In fact, the two cases are quite analogous, and the principle applicable to one is applicable to the other. On the whole, it seems to us that the plaintiff is entitled to recover from the defendant for the depre property for public use, and for which | tiff. The same is true of the case at bar. compensation must be made. Fulton V. Short Route R. & Transfer Co. 85 Ky. 640, 7 Am. St. Rep. 619, 4 S. W. 332; Louisville & N. R. Co. v. Finley, 86 Ky. 294, 5 S. W. 753. Lewis, Eminent Domain, says: 'No right can be acquired in private prop-ciation in the value of her property caused erty under the power of eminent domain, except subject to the duty of making just compensation therefor; consequently the party originally taking or occupying the property cannot transfer to another, by lease or otherwise, any right in the property, except subject to the same duty.'" by the construction and operation of the railroad in question, and that the trial court was in error in not submitting the case to the jury. The judgment and order appealed from are reversed, and a new trial granted. Smith, P. J., and McCoy, J., not sitting. Petition for rehearing denied September 16, 1914. And in line with these decisions is the decision of this court, Faulk v. Missouri River & N. W. R. Co. 28 S. D. 13, 132 N. W. 233, Ann. Cas. 1913E, 1130, an action to recover for a right of way across plaintiff's land that had been appropriated by defendant's predecessor in interest more than sixteen years before the commencement of the action. In the majority opinion written by Corson, J., the court say: KNOXVILLE BANKING & TRUST COM"It seems also to be well settled that the present railway company, defendant, is le TENNESSEE SUPREME COURT. Bank JOSEPH KNAFFL et al. V. PANY. Appt. (130 Tenn. 336, 170 S. W. 476.) bank deposit of checks in insolvent stopping payment. gally and equitably liable as the successor RAND POWDER COMPANY, Intervener, of the former company for the value of the premises used by it belonging to the plaintiff, and that before it can legally occupy and possess the same for its railroad purposes, it must satisfy the claim of the plaintiff for its value. This rule seems to be established upon the principle that the present railway company is no more entitled to occupy and use the premises with out paying for the same than was its predecessor. Its use of the premises is therefore without right as against the plaintiff, and the present railway company and the trust company, as trustee in the mortgage for the bonds issued, clearly hold their interest therein subject to the superior right and claim of the plaintiff to be paid for the premises owned by him." While that was an action to recover for the physical taking of the property, and this is an action based upon the interference with the owner's occupancy and enjoyment of his property, the principle governing in both cases is the same. In each case the present owner of the road is attempting to profit by the tortious acts of its predecessor. Respondent undertakes to distinguish that case from the case at bar, arguing that "defendant company was in possession of the plaintiff's property without title. The plaintiff had not lost his right to injunction or his remedy by ejectment, and could have had either except for the public interest involved." But this argument refutes itself, for, because of the "public interest involved," neither remedy was available to the plain count in an insolvent bank is not prevented 2. A depositor in an insolvent bank who has indorsed a note discounted by it cannot, after he has been indemnified by the maker, set off his liability against the deposit account, although the maker is insolvent. A Α' PPEAL by intervener from a decree | 536, 56 Am. St. Rep. 823, 37 S. W. 284; the Chancery Court for Knox Williams v. Cox, 97 Tenn. 555, 37 S. W. of County denying its claim filed in a pro- 282. ceeding to wind up the affairs of the defendant bank as an insolvent corporation, to an equitable set-off of its deposit account in the bank against its liability on a note held by the bank. Affirmed in part. The facts are stated in the opinion. Messrs. Bowen & Anderson, for appellant: Petitioner is entitled to reclaim the checks deposited by it so long as they