
    Catskill National Bank, Appellant, v. Herbert W. Lasher and Nelson P. Lasher, Respondents. (Action No. 1.)
    Third Department,
    January 6, 1915.
    Bills and notes — crime — forgery of indorsement on promissory notes — validity of guaranty of payment by relatives of forger—consideration — compounding a felony — estoppel.
    Where the cashier of a bank after learning from the indorsers that their signatures upon two notes which it had discounted were forgeries, and after stating to them that he would see them that evening “in shape to do business,” procured a warrant for the arrest of the forger, who was a relative of the indorsers, and together with the constable went to their residence, and leaving the constable outside, with the knowledge of the indorsers, procured their signatures to a memorandum guaranteeing the indorsements to be correct and that the notes would be paid when due, and then returned the warrant to the justice, stating that the matter had been settled, and the warrant and information were thereupon destroyed, but the notes were not paid, the bank cannot recover upon the guaranty, because it must be held to have been made in consideration of the implied promise by the cashier not to prosecute the forger and is, therefore, illegal, being an agreement to compound a crime within the meaning of section 570 of the Penal Law.
    The right of the bank to disregard the notes and sue the forger for moneys had and received was suspended by the execution of the guaranty agreement, and this extension of time was a sufficient consideration for the guaranty, and, hence, it was error for the court to dismiss the complaint upon the ground that there was no consideration for the defendants’ promise.
    The defendants were not estopped from denying the validity of the original indorsements, as the bank knew that the original indorsements were not genuine when it procured the agreement.
    Kellogg, J., dissented.
    
      Appeal by the plaintiff, Catskill National Bank, from a judgment of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of Greene on the 14th day of April, 1914, upon the dismissal of the complaint by direction of the court at the close of the case, both sides having moved for a direction of the verdict, and also from the order of dismissal, pursuant to which the judgment was entered.
    
      J. Stewart Ross and Le Roy W. Ross, for the appellant.
    
      Visscher, Whalen & Austin [H. Leroy Austin of counsel], for the respondents.
   Smith, P. J.:

Prior to August 24, 1909, one W. Platt Fisher presented to the plaintiff bank two promissory notes, purporting to be indorsed by Herbert ,W. Lasher and Nelson P. Lasher, who are the defendants in this action. One of these notes was for $100 and interest, dated May 25, 1909, payable in four months. The other note was dated August 9, 1909, payable in four months, with interest, and for the sum of $150. The plaintiff discounted the said notes, paying the proceeds thereof to W. Platt Fisher.

•Upon the 24th of August, 1909, the plaintiff’s cashier, P. Gardner Coffin, became suspicious of the genuineness of the signature of Nelson P. Lasher upon these notes. Nelson P. Lasher was the father of Herbert W. Lasher and the father-in-law of W. Platt Fisher. Upon that day Coffin went to Nelson P. Lasher and Herbert W. Lasher, and learned that their signatures upon the said notes were forgeries. Coffin thereupon told them that he would be out to see them that evening “ in shape to do business.” Thereafter and upon the same day he swore to an information for the arrest' of W. Platt Fisher. A warrant was procured and placed in the hands of a constable. That night he went to the residence of the defendants, taking the constable with him, who, however, left the conveyance just before they arrived at the defendants’ residence. The defendants, however, knew that he was there. Coffin thereupon wrote upon the back of the notes the following memorandum: “We severally and jointly guarantee the indorsements on the within note to be correct, and jointly and severally guarantee the payment of the same when due.” This he procured to be signed by thé defendants, and thereupon returned to Catskill, taking the constable with him, not having served the warrant. There is evidence to the effect that when Coffin procured the warrant he stated that he probably would not need it, as the matter probably would be settled. There is further evidence that after he returned from Catskill, and upon the next day, he returned the warrant to the justice' of the peace who issued the same, saying that the matter had been settled, and the warrant and information were thereupon destroyed. When the notes became due they were duly protested, and this action is brought to recover thereupon.

At the close of the evidence both parties moved for a directed verdict. This submitted to the court the questions both of law and of fact, and thereafter an order was entered dismissing plain - tiff’s complaint. No decision, however, except the said order was ever made by the judge and no findings of fact and law were ever signed by him. By strict practice this case should be sent back to the Special Term judge for findings of fact and law, upon which this judgment can stand. But with the power given to us under section 1317 of the Code of Civil Procedure, inasmuch as the conclusions to be drawn from the evidence afe clear, and a jury has in fact been waived, this court may find the necessary facts either to sustain or to reverse the judgment entered.

The learned trial court dismissed the complaint upon the ground that there was no consideration for the defendants’ promise. This, we think, was error. If these signatures were in fact forged, as is assumed throughout the case, the bank at the time of the discovery had at once the right to disregard the notes and to sue W. Platt Fisher for moneys had and received. After taking from these sureties their guaranty of the genuineness of the indorsement and their guaranty of the payment of the notes when due, this right was suspended, and the bank had no authority to demand payment thereof from the principal until the due date of the notes. This extension of time was in law a sufficient consideration for the defendants’ promise.

It seems to me clear, however, upon the facts of the case that this contract was made for the purpose of compounding a felony. It is clear that Coffin understood that these signatures were forged. He had gone so far as to swear to an information, upon which a warrant was issued against Fisher for the forging of the signatures. It is nowhere claimed that they were genuine, and it is assumed throughout the case that they were wrongfully put upon the note by Fisher. The defendants were warned that Coffin would come to their house that night “in shape to do business.” He came there with a constable armed with a warrant for Fisher’s arrest. This guaranty was signed by the defendants, relatives of Fisher, for the purpose of saving the son-in-law and brother-in-law from arrest. That such was their purpose is clearly evidenced by the facts in the case, and was known to Coffin at the time that he took their guaranty. Knowing that it was so understood and intended by the defendants, the bank, as represented by Coffin, will be deemed to have assented thereto. So that if the contract had been lawful Coffin would have been bound to refrain from prosecution of Fisher for his crime. The agreement not to prosecute for a felony constitutes a crime within section 570 of the Penal Law and it is unnecessary to cite authorities to the effect that a contract made in violation of positive law gives no right of action for its enforcement.

The burden of the plaintiff’s contention rests upon the claim that the defendants are estopped from denying the validity of their indorsements upon these original notes, and the action is brought upon those original notes. Plaintiff rests largely upon the case of Rothschild v. Title Guarantee & Trust Co. (204 N. Y. 458). I am unable to find, however, in this transaction any elements of an equitable estoppel. There was no representation that these indorsements were originally genuine, and if there were there was no reliance upon any such representation by Coffin, who knew the fact that they were not genuine. The plaintiff has been in no way misled to its prejudice, and failure to prosecute and demand payment is based solely in its reliance upon this new guaranty contract, which is invalid because tainted with crime. In the case cited, upon which reliance is placed, the plaintiff who sought to have canceled a mortgage, made payments upon a mortgage upon which her signature had been forged, but of which fact the defendant had no knowledge, so that the defendant took no steps for the collection of said mortgage, relying upon the validity of the instrument, which was thus asserted by the plaintiff in making payment thereupon. In that case the defendant was misled, and it was held so far to its prejudice as to create an equitable estoppel as against the plaintiff. As stated before, however, this element is wholly lacking in the case at bar. The judgment should, therefore, be affirmed, and this court should find as a fact that the memorandum of guaranty, which is the only evidence of defendants’ liability, was made in consideration of the implied promise by Mr. Coffin acting for the bank not to prosecute W. Platt Fisher for the crime of forgery.

All concurred, except Kellogg, J., dissenting.

Order and judgment affirmed, with costs.  