At the October Term, 1867, Mr. Chief Justice Currey delivered the following opinion, in which Mr. Justice Rhodes and Mr. Justice Sanderson concurred, Mr. Justice Sawyer and Mr. Justice Shafter dissenting:
The counsel for the respective parties have treated the assignment of the Turner note and mortgage by Buckelew to Ross and the Phelans as an assignment of personal property only; and whether it was merely a pledge or a chattel mortgage in effect has been very fully and elaborately discussed. The appellant’s counsel assume that it was a ¡hedge pure and simple; while the respondents’ counsel maintain that it was a mortgage, and that upon the happening of the default of Buckelew to pay his debt at the time agreed upon, the title of Ross to the securities assigned became absolute. These opposing positions seem to be taken by the counsel for the respective parties because the consequences which would result in the one case are supposed to be quite diverse from those that would follow in the other. In the one case, it would seem to be agreed in argument, the plaintiff would be entitled to relief, as against Ross, at least; while in the other, it would result that the plaintiff’s complaint should be dismissed.
Assuming it to be necessary to determine whether the assignment should be regarded as of the nature of a pledge of personal property as security for the payment of a debt merely, or as of the nature of a chattel mortgage, which passed the title of the assigned property, subject to be defeated by performance of Buckelew’s engagement at the day stipulated, we are, from a consideration of the entire instrument, forced to the conclusion that the parties designed it should be a pledge and not a chattel mortgage, to' which [428]*428the common law incidents of such a mortgage were annexed. This result of judgment is necessitated from the expressed intentions and purposes of the parties. The defeasance clause, standing alone, declares upon what conditions the sale and assignment of the Turner note and mortgage should he void and of no effect; but an additional clause follows immediately, declaring the assignment to be made for the purpose of securing the payment of the said sum of thirty thousand dollars, with interest at the rate therein specified, and for no other purpose whatever; and still following this, it is provided that in case Boss and the Phelans, “ their heirs, executors, administrators, or assigns, shall collect and receive the money due on said mortgage hereby assigned, they shall, after retaining the sum of thirty thousand dollars, with interest thereon and their reasonable costs and charges, not to exceed five per cent on the amount of the recovery in that behalf expended, pay the surplus, if any there be, unto the said B. B. Buckelew, his heirs, executors, administrators, and assigns.” The same instrument contains a provision constituting the parties of the second part—Boss and the Phelans—Bnckelew’s attorneys, and authorizing them to have, use, and take all lawful ways and means for the recovery of the money and interest secured by the note and mortgage assigned, and, in case of payment, to discharge the same as fully as he might or could do, if the assignment were not made.
There is a clear and obvious difference between a pledge and a chattel mortgage. By the pledging of personal property by one to another as security for some debt or engagement, the pledgee acquires only a special property in the thing pledged, while the general property remains in the pledgor. (Story on Bail., See. 287; Edw. on Bail., 188-201; 2 Story’s Eq. Jur., Sec. 1,030; 2 Kent, 577.) A chattel mortgage is a conditional transfer or conveyance of the property itself, and if the condition be not duly performed the whole title vests absolutely at law in the mortgagee, (2 Story Eq. Jur., Sec. 1,030; Langdon v. Buel, 9 Wend. 80,) and the [429]*429mortgagee may, after Ms title has become absolute, have his action, if necessary, to obtain the possession of the property. (Patchin v. Pierce, 12 Wend. 61; Fuller v. Acker, 1 Hill, 473.) Delivery accompanies a pledge, and is essential to its vitality. Negotiable instruments, choses in action, stocks, etc., may be so pledged as to be made available to the pledgee for the satisfaction of the debt secured. (Story on Bail., Secs. 290, 297; Edw. on Bail., 197; Wilson v. Little, 2 Comst. 443.) The pledgee may retain the pledge until his debt is paid, but if the debt be not paid when due, or after due, that fact does not work a forfeiture of the pledged property. (Edw. on Bail. 201.) If no time of redemption be fixed by the contract, the pledgor may redeem at any time; and though a day of payment be fixed, he may redeem after the day. He has his whole lifetime in which to redeem, provided the pledgee does not call on him to do so. (4 Kent, 138; Edw. on Bail. 198.) The pledgee may have the property sold for the payment of the debt secured by it, after calling upon the pledgor to redeem, by a judicial decree, or he may himself sell the property after due notice to the owner. (Story on Bail., Secs. 308, 309, 310; Edw. on Bail. 249; Wilson v. Little, 2 Comst. 243; Wheeler v. Newbould, 16 N. Y. 392; Mauge v. Heringhi, 26 Cal. 579; Wilson v. Brannan, 27 Cal. 270.)
