Bank South v. Grand Lodge of Free & Accepted Masons for Georgia

• Court: Georgia Court of Appeals
• Writing for the Court: BEASLEY; BIRDSONG, P.J., and BENHAM
• Citation: Bank South v. Grand Lodge of Free & Accepted Masons for Georgia, 331 S.E.2d 629, 174 Ga.App. 777 (Ga. App. 1985)
• Decision Date: 15 May 1985
• Docket Number: 69856,Nos. 69855,s. 69855
• Parties: BANK SOUTH v. GRAND LODGE OF FREE & ACCEPTED MASONS FOR GEORGIA. DECATUR FEDERAL SAVINGS & LOAN ASSOCIATION v. GRAND LODGE OF FREE & ACCEPTED MASONS FOR GEORGIA.

Page 629

331 S.E.2d 629

174 Ga.App. 777

BANK SOUTH v. GRAND LODGE OF FREE & ACCEPTED MASONS FOR GEORGIA.

DECATUR FEDERAL SAVINGS & LOAN ASSOCIATION v. GRAND LODGE OF FREE & ACCEPTED MASONS FOR GEORGIA.

Nos. 69855, 69856.

Court of Appeals of Georgia.

May 15, 1985.

Richard R. Cheatham, John J. Worley, Atlanta, for appellant (case no. 69855).

B. Michael Mears, Decatur, for appellant (case no. 69856).

Harris Bullock, William E. Zachary, Decatur, for appellee.

BEASLEY, Judge.

The Grand Lodge brought this action for conversion against appellants Decatur Federal Savings and Loan Association and Bank South, alleging that over a ten-month period its Grand Treasurer J. Kirk Nicholson had embezzled approximately $350,000 from accounts maintained at Decatur Federal by withdrawing cash and by writing checks to himself or the Lodge or the Trustees of a fund, which checks he endorsed and deposited in his business checking account at Bank South. The suit sought recovery of the funds less the amounts regained previously from Nicholson and his wife. Bank South and Decatur Federal both moved for summary judgments, which were denied, and this court granted their applications for immediate review.

The undisputed facts show the scheme. The Grand Lodge is a statewide organization headquartered in Macon. The Grand Treasurer is the chief fiscal officer of both the Grand Lodge and its Masonic Home. His authority is delineated in the Masonic Manual Code: "The Grand Treasurer shall have charge of all of the funds, properties and jewels of the Grand Lodge. It shall be his duty to attend all regular communications of the Grand Lodge, and, when required, to meet with the Grand Officers and committees and to produce all books and documents relating to his office, to make a full report at the regular communications, to pay all orders drawn on him by authority of the Grand Lodge, to receive all funds of the Grand Lodge and immediately to deposit them in the repository approved by it.... He shall also be the fiscal officer of the Masonic Home." Nicholson, as a public accountant and a past Grand Master who was familiar with the financial affairs of the Grand Lodge, was unanimously elected to serve a term as Grand Treasurer commencing in October of 1980, after having been appointed in March to serve the remaining portion of a deceased treasurer's unexpired term.

Nicholson handled all financial transactions with no supervision over the performance of his duties and responsibilities. He was authorized as Grand Treasurer to endorse checks payable to the Grand Lodge, to make deposits into Grand Lodge accounts and to sign checks on behalf of the Grand Lodge on his own signature. He could make investments for the Grand Lodge, purchase certificates of deposit, make withdrawals for reinvestment and could on his own execute the documents necessary for withdrawing or transferring such funds. Essentially all Grand Lodge bank account statements were sent to him and he had sole responsibility for reconciling them. The books were audited only once a year.

Shortly after his appointment in March of 1980, Nicholson requested the Grand Master to authorize on behalf of the Grand Lodge the opening of several savings accounts and the purchase of several certificates of deposit at Decatur Federal. Although the Grand Lodge had always maintained its bank accounts near its headquarters in Macon, it authorized Nicholson, who lived in Atlanta, to open these accounts for his convenience and to serve as a holding account to allow daily contributions to accumulate so that at the proper time investments could be made by the Grand Treasurer. The withdrawal of funds was provided for in the customer Grand Lodge's application for each account. The applications read: "Specimens of the signatures of those authorized to make withdrawals from said account and to act in connection therewith are indicated below, and you are authorized to act upon the request of said organization bearing any One of such signatures, ... until you receive written notice of the authorization of others to sign for it together with specimen signatures of such person or persons.... [Y]ou are hereby relieved of any liability in connection with collection of such items which are handled by you without negligence, and you shall not be liable for the acts of your agents, subagents, or others or for any casualty...."

Nicholson's was one of the authorized signatures, without the addition of his title, although it was shown on the application that his title was that of Grand Treasurer. The reverse side of the application form was a resolution of the Grand Lodge which authorized Decatur Federal "to pay withdrawals until further written notice to it signed in the name of this organization as indicated below by any One person or persons, whose names appear below...." Although the two alternatively authorized names were not typed "below," the Grand Lodge's secretary certified "that the signatures on the reverse side hereof are the true signatures of the persons authorized to sign as indicated in connection with said account."

During the period between March and August of 1981 Nicholson wrote checks and withdrew the funds which form the basis of the Grand Lodge's claims from Decatur Federal and deposited them in a Bank South account in the name of "J. Kirk Nicholson, Public Accountant."

The Grand Lodge had begun receiving complaints in December of 1980 about Nicholson's failure to discharge his duties as Grand Treasurer, including the failure to write routine payroll and reimbursement checks on a timely basis, and neglecting other Grand Lodge responsibilities. In April of 1981, the Grand Lodge asked for Nicholson's resignation. An audit of the books and records would have been required by the Masonic Code if Nicholson resigned from office at that time but he requested that he be permitted to remain in office until the end of his term in October "so as not to put any additional expense on the Grand Lodge of having to have two audits." Although Nicholson submitted his letter of resignation effective the end of August and asked to have his name expunged "from the roll of Masonry," his embezzlements were not discovered by the Grand Lodge until the annual fiscal year-end audit in October of 1981. When the auditor reported that a considerably larger amount of money had been deposited in the Decatur Federal accounts than was recorded as withdrawn or still on deposit, the Grand Lodge met with representatives from Decatur Federal and Bank South who furnished it with copies of the records necessary to trace assets, prepare a claim for the fidelity bonding company and assemble information for the district attorney to present to the grand jury. An action was also brought by the Grand Lodge against Nicholson and his new wife, a former employee of Decatur Federal, which was settled after the Nicholsons transferred real and personal property to the Grand Lodge valued in excess of $160,000. Accompanying the delivery of these items were two documents releasing cars and jewelry to the Grand Lodge. A consent order was later entered releasing Mrs. Nicholson from all further claims and dismissing the action against her with prejudice, but expressly reserving the right of action against Mr. Nicholson "by all those suffering loss including [the Grand Lodge.]" This suit followed.

1. The checks which form the basis of the Grand Lodge's claim were made payable to Nicholson by Decatur Federal in two forms:...