to obviate any misapprehensions that may arise from language 
 and expressions used in pi'evious decisions. The i^rincipal cases bear- 
 ing upon the subject arc referred to in the note, but it is not deemed 
 necessary to discuss them in detail " (see Xote 1). 
 
 This case has been affirmed in Pana vs. Bowles, 107 U. S., p. 541, 
 where the Court say: "See also Burgess vs. Seligman, ante, p. 20, 
 where the question how far the courts of the United States are bound 
 by the decisions of the State courts is carefully re-examined and the 
 rules on the subject stated with precision."' And in the following 
 cases: Carroll Co. vs. Smith, 111 U. S., p. 5G3; Anderson vs. Santa 
 Anna, 116 U. S. 3G2; Bolles vs. Brimfield, 120 U. S. 7G4; Foisom vs. 
 Township Ninety-six, 159 U. S. 025. See also Cooley's Con. Lim. (Gth 
 Edition), pp. 20, 21 and 22 and notes. 
 
 Federal courts always follow, in accordance with the above stated 
 rule, the State laws and decisions governing descents, fraudulent assign- 
 ments, taxation, limitation, frauds and perjuries, assignments for 
 benefit of creditors, what the Supreme Court of the United States des- 
 ignates as "rules of pi-operty," and many other statutes and decisions,- 
 all of which are different in every State. As to assignments, see South 
 Branch Lumber Company vs. Ott, i42 U. S., p. 628, an equity case, 
 where the Court say : "The question of the construction and effect of 
 a statute of a State regulating assignments for the benefit of creditors' 
 is a question upon which the decisions of the highest court of the State, 
 establishing a rule of property, uroof controlling authority in the courts 
 of the United States." This is n,n affirmation in the same words of what 
 is said iu the case of the Chicago Union Bank vs. the Bank of Kansas 
 City, 136 U. S., p. 235, an equity case. In 14S U. S., May vs. Tenney, 
 also an equity case, on pp. G4 and G5, the Court say : 
 
 "The decision in White vs. Cotzhausen, 129 U. S. 329, construing a 
 similar statute of Illinois in accordance with the decision of the 
 Supreme Court of that State, as understood by this court, has, therefore.
 
 548 The Law of Pledge. 
 
 no bearing upon the case at bar. The fact that similar statutes are 
 allowjd different effects in different States is immaterial. As observed 
 by Mr. Justice Field, speaking for this court: 'The interpretatiot 
 within the jurisdiction of one State becomes a part of the law of that 
 State, as much so as if incorporated into the body of it by the Legisla- 
 ture. If, therefore, different interpretations are given in different 
 States to a similar local law, that law in effect becomes by the interpre- 
 tations, so far as it is a rule for our action, a different law in one State 
 from what it is in the other.' Christy vs. Pridgeon, 4 Wall. 196, 203; 
 see also Detroit vs. Osborne, 135 U. S. 492." 
 
 How is it possible, if the position of the learned judge a quo be cor- 
 rect, for a federal court of equity to recognize assignments with prefer- 
 ences in one State, where they are allowed, and assignments without 
 preferences in another State where they are forbidden? 
 
 This is certainly not uniform equity jurisdiction in the sense that its 
 rules must be exactly the same in all the States. The Louisiana law 
 regulates preferences, and the case at bar comes within its provisions 
 on this subject. 
 
 Even the admiralty laws, an exclusive branch of federal jurisdiction, 
 vary in the several States, because the admiralty courts, under certain 
 restrictions, enforce liens created by the State laws, and yet admiralty 
 jurisdiction is the same in all the States. In the much quoted case of 
 the Bank of Augusta vs. Earle, 13 Peters, 510, it was argited that the 
 contract was contrary to the policy of the laws of Alabama, and, there- 
 fore, could not be enforced. On page 507 the court say : 
 
 " When the policy of a State is thus manifest the courts of the United 
 States would be bound to notice it as a part of its code of laws, and to 
 declare all contracts in the State repugnant to it to be illegal and void.'' 
 
 A fortiori does this reasoning apply, when a contract, like the one 
 attempted to be set up bj^ the iutervenors, is impossible under the State 
 laws. 
 
 So anxious are the federal courts to conform to the substantiTe rules 
 of law of the various States, that the Supreme Court has held in three 
 cases. Green vs. NeaVs Lessee, 6 Peters, 201, in which the necessity for 
 such conformity is elaborately and convincingly discussed, Suydam vs. 
 Williamson, 24 IIoio. 427, and Leffingwell vs. Warren, 2 Black, 600, 
 that it will follow the settled laws of property in any State, although it 
 may be thereby required to overrule its own decisions, which, when 
 rendered, were in accordance with the decisions of the State courts at 
 that time. So it appears that the Supreme Court has no pride of 
 opinion, when the rights of the citizens of a State demand that the rules 
 of property, as administered in the concurrent jurisdictions, shall be the 
 same. 
 
 In the case of Barrow vs. MiUiken, 74 F. It. 612, decided, one j-ear 
 ago, by the same court, which certified the instant case, an equitable 
 Jien was allowed, and the learned" judge a quo stated in his written
 
 The Law of Pledge. 549- 
 
 opinion that that case was decisive of this one. The fact that the judgeg 
 of the Circuit Court of Appeals have doubted their own decision by cer- 
 tifying the same question to this court is strongly persuasive of the fact 
 that they wish to invoke the aid of this court as a convenient means of 
 discarding error. In Green vs. NeaVs Lessee, supra, the court said : 
 " That it would be a strange perversion of principle if the judicial exposi- 
 tion of State laws by State tribunals could be disregarded by the federal 
 courts." 
 
 The bill of complaint in this case alleges that the defendant corpora- 
 tion is insolvent, and asks that a receiver may be appointed in order to 
 effect a ratable distribution of the defendant's assets. The answer filed 
 by the defendant company admits its insolvency and unites in the prayer 
 of the bill. Thus, the object of the appointment of a receiver in this 
 cause was to effect the same result that would have been attained by a 
 liquidation under the State law. 
 
 Independently of any proof of insolvency, Arts. 3183 and 
 3184 of the Civil Code require a ratable distribution of the 
 debtor's property. These articles are si:nply an expression of the 
 fundamental principle of all systems of insolvency law. There is, 
 therefore, but one question in the case, and that is, whether a ratable 
 distribution of the defendant's property is binding upon this court^ 
 unless lawful preferences, recognized by the State law, can be estab- 
 lished. This question, like every other -question of federal authority, 
 can be determined only by a reference to the federal constitution and 
 the decisions construing it, and by this chart we must be guided. The 
 discussion of the constitutionality of State insolvency laws is, in our 
 opinion, strictly analogous to the question at issue. 
 
 One of the enumerated powers of Congress is the right to establish a 
 uniform law of bankruptcy, and, in the actual exercise of this power, it 
 may override the lien laws enacted by the various States. Now, it is 
 a well settled rule of construction, that the grant of a power in an instru- 
 ment, designed to confer limited powers, is an implied exclusion of 
 other powers of a similar nature. Therefore, Congress is the sole 
 branch of the federal government empowered to annul the State lien 
 laws, and if Congress does not exercise its power, it is competent to the 
 States to establish laws of insolvency, and to regulate priorities, when 
 there are no insolvency laws. The contention at bar is that State lien 
 laws are not only subject to the supremacy of a national bankrupt act, 
 but also to the imputed p'ower of a federal chancellor to declare any 
 State lien law unconstitutional when it comes in conflict with an 
 equitable doctrine, prevailing in 1789. 
 
 Early in the history of our government, the question arose as to 
 the power of the States to enact insolvency laws, and Chief Justice 
 Marshall, in the famous case of Sturges vs. Crowninshield, 4 Wheat. 122,
 
 550 The Law of Pledge. 
 
 held that the grant to Congress of the power to establish uniform 
 bankruptcy laws was not incompatible with the passage of insolvency 
 laws by the States, not impairicig the obligation of contracts, when Con- 
 gress had declined to exercise its power. This case has become one of 
 the landmarks in federal jurisprudence, and has been reviewed and 
 affirmed a score of times. It follows that, if the States have the consti- 
 tutional right to enact insolvency laws, the federal courts must enforce 
 these laws, and allow or deny liens for exactly the same causes that 
 would be recognized in the State courts. It is needless to quote many 
 federal decisions in support of a proposition which none will deny, but 
 see Ogden vs. Saunders, 12 Wheat. 213, where the subject of State 
 insolvency laws is discussed in many phases; Boyle vs. Zacharie, 6 
 Pet. 348; Baldwin vs. Hale, 1 Wall. 228; Gil man vs. Lockwood, 4 Wall. 
 409; Cole vs. Cunningham, 133 U. S. 114; in Brown vs. Smart, 145 
 U. S. 457, the court say : 
 
 " The principles which underlie this case are clearly established by 
 the decisions of this court. So long as there is no national bankrupt 
 act, each State has full authority to pass insolvent laws binding persons 
 and property within its jurisdiction, provided it does not impair the 
 obligation of existing contracts; but a State can not by such a law dis- 
 charge one of its own citizens from his contracts with citizens of other 
 States, though made after the passage of the law, unless thej'^ volun- 
 tarily become parties to the proceedings in insolvency. Sturges vs. 
 Crowninshield, 4 Wheat. 122; Ogden vs. Saunders, 12 Wheat. 213; 
 Baldwin vs. Hale, 1 Wall. 223; Oilman vs. Lockwood, 4 Wall. 409. Yet 
 EACH State, so long as it does not impair the obligation of anv 
 
 CONTRACT, HAS THE POAVER BY GENERAL LAWS TO REGULATE THE 
 CONVEYANCE AND DISPOSITION OF ALL PROPERTY, PERSONAL OR REAL, 
 
 W^ITHIN ITS LIMITS AND JURISDICTION. Smith VS. Union Bank, 5 Pet. 
 518,526; Crapo vs. Kelly, 16 Wall. 610, 630; Denny vs. Bennett, 128 
 U. S. 489, 498; Walworth vs. Harris, 129 U. S. 355; Geilinger vs. 
 Philippi, 133 U, S. 216, 257; Pullman Palace Car Company vs. Penn- 
 sylvania, 141 U. S. IS, 22."' 
 
 Brown vs. Smart, and many other Supreme Court cases, were 
 cited in Butler vs. Goreley, 14G TJ. S. 313, in support of the proposition 
 that there is no force in the position that a State insolvency law is un- 
 constitutional. 
 
 All the foregoing cases are valuable because they show that in each 
 instance the federal courts enforce the State law of liens exactly as 
 they find it, and they all, by iuiplication, necessarily and emphatically 
 negative the id^a that there is such a thing as a uniform system of 
 federal equity jurisprudence, or that there is one set of liens in the 
 State and another In the federal courts. We have quoted the equity 
 cases of Chicago Union Bank vs. Bank of Kansas City, 136 U. S. 235; 
 Soutli Branch Lumber Company vs. Ott, 142 U. S. 628, and May vs. 
 Tenney, 148 U. S. 64, in each one of which the federal courts followed
 
 The Law of Pledge. 551 
 
 the assignment law of the various States in which the cases arose, and 
 pointed out that this was not uniform equity jurisdiction (t. c, jurispru- 
 dence). It is hardly necessary to add that assignment laws and insol- 
 vency laws both have the same object in view— the distribution of a 
 ■debtor's assets, though the means prescribed are different. 
 
 In Bamberger vs. Schooltield, 160 U. S. 149, the Court, through Mr. 
 Justice White, again affirmed the rule enunciated in Chicago Union 
 Bank vs. Bank of Kansas City, snp7-a, and. in that case enforced a prefer- 
 ence allowed under the Alabama law. It was expressly decided in Tua vs. 
 -Carriere, 117 U. S. 201, appealed from the Circuit Court of the United 
 .States for the Eastern District of Louisiana, and affirmed, that the insol- 
 vent laws of Louisiana are in force, and this decision was followed in 
 Shwartz et al. vs. H. B. Claflin Company, 60 F. R. 676. In both these 
 cases attachments in the federal court were dissolved by a cession in the 
 State Court. It can hardly be questioned that a receivership of an insol- 
 vent corporation in a federal court is equivalent to a liquidation of an 
 insolvent corporation in a State Court, and there should be the same 
 result reached in both courts in the distribution of assets. 
 
 It is a work of supererogation to cite more federal cases, holding that 
 State lien laws, as applied to insolvency proceedings, assignment laws, 
 to the distribution of a decedent's assets and to all other subjects, are 
 binding upon the federal courts both of lawandequity, but, recognizing 
 the vast importance of principle involved in this case, we desire to 
 quote the following cases to show how inflexibly the rule has been 
 applied. The syllabus of Smith vs. Union Bank of Georgetown, 5 Pet. 
 618, is : 
 
 " The right of priority of payment among creditors of an intestate depends 
 -on the laxo of the place where the assets are administered, and not on the 
 law of the place of the contract, or of the domicile of the deceased, and, 
 therefore, where administration was taken under the laws of Maryland, 
 of assets there, where all debts are of equal dignity and the intestate 
 was domiciled, and owed a bond debt in Virginia, where bond debts 
 have a preference, held, that the bond debt had no prior right of pay- 
 ment out of the assets in Maryland." 
 
 In Marbury vs. Kentucky Union Land Company, 62 Federal Reporter, 
 page 353, decided by the Circuit Court of Appeals for the Sixth Circuit, 
 the Court say : 
 
 "The last question for our consideration is whether the distribution of 
 the estate of the land company shall be according to the ordinary equi- 
 table rule, or in accordance with the Kentucky statute which governs 
 the distribution of the estates of the deceased insolvents." 
 
 After a full discussion of the subject, the Court further say : 
 
 " The distribution of the land company's estate should be, therefore, 
 in accordance with the rule prescribed by Sec. 35, Art. 2 of chapter 39 
 of the general statutes of Kentucky, concerning estates of decedents '' 
 (page 356) .
 
 552 The Law of Pledge. 
 
 fnEtheridge vs. Sperry, 139 U. S., pages 276-7, the Court say: 
 
 " While chattel mortgages are instruments of general use, each State 
 has a right to determine for itself under what circumstances they may 
 be executed, the extent of the rights conferred thereby, and the condi- 
 tions of their validity. They are instruments for the transfer of prop- 
 erty, and the rules concerning the transfer of property are primarily, at 
 least, a matter of State regulation. We are aware that there is great 
 diversity in the rulings on this question by the courts of the several 
 States, but whatever may be our individual views as to what the law 
 ought to be in respect thereto, there is so much of a local nature 
 entering into chattel mortgages, that this Court will accept the settled 
 law of each State as decisive in respect to any case arising therein. 
 Chicago Banli vs. Kansas City Bank, 136 U. S. 223."' 
 
 This decision announces the doctrine that the States can regulate the 
 disposition and conveyance of personal property in the most emphatic 
 manner, which is an affirmation in part of the more extensive rule 
 quoted in Brown vs. Smart, supra. 
 
 We come now to the important case of Brine vs. Insurance Company,. 
 96 U. S., p. 630, in which the opinion was delivered by Mr. Justice 
 Miller, that great expounder of constitutional law. The present Chief 
 Justice of the United States Supreme Court represented the appellants, 
 and succeeded in reversing the lower Court. The question there at 
 issue was as to the binding effect of the Illinois statutes regulating the 
 foreclosure of a mortgage, upon a federal court of equity sitting in that 
 State. The Court held that these statutes were binding upon the 
 federal court, and that all private contracts are made with special 
 reference to the laws af the place where they are made and to be per- 
 formed, and that these laws are incorporated into the contract. Apply- 
 ing these principles to the instant case, appellees' contract was made 
 subject to the law of Louisiana, by which an equitable lien is expressly 
 excluded. In Brine vs. Insurance Company it was urged that the 
 federal equity practice must be uniform in all the States, and the 
 inference was drawn that federal equity jurisprudence must be uniform. 
 Mr. Justice Miller said that no feaeral decision had held that equity 
 courts could deny substantial rights conferred by State statutes. We 
 do not believe in quoting copious extracts from opinions, but think 
 that the importance of the principle involved in the present case 
 justifies us in departing from the rule, when a leading case bears 
 so closely upon the discussion and presents the subject in such a lucid 
 way, especially in view of the fact that appellees' present contention is 
 reviewed. 
 
 On pp. 633-4 the Court say : 
 
 "It is denied that these statutes are of any force in cases where the 
 decree of foreclosure is rendered in a court of the United States, on the 
 ground that the equity practice of these courts is governed solely by 
 the precedents of the English Chancery Courts as they existed, prior to
 
 The Law of Pledge. 553 
 
 the declaration of independence, and by such rales of practice as have 
 been established by the Supreme Court of the United States, or adopted 
 by the circuit courts for their own guidance. And treating all the 
 proceedings subsequent to a decree, which are necessary for its 
 enforcement, as a matter of practice and as belonging solely to the 
 course of procedure in courts of equity, it is said that not only do the 
 manner of conducting the sale under a decree of foreclosure, and 
 all the incidents of such a sale, come within the rules of practice of the 
 court, but that the effects of such a sale, on the rights acquired by the 
 purchaser and those of the mortgagor, and his subsequent grantees, are 
 also mere matters of practice to be regulated by the rules of the court, 
 as found in the sources we have mentioned. 
 
 '• Oa the other hand, it is said that the effect of the sale and convey- 
 ance made by the commissioner is to transfer the title of real estate 
 from one person to another, and that all the means by which the title 
 to real property is transferred, whether by deed, by will, or by judicial 
 proceeding, are subject to, and may be governed by, the legislative will 
 of the State in which it lies, except where the law of the State on that 
 subject impairs the obligation of a contract. And that all the laws of 
 a State, existing at the time a mortgage, or any other contract, is made 
 which affect the rights of the parties to the contract, enter into 
 and become a part of it, and are obligatory on all courts which assume 
 to give remedy on such contracts. 
 
 ''We are of opinion that the propositions last mentioned are sound; 
 and if they are in conflict with the general doctrine of the exemption 
 from State control of the chancery practice of the federal courts, as 
 regards mere modes of procedure they are of paramount force, and the 
 latter must to that extent give way. It would seem that no argument 
 is necessary to establish the proposition that when substantial rights, 
 resting upon a statute which is clearly within the legislative power,, 
 come in conflict with mere forms and modes of procedure in the 
 courts, the latter must give way and adapt themselves to the forms nec- 
 essary to give effect to such rights. The flexibility of chancery 
 methods, by which it moulds its decrees so as to give appropriate relief 
 in all cases within its jurisdiction, enables it to do this without violence 
 to principle. If one or the other must give way, good sense unhesi- 
 tatingly requires that justice and posiiive rights, founded both on valid 
 statutes and valid contracts, should not be sacrificed to mere questions 
 of mode and form. 
 
 " Let us see if the statutes of Illinois on this subject do confer posi- 
 tive and substantial rights in this matter" (page 634). 
 
 " It is not denied that in suits for foreclosure in the courts of that 
 State the right to redeem within twelve months after the sale under a 
 decree of foreclosure is a valid right, and one which must govern those 
 courts. 
 
 " Nor is it pretended that this court, or any other federal court, caa
 
 554 The Law of Pledge. 
 
 in sucb case review a decree of flie State co"iirfc whicli gives tbe*' right to 
 redeem.' Ttiis is a clear recognition that nothing in that statute is in 
 conflict with any law of the United States. If fliis be so, how can a 
 •court whose functions rest solely in powers conferred by the United 
 States, administer a different law which is in conflict with the right 
 in question? To do so is a"t once to introduce'into the jurisprudence of 
 the State of Illinois the discordant elements of a sfibstantial right which 
 Is protected in one set of courts and denied in the other, with no superior 
 to decide which is right. Olcott vs. Bynum et al., 17 Wall. 44; Ex parte 
 McNeil, 13 lb. 236" (p. 635). 
 
 "But there is another view of the question which is equally forci- 
 ble, and which leads ta the same result. All contracts between private 
 parties are made with reference to the law of the place where they are 
 made, or are to be performed. Their construction, validity, and effect, 
 are governed by the place where the}' are made and are to be per- 
 formed, if that be the same as it is in this case. It is, therefore, said 
 that these laws enter into and become part of the contract " (page 
 >637). 
 
 '•We are not insensible to the fact that the industry of counsel has 
 been rewarded by finding cases, even in this court, in which the prop- 
 osition that the rules of practice of the federal courts in suits in equity 
 can not be controlled by the laws of the States, is expressed in terms so 
 emphatic and so general as to seem to justify the inference here urged 
 ■upon us. But we do not find that it has been decided in anj* case that 
 this principle has been carried so far as to deny to a party in those 
 courts substantial rights conferred by the statute of a State, or to add 
 to or take from a contract that which is made a part of it \>y the law of 
 the State, except where the law impairs the obligation of a contract 
 previously made. And we are of opinion that Mr. Chief Jjiistice Taney 
 expressed truly the sentiment of the court as it was organized in the 
 case of Bronson vs. Kinzie, as it is organized now, and as the law of the 
 •case is, when he said that ' all future contracts would be subject to such 
 provisions, and they would be obligatory upon the parties in the courts 
 •of the United States, as well as those of the States ' '" (page 639). 
 
 Mr. Justice Miller quotes approvingly an opinion of Mr. Chief Justice 
 1'aney in the extract just given, and we now desire to give an excerpt 
 from an opinion of that eminent Chief Justice on circuit, in Maryland, 
 which settles this question of the obligation of federal courts of equity 
 to follow the State law in matters of local policy, so far as unanswerable 
 logic can settle anything. 
 
 The decision places the law upon that solid foundation of common 
 sense and justice from which it can never be dislodged. We ask the 
 attention of the court to the argument of counsel for the complain- 
 ant in that case because he pinned his faith to some of the same cases, 
 upon which counsel for appellees in this case rely. In that case the 
 "Complainant attempted to enforce a bequest in favor of a vague charity,
 
 The Law of Pledge. 555 
 
 •and the court held that it was bound to follow the Maiyland decisions, 
 which had held such a bequest void. 
 
 " The circuit courts of the United States administer the laws of the 
 States in which they sit, unless those laws are in conflict with the con- 
 stitution of the United States, treaties or acts of Congress; and, as a 
 general rule, regard the decisions of the highest judicial tribunals of 
 the State as conclusive evidence of the law. We do- not speak of mat- 
 ters of practice, or the forms of proceeding; but of decisions upon 
 the right or claim in dispute between the parties, where that right 
 depends upon the laws of the particular State. 
 
 The cases of Swift vs. Tyson, IG Pet. (41 U. S-.) 1, and Carpenter vs. 
 Providence Ins. Co., Id. 511, 512, were cases depending upon the usage 
 -of commerce, and the general principles of commercial law. And the 
 Supreme Court have always said that in cases^of that description, where 
 the State court does not decide the case upon any particular law of the 
 State or established local usage, but upon, the general principles of 
 commercial law, if it falls into error, that erroneous decision is not 
 regarded as conclusive evidence of the commercial law of the State, and 
 will not be followed as such by the Supreme Court. And the reason of 
 .this distinction is obvious. The State court does not decide in such 
 cases upon the peculiar laws and institutions of the State. Its decision, 
 therefore, is no evidence that any law has been adopted by the State in 
 -conflict with the general principles which regulate commercial con- 
 tracts throughout the commercial world. 
 
