Opinion of the Court-Ailshie, J., Dissenting.

Q. Was it to be brought down to you the next day? A. I do not think so. I do not think there was any arrangement of that kind. Q. There was no arrangement of that kind made at the time when he got the money and told you he had. a shipment coming in that would be there on the 25th or 26th? A. No, sir, I do not think so."

In other words, the witness admits that there was no definite understanding as to just when and how the payment should be made, whether it should be brought down to the bank by Cramer or an officer of the bank in currency, or whether it should be sent to the bank by remittance in the ordinary and due course of banking business, or an officer of the Bellevue Bank was to call at the Idaho State Bank and get the money. I recite the foregoing for the purpose only of illustrating the fact that this was an ordinary loan made by the Bellevue State Bank to the Idaho State Bank, and that it was made under no other or different arrangements or conditions from any other ordinary loan. It is admitted by all parties that this was in fact a mere loan from the one bank to the other and that the relation of debtor and creditor immediately arose. (Leapheart v. Commercial Bank, 45 S. C. 563, 55 Am. St. 800, 23 S. E. 939, 33 L. R. A. 700; Mutual Acc. Assn. v. Jacobs, 141 Ill. 261, 33 Am. St. 302, 31 N. E. 414, 16 L. R. A. 516.) It is contended, however, that in some fictitious and imaginary way the relation of debtor and creditor, which is clearly established, was subsequently and after the money was all paid out and expended by the Idaho State Bank converted into a trust relation, and that the Idaho State Bank, after it had expended this money, became a trustee for the Bellevue State Bank, its cestui que trust. I am wholly unable to agree with this contention, and shall briefly state my reasons for my disagreement.

It is a well-established rule of law that where one parts with the possession of his property by reason of fraud practiced by the one who procures the property, upon discovering the fraud he may rescind the contract and pursue his property and recover the same, unless it has passed into the hands of an innocent purchaser. (Corn etc. Bank v. Solicitors' Loan

Opinion of the Court-Ailshie, J., Dissenting.

& Trust Co., 188 Pa. 330, 68 Am. St. 872, 41 Atl. 536; Farber v. Stephens, 35 Fed. 17.) Strictly speaking, the right to pursue property in such cases rests upon the doctrine of rescission of contracts rather than that of trust and trustee. (1 Perry on Trusts, sec. 166.) The principle upon which the recovery is allowed is the same both at law and in equity. The misrepresentation or fraud which entitles the party to rescind the contract and pursue the property must consist in some fact material to the contract or of something that goes to the essence of the contract itself. (1 Perry on Trusts, sec. 174.)

Courts of equity are constituted for the purpose of doing substantial justice between the parties, but this must be administered under some recognized system and standard, for the reason that individuals in the same society differ in their views of absolute right and justice and of moral standards as well. This principle is tersely enunciated by Perry on Trusts, at sec. 173, where he says:

"There are in every community two classes of rights,-perfect rights, and imperfect rights. Perfect rights are those that may be enforced, or for the breach of which damages may be recovered; imperfect rights are those which are conceded to every man, but which cannot be enforced by human tribunals, and for the breach of which no damages can be recovered. Thus every man has a right to the utmost good faith, and the most perfect frankness and truthfulness in all the transactions of business; but courts of justice would be utterly powerless to enforce such a standard of morality. They would have neither the time nor the means of investigating the innumerable arts of buyers and sellers. And so courts have been obliged to lay down certain practical rules and limitations upon the subject of misrepresentation."

No court of equity would undertake to interfere with and rescind the transactions of men simply because there has been a breach of the moral or ethical standard generally recognized by men, or because someone has promised to do a certain thing or meet an obligation or transact certain business, and has failed to do so, either at the time or in the manner represented.

Opinion of the Court-Ailshie, J., Dissenting.

If courts were to undertake this thing, they would be overwhelmed and swamped with business. Every case of this kind must be considered in the light of its own peculiar facts and circumstances and be decided on such clear and unmistakable principles of equity as are generally recognized and conceded to be both civilly and morally binding on men in their dealings with each other. It is never equity or justice to restore a negligent person, or one who has failed to exercise reasonable care and precaution, to a right at the expense of innocent third parties.