can be found, or to reclaim the proceeds of said checks so long as it is able to identify them and separate them from the general funds of the bank. Klepper v. Cox, 97 Tenn. 534, 34 L.R.A. does not include the questions that arise where a correspondent bank closes its doors and the bank of deposit does not. The question of trusts in proceeds of collections made by a bank when insolvent was considered in notes to Sayles v. Cox, 32 L.R.A. 715, and American Nat. Bank v. Pedley, 38 L.R.A. (N.S.) 146. The principles underlying the cases cited in these notes are the principles upon which the cases cited in the present note are based. The present note is, however, more limited in its scope than the earlier notes, in that it includes no cases in which it appears that the collection of the paper was complete before the bank ceased to transact business. This limitation is important for the reason that in most cases the collection is regarded as complete when the bank has parted with the paper and received value, even though the value consists in the payment of its own debt to another bank. The courts sometimes state this point in another way. They say that if a correspondent bank has, in good faith, and without notice of the owner's equity, entered credit to the deposit bank for the paper, and the account between the banks is such that the receiver cannot and does not receive the proceeds of the paper, the owner has no preference over other creditors of the insolvent bank, for the reason that he cannot trace the fund into the receiver's hands. See Willoughby v. Weinberger, 15 Okla. 226, 79 Pac. 777, as cited under III. infra, as illustrating this point. This is but another way of saying that the paper was collected, so far as the fund for distribution is concerned, before the bank closed its doors. The question whether or not the correspondent bank is liable under such circumstances is not here considered. See cases cited in the earlier notes. Another limitation upon the scope of the present note is that it covers only the rights of depositors, thus excluding cases that involve paper which the bank held for collection. The theory upon which the decisions are based is that one in possession of personal property belonging to another holds it in trust for the owner, unless the holder is an Where insolvency of the principal is shown, the indorser, or the party really liable, is entitled beyond any question to set off. Knaffle v. Knoxville Bkg. & T. Co. 128 Tenn. 181, 50 L.R.A. (N.S.) 167, 159 S. W. 838. Messrs. Wright & Jones, Hugh M. Tate, and D. C. Webb for appellee. Williams, J., delivered the opinion of the court: The questions for decision in this case arise on the petition of intervention filed by the Rand Powder Company in this (a innocent purchaser for value. Obviously, title to the paper or to the proceeds in the claimant, against the receiver who represents the creditors of the insolvent bank, is a necessary condition to a recovery or to the establishment of a preferred claim on the theory of a trust. The claimant may prove title in two ways: (1) By proving that under the terms of his agreement with the bank title remained in him when the bank received the paper. (The question as to what facts will be considered sufficient to show that title to a check drawn upon another bank, and credited to the owner's deposit account, does not pass to the deposit bank, was considered in notes to Fayette Nat. Bank v. Summers, 7 L.R.A. (N.S.) 694, and to Plumas County Bank v. Bank of Rideout, S. & Co. 47 L.R.A. (N.S.) 552. The question as to what will constitute a transfer of title is not considered in the present note.) (2) By proving that, notwithstanding the fact that the terms of the contract of deposit may have been such as to pass title to the bank, the contract was induced by the fraud of the bank officers, hence the contract was void or at least voidable. See cases cited under III. infra. Having established his title, the claimant must then show that the fund for distribution among the creditors of the insolvent bank has, after it closed its doors, been increased, or that it will be increased, by the addition of the proceeds of his paper thereto. As stated supra, this is equivalent to showing that the paper had not been col- · lected by the bank when it closed, although the payor may or may not have paid it at that time. Where paper is deposited in a bank and is uncollected at the time the bank closes its doors, the right of the depositor, in the absence of proof of fraud, to preference over the other depositors of the bank, depends upon the question as to whether or not title to the paper is in the claimant. Beal v. Somerville, 17 L.R.A. 291, 5 U. S. App. 14. 