Hillsley v. State Bank of Albany

• Decision Date: 19 October 1965
• Citation: 24 A.D.2d 28,263 N.Y.S.2d 578
• Parties: Morton B. HILLSLEY, a/k/a Mort Hillsley, Plaintiff-Respondent-Appellant, v. STATE BANK OF ALBANY, Defendant-Appellant-Respondent, and Glennon Builders, Inc., Thomas J. Birmingham, The Union National Bank of Troy and National City Bank of Troy, Defendants-Respondents, and H. Irving Chase, Donald J. Mooney and Marguerite Mooney, Defendants.
• Court: New York Supreme Court — Appellate Division

Page 578

263 N.Y.S.2d 578

24 A.D.2d 28

Morton B. HILLSLEY, a/k/a Mort Hillsley Plaintiff-Respondent-Appellant, v. STATE BANK OF ALBANY, Defendant-Appellant-Respondent, and Glennon Builders, Inc., Thomas J. Birmingham, The Union National Bank of Troy and National City Bank of Troy Defendants-Respondents, and H. Irving Chase, Donald J Mooney and Marguerite Mooney, Defendants.

Supreme Court, Appellate Division, First Department.

Oct. 19, 1965.

Irving I. Waxman, Albany, of counsel (Lester R. Rubin, Albany, attorney) for appellant Morton B. Hillsley.

John E. Knauf, Albany, of counsel (Ainsworth, Sullivan, Tracy and Knauf, Albany, attorneys) for appellant State Bank of Albany.

Lambert L. Ginsberg, Troy, of counsel (Smith, Pattison, Sampson & Jones, Troy, attorneys) for respondent Union Nat. Bank of Troy.

John J. Glavin, Albany, for defendants-respondents, Thomas J. Birmingham and Glennon Builders, Inc.

Before BREITEL, J. P., and RABIN, VALENTE, McNALLY and STEUER, JJ.

McNALLY, Justice.

By order of the Appellate Division, Third Department, dated May 17, 1965, the appeals from the amended judgment entered in Albany County on October 30, 1964, after a nonjury trial, have been transferred to this Department. That court on a previous appeal affirmed a denial of State Bank of Albany's motion for summary judgment (17 A.D.2d 686, 230 N.Y.S.2d 531) and subsequently vacated its decision by order dated May 17, 1965.

The action arises out of forged endorsements on two checks, $10,000 and $1,500, respectively. Plaintiff-respondent-appellant Morton B. Hillsley was awarded judgment against defendant-appellant-respondent State Bank of Albany in the sum of $10,000 plus costs and disbursements, and $1,500 plus $442.50 interest. State Bank of Albany paid the $1,942.50 portion of the judgment based on the $1,500 check and appeals only from that portion of the judgment which awarded Hillsley $10,000 plus costs and disbursements. The original collecting bank was National City Bank of Troy, subsequently merged into State Bank of Albany, now the real party in interest. Hillsley cross-appeals from the judgment in so far as it denies him interest on the $10,000 and fails to award him judgment against defendants-respondents Glennon Builders, Inc. and Thomas J. Birmingham.

The conversion complained of allegedly occurred when the National City Bank of Troy, the collecting bank, paid to Glennon Builders the proceeds of a $10,000 certified check payable to Glennon Builders and Hillsley upon Birmingham's forged endorsement of Hillsley's name as copayee. The check drawn on defendant-respondent The Union National Bank of Troy is made by defendant H. Irving Chase, attorney and agent for defendants Donald J. Mooney and Marguerite Mooney.

Chase delivered the check to Birmingham as a progress payment on a house which Hillsley was building for Glennon Builders in behalf of the Mooneys. The check is payable jointly to Glennon Builders and Hillsley and bears Chase's notation of 'Re: Mooney' on its face, to indicate that the proceeds were to be applied toward the Mooney house. Birmingham forged Hillsley's endorsement and deposited the check in Glennon Builders' account with National City Bank of Troy, now State Bank of Albany. At Birmingham's request National City Bank of Troy simultaneously issued two cashier's checks totaling $10,000 which Birmingham delivered to Hillsley the same day to be applied not on the Mooney house but on another house, the Springwood Manor house, which Hillsley was then building for Glennon Builders.

Upon the completion of the Springwood Manor house, Hillsley demanded of the purchaser, one English, payment of the balance then due, approximately $19,000, which reflected the credit of $10,000, the September, 1959 payment by Glennon Builders improperly applied to the Springwood Manor house. Mr. English at or about the same time paid the balance of the purchase price to Glennon Builders, which on November 17, 1959 conveyed the premises to Mrs. English.

During the latter part of November, 1959, Hillsley informed Mooney that he had received only $12,900 on account of the construction of the Mooney house. Hillsley was told that Mooney had made payments to Glennon Builders in the total sum of $26,400, which included the $10,000 check payable jointly to Glennon Builders and Hillsley. Hillsley then first saw the check and learned his endorsement had been forged. At the commencement of this action there was due Hillsley about $17,000 on the Mooney house.

State Bank of Albany, the collecting bank, is liable in conversion for the payment on the forged endorsement of Hillsley of the $10,000 check payable to Glennon Builders and Hillsley. (Spaulding v. First Nat. Bank, 210 App.Div. 216, 205 N.Y.S. 492, affd. 239 N.Y. 586, 147 N.E. 206.) State Bank of Albany does not contend otherwise; its sole defense is one in the nature of a credit or set off on the premise that the entire proceeds of the forged instrument were paid to Hillsley. The Bank relies on Lynch v. First Nat. Bank of Jersey City (107 N.Y. 179, 184, 13 N.E. 775, 777); Sundail Constr. Co. v. Liberty Bank of Buffalo (277 N.Y. 137, 142, 13 N.E.2d 745, 747); and Sweeney v. National City Bank of Troy (263 App.Div. 418, 33 N.Y.S.2d 885). These cases sustain the principle that recovery on a forged instrument may be defeated by proof that the...