Finch, J.
The question to be determined on this appeal is, whether the complaint states facts sufficient to constitute a cause of action. The defendants are stockbrokers with whom the plaintiff had an account. The complaint for a first cause of action alleges that at plaintiff’s request the defendants purchased for his account 100 shares of Remington Typewriter stock, which were carried for plaintiff with certain other stocks and held by defendants as collateral security for the payment of the balance owed by plaintiff; that an account was rendered to plaintiff showing a balance due as of August 1, 1921; that on or about said first day of August the defendants sold the branch of their business at which plaintiff had his account to another brokerage concern and that the plaintiff consented that his account with defendants, including the Remington Typewriter stock, should be transferred to said other brokerage firm and that plaintiff’s stock should upon such transfer be delivered by defendants to said other brokerage [543]*543firm. The complaint further alleges that on transferring plaintiff’s account the defendants did not deliver plaintiff’s 100 shares of Remington stock, but retained the same as security for the indebtedness to defendants arising because of the purchase price of the aforesaid branch business sold by the defendants to said other brokerage firm. The complaint further alleges that on ascertaining this fact the plaintiff tendered to the defendants the balance due upon the account, with interest, and demanded his said typewriter stock, which defendants refused to deliver, to plaintiff’s damage in the sum of $2,500.
For a second cause of action the complaint alleges the aforesaid facts down to the consent of the plaintiff that his account be transferred, and then alleges that the other brokerage firm to whom the account was transferred received said Remington stock but did not continue to retain the same, but wrongfully repledged said stock to the defendants as security for the indebtedness to the defendants because of the purchase price of the aforesaid branch business. Upon learning these facts plaintiff tendered to the defendants the amount due on his account and demanded his stock, as aforesaid.
For a third cause of action the aforesaid facts are alleged down to the point of plaintiff’s consent to the transfer of his account. It is then alleged that the firm to whom defendants’ said branch business was transferred did not continue to retain the Remington stock but, without plaintiff’s knowledge, repledged said stock to the defendants as security for an indebtedness by said firm to the defendants greater in amount than the sum remaining due from plaintiff to the defendants for the said purchase price of the stock, of which facts, it is alleged, the defendants had notice. It is further alleged, as in the other causes of action, that on learning these facts demand was made by plaintiff on the defendants for the stock, as aforesaid.
We are of the opinion that the complaint sets forth a good cause of action, in so far as the first cause of action is concerned. Plaintiff’s consent that his account be transferred to another concern was coupled with the condition that the stock which the defendants had purchased on his behalf be delivered to the concern to whom the account was transferred at the time of the transfer of the account. As noted defendants failed to' include the Remington stock in this transfer. There thus having been a failure on the part of the defendants to transfer and deliver the plaintiff’s Remington stock with the remainder of the account, the condition upon which plaintiff’s consent to the transfer of the account was obtained was not performed and, therefore, there was no novation [544]*544and the plaintiff was entitled to receive his stock from the defendants upon tendering the amount due to the defendants. To constitute a novation there must be an extinguishment of the original obligation and an executed mutual agreement among the parties to both the old and the new obligations, whereby the new is substituted for the old. (Inman v. Burt Co., 124 App. Div. 73; affd., 195 N. Y. 558.) In the case at bar there was no actual novation since there was no executed mutual agreement of substitution among the parties, and if reliance is placed upon the aforesaid consent of the plaintiff, as noted, such consent was a qualified consent only and the condition to which it was subject never was complied with and, hence, no novation took place. As was said in Cooke v. McAdoo (85 N. J. Law, 692): “ For the legal rule is well settled that if an agreement intended as a novation is conditional, the novation can only take effect by the performance of the condition before the debt is extinct. 29 Cyc. 1134.”
In so far as the other two causes of action are concerned, the appellant states that these are predicated upon the theory of there having been a complete novation but that the defendants became hable for a conversion of the stock thereafter. Assuming there was thus a novation because all the stock in the account was transferred and the Remington stock then repledged, the brokers to whom the account was transferred then became the pledgees of the stock, with the usual rights and liabilities of brokers in such case. As was said in Matter of Mercantile Trust Co. (210 N. Y. 83, 86): “ For purposes of general definition the relationship between customer and broker in relation to stocks which have been purchased and are being carried by the latter on a margin, has been held to be that of pledgor and pledgee.”
