By the Court
JVIcMillaN, -J.
The principal question presented by the demurrer to the complaint in this action is whether the transfer and delivery of a promissory note after maturity, and without endorsement, as collateral security, for the payment of a debt, enables the pledgee, upon default of the pledgor, to maintain an action on the note in his own name against the maker. The transaction is in the nature of a pledge, and the rights and liabilities of the parties must be determined by the law applicable to pledges of personal property of this character. It is a well settled rule of law relating to this class- of bailments, that the general property in the pawn'remains in the pledger, and a special property therein passes to the pledgee.
There is no rule of law which limits or defines absolutely the special property of a pledgee, but the rights and liabilities of the latter are to be determined from the terms, ex[31]*31press or implied, of the contract between the parties, and we apprehend that whatever sjiecial interest or estate in the pawn is necessary to enable the pledgee to exercise the rights guaranteed to him, or discharge the obligations imposed on him by the contract, will vest in him.
Let ns consider then, so far as it is necessary, what are the rights and liabilities of the parties in this case.
Where goods are deposited to secure a loan, “ It may be . inferred,” says Gibbs, C. J., “ that the contract was this : If I (the borrower,) repay the money, you must redeliver the goods, but if I fail to repay it, you may use the security to repay' yourself. Pothonier & Hodgson vs. Dawson, 1 Holt, N. P., 383, 3 Eng. Com. Law, 154.
The primary, and indeed the only purpose of the pledge, ' is to put it into the power of the pledgee to reimburse himself for the money advanced, when -it becomes due and remains unpaid.
The contract carries with it an implication that the security shall be made effectual to discharge the obligation. Wheeler vs. Newbould, 16 N. Y. Rep., 396. When the pledge is given as collateral security for the payment of a debt, it can be made effectual to pay the debt only by being converted into money ; and in the absence of any special agreement to the contrary, and where there is nothing in the nature of the pawn inconsistent with such intention in the parties, the pawnee may proceed to sell the property without judicial process, upon giving reasonable notice to the debtor to redeem.
The means generally resorted to for the accomplishment of the purpose of the pledge is a sale of the property pledged, and writers upon the subject generally state this as the power conferred upon the creditor to satisfy his debt. Story’s Eg. Jur., Sec. 1,008; 2 Kent Com., 582.
[32]*32But there is nothing in the nature of this bailment which absolutely requires a sale in all eases. And if the subject of the pledge is such that from its nature it is to be inferred with reasonable certainty that the parties intended to restrict the pawnee in the exercise of his powers to a proceeding in chancery, he will not be permitted to sell without a decree. Clark vs. Gilbert, 2 Bing. N.C., 356, explained ; Smith's Lea. Cases, p. 298, 299. Or if from its nature the pawn cannot be converted into cash without injury to both or one of the parties, and may be converted into money by some other method more beneficial to the parties, we think the pledgee is permitted, and in equity, if not at law, required to pursue the latter course; for the bailment is for the mutual benefit of both parties, and is in. the nature of a trust. “The creditor (says Kent,) is required at his peril to deal fairly and justly with the pledge. ” The law, “ especially in the equity courts, is vigilant- and jealous in its circumspection of the conduct of trustees.” 2 Kent Com., 583.
In the case under consideration there is nothing in the contract expressly restricting the power of the pledgee in the disposition of the pledge. Is there anything in the nature of the pledge from which it is reasonably to be inferred that the parties intend to prohibit a sale- of the pledge, either with or without judicial process ; or to afford any remedy concurrently with a sale, or to restrict the pledgee, in any event, in pursuing his remedy to a proceeding in chancery ?
The pawn in this case is an unendorsed negotiable note. There are no facts or circumstances going to show that the amount of the note, so far as the maker is concerned, cannot be fully realized in a suit at law. Under these circumstances, we think the pawnee is not permitted to dispose of the note by sale.
