First Union Nat. Bank of Georgia v. Davies-Elliott, Inc.

• Decision Date: 22 November 1994
• Docket Number: No. A94A1089,DAVIES-ELLIOT,INC,A94A1089
• Citation: 215 Ga.App. 498,452 S.E.2d 132
• Parties: FIRST UNION NATIONAL BANK OF GEORGIA v.
• Court: Georgia Court of Appeals

Page 132

452 S.E.2d 132

215 Ga.App. 498

FIRST UNION NATIONAL BANK OF GEORGIA v. DAVIES-ELLIOTT, INC.

No. A94A1089.

Court of Appeals of Georgia.

Nov. 22, 1994.

Reconsideration Denied Dec. 6, 1994.

Certiorari Denied March 10, 1995.

Newton, Smith, Durden, Kaufold & Rice, Howard C. Kaufold, Jr., Vidalia, for appellant.

Spivey, Carlton & Edenfield, J. Franklin Edenfield, Swainsboro, Glen A. Cheney, Reidsville, for appellee.

ANDREWS, Judge.

First Union National Bank of Georgia ("the Bank") appeals from the judgment entered on a jury's verdict in this case in which a former customer, Davies-Elliott, Inc., was awarded breach of contract and conversion damages and attorney fees and expenses under OCGA § 13-6-11. ¹

Viewed in favor of the jury's verdict, the evidence was that Elliott operated a number of businesses using corporations, including maintenance of railroad tracks in Georgia and other states. In order to conduct this business in Vidalia for the Georgia Central Railroad, Elliott formed Davies-Elliott, Inc. with Davies, his then girl friend. In November 1990, Elliott went to the Vidalia branch of First Union and saw Ms. Willis in order to set up a commercial account for Davies-Elliott, Inc. When Willis asked him to provide a corporate resolution concerning the account, Elliott advised that the corporate documents were being finalized by his attorney. Willis proceeded to open the account and then provided Elliott with a corporate resolution form which he took along with the signature card. When he returned to the Bank, the signature card contained as authorized signers on the account both Elliott and Davies. A corporate resolution dated November 13, 1990 was also provided, on the Bank's form, reflecting that Elliott was president and treasurer and Davies was secretary of the corporation. Checks could be signed by either. Elliott was also the sole stockholder and director of the corporation.

Elliott and Davies also had a personal joint checking account at the Bank, a fact known to Willis.

Since the purchase of the Vidalia bank by First Union in 1987, all processing had been moved to Atlanta. A courier picked up the day's work every afternoon around 2:00 p.m. and took it to the service center in Atlanta. The commercial account signature card was stamped received in commercial bookkeeping in Atlanta on November 5, 1990.

In January 1991, Davies had signed a general power of attorney allowing Elliott to, among other things, sign her name to checks and other documents, since he conducted some of his business out of town.

Several months later, Elliott and Davies had a personal falling out. On March 5, 1991, Davies left their home and checked into a motel. On the evening of March 11, 1991, Elliott received a phone call from Davies who said she was in Mobile and would not be back. Elliott told her he was taking her name off of both checking accounts. He asked her if she had any checks and she denied it.

Davies-Elliott, Inc. used a system of checks issued in books of 25 and Elliott had 200 to 250 checks remaining in the series. On his corporate bank statement received March 29, 1991, checks numbered 1249 to 1428 were processed. Elliott looked at his remaining books of checks and could not tell that any were missing, even though he was aware that Davies had broken into the house before leaving town and taken her personal belongings. In fact, the last check in the last book, no. 1625, had been removed by Davies.

On Tuesday March 12, Elliott went to the Bank and spoke to a teller about removing Davies' name and was referred to Willis. Elliott informed Willis that he wanted Davies off his accounts. Elliott closed the joint personal account and opened a new one in his name only. Because he had a number of payroll checks outstanding on the corporate account, he asked Willis what to do. She gave him a "Customer Request For Name Deletion" form which he began to fill out and signed in her presence. She asked who he was going to substitute as a signatory and, since he did not know, he took the card with him. ² Elliott had also obtained from the Bank a form for corporate minutes. On that form, on March 12, 1991, he recorded his meeting in which he, as sole director of the corporation, voted to remove Davies from office and revoke any authority to bind the corporation.

