#### Sarah M. Gerard *et*al., Respondents, *against*James McCormick, Appellant.

(Decided February 10th, 1890.)

Plaintiffs’ agent in the collection of rents of their buildings, known as the “ Glass Buildings,” borrowed money of defendant for his individual use, and gave his individual property as security. He paid such loan with a check signed with his name followed by “Agent Glass Buildings.” *Held,*that this signature was sufficient to put defendant upon inquiry as to whether the check was drawn upon funds of plaintiffs.

The action to recover the amount of such check from defendant was tried upon the theory that the loan was made to plaintiffs’ agent, as agent, and not individually. *Held,*that newly discovered evidence to the effect that the check was in fact paid out of the individual funds of the agent, which he had deposited in his agent’s account to meet such check, not being germane to the issues, was no ground for a new trial.

Appeal from a judgment of this court entered upon the verdict of a jury and from an order denying a motion for a new trial on the ground of newly discovered evidence.

The facts are stated in the opinion.

*Samuel*Fleischman, for appellant.—The action being one for money had and received, it was essential that plaintiffs, in order to recover money, should prove that the money received by defendant was belonging to plaintiffs *(De Peyster*v. *Winter,*4 How. Pr. 449: *Nat.*
      *41
      *Trust Co.*v. *Gleason,*77 N. Y. 403; *Decker*v. *Salzman,*59 N. Y. 277).

To enable a principal to recover his money paid by his agent in discharge of the latter’s debt, the former must' show that the defendant knew that the agent had no right thus to use the money *(Ford*v. *Union Nat. Bank of Albany,*13 Week Dig. 352, 25 Hun 564, affirmed 88 N. Y. 672; Story on Agency, § 228; *Justh*v. *National Bank of the Com.,*56 N. Y. 478; *Keator*v. *Smith,*15 Week. Dig. 6; *Charlotte Iron Works*v. *American Exch. Nat Bank,*34 Hun 26 ; *Le Breton*v. *Pierce,*2 Allen, 8; *Laubaeh*v. *Leibert,*87 Pa. 55).

The plaintiffs gave their agent power to draw checks and pay out this money. They are estopped from denying his authority to the prejudice of an innocent third party dealing with him in reliance upon his apparent authority *(Bank of Batavia*v. *New York fíe. R. Co.,*106 N. Y. 195; *Gris-wold*v. *Haven,*25 N. Y. 595; *New York fe. R. Co.*v. *Schuyler,*34 N. Y. 30, 58, 68; *Armour*v. *M. C. R. Co.,*65 N. Y. Ill; Story on Agency, §§ 227, 228; *North River Bank*v. *Aymar,*3 Hill 262).

The drawing of the check by plaintiff’s agent was an express declaration that he had authority to check out this nioney, and the plaintiffs cannot claim that he actually exceeded his authority as against the defendant, who was an innocent holder and gave value for the check *(Amidon*v. *Wheeler,*3 Hill 137 ; *Ely*v. *Norton,*2 Abb. Ct.App. Dec. 19; *Stephens*v. *Board of Education,*79 N. Y. 183; *School-dist.*v. *First Nat. Bank,*102 Mass. 174; *LeBreton*v. *Pierce,*2 Allen, 8 ; *Case*v. *Banking Assoc.,*4 Comstock, 166; see, also, *Gray*v. *Johnston,*L. R. 3 Eng. and Ir. App. 1; *Lime Rock Bank*v. *Plimpton,*17 Pick. 159; *Clement*v. *Leverett,*12 N. H. 317). The words “ Agent Glass Buildings,” added to Boswell’s name, were but *descriptio personce,*and defendant had a right to regard the check as Boswell’s individual check *(Dewill*v. *Walton, 5*Seld. 571; *Pentz*v. *Stanton,*10 Wend. 271; *Reznor*v. *Wood,*36 How. 353; *42
      *Hills*v. *Bannister,*8 Co wen, 32; *Taft*v. *Brewster,*9 Johns, 333). The defendant, having given up security upon receipt of the check, was a purchaser for value *(Bank of Salina*v. *Babcock,*21 Wend. 499 ; *Mohawk Bank*v. *Corey,*1 Hill 513 ; *Bank of Sandusky*v. *Scoville,*24 Wend. 115; *Meads*v. *Merchants' Bank,*25 N. Y. 143; *Ford*v. *Union Nat. Bank,*supra; *Justh*v. *National Bank of the Com., supra).*

