
    Northampton Nat. Bank v. Wylie et al.
    
    
      (Supreme Court, General Term, First Department.
    
    March 29, 1889.)
    1. Attachment—Bond—Damages.
    An undertaking given in an attachment proceeding, conformably to Code Civil Proc. N. Y. § 610, by which the sureties obligate themselves, in case the defendant recovers judgment or the warrant is vacated, to pay all costs which may be awarded to the defendant, and all damages sustained by reason of the attachment, does not render the sureties liable for the expense incurred by the defendant for counsel fees as a part of the costs.
    2. Same.
    And where the defendant does not attempt to have the attachment set aside, but directs his efforts solely towards defeating the suit by showing that plaintiff has no legal claim against him, such counsel fees cannot be charged against the sureties, on the ground that they are “damages sustained by reason of the attachment. ”
    3. Same.
    Where the defendant in the attachment suit is a banking corporation, and the property attached consists of funds on deposit with another bank, and there is evidence showing that, if defendant had not been restrained by the attachment, it might h ave secured a higher rate of interest by using the funds in its own business, it may recover as damages under such bond the interest which it thereby lost.
    Appeal from special term.
    Action by the Northampton National Bank against W. Grill Wylie and others. Judgment was given for plaintiff, and defendants appeal.
    Argued before Van Brunt, P. J., and Brady and Daniels, JJ.
    
      Holmes & Adams, for appellants. Peekham & Tyler, for respondent,
   Daniels, J.

The plaintiff is a national banking association created under the laws of the United States, located and carrying on its business in the state of Massachusetts. The defendants commenced an action against it in the superior court of the city of New York, and obtained an attachment in that action, which was served upon the First National Bank in the City of New York. This bank was the depositary and correspondent of the plaintiff, and by the attachment $12,000 of the deposits was seized and held by the sheriff. The money was not paid over by the First National Bank, but it was charged against the plaintiff’s account as so much money subjected to the attachment. The plaintiff appeared in that action, and answered the complaint, which was for the loss of bonds deposited with it for safe-keeping by the plaintiff in the action in which the attachment was issued. The bank appears to have been robbed, and these bonds taken by the thieves, and they thereby have become lost to the owner. The bank by its answer put in issue the charges upon which its liability was made to depend, and defended the action without moving to vacate the attachment. Such a motion, however, would then probably have proved ineffectual, for the reason that it was held by the courts of this state that the property within this state, of a national bank created and located in another state, might be seized under an attachment issued against it as a nonresident by virtue of the laws of this state. Robinson v. Bank, 19 Hun, 477, affirmed 81 N. Y. 387. And that continued to be the exposition of the law in this state, until after the trial of the action brought against the plaintiff. Since then, however, full effect has been given to the language of the act of congress in the case of Bank v. Mixter, 124 U. S. 721, 8 Sup. Ct. Rep. 718, which has so restrained the state attachment laws as to exclude the right to issue an attachment under them against a national bank located and doing business in any state. After the suit had been commenced against the plaintiff in this manner, it was removed into the circuit court of the United States at its instance, and upon a trial in that court a verdict and judgment were recovered in favor of the bank, and that was affirmed upon a writ of error taken to the supreme court of the United States; and it was after that affirmance that this action was brought by the Northampton Bank against the sureties in the undertaking given upon the issuing of the attachment, to recover the damages which the bank had sustained by reason of the attachment. The undertaking was in the form prescribed by section 640 of the Code of Civil Procedure, and the costs recovered by the bank by means of the judgment have been paid. The undertaking conformed literally to this section of the Code, and the sureties undertook and obligated themselves, in case the defendant in the attachment recovered judgment, or if the warrant was vacated, that the plaintiff in that action would pay all costs which might be awarded to the defendant therein, and all damages sustained by reason of the attachment, not exceeding the sum specified in the undertaking. This section of the Code very plainly includes two subjects, clearly distinguishable from each other. One is the obligation to pay the costs awarded to the defendant; the other, to pay the damages which may be sustained by reason of the attachment. Upon the trial it was proved that the plaintiff, as defendant in that suit, had incurred and paid out considerable sums of money by way of expenses in obtaining the attendance and evidence of witnesses in its behalf, and for counsel fees for the services of counsel rendered in the course of the litigation. The legal fees, however, of the witnesses, as well as of the deposition taken in the state of Massachusetts, were included in the costs, and paid as a part of the sum recovered by the judgment.

