The statute of limitations being pleaded in bar, the question arises, At what period of time may it properly be said that Mrs. Kinsley paid, on account of the defendants, the money demanded in this action ? If it be held that the foreclosure of the mortgage, transferred to the People’s Bank by Mrs. Kinsley as collateral security for the debt of the defendants, was a payment by her as of that date, then the present claim is barred by the statute of limitations; but if the payment • is to be considered as having been made at the period of the sale of the foreclosed premises, two years later, then it is conceded that the action was instituted in due time by her administrator.
The facts stated show that Mrs. Kinsley, at the request of the defendants, or of some of them, who were indebted to the People’s Bank on a note for four thousand dollars, agreed to transfer to the People’s Bank, as collateral security for such note, a moilgage which she held against one of the defendants, taking back a written stipulation from the People’s Bank that the mortgage was received by them for the purpose aforesaid, and that, upon payment of the note of the defendants, her assignment of the mortgage was to be void, and the notes and mortgage securing the same were to be reconveyed to her.
The case turns wholly upon the question what was the effect of the foreclosure of this mortgage thus transferred as collateral security for the debt of a third person. Is the debt of such third person, to the amount of the notes secured by the mortgage, or the value of the land, if less than the notes, at once paid; or does the party, holding such mortgage as collateral, hold the land after foreclosure, as he held the mortgage before, as assets to be applied whenever they can be made available ? •
Now, while we fully assent to the doctrine contended for on *139the part of the defendants, as applicable to the ordinary case of mortgagor and mortgagee; and should hold that after a foreclosure by the mortgagee, it is to be taken as a payment of the debt secured by that mortgage, to the value of the land; yet it by no means follows that as between other parties, standing merely in the relation of pledgor and pledgee of said mortgage, the like consequence would follow. In general, where a party transfers to another goods, stocks or notes of hand, as collateral security for a preexisting liability, the same are held in trust for the benefit of all parties; but only the actual proceeds realized from the sales, or payments, as the case may be, are to be accounted for. If, before the actual reduction of them to money, a rise in their value takes place, the assignor has the benefit of it. If a decline in price, the loss falls also on the assignor. It is only on the actual reduction of the pledged property to money, that the same is to be treated as a payment, and accounted for as such, and in the meantime the property is to be held as collateral. So also, we think, if a debtor, or a third person in his behalf, transfers a note secured by mortgage, and assigns both the note and the mortgage as collateral security for a debt; and the debt not being paid at maturity, the pledgee proceeds to enforce the collection thereof by a foreclosure of such mortgage, which is perfected by an entry and three years possession; as between pledgor and pledgee such foreclosure does not change the relation of the parties, nor does such foreclosure necessarily operate as a payment of the notes for which it was pledged as collateral.
In the opinion of a majority of the court, the foreclosure of the mortgage, by the party holding the same as collateral for the debts of a third person, did not, as respects himself and the • party placing it in his hands, necessarily operate as a payment of the debt for which it was thus pledged. Such foreclosure was only one step in the process required to render available the pledge. The property, as well after foreclosure as before, was equally held in trust for the benefit of both pledgor and pledgee, and was to be disposed of for the benefit of all parties. On the one hand, the assignee, who held the same as collateral security, was not, in consequence of the foreclosure, required to take the *140land in payment, if he was ready and willing to proceed to reduce the same to cash by a fair and proper sale of the same ; nor, on the other hand, would he be permitted to retain the same in his own right exclusively, regardless of what would be for the interest of the assignor. The property was holden in trust, first to pay the debt for which it was pledged, and, after enough had been realized to pay this debt, the bank was to hold the surplus for the benefit of Mrs. Kinsley. It continued thus to be holden after the foreclosure. The foreclosure of the mortgage of Gardner was no more a payment of the debt of the defendants to the bank than the assignment of the mortgage. The payment by Mrs. Kinsley is to be computed from the time the assets pledged to the bank were made available. This was at a later period than that of the foreclosure, and so much later as to take the case out of the operation of the statute of limitations as a bar, upon the facts stated in the report of the case.
New trial ordered.