Greenbaum, J.:
This court upon the former appeal in this case held that the dismissal of the complaint by the trial court was error, for the reason that an issue of fact for the jury was presented upon the proofs as to whether Valentine, through whose alleged fraud the plaintiff’s assignors parted with the check for $24,906.25, was the agent of E. D. Shepard & Co., the recipients of the check. (See 179 App. Div. 918.)
The case on appeal discloses that substantially all the proofs which were adduced upon the previous trial were presented at the trial under review. It thus necessarily follows that unless additional undisputed facts were submitted upon the latter trial, the effect of which as matter of law would be to nullify the favorable testimony given on behalf of the plaintiff, the learned trial justice erred in dismissing the complaint and the judgment entered upon such dismissal must be reversed. We find no such additional evidence.
The learned counsel for the respondent in his brief calls attention to two pieces of testimony which were not given upon the first trial. The first related to entries in the books of Ball & Whicher, in which it is claimed that Valentine’s personal account was credited with the profit or commission of $*500 on July 28, 1908, being the difference between $25,000 Yankee Fuel bonds at par and interest amounting to $25,406.25, the price at which Valentine told Ball & Whicher the bonds were sold to Spingarn, and $24,906.25, the amount of the check to E. D. Shepard & Co.
It is argued from this that the entries in the books of Ball & Whicher indicate that the transaction was treated by them as [596]*596a personal one with Valentine on his own ac'count and not as agent for E. D. Shepard & Co. Upon the argument of this appeal the learned counsel for the respondent admitted in open court that he withdrew the contention that he made upon his brief with respect to this item of $500. The reason for this is apparent from an examination of all the testimony on this subject. It appears that the learned counsel misapprehended the character of the entry. The $500 item referred to a check paid by Valentine to Ball & Whicher, and not one paid by them to him. It arose out of a speculative stock account of Valentine with Ball & Whicher concerning some New York Stock Exchange securities for which he was indebted to them and which he repaid on July twenty-eighth when he got his check for $2,406.25, thus crediting his account with the payment of $500.
The second additional piece of evidence to which the court’s attention is directed refers to some testimony given by defendant’s witness Lincoln, to the effect that it was an invariable rule or custom of Shepard & Co. to pay their salesmen a salary and commission of three per cent on the sale of their securities. But it is to be observed that Valentine was not a regular employee, and, therefore, stood on a different basis from those who received a fixed salary. The testimony was not of a conclusive character. It was for the jury to consider it for what they might deem it was worth.
In view of the fact that another trial must be had, we shall endeavor to outline the issues that are to be tried and the law applicable thereto. We will preface our observations by the statement that in the first action, which was brought by Ball & Whicher, the assignors of the plaintiff, against E. D. Shepard & Co., the Court of Appeals held in Ball v. Shepard (202 N. Y. 247) that the plaintiffs in that case could not recover upon the theory upon which that action was brought, which was, that Ball & Whicher had paid for the bonds under a mistake of fact. The ground upon which the court so held was that Shepard & Co. did not share in the mistake and received the money in good faith in the regular course of business and for a valuable consideration.
The theory of the present action is radically different from that just stated. The plaintiff here sues upon the fraud of [597]*597Valentine for which E. D. Shepard & Co. are answerable, and through them, the defendant bank which was their depositary of the proceeds of the fraud.
The proposition of law relied upon by plaintiff to sustain his contention in the present case is that the principal, without prior knowledge of the fraud of the agent, is nevertheless bound by his fraud, if after notice thereof he retains the proceeds of the agent’s act. Such action on the part of the principal constitutes a ratification of the agent’s fraud. (Carr v. National Bank & Loan Co., 167 N. Y. 375; Chisholm v. Eisenhuth, 69 App. Div. 135; Fitzhugh v. Sackett, 50 N. Y. 699; Green v. Des Garets, 210 id. 79.)
