Case Name: James A. Wareham, Respondent, v. Eagle Savings and Loan Company, Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1918-07-31
Citations: 185 A.D. 25
Docket Number: 
Parties: James A. Wareham, Respondent, v. Eagle Savings and Loan Company, Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 185
Pages: 25–41

Head Matter:
James A. Wareham, Respondent, v. Eagle Savings and Loan Company, Appellant.
Second Department,
July 31, 1918.
Savings and loan companies — suit by member for rescission of shares and for recovery of deposits — fraud — evidence.
In a suit to secure the cancellation of shares or subscriptions in a savings and loan company and for the recovery of money paid, upon the ground that the plaintiff had made deposits in reliance upon statements by the defendant that it was doing a banking business based on deposits and withdrawals upon open account, the same as in savings and business banks, evidence held, to sustain the conclusions of the trial court that plaintiff was deceived by the fraudulent representations of the defendant, and that a decree for rescission should be granted.
Mills and Thomas, JJ., dissented, with opinion.
Appeal by the defendant, Eagle Savings and Loan Company, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Kings on the 30th day of November, 1917, upon the decision of the court after a trial at the Kings County Special Term.
Defendant is a savings and loan association, existing by virtue of the laws of New York, now article 10 of the Banking Law (Consol. Laws, chap. 2 [Laws of 1914, chap. 369], as amd.).
The complaint alleged that on and after June 18, 1907, defendant represented to plaintiff and to others, to induce deposits of savings with it, that defendant was doing a banking business based on deposits and withdrawals on open account the same as in savings and business banks; that it would receive deposits for checking account, and would repay all or any part thereof to plaintiff or to his order, at any time on demand, with four per cent interest on any balances to plaintiff’s credit; that plaintiff, relying on such statements, was induced to deposit $400 on June 18, 1907, and sundry other payments between that date and October 5, 1914, amounting in all to $1,724, against which plaintiff had withdrawn $200 by an ordinary commercial bank check, leaving a balance to plaintiff’s credit of $1,524, with interest. Plaintiff also averred that he had received a pass book in which such deposits and withdrawals were entered; that plaintiff had not subscribed for any shares; that any entry of plaintiff’s name as a subscriber to shares was without plaintiff’s knowledge or consent; that he never received any certificate of share ownership; that, having learned that his name had been entered as a subscriber for thirty shares, thereby apparently obligating him to pay $2,600 in addition to the $400 originally deposited, and having discovered the falsity of defendant’s representations, the plaintiff presented his pass book and offered to surrender same on being paid the balance to his credit, and asked that his name be stricken from defendant’s books as a shareholder, also that defendant cancel any such shares so issued to him, which defendant refused. The complaint also averred that such agreement to receive such deposits and to pay interest thereon was ultra .vires and void. Plaintiff asked the relief that such shares or subscription be canceled, with a recovery of the sum of $1,524 so paid.
The answer admitted defendant’s incorporation; that plaintiff had filed a notice of withdrawal of his balance on class B savings shares of defendant, with a general denial of plaintiff’s other allegations.
The court found that defendant made the representations alleged; that thereby plaintiff was deceived into the belief that defendant did a banking business; that when plaintiff made his first deposit of $400 defendant induced him to sign a card by telling plaintiff “ that it was an identification card whereon defendant, without plaintiff’s knowledge or consent, wrote the figures 1 30 ’ between the words ‘ subscription ’ and ‘ shares ’ printed on said card, but plaintiff never intended to subscribe for shares nor knew that he was or was deemed to be subscribing for shares, and plaintiff never received any shares or any certificate evidencing his alleged subscription or ownership of shares.” The court also found that before January 1, 1915, plaintiff had presented his pass book to the defendant, and demanded payment of the moneys due him, with cancellation of such shares, which defendant had refused.
The court refused to find, as defendant had requested, that by an order of this Appellate Division (Matter of Eagle Savings & Loan Co., 164 App. Div. 867), bearing date December 11, 1914, the defendant’s liability to plaintiff had been reduced nine and eighteen one-hundredths per cent, amounting to $192.22.
Almet Reed Latson, for the appellant.
Joseph R. Clevenger, for the respondent.

