Hasbrouck v. Vandervoort — 6 N.Y. Super. Ct. 74

Majority

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Hasbrouck v. Vandervoort and Hayward.

Headnote

Where a certificate of .stock is delivered to a creditor, as collateral security for an existing debt, the transaction is a pledge, and not. a mortgage, of the stock; and the legal title passes to the pledgee.

Although a pledger cannot, in every case, come into equity to redeem the pledged goods, yet, where any special ground is shown, as if an .account of dividends received by the pledgee is wanted, or there has been an assignment of the pledgee, a bill in equity will lie.

(Before Düer and Campbell, J. J.)^[1]

May 22;

June 22, 1850.

InEquity. Demurrer to bill for want,.of-equity. The.bill stated the following, facts. In 1839, Peter H. Schenck was

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created a trustee of certain property, which eventually included some shares of stock- in the Matteawan Company, (a manufacturing corporation,) by marriage articles between Wm. L. Pickering and Mrs. Wilkins, and immediately afterwards the marriage took place between the two latter. ■

Prior to 29th November, 1842, Mr. Pickering had borrowed various small sums of money of the defendants, and having possession of a certificate of one share of the stock so held in trust, worth over $1000, he, with the consent of his wife and her trustee, on that day delivered it to the defendants, as collateral security for the payment of $426, with a power of attorney to transfer it, so as to vest the title in them for that purpose and no other. There remained due on this debt, on the 30th of December, 1843, $226.29, for which Mr. Pickering gave his note at four months, with the understanding that the stock should remain as security for that amount. On the 31st of January, 1844, the defendants discounted a note for Mr. Pickering, dated on that day, payable at six months, for $300,- with the understanding that the stock should remain as a security for that note also, in addition to the preceding one. The first note was paid and taken up at maturity, and the stock--left as security for the $300 note only. The defendants then dissolved their connection in business, and the stock and noté passed to the defendant Yandervoort, who on July 12th, 1845, received a dividend of $150 on the stock. The $300 note was not paid when it fell due, and on 22d June, 1846, there remained due upon it, deducting the dividends, $181, which Pickering tendered to the defendant Yandervoort, and demanded a re-delivery of the stock, &c., which he refused, and claimed the stock as absolutely his own. Subsequent to this, he has received several dividends on the stock, amounting in all to $380, being sufficient to repay the amount due, and leaving a balance due to the estate of Mrs. Pickering. The plaintiff was substituted as trustee in the place of Mr. Schenck, by an order of the supreme court, made 8th September, 1847, and Mr. Schenck duly conveyed the trust estate, and transferred the stock to him. The stock still continues to pay dividends, which the defendant

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Yandervoort receives, and claims a right to receive; and the stock stands in his name. The bill prayed for an answer without oath: That the defendants might be decreed to transfer and'redeliver the stock to plaintiff; That they might account for all the dividends received, and pay any balance, over and above the amount justly due on the note, to plaintiff; That a receiver might be appointed, to receive any dividends declared, or to be declared on the stock; That an injunction might issue, to restrain defendants from assigning the stock, and from collecting or receiving any dividends made upon it; and for general relief.

The defendants put in a general demurrer to the bill, for want of equity, which was allowed by Mr. Justice Edmonds, in the supreme court, and the cause now came up on an order granting a re-hearing; the suit having been transferred to this court:

Wm. Curtis Noyes, for the plaintiff.

I. The-transactions between the defendants and Mr. Pickering, amounted to mortgages of the stock, redeemable when the notes successively became due. (2 Story’s Eq. Jur. §§ 1029, 1031; Brown v. Bement, 8 John R. 159; Huntington v. Mather, 2 Barbour’s S. C. R. 538; Little v. Wilson, 2 Comstock, 443.) .

II. When the last note became due and remained unpaid, the title to the stock at law, vested absolutely in the defendants, subject only to the equitable right of redemption in equity. (Burdick v. McVanner, 2 Denio’s R. 172; Charter v. Stevens; 3 Ibid. 33.) The tender of the money due after the time for payment had expired, did not revest the title to the stock in the plaintiff. (Post v. Arnot, 2 Denio’s R. 344.)

III. The plaintiff therefore properly filed his bill to redeem the stock, the amount due having been tendered and refused, and the defendants being more than overpaid by the dividends received; for the excess of which,,they were liable to account. (2 Story’s Eq. §§ 1030, 1031; Hart v. Ten Eyck, 2 John Ch. R. 62, 100; Kemp v. Westbrook, 1 Vesey Senior, 278 ; Denandray

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v. Metcalf, Pre. in Chy. 429; Harrison v. Hart, Comyn’s R. 392.)

