Case Name: FOWLER v. BOWERY SAVINGS BANK
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1889-04
Citations: 23 Abb. N. Cas. 133
Docket Number: 
Parties: FOWLER v. BOWERY SAVINGS BANK.
Judges: 
Reporter: Abbott's New Cases
Volume: 23
Pages: 133–172

Head Matter:
FOWLER v. BOWERY SAVINGS BANK.
N. Y. Court of Appeals ;
April, 1889.
[Reversing 47 Hun, 399.]
1. Election of remedies ; action for debt mispaid.] If a debtor pays the debt to a wrongful claimant, the creditor must elect whether he will sue the claimant or the debtor ; and if ho sues the claimant for money received to his use, he thereby adopts and ratifies the payment (at least by prosecuting the action to judgment), and cannot thereafter, even when unsuccessful in attempting to collect, the judgment, maintain an action against the debtor.
2. Savings banh, mispayment by.} The relation of a savings bank to' a depositor, even though the deposit be expressed to be for the-benefit of a third person, is that of a debtor; and the depositor’s recovery of a judgment against a stranger who wrongfully draws, .the money, is a ratification which discharges the bank ; and it seems that even the bringing of the action has the same effect.
3. Trust; election, of remedies.} Otherwise of a deposit which remains-the property of the depositor, or of a fund in the hands of a trustee.
4. Trial; omission to plead, new matter.} The objection that hew matter proved upon the trial is no defense because not alleged in the answer, is not available on appeal if not taken at the trial. If such facts are proved without objection, and found by the trial court, and are sufficient to constitute a defense, they require judgment for the defendant; and judgment to the contrary will beroversed on appeal.
Appeal from a judgment of the general term in the-second department, affirming a judgment in favor of the plaintiff rendered upon a trial by the court.
The facts appear in the opinion. ’
The Supreme Court held that a deposit in a savings-bank by a husband in his name in trust for his wife, creates a trust in favor of the latter and passes the title to the depositor as trustee [citing Martin v. Funk, 75 N. Y. 134] and after his death the bank is not protected in a payment to his executor where, before such payment, they have notice-of the claim of the wife [distinguishing Boone p. Citizen’s Savings Bank, 84 N. Y. 83] ; and applied the rule that recovering a judgment against the wrong person cannot beset up as a defense-by the right person, subsequently sued [citing Atlantic Dock Co. v. Mayor, etc., 53 N. Y. 64.]i (The decision below is reported in 47 Hun, 399).
Defendants appealed to the court of. appeals. • -
Carlisle Norwood\ Jr., for defendants, appellants.
• Eugene Burlingame, for plaintiff, respondent.
See note on Election of Remedies at the end of this case.

Opinion:
Earl, J.
On November 15, 1871, John White, the husband of Elizabeth White, deposited with the defendant, in trust for his wife, the sum of $805.93, and the deposit was entered upon a pass-book, which was delivered to him, in this way: " Bowery Savings Bank in account with John White for Elizabeth White." This deposit remained in the bank during the life-time of John White, who died November 13, 1882, leaving a will wherein he appointed John D. Flynn his executor. The will was admitted to probate, and letters testamentary were granted to Flynn on January 23, 1883.
Elizabeth White died December 18, 1882, leaving a last will and testament in which the plaintiff was named as executor, which will was admitted to probate, and letters testamentary were issued to the plaintiff on January 11, 1883.
On January 25, the plaintiff, with his letters testamentary, called at the savings bank and notified it of his appointment as executor, and demanded payment of the deposit. He was told by one of its officers that the money would be paid to him when he came with the pass-book, which was then in the possession of Flynn, the executor of John White. Thereafter, on January 29, Flynn, having in his possession the pass-book, presented the same to the defendant, together with proof that he had been appointed executor of John White, and demanded payment of the deposit, and the defendant thereupon paid the same to him, and the pass-book was surrendered to it. Thereafter, on the same day, the plaintiff called on the defendant again in reference to the deposit, and was informed that it had been paid to Flynn.
This action was commenced in June, 1886, to recover the sum deposited with the defendant, and interest thereon.
It is clear that the plaintiff was legally entitled to receive payment of the deposit from the defendant, and that after the notice and demand by him it had no right whatever to • pay .the same to Flynn ; and but for facts yet to be stated the cases of Martin v. Funk, 75 N. Y. 134; Willis v. Smyth, 91 Id. 297, and Mabie v. Bailey, 95 Id. 206, 209, would be ample authority for the maintenance of this action.
After payment by the defendant to Flynn, the plaintiff, in- the fall of 1883, commenced an action against him to recover, among other.things, the money thus paid. Issue was joined, and the action was tried in the fall of 1884, and a verdict was rendered in favor of the plaintiff, and a judgment was thereon entered. The plaintiff was unable, however, to collect anything on the judgment, and he thereafter commenced this action.
