HUNT, Circuit Judge
(after stating the facts as above). The contract between the corporation and the trust company, like many contracts of pledge, was entered into in. consideration of a cash loan by the pledgee to the pledgor. The loan was made in reliance upon the collateral and on the pledgor’s contract that the collateral might be sold and the pledge relationship ended at the time and in the mode expressly set forth in the contract of pledge; - that upon nonpayment of the note for $600,000 the trust company was authorized to sell, assign, and deliver the whole of the securities or any part thereof “at any broker’s board or at public or private sale, at the option of the said company, without either advertisement or notice which are hereby expressly ■waived.” We need not dwell at length upon the validity of the general features of such a contract, because the appellants say in their brief that a provision in a contract of pledge that the pledgee may sell the collateral without notice to the pledgor is valid and binding ; they admit that where a pledge agreement provides that the collateral may be sold at private rather than public sale the stipulation is valid; and they concede that a provision that a pledgee may become the purchaser at a public sale if the sale is conducted in strict good faith and in accordance with the terms of the contract is valid. Nevertheless they say that this case is distinguishable because the trust company was not merely trustee for the pledgor but for a pledgor which had placed itself entirely in the power of the pledgee by the waiver of all the common-law safeguards in that the pledgee had power to sell without notice or advertisement at public or private sale, and at the public sale was authorized to become the purchaser of the pledgor’s obligation. In their argument that these bonds were never out of the possession of the trust company pledgee, that no new consideration passed, and that no public sale held on the advertisement given could be valid, appellants make these contentions:
First. That, where the pledged collateral consists of an obligation of the pledgor in a greater amount than is due and the collateral is purchased by the pledgee, he cannot enforce it against the pledgor in an amount greater than the sum originally loaned.
Second. That the intent of the pledgee in making a sale on less than 24 hours’ notice must be held to have been to acquire title to the collateral by bare literal compliance with the power of sale or wantonly to sacrifice the equity of the pledgor.
Third. That a sale without notice to the public is not a public sale, and that a just construction of the pledge agreement in the present case is that advertisement was waived by the pledgor only in case of private sale.
Fourth. That the duty of the pledgee was to obtain the highest cash value out of the collateral, and that, if it failed to act fairly in the conduct of the sale with such purpose in view, the sale must be held invalid without regard to the terms of the pledge agreement.
Fifth. That under the facts of the present case inadequacy of price is so great as to constitute conclusive proof of lack of good faith on the part of the pledgee in the conduct of the sale.
[ 1 ] The attempt to make a distinction between the rule which gov[500]*500erns contracts of pledge, where the pledgor prefers to pledge its own mortgage bonds as collateral, and that which governs such contracts, where the pledgor pledges the .bonds of another corporation, is not well founded. The contract measures the rights of the parties; and where the expressed intention is that in case of foreclosure the bonds deposited may be sold as existing securities, and the pledgee is given the right to become the purchaser, why should there be any less good title conveyed to such purchaser than if he were selling the bonds of another corporation? The reason for permitting the pledgee to become a purchaser is to permit him to buy the bonds, if he should wish to do so, at a price higher than any one else will pay for them. Granting that under such a contract the relationship of a pledgee to the bonds may offer temptation to sacrifice the rights of the pledgor, still, if upon close scrutiny it appears that a sale has been fairly made and the right to become a purchaser has been specifically given to the pledgee by the agreement between the parties, the exercise of such a right must be upheld and its attendant advantages, whatever they may ■be, must be accorded to the purchaser. To hold otherwise would be to say that\ the. courts can make a contract which will materially change the relationships of the parties by depriving one of them, in case of default by the other, of the right to acquire full legal title to the thing pledged- The essential characteristic by which a pledge is distinguished from a common-law lien is that the article plédged may be sold by the pledgee upon the nonperformance of the pledgor’s obligation. A sale divests the title of the pledgor and 'gives to the purchaser a good title to the property pledged; the pledgee selling both his own interest and all the right which the pledgor could have empowered him to sell at the time the contract of pledge was made.
