Opinion
Argued January 6, 1875
Decided May term, 1875
Wm. G. Choate for the appellant.
Ambrose Monell for the respondent.
I will assume, without any examination, that plaintiff's claim, if he has any, for the sale of his stock on the 3d day of January, 1866, is against the defendant, and it will be necessary therefore only to determine the rights of the defendant under the instrument dated December 30, 1865, pledging the stock. That instrument was given as collateral security to a note at four months for $2,500 borrowed of defendant, and although the loan might have been called in under that instrument by a notice of one week, yet it was manifestly expected by the parties that it should run for the full term of four months, as it in fact did, and it is proper to keep this circumstance in mind in construing the instrument. I suppose this instrument was made payable upon one week's notice, so that if the security shall depreciate or become precarious before the maturity of the principal note the defendant could call in the loan, and in default of payment realize upon the security.
This instrument first contains a power of sale upon default of payment. That would be a sale which, if regularly made, would bind the plaintiff. The stock would be sold as plaintiff's by defendant, as pledgee. The sale would have to be at broker's board or at public sale, and could be made only after the one week's notice, and after notice to the plaintiff of the time and place of sale. ( Stearns v. Marsh, 4 Denio, 227; Markham v. Jaudon, 41 N.Y., 235; Steuben v. Jerome, 54 id., 480.) The sale in question was made before there was any default, and without any notice of any kind to the plaintiff, and hence cannot be upheld under the power first conferred in the instrument.
But further on in the instrument is this clause: "With authority to use, transfer or hypothecate the same at payee's option, payee being required, on payment or tender at the proper time of the amount loaned and interest, to return an equal quantity of said security, and not the specific stock deposited." Force must be given to this clause. Provision had already been made for a sale upon default. That sale was carefully guarded, as it was to be on account of plaintiff and binding upon him. By that sale the plaintiff would be deprived of his stock, and he would have no right to redeem or reclaim the same or a like amount. This was to be a sale on defendant's account. This clause was inserted so that if, during the running of the loan it was inconvenient for defendant to carry it, he could sell, transfer or hypothecate the stock to realize the money. It was doubtless inserted as an inducement to the defendant to make the loan, and was, in a printed form, used for such purposes. No notice of a sale under this clause was required, because plaintiff had no interest whatever in the sale. The defendant sold the stock as his, simply taking upon himself the burden of returning to the plaintiff, upon demand, when the loan should be paid, the same quantity of the stock. The plaintiff would then be in the same condition that he was in when he pledged the stock. If a loss was made upon a sale of the stock, or it was in any way sacrificed, it fell upon the defendant and not upon the plaintiff. The sale contemplated by this clause was not a sale by defendant as pledgee, because it was not a sale after default, or to realize the money borrowed for which the stock was held as security. It was a sale by virtue of the contract, and the only obligation imposed thereby upon the defendant was to return the same quantity of stock, and so long as he was ready to do that upon demand he was not in default.
It follows, therefore, that defendant committed no wrong when he sold the stock, and as the same quantity of stock was returned to the plaintiff, and sold at his request and upon his account, I cannot perceive that he has any just ground of complaint. He was in the same position when the loan matured and was paid as he would have been in if defendant had not sold the stock.
The judgment must be reversed and new trial granted, costs to abide event.
All concur.
Judgment reversed.