Case ID: misc_23/html/0423-01.html
Source: Caselaw Access Project
Author: {"author": "Barnard, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The East River Savings Institution, Plaintiff, v. Clarence T. Barrett, as Trustee, etc., Defendant.
    (Supreme Court, New York Trial Term,
    April, 1898.)
    Action by a bank toi recover a deposit paid — Knowledge of “ facts constituting the fraud ” — Code Civil Procedure, § 382, subd. 5.
    In !an action brought by a bank to recover of the executor and trustee of S. Barrett a deposit paid, it appeared that after her grandson, Nathan B. Mundy, had become insane the plaintiff, without authority from him, changed his bank book ;to “ in trust for S. Barrett,” that it, without authority from him and with knowledge ,of his insanity, again changed it to the name of “ S. Barrett,” and in 1880 paid to her his deposit.. She died in 1883. In 1895 Mundy recovered the deposit of the bank. The complaint in the present 'action did not allege that ¡S. Barrett was guilty of any actual fraud in the matter, and it appeared, on ¡the contrary, that she had fully believed herself to ,be entitled to the deposit, in the interests of the incompetent. An accounting was demanded.
    Held, that the action, whether deemed legal or equitable, was, in effect, one to recover a sum of money, merely on the ground of fraud, and that as all the “ facts constituting the fraud ” .were known to the plaintiff when it paid the deposit .to S. Barrett in 1880, the action, not brought within :six years of that time, was barred by subdivision 5 of section 382 of the Code of Civil Procedure.
    The facts appear sufficiently in the following opinion.
    Charles N. Judson, for plaintiff.
    Sidney F. Rawson, for defendant.
   Barnard, J.

NathanJB. Mundy, on the 1st of February, 1879, deposited $1,000 with the plaintiff, and took a bank-book showing the deposit in his own name. On the 19th of February, 1877, this bank-book was changed by the hank so as to make the deposit read: “Nathan B. Mundy, in trust for S. Barrett, February 19, 1877.” No authority is shown for this change upon the part of the original depositor. On the 5th of December, 1879, the hook was again changed by the bank, so as to make the deposit stand on the hook in the name of S. Barrett. This last change was made by the -bank when Mundy was in the lunatic asylum, and incapacitated thereby from acting understandingly. Mrs. Barrett was Mundy’s grandmother, and this last change was made on her application. She was the widow of ETathan Barrett. She claimed to own this deposit She wrote to the bank that she wished the account put to her individual credit. That her grandson was insane, and this letter was accompanied by an affidavit on the part of her husband’s executor that her statement was true.

On the 27th of April, 1880, Mrs. Barrett drew out the balance then unpaid, having before that date and in 1880- drawn out portions thereof on three separate occasions.

The payments Wea-e all made on her individual draft..

Mrs. Barrett died in 1883. ín ETovember, 18-94, ETathan B. Mundy brought an action against the bank for the original deposit and interest, and in September, 1895, obtained a verdict from a jury that this money was his own. . By Mrs. Barrett’s will, ETathan B. • Mundy is entitled to a life use of the residue of her estate with remainder over after his death to other parties. ' The defendant is. the trustee for this fund. The justice of the plaintiff’s claim is undeniable. Mrs. Barrett secured a deposit which she did not own and had no right to receive under the evidence.' ETo intentional misstatement was made by her. She was a lady of the highest character. She made her claim in good faith, but it was not well founded. She gave strong evidence tending to support her right to this money, but I feel bound on this question to find with the jury. The sole question remaining is presented by section 382 of the O'ode, subdivision 5, winch reads, as follows: “ Within six .years.”■ An action to procure a judgment, other than for a sum of money, on the ground of fraud, in a case which, on the thirty-first day of December, eighteen hundred and forty-six, was cognizable by the Oourt of Chancery. The cause of action, in such a case, is not deemed to have accrued, until the discovery, by the plaintiff, or the person under whom he claims, of the facts constituting the fraud.” This section covers all cases where the Court-of Chancery on that day had cognizance solely, and all cases where the' jurisdiction was ■concurrent with the lower court. Bosley v. National Machine Co., 123 N. Y. 550. It applies where a sum ,of money is demanded incidentálly to the decree in equity. Carr v. Thompson, 87 N. Y. 160. What action did the bank have on the 27th of April, 1880, when the last of the money had been drawn out by Mrs. Barrett, on the facts as they now appear. The bank had two forms of action. 1. Contract. A payment made to Mrs. Barrett under a claim of title not good, whether made intentionally or by mistake, would support an action by the bank against her. The law would imply a promise to repay. 2. The. bank would have an action for fraud. The complaint would then aver that the payment was procured by an intentional falsehood, or by a statement not known to be true. This action, whether called legal or equitable, would be one for a sum of money merely on thé ground of fraud, and as such would not be relieved from the six years’ limitation in this subdivision 5 of section 382. Miller v. Wood, 116 N. Y. 351. The demand for an accounting in the complaint does not furnish the requirement of an equitable claim which would make the claim other than one for the recovery of money only. This action must be judged by what it might have been in April, 1880. There was no right to an accounting then against Mrs. Barrett, and it is not within the theory of the subdivision that an accounting after the death of the wrongdoer would give an additional right, which would not exist when the cause of action arose. My conclusion therefore is that the action is barred by the Statute of Limitations. Was there anything fraudulent to discover? There was no intent to cheat or defraud, but Mrs. Barrett got money she did not own, and she ought not to keep it; but the defendant is an executor and trustee, and he must plead the statute or become personally liable for the loss of the estate, so far as it is lost by his omission. Butler v. Johnson, 111 N. Y. 204. The bank knew every fact but one. The deposit was received from Mundy as his own. The bank without authority changed the book so as to make Mrs. Barrett beneficiary, and Mundy trustee for her. The bank,.without authority from Mundy, and with full knowledge that he was at the time insane, again changed the deposit-book so that it gave the title of the fund to Mrs. Barrett absolutely, and this was finally followed by the payment of the money to her as her individual property. The bank knew everything then that appears now, except that the validity of the claim of the title was a thing of the future, in 1880. The bank should have, known what it might have known on reasonable inquiry. The bank had notice that the first change was wholly at war with the deposit, and with the final claim. After- Mrs. Barrett obtained that change, the bank should have asked why the conditions were changed so as to make her absolute owner.

The bank knew, in December,. 1879, that it was paying away the property of a lunatic solely upon the representation made by his grandmother, and that she was the owner. And the bank knew that, as against the original depositor, the change was of no use, and that its justification would finally depend on the real fact as to the title. When the title was found to he in Mundy, the bank was without defense under the changed hooks and under Mrs. Barrett’s claim of title.

I, therefore, find that the bank knew of the facts, constituting the' fraud, in 1880, when the money was paid. Higgins v. Crouse, 147 N. Y. 411. I believe the real facts would justify every one. Mr. Mundy became erratic, and finally insane, His grandmother loved him. .He was her heir and next of kin. His grandmother believed this deposit was her own. The demented .child must he cared for. He was cared for and he should, under the circumstances, have let the deposit go-. He g'e-ts now the use of the sum of money from his grandmother’s estate. He has obtained from the bank the deposit which, if not applied to his use, forms part of the estate he uses. The result is not one which should he deemed satisfactory to. the grandson. Jndgment for defendants, with costs.

Judgment for defendants, with costs.