The petition stated a cause of action, and the court did not err in overruling the defendant's demurrers.
DECIDED MARCH 18, 1948. REHEARING DENIED MARCH 31, 1948. Southern Cotton Oil Company brought an action for damages against First National Bank of Dalton, Georgia. It was alleged that the damages were the result of or grew out of the following transactions: In December, 1946, and in January, 1947, the *Page 780 plaintiff sold to Dalton Mattress Company certain raw materials for the manufacture of mattresses; the sales being for cash on delivery. Delivery had been made, but the mattress company had failed to make payment, and advised the plaintiff to draw a sight draft on the mattress company through the defendant. The plaintiff followed these instructions by drawing the draft on February 4, 1947. The draft was delivered to First National Bank of Cartersville on that date, and was immediately transmitted by that bank to the defendant "as collecting agent for" the plaintiff. The plaintiff "had deposited the draft as a cash item with the First National Bank of Cartersville, Georgia, and proceeded thereafter to draw checks against the same," assuming from the assurances of the owner of the mattress company that the draft would be promptly paid upon presentation. The mattress company was a customer of the defendant bank, and was heavily indebted to it at the time it received the draft for collection, and the mattress company was totally insolvent at that time, which was well known to the defendant but unknown to the plaintiff. The plaintiff did not know whether the draft was immediately presented for payment, but, as alleged, it was the defendant's duty, as collecting agent for the plaintiff, to do so and to notify immediately the forwarding bank of its dishonor; and the defendant was also under the duty to notify the plaintiff of the depressed financial condition of the mattress company and to take vigorous measures to secure payment. Upon information and belief the plaintiff charged that the draft was presented and dishonored on February 5, but the defendant failed to give notice thereof and retained the draft in its possession until April 15, when it was returned to the forwarding bank as unpaid, at which time it was immediately charged by the forwarding bank to the plaintiff's account. At the time of dishonor of the draft the mattress company was still in possession of the raw materials which the plaintiff had furnished, and had the plaintiff been promptly notified, it could have taken steps to make collection of its claim. During the period of time intervening between the date of the dishonor and notice of dishonor, as the plaintiff believed, the raw materials in question were used in the manufacture and sale of mattresses, the proceeds of which were turned over to the defendant and credited upon the mattress company's indebtedness *Page 781 to the defendant. It was alleged that this neglect of its duty by the defendant damaged the plaintiff in the sum of $1171.03. The draft, attached to the petition, shows that it was drawn by Southern Cotton Oil Company and made payable at sight to the order of First National Bank of Cartersville. The draft also contained the following: "Dalton Mattress Company, thru to the First National Bank, Dalton, Georgia, Returned unpaid 4/15/47;" and was endorsed on the back by First National Bank, Cartersville, Georgia, and as follows: "Pay to the order of the First National Bank, Cartersville, Georgia. For deposit only to the credit of Southern Cotton Oil Co."
The defendant filed general and special demurrers, which were overruled, and it excepted. Counsel for the defendant contend that for several reasons their demurrers should have been sustained. They say: (1) that the plaintiff had no title to the draft after depositing it, that title was then in the forwarding bank, and that the plaintiff could not recover for that reason; (2) that the forwarding bank, and not the receiving bank, was liable for any negligence in failing to collect the draft; and (3) that the receiving bank was acting for the forwarding bank, and not for the plaintiff, in handling the draft, and that there was no privity of contract or agency relationship between the plaintiff and the defendant.
"The majority rule at common law, and as adopted in the Uniform Bank Collection Code, is that the correspondent is the sub-agent of the depositor of paper deposited for collection, while the minority rule is that the correspondent is the agent of the forwarder and not of the depositor." 9 C. J. S., Banks and Banking, § 228b. The rule that, when money is placed in a bank on general deposit, the title to the money passes to the bank and the relation of debtor and creditor is created between the bank and the depositor, applies to checks or drafts deposited by a customer, if it appears that the check or draft was received as a deposit to be treated as cash, and that this was the intentionof both parties. On the other hand, if a check or draft is deposited for collection, then it is clear that the bank does not take title thereto, and the title to the check or draft remains in the depositor. If *Page 782 the parties intend to treat such paper as cash, title passes at once upon receipt of the deposit, but if the intention is that the bank shall not be responsible except as an agent for collection, title remains in the depositor. "The difficulty in determining the relation between the parties lies in the determination of their mutual intention, and this must of necessity depend upon the individual facts of each case; so that the question is one rather of fact than of law." First NationalBank of Fayetteville, Tenn. v. McMillan, 15 Ga. App. 319,322 (83 S.E. 149). That case also holds that ordinarily, when checks or drafts are deposited in a bank, the presumption is that they are deposited for collection only, and not as cash; but where a check or draft is drawn in favor of a bank, the contrary presumption is authorized. Furthermore, "it appears to be well settled that merely crediting a depositor with the amount of a check, whether this be done in his pass-book or upon the books of the bank, is by no means conclusive evidence that the paper was received as cash or otherwise than for collection. A credit so made in anticipation of collection will be deemed merely provisional, and the bank may cancel the credit or charge back the paper to the customer's account, if it is not paid by the maker or drawer." Id. Under these rules of law, the question of intention, which is a question of fact, is paramount and controlling.
