Gregory v. Merchants State Bank

• Citation: 135 S.W.2d 465
• Parties: GREGORY et al. v. MERCHANTS STATE BANK et al. (two cases).
• Decision Date: 12 August 1939
• Court: Supreme Court of Tennessee

135 S.W.2d 465

GREGORY et al. v. MERCHANTS STATE BANK et al. (two cases).

Court of Appeals of Tennessee, Middle Section.

August 12, 1939.

Certiorari Denied by Supreme Court January 20, 1940.

Appeal from Chancery Court, Rutherford County; T. B. Lytle, Chancellor.

Consolidated suits by Mrs. Ida L. Gregory and W. O. Gregory against the Merchants State Bank and A. R. Dodson, and by Mrs. Ida L. Gregory and J. D. Gregory against the same defendants, to enjoin further prosecution by defendant bank of action upon notes, and for an accounting by defendant Dodson, as trustee. From decree granting relief sought by complainants in part, and denying it in part, the complainants and defendant A. R. Dodson appeal.

Decree in accordance with opinion.

Cantrell, Meacham & Moon, of Chattanooga, and J. D. Richardson, of Murfreesboro, for complainants-appellants.

J. Frank Warmath, of Humboldt, for defendant-appellant, Dodson.

Lloyd S. Adams and J. D. Senter, Jr., both of Humboldt, for defendant-appellee Bank.

FAW, Presiding Judge.

Two suits brought in the Chancery Court of Rutherford County were consolidated and heard together in that Court, and the Chancellor's decree is here for review on two special or limited appeals.

The bill in one of the cases (Rule No. 245) was filed by Mrs. Ida L. Gregory, a resident of Rutherford County, Tennessee, and W. O. Gregory, a resident of Bibb County, Georgia, as complainants against Merchants State Bank, a banking corporation organized under the laws of Tennessee, with its situs and principal place of business at Humboldt, in Gibson County, Tennessee, and A. R. Dodson, a resident of Gibson County, Tennessee, as defendants.

The bill in the other of the two cases (Rule No. 246) was filed by Mrs. Ida L. Gregory and J. D. Gregory, residents of Rutherford County, Tennessee, as complainants, against the same defendants as in No. 245, supra.

The name of A. R. Dodson as a defendant does not appear in the caption of the bill in case No. 246, but it is apparent from the allegations and prayer of the bill that it was intended to make him a defendant, and he was so treated by the Court and counsel throughout the litigation below, and the omission of his name from the caption will be treated as a mere clerical error.

On final hearing, the relief sought by the complainants was in part denied and in part granted by the Chancellor. The complainants Ida L. Gregory, W. O. Gregory and J. D. Gregory appealed from that part of the decree adverse to them, and defendant A. R. Dodson appealed from that part of the decree adverse to him; hence, we will designate the parties as complainants and defendants, respectively, as they appeared on the record below, or by their respective names.

It is alleged in the complainants' bill in case No. 245, and is admitted by the defendants, that, on April 2, 1934, the Merchants State Bank (defendant herein) sued Mrs. Ida L. Gregory and W. O. Gregory (complainants herein) in the Circuit Court of Rutherford County, Tennessee, to obtain judgment for the amount of a note for $1,469, with interest and attorney's fees, which note was dated June 21, 1930, payable to said Bank twelve months after its date, and purports to have been signed by said Ida L. Gregory and W. O. Gregory as makers thereof.

It is alleged in the complainants' bill in case No. 246, and admitted by the defendants, that, on April 2, 1934, the said Merchants State Bank sued Mrs. Ida L. Gregory and J. D. Gregory in the Circuit Court of Rutherford County, Tennessee, to obtain judgment for the amount of two notes, with interest and attorney's fees, which notes purport to have been signed by said Ida L. Gregory and J. D. Gregory as makers, and were payable to said Merchants State Bank twelve months after their dates, respectively. One of said two notes was for $1,180, and was dated September 6, 1930, and the other of said two notes was for $236 and was dated June 6, 1931.

It was further alleged and admitted that the aforesaid actions at law were "pending undisposed of in the Circuit Court at Murfreesboro" (in Rutherford County) at the time the two bills in these consolidated cases were filed (which was February 20, 1935).

It was further alleged in each of the two bills that the aforesaid notes purport to be renewal notes, and that the original notes, of which the notes sued on in the Circuit Court as aforesaid purport to be renewals, were "fraudulently obtained several years ago by the Bank's President and/or Cashier, A. R. Dodson" and that, consequently, said renewal notes are fraudulent and should be cancelled.

