O.C.G.A. § 23-1-14 (2019)

Annotations

JUDICIAL DECISIONS ANALYSIS GENERAL CONSIDERATION FRAUD GENERALLY EQUITABLE ESTOPPEL General Consideration This section is limited in its application to cases in which the party chargeable makes the third party the party’s real or apparent agent, cases in which the party provides the means intentionally, or for a dishonest purpose, or negligently, and cases in which the party derives a benefit from the fraud of the third party. Nowell v. Mayor of Monroe, 177 Ga. 648, 171 S.E. 136, answer conformed to, 47 Ga. App. 665, 171 S.E. 143 (1933). This section does not govern the great majority of cases when one innocently, for an honest purpose and with reasonable care, furnishes to a third party the means by which one perpetrates a fraud from which one who provides the means derives no benefit. Nowell v. Mayor of Monroe, 177 Ga. 648, 171 S.E. 136 (1933). Conversion cases. - The principle stated in O.C.G.A. § 23-1-14 is applicable in conversion cases. Atlanta Classic Cars, Inc. v. Chih Hung USA Auto Corp., 209 Ga. App. 908, 439 S.E.2d 498 (1993). When items stolen from an electric company were sold to a supply company, the electric company was not entitled to summary judgment on its conversion claim against the supply company and its principal because of the equitable doctrine codified at O.C.G.A. § 23-1-14, providing that, when one of two innocent persons must suffer by the act of a third person, the individual who put it in the power of

the third person to inflict the injury shall bear the loss as there were genuine fact issues as to whether the principal was innocent and whether the electric company’s inattentiveness allowed its employee to steal the items with impunity. Fed. Ins. Co. v. Westside Supply Co., 264 Ga. App. 240, 590 S.E.2d 224 (2003). Liability of auctioneer for conversion. - The liability of an auctioneer for conversion does not extend to a case in which it is the true owner who originally enabled the auctioneer’s principal to commit the underlying conversion and the auctioneer subsequently acts without knowledge of the principal’s conversion. Benton v. Duvall Livestock Mktg., Inc., 201 Ga. App. 430, 411 S.E.2d 307 (1991). This section does not apply when no fault or negligence is imputable to the party sought to be held thereby. Nowell v. Mayor of Monroe, 177 Ga. 648, 171 S.E. 136, answer conformed to, 47 Ga. App. 665, 171 S.E. 143 (1933). Liability generally. - When one of two innocent persons must bear a loss, the one who occasioned it or one’s representative cannot obtain affirmative relief in a court for the purpose of placing the loss upon the other party, who was equally innocent. Atlanta Banking & Sav. Co. v. Johnson, 179 Ga. 313, 175 S.E. 904 (1934). When a loss must be suffered which results from the acts of one of two people, i.e., the act of the owner in delivering a stock power signed in blank, and the act of

General Consideration (Cont’d) the corporate officers in accepting from the broker an unauthorized power, it must fall upon the one who first trusted the defaulting broker. Frye v. Commonwealth Inv. Co., 107 Ga. App. 739, 131 S.E.2d 569, aff ’d, 219 Ga. 498, 134 S.E.2d 39 (1963). As between one of two innocent parties who must suffer from a fraud of a third, one who furnished the means to commit the fraud, or whose negligence enables the third party to commit it, must bear the loss. McDonald v. Peoples Auto. Loan & Fin. Corp., 115 Ga. App. 483, 154 S.E.2d 886 (1967). Application of equity when agents commit fraud. - Equity required that as between the lender and the companies, the companies had to bear the loss for any alleged fraud by their agents. R.W. Holdco, Inc. v. SCI/RW Holdco, Inc., 250 Ga. App. 414, 551 S.E.2d 826 (2001). Liability when fraud committed. - By failing to file a lien, the pawnbroker enabled the automobile owners to perpetrate the fraud and must, therefore, bear the loss pursuant to this section. Cobb Ctr. Pawn & Jewelry Brokers, Inc. v. Gordon, 242 Ga. App. 73, 529 S.E.2d 138 (2000). The law does not afford relief to one who suffers by not using the ordinary means of information that may be at hand, whether one’s neglect be due to indifference or credulity. Braselton Bros. v. Better Maid Dairy Prods., Inc., 113 Ga. App. 382, 148 S.E.2d 71, rev’d on other grounds, 222 Ga. 472, 150 S.E.2d 620 (1966). No legal duty by franchisor to consumer. - In a suit brought by a customer asserting conversion against an automobile franchisor and its financial company, the trial court properly granted summary judgment to the franchisor and the financial company as the business entities owned no legal duty to the consumer to prevent the franchisee from presenting an unreasonable risk of harm to the customer. As such, the customer could not predicate liability for conversion under O.C.G.A. § 23-1-14 as a matter of law. DaimlerChrysler Motors Co. v. Clemente, 294 Ga. App. 38, 668 S.E.2d 737 (2008). Cited in Milner v. First Nat’l Bank, 38 Ga. App. 668, 145 S.E. 101 (1928);

