This is an action to recover the sum of $5,000, the proceeds of a check drawn by one .E. E. Thomas, on his account with the defendant to the order of the Central Life Securities Company and deposited with defendant to the credit of that company on the 10th day of December, 1906, pursuant to an agreement between Thomas, the securities company and the. defendant, by which it was not to be subject to the check -of the securities company or to become its property until the happening of a certain event which has not transpired. Thomas was an officer of the defendant and the securities company had no other account with it and no other funds were deposited to its credit. On the 22d day of April, 1907, the securities company drew a check to the order of the plaintiff on the defendant for the amount of this fund. The check was signed for the securities company by Birch F. Bhodus, its president, and by its treasurer, and at the same time it was indorsed for the plaintiff by Bhodus, its president, to the order of defendant for the purpose of opening an account with defendant in the name of the plaintiff. Bhodus then inclosed the check with a letter to defendant, signed by him as president of the securities company, with *620which he also inclosed authorized signatures of the plaintiff for the purpose of opening the account, and stated that he liad requested one Sutherland to call on defendant and open an account and deposit funds in the name of plaintiff. The letter closed with,this statement: “ If your custom in crediting interest on daily balances is satisfactory, I have no doubt that the account of the Republic Life Insurance Company will be a very satisfactory one.” An officer of the defendant, who had no knowledge of the original transaction or of the fact that the fund on which the check was drawn was not subject to be checked out, received the check and inclosures on the 2fth day of April, 1907, and Sutherland called on that day and made out a deposit slip for the amount of the check, "whereupon the same officer of defendant made out a passbook in the name of the plaintiff, crediting it with the amount of the deposit, and delivered the same to Sutherland, who forwarded it to plaintiff. Before transferring the account from the securities company to plaintiff, or opening any account in the name of plaintiff on the books of defendant, it was discovered that this deposit was not subject to be checked out and the account was not transferred and no account was opened in the name of plaintiff. The day after the passbook "¡vas issued the defendant wrote Rliodus, addressing him as- president of the securities company, drawing attention to the fact that this fund constituted a conditional deposit, and inclosing a copy of the letter of the securities company delivered to defendant at the time the account was opened, which was addressed to defendant and signed in the name of the securities company by E. T. Rliodus, its vice-president. The body of the letter was as follows: “ Please pay over to our company Five thousand dollars ($5,000), which we hereby deposit for that purpose■—-upon notification from us that our subscription.of the Central Life Securities Company have reached the amount of Five hundred thousand dollars ($500,000) and been paid in to that amount.” Rliodus wrote a reply to this letter under date of April 27, 1907, which lip signed as president of both companies and in which he presumes to explain the letter, a copy of which the defendant transmitted to him, as follows: “ We presume it must have been the idea of Mr. E. T. Rhodus in giving you such a letter to obtain for this company the favorable influence and good will of your institution until such time as the. Repub*621lie Life Insurance Company was ready to itself receive funds; but now, in view of the fact that the funds are being turned over of the Republic Life Insurance Company, and in further view of the fact that it expects to transact considerable business with you, it should have the benefit of your favorable -influence and good will from this time on.” It is manifest that this was no explanation for filing the letter with the defendant, and it is perfectly clear that the purpose was, as claimed by the defendant and as will be presently seen, to preclude the securities company from checking out this fund until the happening of the event specified in the letter. The defendant replied to this letter, again calling attention to the fact that the deposit was conditional and that for that reason' the account had not been transferred and returning the check drawn against-the account and upon which defendant had issued the passbook. There is no evidence that the defendant received any reply to this letter. On the eleventh day of November thereafter Thomas elected to reclaim the fund upon the ground that the event upon which it was to become the property of the securities company had not transpired, and that a reasonable time for compliance with the conditions had elapsed, and at his request it was credited to his account and a countercharge was made against the securities company to balance its account. On the twenty-first day of the same month plaintiff drew a draft on defendant for the account indicated by the passbook delivered to it by defendant which, on being forwarded for collection through the usual channels, was dishonored by defendant on the 23d day of November, 1907, on the ground that there were no funds on deposit with it to the credit of the plaintiff.