On March 14, Elliott returned the request form to the Bank. Pursuant to the power of attorney, he had signed Davies' name to the card and signed his name as witness. He gave the card to Willis, who noticed that he seemed upset. He asked her for assurance that there "was no way that anybody else can cash a check on this account but me, right?" She replied affirmatively. Upon looking at the card and seeing the corporate name and commercial account number, Willis realized that it was not appropriate for a commercial account, but was for use on a personal account. Although aware of this problem, Willis forwarded the card to Atlanta because she felt that commercial bookkeeping might go ahead and initiate the name removal. She did not contact Elliott about this problem or telephone or fax Atlanta.

The request card was stamped received on Tuesday March 19, 1991 by the commercial bookkeeping section of the service center in Atlanta. Ms. Allen was the processor who handled matters from the Vidalia branch. Although she had no recollection of receiving the request, she stated that, because it was on a personal account form, upon receiving it she would have taken it to her unit leader for action.

Davies wrote check no. 1625 to herself in the amount of $35,500. The check was dated March 13 and deposited in her bank account in Louisiana on March 18, 1991. It was processed by the Federal Reserve System and received by Atlanta Federal Reserve on March 19. It entered the Bank's commercial bookkeeping division on the evening of March 19, 1991. Processor Allen also filed all checks and other documents for Vidalia accounts. The computer which initially sorted incoming checks would separate checks over $10,000 for processor's comparison of the check with the signature card. Upon arriving at work at 8:00 a.m., Bank procedure required that these large checks be handled by the processor first. Check no. 1625 would have been kicked out by the computer on March 19 and compared by Allen on March 20 with the original signature card on file for the account. However, since Davies' name was still on the card because the request form had not been processed, there would have been no action taken. The check cleared the Bank.

On Thursday, March 21, 1991, when commercial bookkeeping was told by Vidalia that checks were bouncing on the Davies-Elliott account, Wyatt, the supervisor of commercial bookkeeping, went back through the checks and discovered the one signed by Davies. Wyatt also located the request form in his department and went to the signature card and marked through Davies' name. He wrote on the card "Del. 3/12/91 notice rec'd 3/19/91 by C/B."

On Friday, March 22, Elliott took his ledger and went to the Bank because he had been notified that Davies-Elliott, Inc. checks were being returned for insufficient funds. He tried to see Willis who was busy with another customer and he dealt with Ramsey. Ramsey and he compared his ledger and the computer's listing of cashed checks and discovered the $35,500 check which he advised her he did not write. Ramsey called commercial bookkeeping in Atlanta and was told Davies had signed the check.

Ramsey got Willis who talked to Atlanta and advised Elliott that the $35,500 was not going to be put back into the account.

Elliott contacted Truett, the Vidalia branch president who told Elliott he was aware of the situation and the check would not be repaid.

The jury awarded Davies-Elliott, Inc. $35,500 (face amount of the check), the $300 in overdraft fees assessed against the account, and $52,000 in attorney fees.

1. The first two enumerations deal with attorney fees and will be considered together.

(a) The first is that the court erred in denying the Bank's motion for partial summary judgment, directed verdict, and for j.n.o.v. as to attorney fees because a bona fide dispute existed between the parties.

The Bank's contention concerning the denial of its motion for partial summary judgment is moot because of the subsequent entry of verdict and judgment and our conclusion that the evidence supports the verdict. Schirmer v. Amoroso, 209 Ga.App. 682, 683(2), 434 S.E.2d 80 (1993); Canal Ins. Co. v. Wilkes Supply Co., 203 Ga.App. 35(1), 416 S.E.2d 105 (1992).

In its motion for directed verdict the Bank contended that there was no showing of bad faith or stubborn litigiousness to warrant consideration of attorney fees under OCGA § 13-6-11. This argument was premised on this court's prior opinion that Davies-Elliott was not entitled to partial summary judgment on the issue of the Bank's liability, First Union Nat. Bank of Ga. v. Davies-Elliott, Inc., 207 Ga.App. 791, 429 S.E.2d 161 (1993), and on the argument that failure to pay a claim does not in itself give rise to liability under OCGA § 13-6-11.

In First Union, supra, this court held that the trial court's ruling based on its analogy of this situation with a stop payment request under OCGA § 11-4-403 was improper primarily because it had been premised upon the affidavit of an expert in banking which could not alone support summary judgment. Id. at 792(1), 429 S.E.2d 161. Questions of fact remained as to the nature of the Bank's duty, whether that duty was breached, and as to the Bank's defense based on constructive fraud.

"A directed verdict is not authorized unless the evidence and all reasonable deductions therefrom demand a certain verdict. OCGA § 9-11-50; [Cit.]. And, where a directed verdict was denied and the jury has made a certain ruling, the evidence is to be construed in favor of the jury's finding and in favor of the non-movant, and a trial court cannot substitute its...