
    BAKER v. N. Y. NATIONAL EXCHANGE BANK.
    
      N. Y. Court of Appeals ;
    
    October, 1885.
    Action against Bank for Amount of Check.—Bank; deposit as agent ; right of principal to recover of bank.— Factors.—Parties.
    Money received by a commission merchant or factor on the sale of his consignor’s goods, is held by him in a fiduciary capacity; and although mingled with the money of others, yet if made up in a sum deposited in bank to the credit of the factor as agent, it may be followed by the principal.
    Such a deposit is a trust fund, and if the bank has notice of the fact it cannot, even with consent of the depositor, apply it to payment of his indebtedness to the bank.
    
      The factor or agent, by giving the principal a check upon such account for the balance due him, sets apart, to him, so much of the deposit account.
    The factor testified that he sold the goods of various persons on commission, receiving sometimes money, sometimes checks, sometimes notes. He was accustomed to put the money in his safe, and pay therefrom his own expenses to the extent and sometimes in excess of the amount of commissions earned; to deposit the checks in bank to his credit in an account opened by him as agent, and headed with his name and the addition “ agt.to remit the notes to the consignor of the goods sold, with an account of sales from time to time, and his own check on such bank account for the balance due the consignor. Held, that a consignor, having received such a check, could, on the bank’s refusing payment because of a prior indebtedness of the factor to itself, maintain an action directly against the bank.
    In the absence of evidence that other consignorsor principals claimed to share the bank deposit in reduction of plaintiff’s claim, it was not necessary to make sucii other consignors parties.
    Appeal by the defendant from a judgment of the general term of the supreme court for the first department, affirming a judgment entered on a verdict directed for the plaintiff by the court.
    "Willard Baker and Milton A. Wilson, partners as Baker & Wilson, sued the New York National Exchange Bank, to recover the amount of a check to the order of the plaintiffs drawn by C. A. Wilson & Bro. upon the defendant.
    The complaint, after allegations in the usual form, stating plaintiffs’ copartnership and defendants’ incorporation, proceeded as follows:
    “III. That plaintiffs are manufacturers of wooden-ware, and send certain portions of their wares to the city of New York for sale upon commission.
    “ IY. That Messrs. C. A. Wilson & Brother, having business at the city of New York, as commission merchants, are the agents of these plaintiffs, and as such receive and sell for said plaintiffs their goods and wares upon commission.
    
      V. That intermediate the first day of November, 1878, and the first day of February, 1879, these plaintiffs shipped and consigned to said C. A. Wilson & Brother, as their agents, certain goods, wares and merchandise, for sale upon commission, and that said Wilson & Brother received, sold and rendered an account of sale of said goods, as the agents of these plaintiffs; and, as these plaintiffs are informed and believe, said Wilson & Brother thereupon deposited the proceeds obtained from the sale of said goods in said New York National Exchange Bank, in the name of C. A. Wilson & Brother, agents, for the sole benefit and as the moneys of these plaintiffs. That, thereafter, and in payment of said proceeds so received as aforesaid, less their charges and commissions, said C. A. Wilson & Brother, agents, drew, delivered and paid to these plaintiffs their certain check directed to the New York National Exchange Bank, of which the following is a copy.
    “No. 121. New York, February 4, 1879.
    136 Chambers St. N. Y.
    Pay to the order of Messrs. Baker & Wilson six hundred and seven tW dollars.
    $607.45. Chas. A. Wilson <& Bro., Agts.
    “ That said plaintiffs thereupon indorsed said check, and presented the same to said New York National Exchange Bank for payment, but it was not paid, and the same was duly protested for non-pay- [ ment and still remains unpaid.
    “VII. That, as plaintiffs are informed and believe, i the proceeds received by C. A. Wilson & Bro., the agents of these plaintiffs, from the sale of plaintiffs’ said goods, wares and merchandise, and deposited by them in said bank as aforesaid, remained in said bank at the time of drawing and delivery of the said check to the plaintiffs, and at the time of the presentation of j said check for payment and the demand of the payment thereof, and that said funds have never been withdrawn, either by said C. A. Wilson & Brother, agents, or by these plaintiffs, and still remain in said bank as the funds and property of these plaintiffs.”
    The relief demanded was judgment for the amount of the check with fees of protest and interest and costs of action.
    The defendant’s answer alleged that since February 4, 1879, Wilson & Brother, agents, had had no moneys deposited with defendants; and set forth their account, in which the bank had charged and deducted a prior indebtedness of the same firm, but which did not arise in their account or transactions “as agents.”
    It also denied, on information and belief, that they kept their account as agents.
    The substance of the evidence is sufficiently stated in the head-note.
    The jury, by direction of the court, rendered a verdict for the plaintiffs for the amount claimed, the judgment entered thereon was affirmed on appeal to the general term, and from that decision, defendant appealed.
    
