McGregor v. Battle

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 seven thousand- *580 dollars 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, §16& et seq. If the money was placed in the bank on general deposit, the moinent 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 ; Schofield Man. Co. v. Cochran, 119 Ga. 901 . 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 a 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 deposit. 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defendant sought to withdraw his money, he signed a check upon the bank; the usual manner in which general deposits are withdrawn. The transaction had all of the characteristics of a general deposit, and was entirely lacking in any of the essential elements of a special deposit. It is true that on the day following the making of the deposit, when the check drawn by the defendant was paid, he received, in payment of his check, a part of the identical money that he had deposited the day before; but he received other money from the bank also; the amount of money put in by him not being, on that day, sufficient to discharge his check in full. What he received on the day following his deposit was the money of the bank. It was true that it was his money at one time on the preceding day, but, as a legal consequence resulting from the de *581 posit in the manner in which it was made, title to the money vested in the bank; and when he drew his check as a general depositor, while he received back some of the very money which he-had himself deposited, he did "not receive it as his own money but as the money of the bank. Some of this money, although the identical money that he had deposited on the day before, was as much the property of the bank as the remainder of the amount paid to him which came from other funds of the bank. There are respectable authorities holding that if a bank receives a general deposit at a time when it is insolvent, and its .insolvency is known to the officers of the bank but unknown to the depositor, the depositor may reclaim his deposit; no title to the money passing on ■account of the fraud perpetrated upon him. In some cases this doctrine seems fo have been recognized in the general terms above stated. In others it has been limited to those cases where the money of the depositor could be identified and separated from the general funds of the bank. In other cases it has been held that the doctrine does not apply if the money of the depositor has become mingled with the general funds of the bank. 5 Cyc. 565; 2 Morse on Banks (4th ed.), §629; Boone on Banks, §295; Magee on Banks, §333; Zane on Banks, §344; 3 Am. & Eng. Enc. Law (2d ed.), 847. The code declares that if any insolvent bank or banker, with knowledge.of such insolvency, shall receive money on general deposit, and fail to pay the depositor within three days after demand, such banker or officer in charge of the bank receiving the deposit shall be guilty of a felony. Civil Code, §1982; Penal Code, §207. The primary purpose of this provision is to punish the officers of a bank who receive on deposit money of others, knowing that the bank is in a condition where it can not repay the same. It is contended that this is a recognition, by the General Assembly, of the fact that the receiving of the deposit in such circumstances is a fraud on the depositor who is ignorant of the condition of the bank, and therefore is in effect a recognition of the principle above alluded to, which authorities a depositor to reclaim his deposit. It is to be noted, however, that the banker or officer of an incorporated bank may prevent a prosecution by repayment of the deposit within three days after demand. In the case of a private banker he' may repay the same from any .assets owned by him independently of those embarked in his bank *582 ing business, or assets thus embarked, so long as he is in a position where he can legally control the disbursement of such assets. But in the case of an officer of an incorporated bank, in order to prevent a prosecution he must refund to the depositor the amount of his deposit out of his own assets; for the penalty of the law is placed upon him as an individual, and 'he has no authority, by virtue of his office in the bank, to use the assets of the bank for the purpose, unless it is done by the authority of those in control of the bank, and under the circumstances it is lawful for the bank to make such a disposition of its assets. The code also declares-that all conveyances, assignments, transfers of stock, or other'contracts made by the bank in contemplation of insolvency, or after insolvency, except for the benefit of all creditors and stockholders', shall be fraudulent and void, unless made to an innocent purchaser for value, without notice ór knowledge of the condition of the bank, and the officers making or consenting to such conveyance or contract shall be punished as for a felony. Civil Code, §1979; Penal Code, §208. The purpose of this provision is to prevent the bank from preferring one of its creditors when the fact of insolvency is known to the creditor. A depositor by general deposit is a-mere creditor, and if the bank makes to the depositor a conveyance, or assignment, or transfer of stock, or other contract the legal effect of which is to give to such depositor a preference over the other creditors* the transaction is void, and the officer conducting the same a felon. It is a well-settled principle that if one obtains the goods of another under a contract of sale as the result of a fraudulent misrepresentation as to his solvency, the seller, upon discovering the fraud, may rescind the sale and reclaim the goods in the event that they are still in the possession of the buyer and the rights of innocent parties are not.affected by such reclamation. It may be, therefore, that where, by the fraudulent representation of the officer of a bank as to its solvency, one-is induced to make a general deposit of his money, the depositor majr, after the discovery of the fraud that has been perpetrated upon him, recover the money that he has deposited, provided the same can be identified and the actual money received by the bank returned to him; but where one intending to become, a depositor in a bank makes no inquiry as to its solvency, and is not induced to make the deposit as the result of any statement made *583 by the officers of the bank, such depositor is in no better position than any other person who deals with an insolvent under the impression that he is solvent. One who sells goods to an insolvent, such sale not being brought 'about by any fraudulent misrepresentation, can not, after the goods'have-been delivered, reclaim the same upon the ground that he has since discovered that his buyer is insolvent, even though the fact of insolvency were well known to every other person than the seller himself. IJpon the same principle we think that where one deals with a bank upon the assumption that it is solvent, and intrusts his money to it as a general depositor, he has no superior claim over other creditors growing out of the fact that he was ignorant of the insolvency at the time of the deposit; there being no fact amounting to an inducement to make the deposit other than the bank holding itself out to the world as a bank of deposit. We do not think that •the mere silence of the officers of a bank as to its condition at the time of the deposit is sufficient either to authorize a depositor to reclaim his money on account of a fraud, or to give him any superior lien over other creditors in the distribution of the assets of the bank. As stated above, however, we are aware that there are respectable authorities which go to this extent.