 So, too, as relates to the jurisdiction, of the circuit court sitting as a 
 court of chancery. It is undoubtedly true, as contended for in the 
 argument of the complainant, in regard to equitable rights, that the 
 power of the courts of chancery of the United States is, under the con- 
 stitution, to be regulated by the law of the English chancery; that is to 
 .sa}% the distinction between law and equity, as recognized in the juris- 
 prudence of England, is to be observed in the courts of the United 
 States in administering the remedy for an existing right. The rule 
 <tpplies to the remedy and not to the right; and it does not follotv, that 
 every right given by the English laio, and ichich, at the time the constitu- 
 tion loas adopted, might have been enforced in a court of chancery, can also 
 be enforced in a court of the United States; the right must be given by the 
 law of the State, or of the United States. It is the form of remedy for which 
 the constitution provides; and if a complainant has no right, the circuit 
 ^ourt, sitting as a court of chancery, has nothing to remedy in any form of 
 proceeding. 
 
 In the case before the court the question is: Is the bequest which 
 the complainants claim a valid one by the laws of Maryland? It is a 
 question which, in its nature, necessarily depends upon the laws of the 
 respective States. Some of the States sanction devices of this descrip- 
 tion; some do not, and undoubtedly it depends upon every State to 
 ^determine for itself, to whom and in what form, and by'what instrument.
 
 556 The Law of Pledge. 
 
 any property within its borders may pass by devise or otherwise. The 
 court of appeals in Maryland have decided that a bequest like this is 
 void by the laws of the State and passes no right to any one. This 
 court is bound to respect this as the law of the State, and if there is no 
 right vested in the complainants by this bequest, this court can not cre- 
 ate one. There is, therefore, neither an equitable nor legal title upon 
 which the powers of a court of the United States can be called into 
 action, either as a court of equity or of law, in behalf of these com- 
 plainants. 
 
 This is not a proceeding to appoint a trustee to execute a valid trust, 
 nor, indeed, are there any cestuis que trustent. This doctrine is fuUj^ 
 maintained in the case of Wheeler vs. Smith, 9 How. (50 U. S.) 55, 
 which was decided at the last term of the Supreme Court. The cases 
 of Trustees of Philadelphia Baptist Association vs. Hart's Executors, 
 and Vidal vs. Girard"s Executors, were in that case recognized as 
 depending upon the laws of the respective States, and not merely upon 
 the doctrines of the English chancer\\ The bill in this case must, 
 therefore, be dismissed with costs." Meade vs. Beale, F. C, Vol. 16, 
 Case No. 9371, p. 1283. 
 
 Fortunately, we are not left to conjecture whether the free grace of a 
 federal chancellor, by the potent magic of an equitable lien, can con- 
 vert an imperfect pledge, under the Louisiana law, into a perfect 
 pledge, because this question has been set at rest by the Supreme Court 
 of the United States, in the case of Casey vs. Cavaroc, 93 U. S. 407, a case 
 involving exactly the same questions as the one at bar, Avhich went up 
 from the circuit court of the United States for the District of Louis- 
 iana. In that case, the receiver of an insolvent bank filed a bill in 
 equity in the federal court to recover some securities which the bank, 
 prior to receivership, had attempted to pledge, on the ground that the 
 pledge was imperfect and conferred no right on the pledgee as against 
 the other creditors of the bank. The circuit court dismissed the bill 
 and the receiver appealed and reversed the lower court. The Supreme 
 Court reviewed the Louisiana law of pledge at great length and the 
 decisions thereunder, and concluded that the pledge was defective 
 under the Louisiana law, and, therefore, could not be recognized in the 
 federal court, by which law that court was governed. 
 
 It was urged in the argument t*hat a similar pledge had been sus- 
 tained by the Supreme Court itself in a case, going up from New York. 
 Clarke vs. Iselin, 21 Wall. 3G0, and that that decision was binding 
 upon the court. The court stated in its opinion that the New York 
 case was governed by New York law, where such a pledge was valid, 
 but that the case at bar was controlled by Louisiana law, where such a 
 pledge was invalid. In Casey vs. Cavaroc, the pledgee, recognizing, as 
 the pledgee does in this case, that he could get no comfort from Loui- 
 siana law, invoked the power of equity to save him, but equitj' mocked 
 at him, and said, in effect: " Shall I, in a matter of State law and local
 
 The Law of Pledge. 557 
 
 policy, recognize rights which are denied to you by the State courts? " 
 On page 491, the court say : 
 
 •' These considerations also supply an answer to another suggestion, 
 that equity will consider as done what the parties intended should be 
 done, which, it is assumed, was, in this case, a transfer of the title of 
 the securities. Equity will not exercise this power when it would 
 injure third persons who have incurred detriment, and acquired con- 
 sequent rights by the acts that are done Such detriment has, in the 
 view of the law, been incurred in this case, and such rights have, by 
 the express letter of the law, accrued." 
 
 In the case at bar all the creditors regarded the sugar bounty as a 
 <;oramon fund, and their rights certainly accrued to subject it. The 
 court will observe the exact parallel between this case and the case at 
 bar. In bosh eases there are insolvent corporations; in both cases a 
 pledge is attempted prior to insolvency, which is invalid under the 
 Ijouisiana law, ia both cases equity is called upon to perfect the 
 p'.elge; in one case equity declined to interfere, and if experience and 
 reason be any guide, it will also decline to interfere in this case. 
 
 Caspy vs. Cavaroc was a much stronger case for equitable interven- 
 tion than the present one; for, in that case, nearly all the elements of a 
 legal pledge existed. 
 
 Appellee's counsel attempts to distinguish between an executed and 
 an executory contract aul claims that a mere promise, though unac- 
 companied by a tra!i-?fer or an assignment, will invest a court of equity 
 with power to transform inchoate rights into perfect equitable rights, 
 and to enforce them by appropriate equitable remedies, while an 
 attempted execution of the contract by the parties themselves places 
 them beyond the sustaining grasp of the chancellor's hand. Upon 
 this principle equity will not help those who try to help themselves, but 
 extends its favors solely to those who promise and do nothing, 
 which is contrary to one of its maxims—" Vigilautibasnon dormieiitibus 
 <Bquitas suhvenit.'' 
 
 If, according to this reasoning, in the case of Casey vs. Cavaroc, 96 
 U. S. 467, the bank had promised to pledge its securities to the Credit 
 Mobilier, Instead of actually attempting to pledge them, the Credit 
 Mobilier would have had an indefeattble right to them as against all 
 the other creditors of the insolvent bank. 
 
 Casey vs. Cavaroc was followed in Bidstrup vs. Thompson, 4.5 F. R., 
 p. 454. a case decided b}^ the circuit court for the Eastern District of 
 Louisiana, In that case the Louisiana law of pledge was applied. 
 
 If the so-called doctrine of an equitable lien is held to apply to the 
 instant case, then it is true that the insolvency laws of Louisiana, and 
 the other States, to the extent that they govern preferences, can always 
 be defeated, where one creditor can get the common debtor to make 
 him a promise, of which a federal court of equity will take cogni-
 
 558 The Law of Pledge. 
 
 zance, to devote a portion of his assets to the payment of his specific- 
 debt. Surely this court must recoil from such a consequence. 
 
 We invite the attention of the court to the following equity cases, in. 
 each of which the State law was followed : 
 
 State Railroad Tax Cases, 92 U. S., pp. 575, G17. 
 
 Van Rensselaer vs. Kearney, 18 U. S., pp. 631. 636 (11 How. 297). 
 
 Carroll vs. Safford, 15 U. S., p. 509 (3 How. 441). 
 
 Nesmith vs. Sheldon, 17 U. S., p. 417 (7 How. 812). 
 
 Beauregard vs. City of New Orleans, 18 How. 497 and 502 (1 Mil- 
 ler, 422). 
 
 Davie vs. Briggs, 97 U. S. 028. 
 
 Elmendorf vs. Taylor, 6 U. S. 360 (10 Wheat. 152). Opinion deliv- 
 ered by Chief Justice Marshall. 
 
 Ridings vs. Johnson, 128 U. S. 212. 
 
 Mellen vs. Buckner, 139 U. S. 388. 
 
 New Orleans Bank vs. LeBreton, 120 U. S. 765. 
 
 The cases of Beauregard vs. City of New Orleans, New Orleans Bank 
 vs. LeBreton, Ridings vs. Johnson, and Mellen vs. Buckner, siipra, 
 went up from Louisiana, and in all these cases a federal court of equity 
 enforced the Louisiana law exactly as it found it. 
 
 See also New Orleans Waterworks Co. vs. Southern Brewery Co.. 36 
 F. R. 833, where the doctrine was applied in a novel but correct manner. 
 
 It has long been settled that a man neither gains nor loses anything 
 by going into a federal court in matters of concurrent jurisdiction in- 
 volving questions of local law and State polic\% and in support of this 
 proposition we quote the following extract from Ex parte McNeil, 13 
 Wall. 213, which is also valuable because it explodes the notion that 
 jurisdiction is jurisprudence: 
 
 '•It is urged further that a State law could not g[\e jurisdiction to the 
 District Court. This is true. A State law can not give jurisdiction to 
 any federal court; but that is not a question in this case. A State law 
 may give a substantial right of such a character that, where there is 
 no impediment arising from the residence of the parties, the right may 
 be enforced in the proper federal tribunal whether it be a court of 
 equity, of admiralty, or of common law. The statute in such cases 
 does not confer the jurisdiction that exists already, and it is invoked to 
 give effect to the right by applying the appropriate remedy. This 
 
 PRINCIPLE MAY BE LAID DOWN AS AXI05IATIC IN OUR NATIONAL 
 JURISPRUDENCE. A PARTY FORFEITS NOTHING BY GOING INTO A 
 FEDERAL TRIBUNAL. JURISDICTION HAVING ATTACHED, HIS CASE 
 IS TRIED THERE UPON THE SAME PRINCIPLES, AND ITS DETERMINA- 
 TION IS GOVERNED BY THE SAME CONSIDERATIONS, AS IF IT HAD
 
 The Law of Pledge 559 
 
 BEEN BROUGHT IN THE PROPEll STATE TRIBUNAL OF THE SAME 
 
 LOCALITY. In no class of cases has the application of this principle 
 been sustained by this court more frequently than in those of admir- 
 alty and maritime jurisdiction." 
 
 This case was artirmeJ in Cowley vs. Xorthern Pacific Railroad Co , 
 159 U. S. 583, where the court say, after discussing the meaning of 
 equitable jurisdiction : 
 
 '' It was also said in Davis vs. Gray, IG Wall. 203. 231, that ' A party 
 
 BY GOING INTO A NATIONAL COURT DOES NOT LOSE ANY RIGHT OK 
 APPROPRIATE REMEDY OE WHICH HE MIGHT HAVE AVAILED HIM- 
 SELF IN THK State courts of the same locality. The wise 
 
 POLICY OF the constitution GIVES HIM A CHOICE OF TRIBU- 
 NALS." " Other cases to the same effect are Holland vs. Challen, 110 
 U. S. 1.5; Marshall vs. Holmes, 141 U. S. 589. Johnson vs. Waters. lU 
 U. S. 640; Arrowsmith vs. Gleason. 129 U. S. 86. 
 
 Should appellees' contention be sustained, they will, by a mere 
 choice of a federal tribunal, have deprived appellants of their un- 
 doubted right in the State courts to participate ratably in the distribu- 
 tion of the fund. 
 In Lippincott vs. Mitchell, 94 U. S. 770, the court say: 
 "This construction is a rule of property of the State, and we are as 
 much bound by it as if it were a part of the statute. It is our dutt 
 
 TO APPLY THE LAW OF THE STATE AS IF WE WERE SITTING THERE 
 AS A LOCAL COURT, AND THIS CASE WERE BEFORE US AS SUCH A 
 
 TRIBUNAL."" Citing, Leffingvvell vs. Warren, 2 Black, 599; Olcott vs. 
 Bynum, 17 Wall. 44. 
 
 In Daniels vs. Case, 45 F. R. 845, the court, af fer torcibly discitssing 
 the binding effect of State statutes and decisions upon federal courts, 
 say: 
 
 " The plaintiff, because of residing on the west Jide ot Kaw river, 
 with the right to sue in the United States Circuit Court, would have a 
 good tax title, while a citizen of Missouri, on the east side ot the river^ 
 would have no title. The, public sense oj justice would challenge to the 
 death any such rule of inequality .''^ 
 
 III. 
 
 We now v/ish to briefly review some of the authorities, relied upon ay 
 appellees. 
 
 It is well to bear In mfnd In the examination of cases the following 
 principle, enunciated by tbe Circuit Court of Appeals for the Eighth 
 Circuit, in the United States vs. Trans-Missouri Freight Association,. 
 58 F. R. 73: " But the language employed by the courts in these cases 
 should be read in the light of tbe circumstances under which it was 
 uttered, and with due reference to tlie point actually adjudicated." In 
 the noted case of Cohens vs. Virginia, 6 Wheat. 264, 339, Chief Justice
 
 5G0 The Law of Pledge. 
 
 Marshall said with his customary force: '• It is a maxim, not to be dis- 
 regarded, that general expressions, in every opinion, are to be taken in 
 •connection with the case in which those expressions are used. If they 
 ^o beyond the case, they may be respected, but ought not to control 
 the judgment in a subsequent suit, when the very point is presented for 
 decision. The reason of this maxim is obvious. The question actuallj' 
 before the court is investigated with care, and considered in its full 
 ■extent. Other principles which may serve to Illustrate it, are consid- 
 ered in their relation to the case decided, but their possible bearing on 
 all other cases is seldom completely investigated."" Also see Wambaugh's 
 The Study of Cases, Chap. II. Applying this principle, the cases cited 
 can not control this case, unless tlie i^oint actually decided was that 
 there must be a uniform federal equity jurisprudence, not jurisdiction, 
 and that substantive rights, denied by the State statutes, are allowed in 
 federal courts of equity. In not one of the cited cases was this held, 
 and, therefore, they are not authorities to sustain appellees' contention. 
 
 The earliest case on the subject is Robinson vs. Campbell, 3 Wheat. 
 212. One of the points in that case was whether an equitable title 
 could be set up as a defence in an action of ejectment, and the court 
 held that it could not be, no matter what the State practice was. The 
 syllabus correctly expresses the decision on this point: 
 
 "To determine whether there is plain, adequate and complete remedy 
 at law, so as to prevent a resort to the equitable powers of the courts of 
 the United States, reference must be had to the principles of the com- 
 mon law of England, and not to the laws of the State where the Court 
 sits. 
 
 '' If the State laws have given a legal remedy founded on an equitable 
 title, the equity jurisdiction of the circuit court is not affected thereb}'."' 
 
 The next case is United States vs. Ilowland. 4 AVheat. lOS. 
 
 In this case it appears that the United States filed a bill of equity in 
 the Federal Circuit Court for ]\Iassachusetts to recover money due for 
 duties. The defendants demurred on the ground that the case was not 
 one of equitable cognizance, as a statute of Massachusetts gave the 
 government the right to proceed at law in such cases. The lower court 
 sustained the demurrer and dismissed the bill, but the Supreme Court 
 held, that under the facts of the case a trust existed, and an accounting 
 would be required, so that the case was. on general principles, one of 
 ■equitable cognizance, and that the State law could not vary the juris- 
 diction in the federal court. The case was remanded to be proceeded 
 with in equity. This decision, therefore, simply announces the proposi- 
 tion, that whether a case shall be proceeded with at law or in equity in 
 the federal courts depends on general principles governing the allot- 
 ment of causes to the law or equity side, prevailing at the time of the 
 adoption of the federal constitution, and not on State legislation. The 
 expressions used by Chief Justice Marshall must be understood with 
 reference to the point he was deciding.
 
 The Law of Pledge. 561 
 
 In the case of Neves vs. Scott, 13 How. 270, two questions of general 
 •equity jurisprudence were presented, one as to the nature of an executed 
 trust, the other as to who were volunteers. The court say : " No ques- 
 tion has arisen concerning any statute law op Georgia, nor was it 
 then, nor is it now, suggested that any word, or phrase, or provision of 
 the articles, should bear any peculiar or technical meaning, by reason of 
 any local law or custom." In that case it was urged that a decision of 
 the Supreme Court of Georgia in a similar case was binding upon the 
 Supreme Court, but the court held that both courts in a matter of that 
 nature resorted to the decisions of the English High Court of Chancery, 
 and that the decision of the Georgia court was not binding upon it. 
 
 In the case of Fitch vs. Creighton, 24 How. 160. the question at issue 
 was as to the form of procedure, and the court held that according 
 to the principles governing the allotment of causes in the federal 
 courts, it was a proper case for equitable relief, and that State statutes 
 could not change the nature of federal remedies. 
 
 The next case is Payne vs. Hook, 7 Wall. 425. In that cas^ a bill in 
 equity was filed by a citizen of Virginia against the Public Administra- 
 tor of Calloway county, Mo., to obtain a distributive share in an intes- 
 tate estate. A demurrer was filed on the ground that under a Missouri 
 statute a State chancery court would have no jurisdiction in such a case, 
 because this branch of equitable jurisdiction had been confided to a 
 special probate court. The court held that the bill stated a proper 
 case for equitable relief, according to the principles, obtaining in 17S9, 
 and that a federal court of equity did not follow the allotment in State 
 courts, when the assignment there conflicted with its fundamental 
 principle of allotment. The lower court sustained the demurrer, but 
 the Supreme Court reversed its decision. The right existed both in the 
 State and federal courts, and it was simply a question as to the forum in 
 which this right should be litigated. Had the demurrer been sustained, 
 this absurdity would have resulted. The right, sought to be enforced, 
 was equitable, not common law; hence, if equity had no jurisdiction, a 
 litigant with an indisputable right could have had no relief in the 
 federal court, since in that court all suits must be allotted to either the 
 common law or equity side. This would have been another of those 
 anomalous cases, which are a standing reproach to the law — a right 
 and no remedy. 
 
 In the case of Fletcher vs. Morey, Federal Cases, Ko. 4864, an equi- 
 table lien was enforced in Massachusetts. The court held that the 
 agreement creating the lien was valid between the parties and not 
 prohibited by the laws of Massachusetts, and that the lien could be en- 
 forced imder the general equity jurisdiction of a federal court g.s well 
 as tinder its particular jurisdiction, conferred by the Bankrupt Act of 
 1841, C. 6, Sec. 8, thus placing its jurisdiction upon a double ground. 
 The court said that it had yet to learn that no equitable lien could exist 
 in Massachusetts, though it was true that no remedy (statutory evi-
 
 562 The Law of Pledge. 
 
 dently) had been provided for its enforcement in tl\e State courts. By- 
 reference to Jones on Liens, Vol. 1, Sec. 30, it will be seen that equi- 
 table liens are enforced in the Massachusetts State courts. But is this 
 case authority for the proposition that a right, denied in the State 
 court, must be enforced in a federal court of equity? 
 
 The learned judge a quo, in his written opinion, lays great stress upon 
 the decision in Kirby vs. Lake Shore Railroad Company, I2O U. S. 130. 
 In that case, an equity case, the only question was as to the time from 
 which the statute of prescription ran in bar of suit, and extinctive pre- 
 scription is the loss of a remedy. 
 
 The case went up from New York, and it was argued that the federal 
 court must adopt the New York statute of limitations, as construed by 
 its highest courts, which was contrary, so it was stated in argument, to 
 the uniform practice in the federal courts of equity, determined by 
 numerous federal decisions. The court held that the construction of 
 the New York statute was doubtful; that its equitj' jurisdiction must be 
 uniform in the several States, and that it could not change its long 
 established rule, which was based upon an ancient equity principle. 
 The point decided was that " it is an established rule of equity, as ad- 
 ministered in the courts of the United States, that where relief is asked 
 on the ground of actual fraud, especially if such fraud has been con- 
 cealed, time will not run in favor of the defendant until the discovery 
 of the fraud, or until, with reasonable diligence, it might have been 
 discovered" (p. 136). 
 
 This case decided no more and no less, and certain it is that the deci- 
 sion was not contrary to the State statute, since its construction was 
 doubtful. 
 
 In the case of Wagner vs. Baird, 7 How. 255, 258, the court say : " In 
 cases of concurrent jurisdiction, courts of equity consider themselves 
 bound by the statutes of limitation, which govern courts of law in like 
 cases; and this rather in obedience to the statutes than by analog}'." 
 
 In Godden vs. Kimmell, 99U. S. 201, the court say: "Statutes of 
 limitation form part of the legislation of every government, and are 
 everywhere regarded as conducive and even necessary to the peace and 
 repose of society. When they are addressed to courts of equity as well 
 as to courts of law, as they seem to be in controversies of concurrent 
 jurisdiction, they are equally obligatory in both forums, as a means of 
 promoting uniformity of decision;" and. on page 210, the above pas- 
 sage from Wagner vs. Baird is quoted with approval. 
 
 In Metropolitan Bank vs. St. Louis Dispatch Company, 149 U. S. 436, 
 448, the court say : "•Courts of equity in cases of concurrent jurisdic- 
 tion consider themselves bound by the statutes of limitation which 
 govern action at law;" citing Godden vs. Kimmell. 
 
 (In Baker vs. Cummings, 1(59 U. S. 189, 206, the court quoted with 
 approval the above sentence from the Metropolitan Bank vs. St. Louis 
 Dispatch Company.)
 
 The Law op Pledge. 563 
 
 In the light of these decisions argument is unnecessary to prove that 
 federal courts of equity, in cases of concurrent jurisdiction, are bound 
 by State statutes of limitation, and in the case of Kirby vs. Lake Shore 
 Railroad Company, the court, on page 138, announced, as settled law, 
 the proposition of the above cases. The confusion caused by this case, 
 as by many others, has arisen from failing to discriminate between the 
 point actually decided and mere obiter dicta. If this case can be con- 
 strued as meaning that federal courts of equity in matters of substan- 
 tive law and concurrent jurisdiction are not controlled by State laws, it is 
 in direct conflict with Brine vs. Insurance Company, 90 U. <j30, Meade 
 vs. Beale, F. C, Vol. 16, Case No. 9371, and Brown vs. Smart, 145 U. 
 S. 454, and a host of other United States Supreme Court decisions, 
 quoted sr<pra, which are a necessary deduction from the limitations of the 
 federal constitution upon federal courts. 
 
