
    John H. Parks, Appellant, v. Knickerbocker Trust Company, Respondent.
    First Department,
    April 15, 1910.
    Banks — action on certificates of deposit — deposit by plaintiff as treasurer of voluntary association — pleading — answer showing title in association.
    It is a good defense to an action against a bank to recover on certificate's of deposit to allege that the moneys were deposited by the plaintiff as the treas-’ urer of a voluntary association which had previously been dissolved so that his authority as treasurer was revoked; that the certificates were issued to him solely as treasurer of the association, and that he notified the defendant at the time of the deposit that in case of his death or disability the deposit was payable to the order of certain specified officers of the association, and that thereafter the defendant paid the deposit to such officers and other members of the association upon demand.
    A bank receiving a deposit from one acting in a representative capacity cannot justify a payment to him if it knows that the funds are about to be wrongfully diverted from the true owner.
    While the relation between a bank and a depositor is that of debtor and creditor, and it cannot escape liability by alleging title in a third person, the defense aforesaid shows that the money deposited did not belong to the plaintiff, but to third persons, of which the defendant was informed when the deposit was made and to whom it paid upon demand.
    
      It seems, that under such circumstances, had the defendant paid to the plaintiff, it would have still been liable to the association or its members.
    Appeal by the plaintiff, John H. Parks, from an interlocutory judgment of the Supreme Gdurt in favor of the defendant, entered in the office of the clerk of the county, of New York on the 30tli day of December, 1909, upon the decision of the court, rendered after a trial at the New York Special Term, overruling the plaintiff’s demurrer to certain defenses contained in the answer.
    
      Francis S. Hutchins, for the appellant.
    
      Louis F. Hoyle, for the respondent.
   McLaughlin, J.:

Action upon four certificates of deposit, each set forth as a separate cause of action, issued by the defendant to the plaintiff, payment of which has been demanded and -refused.

The answer sets up the same defense to each cause of action, and. the plaintiff demurs separately to each so-called second and separate defense, upon the ground that it is insufficient in law upon the face thereof. The appeal is from an interlocutory judgment overruling the demurrer.

The defenses demurred to allege that the plaintiff, at the time the certificates in question were issued, was employed as treasurer by a voluntary association of several corporations; that by the terms of the employment the plaintiff’s authority as treasurer might be revoked and terminated at' any time upon giving him three months’ notice; that in October, 1907, the association gave him notice that it would be dissolved and his authority as treasurer terminated on February 1, 1908; that prior to that time there had come into plaintiff’s hands as treasurer certain moneys of the association, which he continued to hold after February 1, 1908, as the property of the association, no demand having been made upon him for payment of the same; that on the 27th of March, 1908, acting' as treasurer, of the association, he deposited these moneys with the defendant, receiving the certificates of deposit in question, payable to the order of “ J. H. Parks, Treasurer,” and that each certificate “ was issued to and held by.the plaintiff solely as treasurer of said Sulphite Association and as its property; ” that when he made the deposit he notified the defendant that in case of his deatli or disability the amounts represented by the Certificates should be payable -to the order of three specified officers of the association and -that, -thereafter the association, through these “ its proper officers * * * and its other members ” demanded payment of the sums represented by the respective certificates, and that on the 13th of August, 1908, the defendant paid over these sums “to the said Sulphite Association which was and is the lawful owner thereof.”

The facts in connection with the dissolution of the association and the termination of plaintiff’s employment as treasurer are not clearly set forth, by reason of which it is urged that the defense attempted to be pleaded is unavailing, since the association was dissolved on the 1st of February, 1908, the -contention being that the defendant could not, after the dissolution of the association, pay over the moneys in question to it. It does not, however, appear

from the answer that the association Was, in fact, dissolved on that date. All that appears is that the plaintiff was given notice that it would be dissolved, and whether the dissolution took place as stated in the notice nowhere appears. But if so, the answer is not subject to the criticism made upon it in this respect.- ■ The funds represented by the certificates belonged, after the payment of the debts of the association, to its members, both before and after dissolution. Pleadings, when demurred to, are to be liberally construed and the allegation that the moneys were paid to the association upon demand of its- proper officers and its other members necessarily implies that the same were paid to the members of the association, if the- association had, prior to such payment, been dissolved in such a way as to permit payment to be thus made. The plaintiff, by demurring, of course admits that the moneys represented by the certificates belonged to the association and not to him personally. The demurrer also admits that the defendant has paid the same to the association or its members, the lawful owner. Although the money was deposited by him and the certificates issued in his name, the fact that payment has been actually made to the lawful owner is a good defense. ( Viets v. Union National Bank of Troy, 101 N. Y. 563; Van Alen v. American National Bank, 52 id. 1.) The defendant could not legally, under the facts set forth in the answer demurred to, have paid to the plaintiff the amount called for by the certificates. The word “ Treasurer ” immediately following plaintiff’s name in each certificate is, of itself, significant and when read in connection with the allegation that when the plaintiff made the deposit he directed, in case of his death or disability, that the. moneys represented by the certificates should be payable to three specified officers of the association, was sufficient notice that the money deposited did not belong to the plaintiff personally, and when he endeavored to "thus use it justified the trust company in refusing payment, or at least put it upon inquiry as to his authority. A bank or trust company receiving a deposit from one acting in a representative capacity cannot justify a payment to him .of the amount deposited if it knows or facts are presented which, if acted upon, would disclose that the fund is about to be wrongfully and unlawfully diverted from the true owner.

There is no doubt about the general rule, as contended by. the appellant, that the relation between a bank and a depositor is one of debtor and creditor and it cannot escape payment by alleging title to the fund deposited in a third person. The defense here pleaded, in effect, is that tire money deposited did not belong to the. plaintiff but to a third party, and the trust company was so informed when, the deposit was made, and upon the demand of the real owner, prior to' the commencement of this action, the same was paid to him. Had the defendant, after payment had been demanded by the. real".owner, paid to the plaintiff the amounts called, for by the certificates,' it would still have been liable to the association or its members. (Squire v. Ordemann, 194 N. Y. 394 ; Ward v. City Trust Co., 192 id. 61; Seger v. Farmers' Loan & Trust Co., 187 id. 314 ; Hathaway v. County of Delaware, 185 id. 368 ; Sims v. U. S. Trust Co. of N. Y., 103 id, 472; Havana Central R. R. Co. v. Knickerbocker Trust Co., 135 App. Div. 313.) If this conclusion be correct, then it necessarily follows, if it has paid the. money to the' rightful owners, it is a good defense to the plaintiff’s claim.

The' judgment appealed' from, therefore, is affirmed, with costs,, with leave to the plaintiff to withdraw' the demurrer upon payment of costs in this court and in the court below..

Ingraham, P. J., Taughlin, Miller and Dowling,. J J., concurred.

Judgment affirmed, with costs,-with leave to plaintiff to withdraw demurrer on payment of. costs in '.this court, and in the court below. V  