(after, stating the facts as above). The intervener bases its right to recover all these funds, amounting to $1,714.88 to satisfy its claim of $1,716.79, of which $1,476.82 is for the goods delivered to the bankrupt, and $239.97 the proportionate part of the cost of carriage of these goods, upon the proposition that a trust was impressed upon these funds which came to the hands of the receiver as assets of the bankrupt’s estate; they being the proceeds of the goods turned over to the bankrupt and which by agreement of the parties were to be paid over to them as soon as collected.
[1] Leaving for the present out of consideration the effect of section 8 of the Act of June 25, 1910, 36 Stat. 838, 840, amending the bankruptcy act, it cannot be disputed that trustees and receivers in bankruptcy, as well as all other receivers, take the assets of the bankrupt iti the absence of fraud, subject to all equitable liens in favor of third parties to the extent that such assets have been augmented by the wrongful act of the bankrupt. Scott v. Armstrong, 146 U. S. 499, 507, 13 Sup. Ct. 148, 36 L. Ed. 1059; Fourth Street Nat. Bank v. Yardley, 165 L. S. 634, 653, 17 Sup. Ct. 439, 41 L. Ed. 855; York Mfg. Co. v. Cassell, 201 U. S. 344, 26 Sup. Ct. 481, 50 L. Ed. 782; Bryant v. Swofford Bros., 214 U. S. 279, 291, 29 Sup. Ct. 614, 53 L. Ed. 997: In re E. M. Newton & Co., 153 Fed. 841, 83 C. C. A. 23; Gillespie v. J. C. Piles & Co., 178 Fed. 886, 102 C. C. A. 120; Dunlop v. Mercer. 156 Fed. 545, 86 C. C. A. 435.
[2] Nor could there be any doubt that trust funds which have been fraudulently diverted or appropriated can be recovered of a receiver *216whenever such funds are susceptible of identification in the hands of the possessor, or, if they have 'been intermingled with the general funds of the trustee so as to render their identification impossible, a court of equity (and bankruptcy courts are courts of equity in proceedings of this nature) will follow them and decree restitution to the cestui que trust if the unlawful appropriation of the trust funds resulted in swelling or increasing the assets of the insolvent and came to the possession of the trustee. National Bank v. Insurance Co., 104 U. S. 54, 26 L. Ed. 693; Peters v. Bain, 133 U. S. 670, 10 Sup. Ct. 354, 33 L. Ed. 696; Spokane County v. First Nat. Bank, 68 Fed. 979, 16 C. C. A. 81; American Can Co. v. Williams, 178 Fed. 420, 101 C. C. A. 634; First Nat. Bank v. Armstrong (C. C.) 36 Fed. 59; Frelinghuysen v. Nugent (C. C.) 36 Fed. 239; Van Alen v. American Nat. Bank, 52 N. Y. 1.
[3] On the other hand, if, at any time after the misappropriation of the funds and mingling them with those of the wrongdoer, all the money is withdrawn, including that unlawfully mingled, the equities are lost, although moneys from other sources are subsequently placed in the same place. Or if a part of the funds so mingled is withdrawn, and the fund reduced to a smaller sum than the trust fund, the latter must be regarded as dissipated except as to this balance. Sums subsequently added to the fund from other sources cannot be subjected to the equitable claim of the cestui que trust. Beard v. Independent District of Pella City, 88 Fed. 375, 31 C. C. A. 562; Spokane County v. First Nat. Bank, supra; Board of Commissioners v. Strawn, 157 Fed. 49, 84 C. C. A. 553, 15 L. R. A. (N. S.) 1100; American Can Co. v. Williams, supra.
Applying these principles to the facts in this cause, it is clear that unléss section 8 of the amendatory act-of June 25, 1910, makes these rules of law inapplicable, the intervener is entitled to the proceeds of the drafts for the goods which came to the hands of the receiver of the state court and by him turned over to the receiver in bankruptcy and now in his possession. These claims are: F. W. Dillard, $32.53; Arkansas Wholesale Grocer Company, $260.42; CottonVeazy Grocer Company, $76.35; Harris Wholesale Grocer Company, $46.10; and also the proceeds of the check of the Collins-Hampton Grocer Company for $543.35, deposited by the bankrupt on November 29th and now in the possession of the receiver. The check for $304.02, received by the bankrupt for these goods on November 22d and deposited by him on that day, would also be subjected to intervener’s claim1 but for the fact that the hank books show that the bankrupt’s deposit account, which was $822.97 on November 23d, was by withdrawals reduced to $13.72 on November 25th, and again increased the next day by deposit of moneys realized by the bankrupt from other sources. The sum of $13.72 is the only sum which intervener can be entitled to from this check.
[4] The check of intervener for $451.81 is not a trust fund. Intervener bought the goods from the bankrupt and gave them a check for it. It could have credited that amount on the indebtedness due it from the bankrupt; but it saw proper to make this transaction one *217of purchase and sale, and not one of principal and agent or commission merchant. Why give a check for its own goods and then ask for an accounting ? The reason given that it had accepted a check for the full amount from the bankrupt to be paid out of funds realized from the sales, and it took that sum to make the check good, is neither convincing nor persuasive. If this transaction was not a separate purchase, that sum could have been deducted from the amount due from the bankrupt, and its check made for that much less. For these reasons the intervener is not entitled to a decree for that sum in any event.