 In the case of Gordon vs. Hobart, F. C, No. 5609, another equity 
 case, it was argued that, under the facts of that case, the plaintiffs had 
 a remedy at law under the State law, and, therefore, could not go into 
 a federal court of equity. The court held very properly that the fed- 
 eral equity jurisdiction must be uniform, and that the fact that the 
 remedy in the State court was at law did not prevent federal equity 
 jurisdiction from attaching. In the present case it must never be for- 
 gotten that there is no right and, of course, no remedy in the State 
 courts, and that the burden of appellees' song to this court is, " Create 
 us a right and give us a remedy." 
 
 The case of Wheeler vs. Insurance Company, 101 U. S., p. 439, which 
 is confidently asserted to have silenced our contention, simply 
 holds that the lien, there claimed, is recognized by the Louisiana 
 Code and Louisiana decisions, and must be admitted in a federal court 
 of equity. No one can be found to gainsay this indisputable proposition, 
 assuming that the premise about the Louisiana law was correct, but how 
 is it an authority for the exactly contrary position that a right, unknown 
 and denied in Louisiana courts, must still be enforced in a federal court 
 of equity? From what source do federal courts of equity derive the 
 power to trample upon State laws, enacted in pursuance of their 
 reserved rights, guaranteed by the federal constitution? , 
 
 In the case of Riddle vs. Hudgins, 7 U. S. C. C. A. Reports, p. 335, 
 (58 F. R. p. 490) Hudgins & Bro. sold a drove of cattle to Nichols, in 
 Arkansas, and it was verbally agreed that the seller should have an 
 express lien on the cattle for the unpaid purchase price. Nichols 
 removed the cattle to the Choctaw Nation, in Indian Territory, and there 
 died. His administrator took possession of over half the cattle, and 
 upon demand, made by Hudgins & Bro., refused to surrender the cattle 
 or to pay for them. No other creditor of the decedent claimed then), 
 and upon a bill filed in the federal court by Hudgins & Bro., it waa 
 decided that they had a lien on the cattle to secure their debt. 
 There is nothing in the record to show that this decision was contrary
 
 564 The Law of Pledge. 
 
 to a positive statute, and therefore, this case is no authority for the con- 
 tention at bar, which is, that a so-called equitable lien can override an 
 express State statute. This case went up from Indian Territory, where a 
 territorial government existed. 
 
 In the case of Mississippi Mills vs. Cohn, 150 U. S. 202, it was held 
 that the jukisuiction (not jurisprudence) of federal courts, sitting as 
 courts of equity, can not be enlarged or diminished by State legislation; 
 and that whether a federal court of equity has jurisdiction over a par- 
 ticular case will be determined by inquiring whether, by the principles 
 of common law and equity, as distinguished and defined in this country 
 and the mother country, at the time of the adoption of the federal con- 
 stitution, the relief sought in the bill was one obtainable in a court of 
 law, or one which only a court of equity was fully competent to give. 
 In that case, a creditor's bill in a federal court of equity was main- 
 tained, though the remedy in the State courts was at law. 
 
 At this point it would be, perhaps, well to state that, while it is true 
 that federal courts of equity enforce equitable liens in many of the 
 States, it is also true that in all those States, State courts may, or do, 
 enforce similar liens, and we challenge the learned counsel for the 
 appellees to cite a single federal authority holding that a federal 
 court of equity can enforce an equitable lien in direct contravention of 
 a State law, not in conflict with the federal constitution or laws. 
 
 IV. 
 
 A pledge is a right, not a remedy, and is so defined by jurisconsults. 
 Markby's Elements of Law, Ch. XI; Sohni's Institutes of Roman Law, 
 Sec. 59; Holland's Elements of Jurisprudence, pp. 201-2. 
 
 The latter, in his classification of rights, speaks (p. 148) of it as a 
 private, substantive, normal, antecedent right in rem, and it can not be 
 seriously contended that a pledge is one of the equitable remedies, 
 which the federal constitution and laws are supposed to have stereotyped. 
 
 Y. 
 
 Assume, for the sake of argument, that the constitution did adopt a 
 uniform system of federal equity jurisprudence, supposing that it has 
 been satisfactorily determined which of the thirteen colonial systems of 
 equity jurisprudence was adopted, and that federal courts of equity are 
 exempted from any obligation to follow State laws by virtue of any 
 constitutional restrictions upon their powers, it is still true that 
 the maxim, that equity follows the law, was an integral part of 
 every equity system at that time, and, of course, was as much 
 adopted as any other portion of the system. Every text- 
 writer on equity treats of this maxim, and we refer to Merlin 
 on Equity and Equity Pleading, Sees. 110 et seq.; Spence''s 
 Equitable Jurisdiction, Vol. I, pages 419-20-21 ; Pomeroy''s Equity 
 Jurisprudence, Vol. 7, Sees. 425. 426. 427 : Fetter on Equity, pp. 33-4,
 
 The Law op Pledge. 565 
 
 and note 63, in which a quaint but forcible decision of Sir Joseph 
 Jekyll is quoted. In that decision he says that in no case does equity 
 contradict or overturn the grounds of principles of the law, as has been 
 sometimes ignorantly imputed to it. This maxim, as applied to the 
 federal courts of equity, requires them to conform to the positive 
 requirements of State statutes in all matters not national in character. 
 Appellees' learned counsel, at a time when Ihey virtually admitted 
 that they had no rights in the State courts, as shown by the following 
 extract from a brief filed by them in the Circuit Court of Appeals in 
 this case, and, when they relied solely upon the supposed system of 
 uniform federal equity jurisprudence, argued that the maxim had no 
 application to this case : 
 
 •' The statutes of Louisiana on the subject of privileges or statutory 
 liens and the decisions of her courts interpreting those statutes are 
 ENTIRELY IMPERTINENT in this case. They deal with an entirely dif- 
 ferent subject from equitable liens. 
 
 "Whether the law of Louisiana recognizes or denies 
 equitable liens is a question equally foreign to this case. the 
 only effect would be to transfer the subject from the exclusive to the 
 CONCURRENT equitable jurisdiction of the court. 
 
 " If the State law recognizes such liens, that would not deprive 
 this court of the power to enforce them in this case. If it denies such 
 liens, that is the original reason why equity creates and enforces them." 
 
 Like many other questions of law, this matter can only be determined 
 by a brief historical survey of the subject. One of the most curious and 
 interesting chapters in legal history is the frantic efforts, made by Par- 
 liament, at that time composed for the most part of rude and unlettered 
 warriors, in a series of statutes, to abolish the ecclesiastical invention 
 of uses. The chancellors were ecclesiastics, who comprised within 
 their ranks nearly all the learning and scholarship of that age, and 
 they gravely examined the acts of Parliament to abolish uses, professing 
 that they were as much bound by them as the courts of common law. 
 An examination of these crude statutes by trained intellects always 
 developed the fact that only certain prohibitions were contained in 
 them, and that their effect could easily be avoided by applying the 
 principle of uses to contingencies not provided for by Parliament, and, 
 hence, not forbidden. The chancellors said : " Parliament has forbidden 
 A, B and C, but has not forbidden X, Y and Z. Therefore, to the latter 
 we will still continue to apply our principles." The binding effect of 
 positive statutes upon chancery courts was not questioned even at that 
 early stage in the development of equity jurisprudence. 
 
 For a general discussion of this subject see Minor's Institutes, Vol. U, 
 Chap. X, and Spence's Equitable Jurisdiction, Vol, I, pp, 4.% et seq. 
 
 In the nature of things statutes must be obligatory upon courts of 
 equity as well as courts of common law, because it would be contrary to 
 the theory of a government, composed of three coequal and (!0-ordinate
 
 566 The Law of Pledge. 
 
 departments, to hold that the department vested with the power to 
 enact laws can not bind all the courts. No case can be found declaring 
 that courts of equity are not bound to follow positive statutory require- 
 ments. If they were not bound, they would be vested with power 
 to repeal the law, and thus constitute a power higher than the legisla- 
 tive. It is perfectly true that equity allows rights and enforces 
 remedies outside of the domain of the statutes, but has never openly 
 violated them. The history of uses and trusts proves this assertion. 
 
 Blackstone. after enumerating a number of instances of hardship 
 under positive laws which courts of equity can not relieve, concludes as 
 follows : 
 
 '• In all such cases of positive law. the courts of equity, as well as the 
 courts of law, must say with Ulpian, ' Hoc quidem per quam durum est, 
 sed ita lex scripta est.' " 
 
 Blackstone then continues thus : 
 
 " It is said, that a court of equity determines according to the spirit 
 of the rule, and not according to the strictness of the letter. But so 
 also does a court of law. Both, for instance, are equally bound, and 
 equally jjrofess to interpret statutes according to the true intent of the 
 Legislature. * * * But there is not a single rule of interpreting laws, 
 whether equitably or strictly, that is not equally used by the judges in 
 the courts both of law and equity; the construction must in both be the 
 same, or, if they differ, it is only as one court of law may also happen to 
 differ from another. Each endeavors to fix and adopt the true sense of 
 the law in question; neither can enlarge, diminish or alter that sense in 
 a single title." Vol. Ill, marginal page 431. 
 
 Merwin, in his work on Equity and Equity Pleading, says, p. 60: 
 '■^ All positive ntles of law. whether of statute or of common law. areas 
 obligatory upon courts of equity as upon courts of law, whenever the 
 matters to which those rules appl}^ are in question."' See also Fon- 
 blanque's Equit3% Book I. Chap. I, Sec. 3. and Stern et al. vs. Gardner, 
 20 111. 304. 
 
 It is, therefore, clear, that courts of equity are bound bv the positive 
 requirements of statute law, and we think that we do not misstate the 
 position of appellees' counsel when we say that their contention is, that 
 a vmiform system of federal equity jurisprudence was adopted by the 
 federal constitution, but that from that system was eliminated oce of 
 its chief maxims — equity follows the law. 
 
 This maxim, of course, assuming for the sake of the argument that 
 there is no other obligation resting upon federal courts of equity to 
 follow State laws, has enabled them to conform to the inevitable 
 changes in the rules of substantive law of the various States, while 
 preserving uniformity in the forms of procedure in all the States. 
 Were it otherwise, law would be in a state of continual improvement, 
 owing to the means providing for its amelioration, while equity in 
 the federal courts would be unable to modify any of its rules, no matter
 
 The Law op Pledge. 567 
 
 how urgently required by the exigencies of changing conditions. The 
 law would improve, equity would stagnate and defeat the very purpose 
 for which it originally sprang into being. Let us see how the Supreme 
 Court has construed this maxim. 
 
 In the case of Hedges vs. Dixon County, 150 U. S. 182, where the 
 holders of municipal bonds, issued by a county in excess of its author- 
 ity, tried to invest a court of equity with jurisdiction by offering to 
 cancel so many of the bonds as exceeded the prescribed limit, and to 
 have the residue thereof declared valid and enforced, the court said 
 through Mr. Justice Jackson, on page 192, in dismissing the bill: 
 "' The established rule, although not of universal application, is that 
 equity follows the law, or, as stated in Marjniac vs. Thompson, 15 How. 
 281, 299,'" that wherever the rights, or the situation of parties, are 
 clearly defined and established by law, equity has no power to change 
 or unsettle those rights, or that situation, but in all such instances the 
 maxim, oequitas sequitur legem, is strictly applicable. 
 
 " Where a contract is void at law for want of power to 
 
 3IAKE it, a court OF EQUITY HAS NO JURISDICTION TO ENFORCE 
 
 SUCH CONTRACT, or, in the absence of fraud, accident or mistake, to so 
 modify it as to make it legal and then enforce it. Courts of equitt 
 
 CAN NO MORE DISREGARD STATUTORY AND CONSTITUTIONAL REQUIRE- 
 MENTS AND PROVISIONS THAN CAN COURTS OF LAW. Til EY ARE BOUND 
 BY POSITIVE PROVISIONS OF A STATUTE EQUALLY WITH COURTS OF 
 LAW, AND M'HERE THE TRANSACTION, OK THE CONTRACT, IS DECLARED 
 VOID BECAUSE NOT IN COMPLIANCE WITH EXPRESS STATUTORY OR 
 CONSTITUTIONAL PROVISIONS, A COURT OF EQUITY CAN NOT INTER- 
 POSE TO GIVE VALIDITY TO SUCH A TRANSACTION, OR CONTRACT OR 
 
 ANY PART THEREOF. These general propositions clearly establish that 
 the present bill can not be sustained, and our conclusion, therefore, is 
 that there was no error in the judgment of the court below in dismiss- 
 ing the bill, and that judgment is accordingly affirmed. " 
 
 Here the Supreme Court declare in emphatic terms that, when a 
 contract is void at law for want of power to make it, a federal court of 
 equity has no jurisdiction to enforce it. Such is the exact case at bar, 
 where the so-called pledge of the unearned sugar bounty to an unas- 
 certained amount to secure an unascertained indebtedness is attempted 
 to be enforced, and the pledgees, knowing that they have and never 
 had either a right or a remedy in the State courts of Louisiana, are 
 seeking for an unconstitutional perversion of federal power to protect 
 them. 
 
 In the case of Ewing vs. City of St. Louis, 5 Wall. 419, the court 
 say: 
 
 " The complainant can ask no greater relief in the courts of the 
 United States than he could obtain, were he to resort to the State 
 courts. If in the latter courts, equity loould afford no relief, neither will 
 it in the former."
 
 568 The Law of Pledge. 
 
 VI. 
 
 A doctrine, like a tree, is known by its fruits, and it is indispensable 
 in arriving at a correct decision of any disputed proposition of law to 
 advert to its necessary consequences, and we will now accept the pre- 
 mises of the learned Judge a quo, and follow them to their logical con- 
 clusion. 
 
 The equity jurisdiction of the federal courts, meaning the rules of 
 substantive law administered by them, was crystallized by the consti- 
 tution, in 1789, and can not be changed save by an amendment of that 
 instrument. 
 
 The implied mortgage, arising from the deposit of title deeds, was 
 at that time an admitted branch of equity jurisdiction, and, therefore, 
 must now exist. Hence, in defiance of the Louisiana Statute of Reg- 
 istry, a mortgage, perfect as against the world, can, to-day, be created 
 in Louisiana by the simple deposit of title deeds, and enforced in a fed- 
 eral court of equity. 
 
 Trusts were another admitted branch of equity jurisdiction, at that 
 time, and, therefore, must still exist. Trusts upon high consid- 
 erations of public policy are inhibited in Louisiana by Art. 1520 
 of the Revised Civil Code. To-day, in Louisiana, a man may, by 
 act inter vivos, or by will, convey property to another in trust for 
 a third person, and the beneficiary can enforce this trust in a fede- 
 ral court of equity sitting in this State. A widow's right to the assign- 
 ment of dower was then another acknowledged subject of equitable 
 cognizance. Therefore, to-day, in Louisiana, a widow can enforce <her 
 right to the assignment of dower in a federal court of equity. Ex- 
 amples might be multiplied indefinitely, but we think that these are 
 sufficient (o demonstrate that the position is wholly untenable. See 
 the introduction to Adams' Equity, for the grounds of equity jurisdic- 
 tion, practically all of which existed, in 1789. Again, if a federal court 
 of equity is not bound to respect State laws, why can not a chattel 
 mortgage, though unknown to the law of Louisiana, be enforced in 
 that court? 
 
 In each State there must, therefore, be two bodies vested with power 
 to declare the law in matters of State law and local policy, the State 
 Legislature and a federal court of equity, which must declare any 
 State law unconstitutional and void, which in any manner modifies the 
 subjects of equity jurisprudence, supposed to have been adopted by the 
 federal constitution. 
 
 It may be added, that if this doctrine obtains, the Supreme Court of 
 the United States would better at once enter a decree, were such a thing 
 possible, to the effect that every State statute in conflict with any of 
 the doctrines of this uniform system of federal equity jurisprudence is 
 unconstitutional, null and void, and leave the States to begin the im- 
 , possible task of conforming their laws to the new order of things.
 
 The Law of Pledge. 569 
 
 The adoption of this doctrine would also mean the vague and indefi- 
 nite extension of federal power, and that the fiat of the federal chan- 
 cellor would change a government with limited into one of unlimited 
 powers. This is a far stronger objection to the assumption of such 
 power than any argutnentum ab inconvenienti, for it involves the de- 
 rangement of our dual system of government, and the reserved powers 
 of the States, guaranteed by the United States Constitution, would be 
 swallowed up in this flood-tide of usurped federal authority. Finally, 
 even assuming that the position of appellees' counsel is correct, the 
 maxim, equity follows the law, for the first time in the history of the 
 equity system, would be formally abandoned, and a system perfected 
 through centuries of labor would be remitted to that condition of " un- 
 bounded discretion " which marked its crude beginnings. 
 
 The contract sought to be set up by the interveners in this suit is a 
 nullity under the laws of Louisiana, and, therefore, no contract rights 
 could ever have attached. It would seem very anomalous that a con- 
 tract, void under an express State statute, and void in the State courts, 
 could be enforced in the federal courts. 
 
 We have been unable to find a single federal decision, overturning a 
 CONSTITUTIONAL STATE LAW, establishing a rule of property, and the 
 provisions of the Civil Code, defining pledges and privileges, and regu- 
 lating the preferences of creditors, are certainly rules of property. 
 
 vn. 
 
 No one could fail to be struck by the utter inconsistency of the two 
 positions which the appellees' learned counsel advocate. They first 
 claim for their clients a lessor's privilege of the most extensive order, 
 on the ground that the Louisiana statute and decisions, and the sources 
 thereof in the Code Napoleon, give it to them, and that this Court is 
 bound to follow the Louisiana law, no matter how different it may be 
 from the law of every other State in the Union. In the next breath 
 they contend with equal vigor that their clients are entitled to an equi- 
 table lien, which is expressly forbidden by the Louisiana statutes and 
 decisions, and insist that the Louisiana authorities must be disre- 
 garded, taking for granted that they can not seriously argue for 
 the existence of equitable liens in Louisiana. In one case they vehe- 
 mently call upon the Louisiana law to save them; in the other they call 
 with equal vehemence upon a federal court of equity to save them 
 from the Louisiana law. There is absolutely no difference between the 
 cases, or the etticacy of the two statutes, and both are equally obliga- 
 tory upon a federal court of equity. 
 
 They have addressed themselves to the engaging task of extending 
 the lessor's privilege in the teeth of the solemn injunction of the Code 
 that a privilege can only be claimed for those debts to which it
 
 570 The Law of Pledge. 
 
 is expressly granted— to a case never contemplated by the statute, and 
 to the further task of creating a privilege, known as an equitable lien 
 in the common law States, in the teeth of an equally solemn injunction 
 of the Code that lawful causes of preference are privileges and mort- 
 gages. In one case they want the Court to extend a recognized privi- 
 lege, and in the other they want a privilege created, contrary to the 
 State law. 
 
 In conclusion, the value of the federal system in matters of concur- 
 rent jurisdiction with the State courts depends upon its flexibility and 
 its power to adapt itself to the jurisprudence of each State. The 
 harmonious administration of the same laws in the concurrent juris- 
 dictions is one of the wonders of government, and a perpetual vindi- 
 cation of the wisdom of the framers of the constitution. Well may 
 we exclaim with Mr. Gladstone, as we witness its operation, that the 
 federal constitution is the most wonderful instrument that the brain of 
 man has ever devised within a given time. 
 
 Walter H. Saunders, 
 
 Counsel for John II. Murphy^ Intervenor and Appellant.
 
 BRIEF OF J. U. PAYNE ET AL., APPELLEES. 
 
 in. 
 
 The third question is as follows : 
 
 "• If the second question be answered in the affirmative, can such 
 equitable lien, under the laws of Louisiana, be so enforced in the present 
 suit as to appropriate the bounty money to the payment of the claim of 
 the Paynes, to the exclusion of the general creditors of the Ferris 
 Manufacturing Company?"' 
 
 Courts of equity have, from time immemorial, recognized and 
 enforced such equitable liens, and courts of the United States sitting in 
 equity in the State of Louisiana have the unquestionable right and duty 
 to recognize and enforce such a lien, unless its power and duty to do so 
 can be and has been taken away by the statutory law of the State of 
 Louisiana. 
 
 The contention of the appellants rests upon two propositions, failure 
 to maintain either of which would be fatal to the contention, and both 
 of which, we maintain, are absolutely unfounded. 
 
 These propositions are : 
 
 1st. That State legislation can take away the jurisdiction of courts of 
 the United States to recognize and enforce equitable liens. 
 
 2d. That the statutory law of the State does forbid the recognition and 
 enforcement of equitable liens. ♦ 
 
 We will consider these propositions in order and separatelj^ 
 
 Mr. Pomeroy, after defining the nature and origin of equity jurisdic- 
 tion, proceeds to classify the jurisdiction as being either exclusive or 
 concurrent. 
 
 The exclusive jurisdiction, he says, embraces: 
 
 " First. All civil cases in which the primary right violated or to be 
 declared, maintained, or enforced, whether such right be an estate, 
 title, or interest in property, or a lien on property, or a thing in action 
 arising out of contract, is purely equitable, and not legal, a right, title, 
 estate, or interest created by equity, and not by law. * * * 
 
 "Secondly. All civil cases in which the remedy to be granted, and 
 of course, the remedial right, is jiurely equitable, or one which is 
 recognized and administered by courts of equity, and not by courts of 
 law." 
 
 Id., Sees. 137-138. 
 
 "The concurrent jurisdiction embraces all those civil cases in which 
 the primary right, estate, or interest of the complaining party sought 
 
 571
 
 572 The Law op Pledge. 
 
 to be maintained, enforced, or redressed, is one which is cognizable by 
 the law, and in which the remedy conferred is of the same kind as that 
 administered, under the like circumstances, by courts of law, being 
 ordinarily a recovery of money in some form. The primary right, 
 estate, title, or interest, which is the foundation of the suit, must be legal, 
 or else the case would belong to the exclusive jurisdiction of equity; 
 and the law miist, through its judicial procedure, give some remedy of 
 the same general nature as that given by equity, but this legal remedy 
 is not, under the circumstances, full, adequate, and complete. The 
 fact that the legal remedy is not full, adequate, and complete is, there- 
 fore, the real foundation of this concurrent branch of the equity juris- 
 diction." 
 
 Pomeroy Eq. Jur.. Sec. 139. 
 
 In defining the subjects which are embraced in the exclusive equity 
 jurisdiction, Mr. Pomeroy expressly includes the recognition and 
 enforcement of what are called '• equitable liens." Id.. Sec. 1(J5. 
 
 This is done with manifest propriety, because the primary right and 
 the remedy for its enforcement are both created exclusively by equity, 
 and are not recognized at law; and, indeed, as abundantly shown by 
 the authorities cited in our original brief, the fact that the law does 
 not recognize such liens is the very reason why equity grants and 
 enforces them. 
 
 What then can be the force or bearing of arguments going to show 
 that the statutes of Louisiana do not recognize or enforce such rights, 
 even if they were sound? 
 
