Sparks v. Caldwell

MELVIN, J.

This is an appeal from a judgment in favor of plaintiff. The suit was on a promissory note for the principal sum of twenty-one hundred dollars made by one Frank R. Bear in favor of the appellants Caldwell 'and Tungate. The note was indorsed as follows: “For value received, I hereby guarantee the payment of the within note, waiving demand, presentment for payment, protest and notice of protest. H. J. Caldwell, D. W. Tungate.”

In their answer appellants admitted delivery of the note to respondent but alleged that it was transferred as collateral security for the payment of a note for two thousand dollars previously made by them and payable to Sparks, the respondent. Upon motion their answer was stricken out as frivolous, and judgment on the pleadings was given according to plaintiff’s prayer.

The one question presented is whether or not a pledgee can sue a pledgor as guarantor of a collateral security in the nature of a negotiable instrument.

Respondent contends 1. That there is nothing, to prevent the pledgee of a negotiable note from suing upon the pledged security without bringing an action on the principal obligation ; and 2. That even if the rule be otherwise when the pledge

[403]

is transferred by mere

indorsement

and delivery, nevertheless in cases like this where a distinct contract of

guaranty

is made in favor of the pledgee, he may sue upon the pledged note and recover upon it even when the amount of the note and interest, is in excess of the indebtedness which the collateral note was intended to secure. Both of these positions are met, we think, by two California cases. In

Haber

v.

Brown,

101 Cal 452, [35 Pac. 1038], this court said: “The case has been discussed thus far upon the theory of the complaint, that the original transfer of the note in suit to Dinkelspiel & Co. was an absolute transfer thereof by indorsement in the ordinary course of business. But the answer, proofs, and findings show that the transfer was by way of pledge, or collateral security, to secure the indebtedness of John H. Carter and of the firm of Carter & Barker to Dinkelspiel & Co. The Civil Code expressly provides that ‘notwithstanding an agreement to the contrary, a: lien or a contract for a lien, transfers no title to the property subject to the lien (Civ. Code, sec. 2888.) It is settled in this state that, as between the pledgor and pledgee, the general property in a pledge remains in the pledgor, notwithstanding an apparent transfer of legal title to the pledgee.