[33]*33The reasoning of Brown, J., on the same question, in Wheeler vs. Newbould, fully sustains this conclusion. Is there anything in the nature of the pawn in this case which would reasonably indicate an intention to restrict the pledgee to a proceeding in chancery, in realizing his debt from the property pledged ? If there is not, the party has an election to pursue his remedy either at law or in equity. The rights and remedies of parties to promissory notes are generally within the exclusive jurisdiction of the courts of law. If in this case the pledgee has not a remedy by action at law — and we are right in the view we have taken of the power of sale — it is -only because the note is not .endorsed by the payee. Does this deprive him of his right of action at law ? It is doubtless true, that by the law .merchant, if a promissory note is originally payable to a person, or his order, it is properly transferrable by indorsement, and that the indorsement of the payee is necessary to pass the legal title to a third person, so that at law, in the absence of statutory provision to the contrary, he can maintain an action on the note in his own name. But by a transfer without an indorsement, the holder will acquire the same rights that he would acquire upon a transfer of a note not negotiable, that is, he may at law sue the other parties thereto in the name of the payee or assignor. Story on Prom. Notes, § 120, n. 3 ; Story on Bills, § 201, n. 3 ; Jones vs. Wetter, 13 Mass., 301-6. Does the pledge of a note unendorsed operate as an assignment of it ?' It is to be observed that the contract of pledge exists in law, as well as equity, and that by operation of law the pledgee takes not a hen only, which is merely a right to retain until the debt in respect of which the lien was created, has been satisfied, but a property — an ownership in the property pledged. Story on Bailments, § 93, g. h. c. It is a special ownership, that is, it is special [34]*34from the fact that it is limited in its character; it is an ownership limited to the purposes of the pledge, but as to these purposes the property in the pawn is vested in the pledgee, and the rights uf the pledgee to the same extent are paramount to those of the pledgor.
The purpose of the pledge is, as we have seen, that the pledgee may reimburse himself for his debt when it becomes due, and remains unpaid ; this can only be done by converting the pledge into money ; this then he has a right to do in a Iona fide manner, and the contract assigns him such a property in the pledge as will enable him to do it.
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By the Court
JVIcMillaN, -J.
The principal question presented by the demurrer to the complaint in this action is whether the transfer and delivery of a promissory note after maturity, and without endorsement, as collateral security, for the payment of a debt, enables the pledgee, upon default of the pledgor, to maintain an action on the note in his own name against the maker. The transaction is in the nature of a pledge, and the rights and liabilities of the parties must be determined by the law applicable to pledges of personal property of this character. It is a well settled rule of law relating to this class- of bailments, that the general property in the pawn'remains in the pledger, and a special property therein passes to the pledgee.
There is no rule of law which limits or defines absolutely the special property of a pledgee, but the rights and liabilities of the latter are to be determined from the terms, ex[31]*31press or implied, of the contract between the parties, and we apprehend that whatever sjiecial interest or estate in the pawn is necessary to enable the pledgee to exercise the rights guaranteed to him, or discharge the obligations imposed on him by the contract, will vest in him.
Let ns consider then, so far as it is necessary, what are the rights and liabilities of the parties in this case.
Where goods are deposited to secure a loan, “ It may be . inferred,” says Gibbs, C. J., “ that the contract was this : If I (the borrower,) repay the money, you must redeliver the goods, but if I fail to repay it, you may use the security to repay' yourself. Pothonier & Hodgson vs. Dawson, 1 Holt, N. P., 383, 3 Eng. Com. Law, 154.
The primary, and indeed the only purpose of the pledge, ' is to put it into the power of the pledgee to reimburse himself for the money advanced, when -it becomes due and remains unpaid.
The contract carries with it an implication that the security shall be made effectual to discharge the obligation. Wheeler vs. Newbould, 16 N. Y. Rep., 396. When the pledge is given as collateral security for the payment of a debt, it can be made effectual to pay the debt only by being converted into money ; and in the absence of any special agreement to the contrary, and where there is nothing in the nature of the pawn inconsistent with such intention in the parties, the pawnee may proceed to sell the property without judicial process, upon giving reasonable notice to the debtor to redeem.
The means generally resorted to for the accomplishment of the purpose of the pledge is a sale of the property pledged, and writers upon the subject generally state this as the power conferred upon the creditor to satisfy his debt. Story’s Eg. Jur., Sec. 1,008; 2 Kent Com., 582.
[32]*32But there is nothing in the nature of this bailment which absolutely requires a sale in all eases. And if the subject of the pledge is such that from its nature it is to be inferred with reasonable certainty that the parties intended to restrict the pawnee in the exercise of his powers to a proceeding in chancery, he will not be permitted to sell without a decree. Clark vs. Gilbert, 2 Bing. N.C., 356, explained ; Smith's Lea. Cases, p. 298, 299. Or if from its nature the pawn cannot be converted into cash without injury to both or one of the parties, and may be converted into money by some other method more beneficial to the parties, we think the pledgee is permitted, and in equity, if not at law, required to pursue the latter course; for the bailment is for the mutual benefit of both parties, and is in. the nature of a trust. “The creditor (says Kent,) is required at his peril to deal fairly and justly with the pledge. ” The law, “ especially in the equity courts, is vigilant- and jealous in its circumspection of the conduct of trustees.” 2 Kent Com., 583.
