Pawn Or Pledge - Definition - Law Dictionary Home Dictionary Definition pawn-or-pledge

Definition :

Pawn or Pledge [fr. pignus, Lat.], a bailment of goods by a debtor to his creditor, to be kept till the debt is discharged.

A mortgage of goods is in the Common Law distinguishable from a mere pledge or pawn. By a mortgage the whole legal title passes conditionally to the mortgagee; and if the goods be not redeemed at the stipulated time, the title becomes absolute at law although equity allows a redemption. But in a pledge, a special property only passes to the pledgee, the general property remaining in the pledgor. Also, in the case of a pledge, the right of a pledgee is not consummated, except by possession; and, ordinarily, when that possession is relinquished, the right of the pledgee is extinguished or waived. But, in the case of a mortgage of personal property the right of property passes by the conveyance to the mortgagee, and the possession is not or may not be essential to create or support the title.

As to things which may be the subject of pawn: These are, ordinarily, goods and chattels; but money, debts, negotiable instruments, choses in action, and indeed any other valuable things of a personal nature, such as patent-rights and manuscripts, may by the Common Law be delivered in pledge. It is not indispensable that the pledge should belong to the pledgor; it is sufficient if it is pledged with the consent of them owner. By the pledge of a thing, not only the thing itself is pledged, but also, as accessory, the natural increase thereof. If the pledgor have only a limited title to the thing, as for life or for years, he may still pawn it to the extent of his title; but when that expires, the pledgee must surrender it to the person who succeeds to the ownership. See FACTOR.

It is of the essence of the contract that there should be an actual delivery of the thing to the pledgee; for until delivery, the whole contract is executory, however strong may be the engagement to deliver it; and the pledgee acquires no right of property in it. But there need not be an actual manual delivery, as it is sufficient if there are any of those acts or circumstances which, in construction of law, are deemed sufficient to pass the possession of property, as the key of a warehouse. As possession is necessary to complete the title, so by the Common Law the title determines if the pledgee lose the thing pledged, or deliver it back to the pledgor unless for a temporary or special purpose.

It is also of the essence of the contract that the thing should be delivered as a security for some debt or engagement. It may be delivered as security for a future debt or engagement, as well as for a past debt; for one or for many debts and engagements; upon condition or absolutely; for a limited time or for an indefinite period. It may also be implied from circumstances, as well as arise by express agreement, and it matters not what is the nature of the debt or the engagement. The pledge is understood to be a security for the whole and for every part of the debt or engagement. It is indivisible; individua est pignoris causa.

As to the pledgee or pawnee's rights and duties: The pawnee acquires, in virtue of the pawn, a special property in the thing, and is entitled to the exclusive possession of it during the time and for the objects for which it is pledged. The pledgee has a right to sell the pledge, when the pledgor fails to perform his engagement. He might have filed a bill in equity against the pledgor for a sale, or he may proceed to sell ex mero motu, upon giving due notice of his intention to the pledgor. If several things be pledged, each is deemed liable for the whole debt or engagement; and the pledgee may proceed to sell them from time to time, until the debt or other claim be completely discharged. The possession of the pawn does not suspend the right to sue for the whole debt or other engagement without selling the pawn, for it is only a collateral security. A pawnee cannot become the purchaser at the sale. A pledgee cannot alienate the property absolutely, nor beyond the title actually possessed by him, unless in special cases. He may deliver the pawn into the hands of a stranger for safe custody, without consideration; for he may sell or assign all his interest in the pawn, or he may convey the same interest conditionally, by way of pawn, to another person, without destroying or invalidating his security.

The following rules elucidate the principles as to the pawnee's title to use the pawn:-

(1) If the pawn is of such a nature that the due preservation of it requires some use, there such use is not only justifiable, but it is indispensable to the faithful discharge of the duty of the pawnee.

(2) If the pawn is of such a nature that it will be worse for the use, such, for instance, as clothes, the use is prohibited to the pawnee.

(3) If the pawn is of such a nature that the keeping is a charge to the pawnee, as a cow or horse, there the pawnee may milk the cow and use the milk, and ride the horse by way of recompense for the keeping.

(4) If the use will be beneficial to the pawn, or it is indifferent there it seems that the pawnee may use it.

(5) if the use will be without any injury, and yet the pawn will thereby be exposed to extraordinary perils, there the use is impliedly interdicted.

The pawnee is liable for ordinary neglect in keeping the pawn. He must return the pledge and its increments, if any, after the debt or other duty has been discharged. He must render a due account of all the income, profits, and advantages derived by him from the pledge, in all cases where such an account is within the scope of the bailment.

As to the pledgor's rights and duties:-

If the pledge is conveyed by way of mortgage, so that the legal title passes unless the pledge is redeemed at the stipulated time, the title of the pledgee becomes absolute at law; and the pledgor has only an equitable right to redeem. If, however, it be a mere pledge, as the pledgor has never parted with the general title, he may, at law, redeem, notwithstanding he has not strictly complied with the condition of his contract. If, when the pledgor applies to redeem, the pledge has been sold by the pledgee without any proper notice to the former, no tender of the debt due need be made before bringing an action therefor: for the party has incapacitated himself to comply with his contract to return the pawn. Subject to the pledgee's right, the owner has a right to sell or assign his property in the pawn. As the general property of goods pawned remains in the pawnor, and the pawnee has a special property only, either may maintain an action against a stranger for any injury done to it, or for any conversion of it.
Goods pawned are not liable to be taken in execution in an action against the pawnor, at least, not unless the bailment is terminated by payment of the debt, or by some other extinguishment of the pawnee a title, except in case of the Crown, and then subject to the pawnee's right. By the act of pawning, the pawnor enters into an implied engagement of warranty that he is the owner of the property pawned. The pawnor is responsible for all frauds, not only in the title but in the concoction of the contract. The pawnor must reimburseto the pawnee all expenses and charges which have been necessarily incurred by the latter in the preservation of the pawn, even though by some subsequent accident these expenses and charges may not have secured any permanent benefit to the pawnor.

The contract of pledge is put an end to or extinguished:-

(1) By the full payment of the debt, or the discharge of the other engagements for which the pledge was given;

(2) By the satisfaction of the debt in any other mode, either in fact or by operation of law; as, for instance, by receiving other goods in payment or discharge of the debt;

(3) By taking a higher or different security for the debt, without any agreement that the pledge shall be retained therefor (this is called a novation in the Roman Law);

(4) By extinguishing the debt, which also extinguishes the right to pledge;

(5) By the things perishing;

(6) By any act of the pledgee which amounts to a release or waiver of the pledge, Story on Bailents, c.v.; and consult Coote on Mortgages, 9th Edn., pp. 1476 et seq. See PAWNBROKERS.