are simply authorized to allow the insertion of allegations of fact existing when the action was commenced and upon which the action is to be maintained. Provision is then made by section 544 of the Code for what is called "supplemental pleadings." That section provides that: "Upon the application of either party, the court may, and, in a proper case, must, upon such terms as are just, permit him to make a supplemental complaint, answer, or reply alleging material facts which occurred after his 'former pleading, or of which he was ignorant when it was made. The party may apply for leave to make a supplemental pleading, either in addition to or in place of, the former pleading."

The facts which may be alleged by way of a supplemental pleading are "material facts which occurred after his former pleading, or of which he was ignorant when it was made." Just what is meant by the provision that this supplemental pleading may take the place of the former pleading is not clear, but it has been uniformly held that:

"The plaintiff could not, by a supplemental complaint, change the action in its entire scope and purpose by bringing in and substituting a new controversy, and a new and independent cause of action springing out of a transaction occurring since the commencement of the action between the defendants, with which the plaintiff had no connection." Prouty v. Lake Shore & Mich. So. R. R. Co., 85 N. Y. 275, and cases there cited.

It would seem that under these provisions of the Code the complaint in the action must consist of facts in existence at the time of the commencement of the action and upon which the plaintiff bases his right to relief. It may be amended by the court so as to include facts then existing and which are material to the plaintiff's cause of action. As to material facts which occurred after the service of the complaint, or of which the plaintiff was ignorant when his complaint was made, the plaintiff may allege such facts by way of supplemental complaint, and such a supplemental complaint may be served in place of the original complaint, in which case it would entirely supersede it. The plaintiff in this case has attempted to unite in one complaint, called "an amended and supplemental complaint," facts alleged in the original complaint, and which occurred prior to the service of his original complaint, and the facts which have occurred after the service of the original complaint and which she seeks to set up by way of supplemental pleading. I think this practice improper and that it should not be allowed. It is in substance commencing a new action to recover upon facts alleged after the commencement of this action and would introduce an element of uncertainty and confusion. The original complaint in this action was one in equity and demanded a judgment enjoining the defendant from proceeding to make such changes in the premises which had been leased to the defendant under orders of the tenement house commission. The new pleading proposed by the plaintiff as "an amended and supplemental complaint, alleges all the facts set up in the original complaint, and also other facts, not in the original complaint, which happened before the commencement of the action, and further alleges that subsequent to the commencement of the action the defendant entered upon the leased premises, constructed the appliances required by the tenement house commission, ejected the plaintiff from certain portions of the leased premises and caused the plaintiff substantial damage; and the relief that

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the plaintiff now demands is that the defendant be compelled to remove such appliances so placed upon the leased premises and that the plaintiff have judgment against the defendant for the sum of $15,000.

I think the plaintiff should have been granted leave to serve a supplemental complaint, setting up the acts of the defendant after the service of the former pleading in carrying out the acts which, when the former pleadings were served, were threatened, and stating the damages occasioned thereby, and asking to recover in this action such damage. Upon the trial the facts would then have been presented to the court under the original complaint upon which the right of the plaintiff to maintain the action would depend, and the relief to which the plaintiff would be entitled would depend upon the facts alleged in the original and supplemental complaints; but if the plaintiff had no right to maintain the action as one in equity, the cause of action could not be bolstered up by the facts alleged after the commencement of the action. If upon the trial it appeared that the plaintiff at the time it was commenced was authorized to maintain it as an action in equity, the court would have power to retain the action, and to grant the plaintiff such relief as she was entitled to, although in consequence of the wrongful acts of the defendant after the commencement of the action, equitable relief would not give the plaintiff full relief; but it was irregular to attempt to set up by way in one complaint facts which occurred before and after the commencement of the action, and attempt thereby to sustain a new cause of action against the defendant.

For this reason I think this "amended and supplemental complaint" should not have been allowed, and that the order appealed from should be reversed, with $10 costs and disbursements, and the motion for leave to serve this pleading denied, with $10 costs, without prejudice to a motion to be made by the plaintiff, for leave to serve a proper supplemental complaint.

O'BRIEN, P. J., and LAUGHLIN and CLARKE, JJ., concur. PATTERSON, J., dissents.

(111 App. Div. 870)

FLYNN v. SMITH.