In the case under consideration there is nothing in the contract expressly restricting the power of the pledgee in the disposition of the pledge. Is there anything in the nature of the pledge from which it is reasonably to be inferred that the parties intend to prohibit a sale- of the pledge, either with or without judicial process ; or to afford any remedy concurrently with a sale, or to restrict the pledgee, in any event, in pursuing his remedy to a proceeding in chancery ?
The pawn in this case is an unendorsed negotiable note. There are no facts or circumstances going to show that the amount of the note, so far as the maker is concerned, cannot be fully realized in a suit at law. Under these circumstances, we think the pawnee is not permitted to dispose of the note by sale.
[33]*33The reasoning of Brown, J., on the same question, in Wheeler vs. Newbould, fully sustains this conclusion. Is there anything in the nature of the pawn in this case which would reasonably indicate an intention to restrict the pledgee to a proceeding in chancery, in realizing his debt from the property pledged ? If there is not, the party has an election to pursue his remedy either at law or in equity. The rights and remedies of parties to promissory notes are generally within the exclusive jurisdiction of the courts of law. If in this case the pledgee has not a remedy by action at law — and we are right in the view we have taken of the power of sale — it is -only because the note is not .endorsed by the payee. Does this deprive him of his right of action at law ? It is doubtless true, that by the law .merchant, if a promissory note is originally payable to a person, or his order, it is properly transferrable by indorsement, and that the indorsement of the payee is necessary to pass the legal title to a third person, so that at law, in the absence of statutory provision to the contrary, he can maintain an action on the note in his own name. But by a transfer without an indorsement, the holder will acquire the same rights that he would acquire upon a transfer of a note not negotiable, that is, he may at law sue the other parties thereto in the name of the payee or assignor. Story on Prom. Notes, § 120, n. 3 ; Story on Bills, § 201, n. 3 ; Jones vs. Wetter, 13 Mass., 301-6. Does the pledge of a note unendorsed operate as an assignment of it ?' It is to be observed that the contract of pledge exists in law, as well as equity, and that by operation of law the pledgee takes not a hen only, which is merely a right to retain until the debt in respect of which the lien was created, has been satisfied, but a property — an ownership in the property pledged. Story on Bailments, § 93, g. h. c. It is a special ownership, that is, it is special [34]*34from the fact that it is limited in its character; it is an ownership limited to the purposes of the pledge, but as to these purposes the property in the pawn is vested in the pledgee, and the rights uf the pledgee to the same extent are paramount to those of the pledgor.
The purpose of the pledge is, as we have seen, that the pledgee may reimburse himself for his debt when it becomes due, and remains unpaid ; this can only be done by converting the pledge into money ; this then he has a right to do in a Iona fide manner, and the contract assigns him such a property in the pledge as will enable him to do it. Whether it is a note or goods and chattels makes no difference, the property passes, but in the case of a negotiable note, the pledgee, in any action in a court of law which requires a legal title to the property in the plaintiff, must ¡oroceed in the name of the payee of the note, unless there is statutory provision to the contrary.
Assuming that we are right thus far, we think our statute has so changed the law as to permit the pledgee, after default of the pledger, to maintain an action in his own name. The statute reads as follows : “ Every action shall be prosecuted in the name of the real party in interest, except as hereinafter provided, but this section does not authorize the assignment of a thing in action not arising out of contract.” Gen. Stat., Ch. 66, Title 3, Sec. 26,p. 453. In considering this section with reference to the right of action upon a note unendorsed, Elandrau, J., says, “The only question under our practice is, in whom is the real substantial ownership and property of the note? In whomsoever that is found, there the cause of action is also. ” Pease, Chalfant & Co., vs. Rush, Pratt and others, 2 Minn., 111.
As the plaintiff by the pledge acquired a substantial ownership and property in the note, an action brought for the [35]*35purpose of enforcing a right incident to that property or ownership, must under our statute be brought in his own name. It is true the pledger also retains a property in the pledge, but it is entirely distinct and separate from that of the pledgee, aud their interests are perhaps adverse; it is neither necessary nor proper, therefore, that they be joined as plaintiffs in this action.
The debt, to secure which the pledge was given, was payable at a specific time ; when the debt to secure which the pledge was given, is payable at a time certain, and the pawn is a promissory note, no demand by the pledgee is necessary before bringing a suit upon the note pledged. Story on Bailments, Sec. 308; 2 .Pars, on Gont120.
"Whether the pledger should not be made a party .defendant in this action, is a question not presented by the demurrer, and one upon which we express no opinion.
Order sustaining demurrer overruled.