Opinion ID: 1474119
Heading Depth: 1
Heading Rank: 3

Heading: Pledge.

Text: It is our opinion that the contract of August 27, 1930, did not constitute a pledge. The necessary elements of a pledge are (1) a pledgor and pledgee, (2) a debt or obligation, (3) a contract of pledge. In order to constitute a contract one of pledge the following elements are necessary: (1) The possession of the pledged property must pass from the pledgor to the pledgee or to some one for him; (2) the legal title to the pledged property must remain in the pledgor; (3) the pledgee must have a lien on the property for the payment of a debt or performance of an obligation due him by the pledgor or some other person; and (4) there must be a right of redemption in the pledgor. The applicable Oklahoma Statutes are set forth in Note 9. [9] In First National Bank of Gradfield v. Hinkle, 65 Okl. 62, 162 P. 1092, 1093, the court said: It is inherent in the nature of a contract of pledge that the pledged property is delivered as security for a debt, or the performance of an obligation,   . [10] While, by the terms of the promissory note of August 27, 1930, and the several renewals thereof, the stock was pledged to secure the payment of the notes, respectively, the evidence established and the trial court found that it was the intention of the parties that Brown should not be personally obligated to pay the notes. Furthermore, the notes were expressly made subject to the contract dated August 27, 1930, deposited with the stock, and the terms of that contract made it abundantly clear that Brown was not to be under any personal obligation to Phillips to pay the notes. The contract expressly provided that if Brown paid the $365,000, with interest, at the time stipulated in the contract, the stock should be delivered by the Bank to Brown, but that if he failed to pay such amount, with interest, within the time stipulated in the contract, the note should be canceled and returned to Brown, and the stock should be delivered to Phillips. It gave two alternatives to Brown: (1) to pay the note, with interest, at the time stipulated in the contract, and receive the stock, or (2) to receive the note back canceled and forfeit any right to receive the stock. It did not bind Brown to pay the note or perform any other obligation. It gave him the option of either paying the note or receiving it back canceled. In the case of Beverly Hills Nat. Bank & Trust Co. v. Martin, 185 Okl. 254, 91 P.2d 94, 99, the bank asserted ownership of certain stock as executor of the estate of Cora B. Funk on the theory that the stock had been pledged by Funk during her lifetime to secure an indebtedness of $7,500 owing her half brother, Charles A. Bliss. Funk had executed and Bliss had approved a trust agreement which provided that upon her death the stock should be delivered to and become the property of Bliss. It gave her the right to terminate the trust by paying the trustee for the use and benefit of Bliss the sum of $7,500, and provided that upon such payment the trust should terminate and the trustee should deliver the stock to Funk. The court held that the effect of the trust agreement was to terminate the relation of debtor and creditor between Funk and Bliss. It said the debt was superseded by what might be termed a conditional right of revocation comparable to a right to repurchase. It then quoted from 41 C.J., p. 326, as follows: `If it is a debt which the grantor is bound to pay, which the grantee might collect by proper proceedings, and for which the deed of the land is to stand as security, the transaction is a mortgage; but if it is entirely optional with the grantor to pay the money and receive a reconveyance or not to do so, he has not the rights of a mortgagor, but only a privilege of repurchasing the property.' [11]