Each of the bills contains detailed allegations upon which the complainants in each case seek to predicate the claim that said notes were obtained by fraud, and are, therefore, not binding obligations upon them, or either of them.

Aside from the descriptions of the notes on which the aforesaid suits had been brought in the Circuit Court of Rutherford County, the bills in the two consolidated cases contain the same allegations; and, upon these allegations, the complainants seek, in addition to an injunction against the further prosecution of said actions at law, an accounting by defendant Dodson of his administration, for more than thirty years, of a trust for the benefit of complainant Ida L. Gregory and her children, and a judgment against defendant Dodson and defendant Bank for trust funds aggregating many thousands of dollars which, complainants alleged, defendant Dodson had, after depositing same in defendant Bank, diverted from the purposes of the trust and appropriated to his own use and benefit, with the knowledge of the Bank, which Bank he (defendant Dodson) "managed, controlled, directed and operated many years, at will", as the chief officer thereof.

The prayers of the two bills in the consolidated causes are substantially identical, and are as follows:

"1st: That process issue to Gibson County, Tennessee, to compel defendants to come into this Court and answer this bill, but their answers on oath are hereby waived.

"2nd: That a writ of injunction issue, by order of your Honor, restraining and prohibiting the defendants and their attorneys and agents from further prosecuting said suit against complainants on said note in the Circuit Court of Rutherford County, Tennessee, and from prosecuting any similar suit in any other court, and that at a hearing said injunction be made perpetual and said note cancelled.

"3rd: That the defendants be required to set out and show in their answers to this bill the amounts deposited in defendant Bank by the said A. R. Dodson to his own account as trustee for Ida L. Gregory, and to the individual account of Ida L. Gregory, or Mrs. W. H. Gregory, and to set out and show how, when, and by whom the amounts deposited were withdrawn; to set out and show when the original note, or any renewals thereof, executed by complainants jointly, was, or were, delivered to the Bank and carried by the Bank on its records as an asset of the Bank; and, for that purpose, let the Bank be required to exhibit with its answer photostat or certified copies of its books and records showing said facts; also, any cancelled checks drawn on either of said accounts in the possession of either defendant.

"4th: That defendants be required to account for and show the funds belonging to the said Ida L. Gregory and placed in said Bank, and that complainant have and recover of said defendants the amount shown, less legitimate withdrawals.

"5th: That they have such other, further and general relief as the nature of their case may require.

"This is the first application for injunction in this cause."

On preliminary application, a fiat was granted in each of the two cases (by the County Judge of Rutherford County in case No. 245, and by Chancellor Lytle in case No. 246) as follows:

"File this bill; and, on complainants giving an injunction bond in the penalty of $500.00 conditioned as required by law, issue an injunction prohibiting defendant, Merchants State Bank, from proceeding in its suit in the Circuit Court at Murfreesboro, Tennessee, against complainants any further than to take judgment on said note, which it is allowed to do. Complainants will withdraw any pleas that may have been filed in said suit, and allow the suit to proceed to judgment. No steps will be taken on said judgment without leave of the Chancery Court in this cause."

Subpoena to answer for both defendants was issued to Gibson County and there executed upon them. A writ of injunction was issued to Gibson County against defendant Bank, and was there executed. No process to Rutherford County was prayed for or issued.

It is apparent, we think, that each of the bills asserts two distinct and independent causes of action, viz.: (1) Complainants seek to enjoin the further prosecution of the actions in the Circuit Court of Rutherford County, upon allegations that the notes upon which the actions at law are founded, were procured by fraud, and (2) complainants seek an accounting with defendant Dodson as trustee, and a judgment against defendant Dodson for whatever sums may be found due from him to the trust estate, and also a judgment against defendant Bank for the amount of such trust funds as may be shown to have been misappropriated by Dodson with the knowledge of the Bank.

The Chancery Court of Rutherford County had jurisdiction of the suit to enjoin the aforesaid actions in the Circuit Court of Rutherford County; but, upon the facts of this record, had no jurisdiction to entertain the suit for an accounting by the trustee, Dodson, and for judgment thereon against Dodson and the Bank, if objection to the jurisdiction was properly and seasonably made.

"The court of chancery acts ordinarily in personam, and suit may be instituted wherever the defendant, or any material defendant, is found, unless otherwise prescribed by law." Code, sec. 10383.

In the instant case, the bills allege that the defendants are...