Opinion
November 29, 1935.
January 6, 1936.
Pledges — Collateral — Duty of pledgee to sell collateral upon request of pledgor — Promise to carry debtor until the value of securities is restored — Consideration.
1. A creditor-pledgee is under no duty to sell collateral upon the request or order of the debtor-pledgor. [278]
2. A promise of a creditor to carry his debtor until the financial panic is over, and until stocks pledged as collateral security return to their former values, is without consideration, and unenforceable, where such promise does not induce the debtor to forbear or to omit any action which he otherwise might or would have performed. [278-9]
Argued November 29, 1935.
Before FRAZER, C. J., KEPHART, SCHAFFER, DREW, LINN and BARNES, JJ.
Appeal, No. 273, Jan. T., 1935, by defendant, from judgment of C. P. No. 2, Phila. Co., Sept. T., 1934, No. 3203, in case of William D. Gordon, Secretary of Banking, v. George Mitchell. Judgment affirmed.
Assumpsit.
The facts are stated in the opinion of the lower court, STERN, P. J., as follows:
The suit is on three notes executed by the defendant to the plaintiff as payee. The court made absolute a rule for judgment for want of a sufficient affidavit of defense as to the first two of the notes, but refused judgment as to the third. Since it is the defendant who is dissatisfied with this ruling, it is necessary to discuss the action of the court only with reference to the two notes upon which judgment for the plaintiff was granted.
As to these notes the defendant contends that his liability was cancelled because on two different occasions he ordered the plaintiff to sell and liquidate the collateral but the plaintiff refused to do so. The defendant sets up a counterclaim based upon damages which he alleges he sustained by reason of the refusal of the plaintiff to sell the collateral as ordered by the defendant.
It has been so consistently and clearly held that a creditor-pledgee is under no duty to sell collateral upon the request or order of the debtor-pledgor that it is thought no discussion of this principle is necessary. As stated in Tradesmen's National Bank, etc., v. Cummings Bros. Co., 306 Pa. 280, 283: "It is averred that plaintiff refuses to sell the collateral originally posted with it. This likewise does not avail defendant, for, while plaintiff may have the right to sell collateral, it is under no obligation to do so. If defendant wishes the collateral returned, it is its duty to pay the note, whereupon it would become the duty of plaintiff to return the collateral."
The defendant also avers in his affidavit of defense that when the plaintiff refused to sell the collateral it "verbally promised and contracted to carry defendant until after the financial panic then in progress was over, and said bank stocks had returned to the values they had prior thereto."
Apart from the manifest absurdity and improbability of such a promise being made, it is sufficient to say that even if in fact made it would be invalid because unsupported by consideration. Even if the plaintiff, instead of refusing to sell the collateral, had agreed to do so, such agreement would have been without consideration and therefore unenforceable: Union Trust Co. v. Long, 309 Pa. 470, pages 474, 475. Accepting the test laid down in that case as to what constitutes a good consideration, it is to be noted that in the present case the defendant does not claim or allege that the plaintiff's alleged promise induced him to forbear or to omit any action which he otherwise might or would have performed.
It appearing, therefore, that no valid defense to the plaintiff's claim on the two notes was set forth in the affidavit of defense, the court made absolute the rule for judgment as to that part of the claim.
Judgment entered for plaintiff for amount as to which affidavit of defense was adjudged insufficient, with leave to plaintiff to proceed for the balance claimed. Defendant appealed.
Error assigned was order.
Graham C. Woodward, for appellant.
Gerald F. Flood, Bernard J. Kelley, Special Deputy Attorneys General, and Charles J. Margiotti, Attorney General, for appellee, were not heard.
The opinion filed in this case by President Judge STERN of the court below, who presided at the trial, correctly disposes of all questions involved in the appeal and is hereby adopted by us in affirming the judgment.
Judgment affirmed.