Action lies against the maker of a demand note without preliminary demand. (Parker v. Stroud, 98 N. Y. 379, 383; Cottle v. Marine Bank of Buffalo, 166 id. 53.) I see no reason why the. fact that the note was accompanied by collateral which, related solely, to it should vary the rule. For, if the fair implication was that the collateral should be surrendered at the same time the’ note was. delivered up, and the right of the maker to receive the collateral and the note “ stood upon the same footing,” as ..was said in Ocean National Bank of N. Y. v. Fant (50 N. Y. 474), then it follows that, if it was sufficient to produce the note on the trial, if was sufficient if the collateral was produced at that time. The discrimina*83tion to be made between this case and Fant's Case (supra) is that the latter case was against an indorser against whom demand must have been made. (Parker v. Stroud, supra.) I have no quarrel with the doctrine that where a demand was necessary the collateral as well as the note must be present to constitute a valid demand. Holmes & Griggs Co. v. Holmes & Wessell Co. (53 Hun, 58) was decided upon the authority of Fant's case; it was properly held that the makers of the note were entitled to receive the stock on payment of the notes, and that, in order to make a demand, both stock and notes must be held in readiness for delivery. It may be noted that in Holmes’ Case (supra) the court say that “ there does not seem to have been any tender of the stock at any time before the trial, nor, so far as we can find out, was there any tender of the stock upon the trial.”
It is contended that the conversion is shown by the co-operation of the pledgee with the other bondholders in the foreclosure of the mortgage in his assent that his proportionate share of the expenses thereof might be a lien upon the bonds and that the trustee might apply the bonds in payment at the foreclosure sale. A pledgee has the right to sue for and to collect the collateral security (Farwell v. Importers', etc., Nat. Bank, 90 N. Y. 483,489; Wheeler v. Newbould, 16 id. 392, 396; Nelson v. Eaton, 26 id. 410), irrespective of the time when the principal debt is due. (Warner v. Rising Fawn Iron Co., 3 Woods [U. S.], 514; Jones v. Hawkins, 17 Ind. 550; Jones Pledg. § 665) where it is said : “ The money, when received, is a substitute for the note, and is to be held upon the same terms and subject to the same rights and duties as the note.” The expression of the power to sell did not take away the power of collection. (Nelson v. Eaton, supra ; Farwell v. Importers', etc., Nat. Bank, supra.) The pledgee was entitled to require the foreclosure and sale of the mortgaged property upon default upon the bonds. (Coleb. Col. Sec. § 124; 2 Cook Stock & Stockh. & Corp. Law [3d ed.] § 825; Land Co. v. Peck, 112 Ill. 408, 439; McCurdy's Appeal, 65 Penn. St. 290, 297; Allen v. Dallas & Wichita Railroad Co., 3 Woods [U. S.], 316.) The proceeds of a collection are a substitute for the collateral, to be held by the pledgee as trustee for the purposes of the pledge. (Farwell v. Importers', etc., Nat. Bank, supra; Jones Pledg. supra.) As the pledgee was entitled to charge the expenses of the collection *84against the pledgor (Jones Pledg. § 680; Griggs v. Howe, 2 Abb. Ct. App. Dec. 291), it cannot be said that his agreement that the bonds might he charged with a proportionate share of the expenses of collection, i. e., of the foreclosure, was beyond his implied powers.
If it had appeared that the property had been sold under the foreclosure decree and that the purchase price was paid by application of the bonds, and not in money, then a serious .question woiild have been presented. There is evidence from which the court' might have found that the payment of the note had never been demanded. Therefore, the right of the pledgee might be strictly confined to enforce the payment of the bonds because there had been a default thereon. Under the authorities cited he might institute foreclosure as a means of collection, and he might enter upon the agreement for a foreclosure contemplated for that was the only procedure open to him for that purpose. (Batchelder v. C. G. W. Co., 131 N. Y. 42.) But collection by foreclosure would import a sale to realize money to be held by the pledgee as the cash return of the bonds, which were- payable in money. There is evidence that the pledgee entered into. the foreclosure agreement against the protest of the pledgor. If this is so he should be held strictly to his .power of collection, and, in the absence of any assent, lie should not be permitted to defeat the end of collection, which is cash. In Garlick v. James (12 Johns. 146), Thompson, Ch. J., said: “The authority of the' defendant with respect to the note could extend no further than to receiving the money due upon it, without first calling upon the plaintiff, in some way, to redeem. The money, when received, would be a substitute for the note, and to he held upon the same terms and subject to the same rights and duties as the note.” (See, too, Gage v. Punchard, 6 Daly, 229 ; Fairbanks v. Sargent, 117 N. Y. 320, 332.) The duties and relations of a pledgee are said by O’Brien, J., in Toplitz v. Bauer (161 N. Y. 325), to be “ governed more by the general maxims of equity than by the strict rules of the common law,” and lie' is to be regarded as clothed with a trust, first to pay the debt and then to account for the surplus. He must deal with the pledge “ in any way consistent with the general ownership and the ultimate rights of the pledgor,” and, consequently, “ he cannot deal with the pledge under his special and temporary property right so as to impair or to destroy it to the detriment of the *85pledgor.” (Lawrence v. Maxwell, 53 N. Y. 19.) If, then, through the acts of the pledgee, merely under his plea of a right of collection, the foreclosure sale had resulted so that the purchase price was paid by an application of the bonds instead of in money, this in effect would have been his substitution of property other than money in satisfaction of the bonds which he held in trust as pledgee. In Laverty v. Snethen (68 N. Y. 522) the court say: “ Every unauthorized taking of personal property, and all intermeddling with it, beyond the extent of the authority conferred, in case a limited authority has been given, with intent so to apply and dispose of it as to alter its condition or interfere with the owner’s dominion, is a conversion. (Bonv. Law Dict., title Conversion.) ” This definition was approved in Industrial & General Trust v. Tod (170 N. Y. 233). But it does not appear in this record that any proceedings were had subsequent to the entry of the foreclosure, and, therefore, no practical question is presented .for the consideration of the court. (See, too, Storm v. Livingston, 6 Johns. 44.)
The judgment should be affirmed, with costs.
All concurred, except Goodrich, P. J., who read for reversal.