Ingraham, P. J.:
This action was tried before a referee, and the facts as found by him are not, as I understand, disputed. The plaintiff was a domestic corporation, of which one Joseph Horowitz was the president down to May 1, 1904, when he was succeeded by Philip Horowitz, who continued as president until October 28, 1904. The plaintiff was organized to act as selling agent fór a corporation known as the American Woolen Company. The capital stock was substantially all issued to Philip Horowitz, and was subsequently deposited with the American Woolen Company under an arrangement between Horowitz" and the two corporations. By the by-laws of the company the president was given the general management of its business, but without power to draw or indorse checks or other [266]*266obligations of like character, that power being given to the treasurer, who was an'officer or employee of the American Woolen Company.
Philip Horowitz' was in business in the city of Hew York, using as a firm name “ Philip Horowitz & Son.” In June, 1904, Philip Horowitz, under the firm name of Philip Horowitz & Son, opened an account in the defendant bank. Commencing on June 22,1904, he began to deposit in this bank to the credit of Philip Horowitz & Son checks drawn to the order of the plaintiff, indorsed in blank in the name of the plaintiff by himself as jnesident, and then indorsed. with the firm name under winch he did business to the defendant' bank. He continued making-such deposits -until October 26, 1904, when the total number of plaintiff’s cheeks so deposited was eighty-nine, amounting in the aggregate to $28,469.37. The office of the plaintiff corporation and the private office of Philip Horowitz were located in the same building. . The method by which this, misappropriation of plaintiff’s money was-accomplished was as follows: Philip Horowitz would receive the .mail directed to the plaintiff each morning and turn over the checks received by mail which he did not intend to misappropriate to -the plaintiff’s bookkeeper, who was also in the employ of the American Woolen Company, and-these checks would be deposited in the State Bank to the credit of the plaintiff. From day to day, however, Philip Horowitz extracted from the mails the checks drawn to the order of the plaintiff that he wished to appropriate to his own use, and no notice of the receipt of . such checks would be given to the plaintiff’s employees so that on its books the accounts represented by the misappropriated checks would appear still- unpaid. The treasurer of the plaintiff was. in the habit of coming to the plaintiff’s office several times a week, usually in the middle of the day. All checks drawn on the plaintiff’s bank account were signed by him, and neither he nor any of the employees of the plaintiff had any knowledge of the defalcation. When Philip Horowitz’s attention was called by the treasurer or bookkeeper to these accounts being still unpaid, he stated that-the accounts were perfectly good but payments were slow and that he did not wish to push the plaintiff’s" customers.
This action was brought to charge the defendant with the amount of these checks which, it had collected, and for the amount thereof the learned referee has awarded the plaintiff judgment. ■
[267]*267The questions about the regularity of these indorsements and the power of the president to indorse, I do not think were at all material, as the plaintiff by commencing this action to charge the defendant with the amount collected upon these checks necessarily ratified the indorsement and the act of Philip Horowitz in obtaining ¡Day-men t of the checks, its right to recover being solely based upon the ’fact that the defendant, having accepted these checks and collected them, received the plaintiff’s money, for which the defendant was bound to account. That the plaintiff’s president, Horowitz, misap- ■ propriated these checks payable to the order of the plaintiff and which were its property, is conceded. That the deféndant at the request of Horowitz collected the checks drawn to the plaintiff and received the proceeds thereof, is conceded. That-he was able to accomplish this misappropriation of the plaintiff’s checks and their proceeds by the aid afforded him by the defendant in collecting the checks and allowing him to appropriate their proceeds to his own ‘use, is established. But the liability of the defendant depends upon knowledge of this misappropriation being brought home to it, or notice of such facts as required an investigation or inquiry by the defendant as to the ownership of the checks and the right of Horowitz to apply them or their proceeds to his own personal account. Upon their face these checks were payable to the plaintiff, a corporation. The indorsement showed upon its face that Horowitz was the president of that corporation.
