
    Metallurgical Securities Company, Appellant, v. Mechanics and Metals National Bank, Respondent.
    First Department,
    February 11, 1916.
    Banks and banking — action to recover balance of deposit — duty of depositor to examine pass book — discovery, of forged indorsement of checks—when party may not be charged with failure to notify bank of errors in account — erroneous charge as to failure of plaintiff to call employee as witness.
    In an action to recover a balance of a bank deposit alleged to be due it appeared that two checks signed by the plaintiff had been paid by the defendant without the indorsement of the payees therein named and that an employee of the plaintiff drew the money upon said checks and when they were returned presumably abstracted them, as they could not be found. It was contended by the defendant that the checks were payable to bearer. It appeared that it was long after the defendant had rendered an account to the plaintiff that it was discovered that the checks had never reached the payees and that their names had been forged, and soon thereafter the defendant was notified.
    
      Held, that under the circumstances it was error to charge that the plaintiff was bound to use due diligence, to examine its pass book and to report any errors,' and that if the bank was misled thereby the plaintiff cannot recover, because the only error in the account lay in the forged indorsement of the payees of the checks and there is no duty on a depositor to look for forged indorsements.
    There was not sufficient evidence of negligence by the plaintiff in discovering the alleged forgery to raise a question of fact for the jury.
    A party cannot be charged with a failure to notify a bank of errors in an account unless the bank has actually been damaged by such failure.
    A charge that the failure of the plaintiff to call the employee who drew the money on the checks gave the jury the right to infer that, if called, his testimony would have been adverse to the plaintiff’s interest, was erroneous, because it appeared that such employee was at the time in an insane asylum, and further, that he had been forging the plaintiff’s name and had committed other irregularities.
    . Appeal by the plaintiff, Metallurgical Securities Company, from a judgment of the Supreme Court in its favor, entered in the office of the clerk of the county of New York on the 22d day of October, 1915, upon the verdict of a jury for $200, and also from an order entered in said clerk’s office on the same day denying plaintiff’s motion for a new trial made upon the minutes.
    
      Eli J. Blair, for the appellant.
    
      Frank M. Patterson, for the respondent.
   Smith, J.:

The plaintiff seeks to recover from the defendant $1,200 as the balance of the deposit due. Defendant contends that $200 only is due of said deposit, and for that amount the plaintiff has judgment. Two checks of $500 each, signed by the plaintiff and made payable, according to the testimony of "plaintiff’s vice-president, to Bounds, Hatch, Dillingham & Dehevoise, were paid by the defendant bank without indorsement of the payees therein named. It seems that one Begasse, who was in the plaintiff’s employ, procured the money upon said checks, and when the checks were returned at the end of the month presumably abstracted them, as they were not to he found and were not produced upon the trial. The contention of the defendant is, that these checks were payable to bearer; that the checks were lawfully paid and that the evidence that they were payable to Bounds, Hatch, Dillingham & Debevoise, having been sworn to by the vice-president of plaintiff’s bank, it became a question of fact as to whether they were so payable, or payable to bearer. If payable to the Bounds, Hatch, Dillingham & Debevoise firm it is evident that they were not indorsed by the payees and that the indorsements upon which they were paid were forgeries. There is no evidence that these checks were payable to bearer. The only suggestion in the case was introduced by the cross-examination of Vogelstein, plaintiff’s vice-president, in which it was asked if Vogelstein did not know that Begasse claimed they were payable to bearer; to which Vogelstein responded that he so understood. It further appears that upon July first the defendant rendered plaintiff an account, showing that the plaintiff had a balance of $200, and that this account was acknowledged to be correct by the defendant. But this was an account stated, which could be shown to have been made through mistake, and is of little significance, because the check book of the plaintiff shows that these checks had been made, and presumably they had been presented by the payees therein named and charged to plaintiff’s account. It was not until long after July first that it was discovered by the plaintiff that these checks never reached the firm of Bounds, Hatch, Dillingham & Debevoise, and soon after these facts were discovered the bank was notified of the plaintiff’s claim in reference thereto.

Upon this state of facts the court charged the jury: That the plaintiff was bound to use “due diligence to examine the pass hook and vouchers, and to report to the bank, without unreasonable delay, any errors which may he discovered in them; and if he fails to do so, and if the bank is thereby misled to its prejudice, he cannot afterwards dispute the correctness of the balance shown by the pass book.” This charge was, we think, erroneous as applied to this case, because the only error in the account lay in the forged indorsement of the payees of the check, and it has been held that there is no duty on the depositor to look for forged indorsements. (Critten v. Chemical Nat. Bank, 171 N. Y. 219, 228.)

Again. The question was practically left to the jury to determine whether the plaintiff had notified the bank within a reasonable time after its discovery of the irregularities of Begasse. There is no evidence, however, that the discovery of this forgery was made any length of time before the bank was notified thereof, and there was not sufficient evidence of negligence by the plaintiff in this respect to raise a question of fact for the jury. Furthermore, the law is well settled that a party cannot be charged with a failure to notify a bank of errors in an account unless the bank had been actually damaged by such failure. (Kearny v. Metropolitan Trust Co., 110 App. Div. 236; affd., 186 N. Y. 611; Critten v. Chemical Nat. Bank, 171 id. 219; Morgan v. U. S. Mortgage & Trust Co., 208 id. 218.) There is no evidence in the case at bar of any damage resulting to the defendant by the failure of the plaintiff to give notice of any irregularities on the part of Begasse.

If this case must be retried there is one other error in the charge to which attention should be called. It was claimed on the part of the defendant that the failure of the plaintiff to call Begasse gave the jury the right to infer that if called his testimony would have been adverse to the plaintiff’s interest. We are of opinion that the facts in the case do not justify the charge as made. In the first place the evidence shows that Begasse was at this time in the insane asylum. Furthermore, Begasse had been forging the plaintiff’s name and had committed irregularities in the plaintiff’s business. Under these circumstances there was no such relationship between plaintiff and Begasse as would authorize any inference to be drawn against the plaintiff from failure to call Begasse.

The judgment and order must, therefore, be reversed and a new trial granted, with costs to appellant to abide the event.

Clarke, P. J., Scott, Dowling and Page, JJ., concurred.

Judgment and order reversed, new trial ordered, costs to appellant to abide event.  