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Action on check. Before Judge Parker. Fulton Civil Court. January 24, 1955.
1. (a) "Where an instrument is payable to the order of two or more payees or indorsees who are not partners, all must indorse, unless the one indorsing has authority to indorse for the others." Code 14-412. The decisions of the courts holding that the laws relating to partnerships are generally applicable to joint adventures must be construed in pari materia with the Negotiable Instruments Act.
(b) A negotiable instrument made payable jointly to two or more persons must be endorsed by all of them unless they are partners.
2. The checks in this case were not made payable to a fictitious person.
3. The proceeds of the checks did not pay a debt due by the maker to the payee who cashed them.
4. There was no error in excluding the evidence objected to under the hearsay rule and which was not relevant to the issue of the case.
R. W. Didschuneit brought suit against Fulton National Bank in the Civil Court of Fulton County. The petition alleged that plaintiff was a depositor of the defendant, a national banking corporation carrying on the business of commercial banking with an office, agent and place of doing business in Fulton County, Georgia; that on September 10, 1953, the plaintiff drew his check number 3873 in the amount of $5,000 payable to the order of Sanford Company and Atlantic Steel Company, which check was later indorsed by Sanford Company and Atlantic Steel Company by R. S. Stradley, receiver, and deposited to the account of Sanford Company in the defendant's bank; that said indorsement for Atlantic Steel Company was unauthorized, and Atlantic Steel Company received no portion of the funds represented by said check; that on November 24, 1953, plaintiff issued his check number 91 drawn on the defendant in the amount of $1,296.70 payable to the order of Sanford Company and Atlantic Steel Company, which check was later indorsed by Sanford Company and Atlantic Steel Company by R. S. Stradley, receiver, and deposited to the account of Sanford Company in the defendant bank; that said indorsement as to the Atlantic Steel Company was unauthorized, and Atlantic Steel Company received no portion of the funds represented by said check; that upon discovering that such indorsements were unauthorized, the plaintiff on or about March 17, 1954, made demand on the defendant to credit his account with the amount of $6,296.70 representing the sum of said two checks for the alleged reason that defendant had improperly charged the plaintiff's account with such checks in violation of law.
The answer filed by the defendant denied that the indorsements in question were unauthorized and that the checks were wrongfully charged to the plaintiff's account. The defendant also alleged that the checks in question were delivered by the plaintiff to R. S. Stradley as receiver for Sanford Company.
The defendant amended its answer to add a further and alternative defense that if the indorsements of Atlantic Steel Company were not legal indorsements, the plaintiff still could not recover from the defendant by reason of the fact that the plaintiff was not indebted to Atlantic Steel Company, and plaintiff had suffered no loss by reason of the cashing of such checks. The amendment alleged that the checks in question represented payment for work done and due to Sanford Company, the party by whom the work was done and to whom the plaintiff was actually indebted on a roofing and sheet-metal subcontract in connection with a parking garage unit at the Fulton County courthouse, on which the plaintiff was the general contractor, that the Sanford Company was entitled to receive and did receive from the plaintiff full payment under such subcontract and Atlantic Steel Company was not entitled to receive any part of such payment and has made no claim for any part of such money and no claim against plaintiff under such subcontract.
The defendant bases its main defense on the contention that the plaintiff believed that his contract was with the Sanford Company and Atlantic Steel Company as "joint venturers" and intended his checks to be made payable to them as "joint venturers". To put this contention in its real light will necessitate a more complete statement of the testimony.
The evidence introduced upon the trial of the case was substantially as follows: that the plaintiff, Didschuneit, had a contract with Fulton County to build a parking annex onto the court house and he sublet the roofing work under the contract; that among several bids, Sanford Company submitted the lowest bid; that Mr. Robertson, who was manager of Sanford Company, came to his office regarding the subcontract and he told Mr. Robertson that he understood Sanford Company was pretty shaky financially and in the hands of a receiver and if there was going to be any trouble in their completing the job if he gave it to them, he would prefer to take the next bid above them to avoid the trouble; that Mr. Robertson told him that Atlantic Steel Company was backing up Sanford Company financially, and Mr. Didschuneit then told Mr. Robertson if Atlantic Steel Company would go on the contract with Sanford Company, he would be very happy to give them the work; that Didschuneit asked Robertson who was handling the business for Atlantic Steel Company and Robertson told him that it was R. S. Stradley, assistant treasurer of Atlantic Steel Company.
