Deposit of personal property as security for a debt or obligation creates a mutual-benefit bailment. A pawn occurs when tangible personal property is left as security for a debt or obligation. A pledge occurs when intangible personal property is left as security for a debt or obligation. Pawns might include automobiles, jewelry, livestock, or furniture. Pledges might include stock certificates, promissory notes, or bonds.
Conversion is the unauthorized exercise of ownership rights over someone else's property.
A bailee ordinarily has no right to sell, lease, or use the bailed property as security for a debt or other obligation. If the bailment is for consignment, or the purpose of the bailment is to have the bailed property sold and the proceeds given to the bailor, the bailee has the power to sell the bailed goods. Restrictions on such a bailee's right to sell are not effective unless the buyer knows of the restrictions. If the bailor has misled an innocent third person into believing that the bailee owns the bailed property, the bailee may convey good title to that third person. Unless the sale fits into one of the exceptions just discussed, the sale of bailed property by a bailee does not pass good title to the purchaser.