This suit wаs originally brought in the superior court of San Diego county against the defendant bank, a national bank organized under and pursuant to the laws of the United States, and which became insolvent and suspended payment on the 11th day of November, 1891, and against Fredrick N. Pauly, the duly appointed and acting receiver óf the assets and property of the bank, on whose motion thе suit was transferred to this court. The complainant is a municipal corporation of the state of California, and by its bill cnarges that on the 15th day of August, 1891, its then duly elected, qualified, and aсting treasurer, C. R. Dauer, made with the defendant bank a deposit of the moneys of the complainant then in his custody as such treasurer, of $5,975.70, lawful money of the United States, and took from the bank a certificate of deposit therefor, in the words and figures following, to wit:
“5,975.70 The California National Bank.
“Dollars.
“San Diego, Cal., August 13, 1891.
“No. 6,700.
“C. R. Dauer, Co. Treas., has deposited in this bank five thousand nine hundred seventy-five and seventy one hundredths dollars, payаble to the order of same, on return of this'certificate properly indorsed.
“G. N. O’Brien, Cashier.”
Other similar deposits by Dauer, as such county treasurer, aggregating $10,000 additional of complainant’s money, are also alleged, for which similar certificates of deposit are alleged to have been issued by the bank, and taken by the treasurer. The bill further charges that on the 2d of Novеmber, 1891, the then duly elected, qualified, and acting tax collector, H. W. Weineke, of the county complainant, made with the defendant a deposit of the moneys of the complainant then in his custody as such collector, of $6,114.85, lawful money of the United States, and took from the bank its certificate of deposit therefor in the words and figures following, to wit:
“6,114.85 The California National Bank.
“Dollars.
“San Diego, Cal., November 2, 1891.
“No. 6,891.
“H. W. Weineke, Tax Cоll’r, has deposited in this bank six thousand one hundred fourteen and eighty-five one hundredths dollars, payable to the order of same on return of this certificate properly indorsed.
“G. N. O’Brien, Cashier.”
Other similar dеposits by Weineke, as such county tax collector, aggregating $20,000 additional of complainant’s money, are also alleged, for which similar certificates of deposit are alleged to have been issued by
The defendants, by demurrer, urge two objections to the bill: First, that complainant has a plain and adequate remedy at law; second, that the bill contains no equities entitling complainant to any relief against the defendants, or either of them. It is very clear that if the bill states a cause of action at all it is of an equitable nature, and enforceable in a court of equity only. A similar point was raised in the case of National Bank v. Insurance Co.,
“It is objected that the remedy of the complainant below, if any existed, is at law, and not in equity, But the contract created by the dealings in a bank account is bеtween the depositor and bank alone, without reference to the beneficial ownership of the moneys deposited. No one can sue at law for a breach of that contract except the parties to it. There was no privity created by it, even upon the facts of the present ease, as we have found them between the bank and the insurance company. The latter would not have been liable for an overdraft'by Dillon, as was decided by this court in National Bank*62 v. Insurance Co.,103 U. S. 783 ; and, conversely, for the balance due from the bank no action at law upon the account could be maintained by the insurance company. But although the relation between the bank and its depositor is that merely of debtor and creditor, аnd the balance due on the account is only a debt, yet the question is always open, «To whom, in equity, does it beneficially belong? ’ If the money deposited belonged to a third persоn, and was held by the depositor in a fiduciary capacity, its character is not changed by being placed to his credit in his bank account.”
See, also, Bankv. Gillespie, ,
In the present case, not only did the defеndant bank, according to the averments of the bill, have knowledge that the depositors of the moneys in question were, at the time of such deposits, officers of the complainant county, and that the moneys so deposited belonged to the complainant, and were therefore held by the officers depositing the same in trust for the county, but the bank is chargeаble with notice of the fact that 4he law of the state made it illegal for those officers to make, or the bank to receive, such deposits. Yarnell v. City of Los Angeles,
The bank, therefore, acquired nо title to the moneys so deposited, as .•against the complainant, and they continued impressed with the trust in complainant’s favor. It is true that the moneys in question were not made as a sрecial, as contradistinguished from a general, deposit, as those terms are understood- in banking matters; that is to say, it was not agreed between the officers making the deposits and thе bank that the identical moneys deposited were to be returned. The moneys deposited by the officers of complainant were no doubt mingled with the moneys of the bank, and their identity thus lost; but can such fact destroy the trust in complainant’s favor, or prevent the enforcement of it by a court of equity? The bank being insolvent, the question is between the complainant and thе general creditors of the bank represented by the receiver. The ordinary creditors became such voluntarily; they deposited their money with the bank with their eyes open. But the mоney of the complainant was deposited by its officers, and received by the bank, not only without the knowledge of complainant, but contrary to law. To put the complainant on the same plane with the ordinary creditors is to make the former share in a loss to which it did not voluntarily subject itself, and to give to the latter a share in money which never in equity became the property of the bank. This is certainly not just. It was said by Mr. Justice Bradley in Frelinghuysen v. Nugent, 36 Fed. Rep. 239:
“Formerly, the equitable right of following misapplied money or other property into the hands of the parties receiving it depended upon the ability •of identifying it, the equity attaching only to the very property misapplied. This right was first extended to the proceeds of the property, namely, to that which was procured in place of it by exchange, purchase, or sale; but if it became confused with other property of the same kind, so as not to be distinguishable, without any fault on thе part of the possessor, the equity was lost. Finally, however, it has been held as the better doctrine that confusion does not destroy the equity entirely, but converts it into a charge upоn the entire*63 mass, giving to the party injured by the unlawful diversion a priority of right over the other creditors of the possessor. ”
This rule was recognized as correct and applied by the supreme court in National Bank v. Insurance Co.,