DANFORTH, J.
Upon the facts found by the referee it is plain that no title to the corn passed from the plaintiffs to Atkinson or to Atkinson Co. There was an agreement to sell, but payment was to be made in cash upon delivery. Payment was thus made a condition precedent, and until the condition was performed the title could not be affected. ( Russell v. Minor, 22 Wend. 662; Leven v. Smith, 1 Den. 571; Fleeman v. McKean, 25 Barb. 479; Dows v. Dennistoun, 28 id. 393.) Nor was this condition waived by the symbolical delivery of the corn to Atkinson by putting in his hands the title papers therefor, for this was also done upon condition that the title should not pass until payment of the price in cash. ( Corlies v. Gardner, 2 Hall, 374; Hammett v. Linneman, 48 N.Y. 399; Herring v. Hoppock, 15 id. 409; Cole v. Mann, 62 id. 4.) But as Atkinson was thus enabled by the plaintiffs to assume possession and the apparent ownership of the corn, third persons had a right to consider it as his, and the plaintiffs are estopped as against any one who, without notice that the condition had not been performed, made advances thereon as pledgee or purchaser in the belief that the apparent title was the real title and the ownership absolute. ( Saltus v. Everett, 20 Wend. 267; Smith v. Lynes, 5 N.Y. 41; Paddon v. Taylor, 44 id. 371; Comer v. Cunningham, 77 id. 391.)
The defendants claim to be in that position. By the answer in this action they allege that on the 12th day of August, 1876, they bought of Atkinson, in the usual course of business, sixteen bills of exchange drawn by him against merchandise of various kinds and among others, three bills of exchange drawn against corn then on shipboard, and received therewith bills of lading representing the said corn as collateral security for said bills of exchange; that they took these bills in good faith and paid therefor, without notice of "or reason to suspect that the plaintiffs had any interest in or claim upon said corn or any part thereof." And except the fact of payment, this claim may also stand upon the findings of the referee. As to that, he finds the aggregate amount of exchange so purchased was £ 6,725; that the three bills drawn against the corn amounted to £ 2,050, and form part of the £ 6,725, and for this the whole price to be paid was $36,331.81; that on account of said purchase "the defendants paid to Atkinson $17,000 and no more"; that afterward and on the same day, the plaintiffs notified the defendants that they were the owners of the corn, and demanded the same or the bills of lading therefore, or that defendants should agree to account to plaintiffs for the value or the proceeds thereof; that the value of the corn was $13,802.61, and that at the time of this demand there remained in the defendants' hands of the price of said bills of exchange more than $19,000; and that the defendants refused to comply with either of the plaintiffs' demands. At this time also, although the corn had been shipped, the vessel was still in port, and the bills of lading were under the control of the defendants, for they had but a few hours before been mailed by them to their agents and correspondents; and therefore to the extent of the unpaid portion of the price agreed to be paid for the bills of exchange, the defendants had in their possession sufficient means of protecting not only themselves but the plaintiffs from loss, and their refusal to comply with the plaintiffs' demand seems to be without excuse or justification within the rule relied upon. They stand on Atkinson's title as to the money in their hands, and seek to retain that which he was bound to pay over before his title could be perfected.