The facts here fail to show the features of a mortgage. The transaction was a mere lien with respect to bonds of a corporation. There was no conveyance of legal title upon an express condition subsequent but delivery of personal property by a debtor, in security for a debt, accompanied by a written agreement whereby the debtor agreed that, if he did not pay the debt by a certain time, the creditor might dispose of the property to pay the debt. Jones on Collateral Securities (3d Ed.) § 8. A corporation which has issued its bonds frequently pledges them as collateral security for a debt. Nor is it unusual that in suits for forclosure the bonds pledged are offered at public sale and are purchased by the pledgee, who is entitled to the full face value'of the bonds. Cases where this rule has been recognized by the courts are Farmers’ Loan & Trust Co. v. Toledo & S. H. R. Co., 54 Fed. 759, 4 C. C. A. 561; Gilchrist Transportation Co. v. Phœnix Ins. Co., 170 Fed. 279, 95 C. C. A. 475; Atlantic Trust Co. v. Woodbridge Canal & Irrigation Co. (C. C.) 86 Fed. 975; and Bush v. Adams (C. C.) 165 Fed. 802. '
. . . In re Woods’ Estate, 52 Md. 520, decided in 1879, is a learned discussion of the attitude of a creditor who held under a pledge agreement notes of his debtor of a face value largely in excess of the sum loaned to the debtor; such notes being delivered as collateral security for the actual debt of the debtor. The court, among other things, said:
[501]*501“It is true the effect of carrying out these contracts by a sale of the notes was to increase the general indebtedness of the firm, but it did not increase the debt then due the Garretts for which the notes were pledged as security. But this increase of general indebtedness is exactly what the contracts contemplated and what the parties intended in case a sale was made, so that the question comes back at last to the validity of the contracts in this respect. Now, if instead of giving these notes, in the form in which they were drawn, to the Garretts as collateral security, the firm had placed them in the hands of a broker for sale, and he had sold them to the same parties and for the same price the Garretts obtained for them, and the firm had received the proceeds and applied them to this debt, exactly the same result would have followed.
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HUNT, Circuit Judge
(after stating the facts as above). The contract between the corporation and the trust company, like many contracts of pledge, was entered into in. consideration of a cash loan by the pledgee to the pledgor. The loan was made in reliance upon the collateral and on the pledgor’s contract that the collateral might be sold and the pledge relationship ended at the time and in the mode expressly set forth in the contract of pledge; - that upon nonpayment of the note for $600,000 the trust company was authorized to sell, assign, and deliver the whole of the securities or any part thereof “at any broker’s board or at public or private sale, at the option of the said company, without either advertisement or notice which are hereby expressly ■waived.” We need not dwell at length upon the validity of the general features of such a contract, because the appellants say in their brief that a provision in a contract of pledge that the pledgee may sell the collateral without notice to the pledgor is valid and binding ; they admit that where a pledge agreement provides that the collateral may be sold at private rather than public sale the stipulation is valid; and they concede that a provision that a pledgee may become the purchaser at a public sale if the sale is conducted in strict good faith and in accordance with the terms of the contract is valid. Nevertheless they say that this case is distinguishable because the trust company was not merely trustee for the pledgor but for a pledgor which had placed itself entirely in the power of the pledgee by the waiver of all the common-law safeguards in that the pledgee had power to sell without notice or advertisement at public or private sale, and at the public sale was authorized to become the purchaser of the pledgor’s obligation. In their argument that these bonds were never out of the possession of the trust company pledgee, that no new consideration passed, and that no public sale held on the advertisement given could be valid, appellants make these contentions:
First. That, where the pledged collateral consists of an obligation of the pledgor in a greater amount than is due and the collateral is purchased by the pledgee, he cannot enforce it against the pledgor in an amount greater than the sum originally loaned.
Second. That the intent of the pledgee in making a sale on less than 24 hours’ notice must be held to have been to acquire title to the collateral by bare literal compliance with the power of sale or wantonly to sacrifice the equity of the pledgor.
Third. That a sale without notice to the public is not a public sale, and that a just construction of the pledge agreement in the present case is that advertisement was waived by the pledgor only in case of private sale.
Fourth. That the duty of the pledgee was to obtain the highest cash value out of the collateral, and that, if it failed to act fairly in the conduct of the sale with such purpose in view, the sale must be held invalid without regard to the terms of the pledge agreement.
Fifth. That under the facts of the present case inadequacy of price is so great as to constitute conclusive proof of lack of good faith on the part of the pledgee in the conduct of the sale.
