Cabbage v. Citizens Bank & Trust Co.
| Decision Date | 09 March 1948 |
| Citation | 214 S.W.2d 572,31 Tenn.App. 283 |
| Parties | CABBAGE v. CITIZENS BANK & TRUST CO. et al. |
| Court | Tennessee Court of Appeals |
Certiorari Denied by Supreme Court October 16, 1948.
Appeal from Chancery Court, Grainger County; Ben Robertson Chancellor.
Suit involving claims against estate by Gladys B. Cabbage individually and as administratrix of estate of C. B Cabbage, deceased, against the Citizens Bank and Trust Co. and others. Cross bills were filed by some of the defendants. From the decree, the complainant and some of the cross-complainants appeal.
Decision in accordance with opinion.
Where bank held policies payable to insured's estate and mortgage on insured's realty and bank stock owned by insured as security for insured's indebtedness to bank, the realty and bank stock, subject to bank's lien, were assets available for distribution to deceased's unsecured creditors, but proceeds of policies were not so available, and bank must proceed first against realty and secondly against bank stock and lastly against insurance policies.
Susong, Parvin & Fraker, of Greeneville, and H. C. Smith, of Morristown, for Gladys B. Cabbage.
C. K. Ellis, of Rutledge, and J. H. Hodges, of Knoxville, for Citizens Bank & Trust Co. and C. K. Ellis.
W. O. Lowe, of Knoxville, for Linda and R. D. Wolfenbarger.
Donaldson, Montgomery & Kennerly, of Knoxville, for Pearl Hickle and Mrs. O. O. (Irene) Dyer.
O. S. Beeler, of Rutledge, for Eugene Condry, et al.
The original bill in this cause was filed by Gladys B. Cabbage, individually and as Administratrix of the estate of C. B. Cabbage, Deceased, against the Citizens Bank & Trust Company, of Rutledge, Tennessee, and certain other named creditors of said estate, and against the minor children and heirs at law of said decedent, setting forth the insolvency of said estate and seeking the transfer of its administration to the Chancery Court of Grainger County. The bill was sustained for the purposes indicated and the transfer ordered. Claims against the estate and claims and counter claims between parties to the cause, have been asserted and issues joined by answer, cross bill and petition; some of which issues have been resolved and concluded without appeal.
It is deemed unnecessary to recount the various pleadings in detail, but only to consider them as they become material to a determination of the particular matters which are now in controversy before this Court. The respective parties will be referred to by their designation in the Court below.
C. B. Cabbage was for many years Cashier of the Citizens Bank & Trust Company, and the officer actively in charge of the operation of this institution. He was a highly respected, popular and trusted citizen of his community and, in addition to his banking position, numbered among his avoications those of real estate and insurance agent, feed dealer, and Minister of the Gospel. He apparently maintained an unquestioned reputation until May 1942, when his activities in the bank were brought under scrutiny through the discovery of an irregularity in connection with a personal obligation. As a result thereof, he was required to furnish security to the bank for this and other obligations, which security has become of paramount importance to the issues here presented. Following Cabbage's death in October 1943, it developed that he had engaged in peculations of varied sorts during his tenure as Cashier of the bank, some of which have been adjudged and are admitted to be valid claims against his estate and the bank. Others, are the subject of dispute, upon appeal to this Court. All propositions presented for review here have been ably and exhaustively briefed by counsel.
Exceptions reserved to the decree of the Chancellor and errors assigned thereon will be treated under descriptive headings.
In May 1942, an examination of the bank disclosed that notes of the Rutledge Feed Company, held by the bank, amounting to over $2000.00, had been charged off. It was learned that C. B. Cabbage, the bank's Cashier, owned the business individually and operated it under this trade name. The bank required him to execute a personal note for this indebtedness and to secure the bank through the execution of a deed of trust on a house and lot in Rutledge, the procurement and assignment of four policies of life insurance in the amount of $2500.00 each, and the assignment of ten shares of Citizens Bank & Trust Company stock held by him. It has been stipulated that this security was evidenced by a collateral agreement as follows: 'That the said assignment of the proceeds of the life insurance policies aforesaid, and the proceeds of the capital stock of Citizens Bank & Trust Company aforedescribed, and the deed of trust on the house and lot aforedescribed, was made to secure certain notes due the said Citizens Bank & Trust Company by Lewis Phelps Laura Phelps and Carson Phelps, and J. P. Bullis, on which notes he was endorser, and to secure any and all other obligations, he might then owe or thereafter owe the said bank, directly or indirectly.'
