The plaintiff appeals from a judgment upon dismissal on the pleadings and on its opening of the case at Trial Term, and from an order denying its motion, for a new trial. The plaintiff, a stockbroker, sues to recover' a balance of money lent to the defendant, its client, to buy stocks for the latter, with an agreement that such stocks would be held by the plaintiff as collateral security for the loan. There was no plea of tender of the securities or of demand, and upon the argument of the motion for dismissal the plaintiff admitted that it still, held- the stock as collateral security for the debt in suit; that the certificates were so indorsed that it could negotiate them and make good title to the stock in a transferee, free from any claim of the defendant; that it did not produce the stock or the certificates on the trial; that it did not have them present, and that it made no offer to surrender the same or to have the same in court. Such-admissions “ deliberately and intentionally ” state facts which present the question which we shall consider. (See Hoffman House v. Foote, 172 N. Y. 351.) There was the relation of pledgee' and-pledgor. (Content v. Banner, 184 N. Y. 124.) But in the absence of any special agreement for first resort to the collateral the general rule is that the pledgee is neither required to realize upon it nor to return it before action upon the debt. (De Cordova v. Barnum, 130 N. Y. 615; Benecke v. Haebler, 38 App. Div. 344, 348; affd., 166 N. Y. 631.) The pledgee may have sold the collateral and, therefore, cannot produce it. But when the court comes to the ascertain*303ment of the debt, the sale is considered and the proceeds thereof are charged against the debt, or if such sale was not binding on the defendant, or if it was conversion, then the pledgor may insist on credit to the extent of the market value of the collateral. Thus the pledgor would receive the full benefit of a proper sale, while to deny recovery for the debt to the pledgee, if any debt survived such credit, Would be in the nature of a penalty for a sale of the collateral to the extent of wiping out the debt, although the action rested upon the debt and not upon a wrongful sale of the collateral. (See Gruman v. Smith, 81 N. Y. 25; Minor v. Beveridge, 141 id. 399.) All that the pledgee is entitled to in such an action is to recover the debt. If he still have collateral which he may negotiate, he should not recover the debt and yet be left free to negotiate the collateral for his own benefit. He might do this thing to leave the defendant to perhaps an unsuccessful pursuit of him or of one who is a bona fide holder for value. This, to use the expression in Ocean National Bank of N. Y. v. Fant (50 N. Y. 476), “would be most unreasonable. ”
I think then, in this case, as the collateral was negotiable by. the plaintiff it should have producéd it at the trial, (Ocean National Bank of N. Y. v. Fant, supra; Jones Pled. § 106; Coleb. Neg. Sec. § 106; Holmes & Griggs Co. v. Morse, 53 Hun, 58.) It is true that the plaintiff might have insisted upon proceeding after it had been charged with the face value of the collateral (Coleb. Neg. Sec. § 106), but it did not, nor did it appear that if this had been done there would have been any apparent debt. I advise affirmance. I think that it should be clearly understood, however, that such dismissal was not upon the merits. (Nichols New York Practice, 2211.)
The judgment and the order are affirmed, with costs.
Hirschberg, Burr, Thomas and Carr, JJ., concurred.
Judgment and order affirmed, with costs.