
    John S. Davenport, as Receiver of the Bank of Staten Island, Respondent, v. Norman S. Walker, Jr., and John Y. G. Walker, Doing Business under the Firm Name of Walker Bros., Appellants.
    Second Department,
    April 23, 1909.
    Pleading — demurrer to answer —sufficiency of complaint— complaint stating cause of action to recover moneys misappropriated by bank i- cashier—allegations showing knowledge of defendants — defenses — election of remedies — answer — reference to prior allegations — acts showing election of remedies.
    Upon a demurrer to a defense the defendant may attack the sufficiency of the complaint.
    A complaint by the receiver of a bank which alleges- that the cashier drew a cashier’s check upon the hank for a certain, amount and delivered it to the defendants in part payment of his individual debt, and that the defendants accepted the same “ with notice and knowledge that the said funds were the funds of the said bank,” states a cause of action to recover the amount of the check.
    This, because although the fact that the check was a cashier’s check was not notice to the defendants that the funds of the bank were being used to pay an individual debt, the allegation that the check was received by the defendants "with notice and knowledge entitles the plaintiff to prove actual or constructive knowledge.
    An action for money had and received may "be maintained whenever one has money in his hands belonging to another which in equity and good conscience he ought to pay over to the other.
    An allegation in said complaint that the check was duly paid to the defendants by the bank through the New York Clearing House in due course, does not admit that ¿he payment was lawfully made; but merely that the proper course was taken to charge the amount against the hank.
    The rule that in matters of form a pleading must he construed strictly against the pleader no longer obtains.
    Where said cashier’s check was used to pay for certain bonds sold to him by the defendants, the bank on discovering the facts had two remedies: Mrstfkt could ratify the unauthorized purchase, -insist that the cashier, turn over' the bonds, and hold him for conversion if he refused to do so; or, second, the hank could repudiate the whole transaction and recover the amount of the check from the cashier, or from anybody into whose hands it came with knowledge that the money belonged to the hank. But the hank cannot have both remedies, but must elect between them, and, such election having been made, is binding in a subsequent action.
    
      Hence, a third separate defense, which states that on the death of the cashier, the bank by a former receiver presented a claim to his executor, on which claim judgment was subsquently entered in favor of the receiver, and that such claim was for the value of securities, which included the value of certain bonds which were the property of the bank and which had been converted by the cashier to his own use, and that certain of said bonds “ were bought as aforesaid in the first.defense herein and delivered by these defendants to said ” cashier “as the property of the said bank,” shows a prior election by the bank to treat the bonds as its property, it the first defense referred to alleges in reference to the same bonds that the defendants relied upon the cashier’s statements that he was buying the bonds for the bank and received the cashier’s check mentioned in the complaint for nc other purpose.
    While each defense must be complete in itself, a proper reference to material facts previously stated with an intent to incorporate them therein is equivalent to restating them.
    ■But it is no defense to allege that a former recéiver of the bank brought action against its officers and directors for negligence in giving the cashier complete control and management and continuing him in office when they knew that he was dishonest and had misappropriated funds, among them the proceeds of the cashier’s check set forth in the complaint. This, because such action, founded on the negligence of the directors, is not inconsistent with and does not bar a subsequent action to recover the amount of the check from persons receiving it with knowledge that the money belonged to the bank, if the claim was not satisfied in the prior action. " '
    Appeal by the defendants, Borman S. Walker, Ji%, and another, doing business under the firm name of Walker Bros., from so much of an interlocutory judgment of the Supreme Court in part in favor of the plaintiff, entered in the office of the clerk, .of the county of Biclimond on the 14th day of September, 1908, upon the decision of the court, rendered after a trial at the Kings County Special Term, as overrules the defendants’ objection to the complaint and sustains the plaintiff’s demurrer to the third and fourth defenses contained in the answer.
    
      Howard R. Bayne, for. the appellants.
    
      Nathan D. Stern, for the respondent.
   Burr, J.;