 The enforcement of equitable liens arising from contracts is a 
 branch of the great equitable remedy of specific performance which is 
 also assigned by Mr. Pomeroy to the exclusive jurisdiction. Id., Sec. 
 171, No. 3. 
 
 The proposition that State legislation can limit or destroy the 
 exclusive equity jurisdiction of the Fedei'al Courts is absolutely 
 unsound. If such legislation can destroy their exclusive equity juris- 
 diction to recognize and enforce equitable liens, it can equally destroy 
 every other branch of their equity jurisdiction. 
 
 The State might pass statutes of the following tenor and effect: 
 
 1st. Parties to a contract shall not be entitled to enforce specific per- 
 formance thereof, but the sole remedy for breach of contract shall be 
 by an action of damages. 
 
 2d. Parties shall be bound irrevocably by the express terms of their 
 contracts, and shall be entitled to no relief on the ground of accident, 
 mistake, or fraud. 
 
 3d. Nothing shall be considered as done except that which has been 
 actually done, and the rule that that shall be considered as done which 
 ought to be done shall in no case be applied. 
 
 4th. What are known as equitable rights shall not be enforced, but 
 no rights shall be recognized except those derived from the express 
 terms of the statute of the State.
 
 The Law op Pledge. 573 
 
 If such statutes were passed and were binding on tbe Federal Courts 
 of the United States sitting in Louisiana, what would remain of the 
 equity jurisdiction of the Federal Courts? Nothing except a vain and 
 senseless system of judicial procedure, having no rational object or 
 purpose, and no application to any substantive rights whatever to the 
 enforcement of which the system was adapted and for the enforcement 
 of which it was devised. 
 
 The effect would be to convert the State of Louisiana into a little 
 island in the midst of the great sea of federal equity jurisdiction which 
 embraces all the other States of this Union; at the shores of which the 
 argosies of equity jurisprudence must halt and turn away to more con- 
 genial climes. 
 
 The proposition seems to us utterly untenable. It is in irreconcilable 
 contradiction with the following cardinal principles which regulate 
 and define the equitable jurisdiction of the courts of the United States, 
 to-wit : 
 
 1st. That the equity jurisdiction of the courts of the United States is 
 derived exclusively from the constitution and laws of the United States. 
 
 2d. That this jurisdiction, in the language of Mr. Pomeroy, " exists 
 uniformly and to its full extent throughout the entire Union, independ- 
 ent of and unaffected by any State laws or any particular system of 
 jurisprudence and legislation adopted by individual States," and "is 
 wholly unmodified and unabridged by State legislation which deals 
 with subjects belonging to the general system of equity jurisprudence. 
 State laws subtracting from or limiting the scope of equity do not act 
 upon the general powers and jurisdiction held by the national courts. ' 
 
 1 Pomeroy, Sees. 292, 293, 294. 
 
 3d. That Sec. 721, U. S. Revised Statutes, declaring "the laws of tbe 
 several States shall be regarded as rules of decision in trials at common 
 law in the courts of the United States'' does not apply to cases in 
 equity, in which cases the principles of equity jurisprudence, and not 
 the laws of the State, are the rules of decision. 
 
 Every one of the foregoing cardinal principles is firmly established by 
 the consistent jurisprudence of the federal courts from the foundation 
 of the government until now, and not one of them was ever before, to 
 our knowledge, seriously controverted. From the mass of authorities 
 on the subject we select the following: 
 
 " The courts of the United States have jurisdiction in equity derived 
 from the Constitution and laws of the Union, which is uniform 
 throughout all the Slates." 
 
 Robinson vs. Campbell, 3 Wheaton, 212. 
 Neves vs. Scott, 13 Howard, 268, 
 Fitch vs. Creighton, 24 Howard, 159, 
 
 " The equity jurisdiction of the courts of the United States is derived 
 from the Constitution and laws of the United States. Their powers and
 
 574 The Law of Pledge. 
 
 rules of decision are the same in all the States. Their practice is regu- 
 lated by themselves, and by rules established by the Supreme Court. 
 In all these respects they are unaffected by State legislation." 
 
 Xoonan vs. Lee, 2 Black. 509. 
 
 " While the courts of the Union are required by the statutes creating 
 them to accept as rules of decision in trial at common law, the laws of 
 the several States, their jurisdiction in equity can not be Impaired by 
 the local statutes of the different States in which they sit. * * * 'Phe 
 equity jurisdiction of the courts of the United States is the same that 
 the high court of chancery in England possesses, and is subject to 
 neither limitation or restraint by State legislation, and is uniform 
 throughout the different States of the Union." 
 
 Kirby vs. Lake Shore K. K., 120 U. S. 130. 
 
 "Chancery jurisdiction is conferred on the courts of the United States 
 by the Constitution, under certain limitations; and, under these limi- 
 tations, the usages of the high court of chancery in England, which 
 have been adopted as rules by this court, furnish the chancery law 
 which is exercised in all the States, and even in those where no State 
 chancery sj'Stem exists. 
 
 •• Under this system, where relief can be given by the English chan- 
 cery, similar relief may be given by the courts of the Union." 
 
 State of Pennsylvania vs. The Wheeling, etc., Bridge Co., 13 Howard, 
 519. (Syllabus.) 
 
 '• It was not the intention of Congress, by the enactments relating to 
 the adoption of State laws in the courts of the United States, to confine 
 the Federal Courts to the same remedies which existed in the courts of 
 the respective States. Such a rule would forbid equitable jurisdiction 
 to the Federal Courts sitting within those States which have no courts 
 exercising such jurisdiction. The true rule is that the remedies in the 
 courts of the United States are to be, at common law or in equity, not 
 according to the practice of the particular State, but according to the 
 principles of common law and equity jurisprudence, as those systems 
 are distinguished and defined in England." 
 
 Supreme Court ISIS, Robinson vs. Campbell. 
 
 3 Wheat. 212, 222, S. P. 1S19, United States vs. Howland, 4 Id. lOS, 
 115. 
 
 ''The Supreme Court is not bound by the decision of a State court 
 upon a question of equity jurisprudence. The Constitution having 
 recognized equity as a branch of jurisprudence, whenever a case in 
 equity arises under the judicial power of the United States it is for the 
 courts of the United States, and for the Supreme Court, in the last resort, 
 to decide the principles applicable to it." 
 
 4 Wheat. 115; 3 Id. 222; 6 Pet. 658; 9 Pet. 614; 12 How. 139; 
 Supreme Ct. 1851, Neves vs. Scott, 13 How. 268. 
 
 " The jurisdiction of the Federal Courts can not be affected by State 
 legislation, and they will enforce equitable rights created by such 
 legislation if they have jurisdiction of the subject matter and the par- 
 ties." 
 
 Supreme Ct. 1878, Smith vs. Railroad Co.. 99 U. S. 398.
 
 The Law of Pledge. 575 
 
 " The State laws furnish the rule of decision in the courts of the 
 United States in cases at common law, but the equity jurisdiction of 
 those courts is one and the same in every State, and is in no respect 
 dependent upon local law.'" 
 
 2d Cir. 1S37, Lamson vs. Mis, 6 Hunt Mer. Mag. 72; Federal Cases, 
 Vol. 14, No. 8034; 3d Circ. (Pa.) 1826, McFarlane vs. Griffith, 4 Wash. 
 C. C. 585; Federal Cases, Vol. IG, No. 8790. 
 
 " The rule that decisions of a State govern Federal law Courts sitting 
 in civil matters within that State, does not apply to the administration 
 of equity; which is, in such case, governed entirely by the general 
 principles of Courts of Equity." 
 
 6th Circ. (Ohio) 1861, Burt vs. Keyes, 3 West. L. Month. 290; Federal 
 Cases, Vol. 4, No. 2212. 
 
 "• The practice of resorting to a Court of Chancery in order to set up 
 an equitable against the legal title can not now be shaken. In all cases 
 in which a Court of Equity takes jurisdiction, it will exercise that juris- 
 diction on its own principles." 
 
 Supreme Court 1809, Bodley vs. Taylor, 5 Cranch, 191. 
 
 " The remedies in the courts of the United States are to be at common 
 law or in equity, not according to the practice of the particular State, 
 but according to the general principles of common law and equity 
 jurisprudence, as those systems are distinguished and detined in Eng- 
 land." 
 
 Supreme Court 1818, Robinson vs. Campbell, 3 Wheat. 212, S. P. 
 1819, United States vs. Howland, 4 Wheat. 108. 
 
 "State laws can not impair the equity jurisdiction of the Federal 
 Courts. If the common law did not afford a remedy, but resort to 
 equity was permitted on account of the defect, parties whose citizen- 
 ship gives jurisdiction may still apply to the Circuit Court for equitable 
 relief, notwithstanding that as between citizens of the S.ate a State law 
 has provided a letral remedy for cases of like nature. Supreme Court 
 1868, Payne vs. Hook, 7 Wall. 425; 1st Circ. (Mass.) 1836, Gordon vs. 
 Hobart, 2 >>^unm. 401; Federal Cases, Vol. 10, No. 5609; 1855, Cropper 
 vs. Coburn, 2 Curt. C. Ct, 465; Federal Cases, Vol. 6, No. 3416; 4th 
 Circ. (Va.) 1877, Breeden vs. Lee, 2 Hughes, 484; Federal Cases, Vol. 
 4, No. 1828; 5th Circ. (La.) 1871, Noyes vs, Willars, 1 Woods, 187; 
 Federal Cases, Vol. 18, No. 10.374; 1884, Fletcher vs. New Orleans, 
 etc., R. R. Co., 20 Fed. Rep. 345; 8th Circ. (Col.) 1881, Strettell vs. 
 Ballou, 9 Fed. Rep. 256; 3 Mc'Jrary, 46; and see United States vs. 
 Howland, 4 Wheat. 108. 
 
 •'The distinction between law and equity is recognized and estab- 
 lished, for the National Courts, by the Constitution and the acts of Con- 
 gress regulating procedure, and can not be obliterated, with respect to 
 those courts, by any statutes of a State. Notwithstanding a reformed 
 code of procedure of a State declares that the distinction between law 
 and equity is abolished, and that there shall be but one form of action — 
 a civil action — if a complainant resorts to a Federal Court he must 
 proceed at law or in equity, according to the nature of his case. If he 
 files a bill in equity when he has an adequate remedy at law, his bill 
 may be dismissed even on appeal."
 
 576 The Law of Pledge, 
 
 Supreme Court 1SG7, Thompson vs. Railroad Companies, 6 Wall. 134. 
 To nearly same effect, Supreme Court 1870, "Walker vs. Dreville, 12 
 Wall, 440 S. P., 7th Circ. (Ohio) 1872. Butler vs. Young, 1 Flippin, 276; 
 7 West. Jur, 59; G Am, T. Rep. 53; Federal Cases, Vol. 4, No. 2245: 
 N. Dist. of Ga., Shuford vs. Cain, 1 Abb. U. S. 302; Federal Cases, Vol. 
 22, No. 12,823, 
 
 " The distinction between the enforcement of legal rights and the 
 pursuit of equitable remedies in the Circuit Court is well defined bj 
 law, and must be maintained.-'' 
 
 Circ. of Cal. 1S5S. Loring vs. Downer, McAll. 360; Federal Cases, 
 Vol, 15, 8513; Byrd vs. Badger, Id. 443; Federal Cases, Vol. 4, No. 2266. 
 
 " In that class of cases in which courts of equity exercise their own 
 peculiar jurisdiction they do not consider themselves bound by statutes 
 of limitation as obligatory laws, but usually apply them byway of 
 analogy; unless injusiice will result from so doing. 1st Circ. (N. H.) 
 1828. Sherwood vs. Sutton. 5 Mason. 143; Federal Cases, Vol. 21, No. 
 12,781; (R. I.) Pratt vs. Northam, Id. 95; Federal Cases, Vol. 19, No. 
 11.376; (Mass.) 1862, Badger vs. Badger. 2 Cliff. 137; Federal Cases, 
 Vol. 2, No. 718; (Me.) 1874, Sullivan vs. Portland & Kennebec R. R. 
 Co., 4 7d. 212; Federal Cases, Vol. 23. No, 13.596; 3d Circ, (Pa.) 1831, 
 Baker vs. Biddle, Baldw. 394; Federal Cases, Vol, 2, No. 764; 4ih Circ. 
 (Va.) 1880, Etting vs. Marx, 4 Fed. Rep. 673; 4 Hughes. 312; 5ih Circ. 
 (La.) 1880, Chapman vs. Wilson, 4 Woods, 30; 6th Circ. (Mich.) 1883. 
 Chewett vs. Moran, 17 Fed. Rep. 820; 8th Circ. (Me.) 1883, Foggvs. St. 
 Louis, H. & K. R., etc.. Co., Id. 871. See also. Union Bank of Louis- 
 iana vs. Stafford, 12 Ho^v. 327; Orendorf vs. Budlong, 12 Fed. Rep. 
 24." 
 
 "The fact that the statute of limitations of the State has barred the 
 claim in the State couris will not prevent a Federal court from enter- 
 taining a suit brought by a receiver of a national bank against the 
 estate of a decedent for the recovery of a debt alleged to have been 
 fraudulently concealed." 
 
 8th Circ. (Mo.), Johnston vs. Roe, 1 Fed. Rep. 692; 1 McCrary, 
 162; 10 Cent. L. J. 328; 9 Rep. 672. 
 
 " The provision of Rev, Stat. 721, — making the limitation laws of 
 the States applicable to like actions brought in the National courts — 
 does not include special limitations upon suits in equity. Hence 
 Section 378 of the Oregon Civil Code, prescribing a limitation of five 
 years as to a suit in equity to affect a patent to land, is not binding 
 upon the Circuit Court sitting in that State, If, however, the cir- 
 cumstances of the particular case render it equitable and judicious to 
 adopt the statute rule, the court, in the exercise of its discretion as a 
 court of equity, will do so. 9th Circ. (Or.) 1875, Hall vs. Russell. 3 
 Sawyer, 5U6,"' Federal Cases, Vol. 11, No. 5943. 
 
 " The Congress of the United States, in the act by which the Fed- 
 eral courts were organized, enacted that ' the laws of the several 
 States, except where the Constitution, treaties or statutes of the 
 United States otherwise require or provide, shall be regarded as rules 
 of decision in trials at common law, in the courts of the United States, 
 in cases where they apply.' Rev. Stat., Sec. 721 ; Judiciary Act, 24 
 September, 1789, C. 20, Sec. 34, 1 Stat. 92. This statute has been often
 
 The Law of Pledge. 577 
 
 the subject of construction in this court, and its opinions have not 
 always been expressed in language that is entirelj'^ harmonious. What 
 ai'e the laws of Ihe several States which are to be regarded ' as rules of 
 decision in trials at common law ' is a subject which has not been 
 ascertained and defined with that uniformity and precision desirable in 
 a matter of such great importance. 
 
 " The language of the statute limits its application to cases of trials 
 at common law. There is, therefore, nothing in the section which 
 requires it to be applied to proceedings in equity, or in admiralty ; 
 nor is it applicable to criminal offences against the United States 
 (see United States vs. Reid, 12 How'. 361), or where the Constitution, 
 treaties or statutes of the United States require other rules of deci- 
 sion." 
 
 Bucher vs. Cheshire R. R. Co., 125 U. S. 582. 
 
 It has been further held that Section 721, Revised Statutes, does not 
 apply even in law cases to questions of a general nature, such as Com- 
 mercial Law, Law of Public Carriers. Law of Negligence, of Master 
 and Servant, etc. 
 
 See IS Wallace, 546, 16 Peters, 1, 102 U. S. U; 100 U. S. 239; 138 U. 
 S. 67; 147 U. S. 106; 145 U. S. 605; 152 U. S. 282; 70 F. R. 679; Idem., 
 468; 45 F. R. 749. 
 
 See also Judge B. R. Curtis' Lectures on Jurisdiction and Jurispru- 
 dence of Courts of the United States, pp. 13 and 213. 
 
 These cases illustrate how strongly the Federal Courts resist the 
 invasion of their powers and prerogatives by State statutes. 
 
 The suggestion that all these decisions only apply to rules and 
 forms of equity practice and procedure, and not to the substantive 
 equitable rights of the parties, is contradicted by the very terms of 
 the authorities themselves, which make it clear that the rules of deci- 
 sion adopted by the National courts in equity cases in determining 
 equitable rights and principles, are not the laws of the States, but are 
 the rules and principles of equity jurisprudence. 
 
 The doctrine of equitable liens is derived from and founded exclu- 
 sively upon the principles of equity, as established by equity jurispru- 
 dence. The power to recognize and enforce such liens is an element 
 of equity jurisdiction conferred by the Constitution and laws of the 
 United States. State laws did not confer this power and can not take it 
 away. It exists in all the other States of this Union, and the principle 
 of uniformity requires that it should exist equally in the State of 
 Louisiana. 
 
 May it please the Court : 
 
 It is in the nature of things that these repeated and emphatic 
 decisions can not be ignored, or robbed of meaning, or held to 
 be overruled by other decisions which do not, in terms, over- 
 rule. When cases are quoted which contain apparently contradictory 
 doctrines, the court will look at all the decisions together, and find
 
 578 The Law of Pledge. 
 
 some principle on which they may be reconciled. We believe that 
 principle is easily found and clearly apparent. It is this, that as to 
 matter falling within the concurrent jurisdiction of equity, legislation 
 of the States will receive consideration and effect, but that with regard 
 to purely equitable rights, arising under the exclusive equity jurisdic- 
 tion, rights created by equity, solely and exclusively because they are 
 not recognized by law, the decisions quoted and relied upon by us will 
 apply and govern. 
 
 We have examined with great care the authorities referred to by our 
 learned adversaries, and we lind not one which derogates from the 
 principles sustained by this jurisprudence as applicable to cases arising 
 under the exclusive equity jurisdiction. 
 
 Of these authorities the following will be found to be cases at com- 
 mon law : 
 
 Burgess vs. Seligman, 107 U. S. 20. 
 Pana vs. Bowles, 107 U. S. 541. 
 Carroll vs. Smith, 111 U. S. 563. 
 Andreson vs. Santa Anna, 116 U. S. 362. 
 Bowles vs. Brimfield, 120 U. S. 764. 
 Folsom vs. Township, 1.59 TJ. S. 625. 
 Bank vs. Earl, 13 Peters, 519. 
 Greene vs. Neal's Lessee, 6 Peters, 291. 
 Suydam vs. Williamson, 24 Howard, 427. 
 Leffingwell vs. Warren, 2 Black, 600. 
 Telle vs. Walker, 11 U. S. 242. 
 
 Of course the dicta in such cases have no application to equit3' juris- 
 diction. The equity cases referred to are: 
 
 Hedges vs. Dickson, 150 U. S. 182. 
 
 Lumber Company vs. Ott, 142 U. S. 628. 
 
 Bank vs. Bank of Kansas City, 136 U. S. 235. 
 
 Ewing vs. St. Louis, 5 Wallace, 413. 
 
 May vs. Tenny, 148 U. S. 64. 
 
 Casey vs. Cavaroc, 96 U. S. 497. 
 
 Brine vs. Insurance Company, 96 U. S. 627, and others. 
 
 An examination of these cases will show that all of them were cases 
 which fell within the concurrent, and not within the exclusive equity 
 jurisdiction, and that the rights involved therein were not equitable 
 rights created by equity, but rights based upon and derived from the 
 law of the State. 
 
 In Hedges vs. Dickson the court simply held that a contract abso- 
 lutely void under the Constitution and laws of the State by reason of 
 the absolute incapacity of the party, a municipal corporation, to make 
 it, could give rise to no rights, either equitable or legal, a familiar 
 principal of equity. Ex nihilo nihil fit.
 
 The Law of Pledge. 579 
 
 Lumber Company vs. Ott involved nothing but rights claimed under 
 an assignment for the benefit of creditors made in pursuance to a .State 
 statute, and the validity of which depended upon compliance with the 
 statute. 
 
 Union Bank vs. Kansas City Bank and Mav vs. Tenney involved pre- 
 cisely the same question. 
 
 A careful examination of the case of Casey vs. Cavaroc will show 
 conclusively that no equitable lien was claimed or involved, but that 
 the right asserted was based upon a statutory pledge, the validity of 
 which depended upon compliance with the statute. In the statement 
 of the case, at page 4G8, we find that the parties based their right to 
 the securities upon the claim that they were '• actually pledged "" to 
 them. In the argument of their counsel, as set forth at page 473, it 
 will be found that the contention was solely that the pledge was valid. 
 In the opinion of the court, at page 486, it is stated : 
 
 "It must not be overlooked that the Credit Mobilier has no other 
 claim to the securities in question but that of pledge. A pledge and 
 possession, which is its essential ingredient, must be made out, or their 
 privilege fails." 
 
 It is clear that the case involved nothing but a claim of statutory 
 right, which was, of course, to be determined according to the statute 
 in equity, as well as at law. 
 
 The case of Ewing vs. St. Louis, 5 Wallace, 417, was a case involving 
 simply the validity of proceedings taken in pursuance of a State 
 statute, on the ground that the i^roceedings did not comply with the 
 statute. 
 
 Brine vs. Insurance Co., 96 U. S. 627, only held that a State statute 
 which allows the mortgagor twelve months to redeem after a sale 
 under a decree of foreclosure, and to his judgment creditor three 
 months after that, governs to that extent the mode of transferring the 
 title, and that a Federal Court in Equitj' would no more deny that 
 right than would a State Court. 
 
 We have no knowledge of any principle within the exclusive equity 
 jurisdiction that denies such a right. 
 
 We have not time to analyze or to refer to the other equity cases 
 quoted by counsel, but we hazard nothing in saying that of them were 
 cases in which the rights involved were rights arising under the con- 
 current jurisdiction. We believe no case can be found in which a 
 Federal Court of Equity has refused to enforce a purely equitable right 
 created by equity for the very reason that it was not allowed by law, 
 on the ground that the State statutes did not recognize it. 
 
 None of these cases has the slighest application to the question in the 
 case at bar, which involves a purely equitable right, created by equity, 
 and existing independently of any State statute. 
 
 The quotation from Sec. 297 of 1 Pomeroy nuist be read in connec-
 
 580 The Ijaw of Pledge. 
 
 tion with Sees. 291. 292. 293, 294, 295 aud 296; and also with Sees. 137, 
 138 and 139, which define the distinctions between the exchisive and the 
 concurrent equity jurisdiction, and especially with See. 427, which 
 confines the maxim equitas sequitur legem to cases within the concur- 
 rent jurisdiction and excludes it from all application to cases within the 
 exclusive equity jurisdiction, in which — 
 
 "The primary right violated or to be declared, maintained or 
 enforced, whether such right be an estate, title or interest in property,, 
 or a lien on property, or a thing in action arising out of contracts, 
 is purely equitable and not legal; a right, title, estate or interest 
 created by equity and not by law." 
 
 1 Pomeroy, Sec. 137. 
 
 In the latter cases, it is clear that the statutes of the State can not 
 abridge or impair equitable rights or remedies created by equity, inde- 
 pendentlj' of law. 
 