The relation between a savings bank and a depositor therein is that of debtor and creditor, and the defendant therefore became a debtor for the sum deposited with it by John White (People v. Institution, 92 N. Y. 7). After his demand of the deposit, and the payment of the money to Flynn, there were two remedies open to the plaintiff. Fie could sue the defendant as a debtor for the deposit, and recover the amount thereof from it, or he could have brought an action for money had and received to and for his use against Flynn, and recover it from him. But he was not entitled to both remedies at the same time or in succession ; and by electing the one he would lose the other. By electing to sue, the bank he would repudiate its payment to Flynn, and his claim would be that the' debt had not, in fact, been paid. By suing Flynn, he would adopt and ratify the act of the bank in making payment to him, and his claim would be that the money due to him had, in fact, been paid to Flynn, and that Flynn had received it to and fpr his use. Such adoption and ratification of the payment would, legalize the payment as between him and the bank, and thus discharge the bank. Fie could not occupy the position at the same time of claiming that the bank had paid his money to Flynn, and yet that the bank was still his debtor. His election in this case to sue Flynn, and thus to treat him as his debtor, was not harmless to-the bank,'but in law may be presumed to have injured the bank, unless it should now be held to be discharged by its payment to Flynn. After the plaintiff commenced liis action against Flynn, and time ratified and adopted the payment by the bank to him, tíie bank could not during the pendency of that .action, have sued Flynn to recover back the money on the ground that it had been paid by mistake, and received by him without authority, because it would have been a defense to such an action that the real owner of the fund had .adopted and ratified the payment.
But, even if the mere commencement and pendency of the action by the plaintiff against Flynn would have not furnished such a defence, it is beyond doubt that, if the bank should now bring an action against Flynn to recover back the money, he could successfully defend on the ground that the plaintiff had ratified and adopted the payment, and thus discharged the bank by the recovery of a judgment against him for the money paid as the real owner thereof The two remedies—the one against Flynn and the other against the bank—are not concurrent. If the two actions could not be prosecuted at the same time, they could not in succession. Nothing could be more inconsistent than an action against Flynn on the ground that the money due to the plaintiff had been paid to him, and an action against the bank on the ground that it had not paid the deposit, and still remained debtor therefor.
If the money had been absolutely the money of the plaintiff, left on special deposit with the bank, then he could have pursued the money wherever he could trace it without losing his remedy against the bank. In such a case the plaintiff would not be barred of his right of recovery against the bank until he had either recovered his money or the value of the same. All his remedies would be consistent, being based upon the theory of a wrongful disposition of his property. So, too, where a trustee, in breach of his trust, disposes of the trust property, the beneficiary of the trust may pursue it or its proceeds wherever he can trace them, so far as the law will permit him to do so without releasing the trustee. All his remedies in such a case are consistent, and based upon the same theory, to-wit, a breach' of trust; but if a trustee is bound to pay money to a beneficiary as a debt due from him to the beneficiary, then, if lie-makes payment to another person, he has not paid the debt, - and the money paid is not in fact the property of the beneficary. In such case the beneficiary may ignore the payment, and sue the trustee as his debtor; or he may ratify and adopt the payment, and sue the person receiving the-money as his debtor: but he cannot do both. There is, in such case, a breach of trust, or not, as he may elect, and his-election, once effectually made, is conclusive forever {Corn. Dig. "Election," c. 2). If one wrongfully takes and sells personal property not belonging to him, the ownerlias the election to sue him for the proceeds as money had and received to and for his use, and thus ratify the sale, or he may pursue the property and recover it or its value; but he cannot do both, and is bound by his election {Pom. Pern, § 567 eb seg.).
A few authorities may be cited to enforce these views.
In Priestly v. Fernie, 3 Hurl. & C. 977, it was held that where the master of a ship signs a bill of lading in his-own name, and is sued upon it, and judgment is obtained' against him, an action will not lie against the owner of the-ship upon the same bill of lading, although satisfaction has-not been obtained on the judgment against the master. Baron Bkamwell, writing the opinion, said : " If this were-an ordinary case of principal and agent, where the agent, having made a contract in his own name, has been sued on; it to judgment, there can be no doubt that no second action-would be maintainable against the principal. The very expression that where a contract is so made the contractee basan election to sue agent or principal, supposes he can only sue one of them; that is to say, sue to judgment."
