#### William S. Williams, App’lt, *v.*The United States Trust Co. of New York, Resp’t.

*(Supreme Court, General Term, First Department,*

*Filed May 15, 1891.)*

1. Pledge—Securities.

The plaintiff borrowed money of the defendant upon his note and certain securities pledged as collateral. It was agreed that the defendant might sell the securities without notice upon the non-performance of plaintiff’s promise; and further that if the securities fell so that the margin on the loan was less than twenty per cent., the difference should be made good, and upon a failure to do so that the note should become due forthwith, and the defendant be at liberty immediately to sell the securities. The margin, by depreciation of the securities, fell below twenty per cent; the defendant elected that the note should become due, and sold the securities. *Held,*that the sale was authorized by the terms of the agreement.

2. Same—Waiter.

A statement by the defendant’s president that it would not sell the securities below the price of eighty, nothing being said by said president as to notice to the plaintiff in case a sale should be determined upon, was not a waiver of defendant’s rights under the agreement.

Appeal from a judgment dismissing the complaint and directing a judgment in favor of the defendant upon a counterclaim.

*John R. Dos Passos,*for app’lt; *Joseph H. Choate*and *Edward W. Sheldon,*for resp’t.

Lawrence, J.

Originally there were two actions pending between these parties, one brought by the plaintiff, in the superior court, to recover $105,000 as damages for the alleged conversion by the defendant of certain stocks, bonds and securities, belonging to the plaintiff; the other being an action in this court, brought by the defendant against the plaintiff to recover a balance alleged to be due by the latter to the former, upon the closing of the loan and the sale of the securities pledged as collateral therefor.

When the action in this court was reached for trial, by consent of the parties, an order was entered removing the action in the superior court into this court, and consolidating the two actions into one, the result of which was that the cause of action alleged by the Trust Company, in the action in this court, was pleaded as a counterclaim. The transaction out of which the controversy between these parties arose, occurred on the 1st of March, 1884, when the plaintiff obtained a loan from the defendant of $300,000, for which he gave his note, as follows:

> “ $300,000. New York, *March*1, 1884.

> “ Six months after date, without grace, I promise to pay to the United States Trust Company of New York, at the office of said company, in the city of New York, three hundred thousand dollars, for value received, with interest at the rate' of four per cent per annum, having pledged to the said company (as security, with authority to sell the same or any securities that may be substituted in lieu thereof on the non-performance of the promise, in such manner as they, in their discretion, may deem proper, without notice, either at the New York Stock Exchange or at public or private sale,, and to apply the proceeds thereon), four *702hundred thousand dollars Louisville and Nashville E. E. Co. first mortgage bonds, N. 0. and Mobile division. In case of depreciation in the market value of the security hereby pledged or which may hereafter be pledged for the loan, a payment is to be made on acount or additional approved security given so that the said market value shall always be at least twenty per cent more than the amount unpaid of this note.

> “In case of failure to do so this note shall be deemed to be due and payable forthwith, anything hereinbefore expressed to the contrary notwithstanding, and the company may immediately reimburse itself by sale of the security.

> “ W. S. Williams,

> “82 Broad Street, Office Y. S. & Co.”

At the time of giving the note the plaintiff pledged and transferred to the defendant first mortgage bonds of the Louisville & Nashville Railroad Company (New Orleans & Nashville division), of the par value of $400,000. It is admitted that on or about the 1st of July, 1884, the defendant collected and received the sum of $3,500 for interest coupons, maturing on that day, and that on or about the 7th day of July, 1884, the plaintiff paid to the defendant the sum of $1,500, which sums the' defendant applied on account of said note. The note, by its terms, became due on the 1st of September, 1884, and unless the defendant waived, or consented to some alteration of those terms, the defendant would have been entitled, in the event of the failure of the plaintiff to pay it, to sell the securities pledged as collateral, without notice to the plaintiff, either at the New York Stock Exchange or at a public or private sale, and apply the proceeds to «the payment of the note.