The defendant also had notice of. the fact that Horowitz had an account in the bank which was the account, not of the corporation, but of a firm of which Horowitz was a member, and that the proceeds of these checks were credited to that account and disposed of by checks drawn in the name of the firm of which the president was a member! I assume as the settled law of this State that if Horowitz had presented these checks to the defendant bank and .asked the defendant to receive them as payment of an indebtedness existing in favor of the defendant against either Horowitz individually or the firm of Philip Horowitz & Son, of which he was a member, the defendant would have been put upon inquiry as to the right of Horowitz to use the money of the plaintiff to pay his individual indebtedness. (Ward v. City Trust Co., 192 N. Y. 61; Squire v. Ordemann, 194 id. 394; Havana Central R. R. [268]*268Co. v. Knickerbocker Trust Co., 135 App. Div. 313, and cases there cited.) I also assume that the same rule would apply if Horowitz had presented these checks to the defendant and instructed it to collect them and pay a debt of Horowitz or his firm to a third party, the defendant thus having.notice of the fact that Horowitz was using the plaintiff’s checks to pay his individual indebtedness. As I understand the rule, it is, not based upon the fact that the bank' received an advantage by reason of this defalcation or breach. of trust of Horowitz, but solely upon the fact that the defendant was chargeable with notice that Horowitz was using the money intrusted to him as agent or trustee for a purpose not within the terms of his agency or trust, but for his -own personal advantage.^ This was not the case of one independent check, but a series of transactions extending over months, during which time there was a constant diversion of checks drawn to the order of the plaintiff deposited with ’ the defendant, collected by it, and then applied by it to the individual account of Horowitz or his firm. By the act 'of Horowitz in depositing-these checks, and of the defendant in accepting and collecting them, it became liable to. Horowitz’s firm, and recognized its liability by paying out to the order of Horowitz’s firm checks drawn on it by that firm. Was this notice to" the bank that Horowitz was misapplying or using for his own purposes the checks drawn to the order of the plaintiff, and which upon their face appeared to be the plaintiff’s property ?
In Havana Central R. R. Co. v. Knickerbocker Trust Co. (supra) I stated the reasons which satisfied me that there could be no distinction between a case where the bank received the money .in.
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Ingraham, P. J.:
This action was tried before a referee, and the facts as found by him are not, as I understand, disputed. The plaintiff was a domestic corporation, of which one Joseph Horowitz was the president down to May 1, 1904, when he was succeeded by Philip Horowitz, who continued as president until October 28, 1904. The plaintiff was organized to act as selling agent fór a corporation known as the American Woolen Company. The capital stock was substantially all issued to Philip Horowitz, and was subsequently deposited with the American Woolen Company under an arrangement between Horowitz" and the two corporations. By the by-laws of the company the president was given the general management of its business, but without power to draw or indorse checks or other [266]*266obligations of like character, that power being given to the treasurer, who was an'officer or employee of the American Woolen Company.
Philip Horowitz' was in business in the city of Hew York, using as a firm name “ Philip Horowitz & Son.” In June, 1904, Philip Horowitz, under the firm name of Philip Horowitz & Son, opened an account in the defendant bank. Commencing on June 22,1904, he began to deposit in this bank to the credit of Philip Horowitz & Son checks drawn to the order of the plaintiff, indorsed in blank in the name of the plaintiff by himself as jnesident, and then indorsed. with the firm name under winch he did business to the defendant' bank. He continued making-such deposits -until October 26, 1904, when the total number of plaintiff’s cheeks so deposited was eighty-nine, amounting in the aggregate to $28,469.37. The office of the plaintiff corporation and the private office of Philip Horowitz were located in the same building. . The method by which this, misappropriation of plaintiff’s money was-accomplished was as follows: Philip Horowitz would receive the .mail directed to the plaintiff each morning and turn over the checks received by mail which he did not intend to misappropriate to -the plaintiff’s bookkeeper, who was also in the employ of the American Woolen Company, and-these checks would be deposited in the State Bank to the credit of the plaintiff. From day to day, however, Philip Horowitz extracted from the mails the checks drawn to the order of the plaintiff that he wished to appropriate to his own use, and no notice of the receipt of . such checks would be given to the plaintiff’s employees so that on its books the accounts represented by the misappropriated checks would appear still- unpaid. The treasurer of the plaintiff was. in the habit of coming to the plaintiff’s office several times a week, usually in the middle of the day. All checks drawn on the plaintiff’s bank account were signed by him, and neither he nor any of the employees of the plaintiff had any knowledge of the defalcation. When Philip Horowitz’s attention was called by the treasurer or bookkeeper to these accounts being still unpaid, he stated that-the accounts were perfectly good but payments were slow and that he did not wish to push the plaintiff’s" customers.
This action was brought to charge the defendant with the amount of these checks which, it had collected, and for the amount thereof the learned referee has awarded the plaintiff judgment. ■
[267]*267The questions about the regularity of these indorsements and the power of the president to indorse, I do not think were at all material, as the plaintiff by commencing this action to charge the defendant with the amount collected upon these checks necessarily ratified the indorsement and the act of Philip Horowitz in obtaining ¡Day-men t of the checks, its right to recover being solely based upon the ’fact that the defendant, having accepted these checks and collected them, received the plaintiff’s money, for which the defendant was bound to account. That the plaintiff’s president, Horowitz, misap- ■ propriated these checks payable to the order of the plaintiff and which were its property, is conceded. That the deféndant at the request of Horowitz collected the checks drawn to the plaintiff and received the proceeds thereof, is conceded. That-he was able to accomplish this misappropriation of the plaintiff’s checks and their proceeds by the aid afforded him by the defendant in collecting the checks and allowing him to appropriate their proceeds to his own ‘use, is established. But the liability of the defendant depends upon knowledge of this misappropriation being brought home to it, or notice of such facts as required an investigation or inquiry by the defendant as to the ownership of the checks and the right of Horowitz to apply them or their proceeds to his own personal account. Upon their face these checks were payable to the plaintiff, a corporation. The indorsement showed upon its face that Horowitz was the president of that corporation.
