Barry v. Hensley

• Decision Date: 21 November 1936
• Citation: 98 S.W.2d 102,170 Tenn. 598
• Parties: BARRY v. HENSLEY et al. STATE ex rel. HENSLEY et al. v. BOOTH et al.
• Court: Tennessee Supreme Court

98 S.W.2d 102

170 Tenn. 598

BARRY v. HENSLEY et al.

STATE ex rel. HENSLEY et al. v. BOOTH et al.

Supreme Court of Tennessee.

November 21, 1936

Appeal from Chancery Court, Unicoi County; S.E. Miller, Judge.

Proceeding by R. M. Barry, administrator of the estate of William Jackson Jones, deceased, against Creasey Jones Hensly and others consolidated with proceeding by the State, on the relation of Creasey Jones Hensley and others, against Fred D Booth and others. On certiorari to review decree of the Court of Appeals affirming a decree of the chancellor.

Decree of the Court of Appeals modified and, as so modified affirmed.

Cox Taylor & Epps, of Johnson City, for appellants.

Swingle & Hardin, of Greeneville, and Divine, Guinn & Mitchell, of Johnson City, for appellees.

GREEN Chief Justice.

The feature of these consolidated cases coming before us is an effort of the beneficiaries of a trust fund to follow that fund into the hands of the First State Bank of Erwin and through that bank, now insolvent, into the hands of the superintendent of banks. The chancellor and the Court of Appeals both decreed in favor of the beneficiaries. Restrictions on the decree of the latter court, however, rendered it unsatisfactory to the beneficiaries and they, as well as the superintendent of banks, have filed petitions for certiorari. We granted both petitions.

William Jackson Jones, a World War soldier, was killed in action. His war risk insurance was paid in installments to his mother during her life. On her death, R. M. Barry qualified as Jones' administrator and on April 6, 1929, Barry received a government check for $5,600, the balance due on Jones' policy, payable to "R. M. Barry, administrator of the estate of William J. Jones."

Barry was president of the First State Bank of Erwin. He indorsed the $5,600 check as administrator and deposited it to his individual account in the bank. The greater part of this deposit was taken up by an overdraft of Barry's and the remainder was checked out for his personal use.

The First State Bank became insolvent and the superintendent of banks was appointed receiver May 2, 1930, and proceeded with the liquidation of the business of that institution. Advertisement for creditors began May 2, 1930.

Several months later the Citizens Bank of Erwin was organized, largely by stockholders and depositors of the First State Bank. On April 20, 1931, the chancery court of Unicoi county approved a transaction whereby the Citizens Bank purchased from the receiver (in round numbers) $124,000 of notes and accounts receivable, belonging to the defunct bank. In consideration the new bank paid certain creditors of the old bank and the new bank issued its certificates of deposit to depositors of the old bank for 36 per cent. of their balances. The new bank also contracted to take over as trustee the remaining assets of the old bank, the face value (in round numbers) of $200,000, and to collect and distribute the amount realized from such trust assets among the creditors of the old bank.

The distributees of William Jackson Jones did not set up their claim, as against the receiver of the old bank or as against the new bank, by any pleading in these cases until June 8, 1931. This was some weeks after the court had approved the transfer of assets to the new bank and, as we understand, after certificates of deposit for the 36 per cent. of their demands had been issued by the new bank to the depositors of the old bank.

It is insisted by the receiver that this claim of the Jones distributees is barred by provisions of our banking statute contained in sections 5981-5985 of the Code. These sections are as follows:

"5981 The superintendent shall cause notice, to be given by advertisement in such newspapers as he may direct weekly, once a week for six consecutive weeks, calling on all persons who may have claims, but not including deposits shown by the books of the bank which shall prima facie be a proven claim, against the bank to present the same to the superintendent and make legal proof thereof, at a place and within a time to be specified in the notice, not less than ninety days from the day of the first publication of the notice.

"5982 The superintendent shall mail a similar notice to all persons whose names appear as creditors upon the books of the bank.

"5983 If the superintendent doubts the justice and validity of any claims or deposits, he may reject the same and serve notice of such rejection upon the claimant or depositor, either by mail or personally, and an affidavit of service of such notice, which shall be prima facie evidence thereof, shall be filed in the office of the superintendent.

"5984 An action upon a claim so rejected must be brought by the claimant within six months after such service, or the same shall be barred.

"5985 Claims presented and allowed after the expiration of the time fixed in the notice to the creditors shall be entitled to share in the distribution only to the extent of the assets in the hands of the superintendent at the time such claims are filed without allowance for previous distribution."

We do not think the Code provisions were intended to bar claims against an insolvent bank filed more than ninety days after the first advertisement required by section 5981, but that such belated claims, as stated...