It is further alleged that the assignment, | answers, except the first. The replies to the the two notes, and the policy were pinned to- second, fifth, and sixth paragraphs were gengether, and that Elizabeth Brown retained eral denials, and the replies to the third and possession of the policy until July 1, 1899, fourth paragraphs of answer allege that the when Gebhart obtained it from her by rep- cause of action did accrue within a period resenting to her that it was not properly as- in which the action was not barred. signed; that he requested possession of it to have it properly assigned on the books of the company; that Elizabeth Brown delivered the policy to Gebhart for the purpose of having it properly assigned to her, and for no other purpose; and that, though many times thereafter requested, he refused and neglected to redeliver said policy to her; that, on August 2, 1899, Gebhart did deliver to her another written assignment of said policy as follows:

been obtained by the pledgor through deception and false pretenses." Jones on Pledges and Collateral Securities, § 41.

that appellees claim the first lien on the pol-ed to have released his lien when the pledge has icy; and that the defendants to the crosscomplaint wrongfully claim interest in it adverse to them, but that the cross-complainants are entitled to the entire proceeds of the policy.

Appellant bank demurred to appellees' cross-complaint for want of sufficient facts, which was overruled. Said appellant then filed an answer in three paragraphs. The first was a general denial, the second, the sixyear statute of limitations, the third, the ten-year statute of limitations. Appellees demurred to said second and third paragraphs for want of sufficient facts, which was overruled as to the third and sustained as to the second.

The cause was tried by the court, which resulted in a finding for appellees, on which judgment was rendered, after appellant's mo

tion for a new trial was overruled.

Appellant bank assigns errors as follows: Overruling of the demurrer of the bank to the cross-complaint of appellees; sustaining the demurrer of appellees to the second paragraph of the answer of the bank; overruling the demurrer of the bank to the sixth paragraph of the answer of the appellees to the second paragraph of the complaint of the bank; overruling the motion of the bank for

a new trial.

The first error challenges the sufficiency of the cross-complaint of appellees. It is contended by appellant that when said Gebhart procured possession of the policy in 1899, said Elizabeth Brown thereby lost title to it, and by not taking timely steps to repossess the same, she and appellees were guilty of laches, and that appellees' claim was barred by the statute of limitations of six years at the time of the filing of the cross-complaint.

"A pledgee does not lose his lien by permitting the pledgor to have possession of the property for a special and limited purpose, and not merely for his own use and benefit." Jones on Pledges and Collateral Securities, § 44.

"The delivery, however, of the property by the pledgee to the pledgor for merely a temposome temporary use, for the performance of rary or special purpose, as, for example, for some work on it, for sale, for lease for the pledgee's account, for pledge to another creditor of the pledgor, for collection, or to be exchanged for other property to be held in pledge, does not divest the pledgee's lien as against the pledgor or attaching creditors, although it would have that effect as against bona fide purchasers for value from the pledgor while in such temporary possession, without notice of the pledgee's rights." 31 Cyc. 818. See, also, 22 Am. & Eng. Ency. of Law, p. 860.

ulently obtains possession of the property from
"Where the pledgor surreptitiously or fraud-
the pledgee, such wrongful dispossession does
not affect the pledge, and the lien will continue
to subsist." 22 Am. & Eng. Ency. of Law, p.
Mass. 189, 25 N. E. 100.
862; Goodwin v. Massachusetts, etc., Co., 152

The delivery of the policy by Mrs. Brown to Gebhart, under the circumstances shown in the complaint, was not such a surrender of the policy as would show that she intended to give up her security.

[3, 4] The cross-complaint of appellees was a proceeding in rem. It was alleged that the bank claimed some interest in, or lien upon, the proceeds of the policy. It is our opinion that the pleading was sufficient to require the bank to answer. It is contended by appellees that without some showing by the bank that it was a subsequent holder of the policy for value it was in no position to claim that the complaint showed laches. In this contention we feel bound to concur, and, therefore, that such question could only be raised by an answer.

In Corbey v. Rogers, 152 Ind. 169, 52 N. E. 748, it is decided that where a complaint to foreclose a mortgage recites that a certain defendant claims some interest in the mortgaged property, but if he has any interest it is subject to plaintiff's mortgage, such defendant cannot plead the statute of limitations unless he alleges facts showing that he has an interest in the property.

