
    *Alex., Loud., & Hamp. R. R. Co. v. Burke & als.
    June Term, 1872,
    Wytheville.
    Absent, Bouldin, J.
    
    Negotiable Notes—County Bonds—Banks.—C, trustee of a bank in liquidation, transfers to B the note of A, due to the bank, and certain county bonds which had been deposited with the bank by A as security for his note, to be applied first to pay a debt due B, and then for the trustee. After this transfer an order was made in a suit in the Circuit court of the United States, in which C, as trustee of the bank, was a defendant, appointing C receiver in the cause. The note having been protested for nonpayment, B gives A notice that, unless the note was paid by a day specified, he would proceed to sell the county bonds; and the note not having been paid, B advertises the bonds to be sold at auction, specifying time and place. Notice of this sale is not given to A, but he has knowledge of it. A files a bill to enjoin the sale, making B and C defendants. Held:
    1. Same—Same—Jurisdiction,—The transfer of the note and bonds to B, having been made before the appointment of C as receiver, the State court has jurisdiction of the case.
    2. Same—Same—Sale.—The mode of making county bonds available being by a sale of them, the bank, whilst it held them, and B, after the transfer to him, had authority to sell them.
    3. Same—Same—Same—Notice of Time and Place.— A was entitled to notice of the time and place of sale of the bonds; but it appearing that he had actual knowledge of the fact a reasonable time before the sale was to take place, this was sufficient without a formal notice to him.
    This case was argued in Richmond at the March term, and was decided at Wytheville at the June term.
    This is an appeal from a decree of the Circuit court of Alexandria county. The facts of the case, so far as it is material to state them, seem to be substantially *these: Sometime previous to June 1861, the Alexandria, Eoudoun & Hampshire Railroad Company borrowed of the Exchange Bank of Virginia, at their office of discount and deposit at Alexandria, ten thousand dollars, for which they executed their note, and at the same time, as collateral security for the payment thereof, they deposited with the said bank fifteen thousand dollars of the coupon bonds of Clarke county, in the State of Virginia. The note was renewed from time to time till the' 1st of June 1861, when the last note for said sum of $10,000 was given, payable six months after date. That note, not having been paid at maturity, was protested for non-payment, and has ever since remained unpaid. On the 12th day of July 1866, the said bank, by deed of that date, assigned and conveyed all its assets to George W. Camp, in trust for the purposes of liquidation, in pursuance of the act of the General Assembly, passed on the 12th day of Eebruary 1866, entitled “An act requiring the banks of this commonwealth to ■ go into liquidation”—Acts of Assembly 1865-66, p. 204. At the time of the execution of the deed the note aforesaid was in possession of the bank, and passed to the trustee as part of its assets, together with the said coupon bonds, as collateral security for the payment of said note. After the execution of said deed, Burke, Herbert & Co., being holders of notes of the bank to the amount of' $8,500, an arrangement was made between them and Camp, trustee in said deed, whereby it was agreed that the said notes should be surrendered by the former to the latter, in consideration of which the former should be allowed thirty-three and one-third per cent, on the dollar on the $8,500 of notes surrendered, and should have an interest in the said note of $10,000 to the extent of $2,833.333^ and interest thereon, and that the former should undertake the collection of said note, retain the amount due themselves, and pay the excess to said- Camp, trustee.. Accordingly the said note of $10,000, *and-the Clarke county bonds held as collateral security thereof, were transferred bj’the said Camp to the said Burke, Herbert & Co., for the purposes aforesaid. On the 21st of November 1868, in a suit pending in the Circuit court of the United States for the district of 'Virginia, in which William H. Ryan was plaintiff, and said Camp, trustee as aforesaid, was defendant, an order was made appointing said Camp receiver of the said court in the said cause, and requiring him to take, hold, collect and distribute all the assets of the said bank, under the further direction and order of the said ’court. It appears that this order was made after the aforesaid arrangement was made between Camp, trustee, and Burke, ' Herbert & Co., and after the said transfer by the former to the latter of the said note for §10,000, and the Clarke county bonds as aforesaid. The Alexandria, Loudoun & Hampshire Railroad Company having failed to make payment of their said note for $10,000, or any part thereof, Burke, Herbert & Co., by a notice in writing, dated October 27th, 1869, required of them immediate payment of the said note, and notified them that, unless the same should be paid on or before the 10th day of November next thereafter, they, the said Burke, Herbert & Co., -would, after that day, proceed to sell the said Clarke county bonds, and apply the proceeds of such sale to the payment of the said note. And payment not having been made as required by said notice, Burke, Herbert & Co. (or rather Burke & Herbert, who, it appears, were successors or assignees of Burke, Herbert & Co.,) on the 3d of December 1869, advertised in the Alexandria Gazette that they would, “on Saturday, the 15th day of January 1870, at 12 M. of that day, in front of the Mayor’s office in the city of Alexandria, sell by public sale, for cash, ’ ’ the bonds aforesaid, described in the advertisement as “Rifteen thousand dollars of the bonds of Clarke county, in the State of Virginia, with interest coupons attached, from the 1st day of July *1861. These bonds, of one of the richest counties of the State, are secured by the first deed of trust on the Alexandria*, Loudoun & Hampshire railroad, and offer an excellent opportunity for a safe and profitable investment.