The new evidence shows conclusively that the defendant did not receive plaintiff’s money. A new trial should be granted where the court is of the opinion that the ends of justice will be subserved thereby, without regard to technical rules *(Clegg*v. *New York Newspaper Union,*51 Hun 232; *Baylies on New Trials and Appeals,*p.526 ; *Bonynge*v. *Waterbury,*12 Hun 534).

*H. Hettell,*for respondents.—The signature to the check, to wit: “ William Boswell, Agent Glass Buildings,.” was sufficient notice to defendant to put him on inquiry *(Carpenter*v. Farnsworth, 106 Mass. 561; *Wright*v. *Cabot,*89 N. Y. 574; *Budd*v. *Munroe,*18 Hun 316 ; *Pendleton*v. *Fay,*2 Paige, 202; *Anderson*v. *Alen,*12 Johns. 343; *Merchants' Bank of Canada*v. *Livingston,*74 N. Y. 223; *Moore*v. *American L. f T. Co.,*115 N. Y. 65; *Stephens*v. *Board of Education,*79 N. Y. 187; *Argersinger*v. *McNaughton,*24 N. Y. St. Rep. 16). The words of the signature after the name were not merely descriptive of the person *(Fellows*v. *Longyor,*91 N. Y. 331; *Sutherland*v. *Carr,*85 N. Y. 110; *National Bank*v. *Ins. Co.,*104 U. S. 517).

The defendant, being the one whose acts made the occurrence possible, must bear the loss, and is liable to the plaintiffs *(Wright*v. *Cabot,*89 N. Y. 574; *Gloucester Bank*v. *Salem Bank,*17 Mass. 43 ; *Boot*v. *French,*13 Wend. 572; *Sanford*v. *Handy,*23 Wend. 268; *Argersinger*v. *McNaughton,*24 N. Y. St. Rep. 20).

It is a familiar rule of law that, to bind a principal, the authority of the agent must be proved, and it is incumbent on defendant to show that Boswell had authority to borrow money *(Bernheimer*v. *Herrman,*44 Hun 112; *Central*
      *43
      *Nat. Bank*v. *North River*Bank, 44 Hun 116). The authority of the agent cannot be proved by the agent’s declarations nor increased by the agent’s acts *(Snook*v. Lord, 56 N. Y. 605 ; *Marvin*v. *Wilber,*52 N. Y. 270 ; *Eaton*v. *Delaware fíe. R. Co.,*57 N. Y. 390 ; *Home Sewing Machine Co.*V. *Farrington,*82 N. Y. 127 ; *Budd*v. *Munroe,*18 Hun 317 ; *Griswold*v. *Haven,*25 N. Y. 599; *O'Laughlin*v. *Hammond,*21 N. Y. St. Rep. 647; *Briggs*v. *Davis,*20 N. Y, 15 ; 16 N.Y. 134 ; *Swarthout*v. *Curtis,*5 N. Y. 301; *Moore*v. A. *Sp T. Co.,*115 N. Y. 65). Defendant was bound to inquire into the authority of Boswell, and must be presumed to know the limitations of the agent’s authority *(.Martin*v. *Farnsworth,*49 N. Y. 558, and cases cited ; *Sage*v. *Sherman,*Lalor’s Supp. 147, affirmed 2 N. Y. 417 ; *Crane*v. *Evans,*1 N. Y. St. Rep. 217, 218 ; *Argersinger*v. *McNaughton,*24 N. Y. St. Rep. 16). The authorities are all in accord that trust funds can always be recovered, unless against a *bona fide*purchaser for consideration without notice ( *Weaver*v. *Barden,*49 N. Y. 286; *Wetmore*v. *Porter,*92 N. Y. 81, 84; 91 N. Y. 324; *Van Allen*v. *American Nat. Bank,*52 N. Y. 1; *Stephens*v. *Board of Education,*79 N. Y. 186 ; *Smith*v. *Bank of Com.,*56 N. Y. 478-484; *Pierson*v. *McCurdy,*33 Hun 530, affirmed 100 N. Y. 608; *James*v. *Cowing,*82 N. Y. 449; *Falkland*v. *St. Nicholas Bank,*84 N. Y. 145; *Baker*v. *National Exeh. Bank,*16 Abb. New Cas. 458; *JEtna Nat. Bank*v. *Fourth Nat. Bank,*46 N. Y. 82 ; *National Bank*v. *Ins. Co.,*104 N. Y. 517; *Duncan*v. *Jaudon,*15 Wallace 175; *Shaw*v. *Spencer,*100 Mass. 389, 17 Northeast. Rep. 496 ; *Grand Trunk R. Co.*v. *Edwards,*56 Barb. 408).