[1, 2] As an abstract proposition of law, possession is the essence of pledge, and, without it, no privilege can exist as against third persons. Casey v. Cavaroc, 96 U. S. 467, 490, 24 L. Ed. 779; Edwards on Bailments, 246, 22 Am. & Eng. Ency. of Law, 895; Ex parte Fitz, 2 Lowell, 519, Fed. Cas. No. 4,837; St. Joseph Hydraulic Co. v. Wilson, 133 Ind. 465, 474, 33 N. E. 113; Geilfuss v. Corrigan, 95 Wis. 651, 70 N. W. 306, 37 L. R. A. 166, 60 Am. St. Rep. 143; Moore v. Moore, 112 In Scherer v. Ingerman, 110 Ind. 428, 11 N. Ind. 152, 153, 13 N. E. 673, 2 Am. St. Rep. E. 8, 12 N. E. 304, it is held that it is only 170. But it is well settled that the delivery where laches of a party are of such a charby the pledgee to the pledgor for a mere tem-acter as to work an equitable estoppel that porary purpose, or a special purpose, does his right of action will be limited to a less not, in legal contemplation, interrupt the period than that fixed by the statute of limipledgee's possession; and the fact that the tations. policy was turned over to the pledgor for a temporary or special purpose does not take away the possession from the pledgee any more than if the pledgee had turned the policy over to a stranger for the same purpose. "Possession and control of the pledge, without the assent of the pledgee, will not create a forfeiture of the lien, nor defeat his right to recover damages for an injury to the pledge or for a conversion of it. The pledgee cannot be deem

[5] Section 361, Burns 1914, provides: "All defenses, except the mere denial of the facts alleged by the plaintiff, shall be pleaded specially.'

In Baker v. Kistler, 13 Ind. 63, the Supreme Court says:

"The Code says: 'All defenses, except the mere denial of the facts alleged by the plaintiff, shall be pleaded specially.' 2 R. S. p. 42, § 66. This evidently means, facts which the plain

See, also, Adams, etc., Co. v. Darnell, 31 Ind. 20, 99 Am. Dec. 583; National, etc., Ins. Co. v. Owens, 113 N. E. 1024; Storer v. Markley, 164 Ind. 535, 73 N. E. 1081; Peters v. Griffee, 108 Ind. 121, 8 N. E. 727.

From these authorities, it seems clear that the defense of laches is one which is not provable under the general denial, and which must be specially pleaded to be available as a matter of defense. It therefore follows that, even if there had been laches, it would not be available to the bank in this case.

v. Miller, 112 Ind. 584, 14 N. E. 728; Jones on Pledges and Collateral Securities, § 581. In the last-cited case it is held, that a payment upon a note secured by a mortgage, if sufficient to take the note out of the operation of the statute of limitations, will have a like effect upon the mortgage; and, so long as any part of the debt remains unpaid and not barred, the lien of the mortgage continues unimpaired. It is our opinion, therefore, that the court did not err in overruling the demurrer to the cross-complaint of appellees or in sustaining their demurrer to appellant bank's second paragraph of answer.

[10] Appellant bank's brief wholly fails to show that appellees filed a sixth paragraph, or any other answer, to its second paragraph of cross-complaint or interpleader. Such second paragraph of cross-complaint or interpleader is not set out in said brief, nor is such answer, or the substance of it, set out, and no demurrer to any such answer is mentioned, except in the assignment of errors, and the point is made that it should have

[6] The contention of the bank that the cross-complaint of appellees shows that their claim was barred by the six-year statute of limitations is also raised by the second assignment of error, viz., that it was error to sustain the demurrer of appellees to the second paragraph of appellant bank's answer to appellees' cross-complaint. Since the cross-been sustained. No question is therefore precomplaint of appellees merely alleged that appellant bank was claiming some interest in the fund, it was necessary to show in such answer that it was entitled to the benefit of the statute of limitations. This the answer does not do.

[7] It is alleged in appellees' cross-complaint that after the death of Mrs. Brown, or in 1902, renewal notes were executed to appellees by said Gebhart, aggregating the amount due on the original note. If the original note was secured by the policy, the renewal notes carried the pledge with them. "When a promissory note secured by a pledge becomes due and a new note is given in renewal, the pledge remains as security for the new note, in the absence of anything showing that the parties intended that the original debt should be regarded as paid or discharged. When it appears that it will be for the benefit of the creditor that the old debt should be kept alive, the presumption of payment, by the taking of the new note for the old note, does not arise and the original debt is not discharged." Jones on

Pledges and Collateral Securities, § 355a.

