Mayer v. Monzo

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 [868] 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 [869] and a new tria! granted, with costs to appellants to abide the event. Ingraham, P. J., McLaughlin and Laughlin, JJ., concurred; Clarke, J., dissented.