Moseley v. Phoenix Mut. Life Ins. Co., 167 Ga. 491, 145 S.E. 877 (1928); Anchor Duck Mills v. Harp, 40 Ga. App. 563, 150 S.E. 572 (1929); Skinner v. Stewart Plumbing Co., 42 Ga. App. 42, 155 S.E. 97 (1930); Lilly v. Citizens’ Bank & Trust Co., 44 Ga. App. 653, 162 S.E. 639 (1932); Nowell v. Mayor of Monroe, 177 Ga. 648, 171 S.E. 136 (1933); Capital Auto. Co. v. Ward, 54 Ga. App. 873, 189 S.E. 713 (1936); Nightingale v. Juniata College, 186 Ga. 365, 197 S.E. 831 (1938); E. Frederics, Inc. v. Felton Beauty Supply Co., 58 Ga. App. 320, 198 S.E. 324 (1938); Peoples Bank v. Jones, 193 Ga. 720, 20 S.E.2d 74 (1942); Sterchi Bros. Stores v. Clark, 68 Ga. App. 259, 22 S.E.2d 740 (1942); Rose v. Crane Heating Co., 198 Ga. 295, 31 S.E.2d 717 (1944); Townsend v. Tattnall Bank, 76 Ga. App. 500, 46 S.E.2d 607 (1948); Berger v. Noble, 81 Ga. App. 34, 57 S.E.2d 844 (1950); Moore v. Bank of Dahlonega, 82 Ga. App. 142, 60 S.E.2d 507 (1950); Burgess v. Simmons, 207 Ga. 291, 61 S.E.2d 410 (1950); East Atlanta Bank v. Nicholson, 83 Ga. App. 557, 63 S.E.2d 699 (1951); Milner v. Ingram & Le Grand Lumber Co., 86 Ga. App. 543, 71 S.E.2d 786 (1952); Richards v. Dye, 89 Ga. App. 376, 79 S.E.2d 548 (1953); Cesaroni v. Savannah Bank & Trust Co., 90 Ga. App. 107, 82 S.E.2d 172 (1954); National Nu Grape Co. v. Citizens & S. Nat’l Bank, 94 Ga. App. 5, 93 S.E.2d 381 (1956); Pioneer Neon Supply Co. v. Johnson & Johnson Constr. Co., 95 Ga. App. 565, 98 S.E.2d 156 (1957); Dealers’ Disct. Corp. v. Trammell, 98 Ga. App. 748, 106 S.E.2d 850 (1958); Weiss v. Johnson & Johnson Constr. Co., 98 Ga. App. 858, 107 S.E.2d 708 (1959); Birkett L. Williams Co. v. Smith, 353 F.2d 60 (5th Cir. 1965); Levy v. Empire Ins. Co., 379 F.2d 860 (5th Cir. 1967); Weiss v. Moody, 121 Ga. App. 682, 175 S.E.2d 82 (1970); International Harvester Credit Corp. v. Commercial Credit Equip. Corp., 125 Ga. App. 477, 188 S.E.2d 110 (1972); Mayor of Athens v. Gregory, 231 Ga. 710, 203 S.E.2d 507 (1974); Jackson’s Atlanta Ready Mix Concrete Co. v. Industrial Tractor Parts Co., 139 Ga. App. 422, 228 S.E.2d 324 (1976); Georgia Ins. Agencies, Inc. v. Sentry Indem. Co., 152 Ga. App. 728, 263 S.E.2d 702 (1979); Palmer v. Forrest, Mackey & Assocs., 251 Ga. 304, 304 S.E.2d 704

