The adverse interest exception applies only if the agent totally abandoned the principal's interests. ( Henry v Allen, 151 NY 1; Cragie v Hadley, 99 NY 131; Center v Hampton Affiliates, 66 NY2d 782; Ruggles v American Cent. Ins. Co. of St. Louis, 114 NY 415; Andre Romanelli, Inc. v Citibank, N.A., 60 AD3d 428; Price v Keyes, 62 NY 378; Reynolds v Snow, 10 AD2d 101, 8 NY2d 899; Wight v BankAmerica Corp., 219 F3d 79; Baena v KPMG LLP, 453 F3d 1; Fehribach v Ernst Young LLP, 493 F3d 905.) II. The adverse interest exception does not apply when the insiders who engaged in the fraud were the corporation's owners and decisionmakers.
While the effect of a deposit in a solvent bank is to vest the title of the thing deposited in the bank upon the implied contract that it shall repay the amount upon the checks of the depositor, yet, if the bank be chargeable with fraud in receiving the deposit, the depositor may, on discovering that fact, rescind the contract and reclaim the property unless it has in the meantime passed into the possession of a bona fide holder. New York Breweries Co. v. Higgins, 79 Hun, 250; Cragie v. Hadley, 99 N.Y. 131; Rochester Printing Co. v. Loomis, 45 Hun, 93; People v. St. Nicholas Bank, 77 id. 159. Penal Code (§ 601) provides: "An officer, agent, teller or clerk of any bank, banking association or savings bank, and every individual banker * * * who receives any deposits, knowing that such bank or association or banker is insolvent, is guilty of a misdemeanor."
Neither the Riggs Bank nor any other bank was agent of Burton. Craigie v. Hadley, 99 N.Y. 131; Metropolitan National Bank v. Loyd, 90 N.Y. 530; Bank of Republic v. Millard, 10 Wall. 152; Thompson v. Riggs, 5 Wall. 663; Marine Bank v. Fulton Bank, 2 Wall. 252; Phoenix Bank v. Risley, 111 U.S. 125; Scammon v. Kimball, 93 U.S. 362. St. Louis c. Ry. Co. v. Johnston, 133 U.S. 566, distinguished. The title to the check passed under commercial usage absolutely to the Riggs Bank and absolutely to each indorsee.
I. The deposit of a check in a bank accepted by it and credited to the depositor creates a debt and vests the property in the check in the bank. Metropolitan Nat. Bank v. Loyd, 90 N.Y. 530; Cragie v. Hadley, 99 N.Y. 131; Bank of the Republic v. Millard, 10 Wall. 152; Scammon v. Kimball, 92 U.S. 362, 370; Libby v. Hopkins, 104 U.S. 303, 308. II. The law will not presume, from the mere fact that this deposit was of out-of-town paper, that any different result followed from the deposit than in the case of other paper. No such distinction exists in law, and no custom or course of dealing has been shown to create any such distinction.
The deposit of a check or bill in the ordinary course of business, the depositor receiving a credit against which he can draw, has the effect of transferring the title in the check or bill to the bank. Briggs v. Central National Bank of New York, 89 N.Y. 182, 42 Am. Rep. 285; Metropolitan National Bank v. Lloyd, 90 N.Y. 530; Cragie v. Hadley, 99 N.Y. 131, 1 N.E. 537, 52 Am. Rep. 9. The law on this subject was stated in Burton v. United States, 196 U.S. 283, 297, 25 S. Ct. 243, 245 (49 L. Ed. 482), where it was said:
The knowledge of the president was the knowledge of the bank. Martin v. Webb, 110 U.S. 7, 15; Bank v. Walker, 130 U.S. 267; Cragie v. Hadley, 99 N.Y. 131. In the latter case it was held that the acceptance of a deposit by a bank irretrievably insolvent, constituted such a fraud as entitled the depositor to reclaim his drafts or their proceeds.
This doctrine of liability based upon the legal identity of the parties is in the main sustained by a number of cases. Messick v. Rozbury, 1 Handy (Ohio), 190, 191; Cragie v. Hadley, 99 N.Y. 131, 52 Am. Rep., 9, 1 N.E. 537."
See, also, Scammon v. Kimball, 92 U.S. 362, 369, [23 L. Ed. 483]; Davis v. ElmiraSavings Bank, 161 U.S. 275, 288, [40 L. Ed. 700, 16 Sup. Ct. Rep. 502]. "The case of Cragie v. Hadley, 99 N.Y. 131, [52 Am. Rep. 9, 1 N.E. 537], contains a statement of the rule as follows, per Andrews, J.: "`The general doctrine that upon a deposit made by a customer, in a bank, in the ordinary course of business, or of money, or of drafts or checks received and credited as money, the title to the money, or to the drafts or checks, is immediately vested in and becomes the property of the bank, is not open to question.
The ordinary relation between a bank and its depositors is that of debtor and creditor. ( Cragie v. Hadley, 99 N.Y. 133; Commercial Bank v. Hughes, 17 Wend. 94; Met. Nat. Bank v. Loyd, 90 N.Y. 530; Ætna Nat. Bank v. Fourth Nat. Bank, 46 N.Y. 86; Crawford v. West Side Bank, 100 N.Y. 53; Fowler v. Bowery Savings Bank, 113 N.Y. 453.) This is because cash when deposited ceases to be the money of the depositor and becomes the property of the bank.
The court erred in admitting in evidence any testimony tending to show that S. Solon Holl had no knowledge of the facts of which Taylor, his partner, had knowledge, as it was the duty of Taylor to disclose these facts to Holl, and the presumption that the agent has done his duty and imparted all information to his principal cannot be rebutted. (Fuller v. Benett, 2 Hare, 394; Abell v. Howe , 43 Vt. 403; Dresser v. Norwood, 17 Com. B., N. S., 466; Donald v. Beals , 57 Cal. 405; Watson v. Sutro , 86 Cal. 516, 517; Bradley v. Riches, L. R. 9 Ch. Div. 189; Holden v. N.Y. etc. Bank , 72 N.Y. 286; Cragie v. Hadley , 99 N.Y. 134; 52 Am. Rep. 9; Mecham on Agency, secs. 719-21; Slattery v. Schwannecke , 118 N.Y. 543; Richardson v. Palmer , 24 Mo.App. 480; Mullin v. Mutual Ins. Co ., 58 Vt. 113; Constant v. University , 111 N.Y. 604; 7 Am. St. Rep. 769; Rolland v. Hart, L. R. 6 Ch. App. 678; The Distilled Spirits, 11 Wall. 367; Hunter v. Watson , 12 Cal. 377; 73 Am. Dec. 543; Bierce v. Red Bluff Hotel , 31 Cal. 160; Hart v. Bank , 33 Vt. 252; Whitten v. Jenkins , 34 Ga. 305; Day v. Wamsley , 33 Ind. 147; Cummings v. Harsabraugh, 14 La. Ann. 722; Hovey v. Blanchard , 13 N.H. 148; Bank v. Campbell, 4 Humph. 396; Campau v. Konan , 39 Mich. 362; Chouteau v. Allen , 70 Mo. 290; Lebanon Savings Bank v. Hollenbeck , 29 Minn. 323; Yerger v. Barz, 56 Iowa 77; Fairfield Savings Bank v. Chase , 72 Me. 226; 39 Am. Rep. 319; Suit v. Woodhall , 113 Mass. 391; Shafer v. Phoenix Insurance Company ,