Pagano v. United Jersey Bank

• Decision Date: 22 January 1996
• Parties: Linda PAGANO, Administratrix of the Estate of Rose Guarino, Plaintiff-Respondent, v. UNITED JERSEY BANK, Defendant-Appellant, and Peoples Trust of New Jersey, ABC Company, DEF Company and John Doe (said names being fictitious and unknown), its servants, agents and/or employees, jointly, severally or in the alternative, Defendants.
• Court: New Jersey Supreme Court

Page 220

143 N.J. 220

670 A.2d 509

Linda PAGANO, Administratrix of the Estate of Rose Guarino Plaintiff-Respondent, v. UNITED JERSEY BANK, Defendant-Appellant and Peoples Trust of New Jersey, ABC Company, DEF Company and John Doe (said names being fictitious and unknown), its servants, agents and/or employees, jointly, severally or in the alternative, Defendants.

Supreme Court of New Jersey.

Argued Oct. 11, 1995.

Decided Jan. 22, 1996.

James J. Kreig, Princeton, for appellant (Marian B. Copeland, attorney; Mr. Kreig and Richard J. Grossi, of counsel; Ms. Copeland, on the briefs).

Louis Mangano, Elmwood Park, for respondent.

Michael F. Spicer, Princeton, amicus curiae, New Jersey Bankers Association (Jamieson, Moore, Peskin & Spicer, attorneys).

The opinion of the Court was delivered by

COLEMAN, J.

The issue raised by this appeal is whether the common-law rebuttable presumption of payment after a lapse of twenty years should be applied to a passbook-savings account when the issuing bank has no record of the account and has never stamped or otherwise marked the passbook canceled or closed. The Appellate Division held that the presumption was inapplicable. Pagano v. United Jersey Bank, 276 N.J.Super. 489, 648 A.2d 269 (1994). We agree and affirm.

I

On July 10, 1970, Rose Guarino deposited $4,400 into Peoples Trust Company of New Jersey (Peoples Trust), a state-chartered commercial bank. She received a "pyramid passbook account" in her name reflecting the deposit. On May 1, 1975, Peoples Trust became United Jersey Bank (UJB). Fifteen years later, Rose Guarino died of cancer. She had been healthy until her final illness and resulting death.

In August or September 1990, decedent's daughter, Linda Pagano discovered the passbook in decedent's bedroom dresser. The passbook did not reflect any transactions other than the initial deposit. No other evidence related to the account was found among the decedent's personal belongings.

Within one week after finding the passbook, Pagano presented it to UJB and requested payment of the full deposit plus accumulated interest. UJB denied the request, stating that because it had no record evidencing the existence of the account, it was presumed paid.

Pagano, as administratrix of her mother's estate, instituted the present litigation to compel payment. UJB defended on the basis that the claim was barred by the six-year statute of limitations, N.J.S.A. 2A:14-1, and by virtue of the common-law rebuttable presumption of payment after a lapse of twenty years. The trial court rejected the statute of limitations defense and denied UJB's motion to charge the jury on the presumption of payment. The jury rejected UJB's claim that payment had been made and returned a verdict of $4,400 in favor of Pagano. The trial court ordered that interest in the amount of $9,022.98 be added to the judgment.

The Appellate Division affirmed, holding that the cause of action did not accrue until Pagano's demand for payment was rejected. It also held that the common-law presumption of payment was not applicable to passbook-saving accounts. Pagano, supra, 276 N.J.Super. at 496-98, 648 A.2d 269. We granted UJB's petition for certification. 142 N.J. 446, 663 A.2d 1354 (1995).

II

UJB argues that the Appellate Division should have applied the common-law rebuttable presumption of payment to the savings account. It contends that the presumption of payment should arise in favor of a bank when a passbook is produced that shows no entries for at least twenty years, and the bank has no record of the account.

In support of this argument, UJB asserts that New Jersey has recognized the presumption of payment doctrine for over 200 years.

-A-

New Jersey has recognized a rebuttable common-law presumption of payment of a debt based on the lapse of twenty years in areas other than bank deposits for over two centuries. See, e.g., Mathews v. Kelly, 70 N.J.Eq. 796, 796-97, 67 A. 1075 (E. & A. 1906) (applying presumption to guardian's disposition of ward's funds twenty years after final accounting); Magee v. Bradley, 54 N.J.Eq., 326, 329, 35 A. 103 (Ch.1896) (applying presumption of payment to mortgage); Peacock v. Newbold's Exr's., 4 N.J.Eq. 61, 70-72 (Ch.1837), aff'd o.b., 5 N.J.Eq. 535 (E. & A. 1845) (applying presumption of payment to legatee); Executors of Wanmaker v Van Buskirk, 1 N.J.Eq. 685, 693 (Ch.1832) (applying presumption of payment to mortgage); Mease v. Stevens, 1 N.J.L. 495, 496 (Nisi Prius 1793) (applying presumption of payment to debt involving bond). Cf. Kushinsky v. Samuelson, 142 N.J.Eq. 729, 731-32, 61 A.2d 287 (E. & A.1948) (applying presumption of non-payment of mortgage); Conlon v. Hornstra, 82 N.J.L. 355, 357, 83 A. 183 (Sup.Ct.1912) (applying presumption of non-payment of bond); Guerin v. Cassidy, 38 N.J.Super. 454, 460, 119 A.2d 780 (Ch.Div.1955) (applying presumption of non-payment of debt); Betts v. Van Dyke, 40 N.J.Eq. 149, 152 (Ch.1885) (finding the presumption of payment of late claim to legatee was rebutted).

