Mattern v. Sage — 30 N.Y. St. Rep. 855

Majority

p. 855

Sophia L. Mattern, App’lt, v. Russell Sage, Resp’t.

(New York Common Fleas,

General Term,

Filed April 7, 1890.)

Headnote

Brokers—Counterclaim—Securities.

A broker is not legally obligated to sell and realize on stock held as partial security for a debt before counterclaiming and demanding the whole amount. When he has held such stock for a long time, with full knowledge and by mutual arrangement of the parties, presumably in expectation of a rise, it is equitable as well as justifiable that he should be allowed, in an action for an accounting, to counterclaim whatever indebtedness exists without, in default of a direct order, being obliged to depart from the arrangement and sell the stock.

Appeal from judgment against plaintiff for $9,099.86, entered on report of a referee.

Action for an accounting of transactions in stocks carried on "by defendant for plaintiff. The answer set up a counterclaim on an account stated and rendered in 1885 for losses on said transactions ; and alleged that defendant held 200 shares of the stock as security for said balance due him and that he had tendered such stock and demanded payment.

Ira Shafer, for app’lt; Henry S. Bennett, for resp’t

The main controversy in this action was on the facts. There was a direct conflict of evidence between the parties upon all the material facts, but, as defendant was corroborated in so many important points by plaintiff’s own letters, we do not see how the learned referee could have reached any other conclusions than those embodied in his report.

The defendant was not legally obligated to sell and realize upon the stock he holds as partial security for the debt, before counterclaiming and demanding judgment for the whole amount. Defendant claims, and the referee has found, that defendant has been holding this stock for plaintiff’s account for several years and plaintiff has never directed a sale thereof. Because a broker has the right to sell stock out at any time to protect himself, it does not follow that he is obliged to follow this course if he chooses to take the risk of his principal’s eventually making good any loss that may occur. See First National Bank v. Wood, 71 N. Y., 409 . In the case at bar it appears that the stock has been held for such long period with full knowledge and by mutual arrangement of the parties, presumably in the expectation of a rise. It is therefore equitable, as well as legally justifiable, that when the broker is sued by his principal on account of this and other transactions, he should be allowed to counterclaim .whatever indebtedness exists at the time, without, in default of a direct order, being obliged "to depart from the former arrangement.

The judgment appealed from should be affirmed, with costs.

Bischoff, J., concurs.