Island Federal Credit Union v. Gerald Smith 875 N.Y.S.2d198 is a somewhat offbeat case which resulted in an interesting decision by the Second Department of the Appellate Division reversing a Suffolk County Supreme Court Decision. The bank was seeking to recover the proceeds of a bank account opened in the name of a probate estate against the son of the deceased executor. The son was sued both individually and in his capacity as his father’s executor. The bank claimed that the proceeds were paid by mistake to the son .
In its decision, the appellate court determined that the bank account was not a joint account, opining that a "joint tenancy" is an estate held by two or more persons jointly with equal rights to share in its enjoyment during their lives , and creating in each joint tenancy a right of survivorship. The court further stated that joint tenancies may typically involve only natural persons and that a corporation cannot hold property as a joint tenant with a natural person.
Years earlier, the deceased father had been the executor of one Bernard Mallon and had opened an estate bank account in his capacity as Mallon’s executor but also designated himself as a joint tenant of the account. When the elder Smith subsequently died, his son Gerald K. Smith Jr. applied for and received Letters Testamentary to his father’s estate and then withdrew the contents of the father’s joint account with the Mallon estate . The problem here is that in the absence of being able to establish some claim of right to the money originally acquired by the senior Smith from the assets of the Mallon estate (of which he was a fiduciary), the defendant son had no right to withdraw the funds from his father’s account even though he had been named his father’s executor. Because the Mallon estate was not a "natural person", it could not be a joint tenant on a bank account with the late father of the defendant Smith. Since there was no true joint account, Smith had no right to remove the contents in his capacity as his father’s executor since his father had lacked the right to hold the estate’s funds in his capacity as executor in a joint account with himself as an individual.
The money evidently passed to Smith when the bank failed to realize that he had no right to the funds because his father had been legally incapable of creating a joint account with right of survivorship. The old saying that "you just can’t get good help these days" certainly applied to the bank when an employee obviously failed to recognize that there was no viable right of survivorship created by the elder (deceased) Smith. The account should have remained as an estate account with the funds belonging to Mallon’s estate. The principals of equity require that a "party who pays money, under a mistake of fact, to one who is not entitled to it should, in equity and good conscience, be permitted to recover it back". Therefore, even though the appellate court found that triable issues of fact existed as to Smith’s claim of right to the money and refused to permit the bank to recover the funds on motion, it will still be necessary for the defendant Smith to demonstrate on trial that he is entitled to retain the funds before the bank’s case against him would be dismissed. If your faithful lawblogger was an oddsmaker on this one, the bank would be a heavy favorite to win in a race where "place" and "show" are meaningless.