#### Aultman, Miller & Co., Respondent, vs. Connors and another, Appellants.

*May 12*

June *10, 1904.*

*'Account stated: StLrgJiarging: Promissory notes as payment or as*\ *collateral security?*

In the statement of an account between a corporation and its sales agents, certain notes, designated “sundry notes as collateral on machine account” were turned over to the corporation and were treated as a payment, their face valu'e being credited to the agents in determining the balance due from them to the corporation. In a subsequent action by the corporation upon account stated, the agents admitted the stating of the account, but claimed an overpayment thereon and demanded judgment for the excess. *Held,*that upon such pleadings the account could not be surcharged. Defendants were not entitled to a further credit of the sums collected by the plaintiff on said notes, nor could plaintiff recover from them the amount by which such collections fell short of the face value of the notes.

Appeal from a judgment of tlie circuit court for Polk county: A. J. ViNje, Circuit Judge.

*Modified and affrmed.*

Respondent is a corporation engaged in tbe manufacture of farming implements at Akron, Oliio. The appellants, at the time in question, were a copartnership under the firm name of Connors & Seeds, doing business at the village of St. Croix Falls, Wisconsin. In the month of April, 1891, appellants entered into an agreement with respondent by which they were to represent respondent in the sale of its farm implements and articles used in connection therewith at the village of St. Croix Falls and in the vicinity. During the season of 1891, respondent delivered farm implements, extras, and binding twine to appellants under this contract, upon the orders of appellants, amounting in the aggregate to the sum of $1,851.68. The parties made a settlement and stated their accounts on September 29, 1891, wherein it was mutually agreed that there remained due respondent the sum of *312$701.80. Tbis settlement was accepted, omissions and errors excepted. On October 8, 1891, appellants turned over, and respondent received, notes, as payment on tbe account, to the amount of $387, which left a balance on account of $314.80. Bespondent brought an action in 1901, alleging a settlement of the transaction, and that there was an agreed balance due on the accounts as stated on September 29, 1891. They admitted payment by notes on October 9, 1891, to the amount of $387. Appellants answered and counterclaimed, alleging an overpayment on the amount due, and that this overpayment resulted from collections made by respondent on notes turned over to it as collateral.

The cause was referred to IT. P. Burdick, as referee, to hear, try, and determine, who reported on June 14, Í901, that appellants had overpaid respondent on the whole transaction to the amount of $108.59. This report was affirmed by the court, and judgment awarded in appellant’s favor. The order affirming the report and the judgment were subsequently vacated and set aside by order of the court, and the cause re-referred to II. P. Burdick to hear, try, and determine the issues. He filed his reporf as referee on December 19, 1901, finding that appellants had overpaid the amount due respondent in the sum of $137.28. The court thereafter modified the report, finding that appellants were indebted to respondent in the sum of $323.73, with interest from September 29, 1891, and ordered judgment for this sum and costs. Judgment was entered accordingly against appellants, and from this they appeal.

*Frank B.*Dorothy, for the appellants.

*Charles S.*Cairns, for the respondent.

Siebeoicee, J.

This is an action by respondent upon an account stated. It is alleged that the parties to the action on September 29,1891, had a settlement of their monetary transactions, they stated an account, and that it was found that ap-*313pellauts were indebted to respondent in tbe amount specified in tbe settlement and accounting, wbicb tbey agreed to pay. Appellants admitted tbe settlement and tbe stating of tbe account, but claimed that tbey bad paid in1 excess of tbe sum due, and tbey demanded judgment for such excess under tbeir counterclaim. There is no dispute as to tbe items covered by tbe accounting and a subsequent payment of $387 by notes. Tbe controversy arises as to an item of $461.01, designated “sundry notes as collateral on machine account.”

It appears that, at tbe time of tbe accounting, appellants turned over to respondent sixteen notes, wbicb on tbeir face equaled tbe amount of tbe item in dispute. Tbe amount of this item was credited to appellants in fixing tbe balance dire respondent in tbe settlement, and tbey thereby treated the notes as a payment, instead of a deposit collateral to tbe debt. Since respondent brought this action on account stated, and these notes were treated as a payment on account when tbe settlement was made, it must be held to have received them as a payment, and tbey cannot be treated as collateral to tbe balance due. Under this state of tbe transaction between tbe parties, it must follow that respondent is not in a situation to seek relief by way of surcharging tbe account stated.

Tbe referee properly found that tbe balance due on tbe account sued on at the time of tbe.settlement was $701.80. Tic further found that there bad been collected by respondent the sum of $101.79 on collateral notes, wbicb bad not been credited in stating tbe account, and wbicb should be applied as a payment. There is no dispute as to tbe payment of $387 in notes on October 9, 1891. Crediting these amounts, there remained an unpaid balance of $213.01.

Tbe referee also found that respondent bad collected tbe sum of $350.29 on tbe sixteen notes turned over by appellants as collateral to their indebtedness on tbe machine account, and be credited this amount as a payment on tbe debt. He evidently erred in treating this sum as an additional pay*314ment by appellants, for it appears that tbe amount thus collected on notes was realized by respondent on tbe sixteen notes turned over to them on tbe day of settlement and accounting, wbicb were in fact included as a payment in striking tbe balance due on tbe stated account upon wbicb tbis suit is brought. This error of tbe referee in crediting tbe sum realized on these notes as a payment by appellants resulted in producing a loss to respondent equal to tbe sum so collected on these notes. Tbis item should not be credited to appellants, because they bad received tbe benefit of tbe notes as a payment when making *the*settlement.

Tbe court refused to confirm tbe referee’s report, and proceeded to restate tbe account of tbe parties as of September 29, 1891, without any amendment of tbe complaint, wbicb alleges a cause of action on account stated, admitted by appellants, who claimed an overpayment and demanded judgment therefor under their counterclaim. Under tbis state of tbe pleading and tbe issues, tbe court was not empowered to-surcharge tbe account upon any grounds. There is no allegation of fraud or mistake concerning tbe settlement and stated account, and no such question arose upon tbe issues in tbe case. Upon tbe evidence as reported by tbe referee, bis finding should have boon corrected to tbe effect that tbe item of $350.29, collected on notes by respondent and credited by tbe referee as a payment after tbe settlement, be modified by disallowing it, and by finding that there was a balance due respondent on tbe stated account, when action was brought, in tbe sum of $213.01, with interest from October 9, 1891.

It is contended that no competent evidence was adduced to show that tbe sum of $350.29 collected on notes was realized on tbe notes applied as a payment on tbe machine account in tbe settlement of September, 1891. There is direct testimony to tbis effect sustaining tbe finding of the referee. It is therefore immaterial that some corroborating evidence *315of a secondary nature was received upon tbis subject. We find sufficient competent evidence to sustain tbis finding.

*By the Court.*— Tbe judgment is modified by reducing tbe damages to $374.90, and tbe total to $477.03, and as so modified .tbe judgment is affirmed; appellants to recover costs in tbis court.