 The suggestion that the doctrine of equitable liens does not apply to 
 the case of an insolvent debtor would rob the doctrine of application to^ 
 the only case in which it would serve any useful purpose. If the 
 debtor was solvent and had means sufficient for the satisfaction of alL 
 his debts, there would not be the slightest reason for subjecting partic- 
 ular property to a special lien. 
 
 If the Ferris Company were solvent, and if the funds in the hands of 
 the receiver were sufficient to satisfy all of its debts, we would not be 
 here, pressing our claim for a lien on this particular fund. It is because 
 the Ferris Company is insolvent, and the funds in the hands of its 
 receiver are insufEcient to satisfy all its debts, that we assert our lien 
 upon this particular fund. 
 
 Equity recognizes this lien, and this Court, sitting as a Court of equity,, 
 will enforce it. 
 
 This case does not arise under the insolvent laws of the State of 
 Louisiana. It is a case arising under the purelj' equitable jurisdiction 
 of this Court, in the exercise of which this fund has been brought 
 within the custody of the Court, to be marshaled and distributed by 
 the Court to those who are entitled to it, and in distributing it, it is 
 sitting as a Court of equity, and will reeogni/e and enforce the equi- 
 table rights of parties as well as their legal rights. 
 
 There are no conflicting liens on this bounty. Our lien is confined 
 by the decree to the bounty on the cane produced by ourselves, and no- 
 other creditor pretends to have any special lien upon it. It is a conflict 
 solely between our equitable lien and the claims of the general creditors. 
 To deny the lien in such a case would be an effectual obliteration of 
 the equitable power of this Court to recognize an equitable lien in any 
 case. 
 
 We claim this lien is a right o-eofed by equity, founded on the eternal 
 principles of justice, enforced by equity in the exercise of its exclusive
 
 The Law of Pledge. 581 
 
 jurisdiction under power derived from the Constitution and laws of 
 the United States, which State statutes did not confer, and can not take 
 away. 
 
 This involves no infringement of State rights. The States themselves 
 consented to the delegation of this power and jurisdiction. The Con- 
 stitution of the United States and laws passed in pursuance thereof, are 
 as much laws of every State as any statute of the State itself. 
 
 We claim, therefore, that the legislation of the State of Louisiana 
 can not abridge the right of a Court of the United States, sitting in 
 equity, to recognize and enforce equitable liens. 
 
 (2.) 
 
 The other proposition, that the Civil Code of Louisiana prohibits the 
 ■enforcement of equitable liens, is equally untenable. 
 
 State laws and State decisions upon the subject of "privileges" 
 have not the remotest application to the subject of equitable liens. 
 The Louisiana "privilege"' and the eciuitable lien are not merely 
 different, but are radically contradictory and antithetical concepts. 
 
 The Louisiana "privilege"'' is derived exclusively from ihelaio; the 
 equitable lien is derived from the contract of the parties. To say that 
 there can be no equitable lien in any case in which the law does not 
 ^rant a privilege, is to destroy the very reason for which the equitable 
 lien is granted. If the law granted a privilege there would be no need 
 to claim an equitable lien. Many rights may be created by the express 
 terms of a contract, which would not be implied by law in the absence 
 of express agreement. There is, therefore, not the slightest inconsist- 
 ency in sa}ing that although the law does not grant a j:irivilege, the 
 contract of the parties may establish an equitable lien, which is not a 
 privilege. We say, therefore, that the laws of the State prescribing 
 the cases in which the law grants a iwivilege independent of any con- 
 tract between the parties, and decisions of the State Court interpreting 
 those laws, have no application to the subject of equitable liens. No 
 law of the State of Louisiana and no decision of her Supreme Court can 
 be found which declares that the doctrine of equitable liens arising 
 from contract is forbidden by the law of Louisiana. Our researches 
 have failed to discover but three cases which ever dealt with the sub- 
 ject of equitable liens under the law of Louisiana. One is the case of 
 Wheeler vs. Insurance Company, 101 U. S. 439. It was a case arising 
 in Louisiana, and under Louisiana law, in which a purely equitable 
 lien was claimed and enforced, and in which there was no pretence 
 that the party had any statutory privilege, and there the Supreme 
 <)ourt of the United States said : 
 
 " The equitable doctrine upon which appellant's claim is founded 
 undoubtedly obtains in Louisiana. It is derived from the civil law, 
 which is the basis of the Civil Code of that State."
 
 582 The Law of Pledge. 
 
 The other cases are the cases of Succession of Walsh. 9 An. 543, and 
 Webre vs. Beltran, 47 An. 195, which will be referred to hereafter. 
 
 We deny that any decision to the contrary can be found or has been 
 made by the Supreme Court of Louisiana, and we believe that the 
 decision of the Supreme Court of the United States on this point is 
 correct. 
 
 The Civil Code of Louisiana establishes as broad a system of equity 
 as it is possible to conceive of. We call attention to the following- 
 articles of that Code : 
 
 Art. 21. " In all civil matters, where there is no express law, the 
 judge is bound to proceed and decide according to equitj'. To decide 
 equitably, an appeal is to be made to natural law and reason, or re- 
 ceived usages where positive law is silent." 
 
 Art. 1903. •' The obligation of contracts extends not only to what is 
 expressly stipulated, but also to everything that, by law, equity or 
 custom, is considered as incidental to the particular contract, or neces- 
 sary to cai'ry it into effect.'" 
 
 Art. 1964 '' Equity, usage and law supply such incidents only as the 
 parties may reasonably be supposed to have been silent upon from a 
 knowledge that they would be supplied from one of these sources." 
 
 Art. 1965. •' The equity intended by this rule is founded on the Chris- 
 tian principle not to do unto others that which we would not wish oth- 
 ers should do unto us; and on the moral maxim of the law that no one 
 ought to enrich himself at the expense o* another. When the law of 
 the land, and that which the parties have made for themselves by their 
 contract, are silent. Courts must apply these principles to determine 
 what ought to be incidents to a contract, which are required by equit}^" 
 
 The Rubric of the Code under which the two last articles are found 
 is headed: •' Of the obligations to perform, as incidents to a contract, 
 all that is required by equity, usage or law.' 
 
 The remedy for the enforcement of equitable liens is a branch of the 
 great equitable remedy of Speciflc Performance, which is a simple 
 exertion of the power of the court to enforce specifically the obliga- 
 tions of the contract. Differently from the Common Law and from the 
 Code Napoleon, the Civil Code of Louisiana expressly recognizes the 
 remedy of specific performance of contracts : 
 
 Art. 1926. •' On the breach of any obligation to do or not to do the 
 obligee is entitled to damages, or, in cases which permit it, to a specific 
 performance of the contract at his option, etc." 
 
 Art. 1927. " In ordinary cases the breach of such a contract entitles 
 the party aggrieved only to damages, but w'here this would be an inad- 
 equate compensation, and the party has the power of performing the 
 contract, he may be constrained to a specific performance by means 
 prescribed in the laws which regulate the practice of the courts," 
 
 These articles were fully discussed by our Supreme Court in ihe case 
 of Levine vs. Michel, 35 An. 1126. 
 
 There is, and can be, no rational denial that the obligations assumed 
 by the Ferris Company in its contract with intervenors were perfectly
 
 The Law of Pledge. 583 
 
 lawful and binding on the company, and there can be no reason why 
 specitic performance thereof should not be enforced. The fact that 
 the contract was not effectual to create a legal privilege under the 
 statutes of Louisiana, presents no obstacle whatever to compulsion of 
 its specitic performance. 
 
 The Supreme Court of Louisiana has expressly recognized the doc- 
 trine that an equitable right to be paid out of a fund by preference 
 over the general creditors may result from the contract between the 
 parties, although that contract did not create a legal privilege. Such 
 an equitable right was enforced in the case of the Succession of Walshe 
 9 An. 543, where the court began its decision by saying: 
 
 " It may be conceded that the company is not entitled to a privilege 
 upon the fund in dispute, using that term in its technical sense. But 
 we think the equity of the company to receive this fund by reason of 
 the peculiar terms of their contract with Walshe, and the circumstances 
 of the case, is clear.*' 
 
 The court further says . 
 
 " It seems to us it would be a clear violation of the terms and spirit 
 of the contract, and of the reservation made in the judge's order, to 
 take the fund from the company, and distribute it pro rata among all 
 the creditors. This case is the first of the kind presented for the con- 
 sideration of this court, and our attention has not been directed ta 
 decisions of other tribunals upon the precise subject. But we fiod a 
 very satisfactory analogy in the rule of the Supreme Court of Pennsyl- 
 vania, in Morgan vs. Bank of America, 8 Serg. and R. 73." 
 
 This was a plain case of equitable lien upon a fund, arising from con- 
 tract, and not accompanied by any technical privilege, which was 
 enforced by the Supreme Court of Louisiana. 
 
 The case of Webre vs. Beltran, 47 An. 195, is a very parallel case to 
 the one at bar. It was a case of insolvency, and involved the dis- 
 tribution of bounty collected, precisely as in this case. Beltran did not 
 claim to be the owner of the bounty, and he did not claim any technical 
 pledge or privilege on the bounty, but he claimed that under his con- 
 tract v/ith the insolvent he was entitled to have his debt paid out of the 
 Dounty by preference over other creditors. 
 
 The case is very instructive, but we will content ourselves with 
 quoting only one paragraph, to show how plainly the Court enforced an 
 equitable hen arising from contract solely, in opposition to the claims 
 of the syndic of the insolvent and the general creditors under the 
 articles of the code relied on in this case : 
 
 " In reference to the bounty collected by Beltran & Co., it is claimed 
 that the law gave no privilege or pledge to the defendant upon that 
 fund, and that not having been collected from the government at the 
 time of tiie surrender it should be turned over to the syndic to be dis- 
 posed of as the common pledge of all the creditors. It may be true that 
 neither a iirivilege nor a i)ledge resulted by law in favor of Beltran & 
 Co., by reason of their being furnishers of supplies, and that it would be
 
 5j84 The Law of Pledge. 
 
 necessary for them to base their right on contract, but this is precisely 
 what they do. They rest upon the verbal contract between the parties 
 made in the beginning of the year 1892, and the stipulations of tlie par- 
 ties in regard to it." Page 202. 
 
 The Court maintained the contract right of Beltran to be paid out of 
 the bounty by preference over all other creditors. We consider these 
 two cases decisive of the question that the courts of Louisiana will and 
 do recognize and enforce equitable liens arising from contracts by pref- 
 erence, in proper cases, over technical privileges. 
 
 It is, moreover, a familiar principle of the law of Louisiana that 
 privileges and mortgages only take effect upon the property of a person 
 in the condition in which that property was at the time when the party 
 acquired it, and that such privileges and mortgages are subordinate to 
 legal rights created and existing at the time of his acquisition of the 
 property. 
 
 In this case, the cane of these intervenors passed into the ownership 
 and possession of the Ferris Company, subject to the express agreement 
 and obligation that the bounty which might be collected on sugar 
 produced from this particular cane should be devoted to the pay- 
 ment of intervenor's claims, and should be subject to an equitable lien 
 for the satisfaction thereof. The property passed into their possession 
 and ownership subject to these rights and obligations, and they can not 
 be displaced or impaired by any liens or privileges which the law might 
 create upon the property after its acquisition by the Ferris Company. 
 
 There can not be the slightest doubt that if this case was before the 
 Supreme Court of Louisiana, that tribunal would recognize and enforce 
 the right of these intervenors to have their contract executed, and to be 
 paid out of this fund in preference to any other creditors of the Ferris 
 Company, and that any privilege that such creditors might have would 
 be subordinated to the clear equitable right of intervenors, subject to 
 which only, the Ferris Company acquired the property. 
 
 We therefore maintain that the second proposition on which the 
 contention of appellant is founded is equally as fallacious as the first. 
 
 On the whole we submit that all the questions certified to this Court 
 should be solved in favor of appellees, and that this Honorable the 
 Oircuit Court of Appeals should be advised to affirm the decree appealed 
 from. 
 
 Respectfully submitted. 
 
 CHAS. E. FENNER, 
 
 Solicitor f 07' Payne et al., Appellees.
 
 FORMS OF PLEDGES. 
 
 No. 1. 
 
 Know all Men by these Presents, That the undersigned, in considera- 
 tion of financial accommodations given, or to be given, or continued to 
 
 the undersigned by bank of the city of New York, hereby 
 
 agree with the said bank that whenever the undersigned shall become 
 or remain, directly or contingently, indebted to the said bank for 
 money lent, or for money paid for the use or account of the undersigned, 
 or for any overdraft or upon any endorsement, draft, guarantee or in 
 any other manner whatsoever, or upon any other claim, the said bank 
 shall then and thereafter have the following rights, in addition to those 
 created by the circumstances from which such indebtedness may arise 
 against the undersigned, or his, or their executors, administrators or 
 assigns, namely : 
 
 1. All securities deposited by the undersigned with said bank, as col- 
 lateral to any such loan or indebtedness of the undersigned to said bank, 
 shall also be held by said bank as security for any other liability of the 
 undersigned to said bank, whether then existing or thereafter con- 
 tracted; and said bank shall also have a lien upon any balance of the 
 deposit account of the undersigned with said bank existing from time 
 to time, and upon all property of the undersigned of every description 
 left with said bank for safe keeping or otherwise, or coming to the 
 hands of said bank in any way, as security for any liability of the 
 undersigned to said bank now existing or hereafter contracted, 
 
 2. Said bank shall at all times have the right to require from the 
 undersigned that there shall be lodged with said bank as security for 
 all existing liabilities of the undersigned to said bank, approved col- 
 lateral securities to an amount satisfactory to said bank; and upon the 
 failure of the undersigned at all times to keep a margin of securities 
 with said bank for such liabilities of the undersigned, satisfactory to 
 said bank, or upon any failure in biisiness or making of an insolvent 
 assignment by the undersigned, then and in either event all liabilities 
 of the undersigned to said bank shall at the option of said bank become 
 immediately due and payable, notwithstanding any credit or time 
 allowed to the undersigned by any instrument evidencing any of the 
 said liabilities. 
 
 3. Upon failure of the undersigned either to pay any indebtedness to 
 said bank when becoming or made due, or to keep up the margin of 
 collateral securities above provided for, then and in either event said 
 
 5S5
 
 586 The Law of Pledge. 
 
 bank may immediately without advertisement, and without notice to> 
 the undersigned, sell any of the securities held by it as against any or 
 all of the liabilities of the undersigned, at private sale or Brokers' 
 Board or otherwise, and apply the proceeds of such sale as far as needed 
 toward the payment of any or all of such liabilities together with 
 interest and expenses of sale, holding the undersigned responsible for 
 any deficiency remaining unpaid after sucli application. If any such 
 sale be at Broker's Board or at public auction, said bank may itself be a 
 purchaser at such sale free from any right or equity of redemption of 
 the undersigned, such right and equity being hereby expressly waived 
 and released. Upon default as aforesaid, said bank may also apply 
 toward the payment of the said liabilities all balances of any deposit 
 account of the undersigned with said bank then existing. 
 
 It is further agreed that these presents constitute a continuing agree- 
 ment, applying to any and all future as well as to existing transactions 
 between the undersisrned and said bank. 
 
 Dated New York, the day of , 189 
 
 No. 2. 
 
 $ GOLD. Xew York. 189 .. 
 
 without grace promise to pay to or order, at their 
 
 office, in the city of New York, the sum of dollars, gold 
 
 coin of the United States, present standard of weight and fineness, for 
 
 value received, with interest at the rate of per cent, per 
 
 annum, payable having deposited herewith, and pledged as 
 
 collateral security to the holder hereof, the following property, viz. ; 
 
 with authority to the holder hereof to sell the whole of said 
 
 property, or any part thereof, or any substitutes therefor, or any addi- 
 tions thereto, at any Brokers' Board, in the city of New York, or at 
 public or private sale in said cilj' or elsewhere, at the option of such 
 holder, on the non-performance of any of the promises or agreements 
 herein contained, without notice of amount claimed to be due, without 
 demand of payment, without advertisement and without notice of the 
 time and place of sale, each and every of which is hereby expressly 
 waived. 
 
 It is agreed that in case of depreciation in the market value of the 
 
 property hereby pledged which market value is now (S ), or 
 
 which may hereafter be pledged for this loan, a payment shall be made 
 on account of this loan upon the demand of the holder hereof, so that 
 
 the said market value shall always be at least per cent, more 
 
 than the amount unpaid of this note, and that in case of failure to 
 make such payment, this note shall, at the option of the holder hereof.
 
 Forms of Pledges. 587 
 
 become due and payable forthwith, anything hereinbefore expressed to 
 the contrary, notwithstanding, and that the holder may immediately 
 reimburse by sale as hereinbefore provided of the said prop- 
 erty or any part thereof. In case the net proceeds arising from any 
 
 sale, hereunder, shall be less than the amount due hereon 
 
 promise to pay to the holder, forthwith after such sale, the amount of 
 such detic'iency with legal interest. 
 
 It is further agreed that any excess in the value of such collaterals, 
 or surplus from the sale thereof beyond the amount due hereon, shall 
 be applicable, upon any other note or claim held by the holder hereof, 
 
 against now due or to become due, or that may be hereafter 
 
 contracted; and that, if no other note or claim against is so 
 
 held, such surplus, after the payment of this note, and the expenses of 
 such sale shall be returned to or assigns. 
 
 It is further agreed that upon any sale by virtue hereof, the holder 
 hereof may purchase the whole or any part of such property discharged 
 from any right of redemption, which is hereby expressly released to 
 the holder hereof, who shall retain a claim against the maker hereof 
 for any deficiency arising upon such sale. 
 
 Xo. 3. 
 $ New York, 189 ... 
 
 without promise to pay to or order, at their 
 
 oflSce, in the city of N"ew York, the sum of dollars, for value 
 
 received, with interest at the rate of percent, per annum, pay- 
 able having deposited herewith, and pledged as collateral 
 
 security to the holder hereof, the following property, viz. : with. 
 
 authority to the holder hereof to sell the whole of said property, or any 
 part thereof, or any substitutes therefor, or any additions thereto, at 
 any Brokers' Board, in the city of New York, or at public or private sale 
 in said city or elsewhere, at the option of such holder, on the non- 
 performance of any of the promises or agreements herein contained, 
 without notice of amount claimed to be due, without demand of payment, 
 without advertisement and without notice of the time and place of 
 sale, each and every of which is hereby expressly w*aived. 
 
 It is agreed that in case of depreciation in the market value of the 
 
 property hereby pledged which market value is now ($ ), or 
 
 which may hereafter be pledged for this loan, a payment shall be 
 made on account of this loan upon the demand of the holder hereof, so 
 
 that the said market value shall always be at least per cent, more 
 
 than the amount unpaid of this note, and that in case of failure to make 
 such payment, this note shall, at the option of the holder hereof,,
 
 588 The J^aw of Pledge. 
 
 become due and payable forthwith, anything hereinbefore expressed to 
 the contrary, notwithstanding, and that the holder may immediately 
 
 reimburse by sale, as hereinbefore ijrovided, of the said prop- 
 
 ■erty or any part thereof. In case the net proceeds arising from any 
 
 sale, hereunder, shall be less than the amount due hereon 
 
 promise to pay to the holder, forthwith after such sale, the amount of 
 5ueh deficiency with legal interest. 
 
 It is further agreed that any excess in the value of such collaterals, 
 •or surplus from the sale thereof bej-ond the amount due hereon, shall 
 be applicable upon any other note or claim held bj' the holder hereof, 
 
 against now due or to become due, or that may be hereafter 
 
 contracted; and that, if no other note or claim against is so 
 
 lield, such surplus after the payment of this note and the expenses of 
 such sale shall be returned to or assigns. 
 
 It is further agreed that upon any sale by virtue hereof, the holder 
 hereof may purchase the whole or any part of such property discharged 
 from any right of redemption, which is hereby expressly released to the 
 holder hereof, who shall retain a claim against the maker hereof for 
 anv deficiency arising upon such sale. 
 
 Xo. 4. 
 '$ Xew York, 189.... 
 
 On Demand, with interest at per cent, per annum, we 
 
 promise to pay to the Bank of , National Banking Associa- 
 tion, or Order at said Bank, dollars, in United States Gold Coin, 
 
 or its equivalent, for value received, having deposited with said Bank, 
 as collateral security: 
 
 If the market value of said securities, or of any hereafter deposited 
 therewith, or of the remainder after the application of any part thereof 
 to any other note or claim, shall at any time be less than twenty per cent, 
 beyond the amount of this note and interest, the said Bank shall have 
 the right until this note be paid, to retain and apply any money, col- 
 laterals, securities or property of ours of any kind, that it may then 
 have or thereafter acquire to make good the deticiencv. 
 
 In case of the non-payment of this note, according to its terms, we 
 hereby authorize said Bank to sell said collaterals, securities or property, 
 and to apply the aforesaid money and the net proceeds of such sale to 
 the payment of this note and interest thereon; such sale to be 
 made at the Bank's option, without notice, at the Board of Brokers or 
 at public or private sale. Any amount which may then remain due 
 hereon we promise to pay to said Bank, forthwith after sueh sale, with 
 .legal interest.
 
 Forms of Pledges. 58^ 
 
 It is further agreed, that said collaterals, or any excess in the value 
 thereof, or any surplus from the sale thereof, beyond the amount due 
 hereon, shall be applicable upon any other note or claim held by said 
 Bank against us, and for that purpose may be sold in the manner 
 above stated; and if said Bank hold no other note or claim against 
 us, such surplus after paj'ment of this note, shall be returned to us, 
 and in case of any exchange of or addition to the collaterals above 
 named, the provisions of this note shall extend to such new or addi- 
 tional collaterals. 
 
 It is also understood that upon any sale of any of said collaterals, 
 said Bank may become the purchaser thereof and hold the same there- 
 after in its own right, absolutely free from any claim of ours. 
 
 Xo. 5. 
 
 Time. 
 $ * Xew York, 189... 
 
 after date, we promise to pay to The Bank of , National 
 
 Banking Association, or order, at said bank, dollars, in U. S. 
 
 gold coin or its equivalent, for value received, having deposited with 
 
 said bank as collateral security , and agreeing that if the market 
 
 value of said securities, or of any hereafter deposited therewith, or of 
 the remainder after the apijlication of any part thereof to anj^ other 
 note or claim, shall at any time be less than twenty per cent, beyond 
 the amount of this note and interest, we will from time to time duly 
 deposit with said bank further collateral security of sufficient market 
 value to maintain such margin of twenty per cent. ; and that until 
 such further deposit be made or this note be paid the said Bank shall 
 have the right to retain and apply any money, collaterals, securities or 
 property of ours of any kind that it may then have or thereafter acquire, 
 to make good the deficiency; and that, if such further deposit be not 
 so made within one day after demand thereof by said Bank, this note' 
 thereupon, at the option of said Bank, shall become due and payable' 
 forthwith. 
 
