
    Aaron Lefkowitz, Respondent, v. Bernard Reich, Appellant.
    (Supreme Court, Appellate Term,
    April, 1906.)
    Principal and agent — Mutual rights, duties and liabilities — Construction of contract and powers of agent — Effect of ratification of unauthorized transactions.
    Examination of witnesses —p Cross-examination — Latitude.
    Argument of counsel—Improper remarks — Reference to matters not in evidence.
    After plaintiff’s assignors through defendant, the salesman and collector of a brewing company, had advanced $1,500 to it towards the expense of fitting up a beer saloon and dance hall, under an agreement that it would pay the balance of the expense, defendant, upon the representation that the company required it, obtained $500 more but never paid it to the company and subsequently obtained from the company the $1,500 previously advanced it on the statement that plaintiff’s assignors could use it until needed for fitting up the place, and deposited both amounts in his own bank account. Held that it was competent for plaintiff’s assignors, when they ascertained the facts, to ratify defendant’s assumption of agency in receiving the money from the brewing company and that plaintiff was entitled to maintain an action against defendant for money had ' and received.
    Defendant denied in toto testimony of plaintiff’s assignors relating to a payment of $50 on account, made before the assignment of the claim to plaintiff, by which it -was sought to take the case out of the Statute of Limitations, and the assignment to plaintiff was for $2,000, the complaint alleged that no part thereof had been paid, and in affidavits made during the litigation it was stated, in former in substance, that the whole sum of $2,000 was due. Held that defendant had the right to ask plaintiff’s assignors on cross-examination why they had omitted to mention the fact of the alleged payment ; and the refusal to permit such cross-examination was error, as was also a further ruling permitting the plaintiff’s attorney, over defendant’s objection, to explain matters.
    Appeal by the defendant "from a judgment of the Oity Court of the city of New York entered in favor of the plaintiff, after a trial before the court and a jury, and also from an order denying defendant’s motion for a new trial.
    Leonard Bfonner (Benjamin'N. Cardozo, of counsel), for appellant.
    Wales F. Severance (Max D. Steuer, of counsel), for respondent.
   Scott, J.

