I dissent and vote to reverse the judgment appealed from and to grant judgment to the plaintiff as prayed for.
*267The plaintiff, a finance company, seeks in this action to recover the sum of $53,198.75 as holder of a check in that amount made by the defendant and upon which payment was refused. This relief was denied by the trial court on the ground that defendant was entitled to a setoff—a setoff asserted against plaintiff’s principal in this transaction, Arlee Associates, Inc.—in a sum in excess of the amount sought to be recovered.
The facts giving rise to this action are substantially as follows: Arlee Associates, Inc., was engaged in the business of purchasing and selling securities, in what are commonly known as clearance transactions. It entered into an agreement with the plaintiff whereby the latter would furnish the funds for stock to be purchased by Arlee, and upon the sale shortly thereafter the plaintiff would recoup the funds advanced, plus a fee for its ‘1 services ’ ’, with the balance remaining, if any, to be paid over to Arlee. Plaintiff, on its part, had an agreement with the Meadow Brook bank whereby the latter would receive the securities purchased, pay for them (charging plaintiff’s account), deliver the securities to the subsequent buyer and eventually remit the proceeds (less the advance fee) to the plaintiff.
The clearance transaction which gave rise to this lawsuit involved the buying and selling by Arlee of some 900 shares of stock. On May 19, 1961 Meadow Brook received the securities and issued a check in payment therefor in the amount of $53,000, charging plaintiff’s account in such sum. The securities were held by Meadow Brook until May 26, 1961. In order to effect their sale, defendant received instructions from Arlee to accept delivery of the stock and to pay Meadow Brook the sum of $53,198,75. The instructions were complied with and the defendant made a check in that sum payable to the bank. Thereafter, and on May 29, 1961, defendant, having learned that some $200,000 of checks made by Arlee in connection with another transaction, were uncollectable, stopped payment on the check given to Meadow Brook. Meadow Brook assigned the check to the plaintiff and the instant lawsuit ensued.
The issue presented is whether the defendant’s claim against Arlee may be sustained as a setoff against the plaintiff in its action on the check, I conclude that it may not.
Looking solely to the undisputed facts as to the relationship of the parties, it is clear that Arlee was the principal and that the plaintiff was its agent. Meadow Brook in turn was the agent of the plaintiff and consequently must be considered to be the agent of Arlee. For all practical purposes Meadow *268Brook and the plaintiff are one entity in this transaction and I treat them as such.
If Meadow Brook, as agent of Arlee, had been merely a conduit for the delivery of the stock and the collection and transmittal to Arlee of the funds paid in return therefor, then the setoff asserted by the defendant against Arlee would clearly be a good one. It would be so irrespective of whether the claim to the setoff arose out of a different transaction and subsequent to the transaction here involved.
However, in this case, Meadow Brook and the plaintiff were not ‘ ‘ naked ’ ’ agents for the purpose of delivery and collection. Here the agent had such an interest in the • proceeds as ordinarily would entitle it to withhold an amount to the extent of that interest.
There is no doubt but that if the defendant delivered its check in return for the stock, knowing of the plaintiff’s interest, there could be no setoff. However, the defendant asserts that it had no such knowledge. While it is difficult to believe that the defendant, with its expertise in this business, did not fully understand the nature of the transaction, yet, inasmuch as there is nothing in this record to indicate that knowledge was brought home to it, I must assume that defendant had no actual or constructive notice of plaintiff’s interest.
Thus, the ultimate question to be decided on this appeal is whether, in the circumstances of this'case, such lack of knowledge gives the defendant a right of setoff where it would have had none had it known of plaintiff’s interest.