Conceding that Boswell used the money received for rents, yet when he restored or made good the amount *pro tanto*by depositing other moneys in the trust account, the amounts so deposited were impressed with the trust in favor of the principals and became substituted for the original rents and subject to the same equities ( *Van Alen*v. *American Nat. Bank,*52 N. Y. 5 ; *Baker*v. *New York Nat. Exeh. Bank.*16 Abb. New Cas. 458).

*44Bookstaver, J.

The complaint, in -effect, alleged that the defendant, on or about the 19th of September, 1882, received the sum of $501.25, being the money of the plaintiffs, to their use. The answer is, in effect, a general denial, and, as a separate defense, sets up a loan made by defendant, on or about September 19th, 1882, to one William Boswell, as agent for plaintiffs, for their use, of the sum of $500, which was repaid with interest.

Under these pleadings the plaintiffs proved that they together owned the premises 87 and 89 Wall Street, known as the “ Glass Buildings.” William Boswell was for many years plaintiffs’ agent to collect the rents of these buildings, to deposit the same in bank, pay the taxes, Croton rates, insurance, interest on the mortgage on the premises, and such repairs as the plaintiffs directed to be made on the premises, and to apportion and pay over the net balance to the various owners, which he did by check signed “ William Boswell, Agent Glass Buildings.” Boswell kept two accounts in the Corn Exchange Bank, one under the name of “ William Boswell, Agent Glass Buildings,” and the other an individual account in his own name. Boswell had the full confidence of his employers, who had no suspicion that he was not honestly carrying on his agency, until in February, 1887, when he confessed to one of the owners that he had been for a long time misappropriating the rents, and that, among other things, he had during a period of several years retained out of the rents collected by him the money to pay the taxes on the buildings, about $1,700 per annum, but had not paid those taxes. By reason of this misappropriation he had been at all times indebted to the plaintiffs since the year 1879, and still owed them several thousand dollars. On the trial it appeared that the defendant, who is a stockbroker, loaned Boswell $500 on or about the 31st of August, 1882. When the loan was made, Boswell deposited as collateral security thereto his individual property. About two weeks thereafter this loan was repaid by a check for $501.25, signed “William Boswell, Agent Glass Buildings,” whereupon the collateral was sur*45rendered to him. .The testimony of the defendant, we think, does not show that he looked upon the transaction as a borrowing for the account of the owners, although he so stated in his answer. What he testified to shows that he made the loan in the usual way°to Boswell individually, and at the end of two weeks received payment therefor, and he adds that he had, at the time of receiving the check, no idea, and did not suppose that the check represented money belonging to the plaintiffs in this action; that he had no idea other than that the check represented money belonging to Boswell; and further says: “ I made the loan with him. He gave me the security, and I gave him the check. And when he returned it I gave him his security, and he gave me the check.”