[5] The next question to be determined'is: What is the effect of the amendatory act of 1910. By the terms of that act the trustee in bankruptcy “shall be deemed vested with all the rights, remedies and powers of a creditor holding a lien by legal or equitable proceedings tliereon.” The trustee, therefore, is entitled to the same rights an execution creditor would have if the money in controversy had been seized by an officer under a writ of attachment or execution, or, if deposited in the bank, a writ of garnishment had been served on the depositor}'. Would such proceedings defeat the claim of intervener?
If a deposit is made by one describing himself as agent, attorney, or trustee, the rule of law, according to the great weight of authority, is that presumptively he is the owner of the funds, and the deposit is subject to garnishment by his judgment or attaching creditor; but this is only a presumption which may be rebutted by the principal or true owner of the funds, who, if successful, will have priority over the creditor. Ingersoll v. First Nat. Bank, 10 Minn. 396 (Gil. 315); Jones v. Bank, 44 Pa. 253; Proctor v. Greene, 14 R. I. 42; Des Moines Cotton Mill v. Cooper, 93 Iowa, 654, 61 N. W. 1084; Cunningham v. Bank of Nampa, 13 Idaho, 167, 88 Pac. 975, 121 Am. St. Rep. 257, 10 L. R. A. (N. S.) 706; Petty v. Dunlap, 99 Ga. 300, 25 S. E. 697; Silsbee State Bank v. French Market Grocery Co. (Tex.) 132 S. W. 465, 34 L. R. A. (N. S.) 1207.
The court can conceive of no reason why the same rule does not apply when the money is deposited by the agent in his own name without the addition of the word “agent” or “attorney” and mingled with his own funds. An attaching or execution creditor is not a bona tide purchaser entitled to the protection the law affords such purchasers. He can only acquire by the seizure such title or interest as the execution defendant has. The rule that, as money has no earmarks, every one is to he treated as an innocent purchaser, has been modified in cases of this nature. As stated by Judge Jackson, later Mr. Justice Jackson, in First National Bank v. Armstrong, supra:
‘'The old idea tliat. because money has no earmarks, it cannot be followed when mingled with the funds of a wrongdoer, has long since been exploded. The decisions in England and in this country now allow a trust fund, to be followed as long as it can be traced, and its identity ascertained, whether in its original or in some substituted form. A leading case on this subject is Taylor v. Plumer, Maule & S. 562, where the trust fund was traced through several changes; Lord Ellenborongh holding that the property in its new form still belonged to the xn'incipal, notwithstanding the changes which the agent had made in its character. He laid down the principle, since generally recognized, that ‘the product of or substitute for the original thing *218still follows the nature of the thing itself so long as it can be ascertained to be such, and the right only ceases when the means of ascertainment fails.’ ”
Other cases are cited by the learned judge in that opinion following the same rule of law.
In Farmers’ & Merchants’ Nat. Bank v. King, 57 Pa. 202, 9§ Am. Dec. 215, money of the principal deposited by the agent with his own funds had been garnished by his creditors. After the garnishment, the principal demanded so much of the funds as represented the deposit of his money. In sustaining this claim the court said:
“It is undeniable' that equity will follow a fund through any number of transmutations and preserve it for the owner so long as it can be identified. And it does not matter in whose hands the legal right stands. If money has been converted by a trustee or agent into a chose in action, the legal right to it may have been changed; but equity regards the beneficial ownership. It is conceded, for the cases abundantly show that, when the bank received the deposit, it thereby became a debtor to the depositor. The debt might have been paid in answer to his checks, and thus the liability have been extinguished in the absence of interference by his principal to whom the money belonged. But surely it cannot be maintained that when the principal asserted the right to the money before its repayment, and gave notice to the bank of their ownership and of their willingness that the money should be paid to their agent, their right to reclaim it had not ceased. A bank can be in no better situation than any- other debtor. * * * But it is insisted there was no earmark to the money. What of that, if the money can be followed, or if it can be traced into a’substitute? * * * An earmark is not
indispensable to enable a real owner to assert his right to property or to its proceeds or substitute. In regard to money, substantial identity is not oneness of pieces of coin or of bank bills.”
The same conclusion was reached in Packer v. Crary, 121 Iowa, 388, 96 N. W. 870, where money deposited by an agent with his own funds and mingled therewith had been garnished and then claimed by the principal.
The intervener is entitled to recover from the receiver the following sums, money now in his hands, collected from the following parties:
Collins-Hampton Grocer Co....................................... $543 55
Zi. W. Dillard..............................................$13.72
” .............................................. 32.53 46 25
Arkansas Wholesale Grocer Co................................... 260 42
Cotton-Veazy Grocer Co.......................................... 76 35
Harris Grocer Co........................'........................ 46 10
Total ......................................................$972 67
A decree in accordance with the views herein expressed may be prepared and submitted to the court for approval.