O.C.G.A. § 10-6-57 (2019)

Annotations

JUDICIAL DECISIONS Payment to payee without notice of payee’s lack of authority is valid defense. - If the maker pays an installment to the payee without notice that the payee had no authority to accept payment, in a suit by the transferee the maker can set up as a defense that the payment was made, even though the transferor has not remitted it to the transferee. Northside Bldg. & Inv. Co. v. Finance Co. of Am., 119 Ga. App. 131, 166 S.E.2d 608, 1969 Ga. App. LEXIS 1013 (1969). Careless maker may have to pay twice. - Holder, notwithstanding the previous payment of a note by the maker to the original payee, may collect it again, unless one of three things appears: first, that the payee was the holder’s general agent for the collection of such papers; or, second, had special authority to collect in the particular instance; or, third, that the money collected by the payee in fact reached the holder’s hands. If the payee collected for the holder under the payee’s authority, either general or special, or if the holder actually received the money collected by the payee upon the note, this should be an end to the matter. Otherwise, the law renders the careless maker liable to pay a second time. Bank of Univ. v. Tuck, 96 Ga. 456, 23 S.E. 467, 1895 Ga. LEXIS 110 (1895). Maker may have to pay twice if note is not produced, unless payee is agent for holder or money reaches holder. - If the maker of a negotiable promissory note pays it to the original payee without requiring the production and surrender of the note, the maker is liable to pay it again to an innocent holder who acquired title to it in good faith and for value before maturity, unless the payee was the holder’s general agent for the collection of the note and had special authority to collect it, or the money collected thereon in fact reached the

hands of the holder of the note. Northside Bldg. & Inv. Co. v. Finance Co. of Am., 119 Ga. App. 131, 166 S.E.2d 608, 1969 Ga. App. LEXIS 1013 (1969). Debtor should verify that agent possesses security. - If the debtor on a promissory note makes a payment thereon to one claiming to be an agent for collection, it is incumbent on the debtor to see that the agent is in possession of the security, for if the agent is not, the debtor will be liable to pay again, unless the person making the collection had authority to collect the sums due the principal or the money actually reached the owner. Walton Guano Co. v. McCall, 111 Ga. 114, 36 S.E. 469, 1900 Ga. LEXIS 494 (1900); Baker v. Armour Fertilizer Works, 18 Ga. App. 611, 90 S.E. 171, 1916 Ga. App. LEXIS 1138 (1916). Ordinary prudence in requiring production of note protects maker. - General rule set out in this section will injure no one who exercises the ordinary degree of prudence in requiring the production of the note before one pays the note. Howard & Soule v. Rice, 54 Ga. 52, 1875 Ga. LEXIS 69 (1875). Holder not in due course is subject to defense of payment in full. - One who acquires a promissory note, but is not a holder in due course, is subject to the defense of payment in full. Northside Bldg. & Inv. Co. v. Finance Co. of Am., 119 Ga. App. 131, 166 S.E.2d 608, 1969 Ga. App. LEXIS 1013 (1969). One who is not a holder cannot utilize this section. - Plaintiff, who is not a holder in due course, cannot avail itself of the provisions of this section. Northside Bldg. & Inv. Co. v. Finance Co. of Am., 119 Ga. App. 131, 166 S.E.2d 608, 1969 Ga. App. LEXIS 1013 (1969). Section is inapplicable if note to partnership is paid to partner. - This section has no application when payment on a note payable to a partnership is made

