Thе question presented in this case is whether the State Bank of Cochran is responsible to the petitioner, National Factor & Investment Corporation (hereinafter referred to as National Factor), for conversion of funds by T. L. Williams, an officer and part owner of Williams Packing Company, Inc., which funds were deposited by Williams in the State Bank of Cochran (hereinafter referred to as the bank) in a fictitious account under the name of W. C. Hardeman. The case arose when a petition was filed by National Factor against the bank to recover $70,413.10, the loss suffered by reason of Williams’ conversion of funds which his corporation had assigned to National Factor as security for advancements.
Both parties filed motions for summary judgment, and supported them with affidavits. The trial judge denied the motion for summary judgment of National Factor, and granted the motion for summary judgment of the bank. National Factor appealed from the judgment denying its motion for summary judgment and from the granting of summary judgment for the bank.
1. The enumeration of errors contains eight alleged errors. The first two allege that the court erred in denying National Factor’s motion for summary judgment, in not finding that the bank was liable to it, and in not finding for damages prayed for; and the third alleges that the court erred in granting summary judgment for the bank.
T. L. Williams, his wife, and son, owned and operated Williams Packing Company, a corporation engaged in the meat packing business in Cochran, Georgia. The company bank account was carried with Cook Banking Company, Cоchran, Georgia. Williams opened a fictitious account in the name of W- C. Hardeman with the State Bank of Cochran in the year 1955. Checks payable to Williams Packing Company were deposited in this account, as well as individual checks to Williams, and the funds were used for paying personal obligations of Williams and obligations of Williаms Packing Company. In June 1963, National Factor entered into a contract with Williams Packing Company whereunder it agreed to lend money to Williams Packing Company, and Williams Packing Company assigned National Factor title to its accounts receivable. Under the agreement, between June 1963 and June 1965, National Factor advаnced to Williams Packing Company $743,842.05. Of this amount checks totaling $176,098.10 from customers of Williams Packing Company, and made payable to the company, were deposited by T. L. Williams or by his bookkeeper in the fictitious account. Some were endorsed “Williams Packing Company, For Deposit, State Bank of Cochran, Cochran, Georgia,” and others, “Williams Packing Company,” or “Williams Packing Company — T. L. Williams.” or Williams Packing Company, Inc. — T. L. Wililams.” Williams converted to his personal use funds in the defendant bank derived from collection of accounts receivable which had been assigned to National Factor as security for advancements to Williams Packing Company, and as a result National Factor suffered a loss of $70,413.10, for which this action seeks recovery.
The bank relies upon Code § 13-2042, which provides in part: “Whenever any agent, administrator,' executor, guardian, trustee, either express or implied, or other fiduciary whether bona fide or mala fide shall deposit any money in any bank to his credit as an individual, or as such agent, trustee, or other fiduciary, whether the name оf the person or corporation for whom he is acting or purporting to act be given or not, such bank shall be authorized to pay the amount of such deposit or any part thereof, upon the check of such agent, administrator, executor, guardian, trustee, or other fiduciary, signed with the name in which such deposit was entеred, without being accountable in any way to the principal, cestui que trust, or other person or corporation who may be entitled to or interested in the amount so deposited.” It contends that whether Williams bona fide or mala fide deposited the money in the bank, the bank was authorized to pay the amount of the deposit upon his check signed with the name in which the deposit was entered without being accountable in any way to National Factor, unless the bank had knowledge that the depositor was misapplying funds belonging to Williams Packing Company and aided him in doing so, and that the bank did not have such knowledge.