The duty of a broker who purchases stock for a marginal account is either to keep this stock or a like amount of similar stock in his possession, or if he repledges the same, not to do so otherwise than upon terms of immediate repossession upon tender of the exact amount owing to the broker by his customer.
A broker, therefore, who is requested by his customer to purchase securities for the customer’s account may purchase such securities in his own name and may repledge or otherwise dispose of the securities, the right so to do, however, being coupled with the condition that the broker must retain in his possession or under his control like securities in a sufficient amount, so that the client may obtain immediate possession of the securities to which he is entitled upon paying the amount due. As was said by Haight, J., in Caswell v. Putnam (120 N. Y. 153, 157): “ The plaintiff had not ordered the purchase of any specific shares of stock, that which [545]*545had been purchased was taken by the defendants in their own names for and on account of the plaintiff, who had the right to have it delivered to him upon his paying the balance of the purchase-price. * * * The defendants, under the arrangement, undertook to hold 100 shares of the stock, subject to his order, and this agreement was fully performed on their part, if at all times during the transaction they held on hand that amount of the Union Pacific Railroad Company stock, with which they could and did comply with any orders which he should or did make in reference thereto. One share of stock is not different in kind or value from every other share of the same issue and company. They are unlike distinct articles of personal property which differ in kind and value, such as a horse, wagon or harness. The stock has no ear-mark which distinguishes one share from another, so as to give it any additional value or importance; like grain of a uniform quality, one bushel is of the same kind and value as another.
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Finch, J.
The question to be determined on this appeal is, whether the complaint states facts sufficient to constitute a cause of action. The defendants are stockbrokers with whom the plaintiff had an account. The complaint for a first cause of action alleges that at plaintiff’s request the defendants purchased for his account 100 shares of Remington Typewriter stock, which were carried for plaintiff with certain other stocks and held by defendants as collateral security for the payment of the balance owed by plaintiff; that an account was rendered to plaintiff showing a balance due as of August 1, 1921; that on or about said first day of August the defendants sold the branch of their business at which plaintiff had his account to another brokerage concern and that the plaintiff consented that his account with defendants, including the Remington Typewriter stock, should be transferred to said other brokerage firm and that plaintiff’s stock should upon such transfer be delivered by defendants to said other brokerage [543]*543firm. The complaint further alleges that on transferring plaintiff’s account the defendants did not deliver plaintiff’s 100 shares of Remington stock, but retained the same as security for the indebtedness to defendants arising because of the purchase price of the aforesaid branch business sold by the defendants to said other brokerage firm. The complaint further alleges that on ascertaining this fact the plaintiff tendered to the defendants the balance due upon the account, with interest, and demanded his said typewriter stock, which defendants refused to deliver, to plaintiff’s damage in the sum of $2,500.
For a second cause of action the complaint alleges the aforesaid facts down to the consent of the plaintiff that his account be transferred, and then alleges that the other brokerage firm to whom the account was transferred received said Remington stock but did not continue to retain the same, but wrongfully repledged said stock to the defendants as security for the indebtedness to the defendants because of the purchase price of the aforesaid branch business. Upon learning these facts plaintiff tendered to the defendants the amount due on his account and demanded his stock, as aforesaid.
For a third cause of action the aforesaid facts are alleged down to the point of plaintiff’s consent to the transfer of his account. It is then alleged that the firm to whom defendants’ said branch business was transferred did not continue to retain the Remington stock but, without plaintiff’s knowledge, repledged said stock to the defendants as security for an indebtedness by said firm to the defendants greater in amount than the sum remaining due from plaintiff to the defendants for the said purchase price of the stock, of which facts, it is alleged, the defendants had notice. It is further alleged, as in the other causes of action, that on learning these facts demand was made by plaintiff on the defendants for the stock, as aforesaid.
