Pace v. Bank of Thomasville , 155 Ga. 585 ( 1923 )

Hill, J.

(After stating the foregoing facts.)

The court below only passed upon the general demurrer, sustaining it and dismissing the petition. In so doing we are of the opinion that the court erred. The petition alleges that the notes deposited with the bank as collateral security without the indorsement of Theodore Titus Sr. were without value, and that Theodore Titus Sr., who indorsed the notes, did so in consideration that the notes signed by the Thomasville Cadillac Co., a firm composed of Theodore Titus Jr. and W. S. Smith, would be extended for ninety days. It was further alleged that the Bank of Thomas-ville released and discharged Theodore Titus Sr. as indorser or surety on the notes, without the consent of plaintiff; and that it did not, after the release, attempt to enforce and collect the notes against Theodore Titus Sr. and as a result of its action in permitting Theodore Titus Sr. to erase his name as indorser on the notes, totally destroyed their value, and that by virtue of the release and discharge by the bank the collateral notes were rendered totally worthless and without value. Taking these allegations to be true, this amounted to a conversion by the bank of the notes, and under the allegations of the petition the plaintiff is entitled to collect an amount which represents the actual damage which the plaintiff has sustained by such conversion. Citizens Bank of Madison v. Shaw, 132 Ga. 771 (65 S. E. 81). In the above-cited case this court held:

“ If a creditor receives promissory notes under an agreement to collect them and apply the proceeds to the payment of the debt, he is bound to use ordinary care and diligence in making such collection; and if any loss should happen to the pledgor by reason of a want of such care and diligence, the law will compel the pledgee'to make good the loss so resulting. . . If promissory notes are deposited with a creditor under an agreement of the character indicated in the preceding headnote, and they are converted by the creditor, this does not conclusively entitle the debtor to a credit of the face value of the collateral, but to an amount which represents the actual damage which he had sustamed by such conversion. . . If promissory notes are converted, and damages are claimed on account thereof, the amount of principal and interest at the time of conversion appearing from the notes themselves to be owing and unpaid, and the interest upon that aggregate from thence to the trial, is prima facie the measure of damages, if the person setting them up is entitled to full recovery of the value of the notes. The converter has the right to show, in reduction, the fact of payment in whole or in part, the inability of the makers to pay wholly or partially, a release of the makers from their undertaking, the invalidity of the notes, or other matter which will legitimately affect and diminish their value.” We are of the opinion that where a creditor has notes in its possession, of the character set out in the petition, as collateral security for a debt due it by the pledgor, and the notes are indorsed by one whose indorsement renders them solvent, and where the pledgee permits the indorser to erase or withdraw his indorsement from the notes without the consent of the pledgor, thus rendering the notes insolvent, such action on the part of the pledgee amounts to a conversion of the notes, just as much so as if it should sell the notes and receive the value in money therefor.

There is equity in the petition. The plaintiff seeks not only to have the bank required to credit on his indebtedness the value of the property converted, but he offers to pay the bank the difference, if any, between the value of the collateral with interest and his indebtedness to the bank; and he seeks further to have canceled the record of the mortgage given by him to secure the indebtedness to the bank, etc. The plaintiff is not required to wait until the bank brings suit on the indebtedness, which it may delay for years, but he has the right to bring the present action and have his rights determined in a court of equity, as prayed. Whether Theodore Titus Sr. is a necessary party to such a proceeding as the present, is not involved in this case, as the court only passed upon the general demurrer. For the reasons set out above the court erred in dismissing the petition.

Judgment reversed.

All the Justices concur. Kussell, C. J., and Gilbert, J., concur specialty.