Birnbaum v. Marine Midland Bank, N. A.

— Order, Supreme Court, New York County (Rena Uviller, J.), entered January 31, 1983, denying plaintiff’s motion for summary judgment on his first cause of action and Marine Midland’s cross motion for summary judgment dismissing the second cause of action and for interpleader relief, permitting it to hold the funds on deposit to the credit of the action pending final judgment or discharging it upon payment of the funds into court, affirmed, without costs or disbursements. The action seeks to compel Marine Midland to release funds held in checking, savings and tax escrow accounts and in a certificate of deposit, all in the name of Queensbury Plaza. The bank records for both the savings and checking accounts authorized withdrawals to be made by plaintiff, Saul Birnbaum (Saul), or defendant, Jay Birnbaum (Jay). The tax escrow account, which was to be maintained as long as there was an outstanding mortgage debt, was to be renewed or paid into the checking account on maturity. Prior to commencement of this action to compel the bank to release the funds on deposit, Jay had brought an action on March 30, 1982, against Saul in Supreme Court, Monroe County, to enforce a joint venture agreement and for an accounting, contending that he was entitled to a one-third interest as a joint venturer. Two months later, on May 27, 1982, Jay alone instructed Marine Midland to permit no withdrawals from the accounts unless the signatures of both Saul and Jay appeared thereon. As a result, the bank refused to comply with Saul’s direction to transfer the certificate of deposit, pointing to the existence of conflicting claims. By order and judgment entered July 28, 1982, Justice Lyman Smith in the Monroe County action dismissed the action on a finding that the failure of Jay to make a capital contribution, as required by the joint venture agreement, precluded Jay from any interest in Queensbury Plaza. In regard to the “alleged joint venture”, he declared that Jay “had no interest therein or thereunder.” Jay’s motion for renewal and reargument, wherein he claimed that the entity actually was an existing partnership and that he was not required to make any contribution as a condition to the accrual of any partnership rights, was denied and no appeal has been taken. Here, in denying both the motion and cross motion for 777 summary judgment, Special Term found that there were factual questions as to whether Jay had any right to the moneys on deposit on some legal basis other than the joint venture agreement, thereby constituting a separate and different issue than that disposed of in the Monroe County action. As between Saul and Jay, there are conflicting claims to the deposits, the entitlement to which not having been resolved by the disposition in the Monroe action. Clearly, the decision and orders of the Monroe County action are only determinative of the fact that Jay had no interest in Queensbury Plaza as a joint venturer. Relitigation would be precluded under established res judicata and collateral estoppel principles (Schwartz v Public Administrator of County of Bronx, 24 NY2d 65; Smith v Russell Sage Coll., 54 NY2d 185). However, there remains for disposition whether Jay has any other legal interest in the fund, which has not been determined. The factual issue precludes summary resolution as to the first cause of action. We find that the cross motion by Marine Midland for interpleader relief and for dismissal of the second cause of action, sounding in conversion, was properly denied. While the bank has asserted no claim to the funds on deposit, on this record it is not a mere stakeholder. Plaintiff charges that the bank honored checks on the Queensbury accounts which had been signed by Janice Birnbaum, Jay’s mother, who apparently had no authority and no interest in Queensbury Plaza. Marine Midland’s records confirm, at least on the surface, that Janice was not authorized to draw against the Queensbury accounts. While we recognize that the bank has asserted no specific claim to the funds, under the circumstances of this case, involving, inter alia, a claim that the bank acted improperly and inconsistently with its depositor’s instructions in honoring those checks, payment into court and discharge as stakeholder under CPLR 1006 (subd [f]) and section 134 (subd 6, par [b]) of the Banking Law would be inappropriate and unwarranted. The signature cards executed when the accounts were established required the signature of either Saul or Jay for any withdrawal. The refusal to honor Saul’s instructions to pay over the funds in light of conflicting claims may be appropriate under subdivision 4 of section 134 of the Banking Law. However, Saul’s claim that the bank improperly honored checks drawn by Janice, who had no authority to do so, may amount to a conversion (see Hillsley v State Bank of Albany, 24 AD2d 28; Tonelli v Chase Manhattan Bank, 53 AD2d 183, affd 41 NY2d 667). With due deference to the function of the court on a motion for summary judgment as issue finding, not issue determination, there is a question here of whether the actions by Marine Midland were consistent with the obligations imposed upon it when the accounts were open. At this stage in the litigation, we cannot determine on this record whether the bank is entitled to the protection afforded by subdivision 4 of section 134 of the Banking Law. While the bank claims that it acted in accordance with Jay’s letter request directing that no withdrawals be made except upon the signatures of both Saul and Jay — contrary to the instructions given when the accounts were opened — the claim that defendant improperly honored checks drawn by one lacking requisite authority is sufficient at this stage to deny interpleader relief and consequent discharge as a stakeholder. As to the proposal by the dissent that the moneys on deposit be applied to the reduction of the note and mortgage, this would disregard the relief sought by the plaintiff herein, in expressly seeking that the bank “turn over these accounts to me * * * to begin construction during this construction season.” Furthermore, there are other considerations militating against the dissent’s suggestion, namely, Jay Birnbaum may ultimately be found to have an interest in those funds and his possible rights should not be ignored. Also, the bond and mortgage may preclude payment and the ultimate owners of such moneys máy desire to use the fund for a different purpose, without judicial interference or mandate to prepay the mortgage. 778 Finally, none of the parties, including the bank, seeks such relief. Concur — Asch, Milonas and Kassal, JJ. Kupferman, J. P., dissents in part in a memorandum and Silverman, J., concurs in part and dissents in part in a separate memorandum, as follows.