IV. The court of chancery had jurisdiction of the relief sought by the bill. (1.) There was.no remedy at law, either for the stock or dividends, the plaintiff’s title having become absolute there, by the non-payment of the mortgage money when it became due. (2.) The plaintiff’s remedy was in, equity, because the defendants had not filed a bill to foreclose, but might do so, or sell the stock on notice, and the plaintiff was authorized to anticipate and prevent such proceedings by this suit. The right to foreclose, and the right to redeem, are reciprocal. (1 Powell on Mortg. by Rand, 385.) (3.) The jurisdiction of equity was necessary to compel a re-transfer of the -stock ;• the plaintiff was not bound to be content with damages, even if there was a remedy at law. .(4.) It was also necessary to restrain the defendants from receiving dividends, and from ' transferring the stock, as well as for the appointment of a receiver of. the dividends themselves, all of which are distinctly prayed for. (5.) The account was also necessary to be taken of the amount due, and the dividends received, and this alone, made the subject matter of the suit, one of concurrent equitable jurisdiction.

J. M. Mason, for the defendant.

I. The complainant has a complete and adequate remedy at law.

II. A bill to redeem stock that has been mortgaged or pledged, is allowed only upon the ground that a discovery or account is necessary. (2 Story Eq. Jurisp. § 1032; Kempt v. Westbrook, 1 Ves. Sen. 278; Jones v. Smith, 2 Ves. Jr. 372.)

III. The jurisdiction of the court in taking an account is consequent upon the discovery, and is not upheld when the discovery fails, or is not asked for by the bill. (1 Story Eq. Jurisp. §§ 456, 458; Ibid. § 74, and sections immediately preceding; Jeremy’s Eq. Juris. 504; Dunwiddie v. Bailey, 6 Ves. 136; 15 Ves. 358; Frietas v. Don Santos, 1 Young & Jer. 574;

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King v. Rossett, 2 Ibid. 33; and see Crane v. Burrell, 10 Paige, 333.)

IV. The complainant, by waiving an answer under oath, nas waived-the only ground on.which the bill can be sustained, and the bill should be dismissed.

Bv the Court.

The bill was filed to redeem stock in a manufacturing company, and for an account of profits of the stock, and the defendant demurs.

It is said that a mortgage passes the title to the mortgagee, subject to be defeated on payment of the mortgage debt. And it is admitted, that in case of forfeiture by non-payment on the day, the mortgagor may come into a court of equity for the purpose of redeeming. But it is -insisted that in case of a pledge, though the possession passes to the pledgee, the title remains in the pledger, and in case of non-payment, the pledger must bring his action at law for the redemption of the article pledged; or rather for its return, or for compensation in damages. Admitting the transaction in this case, according to the ruling in Wilson v. Little, 2 Comstock 443, (S. C. 1 Sand. S. C. R. 351;) was a pledge and not a mortgage of the stock, yet though termed a pledge the legal title passed, and the same reason might exist, therefore, for coming into equity to redeem. In that case, and in that of Allen v. Dykers, 3 Hill 593 , which were both actions at law,, the plaintiff did not seek a return of the stock, but compensation in damages. Here the • plaintiff asks for a re-transfer of the stock. In Kemp v. Westbrook, 1 Vesey Sen. 278, Lord Hardwicke says: “ I will not say in general that there is a right to come into equity in every case to redeem pledged goods, yet there are cases where it may be. As the pawnee of stock is not bound to bring a bill of foreclosure of the equity, of redemption of the stock, but may sell it, and notwithstanding the mortgagor may bring a bill here for an account of what is due, and to have a transfer to him.”

It would seem that in case of pledging stock, where the legal title passes, the remedy would be the same as upon mortgages. Indeed-, the distinction seems to be only in name in this respect,

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though it may be considered as real, as was the case in Wilson v. Little, where the action was for the recovery of damages, and not for a re-transfer.

“ 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." (2 Story’s Equity, § 1032.)

Here an account is wanted, and the bill avers that the loan was made of the firm which was composed of the defendants; that the certificate of stock was first given to the defendant Hayward, for the security of the .firm; that the firm was subsequently dissolved, and Hayward transferred the certificate to the other defendant, Yandervoort, who has continued to receive the dividends.

It appears to us to be, therefore, a proper case for a bill in equity, and we think the plaintiff selected the right forum for the determination of the controversy.

The demurrer must be overruled.