It is evident, from a view of the entire instrument of assignment, that the parties did not understand nor intend that Buckelew should become divested of all right and interest, even at law, in the money secured by the Turner mortgage, in the event that his own debt was not paid at maturity, else why did they provide for the payment to Buckelew of a surplus which could only arise after the payment of the Turner note or the sale of the mortgaged premises and the payment of the debt of Buckelew?
Whether a particular transaction is a mortgage or a pledge is often a very nice question; and being a question of difficulty, Courts have in many instances used the terms “ mortgage ” and “pledge” indifferently, when not necessary to observe the distinction between them. But when the real [430]*430character of the transaction is manifested hy the language of the parties to the contract disclosing their purpose and intention, all that a Court has to do is to recognize its real and true, character, and to carry into effect by an appropriate decree the parties’ declared intention.
If the appellant’s position that the transaction was one of pledge be incorrect, k does not result that it was in effect one of mortgage of personal property or of a chose in action, but rather that it was an assignment in trust. In Cooper v. Whitney, 3 Hill, 101, where a deed of lands was executed and a covenant made between the parties at the same time, declaring that the grantee should sell the lands and pay certain of the grantor’s debts and return to him the surplus, but containing no reservation of a right to redeem, the Court, by Mr. Justice Bronson, held that it was not a case of sale and purchase, but that the transaction constituted an assignment or conveyance in trust, and that the widow of the trustee was not dowable of the estate which he received and held in trust. “Both real and personal property, as well as choses in action,” says Judge Willard, “may be assigned in special trust. The most usual object of such assignment is the distribution of the property of the assignor among his creditors, toward the payment and satisfaction of their debts.” (Willard’s Eq. Jur., 459, 460.) If a debtor may assign his personal property and choses in action in trust, for the purpose of paying his creditors generally, we see no reason why he may not do the like to pay a single creditor, though the assignee be that creditor. Where the assignment in such a case is made to a person not a creditor, the creditors for whose benefit the assignment is made become interested at their election in the trust property, and to the extent of their debts against the assignor are beneficiaries, because he is interested in the proper disposition of the property assigned, by which his debts are to be paid, and in the surplus, if any remains. So, when the assignment is made to a creditor with authority to sell the property or to collect the amount due on choses in action, and to apply the [431]*431proceeds and avails thereof to the payment and extinguishment of the debt due from the assignor, and to return to him the remaining surplus, the assignor has, upon the same principles and considerations, an interest in the due and faithful execution of the trust. In our judgment, the assignment was of the nature of a pledge of the property assigned. From its terms it is clear that Buekelew retained an interest in the note and mortgage assigned. His assignees accepted them in pledge for their own security and also in trust for their assignor, first to discharge by the proceeds and avails of the securities the debts due them, and then to account and pay to him whatever there might remain of the amount which it was contemplated they should collect of Turner. By the contract of assignment the assignees were not authorized to accept from him to the prejudice of Buekelew less than the amount due on the note "secured by the mortgage.