In the last-mentioned case the rule is well stated as follows: “ ‘ It is an established principle of law that where a person acts for another who accepts the fruits of his efforts, the latter must be deemed to have adopted the methods employed, and he may not, even though innocent, receive the benefits and at the same time disclaim responsibility for the fraud by means of which they arose.’ ”
The law upon which defendant’s liability may be predicated is clear. The facts undisputedly are that the check to E. D. Shepard & Co. was deposited to their credit with the defendant bank; that Ball & Whicher notified defendant of their claim on July 28, 1908; that at all times between July 28 and August 6, 1908, the account of E. D. Shepard & Co. with the defendant showed that it had a credit balance of $24,906.25 and that as a matter of fact throughout that period it was upwards of $50,000.
Upon being apprised of Valentine’s fraud, E. D. Shepard & Co. must be deemed to have held the proceeds of the check as constructive trustees for the latter. The rule under such circumstances is well stated in Importers & Traders’ Nat. Bank v. Peters (123 N. Y. 278): “ When money held by a person in a fiduciary capacity has been paid or deposited by him in his general account at a bank, the party for whom the money is held can follow it and has a charge on the balance in the banker’s hands, and if a person holding money in a fiduciary capacity, pays it to his account at his banker’s, and mixes it with his own money and afterwards draws out some by checks generally and in the ordinary manner, the drawer of [598]*598the checks must be taken to have drawn out his own in preference to the trust money.”
The defendant bank under the circumstances detailed was not a holder in due course. (Citizens’ State Bank v. Cowles, 180 N. Y. 349.) Indeed it was merely the custodian of the proceeds.
Under such circumstances, any declarations or admissions of E. D. Shepard & Co. binding upon them would be binding upon the defendant bank. (Von Sachs v. Kretz, 72 N. Y. 548, and cases therein cited.)
The learned trial court was of the opinion that the evidence of agency was insufficient. We shall, therefore, indicate a few of the important portions of the testimony in the record, which bear upon the question of Valentine’s alleged agency. In the first place it appears to be practically undisputed that when Valentine left the employ of E. D. Shepard & Co. to become an employee of Ball & Whicher, it was understood by both the latter and E. D. Shepard & Co. that Valentine was at liberty to continue selling bonds on his own account for E. D. Shepard & Co. Indeed, it was expressly admitted by Mr.
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Greenbaum, J.:
This court upon the former appeal in this case held that the dismissal of the complaint by the trial court was error, for the reason that an issue of fact for the jury was presented upon the proofs as to whether Valentine, through whose alleged fraud the plaintiff’s assignors parted with the check for $24,906.25, was the agent of E. D. Shepard & Co., the recipients of the check. (See 179 App. Div. 918.)
The case on appeal discloses that substantially all the proofs which were adduced upon the previous trial were presented at the trial under review. It thus necessarily follows that unless additional undisputed facts were submitted upon the latter trial, the effect of which as matter of law would be to nullify the favorable testimony given on behalf of the plaintiff, the learned trial justice erred in dismissing the complaint and the judgment entered upon such dismissal must be reversed. We find no such additional evidence.
The learned counsel for the respondent in his brief calls attention to two pieces of testimony which were not given upon the first trial. The first related to entries in the books of Ball & Whicher, in which it is claimed that Valentine’s personal account was credited with the profit or commission of $*500 on July 28, 1908, being the difference between $25,000 Yankee Fuel bonds at par and interest amounting to $25,406.25, the price at which Valentine told Ball & Whicher the bonds were sold to Spingarn, and $24,906.25, the amount of the check to E. D. Shepard & Co.
It is argued from this that the entries in the books of Ball & Whicher indicate that the transaction was treated by them as [596]*596a personal one with Valentine on his own ac'count and not as agent for E. D. Shepard & Co. Upon the argument of this appeal the learned counsel for the respondent admitted in open court that he withdrew the contention that he made upon his brief with respect to this item of $500. The reason for this is apparent from an examination of all the testimony on this subject. It appears that the learned counsel misapprehended the character of the entry. The $500 item referred to a check paid by Valentine to Ball & Whicher, and not one paid by them to him. It arose out of a speculative stock account of Valentine with Ball & Whicher concerning some New York Stock Exchange securities for which he was indebted to them and which he repaid on July twenty-eighth when he got his check for $2,406.25, thus crediting his account with the payment of $500.