[8] The limitation of the action on the notes being ten years, the right to foreclose the pledge would not sooner expire. Section 295, Burns 1914.

sented on the third assignment of error.

[11] The questions presented by the motion for a new trial are that the decision of the court is not sustained by sufficient evidence, is contrary to law, and that the court erred in permitting appellee Lizzie H. Brown to testify as a witness on behalf of appellees. After said witness had testified to some preliminaries the bill of exception discloses the following:

"Q. Prior to your father's death, was Gebhart indebted to your father in any amount? (The plaintiff, through its attorney objects for the reason the witness is not competent to tesF. Gebhart, which objection is by the court overtify to any indebtedness on the part of John ruled, to which ruling of the court, the plaintiff, at the time, excepts.)"

The presumption is that all parties to an action are competent to testify in their own behalf; and, where it is sought to exclude jecting to point out to the trial court the a party, it is incumbent upon the party obreason, or reasons, why such party is incompetent to testify. No reason whatever was given by appellant bank, upon the occasion now complained of, why the witness was incompetent, and no question can be raised by the objection in this court. Elliott's Work of the Advocate, page 222, and cases there

cited.

[12] We might say, in this connection, that no reason is now given by appellant bank why said witness was not competent to answer the question objected to. The question in no way referred to the insurance policy, the proceeds of which were in controversy.

[9] The appellant bank contends that appellees' cross-complaint was one based on fraud, and was for the recovery of possession of personal property, and therefore, under clauses 3 and 4, § 294, Burns 1914, the second paragraph of answer was sufficient. However, fraud was not the basis of appellees' claim, but fraud is a mere incident in the cause. In such case the six-year statute of limitation does not apply. Wilson v. Brookshire, 126 Ind. 497, 25 N. E. 131, 9 L. R. A. 792; Eve v. Louis, 91 Ind. 457; Caress v. Foster, 62 Ind. 145. We are of opinion that, as long as the notes were not barred, appellees' right to their lien, if they had one, was [13] On appeal this court will not weigh

The court found that appellees' claim should be paid in full, and the remainder of the proceeds of the insurance policy be paid to the appellant bank.

there is any evidence to support the finding | ed over to her daughters as the only heirs, in appellees' favor, and will consider only the and that afterwards Gebhart executed four evidence which tends to support such finding. notes to appellees aggregating the amount of Pittsburgh, etc., R. Co. v. Nicholas, 165 Ind. the debt. There was evidence to show that 679, 76 N. E. 522; Union Traction Co. v. appellees' father and mother had the policy Buckland, 34 Ind. App. 420, 72 N. E. 158; as collateral long before the bank claims to Diamond, Black Coal Co. v. Cuthbertson, have received it in 1893. And there is evi166 Ind. 290, 76 N. E. 1060; Knoefel v. At-dence from which the trial court could find kins, 40 Ind. App. 428, 81 N. E. 600. This that the bank never had possession of the evidence shows that about 1885, said Geb-policy until about the time the assignment hart borrowed of appellees' father the sum to it was received by the company in Februof $3,500, for which he gave him a note, and ary, 1902, and that when it did get possesalso his insurance policy in the Northwest- sion of the policy, it had knowledge that Mrs. ern Mutual Life Insurance Company for $15,- Brown had an assignment of it on the books 000, as collateral security; that their father of the company. gave the note and policy to their mother in 1892; that their father died in 1894, and soon afterwards said policy was placed in the Louisville Trust Company, and an assignment of the policy was made on a slip of paper and pinned to the policy. Some time about 1897 or 1898 Gebhart came to appellees' mother and informed her, in substance, that the assignment which he had theretofore made to her was not good or proper in form, and said if she would let him have the policy he would have a proper assignment made and return both to her. About one month later he brought her another assignment of the policy, which was sent to the company, but never did return the policy. This assignment was on the company's blank, and identified the policy by number and the debt by amount. It is admitted by the bank that it did not procure a written assignment of the policy until after the second written assignment was delivered to Mrs. Brown, and it is also admitted that this writ-tors, more would be paid out in premiums ten assignment was dated back to December 19, 1893, and before making an effort to get such written assignment it had information from the company that Mrs. Brown had a written assignment of the policy as collateral; but, on the other hand, it is shown that appellees did not have any knowledge that the bank had an assignment of the policy until after the death of Gebhart in 1907.