When Eoss commenced his action against Turner to enforce the payment of the debt due from him and to foreclose the mortgage, the relation between him and Wright, to whom Buekelew had re-assigned his right and interest in the note and mortgage, was that of a trustee and cestui que trust, and the relation did not become extinguished by the foreclosure of the mortgage and the sale of the mortgaged premises, at which sale he became the purchaser. ■ Eoss acquired an interest by his purchase under the foreclosure in the mortgaged premises. This interest became substituted in his hands for and in the place of the Turner note and mortgage, and from thence he held the interest thus obtained as a substituted security for the payment of the debt due him from Buekelew, and in trust for the benefit of the owner of th e note and mortgage, through and by means of which it was acquired. The conveyance of the property to him by Turner on the 12th of January, 1858, he received in his trust capacity, and thenceforth held the legal title to it for the benefit of the cestui que trust, as well as for his own security. The acquisition by him of the interest which passed by the sale under the judgment of Moody, stands in the same posi[432]*432tiou and inured to the benefit of the parties as they stood related to each other and to the property as the substituted security for the payment of what was due to Boss. It is a fundamental doctrine of equity that a trustee can gain uo advantage to himself to the detriment of those for whom he holds in trust. This rule is applied to the transactions of the trustee, according to tlm nature and circumstances of different cases, in such manner as to give efficacy to the principle on which it is founded. The objects of the rule are, to secure fidelity on the part of the trustee and to preserve the interests of those whose rights are confided to his care. (Green v. Winter, 1 Johns. Ch. 36; Parkist v. Alexander, 1 Johns. Ch. 397; Holdridge v. Gillespie, 2 Johns. Ch. 33; Van Horne v. Fonda, 5 Johns. Ch. 409; Slade v. Van Vechten, 11 Paige, 22; Fox v. Macketh, 2 Bro. Ch. Cas. 400; Fonblanque’s Eq. Jur., B. 2, Ch. 7, Sec. 7.)
Beither Buckelew nor Wright was made a party to the foreclosure suit against Turner, and as a consequence of the omission the interest of Wright in the securities was not foreclosed. Through or by means of the note and mortgage, Boss obtained Turner’s title in the premises and the possession of the property, which, as we have already observed, he thereafter held as a substituted security for the payment of the debt due, united with an interest of which he could not be divested until he was paid his dues; but when paid, his right to what remained of the property ceased, and it was his duty to transfer it to his cestui que trust, to whom it in equity belonged. What more could Boss in conscience have asked than payment of all that was due him ? Upon what just principle could Wright be deprived of what remained of the property which Boss held as security after the latter was fully paid?
The right of the appellant to call upon Boss to account, and upon it appearing that he has received the amount due him to convey to the appellant the premises, is controverted on the ground that the claim asserted was barred by the Statute of Limitations at the time this suit was commenced. [433]*433To determine this point it is necessary to consider the relations of the parties in respect to the substituted security. The position of Ross in this respect to the premises was not adverse to, but in consonance with the equitable right and interests of the cestui que trust. Ross had the right to retain the substituted security until his demand was paid, and until indemnified for necessary expenditures respecting the property. This was an elemental condition of the contract of assignment in pledge, and even if his demand against Buckelew had not been paid in whole or in part until more than four years had expired after it become due, he was after that entitled to hold the property assigned or its substitute as his security, because such was the effect of the contract of "the parties by which the trust was created. (Kemp v. Westbrook, 1 Vesey Sen. 278.) In cases of express trust, the Statute of Limitations does not begin to run in favor of the trustee so long as the trust continues and is not denied, for the reason that the possession of the trustee subsists in subordination to the rights of the cestui que trust. But if the trust is disavowed by the trustee, and he claims the trust property as his own, adversely to the cestui que trust, and this is brought to the knowledge of the latter, the statute will begin to run from that time. (Kane v. Bloodgood, 7 Johns. Ch. 123; Boone v. Chiles, 10 Peters, 223; Keaton v. Greenwood, 8 Geo. 103; Kemp v. Westbrook, 1 Vesey Sen. 278; Angell on Limitations, Sec. 472.)
Ross, it appears, acquired the legal title to the premises in question on the 12th of January, 1858, and then entered into possession. His possession of and claim to the property was not adverse before that day, nor did his acquisition of the title and possession on that day necessarily or even presumptively make his position in respect to his trust and the trust property adverse to the cestui que trust. The trust could therefore subsist, to every legal and equitable intent, as well as before then. The referee found that on the 29th of May, 1861, Ross was in open, notorious, and exclusive possession [434]*434of the premises, by his tenants, claiming title thereto adverse to the plaintiff and those under whom he claimed. It does not appear from anything in the case that the position and possession of Boss was of an adverse character before then, and as the finding specifies that such was the attitude of Boss on that day, we must presume it in this respect warranted by the evidence in the case, and negatively that he did not hold adversely before that time.
