Easton v. Bank

• Decision Date: 14 May 1888
• Docket Number: GERMAN-AMERICAN
• Citation: 8 S.Ct. 1297,32 L.Ed. 210,127 U.S. 532
• Parties: EASTON v. BANK. 1
• Court: U.S. Supreme Court

8 S.Ct. 1297

127 U.S. 532

32 L.Ed. 210

EASTON v. GERMAN-AMERICAN BANK.¹

May 14, 1888.

[Statement of Case from pages 532-536 intentionally omitted] Charles P. Crosby, J. M. Wilson, and Charles L. Easton, for appellant.

Edward Salomon, for appellee.

Mr. Justice MATTHEWS, after stating the facts as above, delivered the opinion of the court.

The right of the complainant to the relief prayed for is based upon the contention that the Genman-American Bank originally held the bonds secured by the deed of trust as a pledge given by way of security for the repayment of the loan to Bowen Bros.; that it has never sold that pledge, in pursuance of the terms of the agreement between the parties, and as required by law; that the land itself, the title to which was conveyed by Bowen Bros. to Smith in trust, was a mere incident to the pledge and a part of it; that, notwithstanding the form of a sale under the trust deed by the trustee to Dexter, there was no sale in fact, and in law the conveyance by Dexter to the bank operated only to convey the title to the bank in the same capacity in which it held the bonds as collateral, that is, as trustee for the debtors; that the subsequent sale by the bank to Dore was the first effective conveyance of an absolute title, but was made by the bank in its capacity as trustee for the Bowens; and that, as such, the complainant, having succeeded to the Bowens' rights, is entitled to require the bank to account for its proceeds. Where personal property is pledged, the plede e acquires the legal title and the possession. In some cases, it is true, it may remain in the apparent possession of the pledgeor; but, if so, it can be only where the pledgeor holds as agent of the pledgee. By virtue of the pledge, the pledgee has the right by law, on the default of the pledgeor, to sell the property pledged in satisfaction of the pledgeor's obligation. As in that transaction the pledgee is the vendor, he cannot also be the vendee. In reference to the pledge and to the pledgeor, he occupies a fiduciary relation, by virtue of which it becomes his duty to exercise his right of sale for the benefit of the pledgeor. He is in the position of a trustee to sell, and is, by a familiar maxim of equity, forbidden to purchase for his own use at his own sale. The same principle applies, with a like result, where real estate is conveyed by a debtor directly to a creditor as security for the payment of an obligation, with a power to sell in case of default. There the creditor is also a trustee to sell, and cannot purchase the property at his own sale for his own use. In the present case the bonds of the Bowen Bros., secured by the deed of trust, were pledged to the German-American Bank as security for the repayment of the loan made to the Bowen Bros., but those bonds have not in fact been sold, unless the transfer of them by the bank to Dore be considered a sale. It was not such, however, in point of fact or of law. Nothing was paid for them and they were delivered to Dore merely as muniments of title in connection with his purchase of the real estate. At that time they were of no value, for they were merely the personal obligations of the Bowen Bros., from which they had been released by the discharge in bankruptcy. No suit could have been maintained...