      Thomas Allison (John L. Brower, attorney), for the defendant, appellant.
    
      T. Mortimer Seaver (E. More, of counsel), for the plaintiffs, respondents.
    
      
       The opinion of the general term appears in N. Y. Daily Reg. April 3, 1883, and an abstract of the decision is reported in 16 Weekly Dig. 531.
    
   Andrews, J.

The relation between a commission agent for the sale of goods and his principal is fiduciary. The title to the goods, until sold, remains in the principal; and when sold, the proceeds, whether in the form of money, or notes, or other securities, belong to him, subject to the lien of the commission agent for advances and other charges. The agent holds both the goods and the proceeds upon an implied trust to dispose of the goods according to the directions of the principal," and to account for and to pay over to him the proceeds from sales. The relation between the parties in respect to the proceeds of sales is not that of debtor and creditor simply. The money and securities are specifically the property of the principal, and he may follow and reclaim them so long as the identity is not lost, subject to the rights of a bona fide purchaser for value. In case of the bankruptcy of the agent, neither the goods nor their proceeds would pass to his assignees in bankruptcy for general administration, but would be subject to the paramount claim of the principal. Those principles seem to be well established (Chesterfield Manuf’g Co. v. Dehon, 5 Pick. 7; Merrill v. Bank of Norfolk, 19 Pick. 32 ; Thompson v. Perkins, 3 Mason, 232; Knatchbull v. Hallett, L. R. 13 Ch. Div. 696 ; Duguid v. Edwards, 50 Barb. 288 ; Story Ag. § 229).

The relation between the principal and consignees for sale is, however, subject to modification by express agreemen t, or by. agreement implied from the course of business or dealing between them. The parties may so deal that the consignee becomes a mere debtor to the consignor for the proceeds of sales, having the right to appropriate the specific proceeds to his own use:

tn the present case, there is no reason to contend that the bank account against which the check was drawn did not represent trust moneys belonging to the principals, for whom Wilson & Bro. were agents. The deposits to the credit of this account were made in the name of the firm, with the word “ agents ” added. They were the proceeds of commission sales. Wilson & Bro. became insolvent in October, 1878, and they opened the account in this form for the purpose of protecting their principals, which purpose was known to the bank at the time. The check in question was drawn on this account in settlement for a balance due to plaintiffs upon cash sales made by the drawers as their agents. It is clear, upon the facts, that the fund represented by the deposit account was a trust fund, and that the bank had no right to charge against it the individual debt of Wilson & Bro. The bank, having notice of the character of the fund, could not appropriate it to the debt of Wilson & Bro., even with their consent, to the prejudice of the cestuis que trustent.

The supposed difficulty in maintaining the action, arising out of the fact that the money deposited was not the specific proceeds of the plaintiffs’ goods, is answered by the case of Van Alen v. Am. Nat. Bank (52 N. Y. 1). Conceding that Wilson & Bro. used the specific proceeds for their own purposes, and their identity was lost, yet when they made up the amounts so used, and deposited them in the trust accounts, the amounts so deposited were impressed with the trust in favor of the principals, and became substituted for the original proceeds, and subject to the same equities.

The objection that the deposit account represented, not only the proceeds of the plaintiffs’ goods, but also the proceeds of goods of other persons, and that the other parties interested are not before the court, and must be brought in in order to have a complete determination of the controversy, is not well taken. The objection for defect of parties was not taken in the answer, and, moreover, it does not appear that there are any unsettled accounts of Wilson & Bro. with any other person or persons for whom they were agents. The check operated as a setting apart of so much of the deposit account to satisfy the plaintiffs’ claim. It does not appear that the plaintiffs are not equitably entitled to this amount out of the fund, or that there is any conflict of interest between them and any other person or persons for whom Wilson & Bro. acted as consignees. The presumption, in the absence of any contrary indication, is that the fund was adequate to protect all interests, and that Wilson & Bro. appropriated to the plaintiffs only their just share.

We are of opinion that the judgment was properly directed, and it should therefore be affirmed.  