Elgan v. Frances-Mohawk Mining & Leasing Co.

By the Court, Norcross, J. (after stating the facts as above): This is an appeal from the judgment and from an order denying a motion for a new trial. The record contains about forty assignments of error; but it will not, we think, be necessary to consider each separately, as the material questions presented will fall under a few main propositions. It is contended that the court erred in permitting the plaintiff to file an amended and supplemental complaint, after the decision and before the entry of j udgment, setting up the facts which occurred subsequent to the institution of the action. We think, under the facts of this case, no error was committed in such order. It is conceded that the plaintiff was in error as to certain facts alleged in the original complaint, and that at the time suit was instituted plaintiff was not entitled to recover on the actual facts of the case then existing. Blaintiff offered to consent that the motion for a nonsuit be granted. The defendant appellant then asked leave to withdraw such motion, and by. stipulation of the parties the motion and consent were withdrawn, and defendant given leave to file amendments to its answer to conform to the proofs. The defendant filed amendments to its answer, relying upon facts occurring subsequent to the institution of the suit, and praying for the judgment of the court that it be adjudged entitled to the possession of the stock in question, to hold the same as security for the payment of the balance due on the Wilson notes. The case was finally presented to the court upon the facts as disclosed upon the trial, and upon those facts the defendant Keane Wonder Mining Company was asking for judgment in its favor. We think the court very prop [484] erly permitted the plaintiff to amend and supplement his pleading, so that judgment could be rendered in accordance with the undisputed facts shown to have existed at the time of the trial. We think, under the circumstances, defendant appellant is not in position to object to the order permitting the filing of the amended and supplemental complaint. Upon the facts of this case, there is but one controlling question: Has the defendant Keane Wonder Mining Company the right to the possession of the stock in ■question, to be held by it as security for the payment of the balance due on the Wilson notes ? If it has not the right to such possession for such purpose, the stock ought to be delivered to the plaintiff; for it is clearly ■shown to be his stock, and there does not seem to be any controversy over plaintiff’s allegation that a judgment ior damages would not be an adequate remedy in this ■case. It is conceded that the Keane Wonder Mining Company, on the 23 d or 24th day of November, 1908, the date of the assignment of the Wilson notes to the latter company and the surrender by said company of the said :815,000 shares of its stock, theretofore held as pledge, back to said Wilson, and the deposit in escrow of the remaining 160,000 shares of stock to abide the result of this suit, had knowledge of the existence and execution ■of the written agreement between respondent and the ■said Homer Wilson, of date December 23, 1907. (Plaintiff’s Exhibit 1, supra.) By the terms of that agreement, xespondent became the owner of 160,000 shares of the .stock of the appellant corporation, subject to the conditions of the pledge of such stock and the remaining stock of Homer Wilson as security for the payment of the indebtedness of said Wilson and appellant. When the appellant became the assignee of the Wilson notes, it had the undoubted right to hold the security previously held by the State Bank and Trust Company and the Frances-Mohawk Mining and Leasing Company for the payment of such notes. However, [485] having knowledge that the respondent was the owner of 160,000 shares of the 975,000 shares so pledged as security, the appellant was bound to exhaust the security of the principal debtor, Wilson, before resorting to that of the respondent. The appellant could not, by arrangement with Wilson, without the knowledge or consent of respondent, segregate the stock to which respondent was entitled and hold that alone as security for the Wilson notes, and surrender the remaining -stock to Wilson, freed from the conditions of the pledge. This transaction cut off entirely respondent’s right to ever become subrogated to all the rights of the owner and holder of the Wilson notes. The courts are justified in accepting it as a fact established that the appellant considered the 160,000 shares retained as ample security for the payment of the balance due on the Wilson notes, and that the stock surrendered to Wilson, being about five times greater than the stock retained as security, was more than sufficient to have secured the payment of the notes, so that the respondent would have been ultimately entitled to have recovered his stock in full. We think the appellant should be held to have surrendered - its right to hold any part of the respondent’s stock as security for the payment of the Wilson notes. In Le Marchant v. Moore, 150 N. Y 209, 44 N. E. 770, one question, similar in principle to that presented here, was considered by the Court of Appeals of New York. We quote from the opinion in that case by Haight, J., the following excerpt: “Treating the plaintiffs as the owners, with the stock in the possession of the defendants, as pledgees of Evans & Co. for the payment of their indebtedness to the defendants, the plaintiffs had the right to demand, and a court of equity would require, the defendants to first satisfy their claim out of the other securities in their hands belonging to Evans & Co. before resorting to the property of the plaintiffs. The defendants, as pledgees, were entitled to regard Evans & Co. as the owners, until they were notified of the plaintiffs’ [486] rights. Thereafter they were bound to recognize the plaintiffs’ claim, and deal with the stock accordingly. The plaintiffs, as owners, had- the right to have timely notice of any sale of their stock, and to have the other stocks or security in the hands of the defendants belonging to the pledgor first applied. (Smith v. Savin, 141 N. Y. 315; Hazard v. Fiske, 83 N. Y. 287.) ” See, also, Union Pacific Ry. Co. v. Schiff (C. C.) 78 Fed. 216; Brown v. Bank, 112 Fed. 901, 50 C. C. A. 602, 56 L. R. A. 876; Keel v. Leby, 19 Or. 450, 24 Pac. 253; Colebroke on Collateral Securities, sec. 239; Jones on Pledges, sec. 711. The judgment and order appealed from are affirmed.