(Supreme Court, Appellate Division, First Department. March 16, 1906.) 1. TROVER AND CONVERSION-ACTION-EVIDENCE.

Certain stock was pledged with stockbrokers as collateral to a customer's margin account, but did not so appear on the stockbrokers' books. After their failure their assignee scheduled the brokers' claim against the customer as worthless, and later, not knowing that it was secured by the stock, sold the claim for a nominal sum to plaintiff's assignor. In a suit against the stockbroker's assignee for alleged conversion of the stock, he claimed that plaintiff's assignor, in purchasing the claim, was merely acting for the customer. Held, that it was error for the court to exclude evidence that defendant, when he assigned the the claim, had no knowledge that it was secured by the stock, and to refuse to permit plaintiff's assignor to answer how he came to purchase the account.

2. ASSIGNMEnts-SecureD CLAIMS-MEETING OF MINDS.

Where, at the time a claim, thought to be worthless, was assigned for $10, it was in fact secured by certain stock worth $1,120, and it appeared that neither party to the assignment had knowledge of such security, there was no meeting of minds, and the assignment was subject to rescission.

3. PLEADING-Motion for Judgment—ExcEPTIONS-WAIVER.

Where, after the denial of a motion for judgment on a counterclaim for want of a reply, defendant did not rest on his exception, but offered proof of the facts, be was not entitled to rely on such exception on appeal.

Appeal from Trial Term, New York County.

Action by John J. Flynn against Frank S. Smith. From a judgment in favor of plaintiff, and from an order denying defendant's motion for a new trial, he appeals. Reversed.

Argued before O'BRIEN, P. J., and McLAUGHLIN, INGRAHAM, LAUGHLIN, and HOUGHTON, JJ.

George Coggill, for appellant.

Charles De Hart Brower, for respondent.

LAUGHLIN, J. This is an action for the conversion of 10 shares of the capital stock of the Crocker Wheeler Electric Company. One Alfred W. Law owned the stock and had pledged the same to Henry Marquand & Co., stockbrokers, as collateral security to his account as their customer speculating in stocks on margins. The brokers made a general assignment for the benefit of creditors to the defendant. Their books showed that Law was indebted to them in the sum of $4,120.23. The defendant as such assignee duly advertised and sold the claim at public auction. It was purchased for $10 by one Hunter, a lawyer, and the next day the defendant executed and delivered to him an assignment thereof, with a statement of the account annexed, assigning all defendant's "right, title, and interest in and to any and all sum or sums of money now due, or to grow due, upon the annexed account, which said account was duly assigned to me by the firm of Henry Marquand & Company." The stock came into the possession of defendant as assignee, but the books did not show, and he was not aware, that it was held as collateral to Law's account until seven days after the sale, when Hunter demanded it upon the ground that it passed to him as incidental to the account. The defendant declined to deliver it and offered to return the $10 purchase price of the account, which was refused. Neither the account itself nor the advertisement or assignment thereof contained any reference to this stock or indication that any security had been put up or held as margin. Within two months after the sale of the account the defendant sold the stock for $1,120, which apparently was its fair market value then and also at the time of the sale of the account. Hunter subsequently assigned to plaintiff the claim against. Law on the account, all his right to the stock, and his claim against defendant for refusing to deliver it.

The defendant set up as a separate defense, and as a counterclaim, that he did not know that this or any stock was held as margin to Law's account; that he did not intend to sell the stock with the account or to execute any assignment thereof to him; that the sale and assignment

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were made under the misapprehension that there was no margin to secure Law's claim; that Hunter was acting for Law in purchasing the account, and he demanded the rescission of the sale and cancellation of the assignment upon his restoring the consideration. The defendant testified to these facts, and they are not expressly contradicted. He further showed that in the inventory and schedule filed by him as assignee he described this claim against Law as an account receivable, $1,120.42, of "no value," and "uncollectible," and he included this stock in a schedule of securities found in the safe deposit vault, which, on information derived from clerks of his assignor, he inventoried as "believed to be lodged by clients for safekeeping, and to which the assignors had no claim by way of title or lien, and consequently unappraised." There was no reference to this stock on the ledger containing Law's account. The only reference in the books of the assignors to the stock was in the register of securities in the cashier's safe, which indicated that they belonged to Law; and this was referred to in a note to the schedule in which they were inventoried without having been appraised. According to the testimony of Law, Hunter did not know until after the sale that the account was secured by this stock; and on objection interposed by counsel for plaintiff the court excluded Hunter's testimony on this point, upon the ground that it was immaterial whether or not Hunter knew what he was purchasing.

