PLEDGE (OF. plcge, Fr. &Of., OIL pieggio, pledge; of uncertain etymology, perhaps ultimate ly from Lat. prwberc, prwhiberc, to offer, from pew, before babere, to have). Personal erty delivered by one person to another to be held by him as security for the performance of an obligation, usually the payment of a debt. The term also denotes the legal transaction in volved in making a pledge. The common-law pledge corresponds to the pignus, or pawn, under the civil law. although it cannot certainly be said that the common-law illedge was adopted from the civil law.
A pledge is distinguishable from a mortgage in that the relation of the pledgor and pledgee is that of bailor and bailee, the legal interest of the bailee being his right to possession of the pledge with power to sell it upon non-payment of the debt.
Any personal property actually in existence and capable of delivery into the possession of the pledgee may be pledged. Future property (that is, property not yet in existence, as a ship yet to be built or cloth yet to be made) cannot be pledged. An agreement, however, for the pledging of future property creates a valid equitable lieu which a court of equity will enforce whenever the property comes into cxf;tence. The so-called inchoate or potential property which the common law regarded as present legal prop erty, although in fact not in existence, as crops planted but not grown, or the wool to be grown upon sheep actually in existence, might also be pledged, while the mortgagee at common law acquired title to the mortgaged property.
The pledgee has a right to retain possession of the pledge only until the debt is paid or obliga tion performed. He is bound to exercise due or
reasonable care in preserving and protecting the property pledged. Whenever the debt or obliga tion is due, he is entitled to sell the pledge and apply the proceeds to the payment of the debt. turning over the surplus, if ay. to the pledgor. Before selling the property he is required to give fair and reasonable notice to the pledgor, and the sale should be made in such a manner as to secure the best price for the property. The usual method is by public auction at the place where property of the class pledged is usually sold. Notice of the sale and any particular method of sale may be waived by the pledgor. Equity also exercised its jurisdiction to foreclose a pledge by directing a judicial sale of the property pledged. thus giving to the pledgee a remedy in addition to his common-law right of sale. An unauthorized sale or misappropriation of the pledge by the pledgee amounts to a con version of the property for which the pledgor may bring his aethm in trover or replevin.
10 many Status the lqw of pledge is regulated by statute. and in nearly all the States the power of one in the possession of personal prop erty to pledge it is much affected by the factor Acts (q.v.).
('onsult: Colebrook, The Law of Collateral Nei uritics (2d ed.. Chicago. I S98) ; Jones, The Lair of Plcdges 1.2d ed.. Boston. 19111) ; Tyler, The Lair of Pawns, or Pledycs (2(.1 ed., Albany, 1 ) . Compare 11 YPOTHECATIoN.