National Bank of Georgia v. Refrigerated Transport Co., Inc.

Decision Date21 September 1978
Docket NumberNos. 56222,56223,s. 56222
Citation147 Ga.App. 240,248 S.E.2d 496
Parties, 25 UCC Rep.Serv. 528 NATIONAL BANK OF GEORGIA v. REFRIGERATED TRANSPORT COMPANY, INC. REFRIGERATED TRANSPORT COMPANY, INC. v. NATIONAL BANK OF GEORGIA.
CourtGeorgia Court of Appeals

Heyman & Sizemore, William H. Major, Hicks, Maloof & Campbell, Robert A. Bartlett, Smith, Cohen, Ringel, Kohler & Martin, Ralph H. Hicks, Atlanta, for appellant.

Serby & Mitchell, Louis C. Parker, III, Atlanta, for appellee.

DEEN, Presiding Judge.

On a prior appearance of this case, defendant appealed from the grant of a judgment notwithstanding the verdict in favor of Refrigerated Transport Co., Inc. (RTC). National Bank of Ga. v. Refrigerated Transport Co., 143 Ga.App. 661, 239 S.E.2d 551 (1977). This court held that the case was not properly before the court because the trial court had not ruled on appellee's alternative motion for a new trial, and the case was remanded to the trial court with direction that the alternative motion for a new trial be ruled upon as provided in Code Ann. § 81A-150(c)(1). On remand, the trial court filed an order on December 2, 1977, denying plaintiff's motion for a new trial on each and every ground, but did not vacate the previous order ruling on the j.n.o.v. On January 10, 1978 NBG filed a motion with the trial court requesting that the order of December 2, 1977, be set aside because the case was not appealable by the defendant. On February 3, 1978, the trial court entered an order vacating the December 2 order and ruled that the previous order left the case in a posture from which the results could not be appealed, and entered a new order containing findings of fact and conclusions of law whereby it granted plaintiff's motion for a judgment notwithstanding the verdict and denied plaintiff's alternative motion for a new trial. NBG appeals to this court from the grant of the j.n.o.v. RTC cross appeals and moves to dismiss NBG's appeal contending that defendant did not file a timely appeal and that the trial court was without authority to enter the order of February 3, 1978.

I.

When NBG appealed from the trial court's order granting plaintiff's motion for a j.n.o.v., the appeal was premature under Code Ann. § 81A-150(c)(1) because the trial court is also required to rule upon the plaintiff's alternative motion for a new trial before the appeal is properly before this court. In Speer v. Gemco Elevator Co., 134 Ga.App. 360, 214 S.E.2d 425 (1975), the trial court complied with the first provision of CPA Rule 50(c)(1), by ruling on the alternative motion for a new trial when ruling on the motion for a judgment notwithstanding the verdict, but it did not comply with the second provision which requires that the order specify the grounds for granting or denying the motion for a new trial. This court rejected appellant's contentions that the order is void and must be reversed, and remanded the case with direction that the trial court vacate the order and enter a judgment in accordance with CPA Rule § 50(c)(1) specifying the grounds for granting or denying the motion for a new trial.

In McConnell v. Brenau College, 134 Ga.App. 470, 215 S.E.2d 25 (1975), the case was remanded to the trial court with direction that the lower court rule upon the alternative motion for a new trial. When the case reappeared as McConnell v. Brenau College 135 Ga.App. 711, 218 S.E.2d 464 (1975), the trial court had vacated the prior order and entered a new order containing findings of fact and conclusions of law on both motions. We believe that this is the correct procedure for the trial court to follow and was implicit in our prior ruling. As the trial court's order of December 2, 1977, was incomplete, it was not error for the trial court to vacate that order and enter a new order on February 3, 1978, which contained findings of fact and conclusions of law on both motions.

II.

Appellant contends that the trial court erred in granting RTC's motion for a j.n.o.v. As the trial court's findings of fact and conclusions of law are extensive, we adopt them as a part of our opinion:

"1. Plaintiff ('RTC') brought this action for conversion of certain checks accepted by defendant bank (NBG) for deposit in the general corporate checking account of United Account Systems, Inc. (UAS), a collection agency which had been employed by RTC to collect some overdue accounts. There is no evidence of any authority given by RTC to UAS to indorse, cash, or deposit checks made out to RTC, nor is there any evidence that NBG ever checked or questioned the authority of UAS to indorse and deposit RTC's checks into UAS' general corporate checking account.

