dissenting: June 11, 1927, Rogers, as collector, had on deposit in defendant bank $22,964.35 and also a personal account of $2,035.65. On that date he was given a certificate of deposit for $25,000, the aggregate of the two items.
Apparently a year and a half thereafter, viz., January 11, 1929, Rogers turned in this certificate of deposit, receiving therefor $3,500 and a new certificate of deposit for $21,500 and also a certificate for $633.33 representing accrued interest on the $25,000 certificate; and on March 18 turned in his $21,500 certificate, receiving therefor $4,118.25, being $4,000 principal and $118.25 accrued interest, and another certificate of deposit for $17,500; and on April 15 turned in the $17,500 certificate, receiving therefor $4,545.20, being $4,500 principal and $42.20 interest, and a $13,000 certificate of deposit; and on April 22 turned in the $13,000 certificate No. 199 and received a certificate payable to himself personally for the same amount. None of the money went to defendant bank to pay his individual indebtedness, as was the case in People ex rel. Barrett v. State Bank of Herrick, 290 Ill. App. 130.
The four persons who were sureties on Rogers’ bond — Dyche, Sehneidenhelm, McNab and Mitchell — in legal effect paid to the town of the city of Evanston the amount of Rogers defalcation, although all of the money came from the four banks in which Rogers had been depositing the taxes collected by him. They, the four sureties, were entitled to be subrogated to all rights the town of the city of Evanston held against Rogers. But the question is, Had they the right (after paying the amount of Rogers ’ defalcation according to their contracts of surety) to claim the amount of such payments from defendant bank, which at most could be said to be but slightly negligent? I think not. In my opinion the court went too far in applying the doctrine of subrogation in the instant case. Empire Trust Co. v. Cahan, 274 U. S. 473; Bischoff v. Yorkville Bank, 218 N. Y. 106; Whiting v. Hudson Trust Co., 234 N. Y. 394; Massachusetts Bonding & Ins. Co. v. Standard Trust & Sav. Bank, 334 Ill. 494; Bank of Commerce v. U. S. Fidelity & Guaranty Co., 54 F. (2d) 578; Childs v. Empire Trust Co., 54 F. (2d) 981; Bank of Vass v. Arkenburgh, 55 F. (2d) 130; U. S. Fidelity & Guaranty Co. v. Metropolitan Nat. Bank, 1 F. Supp. 514.
Bouvier defines subrogation: "In this country, under the initial guidance of Chancellor Kent, its principles have been more widely developed than in England. ... It is treated as the creature of equity, and is so administered as to secure real and essential justice without regard to form. ... It is broad enough to include every instance in which one party pays a debt for which another is primarily answerable, and which in equity and good conscience should have been discharged by the latter.”
In my opinion, under the facts disclosed in the record it would be highly inequitable to require defendant bank to pay plaintiffs, the four sureties, the amount they had paid to settle Rogers’ defalcations. Their contracts expressly required them to make good any shortage in Rogers ’- accounts, and equity and good conscience should not permit them to shift this burden on the bank. Their obligation was far greater than that of defendant bank.
In the instant case notice to Rogers was not notice to the bank (Montgomery v. Commercial Trust & Sav. Bank, 286 Ill. App. 241) and the knowledge of McCabe when the deposit was originally made by Rogers, is in my opinion insufficient to charge the bank with notice 18 months afterward when Rogers, as above stated, withdrew the money.
In the Bischoff case (218 N. Y. 106) it was held that a fiduciary might legally deposit trust funds in a bank to his individual account; that the bank had the right •to assume the fiduciary would apply the funds to their proper purpose under the trust, and that the bank did not become privy to a misappropriation by merely paying checks drawn upon the individual’s account. It was there further held that the bank’s participation in the diversion of such funds might result from either acquiring an advantage or benefit directly from the diversion, or in joining in a diversion in which it was not interested, with actual notice or knowledge that the diversion was intended, and thereby becoming privy to it. In that case an executor deposited trust funds to his individual account and afterward paid a personal indebtedness to the bank out of such funds. It was held that the bank was liable for a diversion of the amount received by it and also liable if it knew the executor was diverting the funds.
In the Whiting case (234 N. Y. 394) a check was deposited which described the payee as trustee, and it was held this was suggestive of a trust though not conclusive. The opinion was by Judge Cardozo. It was there said (p. 402): “The argument is that the trust company made itself a participant in the wrong when it placed the description ‘special’ rather than ‘ trustee ’ in the title of the account. Rights and wrongs are not built upon distinctions so inconsequent. If the word ‘trustee’ had been added, Eckerson would have been equally free to draw the money out and use it as he pleased. ... A different question would be here if the trust company had received the check for its own use, as, for example, in payment of a debt (Bischoff v. Yorkville Bank, 218 N. Y. 106).” (p. 403) : “Under the law as it then stood, a trustee did not convert the moneys of the trust by the mere act of depositing them in a bank in his individual name (Bischoff v. Yorkville Bank, supra; . . . Whether a trust did in truth exist, the defendant could not be sure. What it could be sure of was that the style of the account would neither change the quality of ownership nor work injury to any one.” (p. 406) : “The cases imposing liability in such circumstances lay down, however, a strict and at times a harsh rule, and are not to be extended. They do not reach a case where the instrument has been collected according to its tenor for the account of the very person who is there named as the payee. The transactions of banking in a great financial center are not to be clogged, and their pace slackened, by over-burdensome restrictions.” The certificate of deposit issued to Rogers was for moneys belonging to the town and moneys belonging to him personally; after 18 months the bank could not be sure that Rogers was not entitled to the money, and it ought not be required to employ a lawyer and an accountant to ascertain the facts and the law applicable before it could pay out the moneys. “The transactions of banking in a great financial center are not to be clogged, and their pace slackened, by over-burdensome restrictions.”
To the same effect is the holding of the Supreme Court of the United States in the Empire Trust Co. case (274 U. S. 473) in an opinion written by Mr. Justice Holmes. And our own Supreme Court in the Massachusetts Bonding Co. case (334 Ill. 494) in referring to the Bischoff case said (p. 506) : “It was said in that case: ‘We do not consider the question, because it is not here, as to whether or not a bank would be protected in honoring a check of a fiduciary depositor, regularly drawn upon his account as such fiduciary and presented by him, even though it had actual notice that he would misappropriate the proceeds. ’ ” Our Supreme Court there held that the surety for a receiver could recover the amount of moneys wrongfully expended by the receiver from the depository bank. But the facts in that case show the greatest irregularity on the part of the officials of the bank as well as on the part of the receiver.