COMMERCIAL NAT. BANK OF CEDARTOWN, GA., v. Chapman

• Decision Date: 18 August 1953
• Docket Number: No. 14313.,14313.
• Citation: 206 F.2d 349
• Parties: COMMERCIAL NAT. BANK OF CEDARTOWN, GA. v. CHAPMAN et al.
• Court: U.S. Court of Appeals — Fifth Circuit

206 F.2d 349 (1953)

COMMERCIAL NAT. BANK OF CEDARTOWN, GA. v. CHAPMAN et al.

No. 14313.

United States Court of Appeals Fifth Circuit.

August 18, 1953.

James A. Branch, Thomas B. Branch, Jr., Atlanta, Ga., Henry A. Stewart, Sr., Cedartown, Ga., for appellant.

James Maddox, Rome, Ga., W. Colquitt Carter, Atlanta, Ga., for appellees.

Before HOLMES, STRUM, and RIVES, Circuit Judges.

STRUM, Circuit Judge.

The sole question here is whether or not, under the laws of Georgia, the transactions hereinafter mentioned constitute a valid pledge of three life insurance policies, creating rights in the pledgee superior to those of the named beneficiaries.

The policies were issued on the life of V. S. Chapman, Jr. On August 16, 1949, the account of V. S. Chapman & Company in the appellant bank was overdrawn. On that day, the bank loaned the Chapman Company $1,000.74 by honoring its outstanding checks in that amount, and Chapman, the insured, "deposited" the policies with the bank as collateral security for said loan. About a week later, August 22, 1949, Chapman procured from the insurance company a loan of $1,400 on said policies. The latter sum was deposited to the credit of Chapman & Company in the appellant bank, thus discharging the loan of $1,000.74.

The bank claims, however, that Chapman continued to leave the policies deposited with and pledged to appellant bank "as collateral and security for his general line of credit." There was never any written assignment of the policies, nor any written evidence of the pledge.

Thereafter, beginning with a note dated February 24, 1950, Chapman from time to time incurred additional indebtedness to the bank, aggregating, with interest, $6,596.78. Each of the notes evidencing these additional loans pledged property or income specifically named therein, but none of these mentioned the insurance policies. The bank, however, claims that although there was no written assignment of the policies there was a valid oral pledge thereof, accompanied by delivery, to secure Chapman's general line of credit, and that in addition to the collateral described in the notes, the insurance policies are also security for the payment of those notes. The policies remained in the actual physical custody of the bank.

Chapman died on December 1, 1950, owing the bank $6,141.47 of the indebtedness last above mentioned. The named beneficiaries and the bank each claimed the proceeds of the policies. The district court held that there was no valid pledge of the policies, and awarded recovery to the beneficiaries.

The Supreme Court of Georgia, which we follow in determining this controversy, has thus determined the common law of Georgia with reference to the pledge of incorporeal property: "At common law, therefore, incorporeal things, though they might be sold or mortgaged, could not...