Now, turning to the undisputed facts of this transaction, let us inquire as to whether the transaction bears any of the earmarks of a trust, and if not, whether there was any such fraud practiced as went to the essence and consideration of the contract so as to convert the transaction into a constructive trust. In the first place, the parties dealt at arms'-length. They sustained no confidential relation toward each other. The Bellevue State Bank was not a depositor of the Idaho State Bank and was not dealing with the bank upon the same theory that a depositor deals with a bank. The Bellevue State Bank was notified at the time Cramer procured this loan that the Idaho State Bank was short of funds, and that Cramer considered it necessary and essential that he procure this sum of $2,500 in order to continue to do business and meet the current demands on the bank. The loan was made upon the promise of Cramer that the bank would repay the sum within a day or two, or upon the Idaho State Bank receiving a sum of $5,000 in currency which was then supposed to be on the way from somewhere not disclosed. In the meanwhile the officers of the bank making the loan had notice that the money was to be immediately expended in meeting the demands of the bank. This money was not delivered to Cramer for the purpose of being applied to the use and benefit of the Bellevue State Bank, but rather to be used and applied as the money and property of the Idaho State Bank. It is said, however, that the fraud and deception in this case consisted in the representation of Cramer that he had a $5,000 shipment of currency on the way that would reach Hailey on that day or

Opinion of the Court-Ailshie, J., Dissenting.

the following day, and that this loan should be paid out of that sum. Let us see if this was the essential ingredient of the contract and the moving consideration for the loan. If the officers of the Bellevue bank would not take Cramer's promise that he would repay this loan or would not trust his word of mouth, then certainly they would have no more reason to trust his representation that he had a shipment of currency on the way, out of which he would make the payment. If he had made a naked promise, as he did, on which he received. this loan, without giving any security or even any evidence of the indebtedness, it might be said that there was no other tangible proof he could have then offered to show that he meant what he said. If they could not rely on his promise to pay, then why rely on his statement about this shipment? But when he told them that he had a shipment of $5,000 currency on the way, they might have asked him for the evidence of that fact. If his statement was true that he did have a shipment on the way, he must have had written evidence either by way of letter or telegram which would have constituted proof that what he said was true. They never even asked for any such evidence or proof; they relied on his word. in this respect as much as they did with reference to the promise to pay. I recite this merely for the purpose of showing that they undoubtedly made the loan upon the faith of Cramer's promise to repay the loan rather than upon the specific representation that he had $5,000 coming. The promise to pay was the real essence of the consideration and contract. The other representation was simply an additional inducement. The subsequent action of the officers of the Bellevue State Bank demonstrates that this was absolutely true, because they never made any demand for the money or took any steps to procure the payment until the 31st, whereas it is proven that Cramer represented that the $5,000 shipment would be received not later than the 26th, the following day after the loan was made. These facts demonstrate conclusively to my mind that this was an ordinary loan, and that it was no more induced upon the representation that Cramer had a shipment of $5,000 in currency coming than it was

Opinion of the Court--Ailshie, J., Dissenting.

induced upon his standing as a banker and business man and his mere promise to pay the debt. No method was pointed out or provided for in that agreement whereby the Bellevue bank should be able to lay hold upon or receive the sum of $2,500 out of this specific shipment in any other mode or manner than by the officers of the Hailey bank bringing it or sending it to the Bellevue bank, and it would evidently have made no difference to the Bellevue bank whether it came out of that shipment or from money received from general depositors. It was a mere trade or commercial transaction.

Another thing in this case which ought to receive serious consideration is the fact that the Bellevue bank at the time of making this loan was placed in possession of such facts by Cramer as to put a reasonably prudent and diligent man on inquiry as to the solvency of the Hailey bank, and this was such notice and information as would have undoubtedly precluded any ordinary business man depositing that sum in the bank at that time on a general deposit. Suppose a general depositor going to the bank had been at the time notified that the bank was so close run for funds that it could not pay out cash over its counter to the sum of $2,500. Does anyone suppose the general depositor would have deposited that money in the bank under those circumstances and with that knowledge and notice? Undoubtedly, he would not have done so. And should a depositor make a deposit under such circumstances, no court of equity would give him a preferred lien on the assets of the bank for that sum on the grounds that the bank was insolvent at the time of making the deposit and that he had no notice. A court of equity would rather charge him with failure to exercise due diligence and impute to him. constructive notice that the bank was then insolvent. This court has said in State v. Cramer, 20 Ida. 639, 119 Pac. 30, that "a bank is insolvent when its assets and property are of such character and value that it is unable to meet its demands in the usual and ordinary course of business." Now, the question arises at once, Did not the Bellevue bank have notice when it made this loan to Cramer that the Idaho State Bank was at the time and the moment prior to the making of the