[14] But without such knowledge on the part of the bank when it procured the policy as collateral, it is contended by appellees that, inasmuch as no new debt was created at the time the bank procured the policy, it was not a bona fide purchaser so as to cut off the prior equities of the Browns. The evidence shows that, prior to the time the bank claims to have procured the policy in 1893, Gebhart was indebted to it in the sum of $15,000, and that a note for this sum was executed to it by Gebhart dated December 18, 1893; that during 1894-5 $2,000 were paid on the principal of the note by Gebhart; that about this time or a little later, but before 1899, the bank let Gebhart have the money to pay two or three semiannual payments of premium, amounting to much less than $2,000, and that it quit loaning Gebhart any more money with which to pay premiums because it was figured that if Gebhart lived as long as some of his ances

and in interest than the policy would be worth at Gebhart's death. It is also shown that interest accumulated on the bank paper executed by Gebhart, and renewal notes were executed by Gebhart from time to time, the last renewal being only about one month before his death in 1907. It will be seen, therefore, that whether the bank procured the policy in 1893 or in 1902 as collateral, it was to secure an existing debt. As between Gebhart and the bank, there can be no question but that a precedent debt would constitute a valuable consideration for the assignment of the policy. An assignment, however, as security for a precedent debt does not make such an assignee a holder for value as against prior equities. In the late work of Jones on Pledges and Collateral Securities, on page 396, the author says:

A letter from the company was put in evidence showing that the policy was assigned to Elizabeth Brown, mother of appellees, on August 2, 1899, by duplicate received and recorded by the company, August 23, 1899, and was assigned to the bank dated December 17, 1893, and not recorded by company until February 2, 1902. The evidence further shows by Lizzie H. Brown that she had not seen the policy from the time Gebhart obtained possession of it from her at the Louis"A pre-existing debt is not a sufficient considerville Trust Company until she was on the ation to constitute a pledgee a holder for value." witness stand, when the policy was handed In support of the text he cites Goodwin v. to her, and she found the place where the Massachusetts Loan Ass'n, 152 Mass. 189, assignment given her mother in 1896 had 25 N. E. 100; Loeb v. Peters, 63 Ala. 243, been pinned to it, and the pinholes in the 35 Am. Rep. 17; Sleeper v. Davis, 64 N. H. policy corresponded with the pinholes in the 59, 6 Atl. 201, 10 Am. St. Rep. 377; Linnard's assignment. The evidence further shows Appeal (Pa.) 3 Atl. 840; Merchants' Ins. Co. that after Mrs. Brown died her estate was v. Abbott, 131 Mass. 397; Lesassier v. Southfully settled, and the Gebhart debt was turn-western, 2 Woods, 35, Fed. Cas. No. 8,274;

Currie v. Misa, L. R. 10 Ex. 153; Leask v.
Scott, 2 Q. B. D. 376; Rodger v. Comptoir
d'Escumpte de Paris, L. R. 2 P. C. 393;
Chartered Bank v. Henderson, L. R. 5 P. C.

501.

In Indiana, the rule has long since been established that a precedent debt does not constitute one a holder or purchaser for value.

[15] It is very evident under the authorities cited that the bank is not a holder for value. The question then arises, Did the "The fact, conceding it to be the fact, that the Browns lose their security by reason of the notes were assigned to appellee in payment of delivery of the policy to Gebhart under the a precedent debt does not show that there was circumstances of such delivery? The evino valid consideration for the assignment. A dence clearly shows that Gebhart came to precedent debt is unquestionably a valuable consideration for a contract, but is not such a con- Mrs. Brown and told her the assignment of sideration as will make a grantee or assignee the policy in the shape it was would do her a bona fide purchaser against prior equities. no good; that it must be assigned on a blank Hewitt v. Powers, 84 Ind. 295; Louthain v. Miller, 85 Ind. 161; Fitzpatrick v. Papa, 89 Ind. of the company and on their books; that he 17. As against one who has no prior equity, a would take it and have it properly assigned precedent debt will support a contract other and return it to her. Upon this promise and wise valid." Boling v. Howell, 93 Ind. 329, 331. for this purpose she let him have possession "As to the mortgages of land taken to secure a precedent debt it is well settled in Indiana of the property. If Gebhart had pledged the that, although a precedent debt is a valuable con- policy to the bank for cash, without any sideration for a mortgage given to secure it, yet notice of prior equities by the bank, instead it will not make the mortgagee a bona fide pur- of a debt already in existence, it is probable chaser, as against prior equities of which he had no notice. That such a mortgage is founded that it would be entitled to the proceeds as upon a valuable consideration was decided in against appellees, but, as shown by the auWork v. Brayton, 5 Ind. 396. Wright v. Bundy, thorities cited under a discussion of the first 11 Ind. 398, and Babcock v. Hordan, 24 Ind. 14, and upon this point these cases have been re assignment of error, a pledgee does not lose peatedly followed; but, so far as these cases as- his lien by permitting the pledgor to have posserted that the holder of such a security was session of the property for a special and limentitled to protection against * * * equities, they have been virtually overruled by Busen-ited purpose, and not merely for his own use barke v. Ramey, 53 Ind. 499; Gilchrist v. and benefit, unless it is subsequently pledged Gough, 63 Ind. 576, 30 Am. Rep. 250; Davis v. for value, without notice. Newcomb, 72 Ind. 413; Hewitt v. Powers, 84 Ind. 295; Louthain v. Miller, 85 Ind. 161; Boling v. Howell, 93 Ind. 329. The doctrine of these later cases is that an antecedent debt is a valuable consideration and will support a mortgage, but is not such a consideration as will make the mortgagee a bona fide purchaser, so as to cut off prior secret equities. This doctrine is supported by abundant authority elsewhere. See the cases cited in Busenbarke v. Ramey, supra, and Gilchrist v. Gough, supra." Wert v.