The second additional piece of evidence to which the court’s attention is directed refers to some testimony given by defendant’s witness Lincoln, to the effect that it was an invariable rule or custom of Shepard & Co. to pay their salesmen a salary and commission of three per cent on the sale of their securities. But it is to be observed that Valentine was not a regular employee, and, therefore, stood on a different basis from those who received a fixed salary. The testimony was not of a conclusive character. It was for the jury to consider it for what they might deem it was worth.
In view of the fact that another trial must be had, we shall endeavor to outline the issues that are to be tried and the law applicable thereto. We will preface our observations by the statement that in the first action, which was brought by Ball & Whicher, the assignors of the plaintiff, against E. D. Shepard & Co., the Court of Appeals held in Ball v. Shepard (202 N. Y. 247) that the plaintiffs in that case could not recover upon the theory upon which that action was brought, which was, that Ball & Whicher had paid for the bonds under a mistake of fact. The ground upon which the court so held was that Shepard & Co. did not share in the mistake and received the money in good faith in the regular course of business and for a valuable consideration.
The theory of the present action is radically different from that just stated. The plaintiff here sues upon the fraud of [597]*597Valentine for which E. D. Shepard & Co. are answerable, and through them, the defendant bank which was their depositary of the proceeds of the fraud.
The proposition of law relied upon by plaintiff to sustain his contention in the present case is that the principal, without prior knowledge of the fraud of the agent, is nevertheless bound by his fraud, if after notice thereof he retains the proceeds of the agent’s act. Such action on the part of the principal constitutes a ratification of the agent’s fraud. (Carr v. National Bank & Loan Co., 167 N. Y. 375; Chisholm v. Eisenhuth, 69 App. Div. 135; Fitzhugh v. Sackett, 50 N. Y. 699; Green v. Des Garets, 210 id. 79.)
In the last-mentioned case the rule is well stated as follows: “ ‘ It is an established principle of law that where a person acts for another who accepts the fruits of his efforts, the latter must be deemed to have adopted the methods employed, and he may not, even though innocent, receive the benefits and at the same time disclaim responsibility for the fraud by means of which they arose.’ ”
The law upon which defendant’s liability may be predicated is clear. The facts undisputedly are that the check to E. D. Shepard & Co. was deposited to their credit with the defendant bank; that Ball & Whicher notified defendant of their claim on July 28, 1908; that at all times between July 28 and August 6, 1908, the account of E. D. Shepard & Co. with the defendant showed that it had a credit balance of $24,906.25 and that as a matter of fact throughout that period it was upwards of $50,000.
Upon being apprised of Valentine’s fraud, E. D. Shepard & Co. must be deemed to have held the proceeds of the check as constructive trustees for the latter. The rule under such circumstances is well stated in Importers & Traders’ Nat. Bank v. Peters (123 N. Y. 278): “ When money held by a person in a fiduciary capacity has been paid or deposited by him in his general account at a bank, the party for whom the money is held can follow it and has a charge on the balance in the banker’s hands, and if a person holding money in a fiduciary capacity, pays it to his account at his banker’s, and mixes it with his own money and afterwards draws out some by checks generally and in the ordinary manner, the drawer of [598]*598the checks must be taken to have drawn out his own in preference to the trust money.”
The defendant bank under the circumstances detailed was not a holder in due course. (Citizens’ State Bank v. Cowles, 180 N. Y. 349.) Indeed it was merely the custodian of the proceeds.
Under such circumstances, any declarations or admissions of E. D. Shepard & Co. binding upon them would be binding upon the defendant bank. (Von Sachs v. Kretz, 72 N. Y. 548, and cases therein cited.)