The case of Cunningham v. Hawkins, 24 Cal. 403, is relied upon by the respondents in support of their plea of the Statute of Limitations, and seems to be regarded by them as strictly applicable to the case at bar. We do not so regard it. In that case we held that a mortgagor could not maintain his bill to redeem after the demand to secure which the mortgage was executed had become barred by the statute, simply on the ground that the respective rights of mortgagee and mortgagor with regard to a foreclosure on the one hand and a redemption on the other, are to be treated as mutual. These respective rights cannot exist independently of each other, because the existence of the one involves that of the other, and as soon as the bar to the one accrues, the other, of consequence, is also barred. This results from the relation of the parties, which is a peculiar one, and perfectly sui generis. In the ease of a continuing trust created by agreement, or resulting from it, the respective rights of the parties are conserved by and co-exist with the agreement, and consequently each may have his remedy to secure its object, while the trust relation subsists; and even after it may be disavowed or denied, until barred by statute or lapse of time. The rights and remedies of the parties in such case are reciprocal and commensurable.
When the relation of trustee and cestui que trust is created by agreement or by the act of the parties in respect to a particular subject matter, and it appears to have been intended that the trust should continue until the object of it should he accomplished, then it of necessity must subsist until its object is accomplished or the relation is dissolved [435]*435by some act or declaration or course of conduct adverse in its nature to the continuance of the trust and the trust relation; and further, until the party whose right is denied has knowledge or can be presumed to be aware of such adverse act or declaration or course of conduct.
The trust assumed by Ross was by the contract to continue and subsist until he was paid the debt due him, and the remainder of the property in his hands, or to come to his hands, was returned to his cestui que trust. By the contract of assignment and the law applicable and governing such cases, Ross was invested with the right to hold the property assigned until he could make out of it, or by means of it, enough to pay him his dues, unless otherwise paid; and the enjoyment of this right was not limited by the period during which he might have maintained an action at law on the note of Buekelew, because the effect of the assignment was to continue his right beyond such period, and Wright, to whom Buekelew had assigned the Turner note and mortgage, had the correlative right to redeem the pledged property, or that which Ross held in trust as its substitute until he assigned his interest therein to his son Attmore, who then succeeded to such right.
On the 29th of May, 1861, Ross borrowed of the Savings Loan Society forty-five thousand dollars, which he agreed to repay, with interest, by installments, and to secure which he mortgaged to said society the premises in question. The plaintiff' alleged in his complaint that the Savings Loan Society had notice at the time this loan was made of the right and interest of the plaintiff", and therefore that the society’s rights and interests in the premises are subject and subordinate to the right and interest of the plaintiff—that is, that the society is in no better position in respect to the property than Ross was when he executed this mortgage. Such is the condition of the Savings Loan Society, provided the officers and managers of its concerns had notice, constructive or actual, of the plaintiff’s rights and interests in [436]*436the premises, or sufficient information to put them on inquiry respecting the same.
It does not appear from the finding and report of the referee that the Savings Loan Society had actual knowledge of the rights and interests of the plaintiff in the premises; and whether the record of the several assignments of the mortgage imparted notice to the society of the plaintiff’s interest in the trust property, depends upon a construction of the several statutes having relation to the recording of instruments in writing affecting or creating an interest in real estate. In our view of the question presented, it is not necessary to decide whether the statutes make any provision for the recording of assignments of mortgages, nor whether the record of an assignment of a mortgage, acknowledged in due form and recorded, operates as notice to subsequent purchasers and mortgagees of the existence of the assignment and its contents. We shall consider the question upon the hypothesis that, if the Savings Loan Society are chargeable at all with notice of the equitable rights of the plaintiff, it is on the ground that its officers had information which imposed on them the duty to inquire and investigate before the money of the society was loaned to Eoss, in order to preserve to itself the character and rights of a subsequent bona fide mortgagee.