The corn when shipped was put on board the vessel "for account and to be held for account of plaintiffs." The weigher's return, showing the quantity of the corn and its delivery upon the vessel, was transferred by the plaintiffs to Atkinson, not only upon the condition before stated, but for the purpose of enabling him to procure bills of lading for the same, "and to prepare and sell his exchange drawn against" it, and the proceeds to the amount of the price of the corn were to be thereupon paid to the plaintiffs. These things were accomplished. The bill of lading was transferred by Atkinson to the defendants as security for the bills drawn by him. The defendants bought this with other exchange, and at the time of the demand had not paid him therefor. So far as the money in their hands is made up in any part from the proceeds of the plaintiffs' corn, I am unable to see how the position of the defendants is better than Atkinson's. So far as it contains the price, or any part of the price, which the defendants agreed to pay Atkinson for the bills of exchange, or so far as it is money agreed to be advanced upon the strength of the security afforded by the bills of lading written for the plaintiffs' corn, how is the defendants' title better than that of Atkinson's? To that extent, in whichever of these ways arising, it is the proceeds of the plaintiffs' property. As such it could be followed if it remained in Atkinson's hands, and there is no reason, in right or justice, why it should not in like manner be taken from those of the defendants. So long as the money is in their hands, it does not matter that the property was received from Atkinson without notice of the plaintiffs' claim or equity. The proceeds of the plaintiffs' property belong to them. Atkinson may be considered as the plaintiffs' trustee or agent, for the purpose of disposing of the property and procuring the advances; and in either view, the plaintiffs, as principals, or as cestuis que trust, would be entitled to the price, or the money agreed to be advanced. ( Scott v. Surman, Willes, 407; Rodriguez v. Heffernan, 5 Johns. Ch. 430; Taintor v. Prendergast, 3 Hill, 72; Lamine v. Dorrell, 2 Ld. Raym. 1216; Kelley v. Munson, 7 Mass. 319; Sheffer v. Montgomery, 65 Penn. St. 329; F. M. Nat. Bk. v. King, 57 id. 202; Lemcke v. Booth, 47 Mo. 385.) The trust is implied in invitum, or is "forced upon the conscience" by mere operation of law (2 Story's Eq. Jur., § 1254), for the reason that the defendants have money in their hands which they cannot conscientiously withhold. (Com. Dig., Chap. 2 A. 1; id. 4 W. 5.) It cannot be doubted that if the corn had come into the defendants' hands with notice of the condition on which Atkinson held it, they would be bound to perform it, or hold the property subject to the condition, as Atkinson held it. The same principle which requires this subjects the defendants to the rights of the plaintiffs, as the true owners of the property to its proceeds; and the fund in the defendants' hands is in like manner liable to the rights of the plaintiffs, in the same degree as if it was in the hands of Atkinson. Its conversion info money, or into any other kind of property, can make no difference with the plaintiffs' rights or the defendants' liability, either at law or in equity. (Story's Eq. Jur., ante, §§ 1255, 1256, 1257, 1258.) Judge STORY there declares the general proposition, "that if any property, in its original state and form, is covered with a trust in favor of the principal, no change of that state and form can divest it of such trust or give the agent or trustee converting it, or those who represent him in right (not being bona fide purchasers for a valuable consideration without notice), any more valid claim in respect to it than they respectively had before such change." Scott v. Surman (Willes, 407) was an action against the assignees of a factor who had sold goods contrary to directions; and the court say: "A man may in many cases consider another as a wrong-doer or as a receiver of money to his use, as he thinks best and most for his advantage," and "the owner may come either against the vendee or the factor at his election; and the plaintiffs by this action have chosen to confirm the sale." In Merrill v. The Bank of Norfolk (19 Pick. 32), the plaintiff had sent to one Lamson, a broker, a quantity of lumber for sale; in part payment the broker took a note, procured it to be discounted by the defendant and the proceeds placed to his credit; afterward and on the same day the proceeds were attached by creditors of Lamson, and the plaintiff after demand brought an action against the bank for the amount of the note. The defendant set up the attachment, but the plaintiff recovered. The court say: "Giving credit for the proceeds to the factor did not divest the plaintiff of his property. It did not amount to payment; and nothing short of payment, either to the plaintiff or his agent, would discharge the defendants from their liability. The plaintiff may follow the property, however it may change form, or in whosesoever hands it may be found, until his rights be divested by his own act or authority. The defendants having the plaintiffs' money in their hands, for which a demand was made before the action was commenced, are liable for the amount." In like manner, in the case before us, the defendants must be regarded as holding the proceeds in place of the property, and therefore liable to pay them over to the plaintiffs as the rightful owners, and this conclusion is sustained by the principle declared in Van Alen v. Am. Nat. Bank ( 52 N.Y. 1), to be well settled, that so long as money or property belonging to the principal, or the proceeds thereof, may be traced or distinguished in the hands of the agent or his representatives or assignees, the principal is entitled to recover it unless it has been transferred for value without notice; and the case itself sustains the doctrine. To the same effect are U.S. v. State Bank 96 U.S. 30); Caussidiere v. Beers (2 Keyes, 198); Cobb v. Dows ( 10 N.Y. 341). Nor does the fact that other moneys are mingled with the proceeds of the plaintiffs' property impair their right. Van Alen's case is to that effect, and so are many cases therein referred to or cited. In one of them ( Pennell v. Deffell, 4 De G.M. G. 372), the court say: "It may indeed increase the difficulty of ascertaining what belongs to the trust, but I can see no possible ground on which it can affect the principle." No such difficulty was suggested by the defendants. Upon demand made they not only refused to return the bills of lading or corn, but even to account for its value or the proceeds thereof. The plaintiffs' rights are denied, and it may be said here, as was said by the late chief judge in Van Alen's case, supra: "The defendant occupies the position of objecting to the title of the plaintiff without having or claiming any title itself." Indeed a further finding of the referee shows that when on a subsequent day the demand was renewed, "the defendants offered to pay the price of the exchange drawn against the corn, if Atkinson would consent; that he refused to consent, and they thereupon refused to pay the price of the exchange, and retained possession of the corn without agreeing to account for the same to the plaintiffs." It is apparent that with notice of the plaintiffs' rights and power, without injury to themselves to respond thereto, they put their refusal only on the ground of Atkinson's refusal. That does not justify them. They withheld it after notice of the trust, and cannot stand on this refusal, without showing that Atkinson had a right to make it. This they have not done. The money was at first in their hands as the money of Atkinson. They may be regarded as his bankers; and so far as they paid it out without notice that it did not belong to him, or that others were entitled to it, they are to be protected. ( School Dist. v. First Nat. Bank, 102 Mass. 174, and cases infra.) This would apply to the $17,000 paid upon his check. But the sum remaining may be followed by the true owner. (2 Story's Eq. Jur., § 1258; Pennell v. Deffell, supra; Ex parte Cooke, L.R., 4 Ch. Div. 123; F. M. Nat. Bank v. King, 57 Penn. St. 202.) In the case last cited it was held, that when a principal can show that the money had been placed in the hands of another by his agent, it is no objection to the owner's claim that the other has promised to pay the agent; it would follow that the refusal of the agent to consent to payment to the principal would be no protection to the holder of the money against a claim made by the real owner. Atkinson acquired no rights by his abuse of trust, and could confer none upon the defendants, except as they became bona fide purchasers for value and without notice. This was not the defendants' relation to the $19,000.
Upon the same facts it follows that the principle relied upon by the learned counsel for the appellants, viz., that when one of two innocent persons must lose by the act of a third, the loss should fall on the one through whose trust or confidence the wrong was committed, has no application to this case, for neither of the parties need suffer any loss. The defendants have in their hands money which they have no right to retain. They must pay it over to some one — either to Atkinson, or his representatives, or the plaintiffs. Atkinson could not complain that it was paid to the plaintiffs; nor could the defendants be required to pay it to him again.
