
    Betsy A. Blair, Respondent, v. D. Munro Hill, as Assignee for the Benefit of Creditors of the Firm of Rodger & Co., Appellant, Impleaded with Robert E. Greene, Individually and as Sole Surviving Partner of the Firm of Rodger & Co.
    
      Banking — the receipt by an instilment banker of a cheek for collection and its deposit by him in a bank to his own credit is a fraud—presumption as to his withdrawal of money from, such bank—when the owner of the check may follow the proceeds ■ into the hands of the banker’s general assignee.
    
    Where a private banker who receives a check for collection, without the knowledge of the payee, deposits the check to her credit in his bank, and sends it to a correspondent bank, which collects it and gives him credit therefor, the payee is entitled to recover the amount of the check from the general assignee of the banker when it appears that the banker’s balance with his correspondent, from the time when such check was credited to him until the time when such balance was paid over to the general assignee, exceeded the amount of such check.
    It will be presumed that drafts drawn by the banker upon his correspondent, after the banker had been credited with the amount of the check, were drawn against funds belonging to the banker and that the trust fund remained continuously unimpaired.
    
      Semble, that a banker who receives a check for deposit when he is hopelessly insolvent, without apprising the depositor of that fact, is guilty of fraud.
    Appeal by the defendant, D. Munro Hill, as assignee for the benefit of creditors of the firm of Rodger & Co., from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Onondaga on the 21st day of July, 1899, upon the decision of the court rendered after a trial at the Onondaga Special Term.
    On the 16th day of December, 1897, the parties in interest in a partition action met at the office of a justice of the peace in the village of Jordan in the county of Onondaga expecting that the avails of the sale of real estate involved in said action would be distributed. The attorneys for the plaintiffs in the action, who resided in Hew York city, were present with checks drawn on a Hew York trust company to the order of the respective parties entitled thereto, among whom was the plaintiff and whose share was $1,591. These checks were indorsed and delivered to W. 0. Rodger. He was a prominent business man in Jordan, the principal owner of the private banking company in that village, and was supposed to be responsible and was guardian ad Utem for several infant defendants in said action, and assumed to represent the other parties. These checks, to the amount of $16,876.27, were taken by Mr. Rodger, and he at the same time told the parties to come to his office on the Thursday following to get their money. Rodger turned over the checks to Hr. Greene, his copartner, and the man in charge of the banking office of Rodger & Co., by whom the checks, pursuant to the direction of Rodger, were at once forwarded for collection to the Chase National Bank, the New York correspondent of said banking company. Credit was given to Rodger & Co. by this New York correspondent on the twentieth of December. Shortly after this, at the suggestion of Rodger, the parties were credited at his banking company with the sums to which they were severally entitled, although these entries were not made in the regular bank books for its customers, but in what is termed the inactive ledger. On the Thursday following the plaintiff was ill, but her husband called at the office of Hr. Rodger to receive the money coming to his wife, and also his own share, as he was one of the parties interested. Hr. Rodger requested that the parties defer receiving the money until the Tuesday following and this request was acceded to. On the day named he drew checks on his banking, company to the order of the several owners, caused them to be signed by them, and the plaintiff received her check along with the others. She presented it to the banking office and Hr. Greene delivered to her a draft on the Chase National Bank. The plaintiff and her husband lived on a farm at considerable distance from Jordan and were not depositors with the Rodger Banking Company, and the entire business had been transacted without consultation with them, and they were ignoraut of the method by which their money was to reach them. The plaintiff took her draft home in the country and was confined to the house by illness until some time in April. She retained the draft until January fourteenth when her husband left it with a bank in Syracuse for collection, but payment was refused by the Chase National Bank on the succeeding day. The other parties interested in the fund had received pay on their drafts some time before. Rodger died insolvent January second, and Mr. Greene, his surviving partner in the banking business, made a general assignment for the benefit of creditors on the seventh of that month, and it developed that Mr. Rodger was a very large borrower of the deposits of the bank and that the company was also unable to pay its debts.
    From the time of the credit to the banking company by the Chase Rational Bank until after the presentation of the draft January fifteenth its balance was sufficiently large in said bank at any time to warrant the payment of this draft. On January first the balance was $6,682.57 and drafts and checks of Rodger & Co. were honored by the Hew York bank down to January eleventh, and the sum finally removed by the assignee in February was $3,927.26. Other facts appear in the opinion.
    
      Homer Weston, for the appellant.
    
      Ceylon H. Lewis, for the respondent
   Spring, J. :

The plaintiff did not realize that Mr. Rodger deposited the check to her credit in the bank. She assumed he took it for collection and was to pay her the avails in cash. The collection through the RTew York bank, the commingling of the fund with his own, and the subsequent giving of the draft to her were all links in the chain with the purpose to stem the tide of financial embarrassment setting toward Rodger. The plaintiff, unacquainted with the business and with Rodger’s circumstances, was an unwitting participant in the project. The transaction did not occur in the banking office, and she had no expectation that his retention of the check was to make her a creditor of his banking company. Accordingly, the general rule that one who deposits in a bank becomes its creditor has no application to her case. He was her agent to get the money on this check for her, and the subsequent transactions terminating in the deposit to the credit of Rodger & Co. in the Hew York bank were wholly in excess of his authority.