The referee found and reported that before the Savings Loan Society made the loan to Eoss, its officers examined the records of mortgages in the Eecorder’s office of the county, and there saw and read the record of the mortgage of Turner to Stephen A. Wright, in Liber 31 of Mortgages, with the marginal references thereto and thereon, specifying the books of mortgages where the several assignments of the mortgage might be found as recorded; and also saw and read the record of the assignment of the mortgage from Buekelew to Eoss and the Phelans, and the record of the assignment from Buclcelew to Stephen A. Wright, and the record of the assignment from Stephen A. to Attmore E. Wright, in the books of mortgages which are mentioned. It [437]*437is further found and reported that the officers of the society made no other or further inquiry respecting the assignments, and had no other notice, and were, otherwise than by the information given by said records, ignorant of the assignment of Buckálew to Stephen A. Wright, and also were ignorant that Eoss ever held the Turner note and mortgage on any other conditions than those expressed in the assignment of Buckelcw to Eoss and the Phelans.
With regard to what shall be sufficient to put a party on inquiry, no definite rule can be laid down. It must be something more than vague rumor, and perhaps each case must depend upon its own circumstances and the position of the persons concerned in it. (2 Lead. Cases in Eq., Part I, p. 35.) The general rule is, that what is sufficient to put a party on inquiry is good notice in equity; that is, where a man has sufficient notice to lead him to a fact, he shall be deemed conusant of it. (2 Lead. Cases in Eq., Part I, p. 35; Green v. Slayter, 4 Johns. Ch. 46; Jenkins v. Eldredge, 3 Story, 325.) And a party thus informed cannot become a bona fide purchaser or mortgagee when knowledge of the truth would render him otherwise. (Pendleton v. Fay, 2 Paige, 205; Pitney v. Leonard, 1 Paige, 461; Hawley v. Cramer, 4 Cow. 722; Tuttle v. Jackson, 6 Wend. 213; Williamson v. Brown, 15 N. Y. 354.)
The officers of the Loan Society saw and read in the records of mortgages what purported to be copies of the various assignments of the Turner note and mortgage. They were treating with Eoss with reference to loaning him money, for which he proposed to secure them by the mortgage on the property in question. Would prudent men, having this information and being interested, have neglected to inquire respecting the matter indicated by what these officers saw and read? We think that which they saw and read was well calculated to put them on inquiry; especially so as they were dealing with one of the parties to the assignment, under which he had acquired .the right which he had; from whom, by inquiry, we must presume they would have [438]*438ascertained all he knew in the premises. The means of knowledge was conveniently accessible, and we are of the opinion they should have made the inquiries suggested by what they saw and read.
The referee found, as we have seen, that the officers of the Loan Society were ignorant, otherwise than as informed by the records—that Ross never held the Turner note and mortgage on any other conditions than those expressed in the assignment of Bnckelew to Ross and the Phelans. Prom this it would seem that the Society had notice of the conditions on which that assignment was made. Such, at least, is the import of the finding. The Society must therefore be deemed to have loaned their money to Ross and taken from him a mortgage on the premises to secure it with knowledge, to a legal intent, of the outstanding equitable rights and interest of the cestui que trust.
Benjamin R. Buckelew died in November, 1859, leaving a last will and testament. His executrix gave the notice prescribed by the statute to creditors of the decedent and of his estate, to exhibit their claims and the necessary vouchers to her at her residence, which was specified in the notice, within ten months thereafter. The ten months expired before the 1st of January, 1861. No claim was ever made or presented to the executrix for the payment of the note which Buckelew gave to Ross and the Phelans; nor did they or either of them ever exhibit any claim whatever against Buckelew deceased or against his estate. The parties entered into a stipulation admitting these facts, and agreed that the facts admitted should be taken and treated as if duly and properly pleaded, and that the plaintiff might avail himself of any and all Statutes of Limitations to the same extent and effect as if they had been properly pleaded. The plaintiff availing himself of the matters stipulated, takes the ground that by the omission to present the note to the executrix as a claim against the estate of Buckelew, Ross lost the right to the rents and avails of the property which he held in trust and as security for the payment of the debt of Buck[439]*439elew, because the claim, became barred by reason of the failure to present it, and the right to maintain an action thereon was lost.
