Case ID: ny-super-ct_24/html/0261-01.html
Source: Caselaw Access Project
Author: {"author": "By the Court, Moncrief, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Alexander Hardy, plaintiff and respondent, vs. Peyton and Frank Jaudon, defendants and appellants.
    Pledgees of stock, to secure the payment of a promissory note given on a loan of money, are liable for a wrongful conversion of such stock if not redelivered on demand and tender, although they are excused by a stipulation in such note from returning the identical certificate of stock delivered on such pledge, where they set up as the only ground for their refusal to deliver, a lien for ■ moneys due by a third person.
    (Before Moncrief, Robertson and Monell, JJ.)
    Heard October 19,1863;
    decided November 14, 1863.
    This was an appeal from a judgment entered on the verdict of a jury.
    The complaint was for damages for wrongfully converting one hundred and fifty shares of stock in the Erie Railroad Company, and the certificate representing the same, which belonged to the plaintiff, and which he had, through J. H. Draper, his agent, pledged with the defendants as collateral security for a loan.
    The cause was tried on the 21st of October, .1862, before Justice White and a jury.
    It appeared by the evidence that on the 18th of April, 1861, Mr. John H. Draper, an employe of Mr. Simeon Draper, but in this transaction acting in behalf of the plaintiff, borrowed $2000 of the defendants ; delivered to them one hundred and fifty shares of Erie railroad stock, and executed a paper of which the following is a copy:
    “ $2000 Hew. York, April 18th, 1861.
    At one day’s notice I promise to pay to Peyton and Prank Jaudon or order two thousand dollars for value received, with interest at the rate of six per cent per annum, having deposited with them as collateral security one hundred and fifty shares Erie E. E. O. stock with authority to sell the same at the brokers’ board, or at public or private sale, or otherwise, at their option on the non-performance of this promise and without notice, P. & F.Jaudon not being obliged to return the identical certificate. J. H. Deapee.”
    The last clause of this note was in writing, the body of it being printed.
    J. H. Draper subsequently tendered the amount due upon the note, with interest, and demanded the stock, which was refused, the defendants claiming a lien for a balance of the account due by another person, (Simeon Draper.)
    Upon the plaintiff resting his case, the defendants moved to dismiss the complaint, on the ground that the evidénce of the plaintiff had failed to sustain the cause of action, which, as set forth in the complaint, was one of trover; that the concluding words of the stock note being “ P. &. P. Jaudon not being obliged to return the identical certificate;” “that they therefore were justified in using it till a demand was made,and if they failed to deliver the stock on demand, were not liable in trover, but only in an action on contract for not delivering.” This motion was denied, to which denial the defendants excepted. Ho evidence was offered by the defendants. The court charged the jury that the plaintiff was entitled to a verdict. To which charge the defendants excepted.
    
      Max Goepp, for the defendants, appellants.
    I. The complaint, which alleges that the defendants have “ wrongfully converted and disposed of” the stock, makes this action one of that class in which the defendants are liable to execution against the person, (Code, §§ 288, 179, sub. 1,) and deprives the defendants of the right of setting up an independent counter claim. (Code, § 150.)
    II. A plaintiff who has set out in his complaint a cause of action under which the defendant is liable to arrest, and is precluded from setting up an independent counter-claim, such as trover, can not recover upon proof of a cause of action on contract merely, under which the defendant would not he liable to arrest, and could set up an independent counter-claim.
    Such a variance is a failure to prove the alleged cause of action in its entire scope and meaning. (Walter v. Bennett, 16 N. Y. Rep, 250. Slawson v. Conkey, 10 How. Pr. 57. Springstead v. Lawson, 23 id. 302. Ten Eyck v. Houghtailing, 12 id. 529.)
    III. The agreement between the parties, or stock note, of April 18, 1861, authorizes the defendants to use, convert, and dispose of the stock as- they please, and binds them only to deliver a like number of shares of the same stock on the repayment of the loan.
    1. The last clause of the contract modifies and controls the previous part. (Ward v. Whitney, 4 Seld. 442.)
    
      (a.) If possible, effect must he given to every expression in the contract. (Chitty on Cont. 70. Westcott v. Thompson, 18 N. Y. Rep. 363.)
    
      (b.) In Decker v. Furniss, (4 Kern. 611,) it was held that the word “ sells,” though importing, of itself, an executed sale, must be made to yield to other parts of the contract which show that the parties designed only an executory agreement to sell.
    (c.) The written parts of a contract control the printed parts. (See Leeds v. Mechanics’ Ins. Co., 4 Seld. 351; Harper v. Albany Mutual Ins. Co., 17 N. Y. Rep. 194; Weisser v. Maitland, 3 Sandf. 318.)
    