I am of opinion that the cases of Oddie v. Nat. City Bank (45 N.Y. 735) and Kirkham v. Bank of America (165 id. 132), relied upon by respondent, are not controlling. In those cases the intention to give the credit and create the relation of debtor and creditor was regarded as clear. In the former case the cheek was credited to a customer in the usual course of business and the customer .relied upon it to his prejudice. As the check was upon itself the bank could readily have ascertained whether or not the account upon which it was drawn was good, and the account was in fact good after the presentation of the check and on the same day, and *622the bank carelessly paid out'the money omother checks subsequently presented. The court decided that it was better to hold that the bank intended to credit the one customer and to hold the other ' liable.as for an overdraft. The court concedes in the opinion that the rule would have been, different had the check been drawn upon another bank and been deposited to the credit of the customer. The check in question was neither drawn nor deposited by a customer nor m the ordinary course of business. It was drawn against a conditional deposit of a single item and presented for deposit as the sole item upon which a new account was to be opened. It did not ponstitute an overdraft. The fund against which it was drawn was not ' yet available. The intention of the drawer, fully known to the payee, as shown by a statement made by Sutherland to one of the officers of the bank when he came there representing the plaintiff and to open the account with .the check, was to have this account consisting of this fund transferred to the credit of the plaintiff. An officer of defendant, ignorant óf the fact that the deposit was condi- ■ tional, was thus induced to issue the passbook. In these circumstances it would be most inequitable to hold defendant • estopped from declining to be bound by the credit indicated by the issuance of the passbook, when within twenty-four hours and as soon as the error was discovered it gave notice to the plaintiff by communicating with the president of the securities companies who represented it in attempting to thus open the account, and on finding a disinclination to rectify the error, returned the check and refused to transfer the account on its books or to give plaintiff credit on its' books. Here the defendant pleaded and endeavored to [irove that the plaintiff received the check with knowledge of all material facts, tending to show that the securities company had no right to transfer the fund and that, with such knowledge, in thus inducing the defendant, to accept the check and transfer the credit to plaintiff, it perpetrated a fraud .on the defendant, on the discovery of which it elected -to and did rescind'the transaction and return the check, and there is no evidence that plaintiff was either a bona fide holder of the check or that its position had changed to its prejudice between the issuance of the passbook and the notice given by defendant that the account had not been transferred.
It is fairly to be inferred from the evidence that Thomas was *623induced to subscribe for capital stock in the securities company, and that he agreed to do so.provided capital stock of the par' value of $500,000 should be subscribed for and the'subscriptions paid in cash. The promoters of the company evidently desired to use the name of Thomas to obtain other subscriptions, and to that end he delivered his check for $5,000 to E. T. Rhodus, who was the vice-president of the securities company, on the agreement; which was communicated to the treasurer of the defendant to whom the check was delivered by Rhodus and by or in his presence both orally and by letter of the securities company written Rhodus and delivered to the defendant by him, that it was given as a subscription for capital stock of the securities company and was not to be paid over to the company until defendant received notice from it that subscriptions to the capital stock had been made and paid in cash to the amount of $500,000, and that until such time the deposit was no.t to be deemed to belong to the securities company or to be available to it, but was to remain the property of Thomas. The court received evidence of these facts, and on -motion of counsel for plaintiff struck it out upon the theory that the evidence failed to show that plaintiff had notice or knowledge thereof. To this ruling counsel for defendant duly excepted. The court excluded evidence, of the conversation between Thomas and Rhodus at the time of the delivery of the check, which was offered for the purpose of showing that the delivery of the check was conditional, the same as subsequently stated to the defendant when the check was deposited to the credit of the securities company, and to this ruling an exception was likewise taken.