Upon this state of facts two questions only were presented to the jury for their determination, namely, whether the money was plaintiffs’, and whether defendant had sufficient notice to put him on inquiry, because it cannot be said that the testimony in any way sustained the defense set up by him in his answer. On both of these questions the jury found in favor of the plaintiffs, and we think the evidence sufficient to sustain such finding.

The appellant contends that the signature to the check, to wit, “ William Boswell, Agent Glass Buildings,” was not sufficient notice to put him on inquiry, and cites in support of such contention *Ford*v. *Union National Bank of Albany,*(13 Week. Dig. 352). The case, appearing only in the Digest, is meagrely reported. The action was brought against the bank for debiting a check drawn in proper form against an account kept with one C. F. Norton, Agent, and crediting its amount to another account which it had with G. F. Norton. It does not appear from the report that the bank had any knowledge except what might be inferred from the word “ Agent.” The court held that the defendant was not liable, because a party must have notice that the money was misappropriated. This decision, doubtless, was based on the fact that the defendant was a bank, and was bound to presume, when a- check was drawn in proper form against an *46account kept with a depositor as a trustee, that the customer was in the course of lawfully performing his duty, and was bound to honor his check accordingly. On no other theory do we see how that decision could be sustained. In *Baker*v. *New York Nat. Bank*(16 Abb. New Cas. 458), the Court of Appeals held that the bank was liable, and said : “ 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.” It is also reported in 16 Week. Dig. 531, where the general term of the Supreme Court says, “ that where an agent deposits the money of his principal in a bank, in an. account kept by him as agent, the funds will be regarded as the property of his principal, so far as they remain undrawn by the agent, and the bank will not have the right to apply the same upon the agent’s pre-existing individual debt.” The words of the signature, after the name, were not merely descriptive of the person *(Fellows*v. Longyor, 91 N. Y. 331). In that case the court says: “ These authorities [meaning those which hold that such additions are merely of description] have no application to this case; . . . the question here is that of the ownership of the moneys; . . . the words ‘ Guardian, etc.,’ operated as notice to the defendant Longyor of the rights of the wards of whom Downer was guardian,” citing a number of authorities. We are therefore of the opinion that the judgment should be affirmed, with costs.

After the trial, the defendant made a motion for a. new trial upon the ground of newly discovered evidence. The case was tried on the theory of the answer that Boswell borrowed of defendant as “ agent ” of the plaintiffs, and that the money was returned by the check in question. The jury found against the defendant upon this, and the alleged newly discovered evidence was to the effect that the check in suit was paid out of money which Boswell deposited the same day in this account, and that before such deposit there was only nine dollars to Boswell’s credit in this account; that the deposit of that date was made from the. proceeds of a *47loan procured by Boswell by mortgage on his individual property. In other words, defendant wishes to prove that Boswell paid with his own money a loan which, according to the answer and the theory held at the trial, was made to the plaintiffs. This is a manifest inconsistency, and such evidence could not avail the defendant, at least until there had been an amendment to the *answer;*such" evidence is immaterial to the questions raised by the pleadings. Conceding that Boswell used the money received for rents for his own purposes, yet when he restored or made good the amount *pro tanto*by depositing other moneys in the trust account, the moneys so deposited became impressed with the trust in favor of the principals, and were substituted for the original rents and subject to the same equities ( *Van Alen*v. *American Nat. Bank,*52 N. Y. 5 ; *Baker*v. *New York Nat. Exch.*Bank, 16 Abb. New Cas. 458). Besides, it appeal's from the papers submitted that Boswell was in constant communication with the defendant; the items were plainly written in the various accounts; and we think defendant could, with proper diligence, have discovered this fact, and that the order denying a new trial was proper and should be affirmed, with costs.

Bischoff, J.,concurred.

Judgment and order affirmed, with costs.