Page:Harvard Law Review Volume 32.djvu/818

782 HARVARD LAW REVIEW control.^^ The general law as to drastic pledge agreements, how- ever, requires the pledgee to act in good faith for the pledgor's ben- efit as well as his own,^^ so that a dishonest or wholly unreasonable determination that the security is depreciating or that the addi- tional security is not satisfactory would not seem to bring about an acceleration which would have any legal consequences. There- fore, it seems incorrect ^^ to say that the holder has arbitrary power to cause acceleration. The power is given him for the purpose of making pajrment as certain as possible, and not for oppressing the maker. There are difl&culties about certainty of time which are not raised by the cases to which we will return later. Furnishing More Collateral as an Additional Promise. — A third formal requisite which is said in several decisions ^'^ to be violated by these collateral notes is the rule that a negotiable instrument must not contain an order or promise to do an act in addition to the payment of money. This is said to be the most serious objection to these collateral notes. One decision which was disposed to re- gard such a note as sufficiently certain in time and amount held it not negotiable, because of this power to demand more col- lateral and sell upon default. The power here conferred is so uncontrolled and uncertain, and its exercise so completely subject to the contingencies of every passing hour from and after the very moment of execution and delivery, that ... it . . . ought not to be sanctioned." ^^ Another court says of this acceleration provision, '^2 Benny v. Dunn, supra. ^^ See the article on "Drastic Pledge Agreements," Murray Seasongood, 29 Harv. L. Rev. 277 (191 6), which discusses many problems about these collateral notes outside the scope of my article. 1^ As in Holliday Bank v. Hoffman, 85 Kan. 71, 77, 116 Pac. 239 (1911, N. I. L.). ^^ See Commercial National Bank v. Consumers' Brewing Co., 16 App. D. C. 186, 204 (1900); Holliday Bank v. Hoffman, 85 Kan. 71 (191 1, N. I. L.); Strickland v. National Salt Co., 79 N. J. Eq. 182, 188, 81 Atl. 828 (1911); and the chattel note cases. 1^ Commercial National Bank v. Consimiers' Brewing Co., supra, 204, 206. A special feature of the note in that case was that a third person was made the depositary of the collateral, and was given the power to decide when there was depreciation in its value, and what additional security or payments on accoimt in lieu thereof were required. It would seem that it is fairer to the maker to give the power to a dis- interested bank than to the holder of the note. The trustee of a corporate mortgage occupies an analogous position.