196 PAWN as promissory notes, and of stock or scrip of incorporated companies, by way of security for loans or debts. Now this giving of security may be regarded as a mortgage or as a pledge. But if it be a mortgage, the parties acquire one set of rights, and come under one set of obligations ; and if it be not a mortgage, but a pledge, their rights and their obligations are very different. A pawnor retains the owner- ship of the pledge, but places it in the possession of the pawnee as his security ; but a mortgageor transfers at once the ownership of the prop- erty, retaining only a right to annul and defeat this transfer by payment of a certain debt. (See MOKTGAGE.) The practical effect of this difference, which gives to it its importance, is this. A mortgagee, who acquires the proper- ty in or the ownership of the thing mortgaged, may do with that thing whatever he may do with his own. He may sell it, or mortgage it, or keep it in his own hands, always subject however to the mortgageor's right to redeem it ; and it makes no difference to the mortage- or whether, when he comes to pay the debt and redeem the thing mortgaged, he finds it in one hand or another. But as a pawnee acquires no ownership whatever, he cannot sell the thing pawned, nor pledge it over, nor transfer it in any way. His whole right consists in the right of possession. He may keep the pawn as a security for his debt, because the owner has lost, not the right of property, but the right of possession ; but the pawnee can do nothing else with' it. Nor is this all ; for he not only may, but must keep the pawn in his possession. This is his bargain with the pawn- or by construction of law; and he holds the pawn only on this condition. If therefore the pawnee, for any reason or in any way, volun- tarily parts with the possession of the pawn by transferring it to a third person, his lien or right of possession is at once gone ; the pawn- or at once recovers his right of possession, and may demand and repossess himself of the pawn, although the debt to secure which it was given remains wholly unpaid. The custom of brokers and others, who lend money or give other ac- commodation on the security of pledged stocks, has been the reverse of this. One holding such stock by way of security has regarded himself only as bound to have that stock ready to be returned when the debt is paid, and in the mean time he does what he pleases with it ; that is, he sells it, or transfers it by way of pledge, or makes use of it as of his own. But recent decisions have declared that by such use the right of the pledgee to hold the stock is wholly lost. The pledger may therefore .de- mand it at once, although his debt be not paid ; and if it be not forthwith redelivered to him, he may have his action for damages, and in this action recover its value at the time of the demand, and perhaps (for this is not quite set- tled) any higher value it may have reached at any time while in the pawnee's hands. For this severe and somewhat technical rule there is this substantial reason. If a pawnee may use in this way stock pledged to him, he forces upon the pawnor the risk of his insolvency at the time when the stock should be redelivered. For if the pawnee be then insolvent, without the stock in his hands, the pawnor has only a claim against him for its value, and must take his dividend with other creditors. But if the pawnee retains in his hands the stock as the pawnor's stock, the pawnor then retakes it as his property. A pledger may always transfer the pawn, but subject to the pawnee's claim ; and if the transferee pay the debt, the pawnee must deliver the pawn to the transferee. The pawnee holds the pawn only as security, nor does it become absolutely his even if the debt be not paid at maturity. There is no forfeit- ure of the pawnor's right to redeem, until something has been done which is the same thing in its effect that foreclosure is in a case of mortgage. What this thing is may not be, in all cases and in all respects, quite certain. There is no doubt that the pawnee may ap- ply to a court of equity and have a decree of sale, and may thereupon sell the pawn in com- pliance with the terms of the decree. Some authorities hold, or rather intimate, that this, which was the ancient and regular way, if not the only one, remains at this day the best and safest. But we are satisfied that it is not neces- sary, and certainly it is not usual. We consider it as now established law, that a pawnee, after the maturity of the debt, and after unsatisfied demand, may sell the pawn, provided he do so in good faith and with all reasonable precau- tions in favor of the pawnor's interest. There is perhaps no other way of doing this, which satisfies the law, than a sale by public auction ; and at all events this is the surest and most proper way. Nor will a sale .by auction be conclusive against the pawnor, unless it is con- ducted, as to time, place, advertisement, notice to the pawnor, and in all other respects and circumstances, in such wise as to indicate per- fect good faith, and to secure a due regard to the rights of the pawnor. The proceeds must be applied to the payment of the debt. If any balance remains over, that must be given forth- with to the pawnor. If any portion of the debt remains unpaid, the pawnee has an equal- ly valid claim to that amount as he had origi- nally for the whole. It is not unfrequent for the parties to agree, when the pledge is made, as to what shall be done with it ; as, for exam- ple, that the pawnee may, if the debt be unpaic at a certain time, sell the pawn, if it consist o: stocks, at the brokers' board. But any sucl agreement must be complied with literally anc accurately. It should be remarked, however, that negotiable bills and notes come under exceptional rule. When they are pledged, it is said that the pledgee has much more power to the use and disposition of them than stocks ; but this exception is not very accurate ly defined. So it should be said, that althougl delivery of possession is absolutely essential
