The Nassau Bank, Appellant, v. The National Bank of Newburgh, John Thorn, Jr., and Thomas J. Adderton, as Executors of the Estate of John L. Adderton, Deceased, Respondents

The Nassau Bank, Appellant, v. The National Bank of Newburgh, John Thorn, Jr., and Thomas J. Adderton, as Executors of the Estate of John L. Adderton, Deceased, Respondents. Bank — checks drawn against an account in which a draft with a forged indorsement has been deposited, to.make good an account in another bank on which forged checks ham been drawn — right of the former against the latter bank — right of one defrauded to retain 'money returned to him — costs in an equity action. This Nassau Bank, which had opened an account with a depositor of a draft for §6,000, the indorsement on which was unauthorized, subsequently paid from such account a check for. $2,400, drawn thereon by the depositor to the National Bank of Newburgh which credited the same to an account of certain executors in the last-mentioned bank, upon which account, without the knowl- • edge, up to that time, of either the National Bank of Newburgh or the executors, such depositor in the Nassau Bank had drawn checks to which he had forged the names of the executors, in the sum of §2,400, which he had received thereon. Held, that the Nassau Bank, which had paid, upon the discovery of the forged signature, the §6,000 represented by the forged draft, was not entitled to recover from the National Bank of Newburgh, or from the said executors, the §2,400. drawn from such account and credited by the National Bank of New-burgh to the executors’ account in that bank. Semble, that the checks for §2,400 were to be regarded as money. Where one person defrauds another so skillfully that the party defrauded, is ignorant of his loss, and restitution is made so adroitly that it does not disclose the original offense, the rights of the party receiving restitution are the same as they would be in case the wrongdoer had confessed his fault and openly made restitution. Where an equity action has been decided by a referee to whom the whole issues were referred, an award of costs can- only be made by the referee, and the Special Term has no power to do so. Appeal by the plaintiff, The Nassau Bank, from judgments of ' the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of Kings on the 10th day of May, 1898, upon the report of a referee dismsssing the complaint, and dissolving an injunction heretofore granted in the action, and also from an order made at the Orange Special Term and entered in the office of the clerk of the county of Kings bn the 10th day of May, 1898, directing that the defendants enter separate judgments and tax separate bills of costs. John M. Gardner, for the appellant. Howard Thornton and H. A. Brewster, for the respondents. [MAJORITY — Cullen, J.:] Cullen, J.: The individual defendants as executors of Adderton were depositors with the defendant bank. One Grant B. Taylor, an attorney at law, was the counsel for the executors. He forged the names of the executors to certain checks, and by these checks obtained from the defendant bank the sum of $2,400. Afterwards, Taylor opened an account in the plaintiff bank, and deposited with it a draft for $6,000 drawn by the Columbus Trust Company on the Chase National Bank, and payable to the order of one Charles Curie. The name of Curie and that of Taylor were indorsed on the draft. Taylor then drew his check on the plaintiff bank to the order of the estate of John L. Adderton for $2,400. This check he indorsed, “For deposit, Est. John L. Aderton, by G. B. Taylor,” and deposited, the same with the defendant bank to the credit of the defendant executors. The check was collected by the defendant bank through its correspondent in New York city and the clearing house, in the usual course of business. Subsequently the plaintiff bank discovered that the indorsement of Curie was not made by him, nor by his authority. There is something singular about, this draft which is not explained by the evidence. Curie testified that the indorsement was not his, nor authorized by him. But the plaintiff conceded that the proceeds of the draft did not belong to Curie, and that he made no claim on them. Who really owned the funds represented by this draft does not appear; and the referee, while he has found that Taylor wrote Curie’s indorsement, has not found that it was a forgery, or that Taylor was not the real owner of the draft. Upon, discovering the fact that Curie’s signature' was not genuine, the plaintiff hank repaid the Chase National Bank the sum of $6,000 and took back the draft. Thereupon it brought this action to recover of the defendants the sum of $2,400 collected by them on Taylor’s check. The referee reported in favor of the defendants that the complaint should be dismissed on the merits, and from the judgment entered on his report this appeal is taken. It is conceded by the learned counsel for the appellant that the check drawn by Taylor on the plaintiff is to be considered as money, and that the effect of the transaction is the same as if Taylor had drawn the money from the plaintiff and paid it to the defendant bank. It is also conceded that it is settled law in this State, under a line of authorities, that money, whether obtained by fraud or by felony, cannot be recovered where it has been paid to the creditors of the party who has thus criminally obtained it, even when the only consideration for the payment was the satisfaction of an antecedent debt. (Justh v. National Bank of the Commonwealth, 56 N. Y. 478; Stephens v. Board of Education, 79 id. 183; Goshen National Bank v. State, 141 id. 388; Hatch v.- Fourth National Bank, 147 id. 184.) The principle on which these decisions rest is thus stated by Judge Finch in Hatch v. National Bank (supra): '“This doctrine goes upon.the ground that money has no earmark; that in general it cannot be identified as chattels may be, and that to permit, in every case of the payment of a debt, an inquiry as to the source from which the debtor derived the money, and a recovery, if shown to have been dishonestly acquired, would disorganize all busi-' ness operations and entail an amount of risk and uncertainty which no enterprise could bear.” It is clear that, under .this rule, had either the defendant bank or the defendant executors known of Taylor’s first forgeries (the checks aggregating $2,400), and received his check on the plaintiff bank on account of the claim that either one or the other of the defendants had against him on account of those forgeries, the plaintiff’s action could not be maintained. This the appellant does not deny. The only question, therefore, presented upon this appeal is whether the facts of this case place it outside the general rule. Prior to the time of the commencement of this action, all- the defendants were ignorant of Taylor’s wrongdoing. The forgery of the checks for $2,400, of course, did not in reality diminish the debt of the defendant bank to the defendant executors. The party defrauded by those forgeries was the defendant bank, and it alone had a claim against Taylor for the amount of the forgeries. When Taylor subsequently deposited with the defendant bank the sum of $2,400 to the credit of the executors of Adderton, the effect of the deposit was not to increase the claim of the executors against the bank by the amount of- that deposit, but to repay to the bank the amount that Taylor had fraudulently obtained from it. This was undoubtedly the intent of Taylor in making the deposit. He owed the executors nothing; he owed-the bank $2,400. The form that the transaction took is not controlling. Taylor had defrauded, the bank so deftly that it was not aware of- its loss. When he made restoration it was necessary that he should make it in such form that it would not expose his original crime. But, as already said, though the form did not represent the true nature of the deposit, the purpose was certain. The defendant executors could not recover from the defendant bank the amount of the deposit, for it was not intended to be made for their benefit. In fact,'the whole question is narrowed to this: Where one person defrauds another so skillfully that the party defrauded is ignorant of his loss, and restitution is made so adroitly that it does not disclose the original offense, does any different rule obtain from a case where one confesses his fault -and openly makes restitution ? We apprehend there can be no distinction between the two cases, and that the very statement of the question precludes the possibility of but one answer. The judgment of the learned referee was, therefore, correct. The Special Term directed that separate bills of costs be allowed the defendants. We think that this direction was unauthorized. This was an action in equity where the costs were in the discretion of the court. By section 1022, Code of Civil Procedure, where the whole issues in an action are referred, the award of costs can be only made by the referee. The judgment appealed from should be modified so as to direct that the defendants recover but one bill of costs, and as modified affirmed, with costs. All concurred. Judgment affirmed, with costs.