to one partner. Brady v. Phillips Mule Co., 27 Ga. App. 444, 108 S.E. 809, 1921 Ga. App. LEXIS 953 (1921). Production of written evidence of debt implies agent has authority to collect. - If payment is made on a written evidence of debt to a person as agent for another, the production of the written evidence of debt raises an implication of the person’s authority as agent to receive the payment. Futch v. F.S. Royster Guano Co., 51 Ga. App. 305, 180 S.E. 368, 1935 Ga. App. LEXIS 675 (1935). If evidence of debt not produced, payor must prove such authority. - If payment on a written evidence of debt is made to a person as agent for another, the production of the written evidence of debt raises an implication of the person’s authority to receive the payment as agent, but when it is not produced there is no such implication, and the burden is upon the person making the payment to establish such authority. Dibble v. Law, 141 Ga. 364, 80 S.E. 999, 1914 Ga. LEXIS 204 (1914); Sherrod v. Springfield Baptist Church, 21 Ga. App. 200, 93 S.E. 1009, 1917 Ga. App. LEXIS 523 (1917); Brady v. Phillips Mule Co., 27 Ga. App. 444, 108 S.E. 809, 1921 Ga. App. LEXIS 953 (1921). Proof that payment reached owner. - In a suit upon a promissory note, if the debtor shows that the debtor paid a part of it to a supposed agent of the holder of the note, but fails to show that the supposed agent produced the note at the time of payment, or that the money so collected ever reached the owner of the note, or that the alleged agent had specific authority to collect the note, no valid defense of partial payment is shown. Lane v. Bank of Thomasville, 23 Ga. App. 275, 97 S.E. 884, 1919 Ga. App. LEXIS 83 (1919). If a debtor makes a payment to a supposed agent of a note creditor, without requiring the production of the note at the time of payment, so as to create by such production an implication of the agent’s authority, the burden is upon the debtor to show: (1) that the payment actually reached the hands of the creditor; or (2) that the payee was a general agent of the creditor for the collection of such paper; or (3) that the payee had special authority from the creditor to collect the particular

payment. Prudential Ins. Co. of Am. v. Franklin, 51 Ga. App. 496, 180 S.E. 869, 1935 Ga. App. LEXIS 383 (1935). Section does not limit proof of authority. - This section does not preclude the debtor from establishing express or implied authority to collect otherwise than by showing production of the evidence of debt, nor from showing the subsequent ratification of the act by the creditor as principal. Roberts v. Bank of Eufaula, 20 Ga. App. 221, 92 S.E. 1015, 1917 Ga. App. LEXIS 824 (1917). Regardless of whether an implication of authority to collect a debt before maturity may arise if the creditor’s agent has possession of an instrument which is evidence of the debt, the debtor who has made a payment before maturity is not precluded from otherwise establishing the authority of the agent receiving such payment. Commercial Credit Corp. v. Noles, 85 Ga. App. 392, 69 S.E.2d 309, 1952 Ga. App. LEXIS 742 (1952). Authority may be shown by course of dealing. - One who has held another out as one’s lawful agent is estopped to deny the agent’s acts within the apparent scope of the agent’s authority and about the agent’s principal’s business; such authority may be established by proof of a long course of dealing by such agent in a similar manner for the principal. Futch v. F.S. Royster Guano Co., 51 Ga. App. 305, 180 S.E. 368, 1935 Ga. App. LEXIS 675 (1935). Customary collection of similar notes. - In a suit on a promissory note, if the debtor shows that the debtor has paid a part of the note to a duly authorized agent of the holder of the note, who has possession of the note, and who also had specific authority to collect the note, by customarily collecting such notes for the holder, a valid defense of partial payment is shown. Futch v. F.S. Royster Guano Co., 51 Ga. App. 305, 180 S.E. 368, 1935 Ga. App. LEXIS 675 (1935). Declarations of the alleged agent are insufficient to establish agency and authority to collect. Baker v. Armour Fertilizer Works, 18 Ga. App. 611, 90 S.E. 171, 1916 Ga. App. LEXIS 1138 (1916). Production, not just possession, must be shown. - Affidavit of a witness setting forth newly discovered evidence

did not furnish sufficient ground for the grant of a new trial since it merely stated that the alleged agent had the note “in his possession” but did not state that it was

produced. Schaefer v. Schaefer, 46 Ga. App. 789, 169 S.E. 256, 1933 Ga. App. LEXIS 247 (1933).

RESEARCH REFERENCES ALR. Making paper payable to agent as charging drawer with loss due to agent’s misappropriation, 8 A.L.R. 304. Trustee in mortgage securing bonds as agent of obligor or holder of bonds as regards deposit or payment in respect of principal or interest, 90 A.L.R. 467; 96 A.L.R. 1233. Payment to payee, indorser, or guarantor of bill or note not in possession thereof, 103 A.L.R. 653. Authority, or apparent authority, of agent to receive payment for commodities which he has authority, or apparent authority, to sell, or for which he is autho-

rized, or apparently authorized, to find a market, 105 A.L.R. 718. Implied or ostensible authority to receive payments of principal of one who has authority to receive payments of interest, 111 A.L.R. 578. Authority of agent who delivers commercial paper or other obligation to third person for collection, to receive payment of proceeds from the latter, so as to preclude principal’s right to enforce payment of proceeds, 163 A.L.R. 1209. Payment to broker or agent authorized to sell real property, as payment to principal, 30 A.L.R.2d 805.