    On the 8th day of January 1870, just one week before the day fixed for the said sale, the Alexandria, Loudoun and Hampshire Railroad Company obtained an injunction of said sale from the judge of the Circuit court of Alexandria county. In the bill on which the injunction was obtained, the plaintiffs claim the right to discharge their said note by the payment of bills of the said bank; aver that they had offered to make such payment, which was refused; and charge that the said note had been fraudulently assigned by said Camp, trustee, for the purpose of defeating their right of set-off or payment as aforesaid; and that the said note was still the property of said Camp, trustee, and subject to such right of payment on their part. They also state that the said note was renewed on the 1st day of June 1861, while the city of Alexandria was occupied by the troops of the United States government, and all communication was cut off and interrupted between Alexandria, where the transaction took place, and Norfolk, Virginia, the place where the bank was located, by the then subsisting hostilities ; and they submit that all contracts made between citizens separated by the hostile lines are utterly null and void, and that the transaction before referred to was such a contract. Copies of the notice and advertisement aforesaid were exhibited with the bill.
    Answers were filed to the bill by the defendants Burke, Herbert & Co., and George W. Camp. An answer was also filed by W. M. Sutton, also made a defendant in the cause, but it is immaterial to state for what purpose. The answers deny the allegations of fraud made in the bill, and affirm the reality and bona fides of the transfer to Burke, Herbert & Co., as aforesaid. x'They also deny that any tender had been made by the railroad company of payment of the note in bills of the bank. Camp, in his answer, also refers to the aforesaid order of the Circuit court of the United States, for the district of Virginia, appointing him receiver of the said court, and says that, in obedience to the said order, all the remaining assets and property of the said bank, which were at that time in his hands as trustee, came into his hands and were thenceforward held by him as receiver aforesaid. No evidence was taken in the cause, except an affidavit of Lewis McKenzie, president of the said railroad, which affidavit seems to have been read as evidence. It relates chiefly to offers which he says he made to pay the note in bills of the bank. It also states that “no authority, either verbal or written, was given to the said bank to sell the Clarke county bonds. They were left as collateral, neither party intending that they should be put in the market and sold, at the time of: the loan, or at any time afterwards.”
    On the 28th of Rebruary 1870, a final decree was rendered in the cause, dissolving the injunction and dismissing the bill. No reason for the decree is stated therein, nor is any reference therein made to any opinion of the court. But there is an opinion of the court copied into the record, though it does not appear to have been regularly made a part thereof. It appears from that opinion, that the case was decided upon the last ground taken in the answer of Camp, that he had been appointed receiver of the Circuit court of the United States for the district of Virginia; the court being of opinion, that if the plaintiffs had any equities against the sale, they must go to that tribunal which had assumed and obtained complete jurisdiction of the property before the State court undertook to interfere with the sale.
    Rrom the decree aforesaid, the Alexandria, Loudoun & Hampshire Railroad Company applied for and obtained an appeal to this court.
    *Beach, for the appellant, insisted, 1st, That there being no special agreement to confer on the bank the power to sell the security, it was not competent for the bank to sell, much less Burke, Herbert & Co. Wheeler v. Newbould, 16 New York R. 392.
    2d, If creditors had authority to sell without judicial proceedings, personal notice to redeem, and of the time, place and manner of the intended sale, must be given to the pledger. And no such notice was given in this case.
    3d, If the bill was dismissed on the ground that Camp was acting as receiver of the court, and the plaintiff’s redress was in that court, the court should have expressed in its decree that the dismissal was without prejudice. Gaylord v. Kershaw, 1 Wall. U. S. R. 81; Durant v. Essex Company, 7 Id. 107.
    F. E. Smith and Claughton, for the appellees, insisted,
    1st, That it was not necessary to give express authority to the pledgee to sell the bonds. Story Eq. Jur. $ 1008; 2 Kent’s Com. 582.
    2d, That it was not necessary to give personal notice to the railroad company of the time, place and manner of sale; and their bill shows they had actual notice on all these points, for they file with it the advertisement.
    
      
      The case was heard before his appointment.
    