(1983); Bank of Danielsville v. Seagraves, 167 Ga. App. 135, 305 S.E.2d 790 (1983); Lamb v. Thalimer Enters., Inc., 193 Ga. App. 70, 386 S.E.2d 912 (1989); Brinkley v. Bosch Olds-Buick-GMC, Inc., 199 Ga. App. 663, 405 S.E.2d 883 (1991); Northwest Carpets, Inc. v. First Nat’l Bank, 280 Ga. 535, 630 S.E.2d 407 (2006). Fraud Generally One of the essential elements of a cause of action for the common-law tort of deceit based upon fraud is the plaintiff ’s right to rely upon the representations. Braselton Bros. v. Better Maid Dairy Prods., Inc., 113 Ga. App. 382, 148 S.E.2d 71, rev’d on other grounds, 222 Ga. 472, 150 S.E.2d 620 (1966). The master could be held liable for the servant’s fraudulent presentation of invoices and receiving payment for more goods than were actually delivered by reason of having clothed the servant with apparent authority and upon the equitable principle contained in this section that as between two innocent persons that the master who put it in the power of the male-factor to inflict the loss should bear it. Lecroy v. Acme Meat Co., 125 Ga. App. 566, 188 S.E.2d 255 (1972). Under ordinary conditions, in cases when a fraud has been committed by an agent, this rule (contained in this section) has been invoked against the agent’s principal for the reason that the employer, by clothing the agent with apparent authority to act for the principal, has made the accomplishment of the fraud possible. But the doctrine applies with equal force against the defrauded third person when it appears the third party could have easily detected the deceit and neglected to do so for, under such circumstances, the third party’s fault must be regarded as the proximate and efficient cause of the loss. Braselton Bros. v. Better Maid Dairy Prods., Inc., 113 Ga. App. 382, 148 S.E.2d 71, rev’d on other grounds, 222 Ga. 472, 150 S.E.2d 620 (1966). A principal who puts a servant or other agent in a position which enables the agent while apparently acting within the agent’s authority, to commit a fraud upon third persons is subject to liability to such third persons for the fraud. Braselton

Bros. v. Better Maid Dairy Prods., Inc., 113 Ga. App. 382, 148 S.E.2d 71, rev’d on other grounds, 222 Ga. 472, 150 S.E.2d 620 (1966). Misrepresentations are not actionable unless the plaintiff was justified in relying upon the misrepresentations in the exercise of common prudence and diligence. The misrepresentations must have been made under such circumstances that the injured party had a right to rely on the misrepresentations. Braselton Bros. v. Better Maid Dairy Prods., Inc., 113 Ga. App. 382, 148 S.E.2d 71, rev’d on other grounds, 222 Ga. 472, 150 S.E.2d 620 (1966). A person who otherwise would be liable to another for the misrepresentations of one apparently acting for that person is not relieved from liability by the fact that the servant or agent acts entirely for one’s own purposes, unless the other has notice of this. Braselton Bros. v. Better Maid Dairy Prods., Inc., 113 Ga. App. 382, 148 S.E.2d 71, rev’d on other grounds, 222 Ga. 472, 150 S.E.2d 620 (1966). Equitable Estoppel Application to sale of automobile. - When the owner of an automobile offers it for sale at an auction, and it is unconditionally delivered to such purchaser, the seller accepting a check for the purchase price, and such purchaser sells it for a valuable consideration to a third person who has no notice of the giving of the check, the title of the original owner is divested or the original owner is estopped from asserting it as against the innocent third-party purchaser although the check is unpaid and returned as worthless. Blount v. Bainbridge, 79 Ga. App. 99, 53 S.E.2d 122 (1949). When the owner of an automobile voluntarily relinquished possession of it to a third person who gave him a worthless check, the owner is precluded from disputing, as against a bona fide purchaser, the existence of any title or power of sale, which through the original owner’s own lack of caution, negligence or mistaken confidence, the original owner caused or allowed to appear to be vested in the third person with whom the innocent purchaser dealt. Equitable Credit & Disct. Co. v.