1 C. C. A. 598, 50 Fed. 647; State Bank, 56 Minn. 119, 45 Am. St. Rep. 454, 57 N. W. 336, Brusegaard v. Ueland, Re general creditors') proceeding, to wind up the affairs of the Knoxville Banking & Trust Company as an insolvent corporation. The powder company deposited as cash items in the bank on December 12, 1912, three checks of its customers aggregating $1,505.24. The company had the right to check against its deposit account. On the same day the bank forwarded the three checks to its correspondent bank at Cincinnati, where they were credited in like manner in favor of the sending bank on December 13th. On the next day the Knoxville bank closed its doors. At and before the receipt by it of the three checks, it was 72 Minn. 283, 75 N. W. 228. This list of cases is not exhaustive. An exhaustive list would necessarily include cases involving paper left for collection and many other cases not within the scope of this note. But this proposition is supported by all the cases cited, infra, at least inferentially. Also see cases cited in the note to American Nat. Bank v. Pedley, as cited, supra, in support of the general proposition upon which this one is based. II. Where title to paper passed to bank by the terms of the deposit contract. If title to the paper passed to the bank when the amount thereof was entered as a credit to the depositor, he has no claim, in the absence of fraud or other ground for rescinding the contract, superior to that of other depositors, even though the paper had not been collected when the bank closed its doors. Gonyer v. Williams, 143 Pac. 736; Terhune v. Bank of Bergen County, 34 N. J. Eq. 367; Perth Amboy Gaslight Co. v. Middlesex County Bank, 60 N. J. Eq. 84, 45 Atl. 704; Williams v. Cox, 97 Tenn. 555, 37 S. W. 282; Re Bank of Madison, 5 Biss. 515, 9 Nat. Bankr. Reg. 184, Fed. Cas. No. 890; First Nat. Bank v. Armstrong, 39 Fed. 231; Franklin County Nat. Bank v. Beal, 49 Fed. 606. Cal. hopelessly insolvent, and so known to be by its managing officers; and on December 16th its assets were placed in the hands of a receiver in the general creditors' cause referred to. After the receiver was appointed, the powder company telegraphed the several drawers of the checks in its favor, as payee, requests to stop payment, with the evident purpose of causing the checks to return from the banks of the drawers through the channel of transmission to the receiver of the bank of original deposit. They were charged against the Knoxville bank by its Cincinnati correspondent and returned to the receiver. By agreement, saving the right of the parBank, 45 L.R.A. (N.S.) 781, on "Bank officer's knowledge of insolvency of bank resulting from his own misconduct as chargeable to the bank." Where the deposit of paper was made at a time when the bank was insolvent to the knowledge of its officers, and the paper was not collected at the time the bank closed its doors, the depositor has the right to the paper or the proceeds thereof as against the insolvent bank and its other depositors. St. Louis & S. F. R. Co. v. Johnson, 133 U. S. 566, 33 L. ed. 683, 10 Sup. Ct. Rep. 390; Wasson v. Hawkins, 59 Fed. 233; City Bank v. Blackmore, 21 C. C. A. 514, 43 U. S. App. 617, 75 Fed. 771 (merely a reeognition of principle; see same case infra, for holding); American Trust & Sav. Bank v. Gueder & P. Mfg. Co. 150 Ill. 336, 37 N. E. 227, affirming 51 Ill. App. 349; Brusegaard v. Ueland, 72 Minn. 283, 75 N. W. 228 (rule not applied for lack of proof as to officer's knowledge); Higgins v. Hayden, 53 Neb. 61, 73 N. W. 280; Perth Amboy Gaslight Co. v. Middlesex County Bank. 60 N. J. Eq. 84, 45 Atl. 704; Cragie v. Hadley, 99 N. Y. 131, 52 Am. Rep. 9, 1 N. E. 537; National Citizens' Bank v. Howard, 3 How. Pr. N. S. 511; Grant v. Walsh, 145 N. Y. 502, 