In Scarf v. Jardine, L. R. 7 App. Cas. 345, the facts-were these: A firm of two partners dissolved. One-retired, and the other carried on the business with a new partner, under the same style. A customer of the old firm sold and delivered goods to the new firm after the change but without notice of it. After receiving notice, he sued the new firm for the price of the goods; and upon their bankruptcy proved against their estate, and afterward' brought an action for the price against the late partner ; and it was held that the liability of the late partner was a liability by estoppel only, and not jointly with the members of the new firm; that the customer might at his-option have sued the late partner or the members of the' new firm, but could not sue all three together; and that, having elected to sue the new firm, he could not afterward sue the late partner. In that case Lord Blackburn said that the cases "are uniform in this respect, that where aman has an option to choose one or other of two inconsistent things, when once he has made his election, it cannot be retracted. It is final and cannot be altered. . . . When once there has been an election to do one' of the two things, you cannot retract it and do the other thing. The election once made is finally made." Lord Watson said: "The respondent had the undoubted right to select his debtor ; to hold either the old firm or the new firm responsible to him for the fulfillment of the contract; but I know of ne authority for the proposition that the respondent could hold his contract to have been made with both firms, or that, having chosen to proceed against one of these firms for recovery of his debt, he could thereafter treat the other firm as his debtor."
In Rawson v. Turner, 4 Johns. 469, it was held, that if a new sheriff receives a prisoner from his predecessor, he-is answerable for his escape, though a voluntary escape may have existed in the time of his predecessor; but the plaintiff has his election either to consider the prisoner in execution, and so charge the new sheriff for the last escape, or as out of execution, and charge the old sheriff. If he has once made his election, and sued the old sheriff, and recovered judgment against him, it is conclusive, and a bar to any action against the new sheriff.
In Sanger v. Wood, 3 Johns. Ch. 416, 421, Chancellor Kent said : " Any decisive act of the party, with knowledge of his rights and of the fact, determines his election in the case of conflicting and inconsistent remedies."
In Morris v. Rexford, 18 N. Y. 552, there was a bargain and sale of goods for' cash, and the vendee took possession, but failing to make payment, the vendor obtained a redelivery of his goods by writ of replevin ; and it was held that this was a disaffirmance of the sale, and evidence iin bar of a subsequent action for the purchase-money, and that, the vendor having elected the one remedy, his right to pursue the other was extinguished! Comstock, J., writ- ' ing the opinion, said : " A vendor of goods, on a sale and •delivery, upon cash terms, if he fails to get payment, may consider the delivery absolute, and rely on the responsibility •of the vendee, or he may disaffirm and reclaim his jwoperty; but he cannot do both of these things. The remedies are not concurrent, and the choice between them once being made, the right to follow the other is forever gone. The law tolerates no such absurdity as a seizure of goods by a person claiming that he has never sold them, and an action by the same person, founded on the sale and delivery of the same goods, for the recovery of the price. In peculiar circumstances a party may take either one of these courses, but having rightfully made his choice, the right to follow the ether is extinct and gone."
So here the law will not tolerate the absurdity of holding that the plaintiff could sue Flynn on the ground that he had received money from the bank belonging to him, and at the same time sue the bank on the ground that it still remained his debtor, and that the money paid to Flynn was not his money, and did not operate as payment.
In Gardner v. Ogden, 22 N. Y. 327, it was held that the "clerk of a broker employed to sell laud, having access to the correspondence between his principal and the vendor, stands in such a relation of confidence to the latter that, if he becomes the purchaser, he is chargeable as trustee for the vendor, and must reconvey or account for the value of the-land ; and, the vendor having brought suit against both the broker and his clerk, making a claim against the broker for having fraudulently sold the land, and against the clerk for a reconveyance or accounting, the court said : In the present case the plaintiff has elected to regard the purchaser as-his trustee, and his complaint, as to him, . . . proceeds on this basis. The plaintiff therefore elects to affirm the sale-made to Smith. He cannot uno flatu affirm it as to him and disaffirm it as to the defendant Ogden. . . . The affirmance of the sale by the plaintiff is a complete answer to the claim for damages against the firm for fraud in,making the sale."
In Bank v. Beale, 34 N. Y. 473, it was held that when a vendor who has been defrauded in the sale of his goods proceeds to judgment against the vendee upon the contract of sale, after he is apprised of the fraud, his election is determined, and he cannot afterward follow the goods, or the-proceeds thereof, into the hands of a third person on the ground of fraud ; that if a principal, with full knowledge of a fraud perpetrated by his agent, in the disposition of property purchased with his funds, prosecute the agent to judgment for the money so misappropriated, he thereby elects to treat the goods as the property of the agent, and cannot afterward claim their proceeds in the hands of a third party.
In Rodermund v. Clark, 46 N. Y. 354, W. and defendant were joint owners of a sloop. Defendant, ignoring W.'s rights, sold the whole vessel to M. W., after the sale, took and retained possession. .M. thereupon libelled the vessel, as-owner, in the United States district court. She was seized by the marshal, and, M. having obtained judgment by default, she was delivered to him. W. assigned his interest,, and also his claim against defendant, to the plaintiff, who sued for conversion, and it was held that W., having elected to assert Iris rights by retaining possession and refusing to-recognize the sale, he and his assignee were precluded from maintaining an action for the conversion ; that, where a party has an election between inconsistent remedies, he is confined to the remedy which he first chooses. Folger, J., writing the opinion, said : W. " had two courses, either of which he might pursue. He could sue the defendant for the conversion, or he could assert his right of possession, by keeping a permanent possession, or regaining possession, if it was interrupted. The effectually taking of either of these two courses precluded him from taking the other."