But it is said that this money represents, in part, the price of bills of exchange drawn against other property; and that "the defendants are in the same position as to all the exchange and all the merchandise." The force of this objection, however, is not apparent. The defendants were not called upon to decide between conflicting claimants to this money. The plaintiffs gave notice of their rights and made their demand on the twelfth day of August; and the question between them and the defendants must stand as of that time. A payment then would have been good against every one. It is true that the referee, at the request of the defendants' counsel, found that afterward, viz., on the fifteenth and twenty-second of August, similar demands, amounting to $11,779.64, were made upon defendants by other creditors of Atkinson for other merchandise, purporting to have been represented by bills of lading accompanying the exchange sold by him to the defendants. But this falls short of a finding that the claims rested on the same ground as that of the plaintiffs, or that the claims were valid. Yet, if this might be inferred, such finding is not only not within any issue in the action, or any allegation or defense set up in the answer, but the defense suggested by the fact found or implied is inconsistent with the answer. If, as is in that pleading alleged, the defendants actually paid Atkinson for the exchange, or advanced, upon the security of the corn, the full amount of the bills of exchange, before notice of plaintiffs' equity or their demand, the claims of others, whether like the plaintiffs' or not, would be in no view material. Again, the action was not commenced until October, and the fact found, if relied upon and valid, should have been stated. If the necessary facts existed, if the defendants were vexed or likely to be vexed by conflicting claims of two or more persons, they had a remedy by action of interpleader, and might have stayed proceedings in this action until the rights of the different claimants had been determined. In such an action they would disclaim any personal interest, and by payment into court, or otherwise, submit the fund to its disposal. This is not the attitude of the defendants. In this action they assert a personal ownership of the bills of exchange, with the corn as security, and payment of the whole amount. In such a case an action of interpleader would not lie. Again, if there was merit in the suggestion that the rights of other persons were involved in this fund, the defendants might have had them brought in as parties to the controversy. (Code, § 122.) That they have resorted to neither remedy, nor set up the conflicting claims by answer, permits the inference that none exist. For aught that appears, the bills of exchange have been paid; and if others ever had an interest in the proceeds, it has in some way been terminated. Having forborne to adopt either mode of proceeding, and having offered to pay over the money upon Atkinson's direction, the defendants thereby identified themselves with Atkinson, and must stand or fall with his title. ( Wilson v. Anderton, 1 Barn. Ad. 450 [20 Eng. Com. Law, 426]; Hoffman v. Conner, 76 N.Y. 121; 12 L.J. [N.S.] 117.)
It is, however, urged by the learned counsel for the appellants, that "by payment of part of the purchase-money for the exchange before notice of plaintiffs' claim, the defendants were entitled to protection as bona fide purchasers." If this means to the amount paid, it is a correct statement of the rule. But I understand the claim to be that they can therefore hold all the purchase-money. This does not seem to be so upon principle, and the cases cited by him fall short of that conclusion. They are DeMott v. Starkey (3 Barb. Ch. 403), Weaver v. Barden ( 49 N.Y. 286), M. T. Nat. Bank v. Crow (60 id. 85). In the first, the note was purchased after notice of its invalidity, and the partial payment made was held to have been wrongful and insufficient to sustain a title. It is true the Chancellor says: To entitle a party to the character of a bona fide purchaser without notice, he must not only have obtained the legal title to the property, "but he must have paid the purchase-money, or some part thereof at least, before he had notice of such prior right," and this is repeated in Weaver v. Barden; but here its meaning and extent appear, for it is added that such an one "is entitled to a lien to the amount of the consideration paid, and to a repayment of that amount, before he will be required to reconvey the stock" — the property then in question. While in the third, the note in question was paid for in full, in money or by canceling and giving up another note. The substance of the transaction here is that the plaintiffs' property was in part the consideration for the bills of exchange, and they are entitled to so much of the price agreed to be paid therefor by the defendants as will make them whole. But in whatever aspect the case is regarded, the conclusion of the learned referee was correct.
It is now objected "that if the plaintiffs had any cause of action against the defendants, it was not in trover, nor by an action in the nature of trover." No question of this kind, however, appears to have been raised upon the trial, and the findings of the referee were so made as to present all the facts in the case which either party thought material. It is too late now to suggest a variance, even if it would otherwise have availed. ( Tyng v. Com. Warehouse Co., 58 N.Y. 308.)
The judgment appealed from should be affirmed.
All concur, except FOLGER, Ch. J., and EARL and FINCH, JJ., dissenting.
Judgment affirmed.
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