Opinion
June Term, 1902.
Charles M. Demond, for the appellant.
Henry G. Atwater, for the respondents.
The three principal questions presented are, (1) whether the plaintiff is entitled to equitable relief in his action as brought; (2) whether the defendants had notice of the claim of the plaintiff when the stock was transferred to them, and (3) whether the suit is barred by the Statute of Limitations.
It will be noticed that the complaint alleges that the defendant Thomas came into possession of the certificate wrongfully by taking it through the negligence, etc., of Bennett, whereas the inference from the evidence would be that Bennett had disapproved of the stock as security and required Thomas to replace it by other security of his own and passed over to Thomas the stock certificate and the right to receive from the plaintiff payment of the account. In this action, however, Bennett, Thomas, the subsequent transferees and the company itself, by whose act the new certificate was issued after notice of plaintiff's claim, are all joined as parties, and if the suit is properly in equity the various rights may be determined as they appear. The gravamen of the complaint is that the plaintiff is entitled to possession of the 100 shares, a new certificate therefor, or the value thereof, together with the right to a proportionate part of the company's assets in case of its dissolution, and that through the acts of the defendants he has been kept out of his own, which he demands, agreeing to turn over to each so much as each is entitled to receive. It is asserted that he is merely seeking to redeem a pledge and hence his remedy is for violation of a contract and he should have obtained all that was due him by making tender and then, in a legal action, recovering the stock or else the value of it. The answer to this is that the mere value of the certificate would not give him that to which he has a right, namely, the stock itself with the interests that go with it. As was said in 2 Story's Equity Jurisprudence (12 ed., § 1032), "Generally speaking, a bill in equity to redeem will not lie on the behalf of the pledgor or his representatives, as his remedy upon a tender is at law. But if any special ground is shown, as if an account or a discovery is wanted or there has been an assignment of the pledge, a bill will lie."
Here it is shown that the pledgee has parted with the pledge without the knowledge or consent of the pledgor and by private and not public sale; that the transferees were notified of the plaintiff's claim, but retained the stock; that the company after notice issued a new certificate. Wrongful acts are alleged and proved and equity alone permits the plaintiff to bring in all the parties and recover of them, not mere money value at a given time, but the stock itself or new stock in the place thereof and the interests and rights which a stockholder has. Further, it appears that the amount of the account for which the stock was pledged is in dispute, and in such cases "it is not necessary to pay or tender the amount before bringing the suit. It is enough if he offers in his bill to pay or to perform whatever obligations rested upon him in that regard * * * and the plaintiff has complied with that rule." ( Zebley v. Farmers' Loan Trust Co., 139 N.Y. 470.) Herein it appears that the pledgee has put it out of his power to return the securities and, therefore, a tender would be a useless ceremony which the law never requires. (Jones Pledg. § 748; Sheridan v. Presas, 18 Misc. Rep. 180.)
It is contended that in an action of replevin in which all the parties were joined, the plaintiff would have had adequate remedy, and reference is made to Nichols v. Michael ( 23 N.Y. 264), a case of fraudulent purchase of goods in which the defendant before the action was brought had transferred the goods to his assignee and both were joined; and it is argued that replevin will lie although the defendant has conveyed the property to other persons. This latter is true, but the relief, if neither party has the thing sought to be replevined, is money damage, and in the case of Nichols v. Michael the assignee had the goods. All such cases are distinguishable from the one at bar for the reason that here the certificate was canceled by the defendant company and a new one issued, and the relief sought is not money damages but a stock certificate of 100 shares with the rights of a stockholder. To that the plaintiff is entitled, if entitled to any relief, and that an action in replevin could not have given him. Only equity could compel the issue of a new certificate or accord to him the rights of a stockholder by compelling the company to recognize the plaintiff's rights. By the wrongful acts of some of the defendants the plaintiff has been deprived of his privileges, and hence he is entitled to look to equity. To that end he properly joined all those having an interest in the subject-matter, and asked for an adjustment of his account and, incidentally, an accounting as to dividends, etc. Apart, therefore, from the matter of adjusting his account and determining his dividends, his cause of action in equity is properly brought.
In this we have assumed that the defendants had notice of plaintiff's claim to the certificate when it came into their possession, or else that it made no difference whether they had notice or not. It is very pertinently urged that the certificate of stock in the hands of Clark did not guarantee to him good title whether he be charged with notice of the pledge or not, because the rule respecting commercial paper in the hands of third persons not charged with notice of existing equities between the original parties does not apply to certificates of stock, even if indorsed in blank. ( Knox v. Eden Musee Co., 148 N.Y. 441; Jones Pledg. §§ 461, 462.) Upon the subject of notice, however, the proof is to be read with every intendment in favor of the plaintiff, and it is a fair inference that if Clark, as testified, received from Burgess a letter dated June 16, 1893, stating that the stock had been pledged by plaintiff for a debt and received from Burgess the transfer dated June 22, 1893 (the answer alleging that he acquired title about that time), he received the stock with notice of plaintiff's claim. And it further appears that the transfers were so unusual, being in the form of indorsements pasted on the back of the certificate, some not witnessed, that Mr. McDonald, the vice-president of the company, sought out the plaintiff to ask about it. Thus is evidence furnished by the very appearance of the certificate sufficient to put an intending purchaser upon inquiry.
