Peter D. Muller and Albert C. Muller, Plaintiffs, v. The National Bank of Cortland, N. Y., Defendant

Peter D. Muller and Albert C. Muller, Plaintiffs, v. The National Bank of Cortland, N. Y., Defendant. Costs — an indorser of a forged cheek is not liable for the costs of an action, of which he had notice, brought by the owner of the check against the bank which paid it under the forged indorsement. One Westcott, who had a deposit with the banking firm of Muller Brothers, drew, three checks upon such deposit payable to the Dunn Salmon Company. One Seybold forged the payee’s name upon the checks, and after such checks had been, indorsed by the National Bank of Cortland they were presented to and paid by Muller Brothers, who charged them to Westcott’s account. The Dunn Salmon Company gave Westcott credit for the amount of the checks and then sued Muller Brothers in conversion for the payment of their checks upon a forged signature. Muller Brothers requested the National Bank of Cortland to ' defend the action, but it declined to do so. Muller .Brothers defended the action and were successful as to one of the checks but unsuccessful as to the other two checks. They then brought an action against the National Bank of Cortland to recover the amount of the judgment rendered against them, which included costs, and also the amount expended for counsel fees in the defense of the action. Held, that the National Bank of Cortland was only liable for the amount of the two checks upon which a recovery had been had against Muller Brothers,, and that it was not liable for the costs awarded in the action brought against Mul-. ler Brothers or for the counsel fees expended by Muller Brothers in the defense of that action. Submission of a controversy upon an agreed statement of facts* pursuant to section 1279 of the Code of Civil Procedure. The plaintiffs are bankers doing business, under the name of . Muller Brothers at Cortland, N. T. F. J. Westcott was a depositor in the plaintiffs’ bank, and drew three checks thereupon, One of sixty-four dollars and forty-two cents bearing date April 22, 1897.; the second of thirty-three dollars and seventy-five cents bearing date August -20, 1897, and the third of eight dollars and thirty-two cents bearing date February 16, 1898. These checks were made payable . to Dunn-Salmon Company, who were selling goods to the defendant, - through their agent, one C. F. Seybold. Upon these checks, the signature of the payee was afterwards forged by said Seybold, and the checks were presented to the plaintiffs for payment with the , forged signature and with the signature of said Seybbld' and the signature of the defendant bank thereupon. The plaintiffs paid the checks and charged them to the account of Westcott, the maker. Dunn-Salmon Company gave credit to Westcott for the checks, and sued the plaintiffs in conversion for the payment of their checks upon a forged signature. Of this action the plaintiffs gave'the defendant notice, with a request to defend the same. The defendant declined to assume the defense of the action, although its.officers stated that they believed a good defense existed.. The action was defended by the plaintiffs, and the defense ■ was successful as to the check for sixty-four dollars and forty-two cents but unsuccessful as to the'other checks, and judgment was entered against the plain-, tiffs for the amount of those: two checks, aggregating, with interest, at the time of the judgment, fifty-four dollars and thirty-six cents. To this sum as damages was added in the judgment the sum of one . hundred and fifty-five dollars and four'cents as costs. This judgment has been paid by the plaintiffs. The expense of the plaintiffs for' counsel in defending that action was seventy-two dollars and forty- - eight cents.' - For these sums, to wit, the amount of recovery, including costs, and the amount expended for.counsel in the defense of .the action brought by Dunn-Salmon Company, these plaintiffs sued the defendant, ■ ‘ Thereafter tlie matter was agreed to be submitted under section 1279 of the Code bf' Civil Procedure. Up to the time of said agreement costs of the action amounting to.twenty-three dollars had accrued. ' . ' • ? - Five questions are here submitted : First, whether the plaintiffs are entitled to recover from the defendant the amount of the thirty-three dollars and seventy-five cents check, together with interest. Second, whether the plaintiffs are entitled to recover of the defendant the amount of the eight dollars and thirty-two cents check, with interest. Third, whether the plaintiffs' are entitled to recover of the defendant the sum of one hundred and fifty-five dollars and four cents, the costs included in the judgment against the plaintiffs brought by Dunn-Salmon Company. Fourth, whether the plaintiffs are entitled to recover of the defendant the sum of seventy-two dollars and forty-eight cents, the amount of their costs for counsel fee in defending