The court also sustained an objection to a question put to Hunter by counsel for defendant inquiring how he came to buy the account, and defendant took an exception. Those rulings were manifestly erroneous. It clearly appeared that the defendant did not intend to sell any right or interest in the stock; and, if this evidence had been received, it might have conclusively appeared that Hunter did not intend to buy any right or interest therein. Brown v. Lanphear, 35 Vt. 252. This evidence, with that already in, might have shown a mutual mistake concerning a material fact, which would have required a rescission at the instance of the party prejudiced. It is true that the collateral goes with the debt, and the owner of the debt holds it as trustee for the debtor, and therefore it passes as incidental to a sale of the debt, and yet it is usually, and especially in this case, a very important incident, many times more important than the debt itself. Knowledge of it, therefore, cannot be immaterial. If, on the other hand, Hunter knew that the stock was pledged as collateral to the account, he must have learned it from Law, with whom he occupied offices and for whom he was acting in part without a definite arrangement as to their respective interests. Law knew all the facts, including the value of the stock, and undoubtedly knew that the defendant had scheduled the account as worthless and the stock as merely held on deposit; and, if Hunter knew these facts, as is quite likely, he was under a duty to disclose them to the defendant, who was acting in a trust capacity, and was not, owing to the condition of the books, chargeable with negligence.

However, the action is not defended on that theory, and there are other grounds upon which this unjust judgment may be reversed. The defendant knew that he was selling the account which he had inventoried as valueless and which brought $10; but he had no knowledge as to the existence of the stock as collateral, and he did not intend to seli

for $10 a secured debt worth more than 100 times that sum. Nothing was done to lead the plaintiff's assignor to believe that he was to receive the collateral, and he could only have known of the existence thereof through Law. The defendant could not have intended to part with any interest in the securities, since he did not know that he held them as collateral. If, as already observed, plaintiff's assignor was equally unaware of the fact that the stock was held as security, he could not have intended to purchase the right to the security. In these circumstances, even if the form of the sale would in law carry the securities to the plaintiff, it is clearly a case for rescission on the ground that the minds of the parties never met as to the poperty and property rights.

Moreover, the defendant merely asks a rescissi n of the contract, not a reformation. He does not ask to retain the purchase rice and have the contract so amended as to except the stock. He offes to return the consideration and to restore the plaintiff's assignor to his former position and asks like restoration for himself. In such case relief may be had, not only on the ground of fraud or mutual mistake, but also upon the ground that, owing to lack of knowledge of a material fact by the party seeking the relief, without negligence on his part, the minds of the parties never met with respect to the property or property interests transferred or even the consideration therefor. Smith v. Mackin, 4 Lans. 41; Bedell v. Bedell, 37 Hun, 419; Crc we v. Lewin, 95 N. Y. 423; Duncan v. N. Y. Mutual Ins. Co., 138 N. Y. 88, 33 N. E. 730, 20 L. R. A. 386; Moffett Co. v. City of Rochester (C. C.) 82 Fed. 255; Id., 178 U. S. 373, 20 Sup. Ct. 957, 44 L. Ed. 1108; Harris v. Pepperell, L. R. 5 Eq. 1; Werner v. Rawson, 89 Ga. 619, 15 S. E. 813; Diman v. Providence, W. & B. R. Co., 5 R. I. 130; Am. & Eng. Enc. of Law, vol. 24, p. 618. The facts of the case at bar fairly bring it within this rule of law.

No reply was served to defendant's counterclaim for rescission. The counterclaim was good. The facts pleaded constituted not only a defense to the action for conversion, but ground for affirmative relief to have the sale of the account rescinded. At the commencement of the trial the defendant moved for judgment on the counterclaim, which was denied, and he excepted. We think this was error also; but since defendant did not rest on his exception, but offered proof of the facts, we think that we should not direct final judgment on the counterclaim. It follows that the judgment and order should be reversed and a new trial granted, with costs to appellant to abide the event.

O'BRIEN, P. J., and INGRAHAM, J., concur. McLAUGHLIN and HOUGHTON, JJ., concur in result.