    2. The last clause is not susceptible of any other construction. To say that it means the pledgees must keep unconverted the stock given to them, hut may, if they choose, return, on demand, a different certificate, is to stultify these parties.
    (a.) Permission to sell, pledge, or otherwise dispose of the certificate is permission to pledge, sell, or otherwise dispose of the stock itself. “ Certificates of stock are the muniments and evidence of the holders’ title to a given share in the property and - franchises of the corporation of which he is a member.” Comstock, J. in the Mechanics’ Bank v. New York and New Haven R. R. Co., (3 Kern. 627.)
    
    
      “ They, are transferable by indorsement and delivery, and the title to the property, thus represented passes by such transfer.” {Id.).
    
    : (b.) .T.he privilege of returning a different certificate is no benefit -unless it includes the privilege of using and disposing of the stock received. The intention of -the parties clearly was that the Messrs. J audon might do as they pleased with the stock, and should only be bound, on payment of the debt by Mr. .Draper, to deliver to him one hundred and fifty shares of Erie.
    IY. If they have failed to do this, they are liable for a breach of contract, but not for a wrongful conversion. (Fuller v. Tabor, 39 Maine, 4 Heath, 519.) , Conversion for which an action, of trover may be maintained consists in the exercise of dominioñ' tod control over property -inconsistent .with and in defiance of the rights of the true owner.
    Y. The judgment should be reversed, and the plaintiff be remitted to his action for breach of contract, in which the defendants .will have the opportunity to present .their counterclaims against. Mr; - Simeon Draper,'and will not be subject to execution against the person, if there should be judgment agajnst them, .. .
    Jere Larocque, for the plaintiff, respondent.
    I. The clause “P. and F. Jaudon not being obliged to return. the identical certificate,’’ is no obstacle in the way of an action on. the, case for "the conversion of the shares. That clause did not give the defendants a right to.use the stock any further than to exercise the authority conferred by the power of attorney, accompanying the certificate, to have the shares transferred into their own names as security for the loan. They were bound (even if they had done so,) to retransfer the same shares on its repayment. The stock note itself expressly limits their right to sell the shares to the case of non-performance of the promise contained in it. ■
    II. There is no evidence that the defendants had parted with the stock, or even had it transferred into their own names, on the company’s books.
    III. They took the ground that redelivery was dependent on the repayment of a balance of account, of Simeon Draper, which was untenable, and are, therefore, not now at liberty to allege any other.
   By the Court, Moncrief, J.

The sole question argued upon this appeal and embraced by the exceptions taken at the trial is, whether by the terms of the agreement between the parties, the defendants were authorized to use, convert and dispose of the stock. The agreement, (or so called stock note,) uses the phrase that the shares are deposited “as collateral security,” “with authority to sell the same at the brokers’ board, or at public or private salé, or otherwise at their option, on the non-performance of this promise and without notice.” This language, unqualified, the appellants concede would give the pledgees no authority to convert or dispose of the shares of stock until after, a failure to perform on the part of the pledgor. The loan was payable at one day’s notice. It is contended that the concluding words of the agreement, “P. &F. Jaudon not being obliged to return the identical certificate,” change the nature of the whole contract. The transaction appears to have been plain and by no means unusual. A loan was asked for and made, and as security for its repayment one hjlndred and fifty shares of the stock of the Erie Railroad Company is deposited with the defendants. They may sell the stock without notice; but may not dispose of it until failure to repay the loan, and that the defendants can not enforce until after giving to the plaintiff one day’s notice. The fact that the stock delivered as collateral security was not to be disposed of until after such notice of recall of the loan, makes clear, if it was not otherwise, the concluding clause of the agreement. The defendants would probably not be guilty of a conversion of the stock by a mere inability to return the identical certificate, by reason of their- having exercised the privilege given to them, by way of abundant caution, or as a supposed greater security, if they handed to the company that certificate, and receiving another certificate for the same number of shares of the stock, or in any other way were deprived of such certificate. The agreement was not to return a particular paper called a certificate of stock, but either the paper evidence that the plaintiff had standing in his name the one hundred and fifty shares of stock, or some other indicia of title to the only thing pledged, to wit: A certain number of shares of the stock of the Erie Railroad Company; not any particular shares, but such number of shares of the stock •of that company. The error of the learned counsel for the appellants, in his argument, is that the plaintiff pledged some specific shares of stock because of the certificate he possessed and delivered to the defendants at the time of making the loan, when in point of fact the plaintiff never owned any par- ' ticular shares of the stock, whether he continued to hold that certificate, or in the course of his business had it exchanged and others substituted a hundred times. He owned one hundred and fifty shares- of the stock of the Erie. Railroad Company, being a certain proportion of its capital stock, and this 1 irrespective of the possession of certificate or other paper indicative of his title. This stock he pledged to the defendants, and they were bound to return that quantity of stock upon hi's repaying the loan and interest.

Upon the undisputed evidence in the cause the plaintiff was clearly entitled to a verdict, and it would have been error for the learned judge below to have submitted the case to the . jury-

The charge that the plaintiff was entitled to a verdict was correct, and the exceptions taken untenable.

The judgment must be affirmed.

Robertson, J. concurred in the conclusion.

Judgment affirmed.