First Nat. Bank of Nashville v. Shook

• Decision Date: 25 January 1898
• Citation: 45 S.W. 338,100 Tenn. 436
• Parties: FIRST NAT. BANK OF NASHVILLE v. SHOOK et al.
• Court: Tennessee Supreme Court

45 S.W. 338

100 Tenn. 436

FIRST NAT. BANK OF NASHVILLE v. SHOOK et al.

Supreme Court of Tennessee.

January 25, 1898

Appeal from chancery court, Davidson county; H. H. Cook, Chancellor.

Bill by First National Bank of Nashville against A. M. Shook and others. From judgment in favor of Shook, complainant appealed to court of chancery appeals, where the judgment was affirmed; thence it appealed to supreme court. Affirmed.

Stokes & Stokes, for appellant.

J. C Bradford, for appellee.

WILKES J.

The original bill in this cause was filed against A. M. Shook, J P. Williams, N. Baxter, Jr., and G. M. Fogg, Jr., to recover upon a note executed by them to the bank. Shook alone made defense. Judgment was taken against the other parties in the court below, but denied as to Shook. The complainant appealed from the decree of the court below so far as it failed to hold Shook liable; and the court of chancery appeals affirmed the decree of the court below, and complainant has appealed to this court, and assigned errors.

The note sued on is in the words and figures and with the erasure as follows:

Nashville Tenn., June 1, 1891.

$9,296 00

2,324 00

__________

$6,972 00

On demand, after date, we promise to pay to the order of H. W Grantland, cash, ninety-two hundred & ninety-six 00/100 dollars, at the First National Bank, for value received, with interest.

J. P Williams.

N. Baxter, Jr.

G. M. Fogg, Jr.

The court of chancery appeals reports that the erasure of the signature of A. M. Shook was made April 20, 1892, upon the payment at that date, by Mr. Shook, of $2,324, under the facts and circumstances following: After the note was made, and two or three payments of interest had been made upon it by all the parties, Mr. Shook said to the gentlemen who were upon the note with him that he had money in bank, and was unwilling to pay interest any longer upon the note. Mr. J. P. Williams, one of his co-makers, was also the vice president and acting cashier of the bank, and stated to Mr. Shook that if he desired to pay his part of the note, and get off of it, he could do so, to which Mr. Shook replied that such an arrangement would be satisfactory to him. Shook thereupon paid the amount stated by Williams to be his share, and Williams erased his name from the face of the note, as heretofore indicated, and said to him, "You are now released from this note." The court of chancery appeals further finds that Williams assumed in the matter to represent the bank, and that there was an express agreement between him and Shook that Shook should be, and was, released. The suit in this case was brought December 9, 1896, and, between the dates when the payment was made by Shook and the erasure made by Williams and the bringing of the suit, the fact of the release and erasure were frequently brought to the attention of the bank, through its directors and officers, and there was a failure to disaffirm the action of Williams, the vice president and cashier, in making the erasure and release. The court further finds that, when the erasure and release were made, each of the other makers was worth many times the amount of the note, and was in good credit. Before the suit was brought, all but Shook had become insolvent. The court further finds that Shook believed Williams had the authority to make the release; that the transaction was made in good faith, by both parties; that there was no concealment of the facts; that the other makers continued to pay interest on the note for several years; that the assistant cashier and discount clerk of the bank knew of the release as early as April, 1893; that the release was known to the other makers of the note, and acquiesced in by them; that in September, 1893, the fact of the release became known to an examining committee of the board of directors; that the matter came before the open board in April, 1894; and that the bank, with full knowledge of the facts, did not disaffirm the transaction until the bill was filed, and left Shook under the belief that he was released and discharged. The court was of opinion that Williams had the authority to make the release according to the usual course of the bank's business as conducted by him; that the bank, by its failure to disaffirm, ratified and confirmed the release; and that the effect of its silence and nonaction was to prejudice Shook, and estop the bank.

Two principal questions are raised by the assignments of errors: First, that a release from the whole of a debt by payment of part only can only be binding and effective when it is in writing; second, that the bank, under the facts found by the court of chancery appeals, did not ratify the acts of Williams, its vice president and cashier, in making this release, and that the bank is not estopped by its laches or failure to object to the release from holding Shook liable on the note.

The argument is that at common law such payment of part of a debt would not operate as a release and discharge of the whole unless a release was executed under seal. 1 Beach, Cont. §§ 424, 432; 1 Am. & Eng. Enc. Law, pp. 97, 98. This was upon the idea that the seal imported a consideration, and without such consideration the release would be inoperative. It is insisted that the matter of releases is now wholly regulated by and dependent upon the provisions of the statute (Shannon's Code, §§ 5570, 5571), and that, under these statutes, a release or satisfaction of the whole upon payment of part is only valid when in writing, and can be effective in no other way. We are of opinion this is putting too broad a construction upon the sections referred to; but their meaning is that, if the release or satisfaction is effected by means of a writing, then the writing would have the same effect as the use of a seal at common law,--that is, would import a consideration,--the use of seals being abolished by the statute in Tennessee. Shannon's Code, §§ 3213, 3214. Again, these statutes provide that such written releases shall have the scope and effect that the parties intended, and not such as would follow at common law. In other words, and by way of illustration, if it was intended that such release should not affect the liability of other parties jointly bound, then such intention would prevail. Evans v. Pigg, 3 Cold. 397; Richardson v. McLemore, 5 Baxt. 586; Williams v. Hitchings, 10 Lea, 328. But it was not intended by the statute to prescribe that a release and discharge could only be made valid and effectual by writing, as, for instance, when the instrument is so canceled and defaced as to preclude a suit upon it,...