45 Am. St. Rep. 626, 40 N. E. 209 (see statement of holding, infra); Re Commercial Bank, 2 Ohio N. P. 170; KNAFFL v. KNOXVILLE BKG. & T. Co. And the fact that the bank was insolvent at the time the deposit was made does not change this rule, if the officers of the bank did not know of its insolvency and committed no fraud in receiving the deposit (see infra, III. for cases where the officers did know of the insolvency). Gonyer v. Williams, Cal., 143 Pac. 736; Terhune v. Bank of Bergen County, 34 N. J. Eq. 367; Perth Amboy Gaslight Co. v. Middlesex County Bank, 60 N. J. Eq. 84, 45 Atl. 704; Williams v. Cox, 97 Tenn. 555, 37 S. W. 282; Balback v. Frelinghuysen, 15 Fed. 675 (knowledge of cashier where defalcation caused the insolvency is not imputed to the bank). III. Where officers of bank knew of its 704; Craigie v. Hadley, 99 N. Y. 131, 52 Am. insolvency at time of deposit. This general rule is based upon the theory that, by receiving the deposit when the officers of the bank knew it to be insolvent, a fraud was committed upon the depositor, which fact enabled the depositor to follow the paper or its proceeds as a trust fund and recover, and the fact that it had not been collected when the bank closed its doors is proof that the paper or its proceeds could be identified. American Trust & Sav. Bank v. Gueder & P. Mfg. Co. 150 Ill. 336, 37 N. E. 227; Brusegaard v. Ueland, 72 Minn. 283, 75 N. W. 228 (theory not applied, but approved); Perth Amboy Gaslight Co. v. Middlesex County Bank, 60 N. J. Eq. 84, 45 Atl. Rep. 9, 1 N. E. 537; Importers' & T. Nat. Bank v. Peters, 123 N. Y. 272, 25 N. E. 319; Grant v. Walsh, 145 N. Y. 502, 45 Am. St. Rep. 626, 40 N. E. 209 (see comment on this case, infra); Re Commercial Bank, 2 Ohio, ties in interest, the checks were collected, and their proceeds held to await the result of this litigation. That the reception of the checks on deposit by the Knoxville bank, when it was in a condition of hopeless insolvency, known to its managing officers, was a transaction rescindable for fraud, and that the depositor may recover the checks, or their proceeds, if not dissipated or so mixed with other funds that they cannot be identified or traced, is so well settled by our cases as not to require citation. In the pending case there is no difficulty in respect to the tracing of the deposited N. P. 170; KNAFFL V. KNOXVILLE BKG. & T. Co. If this theory is adopted, it is obvious, that, as a practical matter, the question as to whether title passed to the bank or not, by the terms of the deposit, is immaterial, for if it has passed the depositor can rescind the contract on the ground of fraud. So, in KNAFFL v. KNOXVILLE BKG. & T. Co., the court does not discuss that question. And it has been directly held that in case the contract of deposit was such as to pass title to the paper, the depositor could rescind and recover the paper or its proceeds from the receiver. Wasson v, Hawkins, 59 Fed. 233; American Trust & Sav. Bank v. Gueder & P. Mfg. Co. 150 Ill. 336, 37 N. E. 227, affirming 51 Ill. App. 349; Brusegaard v. Ueland, 72 Minn. 283, 75 N. W. 228 (rule not applied for lack of proof of officer's knowledge); Higgins v. Hayden, 53 Neb. 61, 73 N. W. 280; Perth Amboy Gaslight Co. v. Middlesex County Bank, 60 N. J. Eq. 84, 45 Atl. 704; Cragie v. Hadley, 99 N. Y. 131, 52 Am. Rep. 9, 1 N. E. 537; Orme v. Baker, 74 Ohio St. 337, 113 Am. St. Rep. 968, 78 N. E. 439. And the fact that the payment of the paper was stopped at the instance of the depositor cannot affect his right to recover on this theory. American Trust & Sav. Bank v. Gueder & P. Mfg. Co. 150 Ill. 336, 37 N. E. 227, affirming 51 Ill. App. 349; National Citizens' Bank v. Howard, 3 How. Pr. N. S. 511; Grant v. Walsh, 145 N. Y. 502, 45 Am. St. Rep. 626, 40 N. E. 209 (see comment on this case, infra); KNAFFL V. KNOXVILLE BKG. & T. Co. In Grant v. Walsh, 145 N. Y. 502, 45 Am. St. Rep. 626, 40 N. E. 209, the depositor of a check drawn and indorsed by himself stopped payment on the check upon learning of the bank's insolvency, and a bank to which the check had been sent sued him after the bank upon which the check was drawn had refused payment, and it was held that if the defendant could prove that the officers of the bank where