Didschuneit testified that he knew Stradley and knew he was one of the officers of Atlantic Steel Company; Didschuneit told Robertson to take the proposal of Sanford Company to Atlantic Steel Company and get them to sign it, and then, after Robertson left, Didschuneit called Stradley at Atlantic Steel Company to find out if Atlantic Steel Company was in fact financing Sanford Company; Robertson left for the Atlantic Steel Company and returned with the bid, signed by Atlantic Steel Company, R. S. Stradley, asst. treas. When it was delivered at first to Didschuneit it was signed only "Sanford Co., Inc., by H. M. Robertson." Didschuneit then issued his purchase order dated January 13, 1953, to Sanford Company and Atlantic Steel Company on the bid in question and this purchase order awarded the bid to Sanford Company and Atlantic Steel Company and this completed the contract.
When the work was completed, the plaintiff, Didschuneit, took an affidavit that all bills for labor and material incurred by Sanford Company, Inc., and Atlantic Steel Company in performing the work under the bid in question had been paid. This affidavit was signed on behalf of Sanford Company, Inc., by H. M. Robertson and on behalf of Atlantic Steel Company by R. S. Stradley.
Payment was made in the total amount represented by the bid to Sanford Company and Atlantic Steel Company by the two checks involved in the instant case and by two other checks which are involved in a companion case, said checks each being in partial payment of the bid and together totaling the amount of the bid. The last of these checks was dated November 24, 1953.
On March 17, 1954, Atlantic Steel Company advised Didschuneit that they denied any connection whatsoever with the contract in question between Didschuneit on the one part and Sanford Company and Atlantic Steel Company on the other part.
Didschuneit was interrogated by counsel for the defendant bank as to whether the relationship between the Atlantic Steel Company and the Sanford Company was that of joint adventurers. The questions propounded and the answers made by him were: "Q. Mr. Didschuneit, did you intend for Atlantic Steel Company to get part of the money from these checks? A. I intended for the Atlantic Steel Company to close out the contract. My purchase order and their proposal to me on the face of these two instruments here formed a contract so far as I knew between myself and the Atlantic Steel Company and Sanford Roofing Company jointly. Q. The question is, did you intend for the Atlantic Steel Company to participate in the possession of the checks? A. Yes, I intended for then to either get some of the money or release it to the proper people . . . Q. On that last statement you made there, as I understand it, you meant for Atlantic Steel Company in whatever relation they had in your contract to get these checks? A. Yes."
The case was submitted to the judge without the intervention of a jury, and he entered judgment in favor of Didschuneit. The bank filed a motion for new trial on the general grounds, and by amendment added a special ground. The court denied the bank's amended motion for new trial and the case is here for review.
We shall for the sake of convenience refer to the plaintiff in error as the defendant and to the defendant in error as the plaintiff.
It is the contention of the bank that a joint adventure comes within the provisions of the negotiable instruments law permitting a partner to indorse negotiable instruments on behalf of the partnership. It insists that since the plaintiff admitted that the check was issued to the Atlantic Steel Company and Sanford Company, Inc., in payment of a debt due them as joint contractors, he cannot complain that the bank cashed the check on the genuine signature of one of the joint adventurers.
The law of this State as pronounced by the decisions of both our appellate courts is that the general laws governing partnerships and agency of partners are applicable to joint adventures. Puckett v. Reese, 203 Ga. 716 (48 S. E. 2d 297); Bowman v. Fuller, 84 Ga. App. 421, 426 (66 S. E. 2d 249). This is not only the law of Georgia but is the law in most, if not all jurisdictions of the United States.