Opinion:
Putnam, J.:
This record, accompanied by the original exhibits, amply supports the findings of fact. On the one side were the plaintiff's positive statements, against which were denials by the defendant's secretary which became materially qualified on cross-examination. Asked what Mr. Wareham said when he came into defendant's office, Mr. Wood, the secretary, testified: " That he wanted — well, substantially he wanted an account that he could deposit, make payments and draw money out when he chose. Q. Did he say he wanted to subscribe for shares? A. Well, he certainly did, because I — Q. Did he request you, did he ask you, did he say that he wanted to subscribe for shares when he first came in? A. I can't just recollect what his wording was. Q. When Mr. Wareham came to the window with his money, did he say that he wished to subscribe for shares before you mentioned anything about shares to him? A. I don't recollect that. Q. Don't you know that he did not? A. I don't recollect whether he did or not."
The secretary finally admitted that he then knew that plaintiff wanted to deposit money and not to borrow money, so that he could withdraw any or all of such deposit at any time. Also that he told plaintiff he could do so, and further that he did not say anything to plaintiff about any sixty-day notice before such withdrawal. Regarding the witness' statement that he had told plaintiff he was subscribing for thirty shares, he testified on cross-examination: " Q. You say you told Mr. Wareham that he was subscribing for 30 shares? A. Yes, sir. Q. What did Mr. Wareham say? A. I don't recollect what Mr. Wareham said, but he subscribed for them. Q. Did you tell him what was the face amount of the shares? A. No, I might not unless he asked me. Q. Do you recollect whether he did or did not? A. I don't recollect it. Q. Did you tell him that he would be required to make payments on account of shares? A. I don't recall just the conversation on those particular — on that particular thing. Q. Did you tell him that by subscribing for shares he would become a member of the defendant? A. Not necessarily. ' Q. Did you? Can you testify affirmatively that you told him that he would become a member? A. I only testified now to just that — answered to that question. Q. Did you tell Mr. Wareham that he might by subscribing to shares have to pay losses in case the company had losses? A. Why, no, I did not. Q. You knew that Mr. Wareham thought at the time he deposited that money that he was opening an account with you by which he could draw by check from time to time, didn't you? A. No. Q. Didn't you tell him that? A. No. Q. Did you tell him that he could deposit money with you and withdraw any or all of it as he pleased? A. Yes."
We find no ground to question the conclusions of the learned court, who had the advantage of seeing the witnesses.
The point, however, remains, whether the facts found justify a decree for rescission.
Defendant's future ability to pay a certain rate of interest was not the point represented. The representation went directly to the root of the mutual relations, leading plaintiff to part with his savings on the belief that he was and would be a depositor pure and simple, not a subscriber for $3,000 in defendant's shares, and hence a participant in its risks.
The peculiar forms of the " signature card," " deposit slip," and the " pass book," all simulated like incidents of accounts with a bank. Such close resemblances (save parts in finer print) would naturally mislead an unskilled customer. By them defendant was obviously held out as a bank, upon which checks passed current. The circumstance that the promise to pay was in futuro did not make these false appearances the less fraudulent.
A depositor in a genuine bank can withdraw his money ' although such right may be a qualified one. A subscription contract for shares, if bona fide, raises an indebtedness to be gradually paid off, followed by delivery of share certificates. Here this was industriously put out of sight by the practice of the depositors' free checking, so that checks on defendant, like those of a real bank, passed through the New York Clearing House. Such convenient check books brought in new customers and quieted any doubts of those already enrolled. How indeed should they surmise that back of this complete guise of a regular bank lay a subscription contract for enough " shares " to absorb all their accumulated savings? The judgment, therefore, rightly treated the plaintiff as deceived and defrauded, and afforded him the fitting remedy of rescission.
Such disposition follows our prior rulings as to this same defendant. (Miller v. Eagle Savings & Loan Co., 174 App. Div. 581; Babeuf v. Eagle Savings & Loan Co., 180 id. 909; Wilcock v. Eagle Savings & Loan Co., Id. 911; Fox v. Eagle Savings & Loan Co., Id. 909; Payne v. Eagle Savings & Loan Co., Id. 910.) We are unable to follow Rosenkranz v. Eagle Savings & Loan Co. (180 App. Div. 388), which passed on testimony different .from that in the case here.
The judgment should be affirmed, with costs.
Blackmar and Kelly, JJ., concurred; Mills, J., read for reversal, with whom Thomas, J., concurred.