Court Opinion

ID: 9577616
Source: CourtListenerOpinion
Date Created: 2023-08-21 21:36:30.909363+00
Date Added: 2024-06-11T13:20:56.404496
License: Public Domain

On Motion for a Rehearing by Bank of LaFayette.
The Bank of LaFayette contends that the ruling in Citizens & Southern Nat. Bank v. Johnson, 214 Ga. 229 (104 S. E. 2d 123) controls this case. All the Supreme Court held in that case was that under the facts there might have been a. mistake in judgment and that a mere mistake of judgment did not amount to bad faith. The court there stated in different words what we understood the rule to be, to wit: “To constitute bad faith by a purchaser of a negotiable instrument before maturity he must have acquired it with actual knowledge of its infirmity or with a belief based on the facts or circumstances as known to him that there was a defense or he must have acted dishonestly.” (Emphasis supplied.)
The bank also contends that Code § 37-116 was superseded by that section of the Negotiable Instruments Law, now Code § 14-506. Code § 37-116 provides: “Notice sufficient to excite attention and put a party on inquiry shall be notice of everything to which it is afterwards found such inquiry might have led. Ignorance of a fact, due to negligence,, shall be equivalent to knowledge, in fixing the rights of parties.” The rule before the passage of the uniform act in 1924 was embodied in Code (1910) § 4291 which provided: “Any circumstances which would place a prudent man upon his guard, in purchasing negotiable paper, shall be sufficient to constitute notice to a purchaser of such paper before it is due.” The gravamen of the old rule *881was diligence. That of the new rule is actual knowledge of facts indicative of a defense, or bad faith. The subject of bad faith was not in the old law. The new law, while it eliminated the former rule that negligence alone would defeat the holder, added another element, that of bad faith. Since mere negligence was eliminated and bad faith or actual knowledge substituted, it follows that Code § 37-116 was not superseded for all purposes by the uniform act since bad faith can be manifested by a failure to notice and investigate facts when good faith requires investigation. And while mere negligence is not enough to show bad faith, negligence can reach such a degree that a jury could infer bad faith therefrom. See Britton on Bills and Notes, §§ 100 through 112. We hold that Code § 37-116 was not repealed completely by the act of 1924 (Ga. L. 1924, pp. 126-165), but that it is still applicable to negotiable instruments covered by the act insofar as it becomes pertinent to the application of the provisions of Code § 14-506. See Pickett v. Bank of Ellijay, 182 Ga. 540 (186 S. E. 426). The ruling in this case is based on the fact that the knowledge of all the facts by one individual officer of the bank raises the question of good faith. It is not implied that the question would arise under any other circumstances. Large banks employ many officers and employees and we do not mean to intimate that the aggregate knowledge of two or more officers or employees would have the effect of raising the issue of bad faith where, partial knowledge of any individual uncommunicated to another would not in itself raise the issue.

Rehearing denied.