In Bowen v. Mandeville, 95 N. Y. 237, it was held that where a party had been induced by fraud to enter into an •executed contract for the purchase of property, he may either rescind and recover back the consideration paid, or affirm the contract and recover damages for the fraud. He cannot have both remedies, as they are inconsistent.
In Cheeseman v. Sturges, 9 Bosw. 246, S., one of the defendants, held real and personal property in trust, to be used for the joint benefit of himself and the plaintiff and a third person, in specified proportions, as co-partners, in a joint enterprise, and under an agreement that he was to make advances for carrying out the enterprise, and that all stocks or other securities than cash which should be received should remain undivided until a final settlement, and that he would not dispose of the property (other than money) without the consent of the others, he accordingly made large advances, and subsequently sold and conveyed all the property without the consent of the plaintiff, and received therefor stock of an incorporated company ; and it was held that the plaintiff, by bringing an action, with full knowledge of these facts, in which he demanded a transfer of his share of the stock, and obtained an injunction against any disposal of it, pending the action, must be deemed to have made his election of that remedy, and be treated as if he had consented to the sale.
. In Mattlage v. Poole, 15 Hun, 556, it was held, in substance, that, where a vendor sells goods to the agent of an undisclosed principal, he may elect whether he will sue the .agent for the price of the goods or the principal, but that he cannot have a recovery against both, and that where he has prosecuted the one to judgment he can have no recovery against the other.
In Riley v. Bank, 36 Hun, 513, plaintiff's intestate^ Mary Biley, had deposited with the defendant upward of •$800. The money was paid to Flannigan during the lifetime of Mary Biley, upon the production by him of the pass-book and Mary Biley's check. It was claimed that at the time of signing the check Mary Biley was of unsound mind, and incapable of executing the same. After Biley was appointed administrator, he presented a verified petition to the surrogate, under section 2706 of the Code of Civil Procedure, charging Flannigan with having corruptly procured an order from Mrs. Biley, knowing her to be insane, and having drawn the'money from the bank, and further averring that he then had the same in his possession, and praying that he be compelled to surrender the same to the petitioner. Flannigan appeared on the return of a citation, and admitted that he obtained the money, from the bank, and that the same.was in his possession, and a decree was entered directing him to deliver the same to the administrator. For his failure to comply therewith, he was committed to the county jail, where he remained until discharged therefrom by the surrogate, because of his inability, from sickness, to bear longer confinement; and it was held that the administrator, by claiming in his petition and procuring a decree of the surrogate's court adjudging that the money in Flannigan's hands belonged to the estate of Mary 'Biley, ratified the.act of Flannigan in drawing the money, and could no longer claim that the bank still owed to him the same money, or bring an action against it to recover the amount of the deposit; that the administrator had an election to treat Flannigan's act in drawing the money in two ways, viz., either to ratify or disavow it; that, having elected to ratify it, he could not thereafter disavow it. That case was appealed to this court, and the order of the General Term, reversing the judgment in favor of the plaintiff, was-here affirmed (103 N. Y. 669). The following authorities-are to the same effect: Curtis v. Williamson, L. R. 10 Q. B. 57 ; Clough v. London & N. W. R. R. Co., L. R. 7 Exch. 26 ; Raymond v. Proprietors, etc., 2 Metc. [Mass.] 319; Sears v. Carrier, 4 Allen, [Mass.] 339 ; Cobb v.. Knapp, 71 N. Y. 348 ; Moller v. Tnska, 87 Id. 166.
This extended examination of the authorities has seemed necessary on account of some difference of opinion upon the-question considered which at first existed among the members of this court. It is seen that they justify the conclusion that plaintiff's election to "sue, and his recovery against' Flynn, furnished a defense to this action.
It is, however, objected on the part of the plaintiff that, the defense that the bank had adopted and ratified the payment to Flynn is not set up in the answer; and such is the-case. "While the defendant alleges in its answer payment to-Flynn, it does not allege that payment was made by the authority of the plaintiff, or that he ratified or adopted it. But there was no such objection upon the trial. All the-facts pertaining to that defense were proved without objection. There was no dispute about the facts, and they were-found by the court. Hence the objection that the answer is-defective is unavailable here.
We are therefore of opinion that the judgment should-be reversed and a new trial ordered, costs to abide the event..
All the judges concurred, except Rugeb, Ch. J.