The defendant also had notice of. the fact that Horowitz had an account in the bank which was the account, not of the corporation, but of a firm of which Horowitz was a member, and that the proceeds of these checks were credited to that account and disposed of by checks drawn in the name of the firm of which the president was a member! I assume as the settled law of this State that if Horowitz had presented these checks to the defendant bank and .asked the defendant to receive them as payment of an indebtedness existing in favor of the defendant against either Horowitz individually or the firm of Philip Horowitz & Son, of which he was a member, the defendant would have been put upon inquiry as to the right of Horowitz to use the money of the plaintiff to pay his individual indebtedness. (Ward v. City Trust Co., 192 N. Y. 61; Squire v. Ordemann, 194 id. 394; Havana Central R. R. [268]*268Co. v. Knickerbocker Trust Co., 135 App. Div. 313, and cases there cited.) I also assume that the same rule would apply if Horowitz had presented these checks to the defendant and instructed it to collect them and pay a debt of Horowitz or his firm to a third party, the defendant thus having.notice of the fact that Horowitz was using the plaintiff’s checks to pay his individual indebtedness. As I understand the rule, it is, not based upon the fact that the bank' received an advantage by reason of this defalcation or breach. of trust of Horowitz, but solely upon the fact that the defendant was chargeable with notice that Horowitz was using the money intrusted to him as agent or trustee for a purpose not within the terms of his agency or trust, but for his -own personal advantage.^ This was not the case of one independent check, but a series of transactions extending over months, during which time there was a constant diversion of checks drawn to the order of the plaintiff deposited with ’ the defendant, collected by it, and then applied by it to the individual account of Horowitz or his firm. By the act 'of Horowitz in depositing-these checks, and of the defendant in accepting and collecting them, it became liable to. Horowitz’s firm, and recognized its liability by paying out to the order of Horowitz’s firm checks drawn on it by that firm. Was this notice to" the bank that Horowitz was misapplying or using for his own purposes the checks drawn to the order of the plaintiff, and which upon their face appeared to be the plaintiff’s property ?
In Havana Central R. R. Co. v. Knickerbocker Trust Co. (supra) I stated the reasons which satisfied me that there could be no distinction between a case where the bank received the money .in. payment of a debt to itself and a case where it received the money and paid it- out upon the private direction of the agent or trustee for his own individual purposes, and it is unnecessary that I should réstate them here. But applying the principle which - the Court of Appeals has now definitely stated- to be the law of this State, as illustrated in Ward v. City Trust Co. (supra), namely, that the question is merely one of notice to the bank, it seems to me that it can make no difference whether the bank knew that Horowitz was applying the proceeds of the checks belonging to plaintiff to his own’ debt to the bank or to satisfy his private obligations to others; that in either-case, where inquiry would have at [269]*269once disclosed the limitations of Horowitz’s authority and that he was misappropriating the property of the plaintiff, the bank cannot deliberately shut its eyes to facts which upon their face show a misapplication and thus aid a defaulting officer or trustee in securing the proceeds of his defalcation. The reversal by the Court of Appeals of Havana Central R. R. Co. v. Knickerbocker Trust Co. (198 N. Y. 422) recognizes this rule. It was there held that where the defendant received the checks drawn by the plaintiff’s treasurer upon the plaintiff’s bank account it was its . duty to present the checks to the institution upon which they were drawn. If it paid them such payment was the most emphatic assertion upon the part of the plaintiff’s own deposit bank that under the arrangement .existing between it and the plaintiff, the plaintiff’s treasurer was authorized to draw just such checks payable to his own order; that the defendant having relied upon that assertion and subsequently paid away the money thus collected the plaintiff corporation ivas estopped from denying that its treasurer in fact possessed authority to draw the checks. This recognized the duty to make inquiry but that the bank upon which the checks were drawn was the proper person to inquire of and its payment of the checks was an answer to that inquiry upon which the defendant could rely.
I think, therefore, that the facts as found by the referee, and which are sustained by the evidence, were sufficient to require the defendant to inquire as to Horowitz’s authority to appropriate the property of the corporation of which he was president; that, having failed to make such inquiry, it is chargeable with the facts which it would have ascertained if such an inquiry had been made, and that if it had had express knowledge of the facts which such an inquiry would have disclosed, it would have been liable to the plaintiff for the misappropriation of its property by Horowitz.
Entertaining these views I think the judgment appealed from should be affirmed, with costs.
Dowling, J., concurred; Clarke and Scott, JJ., dissented.