said action. Fifth, whether the plaintiffs are entitled to recover of the defendant the; sum of twenty-three dollars, being the costs in the action brought by the plaintiffs against the defendant, which had accrued prior to this submission to the court. John O’Donnell and Riley Champlin, for the plaintiffs. Louis F. Doyle, for the defendant. [MAJORITY — Smith, J.:] Smith, J.: Defendant admits its liability upon the matters specified in the 1st, 2d and 5th questions. It denies its liability either for the costs included in the judgment of Dunn-Salmon Company against the plaintiffs or for counsel fee paid by the plaintiffs in the defense of that action. These two, then, are the only disputed questions here for determination. In Corn Exchange Bank v. Nassau Bank (91 N. Y. 74) the plaintiff had paid a check to which the name of the payee had been forged, after which forged signature, however, the defendant had indorsed the same. The depositor, whose moneys had been wrongfully paid out by the plaintiff, procured . judgment against the plaintiff for the amount of moneys thus paid out and for costs. In an action brought by the plaintiff against the defendant upon its indorsement made subsequent to the forged indorsement, it was held that the plaintiff might recover the amount of the checks with interest, but could not recover the costs included in the judgment which plaintiff had paid to its depositor. Danfoeth, J., in discussing the authorities cited in behalf of the plaintiff in that action, said (on p. 80): “ In the other cases cited by the respondent the plaintiff had become liable to costs in actions in which he had a remedy over against the then defendant, but in none of them did it appear that the action in which the costs were, incurred was caused in whole or in part by the wrongful aot or omission of duty on the part of the original defendant. Ro case, I think, can be found in which the right to costs of defending an action so caused has been upheld, and that is .precisely the position of the plaintiff here.” If in the case at bar the action had been brought by Westcott against the plaintiffs to recover his deposit instead of by Dunn-Salmon Company for the conversion of the checks, the cases would then have been .hardly distinguishable, and the authority of the case cited would probably be unquestioned. Within the reasoning, however, of Judge Danfokth in that case I am unable to see that the changed condition affects the force of the authority. In the case cited the plaintiff had failed in its duty to its depositor, and in the action brought to enforce that duty had been compelled to pay costs. These costs he sought to recover against a defendant who had guaranteed, by his subsequent indorsement, the forged indorsement. Revertheless, the court held, because the costs were recovered in an action wherein he was charged with a violation of duty, he could not recover the same against the defendant therein who was only connected with the check by reason of his subsequent indorsement. In the case at bar judgment has been recovered against the plaintiffs for a wrong, for the conversion of a check which was the property of Dunn-Salmon Company. This is certainly no less a wrong than the payment of moneys belonging to a depositor upon a forged indorsement. If the dase were a new one I should have grave doubt whether these questions could be raised by the defendant bank, who had warranted the genuineness of that indorsement by its subsequent indorsement. Under the authority cited, however, we feel bound to hold that, by the payment of the costs in the judgment of Dunn-Salmon Company, the plaintiffs have sécured no right to indemnity as against the defendant. It is unnecessary to discuss the various cases cited by the plain ■ tiffs herein, as they are fully discussed in the case of the Corn Exchange Bank v. Nassau Bank (supra), and we can see no facts which would take the case out of the principle there decided. That the defendant in this case approved of the defense interposed by the plaintiffs cannot alter its liability after having specifically declined to assume the defense. Nor can the plaintiffs’ right be affected by their good faith in asserting the defense or their partial success in defeating a recovery upon one of the checks which was the subject of the action. The 3d and 4th questions must be answered in the negative and judgment ordered for the plaintiffs for the sum of thirty-three dollars and seventy-live cents, with interest from September 1,1897; for the sum of eight and thirty-two cents, with interest from-February 24,. 1898, and for the sum of twenty-three dollars, with costs. All concurred. Judgment directed for the plaintiffs for the sum of thirty-three dollars and seventy-five cents, with interest from September 1, 1897 ; for the sum of eight dollars and thirty-two cents, with interest from February 24,1898, and for the sum of twenty-three dollars. This judgment directed, with costs.