Historically, the rebuttable presumption of payment originated in equity by analogy to the English statute of limitations as early as the statute of 32 Henry VIII, C.F. (1540), and was later made part of the common law. Kyle v. Green Acres at Verona, Inc., 44 N.J. 100, 103, 207 A.2d 513 (1965); Metlar v. Williams, 86 N.J.Eq. 330, 332, 97 A. 961 (Ch.1916). A statute of limitations bars a claim after the passage of a specified time. The common-law rebuttable presumption of payment, on the other hand, is used as evidence, based on the lapse of time, to create a rebuttable inference that the debt has been paid or otherwise satisfied. The presumption is based on the assumption that a person, before the passage of twenty years, would have recovered what belonged to that person unless prevented by some impediment. Gulick v. Loder, 13 N.J.L. 68, 71-74 (Sup.Ct.1832). The persuasiveness of the presumption may be strengthened or diminished by evidence supporting or contradicting the significance of the lapse of time.

Earlier cases applying the presumption recognized that it was based on social policy and convenience. That policy was established, not because of a belief that payment was actually made, but because available proofs to establish either payment or non-payment after the passage of so much time was simply unreliable, if indeed available. Magee, supra, 54 N.J.Eq. at 329-31, 35 A. 103. Another acknowledged policy was the need to establish who had the right to possession primarily through foreclosure. Executor of Wanmaker, supra, 1 N.J.Eq. at 692. Whenever the presumption was applied in this State, it was limited to those cases in which the circumstances failed, prima facie, to explain, justify or provide good cause for the creditor's delay in seeking payment of a debt. See, e.g., Metlar, supra, 86 N.J.Eq. at 332, 97 A. 961 (applying presumption after lapse of twenty years without explanation); Blue v. Everett, 55 N.J.Eq. 329, 342, 36 A. 960 (Ch.1897) (same), aff'd, 56 N.J.Eq. 455, 39 A. 765 (E. & A.1898); Peacock, supra, 4 N.J.Eq. at 70-71 (same).

Recently, the presumption has not been applied at all in this State. It was applied in a reported decision for the last time in 1939. See Phair v. Melosh, 125 N.J.Eq. 497, 501, 6 A.2d 491 (Ch.1939), aff'd, 127 N.J.Eq. 15, 11 A.2d 32 (E. & A.1940). The more recent trend, as observed by the Appellate Division, supra, 276 N.J.Super. at 497, 648 A.2d 269, appears to be away from reliance on the presumption of payment, and instead, on the statute of limitations barring entry into realty twenty years after the right of entry accrues. See Lake Waterloo Corp. v. Kestenbaum, 10 N.J. 525, 529, 92 A.2d 478 (1952) (stating that owner of tax-sale certificate "relie[d] on the presumption of payment [that] arises from" the statute of limitations barring entry into real estate after twenty years); Hollings v. Hollings, 8 N.J.Super. 552, 555-56, 73 A.2d 755 (Ch.Div.1950), aff'd, 12 N.J.Super. 57, 78 A.2d 919 (App.Div.1951) (holding that foreclosure of mortgage and collection on mortgage bond were barred by twenty-year and sixteen-year statutes of limitations). The reason for that result seems to be that "the multiplied statutes of limitation have reduced the occasions for invoking any other rule[,] and it is not frequent that a real rule of presumption is intended to be laid down." 9 Wigmore on Evidence § 2517 (Chadbourn rev. 1981).

-B-

New Jersey has never applied the presumption to a bank deposit, but eleven other jurisdictions have. In those jurisdictions, the bank prevailed in less than one-third of the cases in which the bank did not present affirmative evidence from its records to support its claim of payment. The types of bank accounts to which states have applied the presumption are divided into three categories: checking accounts, savings accounts and certificates of deposit.

Two states have applied the presumption to checking accounts: Boscowitz v. Chase Nat'l Bank of New York, 202 Misc. 1016, 111 N.Y.S.2d 147, 150 (Mun.Ct.1952), and Commerce Union Bank v. Horton, 475 S.W.2d 660, 662 (Tenn.1972).

Six states have applied the presumption to passbook-saving accounts: Owens v. Bank of Brewton, 53 Ala.App. 529, 302 So.2d 114, 116-17 (1974); Hicks v. Exchange Bank & Trust Co., 252 Ark. 61, 478 S.W.2d 54, 56 (1972); In re Fantozzi, 183 Ill.App.3d 732, 132 Ill.Dec. 30, 32, 539 N.E.2d 340, 342 (1989); Morse v. National Cent. Bank of Baltimore, 150 Md. 142, 132 A. 598, 603 (1926); Second Nat'l Bank of Titusville v. Thompson, 44 Pa.Super. 200, 205-06 (Pa.Super.Ct.1910); and Central Nat'l Bank of McKinney v. Booher, 557 S.W.2d 563, 565 (Tex.Civ.App.1977).

Two states have applied the presumption to certificates of deposit: Long v. Straus, 124 Ind. 84, 24 N.E. 664 (1890), and Blackstone v. First Nat'l Bank of Cody, 64 Wyo. 318, 192 P.2d 411, 413 (1948). Virginia has applied the presumption to a savings certificate. Wool v. Nationsbank of...