As I view it, the mere failure to disclose the plaintiff’s interest does not, nor should it, give defendant a right of setoff which it would not have had had there been such á disclosure. This conclusion is dictated by the answers to the following questions: Was the defendant prejudiced in any way by the failure to receive notice of the plaintiff’s interest? Did the defendant rely on the plaintiff being a mere “naked” agent of Arlee? Would not the defendant have consummated the transaction even if it had known of the plaintiff’s interest, and of the plaintiff’s right to protect that interest? Did not the defendant receive consideration in full for the check which it delivered to the plaintiff? These questions lend themselves to ready answers. Foremost, there was no reliance placed by the defendant on an assumption that the plaintiff was an agent merely for collection. Indeed, the testimony of plaintiff’s operations manager clearly indicates that defendant would have closed the transaction even had it known that the plaintiff was *269entitled to deduct its interest from the proceeds. That testimony was as follows:
“ Q. Are you interested in whether the hank has any lien on those securities? A. No, sir.
Q. Do you know whether the bank has any lien on the securities? A. I don’t know.
Q. Did you ask whether the bank has any liens on the securities? A. No, I didn’t ask.
Q. You are not interested in anything but receiving securities and making payment? A. Identical securities sold, I am interested in receiving.
* * *
Q. You are not interested in whether the bank has a lien? A. I answered that question.
Q. You are not interested? A. I answered you before and said, no.
Q. Are you interested in whether the bank is acting for anyone other than Arlee? A. No.
Q. Are you interested in whether the bank is acting for Chatham Security Corporation? A. For anyone.
Q. Not at all? A. The answer is, no.
Q. It makes no difference to you? A. No.”
Under such circumstances how can we say that the failure to notify the defendant of the plaintiff’s interest in any way affected it? The defendant suffered no loss in consequence of the failure to make a disclosure of the plaintiff’s interest. The delivery of the stock was full consideration for the check delivered and no claim has arisen as the result of the specific transaction. In consequence, there was no prejudice to the defendant.
It would be quite different if the defendant placed reliance on the assumption that the plaintiff was an agent merely for collection. Then, perhaps, the defendant could claim prejudice. Not having placed reliance on such assumption its position was not changed in the slightest because of its failure to have notice of the plaintiff’s interest. Why then should the defendant have any greater rights than it would have had had it known of the interest, when it plainly states that it would have closed the transaction in the same manner had it had full knowledge of such interest? Indeed, to allow a setoff by the defendant, in these circumstances, would make for a most inequitable result. The plaintiff would not have parted with the stock—thereby surrendering its security—except in exchange for what appeared to be a good check. The defendant attempts *270to make a windfall for its benefit merely because it allegedly had no knowledge of plaintiff’s interest. We should not impair the plaintiff’s right to protect its interest.
The majority concludes that detrimental reliance is not a prerequisite to the enjoyment of a right of setoff. I agree with that statement but only as a general one not here applicable. There is no question but that a right of setoff would be available to defendant as against Arlee — even absent detrimental reliance—had there been no intervening interest in the plaintiff. The majority find such interest to be of no consequence. However, as I read Foreign Trade Banking Corp. v. Gerseta Corp. (237 N. Y. 265) and Hogan v. Shorb (24 Wend. 458) — relied upon by the majority—they do not ¡support, the majority position. The opinion in each of those cases reveals that the state of mind of the purchaser (i.e., the question of detrimental reliance) was of primary concern in determining whether a setoff was available. While those cases resulted in holdings for the purchasers, the facts differ from those of the instant case in a most important respect. In the Hogan case “the purchaser, when he obtained the goods, did not intend to abide by his contract but proposed to setoff a demand against the agent ” (p. 273). Similarly, in the Gerseta case the court indicated that the purchaser may well have dealt with the importer “in order to obtain a credit on the accounts between them” (p. 274). In stating it was “ not a case where it makes no difference to the purchaser to whom he pays the price of the goods ” (p. 274), the court implied that were there such indifference the result would have been otherwise. In the instant case such indifference is manifest in the record and, I submit, warrants a result contrary to that reached by the majority,
McNally, Steueb and Bastow, JJ,, concur with Breitel, J. P.,• Babiy, J., dissents in opinion.
Judgment in favor of defendant on the merits affirmed, with $50 costs to defendant-respondent against plaintiff-appellant.