
    The American Preservers Co. v. The Columbia Investment Co.
    (Superior Court of Buffalo—Trial Term,
    March, 1894.)
    One T., who was plaintifE’sjnanager, pureliased of defendant certain shares of its stock and paid therefor with plaintiff’s check signed by him as manager; he then obtained a loan for a similar amount upon his individual note, secured by said stock, and deposited the proceeds in plaintiff’s hank account. At that time he was largely indebted to plaintiff for moneys misappropriated by him, and soon after absconded. In an action to recover the amount of the check, which had been paid, held, that, the transaction between defendant and T. was an individual one, entirely independent of plaintiff’s business; that when defendant took plaintiff’s check in payment without making inquiry it was chargeable with all the knowledge it could have obtained had it done so; that the mone.y obtained by T. on his note was his own, and its deposit in plaintiff’s account operated as a payment on his indebtedness to it, the title passed to plaintiff and its application to the payment of the check was a misappropriation of plaintiff’s moneys upon T.’s individual debt, and that plaintiff was entitled to recover.
    Motion for a new trial made upon the minutes of the court.
    It appeared upon the trial that the general manager of plaintiff purchased of defendant certain shares of its stock, for which he gave plaintiff’s check upon an account kept by it in a bank. This check had printed upon its face in large letters “ American Preservers Company,” and at the bottom again the words “ The American Preservers Company, per,” then followed a blank for the signature, after which was printed “ Manager.” The check as made out and delivered in payment for the stock was signed “ The American Preservers Company, per C. F. Tomes, manager.” Defendant took the check, deposited it in its bank for collection, and the same was subsequently paid upon presentation. Upon receiving the certificates of stock, Tomes took them to the bank in which plaintiff kept its account and applied for a loan of an amount equal to the check. The loan was made upon Tomes giving his individual note and attaching thereto the stock as collateral security. The bank then issued to Tomes a transient discount check or draft representing the amount secured by the note, less the discount. Tomes immediately deposited this check in the hank and caused the proceeds to be passed to the credit of plaintiff's account. This transaction made the account of plaintiff good for the check held by defendant, less the amount of the discount, but there was sufficient money in the account with this deposit to more than equal the sum represented by the check, which was paid therefrom upon presentation. Defendant had no knowledge of the disposition of the stock by Tonies or how the account was made good up@n which the check was drawn. At the time of this transaction Tomes was largely indebted to plaintiff for moneys misappropriated by Mm, exceeding very largely the proceeds of his note. Subsequently Tomes absconded, and plaintiff, learning of the check and its payment, demanded the return of the money; this being refused, it brought this action to recover the amount thereof. At the close of the proof the court directed a verdict for plaintiff for the sum represented by the check, with interest.
    
      Simon Fleischman, for plaintiff.
    
      N. W. Norton, for defendant.
   Hatch, J.

The transaction between Tomes and defendant was an individual transaction entirely independent of any business carried on by plaintiff, or of any matter which Tomes, as general manager, was authorized to do for it. Of this fact defendant was advised, or could have been so advised, if it had made inquiry. Making no inquiry, it stood chargeable with all the knowledge it would have obtained had it done so. When it took the check it knew that it was not Tomes’ check,, but the check of plaintiff, for it so read; consequently it took it at its peril and became liable to plaintiff therefor for its proceeds. Gerard v. McCormick, 130 N. Y. 261.

Defendant does not contend against this result. But it claims that as Tomes by means of its property raised the money to meet the check and placed it in plaintiff’s account, it lias suffered nothing by Tomes' act, save a small sum represented by the discount, which defendant offers to pay, and that, as the transaction can be definitely and accurately traced and the equities of the parties perfectly adjusted, no recovery should be had beyond the difference in the deposit and the amount of the check. As before observed, the transaction with Tomes was with him as an individual; defendant sold him the stock, and with full knowledge took plaintiff’s check in payment therefor. As to the plaintiff or any other person-Tomes could sell and convey good title to the stock which defendant could not question. When Tomes took the stock to the bank and gave his note, that was his individual transaction with the bank, and was so understood by both parties to it. Tomes might do with that money manv tliing-s. He could purchase other property with it, he could pay the check of plaintiff with it or he could pay any pre-existing debt, and defendant could not complain, nor could it follow that money although able to trace the transaction. At this time Tomes was largely indebted to plaintiff, and it was competent for him to pay that indebtedness. Had he sent the money by express or otherwise to plaintiff’s head office, there can be no doubt, but that plaintiff would have obtained good title thereto and could have applied it upon his existing indebtedness. If paid to them at any other place or manner a like result would be reached. When placed in plaintiff’s account it became impressed with a trust in plaintiff’s favor, and was payment to it as fully and completely as though the money had been handed to plaintiff’s president; the title then passed to plaintiff, and it could not be divested of it except through some one of its authorized channels. Neither the bank nor any other person.could take it, although, before drawn out, all the factswvere known. It was applied in payment of the check, but this check represented the individual debt of Tomes, and consequently it was a misappropriation of plaintiff’s moneys to apply them thereon.

It is believed that the authorities support the views here expressed. In Justh v. Nat. Bank, etc., 56 N. Y. 484, it was said: “ In the absence of trust or agency I take the rule to be that it is only to the extent of the interest remaining in the party committing the fraud that money can be followed as against an innocent party having a lawful title founded upon consideration; and that, if it has been paid in the ordinary course of business, either upon a new consideration or for an existing debt, the right of the party to follow the money is gone.”

In the present case there was no trust or agency. As we have seen, Tomes did not assume to represent plaintiff in any one of the transactions or in any matter of detail connected therewith, and each person who dealt with him had knowledge of such fact. When the money went into plaintiff’s account it became instantly the plaintiff’s money; Tomes had no interest therein, and it was only his interest that defendant could reach. Stephens v. Board of Education, 79 N. Y. 183; Van Alen v. Am. Nat. Bank, 52 id. 1; Gerard v. McCormick, 29 N. Y. St. Repr. 112.

■ The rule here laid down in no wise conflicts with the law, long established, that a defrauded vendor of goods may pursue and retake the goods as against every person except a hona fide purchaser parting with present value.

Such are the cases relied on by defendant. They are without application, for the reason that the property sold in the present case is not the subject of pursuit; that was pledged by Tomes and disposed of by the bank, and lie received the money on his note and paid a debt lie owed, and the creditor received it with no notice of its source or of the fraud practiced by Tomes. The distinction is very clearly pointed out in Stephens v. Board of Education, 79 N. Y. 183.

Nor do I think defendant has an equitable defense. When it parted with its property it had full notice of the character of the transaction; it chose to receive plaintiff’s check and 'thereby invested Tomes- with control and dominion over the property; it was not influenced in anything it did by what Tomes subsequently did with the property, for of that disposition it had no notice until some time subsequent to the paynient of the check. There was, therefore, nothing in thé whole transaction which influenced its action; it was simply a sale of stock for which it took plaintiffs check for Tomes’ debt, and it elected to do so with complete knowledge of its character. The case, therefore, lacks any equitable features available to defendant. The result is that the money which paid this check was plaintiffs money, for which it is entitled to judgment.

The motion for a new trial is denied, and judgment is ordered for plaintiff on the verdict, with costs.

Motion denied and judgment ordered for plaintiff, with costs.  