There is no English authority in reference to the matter since the doctrine of joint enterprise is of American origin and was unknown to the English courts. They treat joint adventures as a partnership and recognize no difference in the relationship of partners and joint adventurers. Since the advent of the doctrine in this country in the early twenties, the courts throughout the nation have experienced difficulty in distinguishing joint adventures from partnerships. They are so similar in their natures that in almost every conceivable factual situation the law of partnership is precisely adjusted to joint adventures.
Recognizing and respecting the finely fixed and well adjudicated rule pronounced by the Georgia courts that the general laws of partnership are applicable to joint adventures, we must construe the decisions of our courts so holding in pari materia with the Code section above referred to containing the inflexible dogma of the Code that a negotiable instrument payable to persons jointly must be indorsed by them all unless they are partners. So we conclude in obedience to the statute that the check in this case must be signed by both of the payees. Our opinion is fortified by the holdings of the courts of sister States. "The statute above quoted makes the fact of partnership controlling rather than the presumption or inference with respect to partnership; and we can see how it must be so in order to be of any value. Partnership being a relation between persons created by contract, the parties may choose any name in which to conduct the partnership business . . . To attempt to outline by statute what words, or combination of words, would or would not indicate a partnership would be futile. Under the rule laid down by the statute, when there are two or more payees who are not in fact partners, all must endorse unless the one endorsing has authority from the others to endorse for them. It is clear that the names of two persons were used as payees in the check given by plaintiff; hence, it is essential that both of them should endorse if they were not partners, and it is conceded they were not." First National Bank of Garden City v. Daniel, 137 Kan. 423 (20 Pac. 2d 488); Virginia-Carolina Joint Stock Land Bank v. First & Citizens National Bank, 197 N. C. 526 (150 S. E. 34); Karsner v. Cooper, 159 Ky. 8 (241 S. W. 346, 25 A. L. R. 159).
The conceded fact revealed in the record, that while the plaintiff believed there was a joint enterprise, the payees named in the check occupied no such status, leaves no doubt that they were not "partners" or parties to a relationship analogous to that occupied by partners.
2. It is stoutly maintained by the defendant that the check was properly indorsed because: (a) since it was undisputed that Atlantic Steel Company had no interest in the check, it was, under the provisions of the negotiable instruments act, a fictitious party, and hence the check was really payable to Sanford Company alone; (b) that proceeds of the check paid the only debt that the plaintiff owed; that the debt was due to Sanford Company, and for this reason the plaintiff sustained no damage.
The first proposition is met on the threshold of the case by the very wording of the negotiable instruments law contained in Code Ann. Supp.) 14-209 (3) "When it is payable to the order of a fictitious or nonexisting living person . . . and such fact was known to the person making it so payable." It clearly appears from the Code section that in order for the payee to be a fictitious person within the purview of the statute he must either be nonexisting or it must be known to the drawer that he had no interest in the proceeds of the check.
The case of Atlanta & Lowry National Bank v. First National Bank of Carrollton, 38 Ga. App. 768 (145 S. E. 521), is cited and its applicability to this case insisted upon. That case is not only clearly distinguishable upon its facts from this case, but. in a negative way supports the proposition that the payee must intend to make the check payable to a party who has no interest in it in order for such person to be characterized as "fictitious". In the Atlanta Lowry National Bank case, Dr. Earl Quillian was shown to have a contract with Stutz Atlanta Motor Company to deliver him a certain automobile. He had not contracted with Stutz Motor Car Company of America, Inc., nor was Stutz Motor Car Company of America, Inc., in any way concerned with his contract with Stutz Atlanta Motor Company. All of this was well known to the doctor. Nevertheless he drew a check for a portion of the purchase price of the automobile payable to Stutz Motor Car Company of America, Inc., and delivered it to Stutz Atlanta Motor Company. In this situation the fact was inescapable that he deliberately and intentionally made the check payable to a stranger to the contract who had no right to the check, a "fictitious" person within the meaning of the statute.
