Case Name: Marcus Mayer and Others, Appellants, v. Angelo R. Monzo, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1912-07-11
Citations: 151 A.D. 866
Docket Number: 
Parties: Marcus Mayer and Others, Appellants, v. Angelo R. Monzo, Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 151
Pages: 866–882

Head Matter:
Marcus Mayer and Others, Appellants, v. Angelo R. Monzo, Respondent.
First Department,
July 11, 1912.
Pleading—action by stockbroker—answer—conversion of stock by broker — amendment changing date and manner of conversion— failure to prove demand or inability of pledgor to deliver stock.
A defendant sued by stockbrokers to recover the balance of an áccount who alleges as a counterclaim that the plaintiff having pledged the securities converted them by allowing them to be sold by the pledgee on > a certain date, should not he allowed to amend the counterclaim at trial so as to set out a prior conversion in that the plaintiff commingled the securities with others held by him and allowed them to be pledged for a sum in excess of that owed by the defendant. Such amendment sets out a new and distinct tort.
Moreover, the conversion set forth by such amendment is inconsistent with that originally pleaded.
A broker who buys stocks for a customer upon margin may pledge them for so much of the purchase price as is owed by the customer. Under such circumstances the broker’s duty is to either have on hand^oiycmdef his control the stocks which he is carrying for the customer,, but he is
_ not required to do both.
A stockbroker is not guilty of. a conversion ipso faóto by commingling stocks belonging to different customers in order.to obtain a loan on all in excess of the amount due from one of them. ...
A recovery against a stockbroker for conversion is not authorized where it does not appear that the customer demanded his stock or offered to pay the balance due thereon, or that, had he done so'j. the broker having pledged the stock' could not have redeemed it and made delivery.
Clarke, J., dissented, with opinion.
Appeal by the plaintiffs, Marcus Mayer and others, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of Hew York on the 1st day of December -1911, upon the dismissal of the complaint and the verdict of a jury rendered by direction of the court upon the defendant’s counterclaim for $13,623.81, and also from an order entered in said clerk’s office on the 2d day of December, 1911, denying the plaintiffs’ motion for a new trial made upon the minutes in an action by stockbrokers to recover the balance of an account.
David Leventritt of counsel [William F. Goldbeck with him on the brief], Colby & Goldbeck, attorneys, for the appellants.
Herbert C. Smyth of counsel [Roderic Wellman with him on the brief], Sumner & Parry, attorneys, for the respondent.

Opinion:
Scott, J.:
I do not' think that this judgment can be sustained. The facts have been so carefully and exhaustively stated by Mr. Justice Clarke that it is unnecessary to restate them.
The counterclaim upon which the defendant has recovered was a claim for damages for conversion of stocks, and as the pleadings stood when judgment was rendered the defendant relied upon two inconsistent allegations of conversion, one committed on October 22, 1907, and one committed prior thereto. As the answer was originally drawn the conversion is stated as having taken place October twenty-second, and to have consisted . in permitting the stock to be sold by banks and other institutions with whom plaintiffs had pledged them. By the amendment, allowed at the trial, the conversion is alleged to have taken place when the stocks were pledged, and to have consisted 1 of the fact that they were commingled-with other securities, Í the commingled securities being so pledged for a sum in excess > of that which defendant then owed plaintiffs.
I think, in the first place, that this amendment was one which should not be allowed at the trial for it introduced an entirely new and different cause of action, alleging as the ground for recovery an entirely distinct tort from that which was originally'alleged. Passing that objection, however, it is
manifest that the cause of action set forth in the amendment, was inconsistent with that originally pleaded, for if plaintiffs converted defendant's stocks prior to October 22, 1907, there could have been no conversion on- that date, as there was nothing left to convert.
That it is a conversion ipso facto to commingle stocks belonging to different customers and to obtain a loan on all, in excess of the. amount due from any one of the customers whose stocks are thus commingled, I do not concede. It is settled that a broker who buys stocks for a customer upon margin, and to whom the customer still owes a part of the purchase price, is entitled to pledge the stocks so bought for so much of. the purchase price as his customer still owes. The broker's whole duty to his customer under such circumstances is either to , have on hand or under his control the stocks which he is carrying for his customer, but he is not required to do both, that is to have the amount of stocks under control and also an equal amount on hand. The customer's righkto receive his securities
rtenders~the
accrues under sucf
amount he still owes and demands his stock,. ' The refusal of such a demand constitutes the conversión. "If Ahelaroker has "the stock undeF^hís~'eontrol"(uveATff'if be pledged), and can resume posseBsfoñ~by'Tl^í^~the~amÓunt borrowed thereon. hot exceeding'
of-the purchase,-there hasJbeen- y. cQnazersjqn. v
, It does not appear that ever demanded his stock
and offered to pay the amount which he owed, nor does it appear that, if he had done so, plaintiffs had placed themselves in such a position that they could not have repossessed themselves of the stock, and made delivery. I am, therefore, of opinion that no such cause of action was made out under the amendment to the answer.
As the reasoning in favor of the affirmance of this judgment rests wholly, or at least principally, upomwhatJ deem to be the erroneous conclusion that.the original, hypothecation of the stocks jvas illegal, and itself_ constituted a-.ponversi.on, it seems to be unnecessary to discuss the sep_arate,_charge of conversion contained in thqnnswer- aboriginally drawn.
The judgment and order appealed from should be reversed
and a new tria! granted, with costs to appellants to abide the event.
Ingraham, P. J., McLaughlin and Laughlin, JJ., concurred; Clarke, J., dissented.