On appeal from the Essex County Circuit Court.
For the appellants, Riker & Riker (Theodore McC. Marsh, of counsel).
For the respondent, Wolber, Gilhooly & Yauch (John H. Yauch, Jr., of counsel).
The opinion of the court was delivered by
HEHER, J. The appeal in each cause is from a judgment of the Essex County Circuit Court, striking out the complaint as sham and frivolous in part. Appellants allege the conversion of certain bonds and mortgages and mortgage participation certificates owned by them, respectively, and deposited with respondent as collateral security for the payment of promissory notes made or endorsed by William W. Bardsley, the son of appellant, Jennie Bardsley, and a cousin of appellant Mary W. Damerel. The securities consisted of three bonds and mortgages and two mortgage participation certificates of the aggregate principal sum of $25,000 furnished by appellant Bardsley, and two bonds and mortgages, of the total principal sum of $10,000, provided by appellant Damerel.
On December 30th, 1931, respondent advised appellant Bardsley, by letter, that the securities "given by you to your son to use as collateral here must now be considered our property, due to his inability to keep up his interest charges." On the same day appellant Damerel was advised, likewise by letter, that the "mortgages given by you to Mr. William W. Bardsley for collateral purposes must now be considered the property of this bank." Respondent also gave notice to the mortgagors to pay to it the interest thereafter accruing on the securities. William W. Bardsley's obligation to respondent,
on promissory notes made by him, then totaled $26,600, and, in addition, he was liable as an endorser of a promissory note in the sum of $14,000, made by a corporation in which he was interested.
Appellants contend (a) that they are the pledgors; (b) that the securities "occupy the status of surety, as they are pledged for the debt of a third party;" (c) that the lien was discharged by various acts of respondent, viz.: (1) assuming ownership of the securities; (2) selling the same before maturity; (3) selling the same at private sale; (4) selling the same without notice; (5) renewing debt of principal without consent of pledgor-surety; (6) bad faith on the part of respondent; and (d) that the lien having been discharged, the refusal of respondent to return the securities on demand constituted conversion.
Was the status of appellants and respondent that of pledgor and pledgee? This query must be answered in the negative. Each appellant executed and delivered to respondent an authority to pledge, wherein she consented and agreed that her securities therein listed "may be pledged with you as collateral security" for loans or advances "made or to be made to," and "any and all other obligations of" William W. Bardsley, "now existing or hereafter arising * * *." It was therein further stipulated that the pledged securities "may be sold or otherwise disposed of in order to satisfy any or all of said obligations" of William, in the event of default at maturity, and notice of the nonpayment of the obligations was waived.
Appellants concede that the language of this instrument, if it stood alone, "might be construed as a pledge" by William "to the bank rather than a pledge by the owners of the securities direct," but they insist that a pledge by each appellant is found in the transfer of the securities direct to the bank by her assignment, absolute on its face, and the knowledge of respondent of the source and ownership of the securities.
It is not indispensable that the pledge should belong to the pledgor. One may make a valid pledge of property belonging to another, if he has ...