Sunwest Bank of Albuquerque, N.A. v. Colucci

Decision Date10 March 1994
Docket NumberNo. 20673,20673
Citation117 N.M. 373,872 P.2d 346,1994 NMSC 27
PartiesSUNWEST BANK OF ALBUQUERQUE, N.A., Plaintiff-Appellee and Cross-Appellant, v. Michael A. COLUCCI, Defendant-Appellant and Cross-Appellee.
CourtNew Mexico Supreme Court

MONTGOMERY, Chief Justice.

The principal issue in this case, discussed later in this opinion, relates to a subject arising frequently in New Mexico caselaw--prejudgment interest. We seek to clarify the circumstances under which each of the two New Mexico statutes governing an award of prejudgment interest, NMSA 1978, Sections 56-8-3 (Repl.Pamp.1986) and 56-8-4(B) (Cum.Supp.1993), is applied.

The case consists of an appeal and a cross-appeal from a judgment awarding a bank restitution for a mistaken payment. On appeal, the recipient of the payment argues that the trial court misapplied the doctrine of unjust enrichment. On cross-appeal, the bank argues that the trial court erred by failing to award prejudgment interest and by awarding postjudgment interest at a variable rate. We affirm in part, reverse in part, and remand for further proceedings.


In October 1964, Mona Florence and Sue Rutter were joint tenants in checking account No. 24-1987-4 ("the Account") at Sunwest Bank of Albuquerque ("the Bank"). Mona Florence married Michael Colucci ("Colucci") in 1978, and at some point she and Ms. Rutter directed Sunwest Bank to add Colucci as a P.O.D. (payable on death) beneficiary to the Account. Mona Florence Colucci died in May 1990.

After his wife's death, Colucci called the Bank about the Account and was told that the money in the Account did not belong to him. On June 5, 1990, Colucci went to the Bank and spoke to Arnold Cordova, who was relieving the branch manager during the manager's vacation, about withdrawing the funds in the Account. Cordova mistakenly reviewed the signature card to another account, No. 24-79-001, a joint account between Colucci and Mrs. Colucci, rather than the correct card for the joint account (the Account) between Mrs. Colucci and Ms. Rutter. He then issued a cashier's check for the balance in the Account, $12,256.51, and gave it to Colucci.

On September 14, 1990, the Bank filed a complaint against Colucci for money paid by mistake and unjust enrichment, requesting interest on the money due from the date of the mistaken payment. The Bank claimed that it had mistakenly paid Colucci funds from the Account and that the money in that account belonged to Ms. Rutter, not Colucci, upon Mrs. Colucci's death. The court conducted a bench trial in April 1992 and in May entered judgment in favor of the Bank. The court concluded that the balance in the Account had been paid to Colucci by mistake and that he had been unjustly enriched. Colucci was ordered to pay the Bank $12,256.31, with postjudgment interest to be calculated "at a variable rate equal to the rate paid by [the Bank] to the Federal Reserve for funds borrowed." No prejudgment interest was awarded. Colucci, by the personal representative of his estate,1 appeals from the judgment; and the Bank cross-appeals.

On appeal, Colucci argues that (1) the trial court misapplied the doctrine of unjust enrichment because it failed to consider whether Colucci was in fact unjustly enriched and whether the enrichment was at the Bank's expense, and (2) that the Bank should not be entitled to restitution because the harm was caused by its repeated negligence and failure to exercise due diligence. We affirm the trial court's judgment in favor of the Bank.

The Bank contends on cross-appeal that the trial court erred in refusing to permit it to recover prejudgment interest and in setting postjudgment interest at a variable rate. We reverse the trial court on the Bank's cross-appeal and remand for further proceedings.


We now address the issues raised by Colucci on his direct appeal. We begin by reiterating the time-worn axioms that the judgment of the trial court will not be disturbed on appeal if the findings of fact entered by the trial court are supported by substantial evidence and are sufficient to support the judgment, e.g., Whorton v. Mr. C's, 101 N.M. 651, 653, 687 P.2d 86, 88 (1984), and that substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion, e.g., Haaland v. Baltzley, 110 N.M. 585, 588, 798 P.2d 186, 189 (1990). We also note that when a party is challenging a legal conclusion, the standard of review is whether the law was correctly applied to the facts. Golden Cone Concepts, Inc. v. Villa Linda Mall, Ltd., 113 N.M. 9, 12, 820 P.2d 1323, 1326 (1991).

