Flatow v. Jefferson Bank

McLaughlin, J.: Isidor L. Flatow died intestate on the 28tli of February, 1907. At the time .of his death he had a deposit in the defendant bank and the balance in his favor on' that day amounted to $653.62. About a month prior to his death he requested the bank to discount a note for $500. The note was made by one Samuel Mishkóff, payable to Flatow’s order in ninety days from date. Flatow indorsed the note and it was discounted by the defendant, the proceeds being credited to his. account. This action was brought by his adminis [25] tratrix to recover the balance standing to his credit. As a defense the defendant alleged that it was induced to discount the note by Flatow’s false and fraudulent representations to- the effect that he was then worth from $12,000' to $15,000 over and above his liabilities, and that Mishkoff, the maker of the note, was engaged in business on his own account and was a solvent and responsible person ; and by reason of such false and fraudulent representations it claimed the right to set off $500 of the deposit against the note, admitting its indebtedness for the balance, $153.62. The defendant had a verdict of no cause of action, and from a judgment entered thereon and an order denying a motion for a new trial the plaintiff appeals. The evidence justified the jury in finding that the statements made by Flatow as to his solvency were false and that he was not at that time, nor at the time of his death, -worth any amount whatever over and above his liabilities; on the contrary, that his estate was insolvent; that the maker of the note was not engaged in business on his own account, and that he had no property whatever. It also justified the jury in finding that the defendant relied upon the statements made, by Flatow and believed them to be true when it discounted the note. . The note, therefore, having been discounted by means of false' and fraudulent representations, the defendant had. a right at any time thereafter upon discovering the fraud to rescind the transaction and cancel the credit given, and this right related back to the time when the transaction was commenced. The personal representative of Flatow, upon his death, took such rights as he had and no more., (Peyman v. Bowery Bank, 14 App. Div. 432.) When the bank rescinded the contract Flatow became indebted to it for the amount which he had received, and this irrespective of whether the credit be regarded as money of the plaintiff’s intestate or the bank’s own money. In either case the money never belonged to Flatow, nor was he entitled to' the credit, and to the extent, therefore, of $500, Flatow’s administratrix has no interest therein or claim thereto. As was said in Andrews v. Artisans' Bank (26 N. Y. 298): “ If the facts respecting the discount of Bensen’s note were such as the defendant offered to prove them, the credit which the plaintiff obtained on the defendant’s books, being the result of his fraud, was [26] unavailing either as a contract for the payment of the sum which was in form credited or as evidence of money of the plaintiff in the defendant’s hands. The contract to pay the amount to the plaintiff upon his checks in the usual course of banking business, which would have arisen, if no fraud had intervened, could not be predicated of the transaction if it should appear to have been brought about by .the fraud of the party seeking to avail himself of it. Fraud vitiates every contract and renders void as to the guilty party every transaction into which it enters.” The jury, therefore, was justified in finding that the defendant was not indebted to the plaintiff to the extent of $500, but as to the balance of the deposit, $153.62, plaintiff was clearly entitled- to recover, and the verdict is not sustained by the evidence. To the extent of this balance the defendant admitted in his answer that the plaintiff was entitled to recover, and a verdict should have been directed in plaintiff’s favor- for that amount, but instead a verdict of no cause of action was rendered, which was permitted to stand, The judgment, is erroneous to this extent, and inasmuch as. counsel for the defendant, admitted the error, and consented in open court upon the argument of "the appeal that the same might be corrected by directing a judgment against defendant in plaintiff’s favor for $153.62, without costs, such disposition will be made. The order appealed from is affirmed, without costs to either party, and the judgment modified, directing a judgment in favor of the plaintiff and against the defendant for $153.62, without costs to . either party in this court or in the court below. Ingraham, Clarke, Houghton and Soott, JJ., concurred. Order affirmed, without costs, and judgment ordered as directed in opinion, without costs. Settle order on notice.