In August, 1912, plaintiff deliverel to one Stegner, the operator of a grain elevator, about a car load of wheat belonging to plaintiff. The wheat was delivered to Steg-ner at the elevator, hut was placed in a bin by itself and kept separate from other wheat. This wheat was not purchased by Stegner, and the agreement between him and plaintiff was that he -should ship and sell the wheat for plaintiff. Plaintiff testified that it was expre’ssly understood that the wheat was .to be shipped in his name; while Stegner testified that nothing was said as to whose name the grain should be shipped in. Stegner loaded the wheat into' a oar and, by a -bill of lading in which -he was named as consignor, consigned the same to a commission firm at Minneapolis. Upon receiving the bill of lading from the railroad company, Stegner, on August 26th, went to defendant, with whom he had a general banking account, and drew a sight draft for $500.00 on the commission firm. At. the time the draft was drawn, it, with the bill of lading, was delivered to defendant bank for deposit, and the bank, at Stegner’s request, credited Steg-ner’s general banking account with the amount of such draft. The sight draft, with the bill of lading attached, was • immediately forwarded by defendant to its Minneapolis correspondent by whom it was credited to defendant. Upon presentation to the commission firm the draft was honored. At the time defendant gave Stegner credit for the amount of the sight draft, his general bank account was overdrawn to the amount of $346.65. Defendant, by balancing Stegner’s account, immediately applied $346.65 of said $500.00 to the payment and satisfaction of said overdraft. Between August 26th and September nth, following, Stegner issued checks, in favor of third parties, against his account, sufficient to exhaust the remainder of said $500.00 deposit. On September nth, defendant’s account with Stegner was bal-*112andced and closed. On September 23rd plaintiff served .the following notice on defendant:
“To the Sioux Falls Savings Bank:
On August 24, 1912, George A. Stegner, of Sioux Falls, drew a draft for $500.00 on Woodward & Company, a grain commission house of Minneapolis, M-inn., to apply on the proceeds of the sale -of a carload of wheat shipped by him, in -his name, to Woodward & Company, * *' * the bill of lading for the same being attached to the draft, and deposited such draft with you. I am informed that Woodward & Company sold said carload of wheat and from the proceeds thereof paid you the amount of this draft, v-iz: $500.00, and that you have credited the same to Mr. Stegner’s. personal account with you.
“The wheat so shipped by Mr. Stegner to Woodward & Company and on account of whioh he drew said draft, belonged to me and he was not authorized either to ship or sell the same in his own name, but was to ship said wheat to Woodward & Company in my name to sell for me and on my account. The amount received by you from Woodward & Company on said draft belongs to me, and I hereby demand that you account to- me for the amount so received by you and pay the same to me.
E. M. Shotwell.”
Defendant having refused to account for any part of the proceeds of said wheat, plaintiff instituted this suit. In his complaint plaintiff alleged in substance facts as above set forth and prayed judgment: that he be -adjudged to be the owner of the $500.00 draft and the moneys received -in -payment thereof; that defendant 'be required to account to /him for such moneys; and that he recover from defendant the sum of $500.00 and interest from September 23, 1912, the date of the demand. At the trial, this last prayer was modified, and plaintiff asked judgment for $285.60 and interest, being the $500.00 less $214.40 that it was shown had been- paid out by defendant on Stegner’s checks after the deposit of the $500.00 and prior to the notice. At the close of the evidence both parties moved for directed verdict. By consent of parties the case was withdrawn from the jury and submitted to the court for determination, findings -of fact being waived. The court rendered -decision and judgment in favor of defendant, and refused a new trial. Plaintiff appeals from the *113judgment and order denying a new trial, and assigns insufficiency of the evidence to justify the decision and judgment, and error of the court in not directing a verdict for plaintiff.