3. We now turn our attention to the question as to whether the plaintiff sustained damages by reason of the bank cashing the check. It is ably argued in interesting brief of counsel for the defendant that the plaintiff took the affidavit signed by H. M. Robertson and R. S. Stradley as complete assurance that the debts owing by Sanford Company, Inc., for material which went into the construction of the roofing installation had been paid, and issued the check on the faith of the affidavit alone. They also earnestly urge that Sanford Company, Inc., was entitled to the proceeds of the check. But a thoughtful and practical review of the situation constrains us to hold the contrary. The plaintiff was only satisfied with the protection, if any, afforded by the affidavit, because he was led to believe by Robertson, manager of Sanford Company, Inc., that Atlantic Steel Company was responsible for debts due for materials, if any existed, and by the consideration that the endorsement of the steel company would afford recognition by it of responsibility for such debts. To say that by a sheer trick or artifice on the part of H. M. Robertson, manager of Sanford Company, Inc., it became entitled to the proceeds of the check would be to legalize what appears from the record to be a fraud on his part.
Sanford Company, Inc., was entitled to be paid for the construction of the building, not when its manager, H. M. Robertson, falsely duped the plaintiff into believing the materials were paid for, but when the debt for the same was in fact satisfied. Of course, if he had succeeded in inducing the plaintiff to make Sanford Company, Inc., the sole payee of the check, then it would have been no concern of the bank, and it would have incurred no liability by cashing it. But he did not accomplish this. What we hold here is, that under the facts revealed by the record in the case, Sanford Company, Inc., was not entitled to the proceeds of the check and the defendant bank was not protected in cashing it.
We have not overlooked the reasoning that the debt which was to be paid by the check was the amount to be paid Sanford Company, Inc., for its part in the construction work. But that debt only incurred upon the completion of the contract and when the debts due for material were paid.
We do not consider the position of the defendant that the funds were paid to the party entitled to receive them and that they went to pay the exact debt for which the check was drawn.
There is no merit in the further contention of counsel that the imposter doctrine is applicable in this case. The imposter doctrine rests upon the basis of the drawer being deceived as to whom he was making the check payable and it involves a mistake in the payee's identity. No facts in this case support a finding that the parties to whom the check was payable were not the identical payees intended.
The Atlanta & Lowry National Bank case is cited as authority for the proposition that when the party who is entitled to a check receives the funds arising from it the drawer is not damaged, whatever lack of formality or technical reason was involved in honoring the check. Again the decision is recognized as a sound statement of the law, but we hold that in this case the party who obtained the funds by cashing the check was not entitled to them.
4. In the one ground of the amended motion for new trial the defendant complains of the exclusion of certain evidence offered by the defendant. The testimony was offered for the purpose of showing that Sanford Company, Inc., had obtained a release from the only materialman it owed for materials that had gone into the roofing installation. The proof of such release was vital to the issues of the case because, if in fact the release was shown, Sanford Company, Inc., was entitled to the check in question and no recovery could be had against the bank for paying the check proceeds to the rightful owner. The testimony referred to was that of R. S. Stradley, receiver of Sanford Company, Inc., which was as follows: "Q. Tell what arrangements, if any, you maple with Mr. Bennett with respect to the account before you signed the affidavit. A. During the course of the pursuit of this job, there were several other jobs Sanford Co. was working on. They were restricted as far as working capital was concerned, tight on cash, and I discussed this account with Pittsburgh with Mr. Bennett on several occasions on the idea that I had several other jobs winding up about the same time. And I had told Mr. Bennett and he had agreed with me, that it would be all right to let this account ride over until we got the other jobs finished, the proceeds of which I would use to pay the Pittsburgh Plate Glass account. I had that arrangement with the specific understanding he would be paid interest from the time he allowed that to go beyond maturity. That's the arrangement I had with Mr. Bennett."
Upon objection of counsel the trial court properly held the testimony of Stradley to be hearsay. Dyer v. Cannon, 24 Ga. App. 304 (1) (100 S. E. 723); Stewart Bros. v. Randall Bros., 138 Ga. 796, 797 (4) (76 S. E. 352); Barwick v. Walden, 71 Ga. App. 824, 825 (32 S. E. 2d 401). While, as contended by counsel, the evidence may .have been part of the res gestae of the transaction between Stradley and Pittsburgh Plate Glass Company, the latter was not a party to the case and the testimony objected to was not admissible for that reason. If the witness had testified that the debt to Pittsburgh Plate Glass Company had been released and thus satisfied, it would have been proof of an ultimate fact and admissible, but the conversation between the witness and a person not a party to the case was within the hearsay rule. Sapp v. Callaway, 210 Ga. 277 (79 S. E. 2d 532).
