
    Warner v. Watson & Gibson and Others.
    (Supreme Court—Kings County,
    Special Term,
    June, 1893.)
    On the fraudulent sale of pledged stock to a bona fide purchaser, the pledgor is entitled to dividends declared thereon, but not payable at time of purchase.
    The question in this case is whether a bona fide purchaser of railroad stock, “dividend on,” upon the Hew York Stock Exchange, is entitled to dividends declared, but not payable at the time of such purchase, as against the owner of the stock at the time the dividend was declared, who had indorsed an irrevocable power of attorney upon the stock certificate and pledged the stock for a time loan with parties who fraudulently, and without notice to the owner, had, before the loan was due, sold the stock upon the street.
    
      Frederick A. Ward, for plaintiff.
    
      F. Ellery Anderson and Hoadley, Lauterbach Ac Johnson, for defendants.
   Cullen, J.

The dividends for which this action is brought were declared by the Delaware and Hudson Canal Company, out of the profits of the year 1891, payable quarterly during the year 1892 to stockholders of record at various prescribed times during that year. By the declaration of these dividends the dividends became separated from the stock, except as qualified by the provision that the same were payable to the stockholders of record at subsequent periods (Hopper v. Sage, 112 N. Y. 530), and after the declaration of the dividend a transfer of the stock does not transfer the di/vidend. Hill v. Newichawanick Co., 8 Hun, 459. This case is sought to be taken out of the general rule on two grounds: First, that the purchase was made at the stock exchange, where by custom dividends declared pass with the stock till .the books of the company close; second, the qualification that the dividend should be payable only to stockholders of record at the future periods. I cannot see that the custom of the stock exchange can affect the question between these parties. The plaintiff’s assignor was not a member of the exchange, nor an operator or speculator in stocks, nor did the loan relate to any stock transaction. It was an ordinary loan, and had the pledgee been honest, the stock would never have appeared on the exchange. The act of the pledgee was a larceny under the Penal Code.

Where property is lost by a felony, I cannot see how, in this state, the loss of the owner can differ, depending on the market where the purloined property is disposed of.

What distinguishes this case from the many cases cited, is, that the transaction by which it was placed in the pledgee’s power to deprive the pledgor of this stock never contemplated any connection with dealings on the exchange.

The rights of the plaintiff must be the same as if the original loan and subsequent sale had been had with tea merchants.

The remarks in Hill v. Newichawanick Co., 8 Hun, 459, as to the effect of such a sale made by brokers at the exchange have no application to the case at bar. There, the Park Bank had an order for the dividend from the pledgor, and hence the same power to dispose of it as of the stock, and the only question was whether the bank had actually sold it by the sale of the stock. The question was just the same as if the sale had been made by the owner. Here the question is what shall the owner lose by the tortious act of another.

The law determines that, and the stock exchange cannot, by rules or custom, increase it, except as to its members, or as to transactions which presumably were intended to be made in the ordinary course of business there had. As to the second ground, the defendants never transferred the stock so as to entitle themselves to the dividends. They have no greater equities than the plaintiff. Had the plaintiff sold them the stock it might be well argued that he had put it in their power to transfer the stock. He contemplated that they should do so, and be estopped from claiming the dividends.

But here the question is, which of two innocent parties shall suffer for the wrong of another ? The equities being at least as great for the plaintiff as for them, the defendants must-show that they have strictly entitled themselves to the moneys they seek to obtain.

• Judgment for plaintiff, with costs.  