An interlocutory judgment was rendered in this action in favor of plaintiff, directing an accounting by the defendant bank of certain moneys which were deposited with it to the credit of a corporation known as Peabody & Adams.
The suit is brought by a trustee in bankruptcy of an insolvent concern which was during the events hereinafter described trading as Scott Norris & Company. The latter ran a business under that name and one Carlisle Rowntree was its manager. He was the active person in the business and had a power of attorney given by the bankrupt which authorized him to draw and indorse checks for the legitimate purposes of the business and not otherwise. The complaint sets out that Rowntree operated this concern for his own profit as a bucket shop; that in October, 1923, Rowntree, for the purpose of converting to his own use moneys of Scott Norris & Company, in fraud of said Norris and his creditors, indorsed checks drawn by customers of Scott • Norris & Company and deposited them in the defendant bank to the account of Peabody & Adams. When Rowntree made these deposits he furnished the defendant bank with a certified copy of a resolution of the board of directors of Peabody & Adams giving him and his two brothers authority to draw checks upon the funds of Peabody & Adams. He thus was enabled to use these funds for his own purpose. He originally deposited $25,000 in checks and thereafter other deposits, consisting of checks of customers drawn to Scott Norris & Company, were made to the credit of this account under the name of Peabody & Adams. Thereafter Rowntree withdrew moneys for his own use from this account in fraud of the customers of Scott Norris & Company, the bankrupt, and the defendant is sought to be held liable, on the basis of knowledge or means of knowledge of the alleged conversion and transfer of these funds by Rowntree in fraud of creditors of Norris, the bankrupt, since it accepted the account and paid out moneys from it on the order of Rowntree, from whose conduct of the account and from whose deposits therein the defendant, it is asserted, should have discovered the fraud of Rowntree in his fiduciary relationship with Scott Norris & Company. These fraudulent practices and the loss consequent thereon are asserted to be chargeable to the bank because of its duty of inquiry and discovery of the fraud of Rowntree.
Rowntree originally opened this account on the recommendation *599of another depositor, who had asked the receiving teller to solicit the account. Thereafter a teller called and saw Rowntree’s brothers, who stated that they would open an account for a southern firm known as Peabody & Adams. They gave checks drawn to Scott Norris & Company to the teller which had a rubber stamp indorsement. The teller would not accept this deposit, which amounted to $25,000, but took it to the bank to show it to the president. The president of the bank would not accept the deposit. He telephoned to Rowntree, who came to the bank and had Rowntree sign a signature card of Scott Norris & Company. Rowntree also indorsed the checks with the name of Scott Norris & Company in pen and ink. The president also asked for a power of attorney showing Rowntree’s authority to indorse the checks of Scott Norris & Company, and besides required evidence of authorization for drawing against the account of Peabody & Adams. He also held up drawings for several days until the checks could be collected. The president of the defendant bank then sent a messenger with the signature card of Scott Norris & Company signed by Rowntree, to the Continental Bank where an account was kept in the name of Scott Norris & Company, with Rowntree also acting as agent, that bank having on file powers of attorney given by Norris authorizing Rowntree, without limitation, to make, sign and indorse checks for Scott Norris & Company. Norris’ signature was not on file in the other bank and the funds of Scott Norris & Company in that bank were withdrawable only on the signature of Rowntree or his brothers. After the signature card in the Continental Bank was verified as similar to the one given to the defendant bank, and discovering that Rowntree and his brothers had powers of attorney on file in the Continental Bank, the defendant bank also required and was furnished with the power of attorney authorizing withdrawals from its bank. This power of attorney was executed by Norris on October 16, 1923, and authorized Rowntree “ with unlimited power and without limitation ” to deposit money and funds and to make, draw, sign, indorse checks and other negotiable instruments “ for any and all purposes.” It was also furnished with a certified copy of the resolution of the board of directors of Peabody & Adams authorizing withdrawal of the funds of that company by L. U. Rowntree, vice-president, M. J. Rowntree, secretary and treasurer, and Carlisle Rowntree as duly authorized agent. There was no intimation at the time of the receipt of these deposits that Scott Norris & Company were conducting any irregular business, and no complaint or inquiry had been received by it concerning the business of Scott Norris & Company.