The plaintiff demurred to two defenses contained in the answer. Upon the argument the sufficiency of the complaint was attacked. It demands prior consideration. (Lewis v. Cook, 150 N. Y. 163; Baxter v. McDonnell, 154 id. 432.) The complaint alleges that on December 23, 1901, one Otto Ahlmann was indebted to the defendants in a sum exceeding $70,000. An exhibit attached to the complaint shows that the indebtedness arose in connection with the purchase and sale of stocks and bonds, among which were fifty bonds of the Chicago and Alton Bailroad Company. It alleges that on that day Ahlmann, then being the cashier of the Bank of Staten Island, drew a cashier’s check upon said bank for the sum of $40,000 and delivered it to the defendants, who received it in part payment of said indebtedness. It alleges that the amount of the check was duly paid to the defendants by the Bank of Staten Island by payment through' the Mew York Clearing House in due course. It alleges that the said Ahlmann, by means of the said cashier’s check, withdrew from the bank $40,000 of its funds and applied the same in part payment of his indebtedness, and that the defendants accepted the same “ with notice and knowledge that the said funds were the funds of the said bank.” This is a perfectly good complaint. It may be conceded,, in view of Ahlmann’s relations to the bank, that the mere fact that the check was a cashier’s check would not be sufficient to put the defendants upon notice that funds of the bank were being used to pay his individual debt. (Goshen Nat. Bank v. State of New York, 141 N. Y. 379.)’ But this complaint alleges further that at the time, that the defendants applied this $40,000 in part payment of- Ahlmann’s indebtedness to them they accepted such part payment “ with notice and knowledge that the said funds were the funds of the said hank.” An action for money had and received may be maintained whenever one has money in his hands belonging to another, which in equity and good conscience he ought to pay over to that other. (27 Cyc. 849; Mason v. Prendergast, 120 N. Y. 536.) If the defendants knew that Ahlmann was paying his debts with the bank funds, equity and good conscience would forbid them to retain the same. Under this allegation the plaintiff is not limited to any inference that may be drawn from the form of the check, but may prove full and complete notice and knowledge, actual or constructive, that the money which defendants received was money of the bank which Ahlmann had no right to use. The claim that because the relation of debtor and creditor exists between a bank and its depositor (People v. St. Nicholas Bank, 77 Hun, 159 ; Metropolitan Nat. Bank v. Loyd, 90 N. Y. 530; Cragie v. Hadley, 99 id. 131) the words above, quoted simply mean that the check is drawn against funds which are the property of the bank, although subject to draft by the maker of the check, is untenable. Such a construction would be strained and unnatural. So the allegation that the check “was duly paid to the said Walker Brothers by the said Bank of Staten Island by payment through the Hew York Clearing House in due course ” does not mean that it was properly paid or lawfully paid. It simply means that the forms necessary to be observed by the Hew York Clearing House as conditions precedent to charging the Bank of Staten Island with the amount of a check purporting to be payable by it, had been observed. The rule that in matters of form a pleading must be construed strictly against the pleader no longer obtains. (Coatsworth v. Lehigh Valley R. Co., 156 N. Y. 451.)

We come, therefore, to the consideration. of the demurrer to the third defense,, which the court below sustained on the ground that it is insufficient in law. The defendants invoke the rule that when a party has two remedies which are inconsistent, he may elect to pursue either, but that having once made his election with full knowledge of the facts, of which election the commencement of a proceeding is sufficient evidence, his right to prosecute the other remedy is forever gone. (Morris v. Rexford, 18 N. Y. 552 ; Bank of Beloit v. Beale, 34 id. 473; Fowler v. Bowery Savings Bank, 113 id. 456; Conrow v. Little, 115 id. 387; Kirk v. Crystal, 118 App. Div. 32.) The complaint in this action seeks to recover the $40,000 paid by Ahlmann to the defendants upon the theory that the money of the bank was used to pay Ms individual indebtedness arising, among other things, from the purchase for him by the defendants of fifty Chicago and Alton bonds. Upon discovering this the bank had two remedies. It could ratify the unauthorized purchase by Ahlmann and insist that he turn over to them the fifty bonds purchased with their money, and if he refused so to do, sue Mm for the unlawful conversion resulting therefrom, or it could repudiate the whole transaction of purchase and seek to recover its 'money from Ahlmann or anyone in whose hands it could be found who took it with knowledge that it was theirs. It could not have both money and bonds. It could not sue claiming; that the bonds were theirs because the money was not, and also sue claiming that the money was theirs, repudiating the ownership of the bonds. Whichever way they elected in the first proceeding to treat the transaction concluded them in any subsequent proceeding.' The learned trial justice states in his opinion that in the proceeding hereinafter referred to it does not.appear that'the bank claimed ¡title to the. bonds through Alilmann’s purchase-from the defendants. If that is so, the decision is right. If not, we think error was committed. In.construing this defense we must obsérve the rule that each defense must be complete in itself (Sbarboro v. Health Department, 26 App. Div. 179), although proper reference to material facts previously stated with the intent to incorpórate them therein will be equivalent to restating them. ( Walsh v. Lispenard Realty Co., 55 Misc. Rep. 400; Garrett v. Wood, 27 App. Div. 314 ; Stemmerman v. Kelly, 122 id. 669.) The defense: demurred to alleges the death of Áhlmann,. leaving a will which; was duly proved, and that letters testamentary were issued to George Wood, the executor named, therein; that the bank by a former receiver presented a claim to Ahlinann’s executor; which was rejected and referred under the statute, and that such proceedings were thereafter had tha-t on July 2, 1906, judgment was entered in favor of said receiver for the principal and interest of said claim. It further alleges that said claim was for the valué of securities and other . property, including 121 r bonds of the Chicago and Alton. Railroad Company, which were “the property of the said-bank and had been converted by said Ahlmann, while cashier of said bank to his own use;” that said claim “included the 50 bonds, or the proceeds thereof, issued by the Chicago & Alton Railroad Co. delivered as aforesaid to said Ahlmann by these.defendants-oñ or about December 23d, 1901, upon receiving said cashier’s check of $40,000 mentioned in the -complaint.” If this were all it might be doubted whether there was sufficient to identify any portion of the claim made by the receiver with the claim made by the plaintiff here. The words “ as aforesaid ” relate to nothing previoüsly . stated in this defense, and the complaint makes no reference to ' the -delivery of any bonds when the $40,000 check was .paid. . But." in another portion of the answer pleading this defense it is. alleged that fifty bonds were bought as aforesaid m the first defense herein cmd delivered hy these defendants to said Ahlmann as the property of the said hank.” Turning now to the allegations of the first defense, we find from these that the defendants, on the 14th of October, 1901, bought for . Ahlmann fifty refunding bonds of the Chicago and Alton Railroad Company for $44,062.50, for which they, received from him on account $4,062.50; that Ahlmann stated that he was really buying said bonds for the Bank of Staten Island, of which bank he was cashier, and that he would subsequently call upon the defendants to take up said bonds for the benefit of the said bank and pay for them in full"; that on December 23, 1901, he did call upon defendants and stated that he desired to take up said bonds for the bank and pay for them in full; that he was, and for a long time had been, cashier of said bank, and was empowered to purchase bonds for said bank and pay for them out of funds of said bank, and that, relying upon his statement, they delivered to him said fifty bonds of the Chicago and Alton Railroad Company, and received from him the cashier’s check for $40,000, mentioned and described in the complaint, in payment for said bonds, and for no other purpose whatsoever. It seems, therefore, that the $40,000 payment, to recover which this action was brought, is clearly identified with the $40,000 payment which the former receiver claimed was made to purchase fifty Chicago and Alton bonds for the bank, which bonds 'Ahlmann afterwards converted. The bank did claim title to these bonds through Ahlmann’s purchase, and elected, if this defense is true, to treat the bonds as their property. It cannot now claim the amount of the payment made on December 23, 1901, to the defendants, on the ground that the bonds were not purchased for them and. were not their property. The demurrer to this defense in the answer should have been overruled.