 And in case of non-performance of this promise or agreement, we- 
 hereby authorize said Bank, at its option, to sell said collaterals, securi- 
 ties or property, and to apply the aforesaid money and the net proceeds 
 of such sale to the payment of this note and interest thereon, such sale- 
 to be made, at the Bank's option, without notice, at the Board of Brokers,, 
 or at public or private sale, and any amount which may then remain due' 
 hereon, we promise to pay to said Bank forthwith after such sale, with 
 legal interest. 
 
 It is further agreed that said collaterals or anv excess in the value
 
 590 The Law op Pledge. 
 
 thereof, or any surplus from the sale thereof beyond the amount due 
 hereon, shall be applicable upon any other note or claim held by said 
 Bank against us, and for that purpose may be sold in the manner above 
 stated ; and if said Bank hold no other note or claim against us such 
 surplus afler payment of this note, shall be returned to us; and in case 
 'Of any exchange of or addition to the collaterals above named, the pro- 
 visions of this note shall extend to such new or additional collaterals. 
 
 It is further agreed that, in the event of any suspension, failure or 
 assignment for the benefit of creditors on the part of the undersigned, 
 this obligation shall thereupon, at the option of the said Bank with or 
 without notice, immediately mature and become due and payable. 
 
 It is also understood that upon any sale of any of said collaterals, said 
 Bank may become the purchaser thereof, and hold the same thereafter 
 in its own right, absolutely free from any claim of ours. 
 
 No. Gr 
 $ Boston, 189... 
 
 On demand, after date, for value received, with interes*" at the rate 
 
 ■of per cent, per annum, promise to pay to 
 
 National Bank of Boston, or order, at its place of business, 
 
 dollars, having deposited herewith as collateral security, , 
 
 with authority to sell the same, or any collaterals substituted for 
 or added to the above, without notice, either at public or private sale, 
 
 •or otherwise, at the option of the said National Bank, on the 
 
 non-performance of this promise, said Bank applying the net proceeds 
 
 to the payment of this note, and accounting to for the surplus, 
 
 if any; and it is hereby agreed that such surplus, or any excess of col- 
 laterals iipon this note, shall be applicable to any other note or claim 
 
 against held by said Bank. Should the market value of any 
 
 security pledged for this loan, in the judgment of the holder or holders 
 
 hereof, decline, hereby agree to deposit on demand (which 
 
 may be made by a notice in writing sent by mail or otherwise to 
 
 residence or place of business), additional collateral, so that 
 
 the market value shall always be at least per cent, more than 
 
 the amount of this note; and failing to deposit such additional secur- 
 ity, this note shall be deemed to be due and paj-able forthwith, anything 
 herein before expressed to the contrary notwithstanding, and the holder 
 or holders may immediately reimburse themselves by the sale of the 
 security; and it is hereby agreed that the holder or holders of this note, 
 or any person in his or their behalf, may purchase at any such sale.
 
 Forms of Pledges. 591 
 
 Xo. 7. 
 
 $ Boston, 189.... 
 
 without grace, promise to pay to , or order, 
 
 at their office, in the city of Boston, the sum of dollars, value 
 
 received, with interest at the rate of per cent, per annum, pay- 
 able having deposited herewith, as collateral security for the 
 
 payment of this note and for all other indebtedness, whether direct or 
 
 indirect, which i«ay from time to time incur, to said , 
 
 the following property, namely : 
 
 Until the payment of this note and such other indebtedness the hold- 
 ers hereof may, at their option, use or hypothecate all or any of said 
 property for their own use; and upon default in the payment of this 
 note or such other indebtedness, or in the performance of any of the 
 promises herein contained, the holders hereof are authorized to sell all 
 said property, or any part thereof, or any substitute therefor, or any ad- 
 ditions thereto, at one or more sales, at any Broker's Board in the city 
 of Boston, or at public auction or private sale in said city or else- 
 where, at the option of such holders, without notice of amount claimed 
 to be due, without demand of payment, without advertisement and 
 without notice of the time and place of sale, each and every of 
 
 which is hereby expressly waived. On death this note shall 
 
 be deemed at once due and payable ; and the holders hereof may exer- 
 cise the above power of sale, without notice or demand, and before 
 as well as after the appointment of an executor or administrator of 
 estate. 
 
 In case of a depreciation in the market value of the property hereby 
 
 pledged, which market value is now $ , or which may hereafter 
 
 be pledged for this loan, agree to furnish additional security 
 
 satisfactory to the holders hereof, without demand or notice, so that 
 the market value of the property held as security hereunder shall 
 
 always be at least per cent, more than the amount hereof. 
 
 And, upon failure to furnish such additional security, this note shall, 
 at the option of said holders, be deemed to be due and payable forth- 
 with, anything herein expressed to the contrary notwithstanding; and 
 said holders may immediately reimburse themselves by sale of said 
 property or any part thereof as hereinbefore provided. 
 
 In case the net proceeds arising from any sale hereunder shall be less 
 
 than the amount due hereon, promise to pay to the holders 
 
 hereof forthwith after such sale the amount of such deticiency with 
 legal interest. 
 
 It is further agreed that, if the net proceeds received from any sale 
 hereunder exceed the amount due hereon, such excess shall be appli- 
 cable upon any other indebtedness, whether then or thereafter to become 
 due from to said ; and the balance of such proceeds,
 
 592 The Law of Pledge. 
 
 after the payment of the amount due hereon, and the satisfaction of all 
 
 other indebtedness, shall be returned to or assigns. 
 
 It is further agreed that upon any sale by virtue hereof the holders 
 hereof may purchase the whole or any part of said property discharged 
 from any right of redemption, which is hereby expressly released to 
 
 the holders hereof, who shall retain a claim against for any 
 
 deficiency arising from such sale. 
 
 Xo. 8. 
 
 Boston, 189. 
 
 after date, for value received, 
 
 as principal and 
 
 as sureties, jomtly and severally promise to pay to 
 
 Trust Company or order, at its place of business in Boston, 
 
 dollars, having deposited with this obligation as collateral security 
 
 with authority to sell the same, or any 
 
 collaterals substituted for or added to the above, without notice, either 
 
 at public or private sale, or other\\ise, at the option of the said 
 
 Trust Company, on the non-performance of this promise, said trust 
 company applying the net proceeds to the payment of this note and 
 
 accounting to for the surplus, if any; 
 
 and it is hereby agreed that such surplus, or any excess of collaterals 
 upon this note, shall be applicable to any other note or claim against 
 
 held by said trust company. Should the 
 
 market value of any security pledged for this loan, in the judgment 
 
 of the holder or holders hereof, decline, 
 
 hereby agree to deposit on demand (which may be made by a notice in 
 
 writing sent by mail or otherwise to 
 
 residence or place of business) additional collateral, so that the market 
 
 value shall always be at least ...per cent, more than the amount of 
 
 this note; and failing to deposit such additional security, this note 
 shall be deemed to be due and payable forthwith, anything hereinbe- 
 fore expressed to the contrary notwithstanding, and the holder or 
 holders may immediately reimburse themselves by the sale of the 
 security as aforesaid; and it is hereby agreed that the holder or 
 holders of this note, or any person in his or their behalf, may purchase 
 at any such sale.
 
 Forms of Pledges. 593 
 
 No. 9. 
 
 $ Philadelphia, 189... 
 
 On demand, for value received, promise to pay to tlie order 
 
 of Dollars, witti interest, having deposited as collateral 
 
 security for payment of tliis or any other liability or liabilities to said 
 holder hereof, due or to become due, or that may be hereafter con- 
 tracted, the following property, viz.: with the right on the 
 
 part of the holder hereof, to repledge the securities above mentioned, 
 or to substitute or exchange for the same other certificates of like 
 tenor and amount, and also from time to time to demand additional 
 collateral security, and upon failure to comply with any such demand, 
 this obligation shall forthwith become due, with full power and au- 
 thority, to the holder hereof, or assigns, in case of such default, or of 
 the non-payment of any of the liabilities above mentioned at maturity, 
 to sell, assign and deliver the whole, or any part of such securities, or 
 any substitutes therefor or additions thereto, at any broker's board, or 
 at public or private sale, at their option, at any time or times there- 
 after, without advertisement or notice to the undersigned, and with 
 the right on the part of the holder hereof, to become purchaser thereof 
 at such sale or sales, freed and discharged of any equity of redemp- 
 tion. And after deducting all legal or other costs and expenses for 
 collection, sale and delivery, to apply the residue of the proceeds, of 
 such sale or sales so made, to pay any, either or all of said liabilities, 
 as said holder hereof shall deem proper, returning the overplus to the 
 undersigned; and the undersigned will still remain liable for any 
 amount so unpaid. It being further understood and agreed that The 
 
 National Bank of Philadelphia shall have a like lien upon 
 
 any and all funds, stocks, bonds, notes, and other propei'ty at anytime 
 in the hands of the said bank belonging to the maker, or endorser or 
 endorsers, or guarantor or guarantors hereof, as security for this note 
 and for any and all liability or liabilities matured or unmatured, of 
 such maker, endoi'ser or endorsers, guarantor or guai'antors to said 
 bank, which lien shall be enforceable in like manner and shall be sub- 
 ject to all the provisions herein above and before mentioned and set out. 
 
 Payable at The National Bank. 
 
 No. 10. 
 
 $ Philadelphia, 189 . 
 
 after date, for value received, promise to pay to the 
 
 order of dollars, having deposited as collateral security for pay- 
 ment of this or any other liability or liabilities to said holder hereof,
 
 594 The Law op Pledge. 
 
 due or to become due, or that may be hereafter contracted, the follow- 
 ing property, viz. : with the right on the part of the holder 
 
 hereof, to repledge the securities above mentioned, or to substitute or 
 exchange for the same other certificates of like tenor and amount, and 
 also from time to time to demand additional collateral security, and 
 upon failure to comply with any such demand, this obligation shall 
 forthwith become due, with full power and authority, to the holder 
 hereof, or assigns, in case of such default, or of the non-payment of 
 any of the liabilities above mentioned at maturdty, to sell, assign and 
 deliver the whole, or any part of such securities, or any substitutes 
 therefor or additions thereto, at any broker's board, or at public or 
 private sale, at their option, at any time or times thereafter, without 
 advertisement or notice to the undersigned, and with the right on the 
 part of the holder hereof, to become purchaser thereof at such sale or 
 sales, freed and discharged of any equity of redemption. And after 
 deducting all legal or other costs and expenses for collection, sale and 
 delivery, to apply the residue of the proceeds of such sale or sales so 
 made, to pay any, either or all of said liabilities, as said holder hereof 
 shall deem proper, returning the overplus to the undersigned; and the 
 undersigned will still remain liable for any amount so unpaid. It being 
 
 further understood and agreed that The National Bank of 
 
 Philadelphia shall have alike lien upon any and all funds, stocks, bonds, 
 notes, and other property at any time in the hands of the said Bank 
 belonging to the maker, or endorser or endorsers, or guarantor or 
 guarantors hereof, as security for this note and for any and all liability 
 or liabilities, matured or unmatured, of such maker, endorser or 
 endorsers, guarantor or guarantors to said Bank, which lien shall be 
 enforceable in like manner and shall be «ubject to all the provisions 
 herein above and before mentioned and set out. 
 
 Payable at The National Bank. 
 
 No. 11. 
 
 $ Philadelphia, , 189... 
 
 after date, for value received promise to pay to the 
 
 order of dollars, having deposited as collateral security for 
 
 payment of this or any other liability or liabilities to said holder hereof, 
 due or to become due, or that may be hereafter contracted, the following 
 
 property, viz. : with the right ou the part of the holder hereof, 
 
 to repledge the securities above mentioned, or to substitute or exchange
 
 Forms op Pledges. 595 
 
 for the same, other certiflcates of like tenor and amount, and also from 
 time to time to demand additional collateral security, and upon failure 
 to comply with any such demand, this obligation shall forthwith become 
 due, with full power and authority, to the holder hereof, or assigns, in 
 case of such default, or of the non-payment of any of the liabilities 
 above mentioned at maturity, to sell, assign and deliver the whole or 
 any part of such securities, or any substitutes therefor or additions 
 thereto, at any broker's board, or at public or private sale, at their 
 option, at any time or times thereafter, without advertisement or notice 
 to the undersigned, and with the right on the part of the holder hereof, 
 to become purchaser thereof at such sale or sales, freed and discharged 
 of any equity of redemption. And after deducting all legal or other 
 costs and expenses for collection, sale and delivery, to apply the residue 
 of the proceeds of such sale or sales so made, to pay any, either or all 
 of said liabilities, as said holder hereof shall deem proper, returning the 
 overplus to the undersigned; and the undersigned will j still remain lia- 
 ble for any amount so unpaid. It being further understood and agreed 
 
 that The National Bank of Philadelphia shall have a like lien 
 
 upon any and all funds, stocks, bonds, notes, and other property at any 
 time in the hands of the said bank belonging to the maker, or endorser 
 or endorsers, or guarantor or guarantors hereof, as security for this note 
 and for any and all liability or liabilities, matured or unmatured, of 
 such maker, endorser or endorsers, guarantor or guarantors to said 
 bank, which lien shall be enforceable in like manner and shall be sub- 
 ject to all the provisions herein above and before mentioned and set 
 out. 
 
 Payable at The National Bank. 
 
 No. 11— E7idorsed on Back. 
 
 For value received, hereby assign, transfer and set over to 
 
 The National Bank of Philadelphia, or order, a promissory note 
 
 drawn by , to the order of , for dollars, dated 
 
 , payable after date; and do also assign to 
 
 the said The National Bank of Philadelphia, or order, all right, 
 
 title and interest in the collateral and moneys mentioned in the said 
 
 note, and hereby guarantee the prompt payment of the said 
 
 note, at the maturity thereof, whether such maturity occurs by expira- 
 tion of time, or for any other cause, as mentioned in the said note. 
 And this guarantee is made expressly subject to all the terms, condi- 
 tions, and provisions of the said note.
 
 596 The Law op Pledge. 
 
 No. 12. 
 
 Baltimore, , 189. 
 
 for value received, promise to pay to The 
 
 National Bank, or order, at said bank, dollars, with 
 
 having deposited with said bank as collateral security for the payment 
 
 of this note ..., with such additional collaterals as may from time 
 
 to time be required by its president or cashier, and which additional 
 collaterals we hereby promise to give at any time, on demand. If these 
 additional collaterals be not so given when demanded, then this note 
 to be due, and rebate of interest taken shall be allowed on payment 
 prior to maturity. And hereby give to said bank, its presi- 
 dent or cashier, full power and authority to sell and assign and deliver 
 the whole or any part of said collaterals, or any substitutes therefor, or 
 any additions thereto, at any Brokers' Board or elsewhere, at public 
 or private sale, at the option of said bank, or its president or cashier, 
 or either of them, on the non-performance of the above promises, or 
 any of them, or at any time thereafter, and without advertising or 
 
 giving to any notice, or making any demand of payment. 
 
 And also agree to pay all legal or other costs and expenses 
 
 for collection of this note, or sale and delivery of the collateral, and 
 
 should any deficiency remain, farther promise and agree to 
 
 pay the same to the holder hereof on demand. 
 
 It is also agreed, that said collaterals may from time to time, by 
 mutual consent, be exchanged for others, which shall also be held by 
 
 said bank on the terms above set forth, and that if shall come 
 
 under any other liability, or enter into any other agreement with said 
 bank while it is the holder of this obligation, that the net proceeds of 
 sale of the above securities may be applied to this note, and any other 
 liabilities or engagements held by said bank. 
 
 No. 13 
 
 New Orleans ISO. 
 
 after date promise to pay to 
 
 the order of at Bank of New Orleans, dol- 
 lars, for value received, with interest at the rate of per cent. 
 
 per annum, from until paid. 
 
 The securities mentioned on the reverse hereof are hereby pledged and 
 delivered to secure payment of this note. Should said securities decline 
 in value, the maker of this note hereby agrees, within twenty-four 
 hours from demand to that effect by the holder, to pledge additional
 
 EoRMS OiF Pledges. 597 
 
 securities satisfactory to the holder, to cover such decline. Failure or 
 refusal to comply with this demand shall at once mature this note and 
 pledge. On maturity of this note, either by its terms or on account of 
 the failure to make good any decline in value of the pledged securities, 
 the holder is hereby authorized to sell said securities at public or 
 private sale, without recourse to judicial proceedings, and to make 
 any transfers of stock or other property that may be required to effect 
 such sale, and to apply the proceeds thereof to the payment of this 
 note and of any costs, and attorney's fees that may be incurred, and 
 the remainder, if any, to the payment of any other indebtedness, 
 whether matured or not matured, up to the amount of two hundred 
 and fifty thousand dollars owed by the maker hereof to this bank. 
 The holder of this note shall have the right to purchase the pledged 
 securities at their market value, or at any judicial or auction sale there- 
 of, or when sold on the Stock Exchange. The drawer agrees to pay 
 attorney's fees, estimated at 5 per cent, on the amount of this note 
 and secured by this pledge, in case of the employment of an attorney 
 to enforce this note or pledge. At the maturity of this note, any money 
 on deposit, or otherwise to the credit of the maker, on the books of 
 said Whitney National Bank, shall at once stand applied to tho pay- 
 ment of this note, unless otherwise paid. 
 Due 
 
 No. 14. 
 $ New Orleans, La., , 189... 
 
 after date promise to pay to the order of at 
 
 the National Bank of New Orleans, dollars, for value received, 
 
 with interest thereon at the rate of per cent, per annum from 
 
 until paid. 
 
 This note is secured by pledge and delivery of the securities men- 
 tioned on the reverse hereof. Should said securities decline in value, 
 the maker of this note hereby agrees, within twenty-four hours from 
 demand on him to that effect made by the holder of this note, to furnish 
 and pledge additional securities, satisfactory to the holder of the note, 
 to cover such decline. And the failure or refusal by the maker to 
 furnish such additional securities when so called for shall at once 
 mature this note and pledge. 
 
 Should this note not be paid at maturity, or when it becomes due by 
 failure to furnish additional securities as above provided or for any 
 other reason, the then holder thereof is hereby authorized to sell the 
 pledged securities, at public or private sale, without recourse to judicial 
 proceedings, and is hereby irrevocably authorized to transfer any shares
 
 598 The Law of Pledge. 
 
 of stock, or other securities, on the books of the company issuing same, 
 to purchaser under such public or private sale. The proceeds of the sale 
 of said pledged securities shall be applied (1) to thei^aj'ment of all costs 
 and commissions for selling, {2) to the payment of this note, in princi- 
 pal, and interest and the 5 per cent, attorney fees, below stipulated, (3) 
 to the payment of any other indebtedness, then due or thereafter to 
 
 become due, by the maker of this note to the said XationalBank 
 
 up to the sum of $100,000. The holder of this note shall have the right to 
 l^urchase the pledged securities at their market value, if there is any mar- 
 ket value, or at any judicial or auction sale thereof, or when sold on the 
 Stock Exchange of Xew Orleans. Should this note not be paid at 
 maturity or when due as above, or should it become necessary to 
 employ an attorney to make or enforce the same, or should this note be 
 placed in the hands of an attorney for collection, the maker shall 
 pay the fees of such attorney to be estimated at 5 per cent, on the 
 amount then due on this note, which attorney's fees are secured by this 
 pledge. At the maturity of this note, or v/hen otherwise due, as above 
 provided, any money on deposit or otherwise to the credit of the 
 
 maker on the books of said National Bank, shall at once stand 
 
 applied to the payment of this note, unless it be otherwise paid. 
 Due 
 
 Xo. 1.5. 
 $ New Okleaks, 189.... 
 
 after date promise to pay to the order of The _ 
 
 of Louisiana, at its banking house, No street. New Orleans, 
 
 dollars, for value received with interest at the rate of eight per cent, per 
 annum from maturity until paid. 
 
 This note is secured by pledge of the .securities mentioned on the 
 reverse hereof, with the right to call for additional security should the 
 same decline, and on failure to respond, this obligation shall be deemed 
 to be due and payable on demand. With full power and authority to 
 sell, and assign, and deliver, the whole of the said property, or any part 
 thereof, or any substitutes therefor, or any addition thereto, at any 
 broker's board, or at public or private sale, at the option of said bank, 
 on the non-performance of this promise, and without further notice, 
 applying the net proceeds, first, to the payment of this note, interest and 
 cost of the sale, and the balance, at the option of the bank, to any other 
 liability to the bank now existing or which may hereafter accrue, and 
 accounting to me for the surplus, if any, and I hereby agree to pay 
 attorney's fees of five per cent, on the amount sued for, or recovered with- 
 out suit, by sale or collection of the securities, in case of suit or legal
 
 Forms of Pledges. 599 
 
 services in or out of court. It is furtlier agreed that the pledgee shall 
 have the right to buy in the said securities at market rate at said private 
 or public sale. It is further agreed that, independently of the right to 
 sell the said securities, the bank, at the maturity of this note, and on ray 
 default to pay same, shall have the right immediately to apply any sum 
 or balance to my credit, on its books, to the payment of said note, inter- 
 est and costs. 
 
 Due Address 
 
 ISTo. 16. 
 
 New Orleans, La., , 189 
 
 after date for value received, promise to pay to the 
 
 order of the Bank, dollars, with interest at the rate of 
 
 eight per cent, from maturity until paid, having pledged as col- 
 lateral security for the payment of this note, and any other lia- 
 bility to said Bank to the extent of collaterals the following property : 
 
 , with the right to call for additional security should the 
 
 same decline, and on failure to respond, this obligation shall be 
 deemed to be due, and payable on demand, less the rebate for 
 the unexpired term. With full power and authority to sell, and 
 assign, and deliver, the whole of the said property, or any part 
 thereof, or any substitutes therefor, or any addition thereto, at any 
 Broker's Board, or at public or private sale, at the option of said Bank, 
 on the non-performance of this promise, and without further notice, 
 applying the net proceeds, first, to the payment of this note, and the 
 balance, at the option of the Bank, to any other liabilitj% and account- 
 ing to for the surplus, if any. 
 
 Payable at
 
 INDEX. 
 
 Reference is to sections; where reference is made in index to any subject, and a 
 number is not given, the refertnce is to the heading in the index itself. 
 
 ARTIST. 
 
 Section. 
 
 May pledge executed work; delivery of pledge and rights of 
 pledgee ^"^ 
 
 ASSESSMENT, On Stock Pledged. 
 
 Pledgeor bound for them when paid by pledgee -«, 274 
 
 ASSIGNMENT, Of Choses in Action. (See Incorporeal Rights.) 
 
 Distinction between in full ownership or for pledge as 
 
 security 105, 106, 108 
 
 Of bill of lading, efiect of 108 
 
 In Bankruptcy— See Syndic. 
 
 ATTACHMENT. 
 
