First Nat. Bank Of Atlanta v. Am. Sur. Co
| Decision Date | 06 May 1944 |
| Docket Number | No. 30354.,30354. |
| Citation | 30 S.E.2d 402 |
| Parties | FIRST NAT. BANK OF ATLANTA. v. AMERICAN SURETY CO. et al. |
| Court | Georgia Court of Appeals |
Rehearing Denied May 19, 1944.
Syllabus by the Court.
1. In this State an action based on conventional subrogation of the type involved in this case, clearly established by an agreement reduced to writing or otherwise shown, in which no equitable relief is prayed, is a legal action and is not controlled by principles of equity; and a conventional subrogee does not have the burden of showing the superior equity in itself as plaintiff to authorize a recovery.
2. The action of a depositor of a bank in making demand on surety companies, who, under contract with the depositor, were fidelity sureties for the depositor's employees, for the losses sustained through the forgeries of the depositor's checks by an employee, and in assigning its rights and claims in the premises to the surety companies paying the losses, did not amount to an election as between inconsistent remedies barring the sureties as assignees from proceeding against the bank paying such checks.
3. The failure of the depositor to report the forgeries to the bank more promptly and immediately does not bar a recovery against the bank.
4. Negligence of the depositor in failing to discover the forgeries sooner will not bar a recovery by the depositor's assignees.
5. A bank cannot pay out money and charge the amount to a general depositor's account except upon the order of the depositor, and where the money is paid out upon a forged indorsement of the payee's name, the bank acts at its peril in not determining the genuineness of the indorsement, and cannot relieve itself of its liability by showing that it paid out the money in good faith.
6. Under the foregoing principles the evidence demanded a verdict for the surety companies against the bank; and the court did not err in directing a verdict for the plaintiffs.
Error from Superior Court, Fulton County; A. L. Etheridge, Judge.
Action by American Surety Company of New York and another against the First National Bank of Atlanta to recover the amount of checks paid out by defendant bank, the endorsements on which were forged by depositor's employee and which loss had been paid by plaintiffs as insurers under policy indemnifying the depositor against dishonesty of its employees. The court directed a verdict for plaintiffs, defendant's motion for new trial was overruled, and defendant brings error.
Affirmed.
American Surety Company of New York and Indemnity Insurance Company of North America, defendants in error, as assignees of American Telephone and Telegraph Company, sued the First National Bank of Atlanta, plaintiff in error, for $9,920.23, predicated upon the payment by the bank of checks aggregating that amount drawn by the telephone company on which the names of the payees, as indorsers, were forged. It was alleged that the bank was engaged in the business of commercial banking; that the American Telephone and Telegraph Company until September of 1940, and for many years prior thereto, had one Julian Arnold in its employ as chief clerk in the Atlanta office of the company, and that he was authorized and accustomed to call upon the cashier of the company's Atlanta office for checks drawn in payment of bills of contractors and employees doing work for the company; that the checks so issued were drawn upon the First National Bank of Atlanta, in which the telephone company kept a deposit in a checking account; that between August 25, 1938, and September 20, 1940, inclusive, one hundred checks in the total amount of $9,-920.23, varying in amounts from $30 to $150, and made payable to various persons, were drawn by the telephone company upon the defendant bank on the written request of the said Arnold, and delivered in most instances to the mail room to be mailed to the payees named, but in some few instances delivered to Arnold to be taken by him to the mail room for mailing to the payees; that the said Arnold secured possession of said checks and secretly removed them from the mail room and forged the indorsements of the respective payees named therein and deposited each of them to his account in the First National Bank of Douglasville (Georgia), which checks thereafter cleared through the Fulton National Bank of Atlanta and the Atlanta Clearing House, and were accepted by the defendant bank and by it unlawfully charged to the account of the telephone company.