[ 1 ] The attempt to make a distinction between the rule which gov[500]*500erns contracts of pledge, where the pledgor prefers to pledge its own mortgage bonds as collateral, and that which governs such contracts, where the pledgor pledges the .bonds of another corporation, is not well founded. The contract measures the rights of the parties; and where the expressed intention is that in case of foreclosure the bonds deposited may be sold as existing securities, and the pledgee is given the right to become the purchaser, why should there be any less good title conveyed to such purchaser than if he were selling the bonds of another corporation? The reason for permitting the pledgee to become a purchaser is to permit him to buy the bonds, if he should wish to do so, at a price higher than any one else will pay for them. Granting that under such a contract the relationship of a pledgee to the bonds may offer temptation to sacrifice the rights of the pledgor, still, if upon close scrutiny it appears that a sale has been fairly made and the right to become a purchaser has been specifically given to the pledgee by the agreement between the parties, the exercise of such a right must be upheld and its attendant advantages, whatever they may ■be, must be accorded to the purchaser. To hold otherwise would be to say that\ the. courts can make a contract which will materially change the relationships of the parties by depriving one of them, in case of default by the other, of the right to acquire full legal title to the thing pledged- The essential characteristic by which a pledge is distinguished from a common-law lien is that the article plédged may be sold by the pledgee upon the nonperformance of the pledgor’s obligation. A sale divests the title of the pledgor and 'gives to the purchaser a good title to the property pledged; the pledgee selling both his own interest and all the right which the pledgor could have empowered him to sell at the time the contract of pledge was made.
The facts here fail to show the features of a mortgage. The transaction was a mere lien with respect to bonds of a corporation. There was no conveyance of legal title upon an express condition subsequent but delivery of personal property by a debtor, in security for a debt, accompanied by a written agreement whereby the debtor agreed that, if he did not pay the debt by a certain time, the creditor might dispose of the property to pay the debt. Jones on Collateral Securities (3d Ed.) § 8. A corporation which has issued its bonds frequently pledges them as collateral security for a debt. Nor is it unusual that in suits for forclosure the bonds pledged are offered at public sale and are purchased by the pledgee, who is entitled to the full face value'of the bonds. Cases where this rule has been recognized by the courts are Farmers’ Loan & Trust Co. v. Toledo & S. H. R. Co., 54 Fed. 759, 4 C. C. A. 561; Gilchrist Transportation Co. v. Phœnix Ins. Co., 170 Fed. 279, 95 C. C. A. 475; Atlantic Trust Co. v. Woodbridge Canal & Irrigation Co. (C. C.) 86 Fed. 975; and Bush v. Adams (C. C.) 165 Fed. 802. '
. . . In re Woods’ Estate, 52 Md. 520, decided in 1879, is a learned discussion of the attitude of a creditor who held under a pledge agreement notes of his debtor of a face value largely in excess of the sum loaned to the debtor; such notes being delivered as collateral security for the actual debt of the debtor. The court, among other things, said:
[501]*501“It is true the effect of carrying out these contracts by a sale of the notes was to increase the general indebtedness of the firm, but it did not increase the debt then due the Garretts for which the notes were pledged as security. But this increase of general indebtedness is exactly what the contracts contemplated and what the parties intended in case a sale was made, so that the question comes back at last to the validity of the contracts in this respect. Now, if instead of giving these notes, in the form in which they were drawn, to the Garretts as collateral security, the firm had placed them in the hands of a broker for sale, and he had sold them to the same parties and for the same price the Garretts obtained for them, and the firm had received the proceeds and applied them to this debt, exactly the same result would have followed. There would have been the same increase of the general indebtedness of the firm and the same diminution of the Garrett debt which was effected by the sale under the contracts, and in the ease supposed it will hardly be contended that the purchasers would not have had a valid claim against the firm for the full amount of the notes. Such notes are constantly sold on the streets in all the large commercial cities of the country, and it is not uncommon for merchants to resort to this mode of raising money. However hazardous it may be, there is nothing unlawful in it, anti it cannot be doubted but that the purchasers acquire a good title to such paper. It is apparent to my mind that it was in view of this recognized practice, and the acknowledged rights of purchasers in such cases, that these contracts were made and the notes sold thereunder.”
Appellant cites Peacock v. Phillips, 247 Ill. 467, 93 N. E. 415, 32 L. R. A. (N. S.) 42, as sustaining a contrary contention. The court there seems to have followed the settled law of the Illinois jurisdiction and interpreted the power of sale given in the contract in Lhe case as merely enabling the bank to do an act to obtain payment which could not otherwise be done, but not as conferring a power to bestow a greater right upon the purchaser with full notice of the facts and circumstances and the extent to which the bank could enforce the obligation than the bank would have had in case of foreclosure. The case loses much strength as an authority herein because it expressly recognizes that corporate bonds are upon a different footing from promissory notes, secured by trust deeds, given as collateral.
