American Nat. Bank of Macon v. Fidelity & Deposit Co. of Md.

• Court: Georgia Supreme Court
• Writing for the Court: HOLDEN, J.
• Citation: American Nat. Bank of Macon v. Fidelity & Deposit Co. of Md., 63 S.E. 622, 131 Ga. 854 (Ga. Feb 13, 1909)
• Decision Date: 13 February 1909
• Parties: AMERICAN NAT. BANK OF MACON v. FIDELITY & DEPOSIT CO. OF MARYLAND. EXCHANGE BANK OF MACON v. SAME.

63 S.E. 622

131 Ga. 854

AMERICAN NAT. BANK OF MACON v. FIDELITY & DEPOSIT CO. OF MARYLAND.

EXCHANGE BANK OF MACON v. SAME.

Supreme Court of Georgia

February 13, 1909

Syllabus by the Court.

Where the basis of an action is actual fraud, the mere silence of the party committing it is treated as a continuation of the original fraud and as constituting a fraudulent concealment and the statute of limitations does not begin to run against such right of action until such fraud is discovered, or could have been discovered by the exercise of ordinary care and diligence.

(a) Where a right of action exists because of wrongful conduct which does not involve actual fraud, in order to prevent the statute of limitations from running by reason of the fraud of the party committing it, consisting in the concealment of such conduct, there must be something more than a mere failure, with fraudulent intent, to disclose such conduct unless there is on the party committing such wrong a duty to make a disclosure thereof by reason of facts and circumstances, or the existence between the parties of a confidential relation.

(b) Under the facts and circumstances alleged in the petition as amended, it was the duty of the defendants to make known the breach of trust committed by them in paying funds to the receiver in violation of the order of court; and a failure to disclose such fact, with fraudulent intent, was a fraudulent concealment of the facts giving rise to the cause of action and tolled the statute of limitations.

[Ed. Note.-For other cases, see Limitation of Actions, Cent. Dig. §§ 480, 481; Dec. Dig. & 100. ^[*]

For other definitions, see Words and Phrases, vol. 3, p. 2958; vol. 8, p. 7666.]

Error from Superior Court, Bibb County; Robert Hodges, Judge.

Actions by the Fidelity & Deposit Company of Maryland against the American National Bank of Macon and the Exchange Bank of Macon. Judgment for plaintiff, and defendants bring error. Affirmed.

See, also, 129 Ga. 126, 58 S.E. 867.

Atkinson, J., dissenting.

Where it was the duty of defendants to make known a breach of trust in paying funds to a receiver in violation of the order of the court and a failure to disclose such fact with fraudulent intent, it constituted a "fraudulent concealment" of the facts giving rise to the cause of action and tolled the statute.

These cases, with only a few exceptions, the material ones being hereinafter designated, are practically identical in their facts, and will be considered together. In certain litigation against the Macon Hardware Company, one Tindall was appointed receiver of that company, and several banks, including the defendants, were named by the court as depositories in which Tindall should deposit the funds coming into his hands as receiver, the deposits being accepted by the banks subject to an order of the court that checks of the receiver (except such as showed on their face that they were drawn for expenses connected with the receivership) should not be paid unless countersigned by the court.

Part of the funds were paid by the banks to the receiver on checks not drawn and signed in conformity to the requirement of this order, and the amounts thus obtained by the receiver were misappropriated by him. The defendant in error was surety on the bond of the receiver, and, having paid to the clerk of court for the benefit of creditors the amount of the misappropriation upon a judgment therefor recovered in a suit by the creditors upon the bond, brought the present action against the banks to recover the amounts so paid, claiming that they became liable to it as surety by reason of having aided the receiver in committing his breach of trust. The cases were previously before this court, the decision therein being reported in 129 Ga. 126, 58 S.E. 867, to which case reference is made for a fuller statement of the allegations of the original petitions. In that case it was held that the banks had committed a tort which rendered them liable to the surety, the latter, by reason of the payment of the amount misappropriated, having become subrogated to the rights of the creditors of the hardware company; but it was further held that the cause of action was complete at the time of the wrongful payment of the checks by the bank, from which time the statute of limitations began to run against the cause of action, and that it was barred, more than four years having elapsed from the date of the last wrongful payment of a check and the bringing of suit. Before the remittitur was entered in the court below, the defendants in error filed two amendments to the original petitions in each of the cases, alleging facts which it was claimed constituted fraud on the part of the defendant banks which operated to deter or debar the plaintiffs from their cause of action, and tolled the running of the statute of limitations. To the petition as amended the defendants interposed certain demurrers, which were overruled, and the amendments allowed. To this ruling, and to the allowance of the amendments over the objections of the defendants, exceptions were taken.

