Marine Midland Bank v. John E. Russo Produce Co.

• Decision Date: 10 November 1978
• Citation: 410 N.Y.S.2d 730,65 A.D.2d 950
• Parties: MARINE MIDLAND BANK, Appellant, v. JOHN E. RUSSO PRODUCE CO., Canestraro Produce, Inc., John E. Russo, Rita Russo, Andrew Russo and Joseph Russo, Respondents.
• Court: New York Supreme Court — Appellate Division

Page 730

410 N.Y.S.2d 730

65 A.D.2d 950

MARINE MIDLAND BANK, Appellant, v. JOHN E. RUSSO PRODUCE CO., Canestraro Produce, Inc., John E Russo, Rita Russo, Andrew Russo and Joseph Russo Respondents.

Supreme Court, Appellate Division, Fourth Department.

Nov. 10, 1978.

Hancock, Estabrook, Ryan, Shove & Hust, by Richard Cook, Syracuse, for appellant.

Rinaldi & Rinaldi, by John Rinaldi, Syracuse, for respondents John E. Russo Produce Co., Inc., John E. Russo and Rita Russo.

Goldberg & Sanders, by Minna Buck, Syracuse, for respondents Canestraro Produce, Inc., Andrew Russo and Joseph Russo.

Before MARSH, P. J., and CARDAMONE, SIMONS, DILLON and SCHNEPP, JJ.

MEMORANDUM:

In this action for fraud and conversion, appellant claims that it was damaged as the result of a "check-kiting" scheme engaged in by the defendants. At the trial appellant offered proof to show that John E. Russo Produce Co., Inc. ("Russo") deposited checks in its account with appellant based on checks drawn on Russo's Citibank account, where no real funds existed, and covered the Citibank checks with checks drawn on its account with appellant, causing the account to be overdrawn on January 19, 1977. During this period numerous checks were drawn on the Russo Citibank account to Canestraro Produce, Inc. ("Canestraro"), a family-owned corporation with close familial and business ties to Russo and were deposited in Canestraro's account with plaintiff. In response to written interrogatories the jury found that these acts did not constitute fraud or conversion and that appellant was damaged in the amount of $309,800.00 on which the court entered judgment in favor of all defendants. Appellant requests a reversal of the judgment or in the alternative a new trial.

The apparent inconsistency of the jury's verdict does not merit its reversal. The jury was supplied with a list of twelve questions headed by the statement "in addition to a general verdict, you must answer the following questions." The first ten questions inquired whether the five defendants were liable for either fraud or conversion. The eleventh question asked: "Marine Midland has alleged that it was damaged in the amount of $309,800.00 . . . In what amount, if any, do you determine it was injured?" The trial judge instructed the jury that if they answered "no" to the first ten questions, they need not answer questions eleven and twelve, and that their verdict would then be no cause of action as to all the defendants. The jury answered "no" to questions one through ten and, disregarding the court's instructions, answered "$309,800.00" to question eleven. Question twelve was not answered. Thus the jury found no liability on the part of respondents under the only two theories submitted. Question eleven is couched in terms of "injury" not liability and the bank's injury was never disputed. A general verdict is merely a conclusion drawn from the components of the jury's findings. "When the answers are consistent with each other but one or more is inconsistent with the general verdict, the court shall direct the entry of judgment in accordance with the answers, notwithstanding the general verdict . . ." (CPLR 4111, subd. (c)). Here the only conclusion that can be drawn from their answers is that the jury rendered a verdict in favor of the defendants and the failure by the jury to formally articulate that conclusion must be held to be inadvertent and nonprejudicial.

However, the court committed reversible error in charging that no unfavorable inference could be drawn from the invocation by John and Rita Russo of the Fifth Amendment when questioned about the "check-kiting" scheme. Their knowledge was a central issue in the controversy. The trial court should have charged the jury that it could infer that their testimony would not support their version of the case and that the jury could draw the strongest inferences against them that the opposing evidence allowed (Matter of Bernard v. Lavine, 48 A.D.2d 616, 367 N.Y.S.2d 786, app. dsmd. 36 N.Y.2d, 32, 982, 374 N.Y.S.2d 602, 337 N.E.2d 118, app. dsmd. 37 N.Y.2d 773, 375 N.Y.S.2d 95, 337 N.E.2d 604; Gonzalez v. Dumpson, 46 A.D.2d 861, 361 N.Y.S.2d 666, app. dsmd. 36 N.Y.2d 806, 369 N.Y.S.2d 1027, 330 N.E.2d 658; Bradley v. O'Hare, 2 A.D.2d 436, 442, 156 N.Y.S.2d 533, 539; see Rosa v. Blander, 47 A.D.2d 865, 366 N.Y.S.2d 36; Marrone v. Williamson, 40 A.D.2d 873, 338 N.Y.S.2d 91, app. withdrawn 32 N.Y.2d 645, 342 N.Y.S.2d 852, 295 N.E.2d 651; Richardson, Evidence, § 534 (10th ed.); see PJI 1:75).

A verdict in favor of the defendant will not be set aside as against the weight of the credible evidence "unless the preponderance in favor of the plaintiff was so great that the finding in favor of the defendant could not have been reached upon any fair interpretation of the evidence." (Abdoo v. Wentworth, 49 A.D.2d 1002, 375 N.Y.S.2d 226, 227; McDowell v. DiPronio, 52 A.D.2d 749, 382 N.Y.S.2d 201). In its case against the defendants Russo and John Russo, plaintiff established all the elements of its cause of action for fraud by uncontroverted evidence. Unrebutted testimony confirmed that John Russo had actual knowledge of the state of the corporate accounts. Also, as an officer and active participant in the management of the corporation, he would be held to have knowledge of the accounts as drawer of the checks (see A. Sam & Sons Produce Co. v. Campese, 14 A.D.2d 487, 217 N.Y.S.2d 275 and cases cited therein.

A finding of liability against Canestraro for fraud is dependent upon a finding of knowledge that the checks from Russo were drawn on "kited" funds. Although at times overdrafts in the Canestraro account were covered by Russo Citibank checks, no Russo check deposited by Canestraro was returned as uncollectible and its account was not overdrawn on January 19, 1977. It had no involvement with the checks in question. When Canestraro deposited Russo's checks in its account with appellant it made no representation express or implied as to the sufficiency of Russo funds. Furthermore, there was...