 Gives creditor tacit pledge or lien on property attached 531, 533 
 
 ATTORNEY. 
 
 Has lien for his fee on property recovered for client 538 
 
 AUTHOR. 
 
 May pledge executed work; delivery of pledge and rights of 
 pledgee "'^ 
 
 BAILEE. (See Pledgee.) 
 
 BAILMENT. (See Pledge, Delivery, Possession.) 
 
 BAILOR. (See Pledgeor.) 
 
 BANKRUPTCY, Of Pledgeor. (See Syndic.) 
 
 Does not impair rights of pledgee ^^^J^} ^.?^n 
 
 Does not revoke his power of attorney to sell pledge 27b, 2bO 
 
 BELGIUM. (See Policies of Insurance.) 
 
 Bill of lading in is negotiable, and bona fide vendee or 
 
 pledgee has perfect title 360 
 
 BILL OF LADING. (See Warehouse Receipts.) 
 
 Effect of transfer of for pledge 108 
 
 Delivery of in Louisiana made by mailing 145 
 
 And consignee's privilege primes vendor's 145 
 
 Is not symbol of goods, but muniment of title o61 
 
 601
 
 602 Index. 
 
 BILL OF LADING— Continued. 
 
 Section. 
 
 Holder of has constructive, corporeal, vicarious possession 
 
 of goods 331 
 
 Pledge of actually pledges the goods 331 
 
 But pledgee of is not owner of goods 332. 333 
 
 Pledgee has only a qualified property in goods 334. 335 
 
 And is entitled to delivery and possession of goods .336 
 
 In France and Louisiana made to a designated individual is 
 
 not negotiable, and its pledge not valid against owner or 
 
 vendor of goods 337, 338 
 
 Under commercial law is only quasi negotiable 339 to 355 
 
 Aliter under civil law 356 et seq. 
 
 Under law merchant, pledgeor or vendor of transferred only 
 
 title he possessed 339, 340 
 
 Pledgee or vendee obtains only rights of transferror 341 
 
 Statutory enactments to extend negotiability of 342 to 353 
 
 Give qualified negotiability in England.' 342. 344. 345 
 
 Louisiana ." 344 to 351 
 
 Missouri 348 
 
 California 353 
 
 Wisconsin 353 
 
 Give peifect negotiability in Maryland 343, 346, 352 
 
 Juprisprudence in Federal court give qualified negotia- 
 bility 345,348 
 
 But if owner has conferred authority on transferror, pledgee 
 
 obtains valid pledge 355 
 
 In France, Italy, Belgium and Holland have perfect nego- 
 tiability and bona fide pledgee or vendee has title against 
 
 owner 360 
 
 Conflict of law, arising fi-om difference of principle 361, 362 
 
 Bill of lading is receipt for goods and contract of affreight- 
 ment 364 
 
 Performance of contract is at place of delivery of goods 
 
 364, 369 et seq. 
 Doctrine that Jex loci contractus controls unless contrary 
 
 intention is manifested 360 to 368, 376, 377 
 
 Criticism of the docti-ine 378 to 385 
 
 Consequences flowing from rule that lex loci solutionis or 
 
 contractus governs 364. 365 
 
 The law applicable to the bill of lading controls its 
 pledge .7. 369, 381 to 385 
 
 BROKEE. (See Stocks.) 
 
 Is pledgee of margins deposited with him 9, 470, 471 
 
 Pledge extends to stocks and merchandise bought bj' and 
 
 delivered to him 470, 478 
 
 But does not extend to property not delivered, as in purchase 
 
 of " futures " 478, 479 
 
 Contract of pledge is established by implication..470, 471, 475 to 478 
 
 Obligations of and purchaser 471 
 
 Criticism of rule that relation between and customer is one of 
 
 pledge and not of agency 472, 475, 477 to 479 
 
 Admissibility of custom to show nature of relation 472 to 475 
 
 Eight of to repledge stocks held for customer 473, 474 
 
 CALIFOENIA. (See Bills of Lading.)
 
 Index. 603 
 
 CASAREGIS. 
 
 Sfxtion. 
 Quotation from 357 
 
 CHATTEL MORTGAGE. 
 
 Distinction between and pledge 87, 88, 101 
 
 Not linown to civil law 89 
 
 In Louisiana is sometimes effective as pledge Ill, 112, 123 
 
 CHECKS. 
 
 When drawn against designated fund create an equitable lien 
 on the fund 549 
 
 CHOSE IN ACTION. (See Incorporeal Rights, Inheritance, Policy of 
 Insurance, Bill of Lading, Warehouse Receipts, Negotiable Paper.) 
 
 CIVIL LAW. 
 
 Origin and definition of pignns,Jichicia, hypotheca 544 to 546, 552 
 
 For detailed distinctions between and common law — see 
 
 "Common Law '" 
 
 COMMERCIAL PLEDGES. (See Negotiable Paper, Bill of Lading, 
 Policy of Insurance, Warehouse Receipts, Law Merchant.) 
 
 Law of in France, Germany and the Netherlands 325 to 330 
 
 COMMON CARRIER. 
 
 Has lien on goodsfor freight earned in carriage 519, 538 
 
 COMMON LAW, THE. 
 
 Mortgage and pledge not clearly distinguished in 39 et seq. 
 
 Distinction Between and Civil Law. 
 
 In pledge of incorporeal rights 11, 12, 18, 153, 154 
 
 Necessity of notice in seizure of incorporeal rights, 14, 153, 533 
 
 Pledge of inheritance 40 to 55 
 
 Possession of incorporeal rights 163 
 
 Prescription of debts 187 to 193, 195 to 198 
 
 Prescription of ownership of pledge 176 to 186 
 
 Contract of pledge, suretyship and mortgage 188 et seq. 
 
 Arises from difference in controlling principle 193 
 
 Possession of personal property other than bills, notes, etc. 
 
 200, 201 
 
 Use of thing pledged 202 et seq. 
 
 Pledge of another person's property 231 etseq. 
 
 Right of pledgeor's creditors, other than pledgee, to seize 
 
 pledge 255 to 259 
 
 Where pledgee has been deceived in thing pledged ...275 to 277 
 
 Revocation by death of mandate to sell pledge 281 to 289 
 
 Rights of pledgee of bill of lading against true owner, 
 
 where another i.s pledgeor 339 et seq. 
 
 Stipulations of bill of lading, application of lex loci con- 
 tractus or sohttionis 364 to 385 
 
 Seizure of pledge by ordinary creditor 255 to 260 
 
 Righls of factors, agents and pledgees of personal prop- 
 erty 480, 481, 498 et seq. 
 
 Rights conferred by possession of personal property. 504 et seq.
 
 604 Index. 
 
 COMMON LAW— Continued. 
 
 Section. 
 
 Lien at common law and tacit pledge under civil law.. 518 to 537 
 
 Lessor's right of pledge ..523 to 542 
 
 See Personal propertj-. Pledge, Pledgee, Pledgeor, Policies 
 of Insurance, Possession, Power of Attorney, Prescription, 
 Privileges, Redemption, Sale, Seizure, Tacit Pledge, Use. 
 
 CONFLICT OF LAW. 
 
 Arising from different rules governing stipulations of bill of 
 lading 361, 362 
 
 Bill of lading is receipt for goods and contract of affreight- 
 ment 364 
 
 Performance of contract is at place of delivery of goods 
 
 364, 369 et seq. 
 
 Doctrine that lex loci contractus controls, unless contrary inten- 
 tion is manifested 366, 368, 376, 377 
 
 Criticism of the doctrine 378, 385 
 
 Consequences flowing from rule that lex loci contractus or sohi- 
 tionis governs 364, 365 
 
 The law applicable to the bill of lading controls its pledge, 
 
 369, 381 to 385 
 
 CONSTRUCTIVE DELIVERY. (See Delivery.) 
 
 CONTRACT. (See Obligations for special class of as Sale, Bill of 
 
 Lading, Policy of Insurance, etc.) 
 
 CROPS, GROWING. 
 
 Can not be pledged 26 
 
 Aliter in Louisiana under statute 27, 42 
 
 CORPORATE STOCKS. (See Stocks.) 
 
 CREDITOR, ORDINARY. (See Pledgee.) 
 
 Right of attaching in pledged inheritance inferior to that of 
 
 pledgee 51 
 
 Under civil law may seize pledge, subject to pledgee's 
 
 rights 255, 258 
 
 Aliter at common law 259 
 
 But seizure must not impair value of pledge 257 
 
 A showing that value of pledge exceeds pledgee's claim is con- 
 dition precedent to seizure and sale 260 
 
 DEATH OF PLEDGEOR. 
 
 At common law revokes mandate to sell pledge unless agent 
 
 has title 281 to 284 
 
 Modification of doctrine 285 
 
 Under civil law does not revoke mandate 286 to 289 
 
 DEBT. 
 
 Meaning of term in civil law 68, 69 
 
 DEBTOR. 
 
 At civil law of '• A '' must have notice of seizure by creditor 
 
 of "'A " IJ etseq., 533 
 
 Aliter at common law 18 etseq., 533
 
 Index. 605 
 
 DELIVERY. ("See Possession.) 
 
 Section 
 
 Actual or constructive of thing pledged essential ...8, 122, 128 
 
 Of incorporeal rights is effected by transfer of title under Code 
 
 Napoleon and Code of Louisiana 11, 12, IS 
 
 At civil law, notice to creditor of necessary to affect third 
 
 persons 11, 14, 1.53, 533 
 
 Aliter at common law 18, 153 
 
 Impossibility of prevents pledge of property to be acquired in 
 
 futuro 25 et seq., 41 
 
 Constructive of an inheritance 50, 55 
 
 To pledgeor as agent of pledgee, must be for his account, for 
 
 special piirpose and limited in time 128 to 135 
 
 May be to third person, who accepts trust and for benefit of 
 
 pledgee 127, 139 
 
 Not necessary where pledgee is in possession 143 
 
 May be symbolical 144 
 
 Of bill of lading in Louisiana, made by mailing 145 
 
 Of warehouse receipts or keys 146 to 148 
 
 Criticism of constructive 149, 1.50 
 
 Constructive of things too bulky for actual 151, 152 
 
 Difference between in sale and pledge 168 
 
 DEPOSITARY. 
 
 Has lien on property deposited, for expense incurred in pre- 
 serving it 529 
 
 DILIGENCE. 
 
 Degree of required of pledgee in caring for pledge 266, 267 
 
 ENGLAND. (See Bill Lading, Policies of Insurance.) 
 
 Owner can not recover pledge, even if pledgee had notice that 
 pledgeor was agent 482 
 
 Pledge only invalid where pledgee had notice that pledgor was 
 without authority to pledge 483 
 
 Qucere — Is there a distinction between factor and agent P..481 to 483 
 
 EQUITABLE LIEN. (See Tacit Pledge, Privilege, Lien.) 
 
 Analogy between and privilege 521, 543 et seq., 552 
 
 Distinctions between and privilege 552 et seq. 
 
 Derived from the civil law 544, 551 
 
 Follows property into hands of transferees who have notice 547 
 
 Is conferred by intention, express or implied 547, 550 
 
 Possession of property subject to remains with debtor 547 
 
 How created and on what it bears 547, 548 
 
 Check drawn on designated fund, gives on such fund 549 
 
 Real as well personal property may be subject to 549 
 
 Instance of what will create by implication 5.50 
 
 Nature and theory of 551 et seq. 
 
 Louisiana jurisprudence and laws connected with the subject 
 
 556 to 567 
 
 Effect given by Federal Courts, conflict with statutory law 
 
 of States : 561 to 565 
 
 (Reference in note to " 89 La. An." should be " 39 La. An.'")
 
 606 Index. 
 
 Section. 
 
 EQIUITY JURISDICTION. 
 
 Of covirts of Louisiana 564 to 567 
 
 ESTOPPEL. 
 
 Pledgeor can not deny ownership of property pledged by him 
 
 43 et seq. 
 
 EXPENSE. 
 
 Pledgeor bound for necessary in caring for pledge ...270 to 274 
 
 But only for value added to pledge by useful 270 to 274 
 
 FACTOE, Pledge by. (See Warehouse Eeceipts, Power of 
 Attorney, Bill of Lading ) 
 
 At common law can not pledge property of principal 480 
 
 Mandate of is only to sell 480 
 
 Is mei'e agent with limited and specified authority 481 
 
 Relation was broadened by statute 481 
 
 In England so that principal is bound even if pledgee bad 
 
 notice of capacity 482 
 
 Aliter. if pledgee had notice that factor was without 
 
 authority 483 
 
 In New York the statute protects the pledgee when he was 
 without knowledge that the pledgeor was not owner. ..484 to 4S6 
 
 In Massachusetts the rule is like in England 487, 488 
 
 In Louisiana the common law rule obtaifas 489 et seq. 
 
 Though statutes seem to have changed it 493 et seq. 
 
 Under the civil law the pledgee in good faith for value and 
 
 without notice holds against owner 498 et seq. 
 
 And this though agent is without power to pledge prop- 
 erty of principal 500 
 
 The rule extends to pledge made by any bailee or de- 
 positary (but see 506) 501, 502, 505 
 
 In France the rule is perhaps restricted to pledges by 
 
 — (but see 501, 502) 505, 506 
 
 Definition of in Code of Commerce of France 505 
 
 Distinction between and agent 505 
 
 Has lien on goods of principal for advances 519, 538 
 
 FEDERAL COURTS. (See Bills of Lading, Substitution of Pledge, 
 Stocks, Policies of Insurance.) 
 
 Jurisprudence of in Louisiana concerning Equitable 
 
 Liens 561 to 565 
 
 FIDUCIA. 
 
 Origin and definition of 544 to 546 
 
 FRANCE. (See Commercial Law, Pledge No. 1, 3, Policies of In- 
 surance, Prescription, Tacit Pledge, Tortious Pledge, Warehouse 
 Receipts.) 
 
 Pledge of incorporeal rights in 11 to 24 
 
 Lease of real estate may be pledged in , how ef- 
 fected .". 56 to 59 
 
 Commercial law of pledge in 325 et seq.
 
 Index. 607 
 
 FKANCE — Continued. 
 
 Section. 
 
 Bill of lading in is negotiable, and bona fide pledgee or 
 
 vendee has perfect title ! 360 
 
 When made to designated individual is not negotiable 
 
 and transferee can not hold against owner 337, 338 
 
 ''■Rentes sur VEtat " can not be seized but may be pledged. ...4 
 
 Definition of Factor in Code of Commerce of 505 
 
 Validity of sale or pledge of personal property in by 
 
 agents 498 to 506 
 
 Lessor's right of pledge in 524 to 529 
 
 FRUITS OF PLEDGE. (See Use.) 
 
 Pledgee may receive 210, 212 
 
 Must account for to pledgeor.. 211 et seq. 
 
 GIVE, TO. 
 
 Meaning of term in civil law 69, 70 
 
 GERMANY. 
 
 Commercial law of pledge in 330 
 
 HEIR. (See Inheritance.) 
 
 HOLLAND. 
 
 Commercial law of pledge in 330 
 
 Bill of lading in is negotiable, and bona fide vendee or 
 
 pledgee has perfect title .*. 360 
 
 HYPOTHECA. 
 
 Origin andmeaningof ,544 to 546, 552 
 
 ESrCORPOREAL RIGHTS. (See Inheritance, Lease of Real Estate.) 
 
 Could not at one time be pledged 10 
 
 Aliter under modern common and civil law 11 
 
 Are transferred under Louisiana and Napoleon Codes by pledge 11 
 
 Effect thereof as to third persons 11 
 
 Mode of transferring under Louisiana Code 12 
 
 Distinction between transfer of for pledge and for owner- 
 ship 13 
 
 Under Louisiana Code, debtor must have notice of transfer of 
 
 14, 533 
 
 This notice is also necessary in France 15, 16 
 
 But notice necessary only to affect third persons 17 
 
 Notice of transfer of not necessary under common law 18 to 20, 
 
 335 
 
 Only movable can be pledged under Louisiana and Napoleon 
 
 Codes 21, 22 
 
 What are movable and immovable 21 to 24 
 
 INDIVISIBILITY OF PLEDGE. 
 
 The pledge secures every portion of the debt 290 to 293
 
 608 Index. 
 
 INHERITANCE. (See Incorporeal Rights.) 
 
 Section. 
 
 Under civil law an can not be pledged before death of an- 
 cestor 46 
 
 Aliter after death, where estate is composed of movable 
 
 property 46, 52 to 54 
 
 At common law, pledge of is valid both before and after 
 
 death of ancestor 48 to 51. 55 
 
 Constructive delivery of an 50, 55 
 
 INNKEEPER. 
 
 Has lien on effects of traveler for board or lodging 519, 530, 538 
 
 INSOLVENCY OF PLEDGEOR. (See Syndic.) 
 
 The does not impair rights of pledgee 260 et seq. 
 
 And does not revoke his mandate to sell pledge 278 to 280 
 
 INSURANCE. (See Policies of Insurance.) 
 
 ITALY. 
 
 Bill of lading is negotiable, and bona Me pledgee or vendee 
 
 has perfect title 360 
 
 KEYS OF WAREHOUSE. 
 
 Delivery of constitutes deliverv of property contained there- 
 in ^. 146 to 148 
 
 LAW MERCHANT. (See Negotiable Paper.) 
 
 Controls commercial pledges 271 
 
 LEASE OF REAL ESTATE. (See Lessor's Right of Pledge, Rent.) 
 
 May be pledged 56 
 
 Pledge of — — how effected in Louisiana 56 
 
 How in France 57 to 59 
 
 LEbtoEE. 
 
 Rights of under pledge the law gives lessor 524 et seq. 
 
 LESSOR. 
 
 Civil law gives right of retaining possession 519, 523 et seq. 
 
 Analogous to right of distress at common law 519, 525 539 
 
 Difference between Codes Louisiana and Napoleon on right 
 
 of pledge 524 et seq. 
 
 Criticism of Louisiana jurisprudence on subject 528 
 
 Pledge is tacit, because ancillary to contract of lease 529 
 
 At common law may take lessee's property on premises, 
 
 without intervention of law 539 
 
 Aliter at civil law 540, 541 
 
 Exemptions from lien, etc., in Louisiana 542
 
 pup Index. 609 
 
 LIEN. (See Equitable Lien, Privilege. Tacit Pledge.) 
 
 Section. 
 
 Holder of is without right in or to the property 51S. 534 
 
 Analogies between common law and tacit pledge at civil 
 
 law 519, 538 
 
 Differences between them 535, 53G 
 
 Workman has on article made or repaired by him, for price 
 
 of labor 519, 538 
 
 Innkeeper has on effects of traveler for board or lodging 
 
 519,530, 538 
 Lessor has — — on property of lessee for rent of premises 
 
 519,524, 539 et seq. 
 
 Factor has on goods of principal, for advances 519, 538 
 
 The common carrier has — — on goods, for freight earned in car- 
 riage 519, 538 
 
 The depositary has for expense incurred for preservation of 
 
 property , 529 
 
 The attorney has — — for his fee. on property recovered for client.. 528 
 
 To be effective, property must be in possession of creditor .534 
 
 At civil law, the arises from nature of creditor's claim 534 
 
 It can not be created by contract and is stricti juris 536 
 
 Aliter at Coumion law 537 
 
 LOUISIANA. (See Bill of Lading, Lessor. Cbattel Mortgage. 
 Pledge No. 3, Pledgee, Policies of Insurance. Possession, Prescrip- 
 tion, Privilege, Seizure, Sale. Stocks. Tacit Pledge, Vessels, Ware- 
 house Receipts. ) 
 
 Pledge of incorporeal rights in 11. 24 
 
 Seizure of debts due debtor, how effected, notice required 
 
 11 et seq., 533 
 
 Growing crops may be pledged in 27, 42 
 
 Lease of real estate maj' be pledged in 56 
 
 Deed executed in common law form, valid as conventional 
 
 mortgage in 112 
 
 Delivery of bill lading in made by mailing 145 
 
 Consignee's privilege primes vendor's 145 
 
 Pledgee can not in acquire pledge by prescription, but debt 
 
 kept alive by possession of pledge 173 
 
 Bill lading made to designated individual is not negotiable 
 
 in and transferee can not hold against owner 337, 338 
 
 Pledgee can not sell pledge in unless authorized by contract , 
 
 307 et seq. 
 
 But by contract may sell at private sale or auction 307 et seq. 
 
 Pledge in must be by written act, except for promissory 
 
 notes, etc .316 
 
 Factors can not pledge property of principal in 489 et seq. 
 
 Though governed by civil law. follows common law in com- 
 
 mei'cial affairs 490 
 
 Liens in arise from nature of creditor's claim, can not be es- 
 tablished by contract 534 to 536 
 
 Lessor's right of pledge in 524 et seq., 540, .541 
 
 Exemptions from lessor's lien, etc.. in .542 
 
 Jurisprudence and laws of relative to equitable liens. 556 to .567 
 
 Reference on p. 513 to '• 89 La. An," should be to '• 39 La. An." 
 
 Equity jurisdiction of courts of • its laws and jurisprudence 
 
 564. 565 et seq. 
 Effect given Equitable Lien in by Federal Courts, conflicts 
 
 with Statute 561 to 565
 
 610 Index. 
 
 LIMITATION, Statute of. (See Prescription.) 
 
 Section. 
 
 At common law bars right of action for debt secured by 
 
 pledge, but does not bar right of pledgeor to pledge 7 
 
 Aliter under civil law 173 
 
 MARGINS. (See Broker.) 
 
 MARYLAND. (See Bills of Lading, Warehouse Receipts.) 
 
 MASSACHUSETTS. (See Warehouse Receipts.) 
 
 Right of agent in— to pledge personal property .487, 488 
 
 MISSISSIPPI. (See Substitution of Pledge.) 
 
 MISSOURI. (See Bills of Lading.) 
 
 MONEY. 
 
 May be given in pledge 9 
 
 MORTGAGE. (See Pledge, Chattel Mortgage.) 
 
 Distinction between and pledge 27 etseq.. 167 
 
 Acquisitions in fiituro may be subjected to but can not be 
 
 pledged 28. 29 
 
 Pledge and not clearly distinguished in Roman law 31 
 
 Nor in the Common law 39 et seq. 
 
 Aliter by the French civilians 32. 33, 34 
 
 Errors of Judge Story on subject 28, 35 to 38 
 
 Executed in common law form, effect of in Louisiana 112 
 
 Pledgee must reinscribe in proper time 270 
 
 Equity of redemption can not be waived by mortgagor 304 
 
 MOVABLES. (See Personal Property.) 
 
 NEGOTIABLE PAPER. (See Bills of Lading. Warehouse Receipts.) 
 
 Right of pledgee of to repledge 205. 207. 215. 230 
 
 Pledgee of must preserve rights againstendorser by protest. 270 
 
 Pledge of controlled by law merchant .314 to 31li. 321 
 
 And act in writing not necessary 317 
 
 Right of pledgee to sell must be stipulated 317 
 
 Mav validly be pledged before maturitv by others than owner 
 
 318 to 320. 323 to 325 
 
 Alitn- after maturity 322 et seq. 
 