In this case it appears from the indorsement on the draft itself, although it was made payable to the Cartersville bank, that it was "for deposit only to the credit of Southern Cotton Oil Co." Although the petition alleges in one place that the draft was deposited "as a cash item," it appears from the petition that the Dalton bank handled the draft "as the agent of petitioner," and that the draft when returned by the collecting bank to the forwarding bank was immediately charged to the plaintiff's account. Under the authorities cited, and the allegations of the petition as a whole, we think that whether or not the title to the draft was in the Cartersville bank was a question of fact for determination by the jury, and that the court could not hold as a matter of law that such title passed to the bank. "When negotiable paper is deposited for collection, the depositor remains the owner, as to the collecting bank, in the absence of special agreement. And the mere provisional credit as cash, with liberty to draw thereon, *Page 783 will not change the rule." Fleming v. State,62 Tex. Cr. R. 653,661 (139 S.W. 598). Checks deposited in a bank and indorsed "for deposit only" do not create a debtor and creditor relation between endorser and correspondent bank until proceeds have been collected and transmitted. First National Bank v. Morell Co.,53 S.D. 496 (221 N.W. 95, 60 A.L.R. 863).
The contention that the forwarding bank, and not the receiving bank, was liable for any negligence in failing to collect the draft is not maintainable. Under the banking laws as established by the act of August 16, 1919, codified in the Code of 1933, Title 13, the diligence required of a bank receiving a deposit of a check or draft for credit or for collection is clearly defined. It is considered due diligence on the part of such bank in the collection of such item so deposited to forward and route the same without delay in the usual commercial way, and the maker, endorser, or guarantor thereof is liable to the bank until actual final payment is received; "and when a bank receives for collection any check, draft, note, or other negotiable instrument and forwards same for collection as herein provided, it shall be liable only after actual final payment is received by it, except in case of want of due diligence on its part as aforesaid." Code, § 13-2035. Under the allegations of the petition, the forwarding bank promptly transmitted the draft for collection to the defendant, and it was clearly not liable to the depositor for the negligence of the defendant.
The final contention of the defendant, that the receiving bank was acting for the forwarding bank, and not for the plaintiff in handling the draft, and that there was no privity of contract or agency relationship between the plaintiff and the defendant, is untenable. "A depositor who suggests, even though he does not expressly require, the appointment of a particular subagent, with the result that the bank designates such subagent, is estopped to deny that the subagent is his agent rather than the agent of the bank, and the forwarder is not liable for the default of such subagent." 9 C. J. S., Banks and Banking, § 228b. "A collecting bank, knowing of the depressed financial condition of the debtor, is delinquent in its duty if it neglects to inform its customer of such vital condition, and fails to take vigorous measures under the circumstances to secure payment, and if loss occurs by *Page 784 its neglect to exercise that degree of skill, care, and diligence which the nature of its undertaking calls for, with reference to the time, place, and circumstances surrounding the undertaking, it will incur liability to its principal for the loss sustained."Planters' Bank of Americus v. Albert Pick Co., 38 Ga. App. 95 (143 S.E. 441), citing Pinkney v. Kanawha Valley Bank, 68 W. Va. 254 (69 S.E. 1012, 32 L.R.A. (N.S.) 987, Ann. Cas. 1912B, 115). It appears from the draft, as drawn by the plaintiff, that it was to be presented to the payee therein, "thru the First National Bank, Dalton, Georgia", the defendant. It thus appears that the plaintiff selected the subagent through whom the draft was to be presented, and the petition alleged that it was forwarded to the defendant "as the agent of petitioner." We think, therefore, that a relationship of principal and agent between the plaintiff and the defendant was alleged in the petition, and that under the principles of law cited there was privity of contract between the parties on which the action could be based.
The defendant has cited several cases, some of which were decided prior to the passage of the banking laws of 1919, and others of which differ substantially on their facts from the case at bar. We do not think that any of the authorities cited by the defendant requires a contrary ruling herein.
There was no error in the rulings on the special demurrers, and the court did not err in overruling the general demurrers.
This case was considered by the whole court as provided by the act approved March 8, 1945 (Ga. Laws 1945, p. 232).
Judgment affirmed. Sutton, C. J., MacIntyre, P. J., Gardnerand Townsend, JJ., concur. Felton, J., dissents.