[225 N. Y.] Opinion, per HISCOCK, Ch. J. [Feb., through which plaintiff was induced to subscribe for stock and enter into the contract of employment related to something which was to occur in the future in the way of organization of the corporation and payment for its stock in full with property and cash, we think the allegations in the complaint describe a case where a defendant has fraudulently and positively as with personal knowledge stated that something was to be done when he knew all the time it was not to be done and that his representations were false. It is not a case of prophecy and prediction of something which it is merely hoped or expected will occur in the future, but a specific affirmation of an arrangement under which something is to occur, when the party making the affirmation knows perfectly well that no such thing is to occur. Such statements and representations when false are actionable within the authority of Adams v. Gillig (199 N. Y. 314). Therefore, we think that a cause of action is alleged against the defendant corporation for rescission of the stock subscription and restoration of the money paid by the plaintiff thereon with proper credits and debits for dividends and interest. It is more doubtful whether any cause of action has been stated for rescission of the contract of employment made by the plaintiff with the corporation. It is, however, unnecessary to pursue this question to a final determination for plaintiff needs no equitable relief on that subject to protect whatever rights he has. His contract with the corporation is not alleged to have been for any definite time and, therefore, he could terminate it whenever he wanted to. Furthermore, no ground is made out in his complaint for any accounting for damages. It does not appear that the contract which he had with the preceding partnership was for any definite time beyond 1906 and that he, therefore, lost anything by abandoning it, and there is no allegation which indicates 1919.] Statement of case. [225 N. Y.] that if he had not taken the contract which he did with the corporation he would have done better anywhere else or under any other contract he could have secured. The demurrer of the individual defendant is well made. In this action for rescission no cause of action is alleged against him. In making the alleged false representations he acted on behalf of the corporation and the money paid by plaintiff to him was so paid for the purpose of being turned over to the corporation for stock and was in fact so turned over. It is not necessary to consider what his liability would have been in some other form of action; he certainly is not a necessary or proper party to this action and no ground for relief is stated as against him. Therefore, the judgment sustaining the demurrer of the individual defendant and dismissing the complaint should be affirmed, with costs, and the judgment sustaining the demurrer of the corporation defendant and dismissing the complaint should for the reasons stated be reversed, and the judgment of the Special Term as to such defendant affirmed, with costs in this court and the Appeilate Division. CHASE, HOGAN, CARDOZO, POUND and ANDrews, JJ., concur; MCLAUGHLIN, J., not voting. Judgment accordingly. SUSAN D. BRIGHTSON, Appellant, v. JOHN CLAFLIN, Respondent. Pledgor and pledgee - conversion stock pledged to secure payment therefor when dividends declared on stock are cash and should be applied on the indebtedness sale of pledged stock with acoumulated dividends thereon unlawful - rights and remedies of pledgor. 1. Under ordinary circumstances it is the right of a pledgee of stock to collect dividends declared thereon and it is his duty to apply them to the reduction of the indebtedness for which the stock is held [225 N. Y.] as security. He represents not only his own interests as pledgee but also holds a duty to the pledgor. 2. Where dividends have been declared on stock but have not yet become payable a proper sale of the stock would necessarily be made with the forthcoming dividend still on it. But where dividends declared have been paid and have passed into the possession of the pledgee they are not a subject of sale. 3. Plaintiff's assignor subscribed for shares of the capital stock of the corporation of which defendant was president. He did not pay for the stock which was issued to him and in his name, but instead gave his notes to the corporation therefor and the stock was left with and held by the corporation as security for the payment of the notes. The corporation declared dividends upon this stock, and these dividends were for a time either paid to plaintiff's assignor or applied on his indebtedness. Thereafter dividends declared on the stock, and which were represented by checks, were placed by the corporation in a special account and the checks held by it without application to such indebtedness until the dividends amounted to a considerable sum. Disagreements having arisen, plaintiff's assignor was discharged from defendant's employ and defendant by a notice signed in the name of the corporation