One question presented for decision is, whether there was any evidence tending to show that plaintiff had notice or knowledge of the conditions upon which the account of the securities company with the defendant was opened, for it is quite clear that the conditions upon which the account was opened were imposed for the benefit of Thomas, and that the defendant had no right, without his consent, to pay any part of the fund to the securities company until the conditions were complied with. The conditions were not complied with, and compliance therewith was not waived by Thomas. The securities company, therefore, could not have compelled the defendant to pay over the fund to it, and if plaintiff had actual or constructive knowledge of the facts which deprived *624the securities company of any right to draw the check by which it attempted to transfer this fund to plaintiff, then plaintiff is not an innocent holder, and has no more right to recover than the securities company would have had. I am of opinion that the plaintiff was chargeable with notice and knowledge of these' facts and that such notice and knowledge were imputed to it by the fact that Rliodus, who was president of the securities company, and in that capacity presumptively at least chargeable' with knowledge of the conditions upon which this money was placed to the credit of the company, acted for the securities company in drawing the glieck to ' the order of plaintiff and at the same " time was president of the plaintiff and acted for it in accepting the check and in opening the account in its name with defendant. The securities company was represented in the original transaction between it and Thomas and defendant by its vice-president, E. T. Rliodus, who was brother to the president of the companies and also vice-president of plaintiff. It is a reasonable inference that the records and papers of the securities company showed that this letter which was delivered to defendant when the account was opened had been written and that the company had knowledge of the transactions with respect to this matter which rested in parol. Although there is no evidence that the president of the securities company had actual knowledge of the conditions-.upon which the account was opened, there is no evidence to the contrary. He was president of the securities company at that time but did not become president of the plaintiff until' the month of February thereafter. In his capacity as president, in , dealing with the affairs of the company in so far as they related to this account, lie was chargeable with knowledge of the facts. He had, so far as the evidence shows, no personal interest either in haying the check made by the securities company or in having it received by the plaintiff or accepted by the defendant. It -must, therefore, be presumed that he was acting solely in the interests of the respective companies of which he was president, and, therefore, the knowledge which he "had in his capacity as president of the securities company was imputable to him in so far as he dealt with himself as agent of the plaintiff. (Crooks v. People's Nat. Bank, 72 App. Div. 331.)
There is another ground which, I think, is fatal to this judg*625ment. The evidence presented questions of fact as to whether or not defendant intended to and did accept the check unconditionally as cash (See Scott v. Ocean Bank in City of N. Y., 23 N. Y. 289, 291), and as to whether or not the securities company did not act in .bad faith in inducing defendant to permit it to check out this fund (See Peterson v. Union Nat. Bank, 52 Penn. St. 206; Cragie v. Hadley, 99 N. Y. 133.) It must be presumed to have known that it had no right without a new agreement, to which the assent of Thomas was' obtained, to draw on this account. The course pursued ivas calculated to mislead the officers of the defendant. If the securities company had attempted to withdraw this large amount of money, forming the sole item in the account, it is more likely that before paying over the cash it would have been discovered that the account was not subject to checks, but merely transferring it on the books to another account, and that a new one, apparently controlled by the same people, was not apt to attract attention or arouse suspicion, and it did not. There is no evidence that plaintiff parted with value, or that its position has been changed to its prejudice by relying upon the acceptance of the check by defendant during the twenty-four" hours before it received notice. The evidence points to a scheme on the part of the securities company to defraud Thomas and the defendant on becoming alarmed about obtaining the necessary subscription to entitle it to this fund, and it may be that the relations of' these companies are so intimate,, since they had a common president and at least another officer in common, the securities company is using the plaintiff to accomplish this injustice. I am of opinion that a prima facie defense was shown, and that the plaintiff was called upon to give evidence that it was an innocent holder of the check for value.
It follows, therefore, that the judgment should be reversed and a new trial granted, with costs to the appellant to abide the event.
Patterson, P. J., McLaughlin, Houghton and Scott, JJ., concurred.
Judgment reversed and new trial ordered, with costs to appellant to abide event.