FARMERS'BANK OF ALAMO, GA. v. United States Fidelity & Guaranty Co. , 28 F.2d 676 ( 1928 )

BRYAN, Circuit Judge.

This is an appeal from a decree for $3,346.45 in favor of the commissioner of roads and revenues of Wheeler county, Ga., against J. F. Wright, sheriff of that county, as principal, the United States Fidelity & Guaranty Company, as surety on the sheriff’s bond, and the Farmers’ Bank of Alamo, Ga. The' decree pro • vides that, upon payment of the amount adjudged, the surety shall he subrogated to the rights- of the commissioner as against the sheriff and the bank. It was shown without dispute that the amount of the decree represented the sheriff’s shortage in tax moneys collected by him. All of this money was deposited by the sheriff in the bank to the credit of “J. F. Wright Tax Account,” and he had drawn it oiit upon cheeks signed by himself as sheriff, on a separate account which he kept at the bank. The bank defended on the ground that it paid out the money deposited in the tax account in pursuance of instructions from Wright to pay cheeks out of it whenever there were not sufficient funds in his account as sheriff. In the tax account were included small amounts which the sheriff was entitled to as commissions upon collections. The. bank was aware of this, as its cashier usually calculated the amount of commissions that were mingled with public funds. But there is no contention that officials of the bank believed that the withdrawals from the tax account were, or were intended to be, only for commissions.

Both the special master and the District Judge held that the bank had actual knowledge of the trust character of'the funds in the tax account, and notwithstanding this knowledge honored cheeks in the aggregate amount of the decree, which were not made to an official entitled to receive tax money, but which showed on théir face that they were given to discharge personal obligations of the sheriff. The evidence amply sustains these conclusions.

The bank appeals, and contends that, as it did not receive any of the money on a debt due to it, or otherwise participate in the misappropriation, it cannot be held liable.

One who deposits money in a bank as a trustee has the right to withdraw it in the same capacity. If the bank is without notice or knowledge to the contrary, it has a right to presume that the depositor will not violate his trust; but, if the bank has notice or knowledge that a breach of trust is being committed by an improper withdrawal and use of the fund, it then becomes liable for the misappropriation. 3 R. C. L. 549. Because of the actual knowledge which the appellant bank had of the misappropriation by the sheriff of the funds in the tax account, we are of opinion that the decree appealed from is correct. The hank did not act in the belief that no more than the small commissions of the sheriff were being withdrawn. On the contrary, it charged to the tax account checks that were drawn against the sheriff’s personal account. It had , full knowledge that the sheriff was withdrawing public money in payment of his personal debts, and was hound to know that he was misappropriating money deposited and designated as a trust fund.

The decree is affirmed.