Upon this appeal, every issue of fact must be determined in favor of respondent, hence we must presume that the trial court found that nothing was said between respondent and Steg-ner concerning whose name the grain should be shipped in; furthermore, if material hereto, we must presume that the -trial court found, and rightfully, that Stegner was conducting such a business that, when appellant left his wheat with him he clothed him with the external indicia of right to sell same and therefore to pledge it. Nevertheless as between- appellant -and -Stegner the grain and the proceeds thereof remained the property of appellant, and respondent should not be allowed to defend against appellant’s claims to such proceeds, except to the extent that respondent has parted with- .value on the strength of Stegner’s apparent authority to sell the grain, and therefore to pledge -the bill oif lading, unless the facts of this case take it out of the rules. governing the passing of title to' personal property, and bring it under some exception applicable only to -cash 'and -other recognized mediums of -exchange. Saltus v. Everett, 20 Wendell (N. Y.) 267, 32 Am. Dec. 541; Fawcett v. Osborn, 32 Ill. 411, 85 Am-. Dec. 278. Respondent claims that, when a bank, without notice of the trust character thereof, takes from a trustee, for deposit to the trustee’s personal account, cash or'other recognized' medium, of -exchange, it can -credit such deposit against such tru's-tee’s overdraft and defend against any action by the cestui que trust to recover such trust fund though, as -against suoh cestui 'que trust, the deposit was wholly unauthorized and 'therefore wrongful. Appellant contends for the rule contended for by Bolles- in Modern Daw of Banking, 501, wher-e the author -says:
“Why should' not the bank be required to refund to the rightful owner in -all cases wherein its situation -would not be worse than it was before -receiving payment? No rule is better established than this: that trust funds do not lose their -character by reason of -depositing them to- the individual -account of the depositor. If, -therefore, they will pos'ses-s this character, why should *114they- not be recovered, provided they can still be traced, regardless of their .possessor.”
It must be admitted’ that the courts- have uniformly recognized a difference between ordinary personal property -and cash or .other recognized medium of exchange -when considering the question of how far the true owner of property can pursue the same or its proceeds where such property or proceeds has passed into the hand's of innocent third persons through the wrongful act of a trustee of suoh property. In the American decision which perhaps- more than any other has been cited and quoted from in the courts of this country it is' -said:
“It is absolutely necessary for practical business transactions that the payee of money in -due course of business -shall not be put upon- inquiry at his peril as to- the title of the payor. Money has no ear-mark. The purchaser of -a chattel or a -chose in action may, by inquiry, in most cases, ascertain the right of the pers'on from whom be takes the title. Bu-t it is generally impracticable to trace the source from- which the possessor -o-f money has derived it. It would introduce great confusion into commercial dealings if the creditor who- -received money in payment of a debt is subject to the risk of accounting therefor to- a third person who- may be able to -show that the debtor obtained it from him by felony or fraud. The law, wisely, from considerations of public policy and convenience, and to give security and certainty to business- transactions, -adjudges that the possession of money vests the title in the holder as to third persons dealing with him and receiving it in due comise of business and in good faith upon a valid consideration. If the consideration is good as between the parties, it is good as to- all' the world. ‘Money,’ said Lord Mansfield, in Miller v. Race, before cited, ‘shall never be followed into the hands -o-f a person -who bona fide took it in the cours-e -of currency and in the way of his business.’ ” Stephens v. Board of Education, 79 N. Y. 183, 35 Am. Rep. 511.
Pomeroy, in commenting u-pon .the distinction between money and other property a® recognized in the decisions following the holding in the Stephens case, announces,, as the sole reason for this distinction, the fact that money is not “ear-marked.”
The courts should not be unmindful of the necessities of business and we have no fault to find with the rule announced *115in the Stephens case, provided that in applying such rule courts will not refuse to shut their eyes to1 the clear equities of the particular case and will insist on such rule being subject to that other well-established and most just rule, recognized by this court in Finch et al. v. Park, 12 S. D. 63, 80 N. W. 155, 76 Am. St. Rep. 588, Id. 15 S. D. 339, 89 N. W. 654, and which, is so clearly set forth in Brand and Co. v. Williams 29 Minn. 238, 13 N. W. 42, "wherein the court through Justice Mitchell, said:
“An action for money had and received can be maintained whenever one man has received or obtained the possession of the money of another, which 'he ought in equity and good conscience to .pay over. This proposition is elementary. There need be no privity between .the panties, or any promise to pay, other than that which results or is implied from one man’s having another’s money, which he has no right conscientiously to retain. In such case the equitable principle upon which the action is founded implies the contract and the promise. When the fact is proved •that he has the money, if he cannot show a legal or equitable ground for retaining it the law creates the privity and the promise. 2 Chitty, Cont. (11th Am. Ed.) 899; Mason v. Waite, 17 Mass, 560; Hall v. Marston, 17 Mass. 574; Knapp v. Hobbs, 50 N. H. 476; Eagle Bank v. Smith, 5 Conn. 71 [13 Am. Dec. 37]. It is not necessary that the defendant should have accepted the money under an agreement to- hold it for the benefit of the plaintiff, or that the party from- whom he .received it intended it for the plaintiff’s benefit.”
