#### Douglas McKee, Appellant, *v.*Lee S. Bernheim, Respondent, Impleaded with Isaac W. Bernheim and Others, Defendants.

First Department,

February 5, 1909.

Assignment — assignments of pledged stock to different parties — when first assignee has better title — conversion — partnership — when partner may sue copartner for conversion of property not owned by partnership.

Where one who has pledged stock to secure the payment of a debt makes a formal assignment thereof to a third party who notifies the pledgee of the purchase, thei pledgor has parted with title and cannot thereafter give title to the pledgee in consideration of a release from the debt.

Hence, where the assignee tenders the amount of the debt to the pledgee, he is entitled to receive the stock and may maintain an action for conversion if the pledgee refuses to deliver.

Such action for conversion lies although after the original owner of the stock had purchased it from the defendant and pledged it to secure part of the purchase price, her subsequent assignee and the pledgee entered into a joint venture in the nature of a partnership by which they were to share in certain profits from similar stock held in escrow, for the stock sold to the plaintiff’s assignor was not part of the partnership property, and the plaintiff as assignee thereof is not within the rule which prohibits a partner from suing his copartner for conversion.

This is true, although by said partnership agreement the assignee guaranteed to his copartner that the purchase price of said stock should be paid, for as guarantor he was entitled to pay the debt and take.up the collateral without.violating any duty to his copartner, the transaction being in exact accordance with the- agreement between them.

Appeal by the plaintiff, Douglas McKee, from part of an order of the Supreme Court, made at the Mew York Trial Term and entered in the office of the clerk of the county of Mew York on the 26th,day of February, 1908, setting aside the verdict of a jury in favor of the plaintiff rendered by direction of the court and directing the .dismissal of the complaint, and also from a judgment of dismissal entered thereon in the office of the clerk of said county on the 12th day of March, 1908.

*Alfred B. Cruikshank,*for the appellant.

*Leo G. Rosenblatt,*for the respondent.

*425Scott, J. :

