Horne v. C & S Bank of Colquitt County

• Decision Date: 28 June 1983
• Docket Number: 66056,Nos. 66055,s. 66055
• Court: Georgia Court of Appeals
• Parties: , 37 UCC Rep.Serv. 199 HORNE v. C & S BANK OF COLQUITT COUNTY. PILCO PLANTATION, INC. et al. v. CLARK.

Page 897

305 S.E.2d 897

167 Ga.App. 187, 37 UCC Rep.Serv. 199

HORNE v. C & S BANK OF COLQUITT COUNTY.

PILCO PLANTATION, INC. et al. v. CLARK.

Nos. 66055, 66056.

Court of Appeals of Georgia.

June 28, 1983.

Billy G. Fallin, Moultrie, for appellants.

James C. Whelchel, G. Keith Murphy, Moultrie, for appellees.

McMURRAY, Presiding Judge.

These two cases are similar in that they arise out of almost identical facts involving convoluted transactions by and between Sunbelt Agri-Sales Company (also shown as Sunbelt Agri-Sales Company, Inc.) and Ralph T. Clark, d/b/a Sunbelt Irrigation Sales. Clark was the financial advisor and sometimes "controller" of Sunbelt Agri-Sales Company, "to guarantee [Sunbelt Agri-Sales Company's] credit line," although he was not an officer or director. Sunbelt Agri-Sales Company (also Sunbelt Agri-Sales Company, Inc.) was in the business of selling irrigation equipment to farmers. With reference to the above cases irrigation equipment was sold to Pilco Plantation, Inc. and also to Donald Horne. As to each of these sales of irrigation equipment certain checks (for $26,900 dated September 17, 1981, and $40,000 dated September 18, 1981, written by Pilco Plantation, Inc. to "Sunbelt Agri-Sales Co." and a check for $64,000 dated October 27, 1981, from Donald Horne) were delivered to agents for Sunbelt Agri-Sales Company.

Generally, in order to control the business operations, certain checks and other transactions of Sunbelt Agri-Sales Company delivered to it in payment of goods and services would be endorsed over to Ralph Clark, d/b/a Sunbelt Irrigation Sales. Clark had no written agreement with the Sunbelt Agri-Sales Company but he had a checking account d/b/a Sunbelt Irrigation Sales, used by him to pay certain debts of Sunbelt Agri-Sales Company which had no control of said account.

The irrigation equipment was manufactured for Sunbelt Agri-Sales Company by Valmont Industries. Apparently, the irrigation equipment purchased by both Horne and Pilco Plantation, Inc. was ordered by Sunbelt Agri-Sales Company from Valmont Industries but all of same was never delivered or paid for by anyone. Valmont Industries is not involved in this litigation in any way but is only mentioned to show the convoluted nature of the transactions by and between Clark, d/b/a Sunbelt Irrigation Sales, and Sunbelt Agri-Sales Company (or in its corporate capacity). Generally, Clark, d/b/a Sunbelt Irrigation Sales was authorized by the officers of Sunbelt Agri-Sales Company, Inc. (or the owners or partners thereof, if in fact its corporate entity was never established or later established) to deposit funds of Sunbelt Agri-Sales Company to his account, Ralph T. Clark, d/b/a Sunbelt Irrigation Sales. As a rule, the checks were brought into the offices of the company, listed as a payment so that they could be accounted for in the bookkeeping system, then endorsed by Sunbelt Agri-Sales Company by stamp or signed by certain employees or agents and then turned over to Clark to make a deposit to the account of Ralph T. Clark, d/b/a Sunbelt Irrigation Sales. However, Clark was not authorized to deposit checks to his account without the Sunbelt Agri-Sales Company endorsement. Clark then used the funds to pay the operating bills and the invoices of Sunbelt Agri-Sales Company. This method of payment, however, was not used to pay Valmont Industries but generally to handle the payroll and taxes for the benefit of Sunbelt Agri-Sales Company, as "the credit line for operating expenses for Sunbelt Agri-Sales."

The funds available to Sunbelt Agri-Sales Company simply became insufficient to go around to pay all expenses, and it later became defunct.

Donald Horne and Pilco Plantation, Inc., not having received all of the equipment purchased and determining that their checks issued to "Sunbelt Agri-Sales Co." were not endorsed by the payee but by Ralph Clark, d/b/a Sunbelt Irrigation Sales and deposited to that account with C & S Bank of Colquitt County, separately sued this bank for the amounts of the checks, plus the legal rate of interest thereon. Both suits were filed on March 8, 1982. In each of these cases a third party action was brought by the defendant bank against Ralph T. Clark.

The defendant answered in substance denying the claim but admitting either in the answer or through discovery that these checks were not endorsed by the payee Sunbelt Agri-Sales Company but endorsed and deposited to the account of Ralph Clark, d/b/a Sunbelt Irrigation Sales, contending this account was used for the purposes of paying the obligations of Sunbelt Agri-Sales Company and used for the benefit of the named payee. The genuineness of the documents (the checks) involved in the suits was established as having been deposited by Ralph T. Clark, d/b/a/ Sunbelt Irrigation Sales without endorsement by the payee, but the defendant contends the account was in fact "the account of Sunbelt Agri-Sales Co., Thomasville, Georgia." In its answer the defendant also contended that the plaintiffs failed to give notice within a reasonable time of the alleged improper endorsement of the checks in question, and plaintiffs are estopped to assert any claim against the defendant bank and further that the plaintiffs were aware of the business relationship between Sunbelt Agri-Sales Company and Ralph T. Clark, d/b/a Sunbelt Irrigation Sales and had treated them interchangeably and as being the same entity and are therefore estopped to deny the authority of Ralph T. Clark, d/b/a Sunbelt Irrigation Sales to obtain the funds in question.

After discovery, all parties involved moved for summary judgment, and after a hearing and consideration of all the admissions of fact, affidavits and depositions, the defendant's motion for summary judgment was granted, the motions of the plaintiffs were denied, and the motion of the third party defendant Clark was declared to be moot by reason of the grant of summary judgment in favor of the defendant-third party plaintiff (the bank). Plaintiffs appeal. Held:

1. It has been held by the Supreme Court of Georgia in Trust Co. of Columbus v. Refrigeration Supplies, 241 Ga. 406, 408, 246 S.E.2d 282, that in the issuance of checks it is the maker's exclusive privilege to designate the payees of his checks," ' and it is not the prerogative of one who accepts and pays it to question whether the maker had sufficient reason for doing so ... [and] in accepting the check, it is ... [the duty of one who accepts it] to comply with the direction of the maker to 'pay to the order of' the named payees,' " quoting from Pacific Metals Co. v. Tracy-Collins Bank etc. Co., 21 Utah 2d 400, 403, 446 P.2d 303. The Supreme Court of Georgia said it agreed with the language of the Supreme Court of Utah in that case. In the Trust Co. of Columbus case it was declared that all payees must endorse unless the check is payable to those payees in the alternative and that "a bank is not authorized in accepting and paying it except...