We are of the opinion that the complaint sets forth a good cause of action, in so far as the first cause of action is concerned. Plaintiff’s consent that his account be transferred to another concern was coupled with the condition that the stock which the defendants had purchased on his behalf be delivered to the concern to whom the account was transferred at the time of the transfer of the account. As noted defendants failed to' include the Remington stock in this transfer. There thus having been a failure on the part of the defendants to transfer and deliver the plaintiff’s Remington stock with the remainder of the account, the condition upon which plaintiff’s consent to the transfer of the account was obtained was not performed and, therefore, there was no novation [544]*544and the plaintiff was entitled to receive his stock from the defendants upon tendering the amount due to the defendants. To constitute a novation there must be an extinguishment of the original obligation and an executed mutual agreement among the parties to both the old and the new obligations, whereby the new is substituted for the old. (Inman v. Burt Co., 124 App. Div. 73; affd., 195 N. Y. 558.) In the case at bar there was no actual novation since there was no executed mutual agreement of substitution among the parties, and if reliance is placed upon the aforesaid consent of the plaintiff, as noted, such consent was a qualified consent only and the condition to which it was subject never was complied with and, hence, no novation took place. As was said in Cooke v. McAdoo (85 N. J. Law, 692): “ For the legal rule is well settled that if an agreement intended as a novation is conditional, the novation can only take effect by the performance of the condition before the debt is extinct. 29 Cyc. 1134.”
In so far as the other two causes of action are concerned, the appellant states that these are predicated upon the theory of there having been a complete novation but that the defendants became hable for a conversion of the stock thereafter. Assuming there was thus a novation because all the stock in the account was transferred and the Remington stock then repledged, the brokers to whom the account was transferred then became the pledgees of the stock, with the usual rights and liabilities of brokers in such case. As was said in Matter of Mercantile Trust Co. (210 N. Y. 83, 86): “ For purposes of general definition the relationship between customer and broker in relation to stocks which have been purchased and are being carried by the latter on a margin, has been held to be that of pledgor and pledgee.”
The duty of a broker who purchases stock for a marginal account is either to keep this stock or a like amount of similar stock in his possession, or if he repledges the same, not to do so otherwise than upon terms of immediate repossession upon tender of the exact amount owing to the broker by his customer.
A broker, therefore, who is requested by his customer to purchase securities for the customer’s account may purchase such securities in his own name and may repledge or otherwise dispose of the securities, the right so to do, however, being coupled with the condition that the broker must retain in his possession or under his control like securities in a sufficient amount, so that the client may obtain immediate possession of the securities to which he is entitled upon paying the amount due. As was said by Haight, J., in Caswell v. Putnam (120 N. Y. 153, 157): “ The plaintiff had not ordered the purchase of any specific shares of stock, that which [545]*545had been purchased was taken by the defendants in their own names for and on account of the plaintiff, who had the right to have it delivered to him upon his paying the balance of the purchase-price. * * * The defendants, under the arrangement, undertook to hold 100 shares of the stock, subject to his order, and this agreement was fully performed on their part, if at all times during the transaction they held on hand that amount of the Union Pacific Railroad Company stock, with which they could and did comply with any orders which he should or did make in reference thereto. One share of stock is not different in kind or value from every other share of the same issue and company. They are unlike distinct articles of personal property which differ in kind and value, such as a horse, wagon or harness. The stock has no ear-mark which distinguishes one share from another, so as to give it any additional value or importance; like grain of a uniform quality, one bushel is of the same kind and value as another. This doctrine appears to be well sustained by authority. In the case of Horton v. Morgan (19 N. Y. 170) it was held that where the broker is to advance a portion of the purchase-money upon the security of the stock purchased, he may properly take title in his own name, and in such case he is not bound to keep it separate from other stock of the same kind owned by him, but fulfills his duty if he keeps in his possession, ready to deliver to his principal on demand, an amount of stock equal to that purchased by him. In the case of Stewart v. Drake (46 N. Y. 449-453) Allen, J., in delivering the opinion of the court, says that the duty of the brokers was fully performed ‘ if they had at all times stock on hand to meet the demand of the plaintiff when called upon or when required by the exigencies of the dealings between the parties.’ ”