The plaintiff, as assignee of one William J. Deboe, sues for damages for the conversion of 3,000 shares of stock of the Giroux Consolidated Mines Company. The complaint alleges that one Isabelle B. Chase, being the owner of 3,000 shares of the capital stock of the Giroux Consolidated Mines Company, on or about the 12tli day of May, 1905, obtained a loan from the defendant Lee S. Bernheim of the sum of $22,500 and delivered to him as security therefor the aforesaid 3,000 shares of stock, together with her note for $22,500, dated on said day, payable four months after date; that thereafter and on or about the 17th day of September, 1905, the said Isabelle B. Chase duly transferred to one William J. Deboe the said 3,000 shares of stock, and on or about the 8tli day of October, 1906, and before the commencement of this action, the said Deboe duly assigned and transferred the said 3,000 shares of stock and all his right, title •and interest therein, and in the proceeds thereof, and in all claims for damages for the conversion or non-delivery thereof to the plaintiff. It then alleges a tender and demand by Deboe on October 8, 1906, and a subsequent tender and demand by plaintiff on October 9, 1906, and the refusal of said Bernheim to return the stock or any part thereof. The answer specifically admits the ownership of the stock by Mrs. Chase, the loan to her and the delivery of her note and of the stock as collateral therefor in the following terms: “ Admits that prior to September 25,1906, one Isabelle B. Chase was the owner of three thousand (3,000) shares of the capital stock of the Giroux Consolidated Mines Company, and that on or about the 12th day of May, 1905, said Isabelle B. Chase obtained from this defendant a loan of $22,500 and delivered to him as security therefor the aforesaid 3,000 shares of the capital stock of the Giroux Consolidated Mines Company, together with her note for $22,500 dated on the 12th day of May, 1905, and payable four months after said date.” Thus the ownership of the stock by Isabelle B. Chase and its delivery by her to the defendant Lee S. Bernheim as collateral security for her note are specifically admitted and, for all the purposes of this action, conclusively established. It appeared from the evidence that in September, 1906, through one James Shirley, Mrs. Chase offered to sell the stock to Deboe at the price of seven dollars and fifty cents per share. This offer was communicated by Shirley to Deboe who *426accepted it, and Mrs. Chase was notified of such acceptance. She thereupon sent to Deboe a written order on Bernheim, dated September 17, 1906, directing the latter to deliver the stock to Deboe upon payment by him of her note. Subsequently, by a paper dated September 17, 1906, and acknowledged October 10, 1906, Mrs. Chase made a formal assignment of the stock to Deboe. In the meantime Bernheim had been notified by Deboe of his purchase of the stock. Immediately upon receiving this notification and without replying to it Bernheim proceeded to Bangor, Maine, where Mrs. Chase then was, and by making certain representations to her induced her to sign a paper which amounted to a sale of the stock to him in consideration of the cancellation of her note and the return of other collateral held by him. Thereafter Bernheim claimed to be the owner of the stock and-his subsequent refusals to deliver it up were uniformly based upon this claim of ownership. We think that there can be no doubt that the evidence, disclosed a complete and executed sale of the stock to Deboe before Mrs. Chase executed the pretended instrument under which Bernheim claims title. ' That instrument, therefore, conveyed no title to the stock because when it was executed Mrs. Chase had parted with the stock and no longer owned it. The tender of the amoun t due upon the note, the demand for the stock and the refusal to deliver it are not seriously disputed. Both parties asked for the direction of a verdlict, and neither party asked to go to the jury on any question of fact. The pleadings and proofs presented all the facts necessary to establish a cause of action for conversion, and the court accordingly directed a verdict in favor of the plaintiff for a sum which, as it appears to be conceded, represented the damages to which plaintiff is entitled, if he is entitled to recover at all. Thereafter, upon motion, the court set aside the verdict and dismissed the complaint. The appellant questions the regularity of this practice, but the conclusion at which we have arrived renders it unnecessary to consider that ground of appeal. The order setting aside the verdict does not state the grounds upon which it proceeded, but it appears from the opinion of the learned trial justice that it was based upon his conclusion that Deboe and .Lee S. Bernheim were copartners; that the 3,000 -shares of stock owned by Mrs. Chase were a part of the copartnership property, and consequently, since *427each partner is entitled to the possession of the firm property, and one partner cannot sue his copartner for conversion of the firm property, that Deboe or his assignee cannot maintain this action against Bernheim. This ground of defense is not raised by the answer, but seems to have been suggested by a certain agreement introduced in evidence in the course of the trial. That agreement is dated July 13, 1905, and is executed by I. W. Bernheim, Lee S. Bernheim, W. J. Deboe and James Shirley. It recites that on May 8, 1905, Lee S. Bernheim bought of George M. Hurd and Mary E. Hurd 7,550 shares of the capital stock of the Giroux Consolidated Mines Company, which stock was held in escrow by the Colonial Trust Company at Philadelphia, Penn., deliverable on the 6th day of October, 1905; that said' Lee S. Bernheim paid ■ for said stock $22,650 cash; that on the 12th day of May, 1905, L. S. Bernheim had sold to Mrs. Isabelle B. Chase 3,000 shares of the capital stock of the Giroux Consolidated Mines Company, and had taken in payment therefor her note for $22,500, dated May 12, 1905, at four months, with written agreements for extension to eighteen months, said note being secured by 100 shares of the capital stock of the United Verde Mining Company, and 3,000 shares of Giroux Consolidated Mines Company stock. The agreement recited' that the subscribers thereto agreed to participate in the above-mentioned transaction in the proportion of three-fifths to I. W. and L. S. Bernheim and two-fifths to W. J. Deboe. The agreement then recited that the foregoing transactions were made by L. S. Bernheim as the agent of the subscribers, and that they were bound in the above-mentioned proportions as regards payments, profits or losses, expenses, and the delivery to Mrs, Chase of the 3,000 shares of Giroux stock sold to her. The subscribers also guaranteed to said L. S. Bernheim the payment of the note of Mrs. Chase, and agreed until it should be fully paid to leave with the holder thereof the 4,550 shares of stock belonging to said subscribers. L. S. Bernheim agreed on his part that when he had been reimbursed for his outlay, with interest and expenses, and the 3,000 shares of stock should have been delivered to Mrs. Chase, he would divide the remainder of the stock, to wit, 4,550 shares, between the subscribers in the proportion designated. It is apparent from this agreement that Deboe and the two Bernlieims were copartners or *428joint adventurers, but it is equally apparent that the 3,000 shares of stock sold to Mrs. Chase did not constitute, when the agreement was executed, á part of the copartnership assets. These assets consisted of Mrs. Chase’s note and the 4,550 shares remaining after the sale to her. Throughout the whole agreement it is recited and reiterated, that 3,000 shares of the stock had been sold. What the copartners or joint adventurers agreed to do was to make L. S. Bernheim good for his expenditures and expenses, and then to divide' the 4,550 shares of stock between themselves. If Mrs. Chase’s note Was paid L. S. Bernheim would be practically made whole, because the price at which the 3,000 shares were sold to Mrs. Chase fell short by only $150 of what Bernheim had. paid for the 7,550 shares. When the subscribers, including Deboe, guaranteed the payment of Mrs., Chase’s note, this was but one method of securing L. S. Bernheim for $22,500 of the amount he had paid out. Being a guarantor of the debt, it was competent for Deboe, with the consent of the debtor, to pay it and take uqi the collateral given to secure its payment. This was no violation of any duty he owed to Iris copartners. On the contrary, it was exactly in accordance with his agreement with them. The stock deposited as collateral for the payment of the. note being thus released, Deboe, as the purchaser from Mrs. Chase, had the right to demand its delivery to him, and since the 3,000 shares of the stock constituted no part of the copartnership assets; the rule of law applied by the learned trial justice had no application.

It follows that the order appealed from must be reversed, the verdict reinstated and judgment entered therein in favor of the plaintiff, with costs in tills court and the court below.

Patterson, P. J.,Ingraham, Laughlin and Clarke, JJ., concurred.

Order reversed, verdict reinstated .and judgment ordered thereon, with costs in this court and in the court below. Settle order on notice.