30 S.E.2d 402 | Ga. Ct. App. | 1944
Lead Opinion
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 *113 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.
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, 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 *115 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 approve 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 $9920.23, 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 *116 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, although 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 not moneys of the telephone company, and to hold the bank liable for all sums deposited without any deduction therefrom because of the payment of any check to any other person than the payee thereof. The bank alleged and contended that when the telephone company made claim on the plaintiffs, for a loss sustained by it through the acts of its employee, under the terms of the bonds of the plaintiffs, it treated the moneys paid out by the bank to Arnold on the forged indorsements as moneys of the telephone company, and there having been an election of remedies, the telephone company and the plaintiffs as its assignees are barred because of such election from recovering from the bank.
On the trial of the case a verdict was directed by the court in favor of the plaintiff surety companies against the defendant bank for the full amount sued for with interest. A motion for new trial was duly filed, heard, and overruled, and the case is in this court on exceptions to that ruling. 1. The bank contends that the surety companies can not recover by way of subrogation to the rights of the telephone company, even though they *117 took an assignment from it of "all right, title and interest in and to the one hundred (100) canceled checks . . together with and including all choses in action, rights, claims, or right of recovery, which the undersigned [the telephone company] now has or may hereafter acquire, against the First National Bank of Atlanta, the indorsers on said checks, any persons who may have forged any indorsement thereon, and any and all other persons liable . . by reason of any forgery of indorsements on said checks or by reason of the acceptance, negotiation, or charging of the same to the account of the undersigned by the First National Bank of Atlanta." The surety companies contend in this connection that the action is based on a legal assignment and not on a claim of subrogation. These diverse contentions make necessary the consideration of the principle of subrogation as recognized and applied by our courts.
"Subrogation is the substitution of another person in the place of the creditor whose obligation is paid, so that the person in whose favor it is exercised succeeds to all the rights of the creditor. It is of equitable origin, being founded upon the dictates of refined justice, and its basis is the doing of complete, essential, and perfect justice between the parties, and its object is the prevention of injustice." (Italics ours.)Jasper School District v. Gormley,
While subrogation was originally a doctrine in equity, courts of law now recognize and apply it with equal vigor. The legislature of this State has dealt with the subject in various acts, as far back as the act of 1810 (Cobb's Digest, 592), and we have statutes and Code sections dealing with the subject. "A surety who has paid *118
the debt of his principal shall be subrogated both at law and in equity, to all the rights of the creditor, and, in a controversy with the other creditors, shall rank in dignity the same as the creditor whose claim he paid." Code, § 103-501. "A surety who has paid the debt of his principal shall be entitled, also, to be substituted in place of the creditor as to all securities held by him for the payment of the debt." § 103-502. Chief Justice Bleckley, in Hull v. Myers,
Regardless of its origin in equity, subrogation under our Code is now a legal as well as an equitable right. The proof of claim filed by the telephone company with the American Surety Company provides that the telephone company "does hereby assign and subrogate" to the surety company all rights in and to the loss for which the surety company shall pay. The bond of the Indemnity Insurance Company provides that upon payment of any loss, "it shall be subrogated to the extent of such loss to all claims and rights of the assured against any third person or persons." The assignment to the surety companies made by the telephone company conveyed all its rights, title, and interest in and to the forged checks, including all choses in action against the defendant bank on account of such forgeries. These writings show an agreement between the plaintiff surety companies and the telephone company whereby the former were subrogated to the rights and *119
remedies of the latter, and they make a clear case of conventional subrogation. Here we have three writings evidencing the agreement which is conventional subrogation, although such agreement is not required to be in writing. Bleckley v.Bleckley,
We do not find it necessary to decide whether the action in this case was based solely on the doctrine of subrogation as contended by the bank, or on an assignment as claimed by the surety companies. We think that question is immaterial, as the plaintiffs in the suit have an assignment which amounts to conventional subrogation. It may be said that the suit was predicated on both subrogation and an assignment, they being synonymous terms as used in this case. The right of action was assignable. Code, § 85-1805. Lumpkin v. American Surety Co.,
While there are many cases dealing with the doctrine of subrogation, and some confusion and conflict in the decisions of the various state and federal courts, in this State an action based on conventional subrogation of the type presented by this case, clearly established by an agreement reduced to writing or otherwise shown, in which no equitable relief in aid of the claim is prayed, is an action at law, and is not controlled by the principles appertaining to an action in equity; and the conventional subrogees in this action did not have the burden of showing the superior equity as against the defendant in order to recover. This ruling is not in conflict with the decision inWilkins v. Gibson, supra, for in that case the court was speaking of "the superior or equal equities of others," not *120 the respective equities of the subrogee and the alleged debtor. Nor is it in conflict with what was said in Bleckley v.Bleckley, supra, for in that case equitable relief was sought independently of statute in the enforcement of the claimed subrogation, and Mr. Justice Bell in his opinion clearly distinguished the case from those cases wherein no equitable relief (by the plaintiff) was prayed; and considering the opinion as a whole, it seems that he meant that a court of equity had exclusive jurisdiction of the type or kind of suit for conventional subrogation therein presented (where equitable relief was prayed).