If the creditor of a deceased person would preserve his claim against the estate of the deceased, to be paid in the course of the administration, he must present it to the personal representative of the deceased, as required by the statute, otherwise it becomes barred forever—that is, it becomes barred as a claim against the estate, and no action can be maintained thereon. (Probate Act, Chap. VI.) But if he have in his possession property which by contract he holds as his security for the payment of the amount due him, we do not understand he loses his right to retain it in pursuance of the terms of his contract, because he fails to present his claim against the estate. He may not desire to look to anything for payment except that which he has in possession, and which he has a right to retain until his demand is satisfied. A person making a claim against an estate is bound to establish it by affirmative evidence if it is disputed by the executor or administrator, but a creditor of a deceased person having by contract the rightful possession of property as security for the payment of a debt, may retain that possession until it is made to appear that his possession is no longer rightful. Not having presented his claim to the executrix, Eoss lost his right to demand payment of the debt or any part of it out of the general estate of the deceased; and this we think was the extent of his loss by reason of his omission to present such claim.
The appellant’s counsel make a further point, which proceeds upon another and different principle, which is that Eoss was in duty bound to present the demand against Buckelew as a claim against his estate in order to preserve it as a security for Wright, to whom Buckelew was indebted, or his estate was to become indebted, by reason of the assignment made by Buckelew to Eoss and the Phelans of the Turner note and mortgage, which was, as between Buckelew and Wright, the property of the latter. If Eoss was apprised of [440]*440the relations between Buckelew and Wright, it would have been-his duty to have given the latter notice of the payment and satisfaction of the debt due him from Buckelew when that event transpired, in order that Wright might have been enabled to present his claim against Buckelew’s estate, as provided in section one hundred and thirty of the Probate Act. But it is not clear that Ross had notice of the relations existing between Buckelew and Wright. The referee has in effect found that he had not, and hence he should not be charged with consequences which might follow because of the omission, under other circumstances.
It was competent for Attmore R. Wright, who had succeeded to the equitable rights and interests of Buckelew and Stephen A. Wright, to have and maintain this suit. Being ignorant of the amount of the rents and profits obtained by Ross from the property, and consequently whether he had yet received sufficient to satisfy the amount due him, the cestui que trust was entitled to have his action to compel Ross to account, and if paid, or when paid in foil, to convey and surrender the land which he held for his indemnity. If anything remained to be paid, an account was necessary for the purpose of ascertaining how much, in order that Attmore might he enabled to tender the amount still due, and thus place himself in a position to demand a conveyance of the property to him. (Kemp v. Westbrook, 1 Vesey, 278.)
"Whenever Ross received rents or other income from the property, it was his duty to make immediate application of the same, first to the payment of necessary outlays and disbursements in preserving and protecting the property, and then to the payment pro tanto of the Buckelew debt, and if he neglected to do so equity will make the application. From the report of the referee it appears that Ross had received rents, in excess of disbursements, amounting in the aggregate to the sum of fifty-six thousand three hundred and forty dollars and fifty-four cents. At what precise times a large portion of these rents were received does not appear. When the necessary facts in relation thereto may be ascer[441]*441tamed, then the amounts received should be applied as above indicated. And if it shall appear that the Buckeiew debt has been fully paid, or when it shall be so paid, the plaintiff will be entitled to a conveyance of the property executed in due form of law.
The decree is reversed and the cause remanded for further proceedings.
A rehearing was asked and granted after Mr. Chief Justice Currey and Mr. Justice Shafter had left the Bench, which came on to be heard at the October Term, 1868, when the following opinion was delivered by Mr. Justice Crockett:
The principal question in this case is, whether the instrument from Buckeiew to Ross and Phelan was a pledge or a chattel mortgage, or a mere assignment in trust, as contra-distinguished from either. The line of distinction between a pledge and chattel mortgage, whilst well defined in theory, is sometimes difficult of application to the facts of the transaction. This case presents a striking illustration of the difficulty.