The most serious questions relate to the Statute of Limitations and, incidentally, to the doctrine of laches and acquiescence. If the action was cognizable only at law and not a subject of equity jurisdiction, then clearly the six-year Statute of Limitations would apply, but if the plaintiff's action was one in equity, then the ten-year and not the six-year statute is controlling. Undoubtedly the right of a pledgor to redeem is a right founded upon a contract, obligation or liability, express or implied; and in law such right would be barred at the expiration of six years from the time of the denial of the pledgor's right by the pledgee or those in privity with him. It may be conceded that at law the statute commenced to run from the time of the repudiation of the pledge in 1893, and thereafter it would be necessary, in order that the plaintiff should enforce his remedy at law, to begin his action within six years. If, however, while that statute was running, the thing pledged was converted and by assignments passed into the hands of third parties, and if, in addition, to determine the amount due on the pledge, an accounting was necessary or thereafter the plaintiff had no adequate remedy at law, the cause of action as well as the remedy became a subject of equitable cognizance, and in that court only could the rights of the parties be determined or the relief to which the plaintiff was entitled, accorded.
In considering this subject of the Statute of Limitations as well as the nature of the action, we must bear in mind that there was no formal demand upon the plaintiff to redeem the pledge, nor was there any action taken to reduce the thing pledged into possession by means of a judgment or a public sale. The defendant treated the stock as though it was absolutely the property of the individuals who from time to time held it, and through whose action, with the acquiescence of the company, it finally, by mesne assignments and the issue of a new certificate substituted for the old, passed into the name and under the dominion of the defendant Clark. If we assume, therefore, that there was a repudiation of the pledge at the time when the transfer was made to Burgess in 1893, and thus the right which the plaintiff had to commence his action at law to replevy the certificate or redeem the pledge accrued, we must necessarily consider the facts occurring after such right arose and the statute commenced to run for the purpose of determining whether the six or the ten-year statute applies.
Although the mere repudiation of the pledge by the original holder of the certificate did not destroy the plaintiff's remedy at law, we think that the effect of the subsequent assignments, together with the final surrender of the certificate to the company, its cancellation and the issuing of a new certificate therefor, coupled with the fact that a dispute existed as to the amount due on the original pledge, which it was necessary for the plaintiff to have ascertained in order to make a tender, left as his only full and adequate remedy, which was the obtaining of the certificate, a suit in equity as to which, if any, the ten-year statute would apply.
We have serious doubts, however, upon the facts here appearing, whether either statute commenced to run before the commencement of this action. In Bailey v. Drew (17 N.Y. St. Repr. 185), where the bonds were pledged as collateral for a note, it was said: "By the pledge of these bonds as security for the notes the title to the bonds did not pass to the pledgee. The title remained in the pledgor until it was divested by a sale upon notice or by judicial proceeding. * * * The enforcement of this right (the right to redeem) depended upon the ownership of the bonds, and the Statute of Limitations restricting the time in which legal proceedings must be commenced does not limit this right of redemption, for by such redemption the special property of the pledgee ceased, and as the title of the pledgor cannot be divested except by a sale on notice or by legal proceedings, his title to the property remains unaffected by the lapse of time until the pledgee takes the necessary proceedings to divest it. As an incident to this right of redemption the pledgor has the right, where the amount due on the obligation to secure which the pledge was given is uncertain, to come into a court of equity and ask to have the amount ascertained and on payment of such amount to recover the possession of the pledge."
Should we, however, as already stated, consider the cause of action as arising and the statute as beginning to run when the pledge was repudiated, then, clearly, with respect to this suit in equity, the earliest date which can be fixed was when the plaintiff learned that the certificate of stock was in the possession of the defendant Clark, who, against the protest of the plaintiff, obtained its transfer upon the books of the company, which date, as compared with the time this action was commenced in equity, was within the ten-year statute.
The further insistence that if the Statute of Limitations is not a bar, then the plaintiff has lost his rights by laches and negligence, requires but a brief consideration. In Cox v. Stokes ( 156 N.Y. 491) it is said: "Whether the equitable doctrine of laches, as distinguished from the Statute of Limitations, now exists in this State, is open to serious doubt." If, however, either the doctrine of acquiescence or of laches can in a proper case be invoked, neither can be interposed in this action as a bar.
As defined in the American and English Encyclopædia of Law (Vol. 18 [2d ed.], 97), " Laches is such neglect or omission to assert a right as, taken in conjunction with lapse of time more or less great and other circumstances causing prejudice to an adverse party, operates as a bar in a court of equity." And again (at p. 98): "It has been said that if laches is the negligent failure to assert a positive right when opportunity is afforded, acquiescence is the intentional failure to resist the assertion of an adverse right." As to when either doctrine may be invoked it is said (p. 100): "When the delay is of such a nature as to prevent substantial justice between the parties, the courts are ready to declare that the remedy sought is inequitable and must be refused." And again (p. 101): "It has been held that so long as the relative positions of the parties are not altered to the defendant's prejudice, delay is of very little consequence." The rule we have finally summed up as follows (p. 103): "When the complainant has by his delay induced or suffered the respondent to incur expense, or enter into engagements of a burdensome character, a court of equity will consider that he is guilty of such laches as precludes him from obtaining relief. If the bar of the Statute of Limitations is applicable to the suit, but has not intervened, delay alone will not preclude the assertion of the complainant's equitable right. The respondent must in addition have been prejudiced by being lulled into security thereby."
Our conclusion upon the facts here presented, applying the principles thus stated, is that, upon the subject of laches and acquiescence, as well as with respect to the Statute of Limitations, no bar exists to the relief to which the plaintiff in this suit of equity is entitled. It follows, therefore, that the judgment must be reversed and a new trial ordered, with costs to the appellant to abide the event.
McLAUGHLIN, HATCH and LAUGHLIN, JJ., concurred; INGRAHAM, J., dissented.
Judgment reversed, new trial ordered, costs to appellant to abide event.