
    STEPHEN D. STEPHENS, Respondent, v. THE BOARD OP EDUCATION OF THE CITY OF BROOKLYN, Appellant.
    
      Money illegally obtained—when recoverable from third person.
    
    G-. obtained from the plaintiff, upon a forged bond and mortgage which he knew to be such, a sum of money, and paid it to the defendant on a precedent debt, which it did not appear had been discharged, nor that any security therefor had been parted with by reason of such payment. Held, that the defendants were liable for such amount to the plaintiff, after notice and demand.
    Appeal from an order made at Special Term overruling a demurrer.
    
      Wi/nchesier Britton, for the appellant.
    It was the end of the identity of the fund, when Grill deposited plaintiff’s check in the bank, and it was passed to the credit of his account. (Matter of Franklin Bank, 1 Paige, 249; Commercial Bank v. Hughes, 17 Wend., 94; Graves v. Dudley, 20 N. Y.,76; Marsh v. Oneida Bank, 34 Barb., 298; Ætna Nat. Bk. v. Fourth Nat. Bk., 44 N. Y., 82.) The payment not having been made .to defendant by Grill, in the identical money procured from plaintiff, but from his general deposit account in the bank, this action cannot be maintained. There is no privity between plaintiff and defendant, which, is absolutely essential to the maintenance of this action, unless there has been malafides on the part of defendant, which is not this case. (4 B. & Ad., 611, 612; Williams v. Everett, 14 East, 582; Stephens v. Babcock, 3 B. & Ad., 354; Pierce v. Craft, 12 John., 90; Rapalje v. Emory, 2 Dal., 51, 54.) There is no demand and refusal alleged, which is necessary. (Walrath v. Thomson, 6 Hill, 540; Phelps v. Bostwick, 32 Barb., 314; S. C., 24 id., 300; Mayor v. Erben, 3 Abb. Ct. of App. Dec., 255; Sears v. Patrick, 23 Wend., 538.)
    
      Alonzo G. Farnliam, for the respondent.
    The case of Caussidiere v. Beers (2 Keyes, 198), is a case in point, and the Court of Appeals there affirmed the right of recovery in such an action. The appellant is in error in claiming that in order to entitle the plaintiff to recover, it is not enough to trace the fund, but that he must trace the money in bills. A court of equity will always restore parties to the same position they were in before the commission of a fraud or felony, if it can do so without injury to an innocent third party. No title can be made through an act of fraud amounting to a felony. (Brower v. Peabody, 3 Kern., 121.) Where one has found money belonging to another, the law implies a promise to repay it. (McDougal v. Walling, 48 Barb., 364.) In Calland v. Loyd (6 Mees. & Weis. [Eng. Exch.], 26), the principles held by the court in this case were clearly established as the rule in England. (55 N. Y., 213.)
   Brady, J.:

