
    Cornelius F. Timpson, Resp’t, v. Henry Allen et al., App’lts.
    
      (New York Common Pleas, General Term,
    
    
      Filed February 28, 1894.)
    
    1. Brokers—Stock.
    The receipt and deposit of a check, drawn to the order of stock brokers and brought to them by their agent, make them liable to account to the drawer for the proceeds, which they cannot safely pay out except under his direction.
    2. Same. *
    Though the account is kept in agent’s name, his orders will not protect them ; they are bound to ascertain what are the actual orders which he received from the owner.
    3. Same.
    In such case, their liability is the same as though they had notice of the facts, which inquiry could or might have elicited.
    4. Same.
    The presumption that the person in whose name the account stands is the party m interest, does not arise, where such person is an employe or agent, and the real party in interest has been disclosed.
    5. Same.
    The principle that where one of two innocent parties must snffer from the act of a third person,-etc., is not applicable, where the brokers, without inquiry, treat the account and moneys as the property of their own agent, thus assisting him to inflict a loss upon the customer.
    6. Same.
    They are chargeable with their own knowledge derived from the receipt of the customer’s check to their order.
    Appeal by defendants from a judgment in favor of plaintiff entered upon the report of a referee. The action was brought for an accounting against defendants as brokers, and for the value of one hundred shares of Tennessee Coal and Iron stock purchased and held by them on plaintiff’s account. The referee found $2,-303.76 due from defendants to plaintiff,'with interest from November 15th, 1892. and gave judgment accordingly.
    
      Charles H. Brush. (Charles F. Mathewson, of counsel), for app’lts; William, A. Abbott, for resp’t.
   Daly, C. J.

The defendants Henry Allen & Co. were grain and stock brokers in the city of Hew York and W. J. II. Ballard was employed in their office. He was not hired by the firm, but by one Palmeter, an employee of the firm, and received a salary which was paid by the firm, but charged to Palmeter. His employment in and about the office and business of the defendants was ostensibly that of a clerk, or of one connected with the business and transacting it with and for the firm’s customers. He solicited custom and business for the defendants and actually had authority to direct the opening of accounts with customers he procured, his orders in respect thereof and and in the management of the accounts being obeyed by the firm and its employees and his directions for buying and selling given, or transmitted by him to the Board member of the firm were duly executed.

He induced the plaintiff to open an account with the defendants, first for speculations in grain, afterwards in stocks, the latter to be carried on under the name of Ballard A. He received from the plaintiff checks for money to open these accounts, which checks were drawn by the plaintiff to the order of the defendants and received by their' cashier, indorsed by him in their name and deposited to their credit. Ballard directed the accounts to be opened in the name of W. J. H. Ballard A. and his directions were obeyed. Subsequent checks for margins were drawn by plaintiff to defendant’s order and indorsed and deposited like the others. Ballard bought and sold stocks as directed by plaintiff from ti me to time and among other stocks bought by plaintiff’s direction were one hundred shares of Tennessee Coal and Iron. This stock was subsequently sold, without plaintiff’s knowledge, by the direction of Ballard, who also drew and appropriated to his own use moneys from the account in fraud of plaintiff’s rights, with the result that the account showed ultimately an indebtedness to defendants. When the plaintiff, appraised of the misdeeds of Ballard, demanded an accounting, the defendants ignored any interest on his part in the account and claimed to be protected by the orders of Ballard, an ostensible principal in the transactions.

The authority of Ballard, actual and apparent, constituted him the agent of defendants in dealing with the plaintiff, so that the directions of the latter given to Ballard, were, in effect, given to defendants the same as if they had been personally communicated to them. They knew that the account he opened in his own name was the account of a customer and that the customer was the plaintiff; this knowledge being imparted to them by the plaintiff’s check drawn directly to their order with which the account was opened and they assumed the obligation to faithfully carry out plaintiff’s instructions. In buying or selling and paying out moneys on Ballard’s order they took all the risk of his fulfilment of plaintiff’s orders, the same as if such orders had been communicated to one of the firm.