Upon this part of the case, accordingly, the inquiry is limited to the right of the bank to recover against the sureties in the undertaking for any part of the moneys incurred and paid for counsel fees and these other expenses in the course of the litigation. The case of Northrup v. Garrett, 17 Hun, 497, has been cited, and was followed at the circuit as an authority authorizing such a recovery against sureties in the undertaking. But that case was not so far extended as to sanction and support such a recovery. The attachment there had been issued in the court of a justice of the peace, and the obligation arising upon the bond was very much the same as that entered into by the sureties in this undertaking. But all that was there recovered was th'e costs which had accrued in the action before the justice and upon the prosecution of a writ of certiorari brought to review it in the county court. They were held to be a proper charge against the surety in the bond. And so far the case has followed the preceding authority of Ball v. Gardner, 21 Wend. 270, where it was held that all the costs included in the judgment might be recovered against the surety in the attachment bond. But this term “costs,” as it was used in the preceding statute, and has been employed in this section of the Code, has never been attended with that degree of significance as to allow it to include counsel fees incurred and expended in the litigation. It includes the numerous items designated in the statute as costs, together with the fees of officers and witnesses, which may be recovered under its settled and well-defined provisions as a part of the judgment in favor of the successful party. Counsel fees are separate and distinguishable items from those entering into the signification of the word “costs” as it has been employed in these and other statutes; and as part of the costs of the action these counsel fees form no charge whatever against the sureties in the undertaking. Neither is the bank entitled to recover them as damages sustained because of the attachment, for the reason that the counsel fees were in no degree incurred in any proceedings taken for the purpose of vacating or setting aside the attachment. As the law stood at the time, no such proceeding could be successfully prosecuted, and the bank, probably understanding that to be its position, acquiesced in the regularity of the attachment, and made no effort or motion whatever to vacate or set it aside. But its resistance was wholly directed to defeat the action itself by establishing the result that the plaintiff in the suit had no legal claim against the bank arising out of the abstraction and loss of the bonds. The services of counsel rendered and bestowed in the litigation were for this end entirely. They were to support and maintain the position taken by the answer that the plaintiff under the law was exonerated from liability for the loss of the bonds. It is true that this resulted in vacating the attachment, but not from any effort or attempt to set it aside, but because the action itself failed, by establishing the truth of the answer and exonerating the bank from legal liability. Under this state of the case, which is fully sustained by the proof, as well as by the findings of fact, it can in no legal sense be alfirmed that any part of these counsel fees or other expenses was incurred by way of damages occasioned by the issuing and service of the attachment, and, so far as they have been included in the judgment recovered by the defendant, it is erroneous, and should be reversed and set aside.

It appeared by the evidence that the bank kept on deposit with the First National Bank of New York a much larger amount than was subjected to the attachment, and that upon its deposits with the First National Bank it was entitled to interest at the rate of 2J per cent, when they exceeded the sum of $5,000. They did exceed that amount during the pendency of that action, and interest to'that extent was allowed upon the deposits to the Northampton Bank while the $12,000 were held subject to the attachment. But it appeared by the evidence, as the fact might also be inferred from the statute of the state, that the moneys were capable of being used in discounting first-class paper, securing a return in the way of interest at the rate of 6 per cent. That was the rate both in Massachusetts and in this state for prime and commercial paper during the year 1882. It is to be inferred from this evidence that, if the bank had not been restrained from using this $12,000 by the attachment, It might have secured this rate of interest for the use of its money. It would not have been obliged to have left it on deposit with the First National Bank, but might have withdrawn it and used it in the course of its own business, if it had not been for the restraint of the attachment. That it was prevented in this manner from doing, and there is reason to believe, therefore, that it lost interest at the rate of 3| per cent, on this sum of $12,000 for the time it was kept in the First National Bank in subjection to the attachment. For that, under these circumstances, it was considered by the court at the trial that the bank was entitled to recover as interest in this action upon this sum; and the decision to that extent conformed to the obligation with which the sureties charged themselves under this section of the Code of Civil Procedure, as well as the authorities before that, and the case of Robinson v. Bank, supra, since then decided in this court. Dunning v. Humphrey, 24 Wend. 31; Groat v. Gillespie, 25 Wend. 383. To that extent the bank did sustain damages by reason of the attachment. It tied up the fund, and disabled the bank from using it as it otherwise might have done, and from earning by its use this legal rate of interest. But, as already observed, as no part of the counsel fees and other expenses were incurred or expended, otherwise than in defense of the action, and to support the position taken by the answer in exoneration of the bank from liability, the bank was not entitled to any allowance by reason of such expenditures, or because of a larger than the legal rate of expenditures in obtaining its evidence in the state of Massachusetts, or securing the attendance of witnesses from that state upon the trial. The amounts so incurred and paid were neither costs in the action, nor damages sustained because of-the attachment; and, as the costs themselves were included in the judgment and fully paid, the extent of the liability of the sureties in the attachment is for this rate of interest down to the time when it was discharged, on the 1st of February, 1883. The judgment should accordingly be reversed, and a new trial ordered, with costs to the appellant, to abide the event, unless within 20 days after notice of this decision the bank shall stipulate to reduce the recovery to the sum of $425.07, and interest thereon from February 1, 1883. And, in ease the stipulation shall be given, then the judgment will be modified by reducing the recovery to that sum, and the allowance to 5 per cent upon the amount, without costs of the appeal to either party. All concur.  