Mcgregor v. Battle

• Decision Date: 10 July 1907
• Citation: 128 Ga. 577,58 S.E. 28
• Parties: McGregor. v. battle.
• Court: Georgia Supreme Court

58 S.E. 28

(128 Ga. 577)

McGregor.

v.battle.

Supreme Court of Georgia.

July 10, 1907.

1. Banks and Banking — Deposits — Relation Between Bank and Depositor.

When money is placed in a bank on general deposit, the title to the money immediately passes to the bank, and the relation of debtor and creditor is created between the bank and the depositor. The moment the deposit is made the credit of the banker is substituted for the money.

[Ed. Note.—For cases in point, see Cent. Dig. vol. 6, Banks and Banking, § 289.]

2. Same—Payment of Check by Insolvent Bank—Liability of Depositor.

If a bank, though insolvent, is still conducting its business and pays a check of a depositor in the usual course of business, and the depositor has no notice of the insolvency of the bank, the payment is good, and the depositor will be protected. If, however, the depositor is paid, not in the usual course of business, but at a time when he has notice or knowledge that the bank is insolvent, and that the intent of the bank is to create a preference in his favor over other creditors, the payment is not good, and such depositor is liable to repay to the bank, or its representative, such an amount as would be the difference between the amount received by him and his pro rata share of the assets of the bank upon a final winding up of its affairs.

[Ed. Note.—For cases in point, see Cent. Dig. vol. 6, Banks and Banking, § 156.]

3. Trial — Instructions — Submission of Matter Not Within the Issues.

There was no evidence authorizing the judge to charge the jury on the law of special deposits; and the instruction on this subject was, under the facts, of the case, an error of such a grave nature as to require a reversal of the judgment.

(Syllabus by the Court.)

Error from Superior Court, Warren County; B. T. Rawlings, Judge.

Action by C. E. McGregor, receiver, against b. l. Battle. Judgment for defendant, and plaintiff brings error. Reversed.

McGregor, as receiver of the Bank of Warrenton, brought suit against Battle, alleging that on February 17, 1902, and prior thereto, and especially on February 14th the bank was insolvent or in contemplation of insolvency, and while so insolvent the bank, in collusion with the defendant, delivered to him, and he took therefrom, the sum of $7,000 in cash, which amount was received by him under the following circumstances: On February 11th he became a stockholder in the bank, having purchased 70 shares of its capital stock of the par value of $100, and certificates of stock were duly issued and delivered to him. On February 13th, in collusion with Allen, who was his brother-in-law and president of the bank, defendant delivered to Allen the 70 shares of stock, and Allen directed the cashier to pay to defendant $7,000 of the cash of the bank, or to place the same to the credit of the defendant as a depositor, and on February 14th the defendant, with a full knowledge of the insolvency of the bank, drew said $7,000 in cash therefrom. The purpose of Allen was to give the defendant a preference over the other creditors of the bank; the liabilities of the bank being at that time $60,000 while its assets did not exceed $10,000. At that time the bank was absolutely insolvent and known to be so by the defendant. Some of the depositors made inquiries with a view to withdrawing their deposits, when the defendant, in collusion with Allen, made a public display of the $7,000 for the purpose of deceiving them, and they, being so deceived, allowed their deposits to remain in the bank. The assets in the hands of the plaintiff, as receiver, are not sufficient to satisfy all of the liabilities of the bank, and it is therefore necessary to recover from the defendant the amount he fraudulently received. It is charged that the payment to Battle by the bank was for the purpose of giving Battle a preference over the other creditors of the bank, and was done with the intent to delay, hinder, and defraud such other creditors, and that this intent was known to Battle. The prayer was that Battle be required to receive the certificates of stock, and that plaintiff have a judgment for the sum of $7,000, with interest from February 14, 1902. The defendant filed an answer, alleging as follows: He was never a stockholder in the bank. He had no knowledge whatever, until within a few days before its failure, that it was insolvent or in an embarrassed condition. A week or 10 days before the failure, at the solicitation of the cashier, who assured him that the bank was solvent and its stock was a good investment, he agreed to make some investigation as to the bank's affairs with a view to taking stock therein, and, making a casual investigation, he ascertained that three named parties owed the bank large sums, but there was other large indebtedness to the bank that he did not know of. In ignorance of the indebtedness, other than that of the three persons above referred to, he agreed to take $15,000 of stock in the event that one of such persons paid the entire indebtedness and the othersreduced theirs to a safe amount. These negotiations began about February 1st; and on February 10th he agreed to take the stock on the conditions referred to. He made arrangements by which he obtained the money, and on February 12th deposited in the bank $7,000 which he expected to use to pay for the stock. On February 14th he happened to be in the abaank, when the cashier, who had been very officious in endeavoring to induce him to take the stock, without any request from him, handed him through the window a paper, which, to his surprise, he discovered was a certificate for $7,000 of stock. He then stated to the cashier that he was not to take any of the stock except upon certain conditions, and asked the cashier where was Mr. Allen, the president. On being informed that Mr. Allen was in his office in the rear of the bank, he immediately took the certificate to Allen, and asked him if the conditions on which he was to take the stock had been complied with. On being informed that they had not, defendant at once told Allen that he could not take the stock until these conditions had been complied with, and left the certificate of stock with Allen. It was immediately after this that the defendant drew out his money which was on deposit in the bank. It was not placed there in payment for stock, and was not passed to the stock account with the defendant's knowledge and consent. Allen agreed to release the defendant from his contract for the stock, and, in pursuance of this agreement, paid him the money which he had deposited. The trial resulted in a verdict for the defendant; and the plaintiff made a motion for a new trial, which being overruled he excepted.

A. L. Miller, S. H. Sibley, L. D. McGregor, and Davis & Miller, for plaintiff in error.

E.P. Davis, for defendant in error.

COBB, P. J. (after stating the facts). 1. The liability of the defendant to the plaintiff depends upon the character of the deposit made by him when the $7,000 were turned over to the bank. If it was a special deposit for a particular purpose—that is, to be kept by the bank intact to be used to pay for the stock if the conditions upon which he was to purchase were complied with—he would not be liable to the plaintiff for withdrawing the deposit at the time that he did. If the money was deposited with the bank for safekeeping only, there to remain intact until called for, the defendant would have the right to call for the same at any time, and have delivered to him the parcel containing his money, without reference to the financial condition of the bank at the time that the demand for the special deposit was made upon it. In either event, no title to the money passed to the bank. Zane on Banks & Banking, § 162 et seq. If the money was placed in the bank on general deposit, the moment the deposit became complete title to the money passed to the bank, and the relation of debtor and creditor was created between the parties. "The moment the deposit was made the credit of the banker was substituted for the money." Ricks v. Broyles, 78 Ga. 614, 3 S. E. 773, 6 Am. St. Rep. 280; Scho-field Mfg. Co. v. Cochran, 119 Ga. 901, 47 S. E. 208. The defendant admits in his answer and in his evidence that he deposited the money in the bank. The question, therefore, is whether it was general deposit or a special deposit. The money was turned over to the officers of the bank. There was no request that the deposit should be kept separate from the other funds of the bank. It was entered upon the books as a general de-. posit. A certificate of deposit was issued to the defendant, which, so far as the evidence discloses, had none of the indicia of a special deposit. When the defendant sought to withdraw his money, he signed a check upon the bank—the usual manner in which...