2. The bank also contends that the surety companies are barred from any recovery against it because of an election of remedies whereby it is released or discharged from liability, or by reason of which the plaintiffs are now estopped from proceeding against it. The surety companies have no better claim against the bank than the telephone company had, and the contention is that when the telephone company made claim against the surety companies on their bonds for the defalcations of its employee in forging the names of the payees on its checks and appropriating them to his own use, it elected to pursue its remedy against Arnold instead of the bank, and ratified the action of the bank in paying the checks; and that this amounts to an election of remedies by which the surety companies are bound. "An election of remedies is defined as the choosing between two or more different and coexisting modes of procedure and relief allowed by law on the same state of facts." 9 Rawle C. L. 956. "The basis of the doctrine of election of remedies is an estoppel, to wit, that a party can not, in the assertion or prosecution of his rights, occupy inconsistent positions. There must therefore actually exist two inconsistent remedies." Curry v. Washington National Ins.Co.,
Counsel for the bank cite a number of cases from other jurisdictions which apparently hold that to choose between an action *121
against the faithless employee and an action against the bank amounts to an election of remedies, and that an election having been made the plaintiffs could not later on pursue the other remedy. See Fowler v. Bowery Savings Bank,
Counsel for the surety companies cite a number of foreign cases which seem to sustain their contention that there was no election of remedies in this case which now bars the plaintiffs from recovery against the bank. See Grubnau v. Centennial Nat. Bank,
In First Nat. Bank of Ocilla v. Harris,
3. The telephone company signed a receipt each month, when it got its statements and canceled checks or vouchers from the bank, in part as follows: "It is hereby agreed that the undersigned will examine forthwith into the accuracy of the statement *124
and regularity and validity of the said vouchers, and it is further agreed that at the expiration of ten days from the date hereof, the said statements shall be conclusive evidence of the correctness of the balance therein shown, and the bank shall be, and is released from all claims in respect to any and every item shown in the said statement, save such as shall have been questioned or objected to in writing within the said ten days." The failure of the telephone company to comply with the provisions of these receipts and report the forgeries earlier is urged as a reason why the plaintiffs can not now recover. We have found no case in this State dealing with this precise question; but there are decisions from other jurisdictions directly in point. In Detroit Piston Ring Co. v. Wayne County c. Bank,
4. Another contention of the plaintiff in error is that the telephone company was negligent in not discovering the forgeries sooner, and should be barred from recovering now from the bank, *125
and that the surety companies as plaintiffs are in the same position. While the plaintiffs have no better rights than the telephone company had, we can not agree that its negligence would have barred a recovery by it, or that the surety companies are now barred because of its negligence. "The duty imposed on a depositor to examine his passbook, statements, and returned checks does not extend to an examination of the signatures of the payees or of other indorsements on the returned checks; rather, it is the duty of the bank to determine the genuineness of such indorsements and to pay upon the check at its peril; the depositor is not expected, nor is he required, to know whether or not such indorsements are genuine. This rule is applicable even where an agent in the employ of the depositor has forged the payee's indorsement." 7 Am. Jur. 366, § 512. Our Supreme Court has recognized and applied this principle in Atlanta NationalBank v. Burke,
5. It clearly appears in this case that the telephone company was a general depositor of the bank, and that the checks aggregating the sum sued for were paid by the bank on forged indorsements of the names of the payees therein, and charged as paid to the deposit account of the telephone company. "When one deposits money in a bank on general deposit, the bank thereby becomes the debtor of the depositor for the amount of the money so deposited, and undertakes impliedly to pay the money either to the depositor himself or to some person to whom he directs it to be paid." *126 Darien Bank v. Clifton,
6. The evidence demanded the verdict as directed by the court, and there was no error in overruling the motion for new trial.
Judgment affirmed. Sutton, P. J., concurs.
Concurrence Opinion
I wish to add the following reasons why I concur in the judgment. I think the action is sustainable on the theory of assignment or conventional subrogation. The petition alleged that the telephone company and the petitioners had demanded the sums claimed to be due and that the bank refused to pay. The bank's answer states that it admits that it denies liability and refuses to pay petitioners the amount claimed. I take this admission to mean that the bank admits that the telephone company demanded payment and that it was refused. Thus the loss to the telephone company is established. Its contract with *127 the telephone company was breached as a result of which it had a cause of action. It could either assign this cause of action of contract that another should stand in its place with reference thereto. The sureties are not barred by having elected an inconsistent remedy, for the reason that the sureties were not the sureties of the defaulting employee, but were obligated on a fidelity bond in an undertaking between them and the telephone company, to which the defaulting employee was not a party.