(concurring). Plaintiff is the assignee of one Behan.• The cause of action stated in his complaint alleges that his assignor was a depositor in The National City Bank of Troy, defendant-appellant, maintaining therein a checking account. Plaintiff contends that the defendant-appellant paid a check of his assignor drawn to one Kennedy, upon which check the indorsement of Kennedy had been forged by one O’Connell.
The necessary facts concerning the transaction sued upon, and underlying that transaction, are as follows: O’Connell was the agent of Kennedy for the purpose of negotiating the sale of certain real property owned by Kennedy in Watervliet. In the course of his negotiations, O’Connell found prospective purchasers, a man and wife named Shay. After the Shays had agreed to buy the property for the sum of $10,000, O’Connell forged a deed running from Kennedy to them. The Troy Savings Bank took a mortgage on the property purported to have been passed by the fraudulent conveyance and agreed to lend to the Shays the amount of $6,000. Plaintiff’s assignor, a lawyer who represented the Troy Savings Bank, was paid this amount by the savings bank on the written order of the Shays, with the apparent understanding that he would pay certain taxes and expenses connected with the mortgaged premises and the transaction, and pay the balance over to Kennedy on their behalf. The $6,000 check of the Troy Savings Bank, payable to the order of plaintiff’s assignor, was deposited by him in his own general checking account in the defendant-appellant bank. After making the deductions necessary under his agreement with the Shays, he drew a check on his own account payable to Kennedy in the amount of $5,347.17. This cheek was delivered to O’Connell. The savings bank check was deposited in the account of the plaintiff’s assignor on April 21, 1931, the same day that Behan drew his personal check payable to Kennedy out of the same account and delivered it to O’Connell,
*422O’Connell did not deliver the check to Kennedy but instead forged her indorsement on it and deposited it to his own account carried in a Watervliet bank in the name of “ The O’Connell Agency.” O’Connell then obtained from the Watervliet bank its cashier’s check for $5,133.67, payable to his order in the name of The O’Connell Agency, and indorsed it over to Kennedy on April 23, 1931, and she accepted it in full payment of the amount due her. The discrepancy in amount arises out of the fact that O’Connell, with Kennedy’s permission, retained $213.50 as his commissions for the transaction.
The Watervliet bank presented the forged check for payment to the defendant-appellant on April 23, 1931, and the defendant honored that check. On the same day Kennedy gave to the purchasers, the Shays, a true deed of the premises and took back from them a $4,000 mortgage to complete the purchase of the property.
Subsequently, a litigation concerning the priorities of the Kennedy mortgage over the savings bank mortgage was instituted, and it was adjudged that Kennedy’s was a first mortgage and the savings bank was a second mortgagee.
The irregularity in the deed and the forgery of plaintiff’s assignor’s check was not discovered until November, 1937, at which time this action was instituted. In 1938 the Kennedy first mortgage was foreclosed and the premises sold for less than $4,000.
The plaintiff contends that the defendant-appellant, having paid the check in question on a forged indorsement is liable, for the amount of the check.
The relationship between Behan and the defendant was that of debtor and creditor. After Behan deposited moneys in his account, the title to those moneys passed to the appellant bank and the bank became Behan’s debtor for the amount of the deposits so made. This principle is so well established that it does not require citation.
Arising from the debtor and creditor relation, the. law fixes a contractual duty on the bank, by implying a promise from the bank to its creditor-depositor, that the bank will pay only in exact conformity with the depositor’s directions. (Critten v. Chemical National Bank, 171 N. Y. 219; Seaboard National Bank v. Bank of America, 193 id. 26; Crawford v. West Side Bank, 100 id. 50.)
It necessarily follows that when payment is made by the bank upon a forged indorsement to one other than the payee named, the bank has breached the promise implied in law to pay only at the direction of the depositor. (Shipman v. Bank of State of N. Y., 126 N. Y. 318; Kobre v. Corn Exchange Bank, 79 Misc. 212.)
*423On the facts as heretofore set forth, the defendant-appellant has breached that promise, and when the rigid rule of law as set out above is applied to the situation a cause of action arises.
However, the defendant-appellant contends that, since the payee actually intended by the drawer has in fact been paid the full amount, a complete defense to this action is raised under the facts of this case. I am in accord with this contention. The law has recognized certain equitable defenses to the strict legal liability of a bank paying on a forged check. Shipman v. Bank of State of N. Y. (supra) is one of the leading cases in this field, and the able briefs of counsel for both sides devote much time and thought to it. I understand the rule in the Shipman case to be that the bank is held on its promise to its depositor unless the depositor is estopped by his own acts or omissions, or unless the bank can show that the money which it paid on the forgery reached the payee for whom it was actually intended. As I interpret that decision, if it could be shown that the funds which the forger made good to the payee could be traced to the defendant bank, the basis for an equitable defense to the legal liability of the bank is established.
This tracing is, of course, entirely a matter of proof. The principle upon which the defense is based is undoubtedly to prevent the depositor from being unjustly enriched by collecting from his creditor-bank the sum which has, in fact, reached the payee to whom the depositor intended the fund to go.
The plaintiff-respondent’s brief argues that a benefit must be shown to the drawer or expense on the drawee in addition to showing payment to the payee intended. He relies on the language of the Shipman case for his contention that this benefit or expense must be shown and he further states that it must be pleaded. It was not pleaded in the Shipman case, nor did the court indicate that such pleading was required.
I feel that the question of intention of the drawer is the controlling factor. Here the drawer intended that Kennedy receive this fund. To satisfy that intention, he drew a check to her order. Somewhat belatedly, she actually did receive that which Behan had intended her to have. Therefore, Behan cannot now claim against this defendant.
Let us suppose that Kennedy herself had actually indorsed and cashed this check. Surely, that money under the facts as presented to us could not be recovered from her now, nor would this action against the bank lie in spite of the fact that the savings bank suffered loss at the hands of the forger O’Connell on the forged deed.
*424For that reason I regard the loss to the Troy Savings Bank as foreign to this cause of action on a simple forgery of a check, and I think it is immaterial whether or not the savings bank, at the time the amendment to the complaint was suggested by the court, did or did not come in.
In the Shipman case the court said, “As it was not shown that such payment was made at the expense or to the injury of the defendant, or that the plaintiffs were benefited by it, beyond their whole loss, the cause of action stated in the complaint was not affected by the fact.” The fact there referred to, in my opinion, was the fact that there was no evidence that the money which the forger had procured by his fraud ever reached the payee intended. Here, the payee has received the money procured by the forger’s fraud and for that reason, I believe that that defense standing alone is a bar to this action.
The judgment should be reversed, with costs, and the complaint dismissed.
Hill, P. J., Crapser and Heffernan, JJ., concur.