Prior to August 5, 1884, the margin fell below the twenty per cent prescribed in the note, and on that day the defendant served upon the plaintiff the following demand :

> “United States Trust Company of New York, )

> “ 49 Wall Street, N. Y., *August*5, 1884. j “ *W. S.*Williams, *Esq. :*

> “ Dear Sir.—That there may be no misapprehension in regard to your time loan of March 1, 1884, we beg you to understand that we have made a demand for the payment of the loan, on the ground that the margin is below the twenty per cent conditioned for in your note, and request that you confirm the above by letter and return same by bearer, and oblige,

> “Yours, very truly,

> “L. G. H. A.,

> “ *Secretary."*

On the same or the next day, the plaintiff sent to the defendant, this reply:

> “ 82 Broad Street, *August*5, 1884.

> “ Dear Sir—I beg to confirm the facts as stated in yours of even date in regard to my loan of March 1, 1884, and to state in. *703reply that I shall very soon hope to make the margin good and trust no sales will be made of the securities for the present.

> “ Yours truly,

> “ W. S. Williams.

> “ L. Gr. Hampton, *as Secretary.”*

It is claimed by the plaintiff that the defendant had waived its right to sell the bonds, by reason of the failure of the plaintiff to furnish more margin. That contention is based upon the evidence of the plaintiff, who testifies that at an interview between him and Mr. Stewart, the president of the company, either on the 1st or the 4th of August, the following conversation occurred:

> “ Q. State all that was said on that occasion, whether it was the 1st or the 4th, when he said as you say, that he would not sell any bonds below eighty ? A. I went into the office of Mr. Stewart with the note in my hand notifying me of the sale of twenty-two bonds out of the call loan, out of the lot of fifty at the price of eighty; I said to Mr. Stewart, with this note in my hand*,*What does this mean ? you have been selling my bonds here; ’ he said: ‘ Then you must pay your loan; ’ said I: ‘ Certainly I will pay my loan, I did not know that you wanted it; ’ this was in reference to the small loan; he said : ‘ When will you pay it? ’ I said: ‘ I will pay it to-day, or it would suit me better on Monday; ’ this was Friday, August 1, 1884; Monday will do,’ was his reply; I said: ‘ I will bring you a check on Monday, you must not sell my bonds, they cost me a great deal more money, and I cannot afford to have them sold ; ’ he said, as he walked along the side of the railing, ' won’t sell any more of your bonds below eighty,’ leaving me to infer that I would have notice before he sold them.

The witness continued:

> “ I do not know as there was any one else present; I think gentlemen were in the room; the market was then at about eighty, and since the 1st of March it had declined from about ninety or ninety-four; it didn’t decline any more after that, I believe ; during the time from the 1st of March down to the 1st of August it had declined; I do not think it had been all the time declining; it had declined from ninety to eighty-four and down to eighty; it would be in Mr. Stewart's discretion when the bonds would have got below eighty, and declining, as to whether he would need to sell to make his loan ; if he let them drop below seventy, relating to that loan, he would not get his loan out of the securities; he did not fix any limit below eighty at which he would not sell; I understood him to promise me that even though these securities would drop to fifty, still he would not sell without notice to me ; that was my understanding; I stated what he said, that he would not sell any of my bonds below eighty; he didn’t fix any limit of time that this promise of his would cover, any further than he said he would sell no bonds below eighty.

