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DeMedio v. Haddon Savings Bank

A-1498-98T5 (N.J. Super App. Div. 1999) (Unpublished)

BANKS; ACCOUNTS; FRAUD—A bank is not liable to its depositor for allegedly allowing unauthorized account withdrawals where for over 30 years the depositor never complained to the bank.

A functionally illiterate man and his brother-in-law opened a bank account with $50,000 of the man’s money. For more than 30 years, the man gave his brother-in-law all of his employment checks and, later, his Social Security checks to deposit into the account. In addition, he paid monthly rent and some other monies to his sister and brother-in-law with whom he lived. He did not endorse any of his employment or Social Security checks; his brother-in-law did. He never saw his passbook, even though he asked his brother-in-law for it. The yearly interest statements were sent by the bank, but were not in his name. After 34 years, he sued the bank on the theory that it should never have let his brother-in-law withdraw money from the account and that by allowing him to do so, the account had been depleted over the years. It held that the claimant was equitably estopped from making his claim against the bank because “one shall not be permitted to repudiate an act done or a position assumed where that course would work injustice to another who, after having the right to do so, has relied thereon.” According to the Court, the claimant knew that his sister and brother-in-law were completely controlling his account and were withholding information about the account. He also knew that the interest statements were not in his name and his relatives were lying to him about the status of the account. Despite this ongoing activity beginning more than 30 years earlier, the claimant never approached the bank concerning the status of his account or advised the bank that his brother-in-law had no authority to withdraw his money. A bank depositor has a duty to examine his account within a reasonable time, and give the bank timely notice of any objections, and also has the responsibility to supervise its agent. The claimant had argued that the bank should not be allowed to benefit from an estoppel-by-silence defense nor should his failure to report irregularities to the bank exonerate its actions when the bank acts with gross negligence, in bad faith, or in collusion with a third party. The Court rejected those allegations. It believed that the claimant certainly knew either his brother-in-law was splitting the checks by depositing part and retaining part or was making withdrawals from the account. In fact, he admitted he knew his brother-in-law was “robbing” him. Because he had a duty to notify the bank of any irregularities and failed to do so, any damages incurred were solely caused by the claimant. There was no evidence of bad faith on the part of the bank. The Appellate Division, although noting that the lower court never needed to reach the issue of a statute of limitations defense, also pointed out that at the relevant time, a statute existed which gave a depositor only two years to notify the banking institution that the signature of a party to a draft or order was forged. By the time the bank arguably refused to help the claimant, the statute of limitation period had run.


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