Upon this assumed state of facts, namely, that there had been a novation, the relation of broker and customer between the plaintiff and defendants entirely ceased, and instead a relation of broker and customer came into being between the plaintiff and the brokers to whom his account was transferred. It is these latter brokers, therefore, who are accountable to the plaintiff. It is only upon the theory that there had been a conversion by the substituted brokers, in which the defendants participated, that the defendants can be held hable in conversion. It is necessary, therefore, for the complaint to allege facts showing that there had in fact been a conversion. The mere allegation that there had been a repledge of the plaintiff’s stock by the substituted brokers is not sufficient to sustain a cause of action, because from/ this the conclusion does not follow that said brokers may not have [546]*546retained in their possession similar stock which they could have delivered to the plaintiff had he demanded the same. Moreover, as between a broker and his client, such a conversion does not arise until it is shown that the broker has been unable to meet bis obligation to deliver the client’s stock upon demand and tender of the amount due. As was said by Scott, J., in Mayer v. Monzo (151 App. Div. 866, 868): “ It is settled that a broker who buys stocks for a customer upon margin, and to whom the customer still owes a part of the purchase price, is entitled to pledge the stocks so bought for so much of the purchase price as bis customer still owes. The broker’s whole duty to his customer under such circumstances is either to have on hand or under his control the stocks which he is carrying for his customer, but he is not required to do-both, that is to have the amount of stocks under control and also an equal amount on hand. The customer’s right to receive his securities accrues under such circumstances only when he tenders the amount he still owes and demands his stock. The refusal of such a demand constitutes the conversion. If the broker has the stock under his control (even if it be pledged), and can resume possession by paying the amount borrowed thereon, not exceeding the amount which the customer owes on account of the purchase, there has been no conversion.”
Also in Lawrence v. Maxwell (53 N. Y. 19, 23) the court said: “ The right of the pledgee to hypothecate the property pledged may deprive the pledgor of his remedy against third persons who have the property in possession, but will not affect the rights and remedies of the original parties to the pledge upon payment of the debt secured. The right to use, as well as the right to retain the pledge ceases the instant the lien is discharged by the tender or payment of the debt, or the performance of the covenant or engagement for which the security is given. When the offer and tender of payment of the debt was made to the defendant, the lien was discharged and the right of the plaintiff to his property became absolute. * * * Conceding the right to use the stock pledged, by way of hypothecation, or otherwise, as claimed, and that it was at the time of the tender and1 demand lawfully out of the actual possession of the defendant, it was his duty at once to regain the possession and restore the same to the plaintiff. A neglect or refusal to do so gave to the plaintiff an action as for a conversion of the property.”
Also in Rothschild v. Allen (90 App. Div. 233; affd., 180 N. Y. 561) Hatch, J., said: “ When they pledged the stock to secure their own loans they did so at the peril of being able to deliver the same if delivery was demanded by the owner and he tendered pay[547]*547ment.” (Italics not in original.) (See, also, McIntyre v. Whitney, 139 App. Div. 557; affd., 201 N. Y. 526.)
The foregoing authorities sustain the principle already noted that shares of stock purchased by a broker must not be pledged, except in such a manner that immediate possession may be had upon tender of. the amount due from the customer unless the broker has in his possession a like amount for delivery to the customer. Before an action in conversion, however, can be maintained against such broker, it is necessary for the plaintiff to show a demand and tender of amount due.
The valid objection to the second and third causes of action is, therefore, that the plaintiff has failed to,show a demand and tender of amount due to the-substituted'brokers and hence no conversion as to them is alleged.Since the defendants can only be hable for conversion upon the theory that they participated in a conversion of which the substituted brokers were liable and it has been shown that said substituted brokers are not so hable, it follows that the defendants are not liable in conversion so far as the allegations of the second and third causes of action are concerned. As noted, however, the first cause of action is vahd, and hence it was error to dismiss the complaint.
The order appealed from should be reversed, with ten dollars costs and disbursements, and the motion denied, with ten dollars costs.
Clarke, P. J., Merrell and Burr, JJ., concur; Martin, J., dissents and votes for affirmance.
Order reversed, with ten dollars costs and disbursements, and motion denied, with ten dollars costs.