   MONCURE, P.

delivered the opinion of the court. After stating the case he proceeded :

In the petition of appeal various errors in the decree are assigned, but it will be necessary to notice only a few of them. The counsel for the appellants contended that the State court, and not the Federal court, had jurisdiction of the controversy, and in this view we concur with the counsel. It sufficiently appears in the record that before the appointment of Camp as receiver, and while he was acting as trustee, he transferred the note and, bonds to Burke, Herbert & Co., whose duty it thenceforward became to collect the note, and make the *bonds available as collateral security, if necessary, for that purpose. They were invested with the title to the subject, for their own benefit, to a certain extent, and for the benefit of the trustee, Camp, or the creditors of the bank, as to the residue. They were entitled to pursue, in their own name, all the remedies which existed to make the claim available, and they had a right to do so as well after as before the appointment of Camp a.s receiver. That appointment was in subordination to the transfer to them, which was prior in time and paramount in right. If such appointment had been prior and paramount to the transfer to them, then we would have concurred with the Circuit court in considering that the remedy of the appellants, if entitled to any, was by an application to the Federal and not to the State court, and that on that ground the decree was rightly rendered. But differing as we do with the Circuit court in that respect, and regarding the controversy as a proper subject of litigation in the State courts, we proceed, id that view, to consider the errors assigned in the petition, or such of them as seem to be material.

The counsel for the appellants very properly placed no reliance ' on, if he did not expressly waive,, such of the assignments of error as are plainly untenable. For instance, he placed no reliance on the first assignment of error, “That it was the duty of Camp, as trustee of the bank, to have received the notes of the bank in payment of the petitioner’s negotiable note due to the bank.” That it was not his duty to have done so, was expressly decided by this court in the cases cited by the counsel of •the appellee, Camp, of Exchange Bank of Virginia v. Knox, &c., and Farmers Bank of Virginia v. Anderson & Co., 19 Graft. 739. It is proper to state, however, that those cases were decided after the appeal was applied for in this case. Nor did he place any reliance on the fourth assignment of error, ‘ ‘That the said note is invalid and inoperative,, the same having been made at ^Alexandria whilst in the Federal lines, and payable to a person residing in the Confederate lines.” This was a mere renewal of a note which had been long running at bank. It was merely the evidence of the debt, which remained the same debt, notwithstanding the renewal of the note from time to time. .The appellant would have owed the debt if the last renewal had never been given, and would owe it if that renewal could be avoided. As the counsel for the appellee, Camp, rightly argued, “The note was discounted by the branch of said bank at Alexandria, and was held by the said branch as the authorized agent of the mother bank for collection. It so remained until the close of the war. Ward v. Smith, 7 Wall. U. S. R. 447.”

But we will proceed at once to consider the only assignments of error relied on by the counsel for the appellants. They are the fifth and the sixth.

The 5th is in these words: “There being no special agreement to confer on the bank the power to sell the security, it was not competent for the bank to sell, much less Burke, Herbert & Co.”

In regard to . the right of a pawnee or pledgee to make the pawn or pledge available, the law is thus laid down in 2 Kent’s Com. 582, marg. : “The English law now is that after the debt is due the pawnee has the election of two remedies. He may file a bill in chancery, and have a judicial sale under a regular decree of foreclosure; and this has frequently been done in the case of stock, bonds, plate and other chattels, pledged for the payment of the debt. But the pawnee is not now bound to wait for a sale under a decree of foreclosure, as he is in the case of a mortgage of land (though Eord Chancellor Harcourt once held otherwise), and he may sell without judicial process, upon giving reasonable notice to the debtor to redeem. ’ ’ To the same effect is the law laid down in 2 Story’s Eq. § 1008. In ordinary cases no special agreement is necessary to confer on the pledgee *power to sell the property pledged. The power is, ordinarily, incident to the pledge. There are, however, exceptions to the general rule. The case of Wheeler v. Newbould, 16 New York R. 392, cited in the petition, is a case in which there was such an exception. There it was held that “the pledge of commercial paper as security for a loan of money does not, in the absence of a special power for that purpose, authorize the pledgee, upon the nonpayment of the debt, and upon notice to the pledger, to sell the securities pledged, either at public or private sale; but he is bound to hold and collect the same as they become due, and apply the money to the payment of the loan. ’ ’ The natural and proper mode of making such a security available was by collecting the money, and not by selling the security. The notes pledged in that case were due at short periods, and it could not have been intended by the parties that they might be sold by the pledgee, if the principal debt were not paid at maturity. But the same reason does not apply to property which can be made available only by a sale, or to make which available a sale is the proper and legitimate mode. In this case the pledge was of coupon county bonds, which are an ordinary subject of sale, and the proper and legitimate, if not the only, mode of making them available is by a sale. In Wheeler v. Newbould, the existence of the ordinary rule as laid down in Kent and Story supra, is admitted, and those authorities are referred to, and the cases of Willoughby v. Comstock, 3 Hill, N. Y. R. 389, and Dykers v. Allen, 7 Id. 497, are cited, in which the ordinary rule was applied to pledges of stock.

