Opinion
March 31, 1910.
Samuel Evans Maires, for the appellant.
Lewis Squires [ Francis H. Wilson with him on the brief], for the respondents.
This plaintiff brought two actions for fraud against the Cowperthwaits. The actions were tried together, and the records are identical. In one action a certain corporation was made a party defendant and in this action the respondent Aymar. The appeals in these actions are separate. Our judgment in the action first heard on appeal, written by BURR, J. ( Hickok v. Cowperthwait, 134 App. Div. 617), disposes of all of the questions as to the transactions of the defendants Cowperthwait, and, therefore, as to them this judgment is reversed. We have then but to consider this appeal as to the respondent Aymar.
At the time of the alleged fraudulent transactions of the Cowperthwaits, Aymar, as creditor of Cowperthwait senior, held on pledge as security for the debt certain certificates of stock standing in Cowperthwait senior's name. The contention, therefore, is that Aymar had a valid lien upon that stock as against this plaintiff. But it appears that, at the instance of the said pledgor, Aymar delivered up the certificates to him. The learned counsel for Aymar recognizes the rule that a pledgee who parts with possession of the pledge thereby waives his lien ( Black v. Bogert, 65 N.Y. 601; Casey v. Cavaroc, 96 U.S. 467), but insists that the delivery in this instance was within the exception to the rule applied in Hays v. Riddle (1 Sandf. 248), which case he insists is decisive of the case at bar, and in White v. Platt (5 Den. 269). It is well settled that "the pledgee may return the property to the pledgor for some special purpose without losing his right, and the pledge will remain." ( Fairbanks v. Sargent, 117 N.Y. 334.) But in the cases cited the parting of possession was temporary and for a special purpose, so that the pledgor became a mere special bailee, agent or servant of the pledgee. In Hays v. Riddle ( supra) the pledgee delivered up bonds, which were convertible into stock at the option of the holder, for the specific purpose of such conversion, whereupon the stock was to be returned to the pledgee. In White v. Platt ( supra) the pledgee of promissory notes delivered them up for collection that the proceeds might be returned to him. These cases and others like unto them are discussed in Casey v. Cavaroc ( supra). (See, too, Jones Pledges, § 44 et seq.) But as the court say in Casey v. Cavaroc ( supra): "All the cases cited, however, show that a bailment to the pledgor for a mere temporary purpose for the use of the pledgee, or for the repair and conservation of the pledge will not destroy the latter's possession; at the same time they imply that a redelivery to the pledgor, except for the special and temporary purposes indicated, divests the possession of the pledgee, and destroys the pledge."
Upon naked request Aymar returned the certificates, and there is no proof that he did so for any special, limited or temporary purpose of his own or for his own benefit, so that the pledgor could be regarded in possession as the special bailee, servant or agent of the pledgee. Moreover, it does not appear that Cowperthwait senior, after he obtained possession of the certificates, dealt with them for the benefit or to the use of Aymar in any way. He caused the stock represented by the certificates, together with a few other shares, to be transferred to Cowperthwait junior as trustee, and then delivered certificates standing in the name of Cowperthwait junior as trustee to Aymar as security for the old debt. This was done in two instances at about the time when the actions wherein this plaintiff became receiver came on for trial. We are not concerned with the reasons for the acts of Aymar. He appears in this record as a complacent creditor, business associate and friend, who was willing to accede to the requests of Cowperthwait senior without inquiry, to act in accord with his wishes without demur, and to accept whatever was given without complaint. It may well be that he supposed that the security he finally received was as valid as that originally given. But Aymar did not receive finally the original pledge or anything that represented it. The debtor, in place of the original pledge returned, substituted certificates of stock owned by Cowperthwait junior as trustee — a third party, so far at least as Aymar was concerned, which could be done. (Jones Pledges, § 53, and authorities cited.) When Aymar received such certificates he must be charged with notice that he received in pledge the property of a trustee as security for a debt arising out of an independent transaction, and hence he took such security at his peril. ( First Nat. Bank v. Nat. Broadway Bank, 156 N.Y. 459; Gaston v. Am. Exch. Nat. Bank, 29 N.J. Eq. 98. ) For these reasons the judgment must be reversed and a new trial must be granted, costs to abide the final award of costs.
WOODWARD, BURR, THOMAS and RICH, JJ., concurred.
Judgment reversed and new trial granted, costs to abide the final award of costs.