The trial court held that the knowledge requirеd is actual knowledge, and ruled: “Pretermitting the issue of whether knowledge of the plaintiff’s trust interest by the bank is put in issue by the affidavits of G. A. Wise, Paul T. Bell and Ralph E. Moore and the other attendant circumstances, this court concludes that the specific denials of knowledge of misapplication of
In applying Code § 13-2042, the Court of Appeals in United States Fidel. &c. Co. v. Grimsley,
In Tattnall Bank v. Harvey,
In National NuGrape Co. v. Citizens & Southern Nat. Bk.,
We accept as the correct rule that set out in National Nu-Grape Co. v. Citizens & Southern Nat. Bk.,
National Factor relies on the stated circumstances to estab
The fictitious account was in the name of W. C. Hardeman, a living person, who had no knowledge of the account and who was a customer of Williams Packing Company. The acсount was opened in 1955, some eight years before the factoring agreement between National Factor and Williams P'acking Company was entered into. The record is absent any reason for the account. An account in a fictitious name is recognized in Georgia. See Ga. L. 1962, pp. 156, 257 (Code Ann. § 109A-3 — 401 (2)), and Code § 13-2042, the latter contemplating that an account can be opened in any name and the bank may pay out the funds on checks signed in the same name as the account, where the bank has no knowledge of a fraudulent purpose of the account. The fictitious account under the circumstances would not be sufficient to alert the bank to the fact thаt it was fraudulent. Nor would the absence of a resolution of the corporation authorizing deposit of the funds in the fictitious account, or signature card, or disregarding the restrictive endorsements on certain checks, as there is no contention or any evidence in the record that Williams and the bookkeeper werе not authorized to deposit checks payable to Williams Packing Company in the fictitious account and to restrictively endorse the checks. It would be presumed that they were, especially since Williams was an officer of the corporation, and Mrs. Grinstead was the bookkeeper, and this was a family corporation. The president and director of the bank considered and treated the fictitious account as Williams’ account, and Williams Packing Company was thought by them to be Williams’ personal company. Code § 13-2042 authorizes the bank to honor checks drawn on an account in the name of the account by the depositor of the
The sixth circumstance relied on to show notice is that payments were made to Phillips, a director and vice president of the bank (retired and not active as an officer) by Williams from the fictitious account in payment of his personal obligation to Phillips. While the evidence is uncontradicted that Williams paid his personal obligations, which were large, from the fictitious account over the two-year period, it also shows that Phillips during that period paid to Williams a larger sum which was depositеd in the fictitious account. Thus no loss occurred to the account. This account was used as a personal and company account by Williams, was so considered by the bank, and is acknowledged as such by National Factor.
The seventh circumstance relied on is the repayment to the bank of personal debts of T. L. Williams from funds deposited in the fictitious account. Since it is not disputed that this was partially a personal account of Williams, the bank was justified in charging the account in payment of his personal obligations. Furthermore, the record shows that Williams deposited the loans from the bank in the account, and deposits were made to thе account from sources other than checks made payable to Williams Packing Company, more than six times the amount repaid from the account at the bank.
The eighth circumstance refers to deposit of advances from National Factor in the fictitious account. The loss suffered by National Factor did not result from mishandling of the loan funds but from misappropriation of payments made by customers, some of which were accounts receivable which National Factor held as security.
With the specific denial by the officers of the bank that they had knowledge of the misapplication by Williams of funds belonging to National Factor, we must conclude that the facts or circumstances relied upon by National Factor to show knowledge by the bank of conversion of funds by Williams do not make an issue of fact for a jury. There is no evidence of actual knowledge, or any circumstances such as would raise a presump
The trial judge did not err in granting summary judgment for the bank, or in denying summary judgment for National Factor.
2. National Factor contends that Code § 13-2042 is unconstitutional in that it violates Art. I, Sec. I, Par. II of the Constitution of Georgia (Code Ann. § 2-102), which provides: “Protection to person and property is the paramount duty of government, and shall be impartial and complete,” and the equal protection clause of the United States Constitution (Code § 1-815); that it violates Art. I, Sec. IV, Par. I of thе Constitution of Georgia (Code Ann. § 2-401) in that it is a special law enacted for banks in derogation of a general law, Code § 108-423, which provides: “All persons aiding and assisting trustees of any character, with a knowledge of their misconduct, in misapplying assets, are directly accountable to the persons injured”; and violates Art. I, Sec. III, Par. I (Code Ann. § 2-301) of the Constitution of Georgia, which prohibits the grant of special privileges or immunities.
The basis of the contention is the assertion that Code § 13-2042 is partial to banks by relieving them of the requirements of Code § 108-423, while other trustees, fiduciaries, etc., are bound by its provisions. The contention is without merit, as the two Code sections are in harmony, and under either section a bank that knowingly aids a trustee or other person in misappropriating funds is liable to the injured party. See Burkhalter v. Peoples Bank,
3. The court was in error in striking from the affidavit of Paul T. Bell, president of National Factor, the statement that L. L. Phillips, as director, and L. D. Griffin, president of the defendant bank, had knowledge of the financial relationship be
4. It was not error for the court to strike the exemplification of bankruptcy pleadings attached to the affidavit of Paul T. Bell, as it was not relevant to the issue and was hearsay. The bankruptcy petition was not filed until over two months after the expiration of the period of time (May, 1963 — May, 1965) pertinent to this litigation.
5. In view of the ruling heretoforе made that the court properly granted summary judgment in favor of the bank, because there was no evidence that the bank had knowledge of the conversion by Williams of funds belonging to National Factor, the question of whether National Factor had a perfected security interest in funds derived from checks deposited by Williams in the fictitious account is immaterial in this litigation. That would be an issue between National Factor and the bank in the bankruptcy proceeding.
Judgment affirmed.