It was also alleged that the forgery of the payees' indorsements on said checks was unknown to the telephone company and was not discovered by it until on or about September 25, 1940, and that thereupon the defendant bank was notified by the telephone company and by the surety companies that the indorsements had been forged and the checks illegally accepted and charged to the account of the telephone company; that the checks have never been indorsed by the payees named therein, nevertheless the defendant bank has denied liability and refused to pay to the telephone company or to the plaintiffs, assignees of the telephone company, the amount of the checks illegally charged to and deducted from the telephone company's account; that the plaintiffs as sureties on indemnity bonds issued to the telephone company were liable to it for the loss it sustained, and have as such sureties paid to the telephone company the amount of the loss, the sum sued for, whereupon the telephone company transferred and assigned to the plaintiffs all right of recovery and causes of action against the defendant bank and all other persons liable by reason of the illegal acceptance of the checks upon the forged indorsements of the payees named therein. A copy of the alleged assignment was attached to and made a part of the petition of the plaintiffs, together with a list of the checks referred to, showing number, date, name of payee, and the amount of each check.
The defendant bank answered the suit and admitted it was a banking corporation engaged in the business of commercial banking; and alleged that Julian Arnold was the employee of the telephone company for a period of more than 24 years, and that when the check transactions for which the plaintiffs would recover occurred over a three-year period during 1938, 1939, and 1940, the said Arnold bore the title of clerk of the construction department with duties including the supervision of clerical and accounting work in this department, the approval of sundry disbursement reports and contract payments in connection with the construction of telephone lines and other enterprises carried on by the telephone company; that Arnold had no authority to let contracts or issue checks, but could requisition checks upon contracts which had been let, and could ap-prove payment of expenses of construction gangs for emergency repair work, provided proper evidence of the expense was presented; that the checks in question were obtained by Arnold substantially as follows: he would prepare a disbursement report falsely showing an amount due an employee or contractor for having done work for the telephone company, which report accompanied by a false voucher would be tendered to the agent of the telephone company having authority to issue checks; that such checks were made up to be mailed, and Arnold, who had access to the mail room, would extract the checks and deposit them to his credit in the bank at Douglasville; that all of the checks were returned to the telephone company, after having been paid by the defendant bank, pursuant to written contracts under which it was agreed that the telephone company would examine forthwith into the accuracy of the statements prepared by the bank showing withdrawals, dates of same, deposits, and balances, which statements were delivered along with the checks, and would examine said checks for the purpose of ascertaining their regularity and validity; that the telephone company totally failed to comply with the provisions of its said contract, and did not examine said checks, and would have discovered that they were irregular had it examined them, and by the exercise of the slightest degree of diligence would have discovered the irregularity and invalidity of the said checks, and its failure to do so bars the plaintiffs from recovering because of the telephone company's negligence, which negligence made the loss possible and estops the plaintiffs from recovering.
The defendant bank admitted that the checks described in the petition of the plaintiffs, totalling the sum of $9,920.23, were drawn by the telephone company on it, and were issued upon the written request of Arnold, and in accordance with his instructions, and were delivered to him, and that he indorsed on each check the name of the payee, and that each check was thereafter deposited to Arnold's account in the First National Bank of Douglasville, and that each of said checks was thereafter cleared through the Fulton National Bank of Atlanta and the Atlanta Clearing House. The bank denied that it was notified promptly by the telephone company of the forged indorsements on the checks, setting up that it was not so notified until the month of June, 1941, al though the forgeries were discovered in September, 1940, and it alleged that the failure of the telephone company in this respect had deprived the bank of the opportunity of recovering from the wrongdoer, and the plaintiffs were, therefore, estopped from recovering any amount from the defendant. The bank also alleged that there had been an election of remedies which completely bars the plaintiffs from any recovery against the defendant, in that the telephone company, if its checks were improperly paid to Arnold and charged to its account, had the right to treat the moneys so paid either as moneys of the telephone company, with the right in it to pursue any remedy it had against Arnold, or to treat the said moneys so paid out by the bank as moneys of the bank and...
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