It remains for us to consider the demurrer to the fourth defense. It is therein alleged that in March, 1905, a former receiver of the bank began an action against the officers and directors and the personal representatives of a deceased officer and director of the bank, for damages for failure to exercise' that same degree of care and prudence in the execution of their trust that men of common pru-' dencc ordinarily exercise in their own affairs. (Hun v. Cary, 82 N. Y. 65.) The general negligence complained of was the giving over to Ahlmann of the- entire and exclusive management, control and supervision of the said bank and its books, records, loans and assets, continuing him in his office as cashier after they knew that he was dishonest and had stolen' the assets of the bank, and omitting, after they knew of his misappropriations and wrongful acts, to take any steps to retrieve the losses or recover the assets so misappropriated. Among the assets enumerated as lost was the sum of $40,000 received by the defendants as the proceeds of the cashier’s check as alleged in the complaint. It is claimed by the defendants that this remedy is inconsistent with that sought to- be enforced in this action. We fail to see how it is so. The gravamen of that Complaint was the negligent conduct of the defendants resulting in loss. Certainly, the sum of $40,000 had been lost to' the bank at that time, and does not seem yet to have been regained. The loss complained of was. not the conversion of the bank’s bonds purchased with the check in question it was the loss of the bank’s money by its application to the payment of Ahlmann’s individual indebtedness to the defendants. "This is precisely what the plaintiff now complains of. Suppose that the receiver had first brought this action against the defendants, but had failed to collect anything upon the judgment recovered therein, would it be any defense to a subsequent action for negligence against the officers and directors of thé' bank that this action had been brought ? Would it not have simply made the evidence of the loss resulting from their negligence more conclusive ? If, on the other hand, pending the action against the officers and directors, the bank had collected this sum of $40,000 from the defendants, such collection would have reduced the amount of the damages to be recovered in the other action, but would not • have been a bar to the same. The position of the bank is in each case the same. Its claim is that its funds were improperly diverted and stolen. In the one case it sues the persons into whose hands such funds came with knowledge of the theft; in the other it sues those whose negligence made the theft possible. The demurrer to this defense was properly sustained.

The interlocutory judgment should be modified by reversing so much of the said judgment as sustains plaintiff’s demurrer to the third defense set up in the answer, and said demurrer should be overruled; and the said judgment as so modified should be affirmed, without costs to either party as against the other.

Woodward, Jenks, Gaynor and Rich, JJ., concurred.

Interlocutory judgment modified by reversing so much of said judgment as sustains plaintiff’s demurrer to the third defense set up in the answer, and said demurrer overruled, and as thus modified judgment affirmed, without costs to either party as against the other.  