The plaintiff sues as assignee of the firm of Schneider Brothers upon a state of facts which must be deemed to have been established by the verdict as follows: In 189-7 that firm were desirous of fitting up and running a beer saloon and dance hall. They had not sufficient money themselves; and, through the mediation of defendant, made an arrangement with the Malcolm Brewing Company, for whom defendant was salesman and collector, whereby the company agreed to advance the greater part of the cost of fitting the place up. Under this arrangement it was agreed that Schneider Brothers should pay in cash $1,500, and that the brewing company should pay the balance of the expense, taking a chattel mortgage to secure themselves. Schneider Brothers paid the $1,500 to the brewing company and, subsequently, paid a further sum of $500 to defendant on his representation that the brewing company required that that additional amount should be put up. This sum, however, defendant never paid to the company. The fitting up took longer than had been anticipated' and defendant stated to the brewing company that Schneider Brothers desired the return of the $1,500 as they could use it until it should become necessary to apply it to the payment for the fitting up of the place. Defendant admits the receipt of the $1,500 from the brewing company and of the $500 from Schneider Brothers, and it appears that both amounts were deposited in his own bank account. He asserts, however, that it was all expended by him in fitting up the place. On this issue the jury found against him, and we must assume from their verdict that defendant appropriated the money to his own purposes. Under these circumstances may the plaintiff maintain an action as for money had and received ? We think that he may. It is undoubtedly true that it has been held that, in the case of a mere agency for the transmission of money, the party for whom the money was designed cannot maintain an action against the agent as for money had and received to his use, and the reason for the rule has been said to be that the law will not imply a promise to one person upon a consideration moving entirely from another and where there is no privity of contract between the parties. Bigelow v. Davis, 16 Barb. 561. As we consider it, however, the plaintiff’s right to recover -rests upon the broader principle that money in the hands of one person, to which another is equitably entitled, may be recovered in a common-law action by the equitable owner upon an implied promise, arising from the duty of the person in possession to account for, and pay over the same to the person beneficially entitled thereto. Roberts v. Ely, 113 N. Y. 129; Mason v. Prendergast, 120 id. 537. In the case at bar, Schneider Brothers had never lost their beneficial ownership and.interest in the money. They had paid the $1,500 and the $500, as they supposed, to the brewing company, not as absolute payments as for a debt due, but as advances to be expended by the brewing company for the benefit of Schneider Brothers. The brewing company obtained no title to it, except as a deposit to be applied to fitting up the saloon. In a very important sense, therefore, Schneider Brothers remained the owners of the money, which could not, without their consent, be diverted from the purpose to which they had appropriated it. With all the facts defendant was fully cognizant, and he must, therefore, be deemed to have known that both the $1,500 and the $500 remained the property of Schneider Brothers, until used for the special purpose to which they had appropriated it. He knew, therefore, when it came into' his hands, that neither he nor the brewing company had any right to use the money otherwise than in fitting up the saloon, or any right whatever to retain it, if it was not so used. The jury have found that it was not used for the purpose for which Schneider Brothers paid it. It follows that, in equity and in good conscience, it was defendant’s duty to repay it, not to the brewing company who had no claim to it, if it was not used in fitting up the saloon, but to Schneider Brothers whose money it was. It is no answer to say that Schneider Brothers might have sued the brewing company on the theory that defendant acted for them and as their agent. He also undertook or assumed to act as Schneider Brothers’ agent; and, although they were unaware of the fact at the time and for a long time thereafter, it was competent for them, when they ascertained the facts, to ratify defendant’s assumption of agency and sue upon that theory. Dechen v. Dechen, 59 App. Div. 166. If, therefore, there were no question in the case except as to the right of plaintiff to sue upon the state of facts above detailed, we should find no difficulty in affirming the judgment. There is, however, another and a serious question to consider. The transaction by which defendant, as it is said, became possessed of Schneider Brothers’ money, took place in 1897, and plaintiff’s claim would, therefore, have been barred by the Statute of Limitations, unless some fact appeared to take the case out of the statute, which was duly pleaded as a defense to the action. To avoid the effect of the statute, plaintiff’s assignors testified that, in 1904, some months before the commencement of this action, the defendant, who up to that time had vigorously denied liability for the money, came to the Schneiders and voluntarily confessed that he owed the money, and paid $50 in bills on account, promising to pay the balance later. This payment is relied upon to take the case out of the statute. The defendant denies this story in toto, and, as evidence of its improbability, points to the fact that the assignment to plaintiff, although made after the alleged payment, was for a claim of $2,000, instead of $1,950; that in the complaint $2,000 is claimed, and it is asserted that no part of it has been paid; that in affidavits made for various purposes during the litigation the assertion is uniformly made, in form or in substance, that the whole sum of $2,000 is due, and no hint or suggestion is made as to any payment having been received on account thereof. It may be that these circumstances, apparently contradictory of the story that defendant had paid $50 on account, were susceptible of satisfactory explanation; but they certainly presented a situation which entitled the defendant to cross-examine the plaintiff’s assignors with considerable particularity. An attempt was made to so cross-examine them; but the court, upon the objection of immateriality, excluded many pertinent and relevant questions as to why the witnesses had uniformly omitted to mention a fact so material and important to the maintenance of the action, and, after refusing to permit the plaintiff’s assignors to be cross-examined upon the subject, the court, against defendant’s objection, permitted the plaintiff’s attorney to make the explanation which defendant had been forbidden to ask of the witnesses themselves. It is impossible to say that these rulings may not have affected the conclusion of the jury upon the question whether or not the $50 had been paid, and thus practically defeated a defense which defendant was entitled to interpose.

For this error the judgment must be reversed and a new trial ordered, with costs to appellant to abide the event.

Tbuax and Bischoef, JJ., concur.

Judgment reversed and new trial ordered, with costs to appellant to abide event.  