We concede that a bank has a lien upon deposits and other property coming into its hand, 'to .secure overdrafts and debts owing from the depositors; that courts are justified, upon slight evidence, in holding that a party, by depositing funds or other property with the bank, authorizes the application of such funds or property to any overdraft or other indebtedness due from him to the bank; that, in the case of money or other circulating medium, neither a bank nor an individual should be compelled to take it at the same risk and peril that it would other personal property; that one should not be put upon inquiry to ascertain the true ownership of a fund 'of such character where there is nothing .to fairly give notice of the -source from which the fund was received or that the fund does- not belong to- the -depositor *116or .payor; and that, where a bank has innocently taken, from one not the true owner thereof, money, draffs, or checks, and applied the same upon a debt or overdraft, and, relying upon such deposit and application thereof, has placed itself in a position where it would be inequitable to. require it to account to the true owner of the; fund, ,t'he bank should not be hold'en to. the true owner of such fund. We deny that there is any recognized principle of law, or even any reason founded upon that necessity which is said to know no law, that will sustain either the justice or necessity of holding that, when a fund, even though it consists of money, ■ can be fully and clearly traced into the hands of one who. has neither paid a valuable consideration therefor nor changed his relation to the person from whom the fund' was received so as to give rise to any equitable defense against the claims of the true owner of such fund1 — when one man has money which in equity and good conscience belongs to another — such fund should not be recovered by the equitable owner thereof. Applying, without limitation, the rule contended for by respondent would permit a bank to retain, as1 against the true owner, money procured through highway robbery and deposited by the robber to meet an overdraft. — a case where, upon the one side the money is procured through no confidence or trust placed in the wrongdoer, while, upon, the other side, the money is received from the wrongdoer whonr the bank has allowed to become indebted to it; not a case where the law must determine as between two. persons who have placed confidence in a third; and where it might be said that he who confided most must suffer. We refuse to adopt any rule that must lead -to such results.
A. deposits ¡in a bank the money of C., making the deposit in his own name; A. owes the bank nothing and’ the money -remains on deposit without being checked out; the authorities agree that C. can recover this money from the bank, and why?— because it is a trust fund belonging to C. and in and to which the bank can have no rightful ¡claim, as against C. Under those facts no suggestion is made that money has no ear-marks. A goes to the -bank with C.’s money and deposits it at a time when his account to the bank is overdrawn; C. ascertains where his money •has gone and, before there has been any change of circumstances, except the mere .crediting of A’s account with the amount depos*117ited, demands the money; upon what possible rule of equity or why, as a -matter of good conscience between C and the bank, or upon w'hat rule of business necessity, should the bank retain this money from- C? Absolutely none. The bank had no> right, legally or -equitably, to be paid out of this or any other fund not belonging to A; it allowed the overdraft relying up-on the confidence it had- in A, and not in reliance upon any expectation that A would pay such overdraft out of some third party’s money; it did not change its position to its detriment; why should’ C be, against -his will, forced to pay A’s debt to- the bank, and this inequitable ruling be placed on the ground either of necessity, or that other equally unsatisfactory ground — that money has no ear-marks? How much more logical it would be to hold that the true owner should recover so long as no equities have arisen in favor of the bank, but that he -cannot recover when, under all the circumstances surrounding the case — the nature of the fund, lack of knowledge of true ownership thereof, reliance placed upon the deposit of such funds, change -of situation as between the bank and the depositor, such as