it was deposited knew of the bank's insolvency at the time, he could rescind the contract and escape liability on the check so far as the bank had any rights. It was further held that if the correspondent bank knew of the other bank's fraud when it received the check, it was not a items; the identical checks came into the hands of the receiver after insolvency; and, nothing else appearing, the receiver took them to hold in trust for the defrauded depositor. We are not concerned with a consideration of any claims that may have been urged had the Cincinnati bank held the checks and sought to establish right thereto. That bank evidently had no cause to withhold the checks from the Knoxville bank, and released and returned them, as has been stated. It is insisted in behalf of the receiver that, when the checks were received and bona fide purchaser, and that it could not recover. This latter point is not within the scope of this note, but it shows the effect of fraud in receiving the deposit. It should be observed here that cases like Willoughby v. Weinberger, 15 Okla. 226, 79 Pac. 777, where the bank had used the paper in settlement at the clearing house before it closed its doors, are not included herein. Neither have other cases been cited where the facts involve the same principles that are involved in the Willoughby Case, for the reason that the rights of third persons who were not parties to the fraud are involved in such manner that the equities lie between the third parties and the depositor, even though the suit is against the insolvent bank or in the form of a claim for preferment. In such cases the proceeds of the check cannot be traced into the hands of the receiver, and so far as the receiver and the general creditors are concerned, the paper had been collected and the proceeds mingled with the bank's general fund, losing its identity, before the bank closed its doors, even though the holder of the paper has not collected it from the drawee. For the purposes of this note this class of cases is regarded as if the paper had been collected before the bank was closed, City Bank v. Blackmore, 21 C. C. A. 514, 43 U. S. App. 617, 75 Fed. 771, is another case where the suit was by the depositor against the receiver, but the equities were clearly between the depositor and the correspondent bank. The plaintiff stopped payment upon the check through the payor after the collecting bank had credited the amount thereof to the deposit bank on a balance due to the former; but after the collecting bank had attached the debt owed by the payor to the depositor, the latter ordered the payor to pay the check, which instruction was obeyed. It was held that this act was a recognition by the depositor of the legality of the collecting bank's claim to the check and its proceeds. Since neither the check nor the proceeds went to increase the fund for distribution, the depositor could not have a preferred claim against that fund. In KNAFFL V. KNOXVILLE BKG. & T. Co. the court appears to have silently overruled Friberg v. Cox, 97 Tenn. 550, 37 S. W. 283; credited by the Cincinnati bank, the right to follow the same as trust funds was lost to the depositor company, which could not by its own volition and act stop payment of the checks, and thereby render them traceable and recoverable. We cannot hold with this insistence. The depositor did nothing beyond its legal right. By a well-known rule of law it is required that, in order to obtain, one who has been defrauded shall act promptly in disaffirmance and self-protection, and it was within the privilege of the depositor to save itself harmless by procuring the drawers of the checks to stop payment. The checks did not operate as assignments of any parts of their drawers' funds in their banks to the credit of the drawers. Negotiable instruments act 1899 (Law3 1899, chap. 94); Akin v. Jones, 93 Tenn. 353, 25 L.R.A. 523, 42 Am. St. Rep. 921, 27 S. W. 669. banks, the drawers of the checks had a right to countermand payment. Pease v. State Nat. Bank, 114 Tenn. 693, 88 S. W. 172. In the case of First Nat. Bank v. Strauss, 66 Miss. 479, 14 Am. St. Rep. 579, 6 So. 232, it was, without argumentation, held that such a depositor in an insolvent bank might stop payment and