Colucci contends that the trial court erred in finding that he had been unjustly enriched. There is no question that "[a] person who has been unjustly enriched at the expense of another is required to make restitution to the other." Restatement of Restitution Sec. 1 (1937); see Hydro Conduit Corp. v. Kemble, 110 N.M. 173, 175, 793 P.2d 855, 857 (1990) (citing Restatement of Restitution Sec. 1 and stating that restitution is created by courts for reasons of justice and equity). Therefore, if Colucci was unjustly enriched at the Bank's expense he must make restitution to the Bank. Colucci argues that if he was enriched, it was not at the Bank's expense; he also asserts that he was not unjustly enriched.

A person who receives a benefit has been enriched. Restatement of Restitution Sec. 1 cmt. a. A person who receives any sort of advantage, such as possession of or some other interest in money, has been conferred a benefit. Id. Sec. 1 cmt. b. Colucci received a benefit when the Bank gave him a cashier's check for more than $12,000, and he was thus enriched.

Colucci maintains, however, that he was not enriched at the Bank's expense, because the Bank had no interest in the funds he received except as custodian for Ms. Rutter. This argument misapprehends the relationship between a bank and its depositor. "The relationship between a bank and its depositor is a contractual relationship of debtor and creditor." Loucks v. Albuquerque Nat'l Bank, 76 N.M. 735, 743, 418 P.2d 191, 197 (1966). When money is deposited in a bank, the money becomes the property of the bank and the bank becomes a debtor to the depositor. 1 Raymond Natter et al., Banking Law Sec. 9.05, at 9-19 (1994); see also In re Nat Warren Contracting Co. (Alexander & Jones v. Sovran Bank, N.A.), 905 F.2d 716, 718 (4th Cir.1990) (money deposited in bank becomes bank's property and depositor is creditor of bank).2 The funds that Colucci received belonged to the Bank, and so Colucci benefitted at the Bank's expense.

Since Colucci clearly benefitted at the Bank's expense, the question remains whether the facts support the court's conclusion that he was unjustly enriched. A person receiving a benefit has been unjustly enriched if retention of the benefit would be unjust. Restatement of Restitution Sec. 1 cmt. a. It is often considered unjust to retain a benefit where there has been a mistake in conferring the benefit. See id. Secs. 15 to 55 (stating conditions under which there is right to restitution because of mistake in conferring a benefit). For example, "Where a plaintiff has paid money in the mistaken belief that an enforceable contract exists, the plaintiff is entitled to recover the money paid, as restitution." Reynolds v. Slaughter, 541 F.2d 254, 256 (10th Cir.1976) (applying New Mexico law); see also Restatement of Restitution Sec. 15 (person is entitled to recover money paid another pursuant to supposed contract person erroneously believed to exist); Rabbit Ear Cattle Co. v. Frieze, 80 N.M. 203, 204, 453 P.2d 373, 374 (1969) ("The general rule is that payments made as a result of a material mistake of fact are regarded as involuntary and are recoverable.").

The Account, owned by Mrs. Colucci and Ms. Rutter, was a joint account.3 See Johnston v. Sunwest Bank, 116 N.M. 422, 424, 863 P.2d 1043, 1045 (1993). When Mr. Cordova, acting on behalf of the Bank, mistakenly closed out the Account, a section of the Probate Code, NMSA 1978, Section 45-6-104(A) (Repl.Pamp.1989), provided in part:4

Sums remaining on deposit at the death of a party to a joint account belong to the surviving party or parties as against the estate of the decedent unless there is clear and convincing evidence of a different intention at the time the account is created.

Ms. Rutter, as the surviving party, was the owner of the funds remaining in the Account on the death of Mrs. Colucci in the absence of clear and convincing evidence that the parties had a different intention when creating the account. See Barham v. Jones, 98 N.M. 195, 197, 647 P.2d 397, 399 (1982) ("With a joint account, the law presumes a right of survivorship in the surviving party."). Colucci, as a P.O.D. beneficiary of the Account, would be entitled to the account balance only upon the deaths of both Mrs. Colucci and Ms. Rutter. See Sec. 45-6-104(B) (providing that if account is P.O.D. account, sums remaining on deposit on death of survivor of two or more original payees belong to P.O.D. payee).

The Bank's employee, Mr. Cordova, testified that he reviewed the wrong signature card before disbursing the funds in the Account to Colucci and that Ms. Rutter was in fact entitled to those funds. We hold that this was substantial evidence to support the trial court's finding that the account balance was mistakenly paid to Colucci. We also hold that this finding supports the court's judgment. Because the Bank mistakenly believed that a debtor-creditor relationship existed between it and Colucci obligating it to pay the balance in the Account to him, the Bank was entitled to restitution for Colucci's unjust enrichment.

Colucci contends that the Bank should...

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