*600After the president of the Lebanon National Bank read in a newspaper that Scott Norris & Company was restrained by the Attorney-General from doing business it permitted no withdrawals from the account of Peabody & Adams and all moneys then on deposit were turned over to the plaintiff as receiver or as trustee when a petition in bankruptcy was filed against Norris individually and trading under the name of Scott Norris & Company.
There was no proof that Norris, the bankrupt, owned any of the assets or property of Scott Norris & Company. He was not a witness on this trial. Plaintiff showed that Carlisle Rowntree was the head of the office and gave all instructions as to managing the business. In reality the Norris Company was merely a vehicle or conduit for Rowntree through which Rowntree operated.
There was nothing in the proof which showed that Rowntree exceeded his authority as agent in depositing these checks drawn to Scott Norris & Company, in the account of Peabody & Adams. The supposed principal, Norris, did not testify and not one letter or any other document indicated that Rowntree’s acts were unauthorized.
The theory of plaintiff is that Norris, the bankrupt, was the owner of the business known as Scott Norris & Company; that he was thus liable for its debts; that Rowntree was his agent and acted without authority under such circumstances as ought to have put this defendant bank on inquiry as to where he was receiving the funds; for what purpose he was depositing them and to whom they were being disbursed. Upon this state of facts it is argued that the principle of law governed which subjects a third person to liability when it deals with an agent acting outside of his authority under such circumstances as are sufficient to put him on notice that the agent is exceeding his power in dealing with the property, moneys or funds of his principal. The trustee sues in behalf of Norris for the benefit of his creditors and if Norris himself had no cause of action, the plaintiff can have none. It was necessary to establish liability against • the bank to show that Rowntree was Norris’ agent in order to show that he violated his agency. As indicated, Norris did not make any proof with respect to Rowntree’s status in the business. The only proof of agency is contained in the powers of attorney which powers were executed under Rowntree’s plan to cover up his actual ownership. The evidence, if it indicates anything outside of the powers of attorney, shows that Norris was the dummy and Rowntree was the proprietor of the business of Scott Norris & Company. Norris not only did not own the money as principal in this bank, but he had no signature card on file in the only place where that firm had an *601account. The money was not, therefore, withdrawable by Norris, the supposed owner of the business whose alleged agent is charged with the fraud against his principal. All the proof shows that Rowntree was the owner of the business and liable for its debts. All the legal rights which grew out of the conduct of the business belonged to him. He merely hid his identity with the name of the business. The very nature of the style of the business which he ran precluded his being an agent because he was in reality the principal, and the fact that he pretended to act as agent could not create that status when it did not actually exist. The bank, therefore, was dealing with the principal. Although he pretended to be an agent, the proof shows that the moneys did not belong to Norris and he could maintain no action against Rowntree because Rowntree was not his agent, and, therefore, neither could the plaintiff. No inquiry would have shown the bank anything other than that Rowntree had complete authority if he was an agent under the power of attorney to indorse and draw all the checks which this bank honored, or if they had inquired of Norris, it would have been discovered that Rowntree was the real principal.
Nothing in the proof brings the bank under the rule which requires a depository to pay the loss incurred through permitting an agent to exceed the authority conferred by his principal in withdrawal of funds. Nor can plaintiff recover on the theory of a fraudulent transfer of the bankrupt’s funds through the medium of withdrawal of these funds after they were deposited to the credit of Peabody & Adams. The- bank was not a transferee. It was merely a depository. The deposits merely created a debtor and creditor relationship with the bank and Peabody & Adams. The transfer ran to Peabody & Adams and if a cause lies at all for conversion of the funds fraudulently against the rights of creditors, it lies against Peabody & Adams, who were the transferees. The bank discharged its obligation with respect to these funds when it paid to Peabody & Adams on check drawn by a person authorized to make such withdrawals.
No liability of the bank is made out in law or fact, and the judgment should be reversed, with costs, and the complaint dismissed, with costs.
Dowling, P. J., and Finch, J., concur; Merrell and Proskauer, JJ., dissent.