surrender of evidence of indebtedness — equity and good conscience demand that the bank be absolved from liability -to the true owner. There is no difference between the above illustration and the case before us; when Steg-ner overdrew his account, it was by permission- of respondent, which, to the extent of the overdraft and upon the faith it had in Stegner, allowed him to become indebted to it; it did not and could not rightfully allow an overdraft in the hope and upon the strength that Stegner would pay the same out of anyone’s funds but his own. When Stegner made the deposit, by necessary implication, he authorized the bank to apply such -deposit upon his overdraft; but the bank -had, as against appellant, neither a legal nor an equitable right to this money; when it took it and in ignorance of its true ownership, credited Stegner’s account- therewith and honored checks .against it, it put -itself in -a position where, to the amount of su-ch checks, it would be inequitable and unjust, in view of the necessities of business, to compel it to- restore the fund to appellant and he must suffer such loss. While the very nature of the trust fund1 deposited- and1 the necessities- of. commerce -did, under the facts of this case, in -equity -and good conscience, excuse respondent from any duty of 'attempting to *118trace the ownership of the draft and of die cal' of wheat, yet it must be borne -in mind that to. the extent of the amount which appellant seeks to recover, respondent never changed its: position for the worse so. far as any evidence shows. It credited S-tegner’s account with the amount of the draft, bu.t it did not, by so doing, lose any right of action against Stegner for the amount of such overdraft, as Stegner could not claim a -payment by this draft. Therefore no necessit}'- of commerce required or justified (he bank in refusing to pay over to appellant the amount of such draft less checks paid after the deposit. In Pennell v. Defell, 4 De Gex, M. & G. 372, it was said:
“When a trustee pays trust money into a bank, the account being- a simple account -with himself, not marked or distinguished in any -other manner, the debt thus constituted from the bank to him is one which, as long as it remains due, belongs specifically to the trust, as much an-d a-s effectually as -the -money so paid would have; done, had it specially been placed in a particular -depository, and so remained.”
It seems to us that the facts in- the -case at bar rightfully call for such words a-s were used by the Dord Chancellor in Murray v. Pinkett, 12 Clark & F. 764, when -he said:
“Then here are t-wo equities; that is to say, here is a trustee of the property, which he held for the benefit of the cestuis que irustent, endeavoring toi -create an equity upon that property to -secure hi-s own debt. Which of these two equities is to prevail? Undoubtedly, the former (the equity of the cestui que trust.)”
See also F. & M. Bk. v. Farwell, 58 Fed. 633; 7 C. C. A. 391.
The principle we are contending for is fully recognized in Wilson & Co. v. Smith, 3 Howard (44 U. S.) 763, 11 L. Ed. 820, a case wherein plaintiffs had drawn- a draft upon their debtor and sent it to their agent for collection, this agent sent the collection to its own agent which collected the amount -of the -draft and, supposing the draft to be -the -property o-f the party from whom he received it, which party was indebted to him, he credited him- with the amount collected and -did not remit same. Playing -refused to pay plaintiffs the amount collected, plaintiffs brought this action, and in holding that plaintiffs cou-l-d recover, the court said:
*119“Upon this part of the case, as well - as upon the question 'certified, we think the ease of The Bank of the Metropolis v. The New England Bank decisive against the defendant. It appears from the statement that he made no> advances, and gave no new credit to St. John on account of this bill. He merely passed it to his credit in account. Now, if St. John had owed him nothing, upon the principles we have already stated, the plaintiff would be entitled to recover the money; and we see no reason why be should be barred of his action because St. John was debtor to the defendant, since the case shows that he incurred noi new responsibility upon the faith of this bill, and his- transactions with St. John remained in all respects the same as- they would have been if this bill had never been transmitted to him.”