The chief distinctions between the two at common law were, that in a pledge the title did not pass to the pledgee, who held only a lien on the property, and in all cases the possession must accompany the pledge; whilst by a chattel mortgage the title of the mortgagee became absolute at law, on the default of the mortgagor, and it was not essential to the validity of the instrument that possession of the mortgaged property should be delivered. Nevertheless, when the transaction is evidenced by a written instrument, as in this case, it often becomes difficult to decide, on the face of the paper, whether it was intended as a pledge or a mortgage. Whether it be the one or the other, the object and design of it, in all cases, is to secure the payment of money, or the performance of some act by the maker of the instrument, or some one else, for whom he undertakes. But whilst the [442]*442general office to be performed by each is the same, to wit : to secure the payment of money or the performance of some other act, the consequences resulting from a failure to perform are widely different in the two cases. In the case of a pledge the title remains in the pledgor, after condition broken, with a right to redeem at any time before a sale of the property; and if the property be sold by the pledgee, in satisfaction of his demand, he cannot become the purchaser at his own sale. But in the case of a chattel mortgage, the title of the mortgagee became absolute at law, on the default of the mortgagor; and on the foreclosure of the mortgage, the mortgagee was at liberty to become the purchaser. In this and similar cases the difficulty lies in determining, on the face of the instrument, whether the parties intended it to he a pledge or a mortgage. There is no set form of words for either, and the intent is to be deduced from the- whole instrument, and all its provisions taken together.
The subject matter of the transaction in this case was a note and mortgage on real estate made by D. S. Turner, and which were placed by Buckelew in the hands of Ross and Phelan, to secure the payment to them of Buckelew’s note for thirty thousand dollars, with interest.
There is no room for doubt that a note and mortgage of that character may become the subject of either a pledge or mortgage. They are but choses in action, and it is well settled that choses in action may be pledged. (Story on Bailments, Secs. 290-297; Edw. on Bailments, 197; Wilson v. Little, 2 Comst. 443.)
To make such a pledge available to the pledgee, there must necessarily accompany the pledge a power to assign the note and mortgage, in case of a sale of them, and to release the mortgage on satisfaction of it, otherwise it would not be possible for the pledgee, on a sale, to convey the legal title to the purchaser, or on a satisfaction of the mortgage to release it of record. But the instrument in question contains more than a mere authority from Buckelew to assign the note and mortgage to a purchaser, and to discharge the mortgage on [443]*443satisfaction. It contains also a formal assignment to Eoss and Phelan, by which they were invested with the legal title, and with full authority to take all proper steps for collection of the debt, and the release of the mortgage on the satisfaction thereof.
So far the instrument partakes of the character of a chattel mortgage, which, in the granting part, conveys the legal title to the mortgagee, and which is followed by a defeasance declaring the conditions on which the conveyance is to become void. This instrument contains both the absolute grant or assignment and a defeasance in the usual form. But the defeasance is followed by a provision to the effect that the instrument is “made for the purpose of securing the payment of the said sum of thirty thousand dollars, with interest as aforesaid, and for no other purpose whatever; ” and it is insisted by counsel that thfese words repel the idea that the instrument was intended as a mortgage, and go strongly to fortify the proposition that it was only a pledge, or at most an assignment in trust. But we are unable to perceive the significance of these words in that light. Whether it be construed to be a pledge, a mortgage, or an assignment in trust, these words would have equal significance, and would be equally true as applied to the transaction. Whatever we may term the instrument, and however we may classify it, it is obvious that it was “made for the purpose of securing the payment of the said sum of thirty thousand dollars, with interest as aforesaid, and for no other purpose whatever.” The whole instrument, even without the aid of these words, establishes clearly that it was intended only as a security, and for “no other purpose whatever.” This provision, therefore, can have no significance in determining the character of the instrument. It is the common practice to recite in mortgages that the instrument is intended only as a security, though these words are superfluous when the intent sufficiently appears from other portions of the instrument.
There is also a provision to the effect that on the collection by Eoss and Phelan of the note and mortgage made by Tur[444]*444ner, they are to account to Buekelew for the excess, after retaining the thirty thousand dollars and interest due from Buekelew, together with the costs of collection; and counsel maintain that this provision proves that Buekelew was to retain an interest in the note and mortgage, even after default made in the payment of his own note; and hence that the transaction was a pledge and not a mortgage. This argument is founded on the fact that, in case of a pledge, the title remains in the pledgor, even after default made; whereas, in the case of a chattel mortgage, the title of the mortgagee becomes absolute at law on the default of the mortgagor. Hence the argument that, inasmuch as the instrument provides for a payment of the surplus to Buckelew, it follows, as it is claimed that he retained an interest in the property after default made, and that for this reason it was a pledge, and not a mortgage.