[2] Inasmuch as the contract involved herein was not in itself invalid, its provisions became enforceable unless it appears that, in the manner of enforcement, some wrong was done to the steel corporation. Of course the power of sale must have been fairly exercised; but, if it was pursued under the letter as well as the true spirit of the contract, there can be no conclusion of unfairness or of sacrifice of the equity of the pledgor. The terms of an agreement of pledge may be severe; but, if they are complied with, it is but carrying out the intention of the parties. The notice sent on August 1, 1911, by the Metropolitan Trust Company to the Western Steel Corporation made it perfectly plain that unless the note of the corporation was paid on or before Monday, August 28th, the securities would be sold at public auction on Wednesday, August 30th. This gave the steel corporation more than three weeks’ time within which to perfect an expected “arrangement” whereby they would take up the note in full before sale of the securities. But they failed to do' anything. Then the pledgee, as authorized by the contract, proceeded to sell at public sale after notice published in those New York papers customarily used by pledgees in New York to give notice of sales of pledged col[502]*502lateral. The sale was made at a regular weekly auction in salesrooms in New York where buyers of securities congregate; the auctioneers who conducted th§ sale were well known as carrying on a large business in selling stocks and bonds; the salesrooms were those designated by the rules of practice of the Supreme Court of the state of New York for the sale of real estate; and the sale was made to the persons who made the highest bid.
Thus far we can find no prejudice to the rights of the steel corporation. That the notice of sale was published for only one day before the sale and upon the day of the sale is not evidence of wrongdoing, for the contract expressly authorized a sale, public or private, “without either advertisement or notice” which were expressly waived. The contract was not unusual, nor was the notice for less time than is customarily given. The pledgor itself had had ample notice that a sale would be made, yet made no objection to the contemplated step. Moreover, the trustees offer no evidence to the effect that, if longer advertisement had been had, better bids would probably have been made. Indeed, they presented no testimony whatever of an affirmative character which would warrant this court in reversing the decision of the court below. The argument of inadequacy of price paid for the bonds is pressed with much earnestness. Reiterating the elementary rule that if there were any evidence of wanton disregard of the rights of the pledgor, or any such gross inadequacy of price as to raise a presumption of fraud, the sale should be set aside, nevertheless we find nothing in the record to show that the price paid or the circumstances surrounding the sale indicate fraud or lack of good faith. It is true that the appraisal in bankruptcy, which was made several months after the sale, showed that the whole property covered by the bond issue was worth at least $366,035, and much more as a going concern properly financed; but the estimates of value put upon the mineral claims were based largely upon hearsay and apparently in some instances were not made with full information of the state of the liens pending against certain of the property appraised. The appraisers reported that the coal properties required development work before it would be possible to realize upon them; foreclosure would have to be made in several matters where liens existed; and liens for labor would have to be satisfied. The steel plant had never been operated successfully, nor did the pledgor when it pledged its bonds put any estimated value upon them in the contract of pledge, although in the body of.the contract there was a description of the bonds and a space in which to insert an “estimated market value of $—=-.”
In the light of all these circumstances, there is ample support for the decision of the court below holding that neither gross inadequacy of price nor fraud was established or could be presumed. As said by the court in its opinion:
“The schedule and the report of the appraisers show that the properties owned hy the bankrupt corporation are widely scattered, incumbered, and largely unpaid for. Their value is uncertain and highly problematic at best. Suffice it to say on this branch of the case that no such inadequacy of price is shown as would shock the conscience or raise a presumption of fraud where it is conceded that no fraud was practiced or existed.”
[503]*503Muhlenberg v. Tacoma, 25 Wash. 36, 64 Pac. 925, cited by appellants, is not directly pertinent because the court found that the sale of the pledge was with the object of getting title to the property. Perkins v. Applegate (Ky.) 85 S. W. 723, was a case where the facts disclosed false statements and positive deception and improper conduct.
As sustaining a sale made where the procedure was much like that pursued in the present case, the following cases are relevant: Farmers’ Loan & Trust Co. v. Toledo & S. H. R. Co., supra; Morris & Whitehead v. East Side Ry., 104 Fed. 409, 43 C. C. A. 605; Wheelwright v. St. Louis, N. O. & O. C. T. Co. (C. C.) 56 Fed. 164: Fidelity Insurance Co. v. Roanoke Iron Co. (C. C.) 81 Fed. 439; Farmers’ National Bank v. Venner, 192 Mass. 531, 78 N. E. 540, 7 Ann. Cas. 690; In re Mertens, 144 Fed. 818, 75 C. C. A. 548; Hiscock v. Varick Bank of New York, 206 U. S. 28, 27 Sup. Ct. 681, 51 L. Ed. 945.
We think that these views sufficiently meet the main points of appellants’ case. We have given very careful consideration to the arguments, and our conclusion is that the contract was valid and that there is no sufficient reason advanced for setting aside the sale made thereunder and denying to the appellee the full benefit of its securities.
Decree affirmed.