The receipt and deposit of the plaintiff’s check drawn to their order and brought to them by Ballard made them liable to account to plaintiff for proceeds which they could not safely pay out, except under 'the direction of the lawful owner. Sims v. U. S. Trust Co., 103 N. Y. 472 ; 4 St. Rep. 205. The orders of Ballard did not protect the defendants, who were bound to ascertain what were the actual instructions he received from the plaintiff. Had they inquired, it would have been disclosed that the account which Ballard opened with checks in his own name, was the plaintiff’s account, to be known as Ballard A. and that the instructions given to Ballard were given to him as the agent of defendants. As they refrained from making an inquiry, the liability of the defendants is the same as if they had notice of the facts which inquiry could, or might, have elicited.

The several grounds upon which defendant seeks to escape liability will be considered. It is' claimed that the plaintiff instructed Ballard to conceal his interests in the account from the latter’s principals. This contention is founded upon the admitted fact that plaintiff instructed Ballard to open an account under the name Ballard A., because he did not wish it known that he was operating in stocks ; but there is no evidence that he intended the facts to be concealed from the defendants and there was, in fact, no concealment from them ; because the plaintiff opened the account with his own checks drawn to their order; a direct transaction with them in his own name and constituting notice that the money was deposited with them was his money and the account was his account.

Defendants claim the benefit of the presumption that the person in whose name the account stands, is the party in interest, from whom they are justified in taking instructions. Willard v. White, 56 Hun. 581; 32 St. Rep., 151. The case cited was that of an account opened with New York brokers by correspondents in another city; although the correspondents were known to be brokers and presumably acting for third parties, the New York dealers were justified in treating them as principals and acting upon their instructions. But there could be no presumption in this case that Ballard was the owner of this account because he opened it in his own name, for he was the employee and agent of the defendants and he disclosed the real party in interest to his principals by delivering to them the checks of the latter payable to their order with which the account was opened. The defendants also invoke the principle that where one of two innocent parties must suffer from the act of a third person that party must sustain the loss who has enabled a third person to. do injury. The application of the doctrine is entirely against the defendants in this case even if they were innocent parties, which they are not. They knew that the account was opened with the plaintiff’s money and they could not pay it out -without order's, yet they refrained from inquiring for his instructions and treated the account and moneys as the property of their own agent, thus assisting the latter to inflict upon plaintiff the loss resulting from any temptation to which this dealing might have subjected him.

Nor are the remaining objections of defendant to this judgment any more substantial than the others: They claim that they are not chargeable with Ballard’s knowledge of the facts as to the ac-count because he was acting independently and adversely, to ■their interest. The answer is that the defendants are chargeable with their own knowledge derived from the receipt of the plaintiff’s checks to their order. They claim that no notice is to be imputed from the manner in which the checks were drawn because the plaintiff’s actual instructions to Ballard were to place them to Ballard’s account. But the plaintiff gave no such instructions. His direction to Ballard was to place them to plaintiff’s account under the name of Ballard A., which was adopted as a title for the account and in no wise constituted Ballard the owner of the .moneys or property embraced in it. They claim that plaintiff’s own negligence is the cause of his loss in that he opened his accountin the name of an employee of defendant and thus himself opened the door to the fraud and imposition subsequently practiced upon him. This contention is answered by defendants’ own suggestion that the possibility of fraud could have been avoided by calling the attention of the defendants or their cashier to the fact that the account was the plaintiff’s; but this was done in the most effectual manner by the plaintiff’s opening the account with his own checks drawn to the defendant’s order, the legal effect of which was to change them with the obligation of paying out no part of the proceeds without his instructions.

Ho other point made upon this appeal requires the reversal of a judgment founded upon the clearest principles of justice and supported by the able opinion of the referee. As to all questions of fact which the referee was called upon to decide where there was a conflict of evidence, we think the preponderance is clearly with his findings. Where the testimony of Ballard is opposed to that of plaintiff, we do not hesitate to say that it was entitled to no more weight than the referee gave it.

The judgment should be affirmed, with costs.

All concur.  