Hartford Accident & Indem. Co. v. First Nat. Bank & Trust Co. of Hudson

• Decision Date: 11 July 1939
• Citation: 281 N.Y. 162,22 N.E.2d 324
• Parties: HARTFORD ACCIDENT & INDEMNITY CO. v. FIRST NAT. BANK & TRUST CO. OF HUDSON et al.
• Court: New York Court of Appeals Court of Appeals

281 N.Y. 162

22 N.E.2d 324

HARTFORD ACCIDENT & INDEMNITY CO.

v.FIRST NAT. BANK & TRUST CO. OF HUDSON et al.

Court of Appeals of New York.

July 11, 1939.

Appeal from Supreme Court, Appellate Division, Third Department.

Action for reimbursement for payment of a judgment obtained against a bank by a depositer, by the Hartford Accident & Indemnity Company against the First National Bank & Trust Company of Hudson, wherein defendant moved to bring in as a party defendant the Farmers National Bank of Hudson, New York, and wherein Merlon J. White was made a party defendant on motion of the Farmers National Bank of Hudson, New York. From a summary judgment for the First National Bank & Trust Company of Hudson against the Farmers National Bank of Hudson entered January 30, 1939, upon an order of the Appellate Division of the Supreme Court, 256 App.Div. 30, 9 N.Y.S.2d 590, which reversed an order of Special Term, 162 Misc. 348, 294 N.Y.S. 522, denying a motion for summary judgment, the Farmers National Bank of Hudson appeals.

Judgment of the Appellate Division reversed, and order of Special Term affirmed. Warner M. Bouck, of Albany, for appellant.

George C. Inman, of Hudson, for respondent.

LOUGHRAN, Judge.

For convenience, we abbreviate the corporate names appearing in the record: The Savings Bank; First National Bank; Farmers National Bank; the Indemnity Company.

In May, 1935, the Savings Bank drew to the order of Anna Gaddis (a depositor) its draft for $5,000 on First National Bank and debited her savings account in that sum. This draft, indorsed in the name Anna Gaddis, was deposited by one Merlon J. White in his account in Farmers National Bank, and was by that bank indorsed and collected from First National Bank, where the Savings Bank had a deposit to which the payment was charged.

In an action thereafter brought by Anna Gaddis against the Savings Bank, she had judgment for the full amount of her savings account on a finding that the indorsement of her name on the $5,000 draft was a forgery. This judgment has been paid by the Indemnity Company, that company having insured the Savings Bank against such a liability.

The present action was brought by the Indemnity Company (as subrogee of the Savings Bank) against First National Bank for reimbursement of the payment of the Gaddis judgment. First National Bank brought in Farmers National Bank as a party and demanded judgment over against it. The collateral pleadings served in this action by these now defendant banks presented again the issue whether the indorsement of the name Anna Gaddis on the $5,000 draft was a forgery.

The Indemnity Company has a judgment on the pleadings against First National Bank. This judgment has not been challenged and may be passed over.

Secial Term denied a motion by First National Bank for summary judgment in its cross-action against Farmers National Bank. First National Bank appealed to the Appellate Division where the order of Special Term was reversed and the motion was granted. Farmers National Bank now appeals to us from the summary judgment directed against in favor of First National Bank.

The Appellate Division held that the Savings Bank by appropriate notice had offered to Farmers National Bank a full and fair opportunity to defend the Gaddis action and that, though the offer had been declined, the result was that on the issue in the present case in respect of forgery of the indorsement in the $5,000 draft of the indorsement on the $5,000 draft the judgment antecedently recovered by Anna Gaddis against the Savings Bank. We think this employment of the doctrine of res judicata should not be approved.

A generally accepted statement of the rule in question may be abridged as follows: ‘When a person is responsible over to another, either by operation of law or by express contract * * * and he is duly notified of the pendency of the suit and requested to take upon him the defence of it, he is no longer regarded as a stranger, because he has the right to appear and defend the action, and has the same means and advantages of controverting the claim as if he was the real and nominal party upon the record. In every such case, if due notice is given to such person, the judgment, if obtained without fraud or collusion * * * will be conclusive against him, whether he has appeared or not.’ Littleton v. Richardson, 34 N.H. 179, 187,66 Am.Dec. 759. This rule operates only against persons who will be directly responsible over to the person first sued should judgment go against him. New York Title & Mortgage Co. v. Title Guarantee & Trust Co., 187 App.Div. 537, 175 N.Y.S. 763; 1 Freeman on the Law of Judgments, 5th Ed., 448; 24 Am. & Eng.Ency. of Law, p. 741.

The obligation of the Savings Bank to Anna Gaddis was a simple debt. The only applicable obligation of Farmers National Bank ran to First National Bank and was a warranty of the genuineness of the indorsement of the name Anna Gaddis on the $5,000 draft. Negotiable Instruments Law (Consol.Laws, c. 38), ss 115, 116. There was no obligation of Farmers National Bank to the Savings Bank in respect of the loss resulting to the Savings Bank in the Gaddis action. In that state of the several relationships of these parties, there was no right of the Savings Bank to impose upon Farmers National Bank a duty to defend the Gaddis action. The judgment in that action, therefore, is not in this action available to First...