 Even after maturity pledge valid in some States 321 
 
 A pre-existing debt is a valid consideration for the pledge 
 of in souie States; Aliter in others 321 
 
 NEW YORK. (See Policies of Insurance, Warehouse Receipts.) 
 
 Pledgee in without notice of pledgeor's want of authority 
 
 holds pledge against owner. 484 to 4S6 
 
 Aliter where consideration for pledge was a pre-existing 
 debt of pledgeor 321 
 
 OBLIGATIONS. 
 
 All valid may be secured by pledge .. — 65. 67. 71 
 
 Of third persons, may be secured by delivery of pledgeor"s 
 
 property 72 
 
 Effect of such pledges 73 to 75 
 
 y
 
 Index. 611 
 
 OBLIGATIONS— Continued. 
 
 Section. 
 
 Xullity of releases pledge 76. 77 
 
 Aliter where nullity of arises from incapacity personal to 
 
 debtor 76, 77 
 
 The law will not aid recovery of pledge given for illegal or 
 
 immoral purpose 77 to 89 
 
 Aliter where the contract is not executed 82, 83 
 
 OWXEESHIP. 
 
 Pledgeor retains of property pledged ]08 
 
 Pledgee, even by stipulation, can not acquire of pledge in 
 
 payment of claim 2'J9 to 802 
 
 Such stipulation valid after maturity of debt 308 to 80.") 
 
 PATENT OF INVENTION. 
 
 Maybe pledged _^ 69 
 
 Pledgee of without right to work invention 63 
 
 Notice of pledge of not necessary 154 
 
 PAYMENT. 
 
 Meaning of in civil law 68. 69 
 
 Of obligation, extinguishes pledge 194 
 
 PERSONAL PROPERTY. (See Factor, Incorporeal Rights. Inherit- 
 ance). 
 
 Possession of is equivalent to title oOi 
 
 Distinction between common and civil law in this respect 507 
 
 Reason for common law rule 508 et seq. 
 
 At commun law, possession of confers only prima facie title 
 
 509 et seq. 
 
 And vendee or pledgee of acquire only the title of vendor or 
 
 pledgeor 510 et seq. 
 
 Criticism of common law rule 511 to 516 
 
 Superiority of civil law rule 517 
 
 PIGNORATIVE CONTRACT. 
 
 Nature of 116 et seq. 
 
 Distinguished from sale with right of redemption 117 et seq. 
 
 Gives creditor nolienor privilege against third persons. 121. 158, 159 
 
 PIGNUS. 
 
 Origin and definition of 544 to 546 
 
 PLEDGi:. (See Pledgeor, Pledgee, Tortious Pledge, Creditor.) 
 
 1. Objects of Pledge. 
 
 What may be pledged .1, 3, 4, 9, 11 
 
 What may not be pledged 8, 21, 22, 25, 26, 28, 56, 63, 64 
 
 Incorporeal rights could formerly not be 9 
 
 Aliter under modern common and civil law 11 
 
 Immovable incorporeal right can not be 21, 22 
 
 Nor incorporeal rights not evidenced by muniment of 
 tide 12. 153 et seq.. 1(!(!. 167
 
 612 Index. 
 
 pledge-Continued. 
 
 Section. 
 But may be pledged by written act of ; the act constitut- 
 ing delivery of the credit. 169 et seq. 
 
 Nor property to be acquired in futuro 25 et seq. 
 
 Aliter under statutes 25, 42 
 
 Property of others than pledgeors may be pledged by delivery 43, 72 
 
 Effect thereof against owner 44. 45, 73 to 75 
 
 The may by contract be made to cover the debt incurred 
 
 subsequently 294 to 296 
 
 Aliter in France and other countries of Europe 297, 298 
 
 (See Inheritance, Patent, Lease. Rent, Policies of Insurance, 
 Warehouse Receipts, Negotiable Paper, Bills of Lading.) 
 
 2. Purpose and Fokm of Pledge. 
 
 Object and purpose of 2, 5 
 
 Detinition of ." 66, 68 
 
 Chattel mortgage and distinguished 87, 88, 101 
 
 Form and essentials of 8, 84 
 
 At civil law, act of must be in writing, except commer- 
 cial pledges 89. 91. 317 
 
 Right of sale by pledgee must be stipulated 317 
 
 Written act not necessary at common law 98 
 
 Pledge of negotiable paper controlled by law mer- 
 chant 314 to 316 
 
 Property pledged must be described ih act of 92, 93 
 
 But act need not be in any certain form 94 
 
 And written act necessary only against third per- 
 sons 95 to 97 
 
 Validity of when in form of sale 98 et seq., 116 et seq. 
 
 Objections to in form of sale 101, 102, 110, 116 et seq. 
 
 (See Mortgage, Lien. Equitable Lien. ) 
 
 3. The Contract, Its Requirements and Effect. 
 
 The contract of 5, 6 
 
 Possession of~by pledgee is precarious 7 
 
 But duration of possession not limited 6 
 
 Pledgee can not acquire ownership of 7 
 
 LTnder Codes Napoleon and Louisiana of incorporeal rights 
 
 is transfer of rights 11 
 
 Effect of such transfer 12 
 
 Transfer for pledge is not equivalent to ownership 13, 113 
 
 Debtor of incorporeal right must have notice of transfer 
 
 14, 153 et seq. 
 
 Effect of such notice 15 to 17, 153 et seq. 
 
 Notice not necessary under common law 18 to 20 
 
 Nor at civil law of incorporeal things which are not 
 
 credits 154 
 
 Any legal obligation may be secured hy 65, 67 
 
 The obligation of one may be secured by of another's 
 
 property 72 
 
 Effect of such a transaction 73, 75 
 
 Nullity of obligation, invalidates 75. 76 
 
 Aliter where nullity is caused by incapacity personal to 
 debtor 75.76
 
 Index. 613 
 
 PLEDGE— Continued. 
 
 Section. 
 
 The law will not aid recovery of given for immoral or illegal 
 
 purpose 77, 80 
 
 Aliter where the immoral contract is not yet executed 82, 83 
 
 (See Presei'iption, Possession, Delivery. Pignorative Contract, 
 Sale.) 
 
 4. Miscellaneous. 
 
 The of usufruct of a thing, is not of thing itself 24 
 
 Fruits of things pledged become part of 25 
 
 An agreement to maj^ be enforced 41 
 
 The is indivisible, and secures every part of the obligation 
 
 290 to 293 
 
 PLEDGEE. (See Prescription, Pledgeor, Pledge, Creditor, Possession.) 
 
 Eights of in pledged inheritance, against subsequent creditor.. 51 
 
 Eights of -in pledged patents 63 
 
 In works of the Mind 64 
 
 At civil law is without title in thing pledged 113 
 
 And can not use things pledged — is mere depositarv..l99 et seq. 
 
 Exception to rule ' 209. 213 
 
 Has right only to proceeds of pledge 200, 255 to 258 
 
 Aliter at common law, where right is in the thing. .200, 259 
 
 At common law may use thing pledged. .202, 210, 213, 224 et seq. 
 
 But use must not injure thing, and is at peril of 225, 226 
 
 Criticism of common law doctrine 227 
 
 The— —may receive fruits of thing pledged 210 to 112 
 
 But must account for them 211 et seq. 
 
 May receive and enforce payment of claims pledged with 
 
 him 207, 212, 213, 266 to 270 
 
 Eight of to subpledge questioned 205, 207, 215 to 217 
 
 Limitation of right by Judge Story 228 
 
 But right now fully established 2l4 et seq,, 229, 230 
 
 The may transfer his claim, with pledge 222 
 
 The^ — —not bound to surrender pledge to assignee or syndic of 
 
 pledgeor 260 to 263 
 
 Difficulties and limitation of the rule 264, 265 
 
 Degree of diligence required of in preservation of pledge. 266, 267 
 
 Liability if pledge is stolen 268, 269 
 
 For neglect to enforce right arising under pledge :..270 
 
 Special skill not required in care or administration of pledge 
 
 unless specially agreed 270 
 
 The may recover necessary expense incurred in caring for 
 
 pledge 270 to 274 
 
 If expense only useful, then only for value added to pledge 
 
 270 to 274 
 
 At civil law may demand another pledge, when deceived in 
 
 thing pledged 275. 276 
 
 Or may rescind contract and demand immediate payment . 276 
 Aliter at common law, where he has only action in damages. 277 
 
 Even by contract can not appropriate pledge in payment of 
 
 debt 299 to 302 
 
 May do so by contract after maturit}^ of claim 303 to 305 
 
 Under civil law can not sell pledge without judgment 306 
 
 Aliter if pledge consists of commercial paper, when sale may 
 
 be stipulated 306, 317 
 
 In Louisiana, sale may be stipulated 307 to B09, 317
 
 614 Index. 
 
 PLEDGEE— Continued. 
 
 SECTIO>f. 
 
 At common law may sell at public auction after notice 310 
 
 And may stipulate for private sale 310 
 
 The- may be purchaser at sale of pledge 311 
 
 Even when under the contract he is vendor .312, 313 
 
 PLEDGEOK. 
 
 May pledge his property to secure obligation of another 72 
 
 Rights of when pledged property pays debt 73 to 76 
 
 The is released by nullity of obligation of debtor 75. 76 
 
 Aliter where nullity is caused by incapacity personal to 
 
 debtor 75, 76 
 
 The law will not aid the to recover property pledged for 
 
 illegal oriramoral purpose 77 to 80 
 
 Aliter when the contract is not yet executed 82, 83 
 
 The retains ownership of thing pledged 108, 113 
 
 At civil law may perhaps revendicate pledge acquired by 
 
 pledgee by prescription 176 to 182 
 
 May rescind contract of pledge for misuse of pledge 240 to 254 
 
 Assignee or syndic of occupies same position as 260 to 263 
 
 Difficulties and limitations of rule 264, 265 
 
 POLICIES OF IXSURANCE. 
 
 Pledgee must renew when requested 270 
 
 Premiums on paid by pledgee form part of secured debt 274 
 
 Life, tire or marine n)ay be pledged.. 444 
 
 At common law, simple delivery of suffices 444 
 
 But where payee is designated, his endorsement is necessary 445 
 
 In England it is more common to mortgage than to pledge 446 
 
 Steps necessary to effect pledge of at civil law and in Louis- 
 iana 447 
 
 Policy void if pledged or transferred without consent of 
 
 insurer .450, 455 
 
 But insurer alone can demand nullity of but not of 
 
 pledge 452 
 
 Assignment or pledge of on life to one not having insurable 
 
 interest 453 et seq. 
 
 Defeasible if issued to one without interest 453 
 
 Therefore defeasible it pledged or assigned in that way..463, 454 
 The question not settled in France 455, 464 
 
 In Belgium the iss?(e is prohibited 456 
 
 Rule in Supreme Court of United States 457, 465 
 
 In England if was valid when issued, it may be trans- 
 ferred to any one 461 to 463 
 
 Rule in New York and other States is like that of England 
 
 458. 459. 463 
 
 A on life is an agreement to paj' a certain sum of money 
 
 458, 460 to 463 
 Under rule of United States Supreme Court creditor can hold 
 
 only for amount of debt .465. 466 
 
 When debt is paid -being only security must be reas- 
 signed 467 
 
 In France obtained by creditor remains his, if debtor was 
 
 not charged with premiums — Creditor may in addition recover 
 debt 468,469
 
 Index. 615 
 
 POSSESSIOX. (See Delivery.) 
 
 Section. 
 
 Of thing pledged is essential 8, 84 et seq., 122, 125, 126 
 
 Maybe actual or constructive g 
 
 Of inheritance in expectancy, how acquired 50 
 
 Examples of by pledgee's agent 123 et seq. 
 
 Control of pledge, not equivalent to 126 
 
 May be by agreed depositary, who accepts trust ...127 
 
 But must be for benefit of pledgee 127 
 
 By pledgeor, must be for account pledgee and for special pur- 
 pose 128 to 135 
 
 May begin before or after creation of debt secured by pledge 
 
 136, 142. 143 
 
 In Mississippi is destroyed, if pledged property is substi- 
 tuted 137 
 
 Aliter in Federal Courts and in other States 137 et seq. 
 
 Distinction between common and civil law in — — of pledge by 
 
 the pledgee 162 et seq. 
 
 Of incorporeal rights must be apparent 164 et seq. 
 
 Difference in for purpose of sale and pledge 167 
 
 What is sufficient at common law for incorporeal rights 
 
 169 et seq. 
 
 Of pledgee is not as owner 173 
 
 Under Codes Napoleon and Louisiana prescriptive title ac- 
 quired by after payment of obligation 173 to 175 
 
 But pledgeor may perhaps revendieate 176 to 182 
 
 At common law does not confer title 184 to 186, 196, 197 
 
 Except where continued for '' long lapse of time " ....184 to 186 
 
 At civil law ■ prevents prescription of debt 183 et seq., 195 
 
 Aliter at common law 189 to 192, 196, 198 
 
 POWER OF ATTORNEY. 
 
 To sell pledge, is not revoked by bankraptcy of pledgeor. ..278, 279 
 
 Nor by his death, at civil law 286 to 289 
 
 Aliter at common law, unless title to pledge was in agent. 
 
 281 to 284 
 
 Modification of doctrine 285 
 
 PRESCRIPTION. (See Limitation, Statute of.) 
 
 Does not affect pledge 7, 173, 183 
 
 At civil law the debt secured by pledge is not affected by 
 
 7, 173, 183, 197 
 
 Aliter at common law 187 to 193, 198 
 
 In France and Louisiana pledgee acquires title by if he re- 
 tains possession of pledge after payment of obligation .173 to 175 
 But it seems that the action of revendication is still left the 
 
 pledgeor 176 to 182 
 
 At common law pledge can not be acquired by 184 to 186 
 
 But if "after a long lapse of time" without a claim of re- 
 demption, the right is extinguished 184 to 186 
 
 PRIVILEGES— Civil Law. (See Liens, Equitable Liens, Tacit 
 Pledge.) 
 
 Distinction between- — and pledge 520, 521 
 
 Are analogous to equitable lien at common law.. ..521, 543 et seq, 552 
 
 In Louisiana are fixed by statute 529 et seq. 
 
 Are creatures of law, can not be created by contract, and are 
 stricti juris 536, 552 to 555
 
 616 Index. 
 
 Section', 
 RECEIPTS. (See Warehouse Receipts.) 
 
 EECEIVER. (See Syndic.) 
 
 REDEMPTION. (See Sale.) 
 
 Right of — — at civil law in contract of sale 1]4. 115 
 
 Distinguished from equity of in common law mortgage. 115 
 
 Waiver of equity of in mortgage is void 303 
 
 Pledgeor may redeem pledge, though he stipulated that pledgee 
 
 should retain it in payment of claim 299 to 302 
 
 But can not do so if stipulation made after maturity of obli- 
 gation 303 to 305 
 
 RENT. (See Lease.) 
 
 May be pledged at common law 60 
 
 Aliter at civil law 61. 62 
 
 RESCISSION OF CONTRACT OF PLEDGE. (See Resolutory 
 Condition.) 
 
 Pledgee may demand — — for misuse of pledge 240 et seq. 
 
 REPLEDGE. (See Subpledge.) 
 
 RESOLUTORY CONDITION. (See Rescission.) 
 
 The is implied in contract of pledge 240 et seq. 
 
 SALE. (See Pignorative Contract.) 
 
 Pledge in form of 98 et seq., 116 et seci. 
 
 Effect of with right of redemption 114, 115, 119, 120 
 
 Effect of simulated as security 119 to 121, 159 
 
 Every species of incorporeal right may be subject of 158 et seq. 
 
 But possession must be apparent and notorious 158 et seq. 
 
 The of a credit, without muniment of title, as a disguised 
 
 pledge, is without effect against third persons (but see 169) 
 
 158 et seq. 
 
 Under civil law of pledge must be preceded by judgment .306 
 
 AUter under statutes in pledge of commercial paper 306 
 
 In Louisiana parties may agree to of pledge 307 et seq. 
 
 At common law pledgee may sell at public auction after reason- 
 able notice to pledgeor 310 
 
 And parties may stipulate for private 310 
 
 And pledgee may buy at private or public 311 to 313 
 
 Even when, under the contract, he is vendor, if it be so 
 stipulated 311 to 313 
 
 SEIZURE— Judicial. 
 
 Creditor by has tacit pledge or lien 531, 533 
 
 In Louisiana debtor must have notice of of credits.. 11 et seq., 533 
 
 Aliter at common law 19 et seq.. 533 
 
 STATUTORY PLEDGE. (See Lien, Tacit Pledge.) 
 
 Criticism of term 522, 523
 
 Index. 617 
 
 STOCKS. (See Broker.) 
 
 Section. 
 
 Development of right to pledge shares of 409 to 411 
 
 Transfer of on books of corporation necessary for valid 
 
 pledge (but see 414) 412 et seq. 
 
 Pledge without such transfer not good against creditor of 
 
 pledgeor 415 
 
 Aliter in Louisiana 419, 427 to 431 
 
 Provision in charter of corp. that sale is not valid with- 
 out transfer does not affect pledge 431 
 
 Aliter in other States, at least for debts due corp. by 
 
 transferror before pledge 432 
 
 Pledgee of transferred succeeds to liability of pledgeoi'..415, 416 
 
 And real pledgee is liable, though transfer is to intex'posed 
 
 irresponsible party .415 
 
 But the liability doubtful, where pledgeor received the 
 
 dividends 417 
 
 Under National Bank act, transferee though not owner is liable 
 
 as shareholder 418 
 
 Qualification of doctrine, and rules of Supreme Court of 
 
 United States 424 to 426 
 
 Statutory exception to rule, that transferee holding as pledgee 
 
 is liable 420 
 
 And parties to pledge, by endorsement on certificate or 
 
 books of corp. may relieve pledgee from liability 421 
 
 Liability of pledgee of pledged by corporation itself... 422, 423 
 
 Pledgee of is entitled to dividends ..433 
 
 But corporation must have notice of pledge 434 
 
 If corporation without notice pays to pledgeor pledgee may 
 
 recover from him 434, 435 
 
 Pledgee may sell without notice and at private sale, if it is so 
 
 stipulated 436 
 
 And may substitute other shares for those pledged 437, 438 
 
 Criticism of right to substitute 439, 442 
 
 But where stipulated, right to substitute approved by some 
 civilians 443 
 
 STOLEN PROPERTY. 
 
 Pledgee of lost or can not hold against owner 503 
 
 SUB PLEDGE. 
 
 Right of pledgee to questioned 205, 207. 215 to 217 
 
 Denied at civil law 217 et seq. 
 
 Generally admitted at common law 224, 229, 230 
 
 Limitation of doctrine by Judge Story 228 
 
 Rights of subpledgee 216, 217 
 
 Pledgee of negotiable paper, acquired from another than owner, 
 may validly 324 
 
 Broker may stocks held for customer 473, 474 
 
 SUBSTITUTION OF PLEDGE. (See Stocks.) 
 
 In Mississippi, the by other things destroys pledge 137 
 
 Aliter in Federal Courts 137 et seq,
 
 618 Index. 
 
 TACIT PLEDGE. (See Liens, Privilege, Equitable Lien.) 
 
 Section'. 
 
 Criticism of term 520 
 
 True meaning of 523 et seq. 
 
 Is contracted under law, permitting creditor to retain posses- 
 sion 523 et seq. 
 
 As between lessor and lessee 519, 524 et seq., 538 
 
 As between innkeeper and guest 519, .530, 538 
 
 Of workman on property repaired 519, 538 
 
 Of caiTier for freight earned 519. .538 
 
 As between factor and principal 519, 538 
 
 Of attorneys on property recovered for clients 538 
 
 T)istinction between Codes Napoleon and Louisiana on subject 
 
 524 et seq. 
 
 Criticism of jurisprudence of Louisiana on subject 528 
 
 Kesults in favor of creditor by judicial seizure of debtor's Ppp-_^ 
 
 erty 531, 533 
 
 But seizure must be accompanied by taking possession 532 
 
 Is effective only when property is in possession of pledgee 534 
 
 Analogy and difference between and lien at common 
 
 law 519. 535. 530 
 
 TORTIOUS PLEDGE. 
 
 Pledge of another's personal property, other than negotiable 
 
 paper, is invalid 231, 233, 234, 238, 239 
 
 Aiiter in France, Belgium, Holland and Italy 232, 234 to 239 
 
 USE. (See Fruits of Pledge.) 
 
 At civil law pledgee has not of pledge 199 et seq. 
 
 Aiiter under common law "202, 210, 213 
 
 Exception to civil law rule '209, 213 
 
 Right to sabpledge 205, 207, 214 
 
 USUFRUCT. 
 
 Of real estate can not be pledged 
 
 Pledge of of thing is not pledge of thing 24 
 
 VESSELS. 
 
 Pledge of valid when in form of sale 101. 102 
 
 Chattel mortgage on effective as pledge in Louisiana 123 
 
 WAREHOUSE RECEIPTS. (See Bills of Lading, Negotiable 
 Paper, Incorporeal Rights.) 
 Like a bill of lading, it is not a symbol of, but a muniment, of, 
 
 title to goods 386 
 
 Is quasi negotiable. Holder for value of has indefeasible 
 
 title against maker 387 
 
 Pledgee of has only pledgeor's title, true owner can re- 
 
 cover •• " ooo« oov 
 
 Rule in Louisiana and Maryland 390 et seq. 
 
 Criticism of decisions interpreting statutes of Louisiana 
 
 392. 401
 
 Index. 619 
 
 WAREHOUSE KECEIPTS -Continued. 
 
 Section. 
 
 In some countries of Europe. Marj^lancl and Massachusetts 
 
 pledgee of holds against owner 
 
 352, 399, 400. 482, 487, 498 et seq. 
 Conflicting decisions of Xew York courts of "Factor's Act" 
 
 402 to 404 
 As with bill of lading, if owner has given indicia of ownership 
 
 to agent, he may validly pledge 406. 407 
 
 Law of France concerning 408 
 
 WISCOXSIX. (See Bills of Lading.) 
 
 WORDS AND PHRASES. 
 
 Debt, meaning of, at civil law (ji) 
 
 Factor, detinition of in Code of France r)0o 
 
 Ficlucia. origin and meaning of 544 to 546 
 
 Hypotheca, origin and meaning of .544 to 546 
 
 Ownership, detinition of 333 
 
 Payment, meaning of at civil law 68. 69 
 
 Pignus, origin and meaning of 544 to 546 
 
 Pledge, definition of 66, 68 
 
 Statutory pledge, criticism of term 522, 523 
 
 Tacit pledge, criticism of term .520. 523 
 
 To Give, meaning of term at civil law (59. 70
 
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