## Facts

- Marine Midland Bank alleged that John E. Russo Produce Co., Inc. and Canestraro Produce, Inc., controlled by members of the Russo family, engaged in a check-kiting scheme using accounts at Marine Midland and another bank.
- Produce maintained accounts structured so overdraft items could be held for assurances of a covering deposit before payment.
- Canestraro was closely connected to Produce through shared facilities and family ownership; Rita Russo worked as a part-time bookkeeper for Canestraro and was an authorized signatory on Canestraro’s Marine Midland account.
- The bank claimed the interbank float was used to create artificial balances and obtain funds against uncollected deposits, ultimately causing the bank a loss.
- At deposition/trial, certain individual defendants invoked the Fifth Amendment and refused to answer questions about the alleged transactions.
- The bank sued for fraud and conversion and sought to impute to Canestraro the bookkeeper/signatory’s knowledge and conduct under agency principles.
- The jury was instructed to return a general verdict and answer 12 special interrogatories; it answered the liability interrogatories in defendants’ favor, found the bank sustained a $309,800 loss, did not answer one interrogatory, and did not return a general verdict.
- The bank made an oral post-verdict application asserting inconsistency, but the jury was discharged without resubmission for clarification; judgment was entered for defendants and affirmed on intermediate appeal.

## Issues

1. Whether, and under what conditions, a civil factfinder may draw an adverse inference from a party’s invocation of the Fifth Amendment privilege against self-incrimination.
2. When an employee/bookkeeper’s knowledge or participation in a fraudulent scheme may be imputed to a corporate employer under agency principles.
3. Whether the trial court abused its discretion in handling requests to amend pleadings to conform to proof.
4. Whether alleged inconsistencies or defects in special interrogatory answers (including omission of a general verdict) required resubmission to the jury or a new trial, and what is required to preserve such objections for appellate review.

## Decision

- The Court of Appeals affirmed judgment for defendants.
- The court held that in civil cases an adverse inference from Fifth Amendment silence may be permitted, but it is not mandatory and must be weighed with all evidence; no reversible error was shown in the trial court’s handling on this record.
- The court found no basis to overturn the jury result on the agency/imputation theory; the evidence and findings did not compel imputation of the bookkeeper’s alleged knowledge to the corporation.
- The court upheld the trial court’s management of motions to amend pleadings as within its discretion.
- The court held the bank did not adequately preserve its verdict/interrogatory objections with specific, timely requests for corrective action before the jury was discharged; the irregularities did not warrant reversal on the record presented.

## Legal Principles

- In a civil action, a factfinder may draw a permissive adverse inference from a party’s invocation of the Fifth Amendment, considered in context with other evidence and not as a substitute for proof.
- Knowledge of an agent acquired within the scope of employment is generally imputable to the principal, but imputation in fraud contexts depends on the agent’s role, authority, and whether the conduct was within the scope of agency as found by the factfinder.
- Trial courts have broad discretion to permit or deny amendments of pleadings to conform to proof, particularly where sought late and where prejudice is asserted.
- To preserve appellate review of alleged inconsistencies or defects in special interrogatories and verdict procedure, counsel must make a specific and timely objection and request appropriate corrective action before the jury is discharged; generalized objections or post-trial complaints are insufficient.
- Courts should, where reasonable, construe and reconcile special interrogatory answers rather than order a new trial based on technical irregularities.

## Conclusion

The court affirmed a defense judgment in a check-kiting fraud case, recognizing permissive adverse inferences from Fifth Amendment silence in civil trials while stressing that objections to special-verdict irregularities must be raised specifically and in time for the trial court to correct them before the jury is discharged.


Marine Midland Bank v. Russo, 50 N.Y.2d 31, 427 N.Y.S.2d 961, 405 N.E.2d 205 (1980)