recover. In Grant v. Walsh, 145 N. Y. 502, 45 Am. St. Rep. 626, 40 N. E. 209, it appeared that there was a stopping of payment of a check deposited in an insolvent bank, by the act of the depositor after it had been passed to a correspondent bank, and it was held that the receiver had no enforceable right to the check as against such depositor. The chancellor, in decreeing in favor of the receiver on this phase of the case, erred. Another and distinct claim is advanced in its intervening petition by the Rand Powder Company, based upon the following facts: That company had in the bank a In Beal v. Somerville, 17 L.R.A. 291, 1 C. C. A. 598, 5 U. S. App. 14, 50 Fed. 647, it appeared that the bank was irretrievably insolvent at the time the bank received the paper, but the decision went in favor of the owner of the paper on the ground that title to the paper, under the terms of the deposit, never passed to the bank, so that it was not necessary for the court to consider the doctrine here discussed. This and similar cases are not within the scope of this note. See same case discussed, supra. In Standard Oil Co. v. Hawkins, 33 L.R.A. 739, 20 C. C. A. 468, 46 U. S. App. 115, 74 Fed. 395, it was assumed that a depositor of paper uncollected at the time the bank closed its doors could sustain a preferred claim against other depositors where the officers of the bank knew of its insolvency at the time the deposit was received; and the case turned upon the question of estoppel by making an unpreferred claim. Before payment or certification by their Klepper v. Cox, 97 Tenn. 534, 34 L.R.A. 536, 56 Am. St. Rep. 823, 37 S. W. 284, and Bruner v. First Nat. Bank, 97 Tenn. 540, 34 L.R.A. 532, 37 S. W. 286, on one very important point. In these cases the general rule that the depositor may rescind his deposit contract because of the fraud of the bank, and recover the amount of his uncollected paper as a preferred claim, is admitted, but it is held that the mere fact that a correspondent bank had, prior to the time the bank closed, credited the amount of the paper to the deposit bank, defeats the right of the depositor to recover a preferred claim, even though the receiver collects from the correspondent bank a large balance which includes the proceeds of the paper; while the court in KNAFFL V. KNOXVILLE BKG. & T. Co. holds that the right to follow the fund was not lost to the depositor by the mere fact that the correspondent bank had credited the deposit bank with the amount before the latter bank had closed its doors. A distinction could be pointed out, i. e., in the later case payment had been stopped, the paper IV. returned to the receiver, and the credit balanced by a charge against the insolvent bank, while in the earlier cases the actual cash passed through the correspondent bank to the receiver. But all these transactions, be it remembered, took place after the insolvent bank closed its doors, so the distinction is only apparent. In the earlier cases, especially in the Bruner Case, it is certain that the drawee had not paid the checks to the correspondent bank when the latter had notice of the other bank's closing. It seems more reasonable to infer that the court in the later case intended rather to place itself in line with the weight of authority than to make a distinction based upon transactions that took place after the rights of the parties had become fixed by the closing of the insolvent bank. The cases cited by the court fully support its new po sition. Where unauthorized act of bank had given it apparent title. The cases here cited are not strictly within the scope of the note, since the relation between the banks and the claimant proved to be that of agent and principal, and not that of debtor and creditor. So, the paper was not really deposited. But the bank in each case had attempted to change the relation and had performed some act which, if it had been authorized, would have had that effect. The cases are cited as illustrative of the general proposition that where title to the paper does not pass to the bank, there is, generally speaking, a trust in the proceeds. Where a bank had in its possession paper the amount of which it entered as a general deposit to the credit of the owner, but |