This argument, however, is more specious than sound. If it had been in strict form a chattel mortgage, with a provision for the payment of the surplus to the mortgagor, would this of itself have converted it into a pledge? We think not. For whilst the title of the mortgagee would become absolute at law on default made, it is not controverted that the mortgagor could still redeem in equity. The provision for payment of the surplus is only expressing in words a right secured to the mortgagor by a Court of equity, if the instrument had been silent in that respect. It is none the less a mortgage because the parties have expressed in terms what a Court of equity would otherwise have implied, to wit: that the mortgagor was entitled to the surplus, after payment of the mortgaged debt, interest, and costs.
We are fortified in the opinion that the instrument was intended as a mortgage, by the fact that it is so denominated by the parties to it. One of the provisions is that it shall be lawful for Eoss and Phelan to effect insurance on the buildings included in the mortgage from Turner, and that the premium paid therefor “shall be a lien upon the said mortgaged premises, added to the amount of the said notes hereinbefore [445]*445mentioned and secured by these presents.” The “mortgaged premises” referred to must of necessity be the note and mortgage of Turner, and not the real estate included in the Turner mortgage, on which it was notin the power of Buckelew to impose a new lien in favor of Ross and Phelan.
On the whole, we conclude that the instrument in question has all the distinguishing characteristics of a chattel mortgage, and was so intended by the parties to it. It follows that Ross had the lawful right to purchase, for his own account, at the foreclosure sale, and in the absence of fraud, the purchase inured to his own benefit.
But if the instrument be not, strictly speaking, a chattel mortgage, we are, nevertheless, of opinion, that on a fair construction of it, under whatsoever classification it may fall, Ross had the right to purchase and hold, for his own account, the property in the Turner mortgage, at a fair judicial sale, under the decree of foreclosure.
The legal title to the note and mortgage was not only conveyed to him, but he was expressly authorized “to have, use, and take all lawful ways and means for the recovery of said money and interest.” This included the power to collect it by legal process, and to do whatever was proper and necessary to make the mortgaged property available for the payment of the debt. It was clearly within the contemplation of the parties that the foreclosure of the mortgage and a sale of the mortgaged property might become necessary, and Ross was clothed with full authority to accomplish that result. Was it contemplated by the parties, in the event of a foreclosure of the Turner mortgage, that Ross should not have the right to purchase the property for his own account, at a fair judicial sale? Was it within the scope of the contract, that in case of a purchase by him, at such sale, he was to hold the title only as a security for his debt, and subject to redemption by Buckelew in case Buckelew saw fit to redeem; but if he elected not to redeem, then that Ross should be forced to hold the property as his own at the price paid for it? Was it understood between them that if Ross [446]*446should purchase at the foreclosure sale, Buckelew was to have the right to claim the benefit of the purchase, if it turned out to be an advantageous one, or to reject it if he elected to do so? There is nothing in the contract to justify the belief that the parties contemplated anything of the kind. On the contrary, it is evident that Eoss and Phelan, in their capacity of creditors, retained the right to do whatever was necessary and proper to procure satisfaction of the debt due to them from Buckelew; and, as a means to that end, it was obviously within the contemplation of the parties that they should have the right to foreclose the Turner mortgage; and if they should elect to do so, to purchase for their own account the mortgaged property, holding the surplus, if any, in trust for Buckelew. This, in our opinion, was the only trust created by the instrument, except in so far as they were bound to the use of due diligence for the collection of the Turner note and mortgage. It has not been claimed, and could not be maintained, that under the contract it was imperative on Eoss to purchase at the foreclosure sale, whether he deemed it to his advantage to do so or not. If he had failed to purchase at any price, Buckelew could not have complained in the absence of fraud.
On the other hand, having elected to purchase at that sale, as a legitimate method of procuring payment pro tanto, of the debt due to him from Buckelew, he is entitled to the exclusive benefit of the purchase, unless by the terms of the contract a trust is created, which denies to Eoss the usual right of a creditor to purchase the property of his debtor at a fair judicial sale. We think the contract not only fails to create s&ch a trust, but, on the contrary, tends strongly to the conclusion that Eoss was not thereby intended to be deprived of any of his rights as a creditor, including the right to purchase for his exclusive benefit the mortgaged property at the foreclosure sale.
The view we have taken of the case renders it unnecessary to consider the other questions presented in the record.
Judgment affirmed.