But if the evidence had fallen within an exception to the hearsay rule, it would not have been admissible. It did not show a release of the debt to which it referred but simply an extension of the time in which it was to be paid. The evidence simply showed that Sanford Company, Inc., would pay the debt from the monies it collected for other jobs it was to finish, but did not suggest that if the plate glass company was not paid from the funds collected by Sanford Company, Inc., for the other jobs it was not to be paid at all. To use the vernacular of the witness it was to "ride" until other work being done by Sanford Company was completed. To defer the collection and to release it are two entirely different things.
FELTON, C. J., dissenting. I concur in the conclusion that the bank improperly cashed the checks involved in this case upon the endorsement of only one of the payees for the reason that even if one joint adventurer has authority to indorse for another, the payees in this case were not joint adventurers and it is immaterial if the plaintiff thought they were.
I dissent from the judgment affirming the refusal to grant a new trial for the reason that I think the court should have admitted the testimony which was excluded as shown in ground four of the amended motion. The testimony excluded except for a limited purpose only was that of Robert S. Stradley, receiver for Sanford Company, subcontractor. The testimony in substance was that he had known a Mr. Bennett for five or six years; that he had seen him at the Pittsburgh Plate Glass Company office; that he had dealings with him as credit manager of Pittsburgh Plate Glass Company and as such had discussed with Mr. Bennett the bill for the materials bought by Sanford Company and used on the Fulton County parking garage; that Mr. Bennett agreed that it would be all right to let the account ride over until Sanford Company got another job finished, the proceeds of which Stradley would use to pay the Pittsburgh Plate Glass Company account. This testimony was not hearsay. The truth or falsity of what Bennett said to Stradley was not in issue. The issue was whether Bennett released the funds due from the plaintiff to Sanford Company which Sanford Company owed Pittsburgh Plate Glass Company. The issue was what words were used by Bennett, not whether they were true or not. When the words used by Bennett were shown, the law would attach the proper legal consequence. There was at least a question for the jury to decide whether Bennett released the funds. If he did, the plaintiff was released from his obligation to Pittsburgh Plate Glass Company on his bond and there would be no liability on the part of the bank in this case because the plaintiff would have suffered no loss by reason of the payment of the check without the proper indorsement. It is true that Pittsburgh Plate Glass Company would not be bound by the judgment in this case unless an equitable action is brought making it a party, and the possibility of a jury's making a different finding in an action by the Pittsburgh Plate Glass Company on the plaintiff's bond is not a bar to the admissibility of the testimony in this case. The utterance of Bennett here is the issue. VI Wigmore on Evidence 185, 1770; McCormick on Evidence 463, 228. Whether the statement was made by Bennett depends on the veracity and credibility of a sworn witness, Stradley, or witnesses, Stradley or Bennett. The question whether Bennett made the statement or not is not dependent on the veracity and credibility of Bennett, as it would be if the truth or falsity of Bennett's statement were in issue. The court erred in excluding Stradley's testimony on the ground that it was hearsay and in admitting it for the sole purpose of explaining why Stradley made an affidavit that all bills for labor and material had been paid so that he could collect the balance due on the contract from the plaintiff. The testimony of Stradley that he was dealing with Bennett as credit manager could have been known by Stradley and, in the absence of objection on the ground that it was a conclusion, it was enough to establish the fact; and prima facie, a credit manager has authority to settle and adjust claims (2 C. J. S. 1339, 1340, 118 a (1a), note 69) and make the arrangement by way of waiver as is contended for in this case which is in line with the settlement and adjustment of claims.
Spalding, Sibley, Troutman & Kelley, Griffin B. Bell, contra.
Smith, Kilpatrick, Cody, Rogers & McClatchey, A. G. Cleveland, Jr., Hugh Dorsey, Jr., for plaintiff in error.
Saturday May 23 02:55 EDT

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