We, therefore, think it was competent for the bank to sell the bonds in this case, or would have been if the bank had not transferred them to Burke, Herbert & Co. We also think that it was competent for Burke, Herbert & Co., as transferees of the note and bonds, to make the sale.

*It seems to have been conceded by the counsel for the appellants, in argument, that the Exchange Bank would have had a right to sell the bonds, and also that the assignment of the note carried with it an assignment of the pledge. In this case, the bonds were expressly transferred along with the note. But the counsel argued that the original pledgee was, in effect, a trustee, who could not delegate his trust, and therefore, that an assignee of the debt is not a trustee, and cannot sell the property pledged, though he may have it sold under a decree of a court of chancery. The counsel admitted that he could find no authority to sustain this view. The power to sell property pledged for the security of a debt does not arise from any peculiar trust reposed in the original creditor, but is an incident to the pledge, and a part of the security of the debt. It follows the debt in to whosesoever hands it may come. That no authority can be found, or was not found, by the learned counsel to sustain his view, goes far, very far, to show that it is unsound. In the commercial world it must often occur that debts secured by a pledge are assigned, and that the assignee exercises the ordinary right of selling the subject of the pledge on the non-payment of the debt. We have not sought for cases of this kind, but doubt not there are many in the books. If there are not, it is doubtless because the right has never before been questioned. On principle, we think there is no doubt.

The sixth assignment of error is in these words : “Even if the creditors had authority to sell without judicial proceedings, personal notice to redeem, and of the time, place and manner of the intended sale, must be given to the pledger. No such notice was given. 16 New York R. 392.”

Certainly before a sale can be made by the pledgee, without judicial proceedings, he must give reasonable notice to the debtor to redeem. Such notice is indispensable. *2 Kent’s Com. 582, marg.; Stearns v. Marsh, 4 Denio’s R. 227. Such notice was given in this case. So also reasonable notice must be given to the debtor of the time and place of sale. Id. 2 Story’s Eq- i 1008. “The creditor will be held at his peril to deal fairly and justly with the pledge, both as to the time of the notice and the manner of the sale. ’ ’ 2 Kent’s Com., supra. It does not appear that in this case any formal notice of the time and place of sale was served upon or given to the debtor, but it does appear that the debtor had actual notice thereof, and that is sufficient. It is equivalent to the most formal notice. The only object of requiring notice to be given in such a case is to inform the debtor of the time and place of sale; and when he is already otherwise fully informed on the subject, to require a further and more formal notice to be given him is to require a vain thing. The case is not like a legal proceeding, in which service, or waiver of notice, should appear in the record. Here the whole matter is in pais, and the question is, Did the debtor have actual notice of the time and place of sale? The safest course is to have a formal written notice served upon him, for then the fact of notice can be easily proved. If this safe course be not pursued, the creditor must, at his peril, be prepared to prove otherwise that the debtor was informed of the time and place of sale a reasonable time before the same was to take place. Here there can be no doubt about the fact that the debtor had such information. The written notice to redeem was very specific, and notified the debtor that unless payment of the debt should be made on or before a certain day, the creditor would thereafter proceed to sell the bonds and apply the proceeds to the payment of the debt. The debtor, not having complied -with this requisition to redeem, had every reason to expect that his failure would soon be followed by a sale, according to the notice. Accordingly, early in December following, the very next month, *a sale of the bonds was advertised in the Alexandria Gazette, a newspaper published in the city wthich was the chief terminus of the road of the Alexandria, Boudoun & Hampshire Railroad Company, and the place, no doubt, where the principal office of the company was located and their chief officers resided. The day fixed for the sale was the 15th of January, more than a month after ‘the advertisement was first inserted in the newspaper, and such insertion was to be continued weekly until the day of sale. If the fact of actual notice could not be inferred from these strong circumstances, there is other and conclusive evidence in the record of such actual notice. The injunction was obtained on the 8th day of January 1870, one week before the day fixed for the sale, and a copy of the advertisement is filed as an exhibit with the bill, thus conclusively showing that the plaintiffs were fully informed of the time and place of sale, just as much so as if a copy of the advertisement had been served upon them.

We are, therefore, of opinion that there is no error in the decree, and that it ought to be affirmed.

Decree affirmed.  