> “ Q. Forever ? A. That was the way it was left, and I went out of that office, understanding that there was an agreement with him that he held these bonds at eighty, and not a dollar less in *704any event, and that there would he no change without notice to me; that was the way I understood it; nothing was said about notice, I was led to infer that; certainly he could revoke it by notice to me; from your reading of this stock-note, this promise of his as I swear to it, is evidently directly contrary to the provisions of the note that the company was always to be entitled to call for margin to the extent of twenty per cent above what was necessary to cover the loan; I understood Mr. Stewart’s agreement as I have stated; that was the understanding between Mr. Stewart and myself, and I left the office on the 1st or 4th of August with that impression or belief; I offered no inducement to Mr. Stewart for giving such an extraordinary change of this agreement; I paid him nothing except-to pay up the loan and take my securities away; I gave him no consideration on the 1st or 4th of August on the $300,000 loan; Mr. Stewart, the president of this company, made this promise, destroying the effect of the agreement in the note without any inducement or consideration, as a purely voluntary offer on his part; this is my positive assertion ; I did not think he was a fool for doing it; I think he knew of my responsibility; if my counsel, in his opening, stated that my whole fortune was involved in this $300,000 loan, and the bonds that secured it, he was mistaken, because I' was the owner at that time of over $1,200,000 of these bonds; I left the office that day understanding that Mr. Stewart would take- no action against me in the sacrifice of my securities without my being notified of it; I did not understand he gave up any agreement; I did not say that this promise was entirely contrary to the terms of this agreement, for twenty per cent; I do not know that it was; while he remained under a promise not to sell them at eighty, he, if he assumed the responsibility, could sell them, if he called for margin and I did not give it; I did not question his right to revoke it, but I went out of the office supposing that I should not be troubled without notice; I do not know whether I received the letter of August 5th (letter shown witness); I do not say I did not receive it; I have no recollection of having received it.”

It will be observed that this interview, if it took place on the 4th of August, happened only one day before the date of the letters above set forth.

In regard to the letters of August 5th, the witness testified as follows:

> “ I say I have no recollection of having received that letter; I have not denied the receipt of it; you can bring it to my notice, however; that is my signature, but not my writing; unquestionably it was in reply to this letter which Mr. Hampton has proven ; I guess the trust company drew that for me to sign, and then I signed it; when I received this letter on August 5th, which I answered the next day, I saw at once that it was entirely inconsistent with the promise that I have testified that Mr. Stewart had made with me on the day before, and that letter is confirmatory to me that he did make the promise on the day before;' I regarded this letter as revocation of the promise, and I understood when I *705left on the 1st that he had the right to revoke it, of course; I do not think I went to Mr. Stewart after giving him a reply; I think I did not go to him and say, Mr. Stewart, your letter is inconsistent with the promise you made me yesterday; ’ I do not know as I gave it any consideration at that time; I do not remember that I did.

> I was absent the greater part of the time between the 5th day of August, when I wrote that last letter, and the 1st day of September, when the loan fell due according to the terms of the note; I did not carry him any further margin as I promised by the letter of the 5th of August, or any security whatever; I knew he was refraining or holding the loan as it was, as a matter of pure indulgence to me, but not on the strength of that letter; I do not know that the letter had anything to do with it; I knew that by the terms of the contract he had a right to sell; the promise of the 1st of August had been revoked by this previous letter.”

It seems to us that the evidence of the plaintiff is entirely inconsistent with the theory that the defendant had waived any of its rights under the note.

He admits that the letter from the defendant was inconsistent with the alleged promise of Mr. Stewart; *that he regarded it as a revocation of the*promise, and that when he left after the promise was made, he understood that the defendant, had *a right to revoke it of course.*If there was no waiver of the rights of the trust company, as expressed in the note, we find no difficulty in affirming this judgment.

However stringent or harsh the provisions of the contract between the parties may seem to be, when viewed in the light of subsequent events, it was one which they were perfectly competent to make, and one which the plaintiff as a banker and financier in this city, since 1858, thoroughly understood. It is claimed however that the provision of the note, which permits the defendant to sell without demand and without notice, only applies to a sale necessitated by the failure of the plaintiff to keep his margin good.

This construction of the note we cannot assent to. It would be anomalous that a power to sell without demand and without notice, should be given for a failure to keep the margin good, and should not be agreed to, when the whole of the principal sum should become due.

Such a contract might be made, but it is not, in our opinion, made in this instance.

We have examined the exceptions taken by the plaintiff’s counsel during the trial, but do not regard them as well founded.

Our examination of the record in this case leads us to the conclusion that no error was made by the learned justice before whom the case was tried in dismissing the complaint, and as the evidence clearly showed that after the sale of the securities there still remained due to the defendant the sum of $2,465.87, a verdict was properly directed in favor of the defendant for that amount.

*706The judgment below must, therefore, be affirmed, with costs and disbursements to the respondent.

Van Brunt, P. J., and Daniels, J., concur.