Ford v. H. C. Brown & Co.
| Decision Date | 31 March 1905 |
| Citation | 88 S.W. 1036 |
| Court | Tennessee Supreme Court |
| Parties | FORD et al. v. H. C. BROWN & CO. et al. |
Bill by Betty Ford and others against H. C. Brown & Co. and others. From a judgment in favor of plaintiffs, affirmed by the Court of Chancery Appeals, defendants appeal. Affirmed.
John Ruhm, for complainants. Wheeler & Trimble and Jas. A. Ryan, for defendants. Walter Stokes, for defendant First National Bank.
Complainant exhibited this bill against the defendants, Henry C. Brown, Fred Laitenberger, and Jesse Trinum, as individuals and as a partnership using the firm name of H. C. Brown & Co., against the First National Bank of Nashville, Tenn., and the Chattanooga Savings Bank. The principal object of the bill was to enjoin the Chattanooga Savings Bank against the payment of two certificates of deposit which that bank had issued to Woodworth as trustee for complainant Betty Ford, and which certificates of deposit had been indorsed and transferred by Woodworth to H. C. Brown & Co. in payment of a gambling indebtedness. H. C. Brown & Co. indorsed said certificates of deposit to the First National Bank of Nashville, and that bank had forwarded the certificates to Chattanooga, and was seeking to collect them from the Chattanooga Savings Bank at the time the original bill herein was filed. It is alleged that these two certificates of deposit represented the earnings of the complainant Betty Ford as a domestic in the family of D. Woodworth, Jr., of Chattanooga, during a period of 18 or 20 years. D. Woodworth, Jr., had died, and the certificates of deposit which had been issued to him were changed, and issued in the name of C. N. Woodworth, trustee.
These certificates of deposit were as follows:
The Chattanooga Savings Bank answered the bill, and averred that it had issued the certificates, but had refused to pay the same, because they were not due, and because it had received notice from Betty Ford not to pay them; that it had no interest in the controversy, but was willing to pay the certificates to whomsoever the court might adjudicate they should belong.
The defendants H. C. Brown & Co. also answered the bill, denying all of its material allegations.
The First National Bank of Nashville also answered, denying all knowledge upon its part of the gambling transactions, and all knowledge of the relations between Woodworth and Betty Lord, and denied any knowledge that its codefendants had conducted any gambling establishment or rooms; denied all knowledge of the intoxication of Woodworth, or of his transaction with H. C. Brown & Co. with regard to said certificate. It admitted, however, that on April 24, 1903, these certificates of deposit were presented by H. C. Brown & Co. to the First National Bank at Nashville for discount, and avers that it purchased said certificates from H. C. Brown & Co., and paid their face value in cash, and then sent the certificates to Chattanooga for collection. It avers that it took these certificates in due course of trade for a valuable consideration, and without any notice of the rights and equities of Betty Ford, or of any one else, and avers that it is an innocent holder for value in due course of trade and without notice.
The Court of Chancery Appeals finds that C. N. Woodworth, having possession of those certificates, brought them to Nashville, Tenn., and on or about the 22d or 23d, or, possibly, the 24th or 25th, of April, 1903, he went to the gambling house located over the Climax Saloon on Cherry street, in Nashville, Tenn., and there engaged in gambling. It is shown he drank heavily and lost large sums. While thus drinking and gambling, he not only lost a large amount of his own money, but he also indorsed and transferred these certificates of desposit belonging to the complainant, upon which he obtained money and chips to be used in gambling. He lost and gambled away all of the money and chips so obtained, except about the sum of $600 or $700, which the gamblers in charge of the place offered to repay him, but which he at the time declined.
That court further finds that H. C. Brown & Co. came into possession of these certificates, and on the 25th of April, 1903, took them to the First National Bank of Nashville, and there sold and disposed of them to the First National Bank for cash. The bank, overlooking the fact that the certificates were not due, took them for cash, as H. C. Brown & Co. were among their regular customers. They paid cash for them, and sent them to Chattanooga, through their correspondent at that place, for collection. In the meantime, C. N. Woodworth, having become to some extent rational, telegraphed the Chattanooga Savings Bank at Chattanooga not to pay these certificates. The Bank at once notified the mother of C. N. Woodworth and Betty Ford, who immediately advised the bank not to pay or recognize these certificates.
It further appears that when these certificates were first presented to the First National Bank, they bore the indorsement of complainant C. N. Woodworth and the indorsement of H. C. Brown & Co., but at that time the First National Bank refused to take the certificates, because one of them was not properly indorsed; that is to say, it was simply indorsed by C. N. Woodworth, when it should have been indorsed, as it was payable on its face, by "C. N. Woodworth, Trustee for Betty Ford." Thereupon H. C. Brown & Co. took the certificates back, and returned with them in a short time properly indorsed.
The Court of Chancery Appeals finds as a matter of fact that this new indorsement was made by C. N. Woodworth. After the indorsement was corrected, the certificates were taken back to the First National Bank, and on the 25th of April the teller of the bank bought the certificates in question from H. C. Brown or H. C. Brown & Co., paying cash therefor, overlooking the fact that the certificates were not due. The officers of the First National Bank denied all knowledge as to how H. C. Brown & Co. acquired these certificates, and all knowledge of the transaction between Woodworth and H. C. Brown & Co. and their employes, or of any person who obtained these certificates of C. N. Woodworth, and the Court of Chancery Appeals finds there is nothing in the record to indicate that these officers had any knowledge of the transactions mentioned.
The Court of Chancery Appeals further finds there is no evidence in the record from which we are justified in finding that the officers of the bank had any knowledge in regard to the gambling carried on over the Climax Saloon.
The Court of Chancery Appeals finds that H. C. Brown & Co. was affected with full notice and had knowledge of this embezzlement on the part of Mr. Woodworth, and of this violation of his trust, and had full knowledge of his want of legal right and capacity to transfer this property. They must have known, and did know, that they were taking the certificates in violation of this trust, and taking funds which Woodworth was practically embezzling. As to the First National Bank, there is no proof to show that the officers of the bank had any knowledge of these transactions, or even that H. C. Brown & Co. conducted gambling rooms over the Climax Saloon, and hence the rights of the First National Bank must depend upon the facts disclosed upon the face of the paper itself and the indorsements thereon.
As already stated, one of these certificates was payable to C. N. Woodworth, trustee for Betty Ford, and the other simply to C. N. Woodworth, trustee. One of them was dated March 21, 1903, due 12 months after date, and the other was dated October 7, 1902, and due 12 months after that date. Each of them bears interest to maturity only at the rate of 4½ per cent. per annum. It is disclosed on the face of each certificate that it is not subject to check, but is an interest-bearing certificate of deposit. The first certificate, which was made payable to C. N. Woodworth, trustee for Betty Ford, was indorsed by C. N. Woodworth, trustee, and afterwards the words, "for Betty Ford" were added by him. The other certificate was simply indorsed "C. N. Woodworth, Trustee."
That court further finds that these certificates were sold and transferred by H. C. Brown to the First National Bank of Nashville on the 25th day of April, 1903. On the 24th of April, 1903, at 7:45 a. m., C. N. Woodworth had telegraphed the cashier of the Chattanooga Savings Bank, which had issued these certificates, not to pay them. So when the certificates were sent to Chattanooga for collection, the Chattanooga Savings Bank refused to pay them, on the ground that they were not due and on the further ground that Betty Ford contested the right of the First National Bank to them. It appears, therefore, that before the First National...
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