2. If a bank is insolvent but is still conducting its business, and pays the check of a depositor in the usual course of business, and the depositor has no notice of the insolvency, the payment is good, and the depositor is protected notwithstanding the bank is actually insolvent. In Hill v. W. & A. R. Co., 86 Ga. 284 , it was held that a depositor who draws his check on a bank and receives effects therefrom, without notice of, or reason to suspect, its insolvency, will be treated as a bona fide purchaser under the act above referred to. See also Dutcher v. Importers Bank, 59 N. Y. 5 . There is no ruling in the case in the 86 Ga. as to what would be .'the effect upon the transaction if the depositor knew of the insolvency, or had reason to suspect it, at the time that he received •payment of his check, when such payment was made while the bank was still in operation and the payment made in the usual course of business. It is a well-known fact that the suspicion that a bank is insolvent causes all depositors who are acquainted with the facts leading to the suspicion to rush at once and withdraw their deposits. 'A run on a bank is always produced by *584 those who think they have reason to suspect that the bank is in a failing condition. And we are not prepared to hold, if a bank is still in operation, open during the usual hours of business, paying its checks in the order in which they are presented, according to the. custom of bankers, that a depositor who merely had reason to suspect the solvency of the bank, this being the motive for his drawing a check, would be required to repay to the bank the amount so withdrawn^ less what would be his pro rata share in the assets of the bank on the day that the amount was withdrawn, in the event that the bank was afterwards forced to liquidation and was in fact insolvent. Neither are we prepared to hold that one who actually knows -that a- bank is insolvent, but does nothing except to draw his check and present it and receive paj-ment over the counter in the usual course of business, would be required to refund the amount so withdrawn, less his pro rata share upon a final winding up of the affairs of the bank. As we understand this, record, a decision- of these questions is not necessary. But when a depositor with notice, or knowledge, or reason to suspect that a bank is insolvent, by collusion with the officers of a bank, receives payment of his check not in the usual course of business, and under such circumstances that payment to him gives him a prefer-' ence over the other creditors, the depositor is guilty of a fraud upon the other creditors, and will be required to refund all of the amount so withdrawn by him, except what would be his proportion of the assets upon the winding up of the affairs of the bank. And especially would this be true in a case where the doors of a bank were closed and other depositors were not being paid and the depositor receiving his money was singled out as the sole depositor, or one of' a select few, who were being paid, when the depositors, as a class, were not being paid in the order in which their checks were presented. It has been held that if a payment was made not in the ordinary course of business, when the bank was actually, though not avowedly, insolvent, the payee can not hold the amount paid to him, though he was ignorant of the bank’s condition. 2 Morse on Banks (4th ed.), §625. Paj-ment made by an insolvent bank, or made in contemplation of insolvency, with the intent to give a preference to a particular creditor, is void, irrespective of whether the insolvency was open and notorious or whether the payee knew of the insolvency or motive of the bank *585 in making the payment. Boone on Banks, §301. Under onr statute, however, it would seem that if the depositor, although paid not in the usual course of business, was ignorant of the insolvency and of the intent of the bank to prefer him, he would be protected and not required to refund. However, it would seem, under some circumstances, that payment out of the usual course of business would be a circumstance to be given great weight in determining whether there was notice; as a payment made with a view of giving a preference to a particular creditor is rarely, if ever, made in "the usual course of business. See, in this connection, Clarke v. Ingram, 107 Ga. 565 .

3. There was no evidence whatever authorizing the instruction of the judge on the subject of special deposits. The instruction of the judge, that if the defendant placed his money on deposit, and such action was induced by the officers of the bank, and if the insolvency of the bank was unknown to him, he would have a right to withdraw the money when he learned of- the insolvency, was also unauthorized by the evidence; there being no evidence whatever that there was any inducement held out to him to make the deposit which he himself claims was a mere general deposit. The errors thus committed are of such grave nature, under the facts of the case, as to require a reversal of the judgment.

The assignment made by the president and cashier of the bank, without the authority of the board of directors, was admissible simply as a circumstance showing the insolvency of the bank; it being in effect an admission of both the president and the cashier that the bank was insolvent on the day of the transaction in question; but the rejection of this evidence probably would not have been alone sufficient reason for reversing the judgment.

Judgment reversed.

All the Justices concur.