This action was brought to recover a sum of money received under the following circumstances : William L. Grill, being a member of the board of education of the city of Brooklyn, ■ and while acting as its agent, received and embezzled certain of its moneys.. In December, 1871, Grill, upon a forged bond and mortgage, which he knew to be such, obtained from the plaintiff a sum of money, namely, $4,129.34, and deposited the same in the City National Bank to his credit, immediately, and upon the 21st of December, 1871. He had, at the time of the deposit, to his credit, the sum of seventeen dollars, or thereabout. Upon depositing the amount, as stated, he drew his check in favor of the defendants for the sum of $3,600, which was deposited to their credit by their secretary, and, on the twenty-third of December, paid to the bank in.which it had been deposited by them. These facts are all abundantly set out in the complaint, to which the defendants demur. The demurrer was overruled at Special Term, and chiefly upon the authority of the case of Caussidiere v. Beers. The facts in that case were these: The plaintiff intrusted moneys of his to a clerk, and the latter, having gone to the gambling house of the defendant, lost them at play. The action was sustained, and the plaintiff had judgment. In 'that case, it was apparent that the defendant obtained the money by a process condemned as unlawful and unjust, and had no conscientious or equitable claim to retain it. In this case the defendants received it in an apparently proper mode, and in the payment of a just claim; having no share in, or notice of the illegal manner in which it was obtained from the plaintiff. The cases cannot rest precisely, therefore, on the same foundation. The question is not, however, whether the defendants received it in an unlawful manner, but whether, having received it in form in a legal manner, it can be withheld against the plaintiff from whom it has been stolen; and this question, though it may not be determined by adjudications precisely "similar, can be disposed, of on principles decided in analogous cases. The defendants’ debtor, Gill, never had any right, title or interest in the money. It belonged to the plaintiff as long .as Gill held it. He passed it away to the defendants in payment of a precedent debt, there being no evidence that the debt was discharged, or any security parted from by them. It was not received, therefore, for a valuable consideration, .within the law merchant as applied to negotiable promissory notes, so as to 'shut out existing equities. A holder can claim protection from the defense of a party whose negotiable paper has been obtained by fraud, only in case he has parted with value, or suffered some injury from it. It was, as said in Rapalje v. Emory, a receipt of money unjustly given to them, or at least, without a valuable consideration. If the delivery of an equal amount in value of personal property, obtained in the same felonious way, had been made to the defendants, there is no doubt that it could -be recovered by the owner, in an action to be brought for that purpose. The defendants having given nothing for it, and their debtor, Gill, having no title to it, the defendants should not be permitted to retain it. The case of Caussidiere v. Beers sustains this principle. The business of the defendant in that cause was illegal, it is true, and he acquired no title to any money obtained through its agencies; but the defendants, in legal effect, as to title, stand upon precisely the same basis. They took the money innocently, but without consideration, and, as against‘the plaintiff, acquired no right to retain it. They are in no better position than if it had been in the form of a note. In the case of CoZland v. Loyd and others, the plaintiff gave a sum of money to his wife to keep for him; without his knowledge, she took part of the money, a fifty pound Bank of England note, and deposited it in the defendant’s hands, in the name of her infant son by a former marriage, taking a receipt in his name, bearing interest. The plaintiff, when he discovered the fact, demanded the money, which the defendant refused to pay, and he commenced an action. He recovered, and the judgment was sustained. “ These authorities,” said Brown, J., in Caussidiere v. Beers, in concluding his opinion, seem to meto be decisive of the rule, that where one receives the money of another, and has not the right conscientiously to retain it, a privity between the true owner and the receiver will be implied as well as a promise to pay it.” This is such a case. The defendants have not the right, conscientiously, to retain the plaintiff’s money, and they ought to pay it.. It does not appear, however, that any demand was made of the money, by the plaintiff, before this action was brought. No demand is alleged in the complaint. The question arising upon that subject is not alluded to by the learned justice in his opinion delivered at Special Term, and is not discussed by the plaintiff in his points." I do not understand that the defendants owed any duty to the plaintiff, uptil notice of his claim and a demand. The contract, as said in Sears v. Patrick, was not negotiable; and there is not, and cannot be, any privity of contract between the assignee and the debtor, until the latter has notice of the assignment. The defendant must know that the plaintiff is entitled to the money, as also said in that case, before the law will imply a promise to pay him. 1 think the cases analogous on the necessity of a demand. -The defendants were entitled to know of the plaintiff’s claim and title, before any obligation to him was created. In the cases of Calland v. Loyd and Caussidiere v. Beers, the demand was, it would seem, regarded as necessary to the right of action for it was made in each of those cases, as appears by the reports. The order made at Special Term must, for this reason, be reversed, and judgment given for the defendants on the demurrer, with liberty to the plaintiff.to amend in twenty days, on . payment of the costs of the demurrer and( of this appeal.

■ Davis, P. J., and Daniels, J., concurred.

Ordered accordingly. 
      
       2 Keyes, 198.
     
      
       Lawrence v. Clark, 36 N. Y., 188.
     
      
       Cardwell v. Hicks, 37 Barb., 458.
     
      
       2 Dall., 51-54.
     
      
       Saltus v. Everett, 20 Wend., 267; Brower v. Peabody, 3 Kern., 121.
     
      
      6 Mees & Wels., 26, cited in Caussidiere v. Beers.
     
      
       23 Wend., 528.
     