Case Name: JOYCE-PRUITT CO. v. DEXTER STATE BANK; PECOS VALLEY LUMBER CO. v. SAME (two cases)
Court: Supreme Court of New Mexico
Jurisdiction: New Mexico
Decision Date: 1918-09-19
Citations: 25 N.M. 1
Docket Number: Nos. 2150-2152
Parties: JOYCE-PRUITT CO. v. DEXTER STATE BANK PECOS VALLEY LUMBER CO. v. SAME (two cases)
Judges: Hanna, C. J., and Parker, J., concur.
Reporter: New Mexico Reports
Volume: 25
Pages: 1–7

Head Matter:
(Nos. 2150-2152.
Sept. 19, 1918.)
(On Motion for Rehearing, Nov. 21, 1918.)
JOYCE-PRUITT CO. v. DEXTER STATE BANK PECOS VALLEY LUMBER CO. v. SAME (two cases)
SYLLABUS BY THE COURT.
An agent, who collects money belonging to his principal, has no right to set off against it an antecedent debt or claim owing to him by the principal, without first showing that the principal has agreed that he might so apply it.
Appeals from District Court, Chaves County; Richardson, Judge.
Action by the Joyce-Pruitt Company and two actions by the Pecos Valley Lumber Company against the Dexter State Bank. Judgments for plaintiffs, and defendant appeals.
Judgments affirmed.
H. C. Maynard, of Roswell, for appellant.
H. M. Dow and Tomlinson Fort, both of Roswell, for appellees.

Opinion:
OPINION OP THE COURT.
ROBERTS, J.
The same identical questions are involved in each of the above eases, and upon stipulation of counsel they are submitted upon the same transcript and briefs. The facts out of which the litigation arose may be briefly stated as follows:
Nelson Bros, were partners, engaged in farming and stock-raising. They were indebted to the Dexter State Bank in the sum of $492.50. They advertised a sale of their personal property, naming on the printed advertisements the Dexter State Bank as clerk of the sale and certain parties as auctioneers. After posting notices of the sale Nelson Bros, executed to the bank a bill of sale, covering all the property advertised for sale, for the purpose of securing the indebtedness which they owed the bank. The arrangement between the bank and Nelson Bros., as we understand the evidence, was that the bank was to act as clerk of the sale; that it was to discount the notes taken at the sale, and to pay the expenses of the sale, and turn over to Nelson Bros, the net proceeds of the sale, less the discounts, expenses, and its commission. The bank was to deduct from the proceeds the amount of indebtedness owing the bank by Nelson Bros. The bank, after the sale, had on hand approximately $1,309.50 net, belonging to Nelson Bros. They gave the bank a check covering the amount owing it. This amount the bank placed to their credit, and honored the check.
Either immediately prior to the sale, or after the sale, the bank purchased certain claims against Nelson Bros. At the sale, so the representative of the bank testified, certain parties purchased property belonging to Nelson Bros, and set off the purchase price with claims which they held against Nelson Bros. The bank also paid out certain moneys on mortgages and judgments against Nelson Bros. It asked that it be allowed an offset on the claims which it had purchased and -held against Nelson Bros, and the money paid out on such judgments, mortgages, etc. The trial court held that the bank was not entitled to the offsets and credits claimed, and gave judgment for the appellees. To review such judgments the appeals are prosecuted.
There is no contention as to the money paid the bank on the note owing by Nelson Bros., secured by the bill of sale. This was paid, as' stated, by Nelson Bros. ' check. The question is as to the right of the bank to an offset on the claims purchased by it, and its claimed credits for the moneys paids out on the mortgages, judgments, etc. Appellant contends that, under the agreement between the bank and Nelson Bros., there was created simply the relation of debtor and creditor; hence the bank had a right to purchase claims against Nelson Bros, and set off such claims against the demand of Nelson Bros. If appellant is correct in this contention, undoubtedly the bank would have the rights claimed for it. But here the bank was the agent of Nelson Bros., and by virtue of such agency collected the money in question. An agent, who collects money belonging to his principal, has no right to set off against it an antecedent debt or claim owing to him by the principal, without first showing that the principal has agreed that he might so apply it. Mechem on Agency (2d Ed.) § 1349. In the case of Tagg v. Bowman, 99 Pa. 376, the court said.
"An agent cannot avail himself of an advantage given by his agency to apply it to his own benefit, to the injury of his principal.''
In the case of Tagg v. Bowman, 108 Pa. 273, 56 Am. Rep. 204, the court said:
"The receipt of money by one person from another, to be applied to a specific purpose, implies an agreement on the part of the former not to apply it to any other use, and of course not to his own by pleading a set-off. Smuller v. Union Canal Company, 1 Wr. [37 Pa.] 68; Bank v. Macalester, 9 Barr [Pa.] 475; Ardesco Oil Co. v. North American Oil & Mining Co., 16 P. F. S. [66 Pa.] 375, 380. In Simpson v. Pinkerton, 10 W. N. C. 423, we held that an attorney at law or in fact employed to collect a claim, when he has received the money, has no rig'ht to set off an antecedent debt or claim of his own against his constituent, without first showing that the latter agreed he might retain his demand out of the money. It was also ruled, in Middletown & Harrisburg Turnpike Road v. Watson, 1 Rawle [Pa.] 330, that an agent of the company, who had received money to its use, could not in a suit against him set off debts of the company which he had paid without showing he had authority to pay them. It is there said: 'As long as the agent acts within the scope of his authority, and no longer, he is protected. It was the duty of Watson to collect and pay over the funds as they came into his hands. It was for the company to direct the application of the money, when in the treasury or under their control, to the discharge of their debts, the repair of the road, or whatever purposes they might suppose most beneficial to the corporation. This they have been prevented from doing by an assumption of power by their agent and a misapplication of the funds of the company. If such a breach of trust should be permitted, it would, in practice, lead to great abuses, by introducing- a scene of speculation and fraud the most disastrous, and of the most secret and dangerous nature.' "
The trial court evidently refused to allow the bank credit for the money paid out by it on the judgment and mortgage on the theory that it had no right to make the payments without specific authority of its principal, and further because the bank failed to show that these liens were legal and valid. It made no attempt to show this, going no further than to show that it had made the payments on a mortgage and a judgment. Nor did it attempt to show that the offsets which it had allowed purchasers of property at the sale were valid and legal debts owing by Nelson Bios.
Finding no error in the proceedings, the judgments in each of the causes will be affirmed; and it is so ordered.
Hanna, C. J., and Parker, J., concur.