"2. Plaintiff's cause of action is grounded in Section 3-419 of the Uniform Commercial Code (Ga.Code § 109A-3-419) which provides in relevant part as follows:

"(1) An instrument is converted when . . .

"(c) it is paid on a forged indorsement . . .

"(3) Subject to the provisions of this Act concerning restrictive indorsements a representative, including a depository or collecting bank, who has in good faith and in accordance with the reasonable commercial standards applicable to the business of such representative dealt with an instrument or its proceeds on behalf of one who was not the true owner is not liable in conversion or otherwise to the true owner beyond the amount of any proceeds remaining in his hands.

"The jury returned a verdict for plaintiff for the amount of money remaining in the hands of NBG, the verdict obviously representing a finding that NBG had acted in good faith and according to reasonable commercial standards. Plaintiff moved for a directed verdict at trial, and now moves for judgment notwithstanding the verdict, on the grounds that the jury had no basis for this verdict.

" 3. The checks were endorsed by UAS in several ways: one was merely stamped for deposit to the account of UAS; several were stamped with the typewritten or handwritten addition of one of several trade names of RTC or 'agent for RTC' or words to that effect; one was stamped with the stamp that NBG provided for deposit to it and to 'UAS, agent for ______,' with 'Refrigerated Transport' handwritten in the blank space. The evidence at trial was undisputed that the indorsements were unauthorized within the meaning of Ga.Code § 109A-1-201; therefore, they were 'wholly inoperative' as RTC's unless RTC ratified them or is precluded from denying them. Ga.Code § 109A-3-404. NBG defends this motion on the basis of ratification, based on the request made to UAS by Mr. White of RTC to return the checks Or money to RTC, implying that the cashing of the checks was ratified. 'To Infer ratification, either from declarations or acts, it must appear affirmatively, that at the time of making the declarations, or doing the acts, the principal knew that the agent had performed the act, claimed to have been ratified.' Mapp v. Phillips, 32 Ga. 72, 80 (1861). There is no evidence herein that, at the time Mr. White asked for 'the money,' he knew or had any reason to suspect that UAS had cashed or deposited checks made payable to RTC; indeed, he stated that he did not think that any bank would accept such checks. (T. 115-117). It is the opinion of this Court that there was no evidence of ratification.

" 4. The bank could not have been a holder in due course without a valid indorsement of a check being deposited by one not the payee. Ga.Code § 109A-3-302(1)(c); see Salsman v. National Community Bank, (102 N.J.Super. 482) 246 A.2d 162 (N.J.1968); E. L. Von Gohren v. Pacific National Bank of Washington, (8 Wash.App. 245) 505 P.2d 467 (Wash.App.1973).

"5. The only remaining defense is that NBG acted in good faith and in accordance with reasonable commercial standards applicable to the business of banking, which would entitle defendant to the limitation to liability in conversion set out in Ga.Code § 109A-3-419(3). There are no Georgia cases interpreting the meaning of this exception to Ga.Code § 109A-3-419; however, the general case law on this section of the Uniform Commercial Code yields the following principles.

" The exception set out in Ga.Code § 109A-3-419(3) is an affirmative defense, the burden of proving it being on the bank. Berkheimers, Inc. v. Citizens Valley Bank, (270 Or. 807) 529 P.2d 903 (Or.1974). It has been held that the defense could not even be raised where the indorsement was typewritten and therefore suspect on its face; such acceptance by a bank could not be shown to be commercially reasonable. Bank of the West v. Wes-Con Dev. Co., Inc., (15 Wash.App. 238) 548 P.2d 563 (Wash.App.1976). Where the absence of the indorsement of one of two co-payees could be readily detected by an examination of the instrument, the Oregon Supreme Court refused to allow the defense of commercial reasonableness, although good faith may have been shown. Berkheimers, Inc. v. Citizens Valley Bank, supra, at 905.

"Further authority that good faith and commercial reasonableness are separate requirements, both of which must be met to support the defense of U.C.C. § 3-419(3), is found in Belmar Trucking Corp. v. American Trust Co., 65 Misc.2d 31, 316 N.Y.S.2d 247 (N.Y. County Civ.Ct.1970). While the bank apparently acted in good faith, the court found that the bank had not complied with the standards of commercial reasonableness and was not entitled to the exception. Taking judicial notice of the fact that checks payable to a corporation are not normally indorsed in blank by corporate officers and delivered to third parties, the court held that a collecting bank...

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