The learned trial court was of the opinion that the evidence of agency was insufficient. We shall, therefore, indicate a few of the important portions of the testimony in the record, which bear upon the question of Valentine’s alleged agency. In the first place it appears to be practically undisputed that when Valentine left the employ of E. D. Shepard & Co. to become an employee of Ball & Whicher, it was understood by both the latter and E. D. Shepard & Co. that Valentine was at liberty to continue selling bonds on his own account for E. D. Shepard & Co. Indeed, it was expressly admitted by Mr. Lincoln, the defendant’s principal witness, who had complete charge of the management of the business of E. D. Shepard & Co., that Valentine’s employment with Ball & Whicher, a Stock Exchange concern, would be agreeable to them because Shepard & Co. was not a Stock Exchange house.
We thus have evidence that at the outset of Valentine’s relations'with Ball & Whicher it was understood by all the parties concerned that Valentine might act as the agent of E. D. Shepard & Co. in respect of particular sales of their bonds. The books of E. D. Shepard & Co. in evidence show that thereafter Valentine madex a number of sales of bonds for them to third parties, notably to one Parsons and one Woolworth. This testimony was elicited from the defendant’s own witnesses. In each of these cases it was shown that the bonds were delivered. directly by E. D. Shepard & Co. to the purchasers, Parsons and Woolworth, respectively, and the books of account of the sellers showed that they were paid for by checks drawn by the purchasers to the order of E. D. Shepard & Co., who took and kept them and immediately [599]*599thereafter paid a compensation or commission thereon to Valentine.
Coming now to the transaction directly involved in this case, the evidence is that on the morning of July 28, 1908, Valentine obtained a quotation of $25,000 Yankee Fuel bonds at ninety flat, which meant that Valentine would be entitled to receive as his compensation any moneys in excess of ninety which he might obtain on the sale of these bonds. E. D. Shepard & Co. claim that this was a sale to Valentine and that the excess above ninety was not to be treated as a commission. The books of Shepard & Co., however, show that the bonds were billed to Ball & Whicher and not to Valentine, although Ball & Whicher were not the purchasers, the ostensible purchaser being one Spingarn. It may be assumed that E. D. Shepard & Co. then knew nothing of Spingarn. The same thing is true of Ball & Whicher, who knew nothing about him until Valentine came to them and stated that Spingarn was the purchaser, and it was upon that false representation that Ball & Whicher cleared the transaction.
The books of account of Shepard & Co. contain entries with respect to this transaction indicating the payment to Valentine of the excess over ninety, amounting to $2,406.25 as “ commission ” paid to him. The stub of their check book as well as their cash, journal and ledger entries show that that sum was paid as commissions. The ledger entries are made in an account known as “ Salesmen’s Commission Account.”
It is true that the defendant’s, witness Lincoln attempted to prove that these entries were made inadvertently. In this connection attention should be called to his cross-examination on this point as follows: “ Q. Do you know what a salesman’s commission means? A. Yes. Q. What does that mean? A. The amount of money he receives over what we receive. Q. That he receives as a commission on the sale? A. Yes, it would be rather an elastic term, commission. Q. It is his compensation, isn’t it, it is the compensation that the salesman gets for the transaction, isn’t it? A. Yes, it might be.”
The entries as they stand are admissions on the part of [600]*600E. D. Shepard & Co. that the sum of $2,406.25 was paid to Valentine as a commission. The jury might consider the question that if Valentine was the purchaser, why did not the books of E. D. Shepard & Co. show that he purchased the bonds?
Sufficient has been shown to demonstrate beyond a doubt that the case presented a question of fact for the jury and that the dismissal of the complaint was error.
The judgment and order appealed from should be reversed and a new trial ordered, with costs to appellant to abide the event.
Dowling, Laughlin, Page and Merrell, JJ., concur.
Judgment and order reversed and a new trial ordered, with costs to appellant to abide the event.