The doctrine is well settled that where a bank or an individual receives a check for collection the proceeds are the property of the owner of the check and do not pass either to the original collecting agent or to its correspondent bank. (National B. & D. Bank v. Hubbell, 117 N. Y. 385; Nat. Park Bank v. Seaboard Bank, 114 id. 28.)

O’Connor v. M. Bank (124 N. Y. 324); People v. Merchants & Mechanics’ Bank (78 id. 269), and cognate cases relied upon by the appellant’s counsel, hinge upon the fact that in each instance there was a voluntary deposit in the bank so that the depositor became its creditor in common with the other depositors. So in Metropolitan Nat. Bank v. Loyd (90 N. Y. 530) the check was not left with the bank for collection, but by direction of the depositor credit was given him for the amount on its presentation and he could demand payment or withdraw the fund at any time. This necessarily vested the bank with the absolute title to the check and that ownership passed to its transferee.

Rodger, therefore, had no other duty to perform in regard to the check than to collect it and turn over the avails to his principal, the plaintiff. When he intermingled the proceeds with the general account of Rodger & Co. he misappropriated them. Their character as a trust fund, however, still adhered to them. The fact that they were incapable of specific identification did not debar the plaintiff from following the money. If the rights of intervening depositors had attached to the fund a court of equity possessed the power to unravel and adjust those rights. The significant fact, however, appears without dispute that from the time credit was given to Rodger & Co. by its Hew York correspondent until the removal of the fund by the assignee in February, there was more than sufficient money to the credit of Rodger & Co. to honor this draft of the plaintiff. The banking company treated it as having been paid in their statement, and knowledge of its non-payment was derived from the Hew 'York bank. After the credit arising from the collection of these checks, whatever withdrawals were made on the drafts and checks of Rodger & Co. presumptively were rightfully withdrawn, and, hence, the trust fund remained continuously unimpaired. (Matter of Holmes, 37 App. Div. 15; affd. on opinion of Appellate Division, 159 N. Y. 532; Importers & Traders’ Nat. Bank v. Peters, 123 id. 272; National Bank v. Ins. Co., 104 U. S. 54.)

A trustee cannot, by mingling the funds of his cestui que trust with his own, thereby rendering it impossible to trace the identical moneys, destroy the fiduciary character of the deposit. It is fundamental that where there has been a conversion or misappropriation of property, the rightful owner can retake it wherever found. If it is money and not susceptible of precise identification because commingled with other moneys, the entire fund will be impressed with the trust. The wrongdoer cannot escape liability because he has made his fraud difficult of detection. The only variation from the rule attaching the whole fund with the trust arises, when it is necessary to require identification to guard the rights of others. (Holmes v. Gilman, 138 N. Y. 369; Van Alen v. American Nat. Bank, 52 id. 1.)

As was said by Chief Judge Chubch in the case last cited (at p. 7), “ When a trustee deposits trust moneys in his own name in a bank with his individual money, the character of the trust money is not lost, but it remains the property of the cestui que Oust. If such money can be traced into the bank, and it remains there, the owner can reclaim it.”

In Matter of Cavin v. Gleason (105 N. Y. 256) the trustee diverted the fund but it never came into the custody of the assignee, so he was not charged with its payment. In this case, as has been said, there never was a reduction in the fund below the amount of this draft, so it was impressed with the trust when turned over to the assignee.

As the Chase National Bank has paid over the entire fund to the assignee, it is not interested in this controversy. A different situation might be presented if the bank had paid out the money innocently on checks of Rodger & Co. Hatch v. National Bank (147 N. Y. 184) and Nassau Bank v. Nat. Bank of Newburgh (159 id. 456), and like cases, had that circumstance as a potent factor, and are not, therefore, akin to this case.

The solution of these transactions is necessarily colored by the fraudulent conduct of Rodger. (Importers & Traders' Nat. Bank v. Peters, 123 N. Y. 272.)

At the time the check was retained by him, both he and his banking company were hopelessly insolvent, and that had been the condition for some time. He was cognizant of the situation, and it was his duty to apprise the plaintiff of it. His failure to do this made his acquisition of the check fraudulent, even if the plaintiff had known he was to use it. (Spring Brook Chemical Co. v. Dunn, 39 App. Div. 130; Cragie v. Hadley, 99 N. Y. 131; Grant v. Walsh, 145 id. 502.)

Had this been property which could have been reclaimed in specie, that would have been the proper remedy. The check fraudulently acquired had been converted into money, and the only course open was to follow this equivalent which was the result of the wrongdoing of Rodger.

The judgment should be affirmed, with costs.

All concurred, except Williams, J., not sitting.

Judgment affirmed, with costs.  