[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 27 The learned court below erred, we think, in holding that a sale of the stock by Fitch Co., without notice, although irregular, and technically amounting to a conversion, operated as matter of law as an extinguishment of the entire claim of the plaintiff, and debarred him from maintaining an action thereon. The relation of the parties was that of pledgor and pledgee. (Markham v.Jaudon, 41 N.Y. 235; Baker v. Drake, 66 id. 518.) For a conversion of the pledge, the pledgee was liable for the damages sustained by the defendant, but whether they would equal the amount of the claim would depend upon the facts developed. The rule for adjusting damages in such a case was settled by this court in Baker v. Drake (53 N.Y. 211), overruling Markham v. Jaudon (supra), upon the rule of damages, but leaving it undisturbed in other respects. The action was not based upon the wrongful sale, but upon the debt for the advance made by the brokers *Page 28 to purchase the stock. The title of the stock when purchased was in the defendant, the advance of the whole or a portion of the purchase-money created the relation of debtor and creditor, and the stock put up as security, together with any additional amount called a margin, was a pledge to secure the debt.
In such a transaction it is expressly or impliedly agreed that the margin (so called) shall, if the stock depreciates, be replenished and kept good upon demand, and upon failure to do so, The stock may be sold upon reasonable and customary notice. The stock in question did depreciate, a call for additional margin was made and complied with, a second call was made, but not responded to, and the brokers sold the stock, but neglected to give notice to defendant. This rendered the sale irregular, and constituted a conversion. The action was brought for the balance due to the brokers for the advance after deducting the amount for which the stock sold. The defendant was not bound by this sale for want of notice, and might insist upon full indemnity for his loss or injury, but such loss was not necessarily the whole amount of the plaintiff's claim. The stock sold at 90. Suppose that was then its full value, and it had gone down to 50 and remained there, it is very clear that so far from being injured, the defendant would have been benefited by the sale. The defendant cannot claim a greater benefit than would have been derived if the act complained of had not been committed. The defendant might have shown that the market value of the stock at the time of the sale exceeded the price for which it was sold, and he was entitled to a reasonable time after notice of the sale to replace the stock, and if in the meantime it had advanced in price, the defendant would have been entitled to the difference. (Baker v. Drake, supra.) Beyond this he was not legally injured. (Id.)
The judgment should be reversed, and a new trial granted, costs to abide event.
All concur.
Judgment reversed. *Page 29