The Chancellor held that the security afforded by this agreement should be applied toward the satisfaction of liabilities adjudged against the bank as a result of the peculations of the Cashier, as well as the latter's contractual obligations to the bank, direct and indirect. The complainant and cross defendant, Gladys B. Cabbage, individually and as Administratrix of the Estate of C. B. Cabbage, Deceased, excepted thereto and assigns the same as error upon appeal.
We are of the opinion that the record amply supports the decree of the Chancellor in this regard. A determination of this issue resolves itself to a construction of the agreement in light of the circumstances surrounding its execution. Although the rule of ejusdem generis is persuasive, it is not conclusive. The intention of the parties may determine its applicability. The case of Fourth National Bank v. Stahlman, 132 Tenn. 367, 178 S.W. 942, L.R.A.1916A, 568, is considered related only in connection with the principle that the meaning and intent of the language employed in a pledge agreement should be determined with due regard to the surrounding circumstances. 'Obligation' is the particular word used in the subject assignment. It is a term susceptible of considerable scope, depending of course upon such words of limitation as may accompany it and the purpose of its usage as made manifest by the situation under which it is applied. 46 C.J. 849. It is said to have two well defined legal meanings, '(1) Where it is the name given to the contract itself; (2) the other includes those cases where it refers to the duty imposed on a person in connection with a contract to perform it, or to a liability arising from his contract, or from his actionable, tortious conduct.' Vol. 29, Words and Phrases, Perm.Ed., page 40.
'The terms of the agreement under which the collateral is taken may authorize it to be held for the satisfaction of all debts which may accrue against the pledgor; and, in this situation, the property may be applied to the satisfaction of any debt upon which he at any time becomes liable to the pledgee, whether as an individual or as a member of a partnership.' 41 Am.Jur. 613.
The instant agreement extends rather than restricts the term 'Obligation'. It provides that the same shall secure 'any and all other obligations he might then owe or thereafter owe the said bank, directly or indirectly.' This alone would not suffice to make the agreement effective as to obligations other than those of the nature specified. But at the time this security was pledged, it had been discovered that the Cashier, Cabbage, had charged off notes held by the bank, which though being ostensibly the obligation of the Rutledge Feed Company, were in fact his own. Under the circumstances, this was more than a mere contractual liability. It amounted to fraud, a deceit practiced upon the bank which should and, we think, did serve as a warning to the other officers and directors of this institution. Despite the fact that the evidence in connection with this discovery tends somewhat to discount any apprehension of dishonest motives on the part of the Cashier and to minimize concern on behalf of the officials, it appears manifest that the security was demanded as a precautionary measure extending in its intent beyond the scope of mere contractual liability. Any reticence on the part of the bank officials, demonstrated in the manner his act was characterized and in their failure to then remove him from a position of responsibility, may be attributed to his value and importance to the bank.
It appears that on January 14, 1942, the cross-complainant, Miss Perl Hickle, loaned C. B. Cabbage the sum of $2500.00, taking his personal note therefor. No security was afforded for this loan at the time. However, subsequent thereto and following the discovery of the irregularity in connection with the Rutledge Feed Company notes and the consequent execution of the instruments securing the bank, the bank's president advised Miss Hickle of Cabbage's financial condition, but suggested that he might have some unpledged bank stock which would possibly be available as security for her loan. Whereupon, ...
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Montgomery v. Hughes Developers, Inc.
...and justice, require that the corporation make good the losses they have sustained." 34 N.Y. at 78. In Cabbage v. Citizens Bank & Trust Co., 31 Tenn.App. 283, 214 S.W.2d 572 (1948), the secretary of the board of directors, who was also custodian of the stock book, issued himself stock, with......