Naylor. 93 Ind. 431, 433.

tled

"In Hare & W. Lead. Cases, vol. 2, p. 104 (3 Am. Ed.), it is said that 'it is equally well set* that, although a sale, vitiated by fraud, cannot be set aside in the hands of a bona fide purchaser from the fraudulent vendee, yet that no one can claim the benefit of this doctrine, who has not parted with value, or who has taken the goods as security for an antecedent debt. Buffington v. Gerrish, 15 Mass. 156 [8 Am. Dec. 97]; Hodgeden v. Hubbard, 18 Vt. 504 [46 Am. Dec. 167]; Poor v. Woodburn, 25 Vt. 234; Clark v. Flint, 22 Pick. (Mass.) '231 [33 Am. Dec. 733]. In Upshaw v. Hargrove, Adm'r, 6 Smedes & M. (Miss.) 286; Boon, Adm'r v. Barnes, 23 Miss. 136, and Halstead v. President, etc., of the Bank of Kentucky, 4 J. J. Marsh. (Ky.) 554, the same rule was applied to the conveyance of land by a debtor to a creditor, which was said not to render the latter a purchaser for value, unless something was given up or relinquished on the faith of the conveyance, or the transfer accepted in absolute payment or satisfaction for the debt." Busenbarke v. Ramey, 53 Ind. 499, 502.

"It is insisted that, as the mortgage was executed to secure a pre-existing debt which Heffner owed the appellee, it is not supported by a sufficient consideration, and we are referred to Busenbarke v. Ramey, 53 Ind. 499; Gilchrist v. Gough, 63 Ind. 576, 30 Am. Rep. 250; Davis v. Newcomb, 72 Ind. 413. We do not regard the cases as declaring the doctrine for which appellants contend. We understand them to

[16] The evidence does not show any laches on the part of the Browns which in any way injured the bank. The evidence shows that the bank was not a holder for value. It gave up nothing, on the strength of the policy, and the Browns knew nothing of the claim of the bank until after Gebhart's death. Laches implies something more than mere lapse of time; it requires some actual or presumable change of circumstances, rendering it inequitable to grant relief. The Supreme Court of the United States, in O'Brien V. Wheelock, 184 U. S. 450, 22 Sup. Ct. 354, 46 L. Ed. 636, states the rule:

relief from those who have delayed the assertion "The doctrine of courts of equity to withhold of their claims for an unreasonable length of time is thoroughly settled. Its application depends on the circumstances of the particular case. It is not a mere matter of lapse of time, but of change of situation during neglectful repose, rendering it inequitable to afford relief."

The rule covering the defense of laches is thus stated in Galliher v. Cadwell, 145 U. S. 368, 12 Sup. Ct. 873, 36 L. Ed, 738:

"The cases are many in which this defense has been invoked and considered. It is true that by reason of their differences of fact, no one case becomes an exact precedent for another, yet a uniform principle pervades them all. They proceed on the presumption that the party to whom laches is imputed has knowledge of his rights, and an ample opportunity to establish them in the proper forum; that by reason of his delay the adverse party has good reason to believe that the alleged rights are worthless, or have been abandoned; and that because of the change in condition or relations during this perilod of delay, it would be an injustice to the lat