#### PEOPLE v. MERCHANTS’ BANK OF BINGHAMTON. In re FRIEND et al.

(Supreme Court, General Term, Fourth Department.

December 26, 1895.)

Banks—As Collection Agents—Receiver.

A bank holding a note for collection from one not a depositor, and which receives payment thereof by charging to the account of a depositor having sufficient to his credit to meet it, does not become thereby a debtor of the owner of the note, but holds the amount of the collection in trust for him; such trust being impressed on all the funds of the bank, which may be followed though they pass into the hands of a receiver.

Appeal from special term, Broome county.

Petition by E. & G. Friend & Go. to compel George W. Dunn, as receiver of the Merchants’ Bank of Binghamton, to pay their claim *990against the said bank. From an order of said claim in full, the receiver appeals.

Affirmed.

Argued before HARDIN, P. J., and MARTIN and MBRWIN, JJ,

George F. Lyon, for appellant.

Mandelbaum Bros., for respondents.

PER CURIAM.

The petitioners, E. & G. Friend & Co., are merchants in the city of New York. On December 29,1894, they sent to the Merchants’ Bank of Binghamton three promissory notes, payable at that bank, made by Reynolds, Rogers & Lay, who resided in Binghamton, and were depositors in the Merchants’ Bank. Accompanying the notes was a letter to the cashier of the bank, which was as follows: “We beg to inclose for collection, Reynolds, Rogers & Lay, $1,073.25; do. Am. Exch., $1,000; do. ‘Paid,5 $1,364.43, for proceeds of which please send New York exchange, and oblige.” Each of these notes was indorsed upon the back: “Pay to the order of Merchants’ Bk. for collection account of E. & G. Friend & Co.” Friend & Co. had no account with the Merchants’ Bank. The first of these notes was paid at maturity, and the bank remitted the proceeds less their charges. The second matured January 17, 1895. On that, day the account of Reynolds, Rogers *&*Lay was not good for the amount of the notes, but they deposited $634.40 to make their account sufficient to meet it. The bank thereupon stamped and canceled the note as paid, returned it to Reynolds, Rogers & Lay, and charged the same to their account. It then sent to Friend & Co. its draft upon the American Exchange Bank of New York City for the amount collected, less one dollar, collection fees. Before it was presented, the Merchants’ Bank went into the hands of a receiver, and the American Exchange Bank declined to honor the draft. The amount deposited and standing to the credit of Reynolds, Rogers & Lay in the Merchants’ Bank has never been drawn out, and there has been in that bank at all times since such deposit was made more than money enough to pay the petitioners’ claim. The third note had not matured when the receiver was appointed, and it was returned to Friend & Co. On April 3d a motion was made for an order directing the receiver to pay to the petitioners the sum of $999, that being the amount of the note less the commission for collecting it. This motion was based upon the verified petition of Friend & Co., and an affidavit of Frank B. Reynolds. Upon the hearing, the affidavit of George W. Ostrander was read in opposition to such motion; and, upon the hearing, the court granted the order appealed from.

Practically the same question as is presented upon this appeal was before us in the case of Arnot v. Bingham, 55 Hun. 553, 9 N. Y. Supp. 68. In that case all the essential facts were substantially like those in the case at bar. We there held that the owners of the note were entitled to collect it from the receiver of the bank to the extent of the funds he received from the bank that were in its possession when it failed. We also held that the relation between the former owners of the note and the bank was that of bailor and *991bailee, or trustee and cestui que trust, and that the fund received by the receiver was the property of the owners of the note, or so far impressed with a trust in their favor as to give them an equitable title thereto. If that case was correctly decided, it follows that the order in this case should be affirmed. While it must be admitted that in that case we were not free from doubt, and that the general term of the Fifth department has held an opposite doctrine, still, upon a re-examination of the question, we are disposed to adhere to our former decision, and affirm the order appealed from.

Order affirmed, with $10 costs and disbursements.