The above holding is affirmed in Bank of Metropolis v. New England Bank, 6 Howard (47 U. S.) 209; 12 L. Ed. 408, and in United States v. State Bk. (6 Otto) 96 U. S. 30, 24 L. Ed. 647. To the same effect is the case of Porter v. Roseman, 165 Ind. 255, 74 N. E. 1105, 112. St. Rep. 222, 6 Ann. Cases 718, a case identical with the one at bar in principle; the 'court said:
“Appellee thus having .in his possession money which ex aequo et bono belonged and ought to have been returned to appellant, an action for money had and received might have been well brought for its recovery; and it was not material how the money came into his hands, if the plaintiff is justly entitled to receive it. In such a case the law implies a promise to pay.”
This principle was also fully recognized in Davis v. Bk. (Tex. Civ. App) 29 S. W. 926, a case where the bank had not changed its position so as to create equities in its favor. The court said:
“There is neither allegation nor evidence that the bank lost its debt upon Hancock by ■ reason of this transaction, before it was advised that he was not entitled to this credit; and, in the absence of such evidence, we do not see upon what principle it should be allowed to retain this money. The evidence is undisputed that the proceeds of these three cars, of calves, as between Hancock and appellant, did in fact belong to the latter, and that the former had no right whatever to use it. Under these circumstances, it is perfectly manifest that the bank would have *120no right to appropriate appellant’s money to the satisfaction of an account which Hancock already owed it.”
We are not unmindful of the later case of Bk. v. Hill, (Tex. Civ. App.), 141 S. W. 300, but in that case no question of existing equities seems to have been considered. Certainly, the following from Burtnett v. Bank, 38 Mich. 630, is directly applicable:
“But we are not aware of any principle which will enable a 'depositary who has received from a trustee or agent a fund belonging in fact to the principal or beneficiary to appropriate it by his sole act to his own debt held against the trustee or agent and thereupon to insist that his want of knowledge of the true ownership is sufficient to guard such inequitable appropriation and bar the real owner from pursuing the fund.”
But it might be urged that this last case has been overruled in the later decision in Garrison v. Union Trust Co., 139 Mich. 392, 102 N. W. 978, 70 L. R. A. 615, 111 Am. St. Rep: 407, 5 Ann. Cases 813. A careful reading- of this decision shows that it fully supports ou-r position. There will be found therein extensive quotations from Morse on Banks and Banking wherein the opinions in the Bank of Metropolis cases are reviewed, and 'the Michigan case quotes, with apparent approval, the following deduction drawn by Morse from the federal decisions, when, in speaking of one who has collected the trust fund, he says:
“But unless it has made some payment, or suffered a balance to remain undrawn, or otherwise substantially relied on the agent’s (trustee’s) ownership, so that it would be unjustly prejudiced by the denial of that ownership, then it cannot retain the money.”
It will thus be seen that the Garrison case fully approves the rule we are contending for — the rule approved by the federal courts.
In the case of Cade v. Bk. 46 Neb. 756, 65 N. W. 906, one much like this in its facts, the court fully recognized the equitable doctrine we are contending for when it said:
“A consideration of the authorities cited leads irresistibly' to the conclusion that appellant’s right to the money in controversy was not affected by the deposit thereof in FÍtche’s name/ and that he is entitledl to reclaim it, notwithstanding that fact, unless there exists in favor of the bank an equitable defense, arising out of *121the subsequent transactions, which should prevail as against his title.” •
Many decisions will be found which at first blush seem to sustain respondent's contention, but which upon careful examination will be found to recognize the rule which we hold should control. Among such decisions is that in Smith v. Des Moines Nat. Bk. 107 Ia. 620, 78 N. W. 238, wherein is to be found a most exhaustive review of the decisions touching the question of following trust moneys deposited by the trustee to his personal account in a bank. In that case the trust funds were received by the bank without any notice of their trust character and were applied in payment of a note held by the bank against the depositor. The court held that the cestui que trust could not recover of the bank, but said:
“Had the bank in this case simply relied upon its lien on the deposit, or had it treated it simply as security for tire note of the investment company, which was a prior and antecedent debt, it may be that it should not be treated as a bona fide holder of the deposit. But the evidence shows that it cancelled and surrendered the note with the final assent of the investment company, and without notice of plaintiff’s rights.”
Upon both reason and authority the judgment of the trial court should be and is reversed and such court is directed to enter judgment for $285.60 and interest at 7 per cent from September 23, 1912, together with costs.