Court Opinion

ID: 5461513
Source: CourtListenerOpinion
Date Created: 2022-01-09 19:37:57.874244+00
Date Added: 2024-06-11T08:32:54.487412
License: Public Domain

Welles, J. (dissenting.)
The relation which these parties sustained to each other was two-fold. First, that of principal and agent in respect to purchasing the stocks in question, by the defendants for the plaintiff; and, second, that of pledgor and pledgee in reference to the right and power of the defendants to keep and hold the stocks after they were so purchased, as security for their advances in making the purchases, and of disposing of them in any event. In regard to the first, there appears to be little or no dispute. Brokerage is a species of agency, and is so treated in all the elementary books on the subject.
In the purchase of stocks by a broker, for his principal, where the former advances the whole or any part of the purchase price, he may hold the stocks as security for the repayment of such advances. "
In consequence of the fluctuations in the market value of nearly every kind of stock, it is usual for the parties to agree, where the broker is to carry the stock for any time, that the principal, or person on whose account the purchase is to be made, shall place in the hands of his broker or. agent, a sum of money or its equivalent, which, in the dialect of stock brokers, *469is called a margin, as a further security to the latter against losses to which he may he exposed by reason of subsequent depression in the market value of the stocks to be purchased.
The stocks in question were one hundred shares of the Erie Railway Company, and two hundred shares of the Cleveland and Pittsburgh Railroad Company. These stocks were purchased on or about the 26th day of April, 1865, by the defendants, at the request and for the account of the plaintiff, at an aggregate cost of about $16,200, the defendants having in their hands at the same time a margin of between 19 and 20 hundred dollars. Evidence was given by the plaintiff tending to show that the defendants agreed to hold these stocks until the plaintiff should direct them to be sold. The defendants gave evidence tending to prove that it was agreed by the plaintiff to keep the margin of 10 per cent good, and that in case it was not kept good, the defendants were to be at liberty to sell the stocks without notifying the plaintiff, and without giving notice of the time or place of sale; and the plaintiff gave evidence contradicting such alleged agreement of the plaintiff. The justice before whom the action was tried, held, and so charged the jury, that if they believed that the plaintiff so agreed as alleged by the defendants, the plaintiff could not recover, and submitted the question fairly to the jury.
It appeared that on the 30th of May, 1865, the defendants sold the 100 shares of Erie stock, and on the 7th July of the same year they sold the 200 shares of Cleveland and Pittsburgh stock, for the aggregate amount of $14,062.50 ; that at the times of such sales the market value of these stocks had become so depressed that the whole of the margin in the plaintiff’s hands had become exhausted.
It also appeared that in the latter part of July the plaintiff directed the defendants to sell the 100 shares of Erie stock, and as the plaintiff testified, the defendants then for the first time told him the whole of the stocks (Cleveland and Pittsburgh, and Erie) had been sold, and that that was *470the first time the plaintiff had notice or knowledge of the sales, or of any intention on the part of the defendants to sell. There was no attempt to show that any notice of the time and place of the sale was ever given to any person, in any way. The sales were made at auction, at the board of stock brokers. Afterwards there was a large advance in the market value of both of these kinds of stocks.
The doctrine of the judge’s charge to the jury was that the transaction was a pledge of the stocks to secure the repayment of the money advanced by the defendants, &c. ; that the duty of the defendants was to • give notice to the plaintiff that his margin was diminished or exhausted, and require him to make it good ; and that before he could legally sell on the plaintiff’s default, &c. he must give reasonable notice of the time and place of sale.
In the case of Hanks v. Drake and others, recently decided by the general term of this district, (ante, ft. 186,) Judge Ingraham holds that, in a .case like the present, the transaction is not a pledge of stocks, hut an agency by the broker to purchase for another and hold the stock as security that the margin shall be kept good and the advance be repaid; and that in case the owner of the stock was in default, the broker might sell without previous notice of the time and place of sale. The case, however, did not necessarily, nor indeed at all, depend upon that question,, but seems have been decided on the ground that there had been a clear ratification of the sale of the stock, which was claimed to be illegal for want of notice. The learned justice refers to the cases of Genet v. Howland, (45 Barb. 560,) and Milliken v. Dehon, (27 N. Y, Rep. 364,) in both of which cases the parties agreed that in case of failure, &c. a sale might he made without notice.
In the present case it- cannot be doubted that the stocks in question were in the hands of the defendants as security for money advanced ; nor that the legal title was at the same time in the plaintiff. Must not their relations have been *471either 1 that of pledgor and pledgee, or of mortgagor and. mortgagee P It could not be the latter, for the reason that the title was in the plaintiff, and so continued from the time they were purchased by the defendants. A mortgage of personal property conveys the title, subject to be defeated by payment, or other performance of the condition. A sale is never necessary to perfect the legal title under a mortgage after condition broken. It is only of service to foreclose a supposed equity of redemption. It is a dead pledge, as its name imports. In case of a simple pledge there is .no title in the pledgee, but the same continues in the pledgor until after a sale for condition broken ; and such sale must be on reasonable notice of time and place, unless otherwise provided in the contract of bailment. I confess I am unable to see in the transaction, so far as it relates to the terms and conditions upon which the defendants held the stocks, any thing but a mere simple pledge. (Wheeler v. Newbould, 16 N. Y. Rep. 392. Dykers v. Allen, 7 Hill, 497. Brass v. Worth, 40 Barb. 648.)
[New York General Term,
June 3, 1867.
The evidence on the part of the defendants, tending to show what was the contract, was flatly contradicted by that given by the plaintiff, and the question was submitted to the jury, with proper instructions, and the verdict settles the question in favor of the plaintiff—that the contract was as he claims it to have been.
The offer of evidence, by the defendants, of the existence of a usage, was properly excluded. The law settled the rights of the parties, which could not be varied essentially by a usage by which the plaintiff never agreed to be bound.
In my opinion the judgment and order appealed from should be affirmed, with costs.
New trial granted.
Leonard, Clerke and Welles, Justices.]