notified the assignor that at a given time and place there would be sold the stock theretofore pledged "together with the rights to uncollected dividends" from a given date. Applying the dividends at their full amount and value the stock was sold for less than it was worth. Plaintiff's rights were based upon an assignment to her by the pledgor subsequent to this sale. Held, that the defendant was guilty of conversion. These dividends had been detached from the stock and had become cash or the equivalent of cash which could not lawfully be sold. His misconduct infected the sale of the pledged stock, which under proper conditions might have been sold. Inasmuch as part of the entire transaction was unlawful the whole of it necessarily becomes so. (Wheeler v. Newbould, 16 N. Y. 392, followed.) 4. Defendant was chargeable with knowledge of the law which condemned the step which he was about to take and the pledgor did no act which enticed him to believe that the act was lawful or that his conduct would be accepted and acquiesced in. Neither was there any such delay of action by the pledgor or the plaintiff as to sustain a conclusion of law that there was acquiescence in what had been done and a waiver of rights which might have existed. 5. The real damages as the case now stands are those which the pledgor suffered by reason of an improper and unlawful sale as the 1919.] Points of counsel. [225 N. Y.] result of which there was realized a smaller sum than should have been realized for application on his indebtedness or for restoration to him in case there was a surplus over and above the indebtedness. Brightson v. Claflin, 173 App. Div. 967, reversed. (Argued January 21, 1919; decided February 25, 1919.) APPEAL from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered May 24, 1916, affirming a judgment in favor of defendant entered upon the report of a referee. The nature of the action and the facts, so far as material, are stated in the opinion. Barclay E. V. McCarty for appellant. The respondent was the author of the auction sale of May 29, 1907; and, consequently, he was liable, personally, in conversion, in respect of any property that was converted by the process of that sale. (Fishkill Inst. v. Bank, 80 N. Y. 162; Schultz v. U. S. Fidelity Co., 201 N. Y. 230; Russell v. McCall, 141 N. Y. 437; MacDonnell v. Buffalo Co., 193 N. Y. 92; Pease v. Smith, 61 N. Y. 477; Laverty v. Snethen, 68 N. Y. 522.) The sale of the nineteen uncollected dividends, theretofore due and collectible, was illegal; and, consequently, all those uncollected dividends were converted by the process of that sale. (Wheeler v. Newbould, 16 N. Y. 392; Jones on Collateral Securities [3d ed.], §§ 651, 661, 692; Gutman v. Schreiber, 173 App. Div. 670; Field v. Sibley, 74 App. Div. 81; Garlick v. James, 12 Johns. 146; Union Trust Co. v. Ringdon, 93 Ill. 458; Fletcher v. Dickinson, 7 Allen [89 Mass.], 23; Hill v. Newichawanick, 71 N. Y. 593; 8 Hun, 459; King v. Paterson, etc., R. R. Co., 29 N. J. L. [5 Dutch.] 504; Laverty v. Snethen, 68 N. Y. 522; MacDonnell v. Buffalo Co., 193 N. Y. 92.) The stock was sold, not separately, but coupled, as one entity, with the nineteen unsalable dividends; and, consequently, [225 N. Y.] Opinion, per IISCOCK, Ch. J. [Feb., the stock also was converted by the process of that sale. (Laverty v. Snethen, 68 N. Y. 522.) The plaintiff never lost, by "waiver or acquiescence," any right to object to the auction sale of May 29, 1907; for, on the trial court's findings of fact, five days before that sale took place, she warned the respondent, by written notice, that she declined to recognize the legality of the proposed proceeding. (Glenn v. Garth, 133 N. Y. 18; New York Rubber Co. v. Rothery, 107 N. Y. 310; Muller v. Pondir, 55 N. Y. 325.) John L. Wilkie, Arthur F. Gotthold and George J. Thomson for respondent. The sale of the uncollected dividends did not constitute a conversion. (Willoughby v. Comstock, 3 Hill, 389; Weir v. Dwyer, 62 Misc. Rep. 7; Nichols v. Eaton, 26 N. Y. 410; Milliken v. Dehon, 27 N. Y. 366; Strong v. Nat. M. B. Assn., 45 N. Y. 718; Porter v. Parks, 49 N. Y. 564; Brooklyn Bank v. Barnaby, 197 N. Y. 210; Small v. Housman, 208 N. Y. 115; Barber v. Hathaway, 47 App. Div. 165; Huggans v. Fryer, 1 Lans. 276; Jones on Collateral Securities [3d ed.], §§ 603, 651; Chapman v. Brooks, 31 N. Y. 75.) Plaintiff's right to object, if any, has been lost by waiver or acquiescence. (Brown v. Bowen, 30 N. Y. 519; McPherson v. Rollins, 107 N. Y. 316; Erie Co. Savings Bank v. Roop, 48 N. Y. 292; Garnar v. Bird, 57 Barb. 277; Krantz Mfg. Co. v. Gould Storage B. Co., 83 App. Div. 133; Hogan v. City of Brooklyn, 52 N. Y. 282; Schanz v. Sotscheck, 167 App. Div. 202; Manchester v. Braedner, 107 N. Y. 346; Shoemaker v. Benedict, 11 N. Y. 176; Brooklyn Bank v. Barnaby, 197 N. Y. 210; Matter of Kendrick, 107 N. Y. 104.) HISCOCK, Ch. J. This action is brought to recover for the alleged conversion, through sale, of certain stocks held as security and of dividends which had been declared thereon. The claim of conversion is predicated on the |