Conford, Gaulkin and Kilkenny. The opinion of the court was delivered by Gaulkin, J.A.D.
This is an appeal from a judgment of the Chancery Division directing defendant bank to reopen plaintiff's checking account and restraining defendant from crediting to itself the $749.39 in that account.
Plaintiff, F.I.N.N.E., Inc. maintained a checking account with the National State Bank of Newark (National), the defendant. In June 1959 a check for $3,041 was deposited in the account of plaintiff, issued by the United States Treasurer to one Pearl Bartley. The indorsement of Pearl Bartley was a forgery, but this fact was not discovered by anyone for about two years, and it is not suggested that plaintiff was aware of the forgery at the time of the deposit.
On October 11, 1961, after learning of the forgery, plaintiff drew a check on the account to its attorney for $500 for past services. The attorney said this was done "[b]ecause, I having been advised of this situation and, in fact, having had an interview with the Secret Service Department and my client in my office, in which these facts were brought out and testimony was taken from the principal of the corporation as to how this thing came about, there was no problem in terms of my client being involved. I said, 'You owe me some money; you had better pay me.'"
On October 17, 1961 the check was returned with the notation "To charge off balance of your account and close it out for a partial refund of Treas. Check #13,610, 784, dated 6/1/59 returned for refund, reason: Unauthorized Endorsement, Estate not entitled. Check was payable to Pearl Bartley, and deposited by you to your account." On the same date National wrote plaintiff as follows (emphasis ours):
"Enclosed is a duplicate debit advice in the amount of $749.30, the balance remaining in your account, which has been attached as partial settlement for the refund requested by the Treasury Department for check No. 13,610, 784 in the amount of $3,041.00 returned for reason of forged endorsement.
This will close out your account with us."
The demand for the refund had been made by the Treasury Department upon the bank on July 11, 1961.
Plaintiff then filed its complaint in the Chancery Division, demanding judgment:
"(a) That the defendant be restrained and enjoined from closing plaintiff's account and from refusing to honor checks drawn upon such account by plaintiff;
(b) that defendant be restrained and enjoined from crediting to its own order such monies as are ...