Equitable Estoppel (Cont’d) Murray, 79 Ga. App. 795, 54 S.E.2d 650 (1949). Application to agreement between spouses and innocent third party. - Wife’s transfer and delivery of stock certificate to her husband operates to invest the husband with such external indicia of ownership that his pledge to an innocent lender is, on the principle of estoppel, binding upon her. The private understanding between a wife and her husband that she was merely lending the stock to him does not affect the right of the bank to hold the stock as security for a loan when the bank acted innocently and without knowledge of such agreement. Groover v. Savannah Bank & Trust Co., 186 Ga. 476, 198 S.E. 217 (1938). Mistaken identity. - When the defendant loan company made check payable to name given by the person who made application for a loan, delivered the check to that person, and did not question the person’s identity, the loan company and not the plaintiff who subsequently cashed the check for payee, knowing the payee by the name thereon, was responsible for the mistaken identity, if any, of the person to whom it issued and delivered the check. Peoples Loan & Sav. Co. v. Pardue, 56 Ga. App. 632, 193 S.E. 486 (1937). Sales to innocent third parties. - Rule that when an owner has given to

another such evidence of the right of selling the owner’s goods as, according to the custom of trade or the common understanding of the world, usually accompanies the authority of disposal, or has given the external indicia of the right of disposing of the owner’s property, a sale to an innocent purchaser divests the true owner’s title, is merely a special application of the rule embodied in this section that, ‘‘When one of two innocent persons must suffer by the act of a third person, he who put it in the power of the third person to inflict the injury shall bear the loss.’’ Cook Motor Co. v. Richardson, 103 Ga. App. 129, 118 S.E.2d 502 (1961). Application to contractors. - In the general contractor’s action against the materials provider relating to the provider’s request for payment under a payment bond, the general contractor’s claim that it was entitled, under equitable estoppel provided in O.C.G.A. § 23-1-14, to rely on the incorrect contract price stated in the provider’s notice to the contractor failed; the provider’s statutory notice to the contractor was not what put the subcontractor in a position to fail to complete its work or to fail in paying the provider for materials, which was the basis of the claim against the payment bond. Sierra Craft, Inc. v. T. D. Farrell Constr., Inc., 282 Ga. App. 377, 638 S.E.2d 815 (2006), cert. denied, No. S07C0460, 2007 Ga. LEXIS 145 (Ga. 2007).

RESEARCH REFERENCES Am. Jur. 2d. - 27 Am. Jur. 2d, Equity, §§ 146, 147. ALR. - Propriety of suit in equity by or against several insurers under fire policies covering same risk, 98 A.L.R. 181. Who must bear loss as between drawer induced by fraud of employee or agent to issue check payable to nonexisting person or a person having no interest in the proceeds thereof, and one who cashes or

pays it on the forged endorsement by such employee or agent of the name of such ostensible payee, 99 A.L.R. 439. Relative rights as between purchaser of chattel from one who had previously bought it with stolen money, and victim of the theft, 62 A.L.R.2d 537. Right to reformation of contract or instrument as affected by intervening rights of third persons, 79 A.L.R.2d 1180.