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ARTICLE 6.

PLEDGE A CUMULATIVE SECURITY.

230. Pledge a cumulative security.

230. Pledge a Cumulative Security.

A pledge is an additional and cumulative security, the existence of which does not affect nor impair the right to maintain a direct action for the enforcement of the secured obligation; nor is the pledge affected or discharged by such action or the judgment rendered therein until the judgment is satisfied.1

1 Pledge is Additional and Cumulative Security: Hawley Bros. Hardware Co. v. Brownstone, 123 Cal. 643, 648, 56 Pac. 468; Sonoma Valley Bank v. Hill, 59 Cal. 107, 110; Ehrlich v. Ewald, 66 Cal. 97, 4 Pac. 1062; Savings Bank of St. Helena v. Middlekauff, 113 Cal. 463, 467, 45 Pac. 840; French v. McCarthy, 125 Cal. 508, 512, 58 Pac. 154.

In the absence of a statute or stipulation to the contrary, the possession of the pledged property does not suspend the right of the pledgee to proceed personally against the pledgor for his debt, without selling the pledge, for the reason that the security is only collateral: Sonoma Valley Bank v. Hill, 59 Cal. 107, 110.

Code of Civil Procedure, section 726, sections 385388 below, is inapplicable to pledges: Ehrlich v. Ewald, 66 Cal. 97, 4 Pac. 1062.

Where a second note extending the time of payment was given as security for the payment of a former note, as soon as that extended time had expired, the plaintiff [pledgee] had a right to bring his action upon the old note, if the amount was not then paid”: Welch v. Arrington, 23 Cal. 322.

An executory contract for a pledge is not affected by a direct action for the recovery of the money, nor was the right to recover the money in a direct action affected by the existence of the lien: Citizens' Bank of Paso Robles v. Rucker (Cal., March 13, 1903), 72 Pac. 46.

ARTICLE 7.

ENFORCEMENT OF PLEDGE.

231. Methods of enforcement.

232. Pledgee generally may not sell evidence of indebtedness.

233. Demand of performance of principal obligation must be made.

234.

Demand of performance, how waived. 235. Actual notice of sale must be given pledgor.

236.

Sale of pledged property must be made at public auction.

237. Irregular sale voidable.

238. Pledgee may purchase at sale.

239. Application of proceeds of sale.

240. Pledgee may maintain action for deficiency.

231.

Methods of Enforcement.1

An obligation secured by pledge may be enforced against the pledged property either

(1) by a nonjudicial sale as hereinafter provided, or .

2

(2) by a foreclosure action.3

1 Methods of Enforcement: Wilson v. Brannan, 27 Cal. 258, 271; Wright v. Ross, 36 Cal. 414, 429; Ehrlich v. Ewald, 66 Cal. 97, 4 Pac. 1062. Compare Mauge v. Heringhi, 26 Cal. 577.

2 Nonjudicial Sale.-Civil Code, section 3000: "Where performance of the act for which a pledge is given is due, in whole or in part, the pledgee may collect what is due to him by a sale of the property pledged, subject to the rules and exceptions hereinafter prescribed."

3 Foreclosure Action.-Civil Code, section 3011:

232. Pledgee Generally may not Sell Evidence of

Indebtedness.4

In the absence of a special agreement permitting the sale, a pledgee or pledgeholder must not himself sell any evidence of indebtedness pledged to him, except the obligations of govern

"Instead of selling pledged property, a pledgee may foreclose the right of redemption by a judicial sale, under the direction of a competent court."

4 Civil Code, section 3006, provides. "A pledgee cannot sell any evidence of debt pledged to him, except the obligations of governments, states, or corporations; but he may collect the same when due.”

Where the pledged property is a note secured by mortgage, the pledgee may upon its maturity collect it by a foreclosure action: Kelly v. Matlock, 85 Cal. 122, 129, 24 Pac. 642.

5 In Absence of Special Agreement.-The provision that the pledgee must not sell the evidence of indebtedness, being designed for the benefit of the pledgor, may be waived by him. The effect of an agreement, however, which permits the pledgee to sell the evidence of debt is not to restrict the pledgee to the mode agreed upon (as was urged by counsel), but is merely a permission added to his statutory rights; so that he may either sell or colleet, while under the code he could only collect. The authorization is considered in law as given not for the purpose of restricting or curtailing the rights of the pledgee, but for the purpose of enlarging his rights, making the pledge more advantageous to him by giving him a more effectual and speedy means of obtaining money from his security: McArthur v. Magee, 114 Cal. 126, 129, 45 Pac. 1068; Farmers' etc. Bank v. Copsey, 134 Cal. 287, 66 Pac. 324. Compare Donohoe v. Gamble, 38 Cal. 340, 351, 99 Am. Dec. 399.

6 Civil Code, section 3006, applies to a pledgeholder: Fernandez v. Tormey, 121 Cal. 515, 520, 53 Pac. 1119.

ments, states, or corporations. He may, however, collect the same when due, or cause it to be sold by judicial sale in a foreclosure action.

233. Demand of Performance of Principal Obligation must be Made.

After the principal obligation is due and before a sale of the property pledged as security for the performance thereof is made, the pledgee must demand performance thereof from the debtor if the debtor can be found.8

234.

Demand of Performance, How Waived.

A debtor or pledgor waives a demand of performance as a condition precedent to a sale of the pledged property by a positive refusal to perform after performance is due; but cannot waive it in any other manner except by contract.9

7 Such evidence of debt is, however, subject to sale in a foreclosure action in satisfaction of the demand secured thereby: Donohoe v. Gamble, 38 Cal. 340, 353, 354, 99 Am. Dec. 399 (Rhodes, J., dissenting). 8 Compare Civ. Code, sec. 3001.

Dewey v. Bowman, 8 Cal. 145, 151; Gay v. Moss, 34 Cal. 125, 132.

Where the pledgee does not demand performance nor give reasonable notice of the intended sale, the sale amounts to a conversion, and the pledgor becomes liable for the value of the pledged property with interest, less the amount of the secured obligation: Gay v. Moss, 34 Cal. 125, 132.

9 Civ. Code, sec. 3004.

Hyatt v. Argenti, 3 Cal. 151, 160-167; Bendel v. Crystal Ice Co., 82 Cal. 199, 22 Pac. 1112.

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