The plaintiff made in its amendments, among others, substantially the following allegations: On August 31, 1896, the court passed an order wherein the receiver was directed to pay out none of the money in his hands until the further order of the court. The receiver and the banks had notice and knowledge of this order at the time it was entered. Two hundred and five dollars was drawn from the Exchange Bank by the receiver on unauthorized checks and misappropriated by him prior to the date of this order, but all of the other moneys drawn by the receiver from the two defendant banks were drawn after the date of this order. All of the assets of the hardware company had been converted into cash by the receiver and deposited in the defendant banks and other banks named by the court as depositories for said funds prior to June 1, 1896; and the receiver had filed his reports in court, pursuant to orders thereof, showing his receipts, deposits, and disbursements of such funds. The last of these reports of the receiver was filed on June 3, 1896, and it appeared from this report that all of such funds that had not been disbursed by him in conformity to the order of the court were on deposit in the banks. The defendant banks had notice of this and the other reports of the receiver. The Exchange Bank knew at the time of the filing of the report of the receiver on June 3, 1896, that $205 of the funds shown by this report to be on deposit in the Exchange Bank had been misappropriated by the receiver. The defendants never at any time questioned the correctness of the receiver's reports, nor took any steps to have the receiver file other reports after June 3, 1896, and knew that no reports were filed by him between that date and February 22, 1901. The surety company relied upon the report of the receiver, and upon the faith thereof, and upon the fact that the reports were not questioned by the banks or any of the other parties in the case, believed that the funds sued for were on deposit in the banks until the banks filed their reports on February 20, 1901. The defendant banks knew that the surety company was relying on the reports of the receiver, and reposed confidence in the defendant banks that they would not improperly disburse the funds. The unauthorized payments by the defendant banks to the receiver were made without the knowledge of the surety company or the creditors of the hardware company, except the defendant banks. The unauthorized checks of the receiver paid by the defendant banks were retained by them and their existence concealed by them and the receiver from the surety company and the creditors of the hardware company until the filing of the reports of the banks on February 20, 1901, which were filed in obedience to an order of the court requiring the defendant banks to file their reports; nor was there anything to put the surety company or the creditors on notice of the breach of trust by the defendant banks and the misappropriation of the money by the receiver until February 20, 1901. The defendant banks had knowledge of the misappropriation of the money by the receiver, and fraudulently concealed knowledge thereof and of their breach of trust in the unauthorized payment of funds to the receiver from the surety company and the creditors until the filing of the banks' reports on February 20, 1901. The surety company was debarred and deterred from bringing its action by such fraudulent concealment by the receiver and the defendant banks until the discovery of the breach of trust when the banks filed their report on February 20, 1901. There was nothing to put the surety company or the creditors on notice of the breach of trust by the banks and the misappropriation of the funds by the receiver, nor could they have discovered the same by the exercise of reasonable diligence prior to February 20, 1901.

Hardeman, Jones & Johnson and Miller, Jones & Miller, for plaintiffs in error.

Erwin & Callaway and John P. Ross, for defendant in error.

HOLDEN J.

1. According to the former decision of the court in these cases reported in 129 Ga. 126, 58 S.E. 867, when the defendant banks paid to the receiver the funds deposited with them under an order of the court, in violation of an order of the court that none of the funds be paid out except on checks countersigned by the court, unless the checks showed on their face that they were drawn for expenses, a right of action arose against the banks in favor of the creditors; and, when the...