Kenner v. City Nat. Bank

• Decision Date: 15 February 1932
• Citation: 46 S.W.2d 46,164 Tenn. 119
• Parties: KENNER v. CITY NAT. BANK.
• Court: Tennessee Supreme Court

46 S.W.2d 46

164 Tenn. 119

KENNER v. CITY NAT. BANK.

Supreme Court of Tennessee.

February 15, 1932

Appeal from Chancery Court, Knox County; Robt. M. Jones, Chancellor.

Suit by J. C. Kenner and another against the City National Bank. A decree dismissing the bill was affirmed by the Court of Appeals, and complainants appeal.

Reversed and remanded.

Fowler & Fowler, of Knoxville, for defendant City Nat. Bank.

GREEN C.J.

This is a suit to recover some $180,000, the value of certain notes alleged to have been deposited by the complainants in defendant bank for collection and reinvestment of their proceeds. It is charged that these notes or their proceeds were fraudulently converted by defendant's cashier. The chancellor dismissed the bill, and the Court of Appeals affirmed his decree. Complainants' petition for certiorari was granted by this court, and the cause has been fully heard here.

Each of the courts below made an extended finding of facts, and these findings largely concur. The concurrent findings, being amply sustained by the proof, are of course binding on this court. Code, § 10620. Findings of fact by the Court of Appeals are binding on this court, unless challenged by petition for certiorari. Defendant bank has filed no petition for certiorari. Hibbett v. Pruitt, 162 Tenn. 285, 36 S.W.2d 897; Brown v. Brown, 155 Tenn. 530, 296 S.W 356; Bray v. Blue Ridge Lumber Co., 154 Tenn. 342 289 S.W. 504; Miller v. Kendrick, 153 Tenn. 596, 285 S.W. 51.

Facts thus established, or facts undisputed on this record, are then, these:

On March 20, 1928, F. E. Haun, cashier of defendant bank, executed and delivered to the complainants a paper writing containing a long list of negotiable promissory notes aggregating $280,894.29. On the last page of this document, in Haun's handwriting, appears the following:

"March 20--28. Received of J. C. & S. H. Kenner the above notes and cash $280,894.20 is acknowledged and collection or renewal will be attended to. City National Bank, F. E. Haun, Cashier."

In July, 1928, it developed that Haun was a defaulter to his bank, and that he had defrauded others, and had proven unworthy of the high confidence that his employer and the public generally had reposed in him. He was discharged by defendant bank, and his criminal conduct became public.

Thereupon the complainants had their attorney go to defendant bank and demand the surrender of the notes receipted for by Haun as aforesaid. Search was made for these securities, and in Haun's desk, not among the bank's bills payable, notes amounting to $99,636 were discovered. These notes were taken to be the property of the complainants and were turned over to them.

Prior to his connection with the City National Bank, Haun was cashier of a smaller institution known as the Knoxville Savings Bank. The latter bank was located near the business house of complainants, and they were customers of that bank and became acquainted with Haun. They advised with Haun about their investments, and, while Haun was at the Knoxville Savings Bank, complainants purchased from him or through him various securities. Whether complainants were at that time dealing with Haun as an individual or with Haun as cashier of the Knoxville Savings Bank is not material, in view of the findings of the Court of Appeals as to subsequent events.

In 1918 the City National Bank took over the Knoxville Savings Bank; the former bank purchasing all the stock of the latter bank. It appears without controversy that, at the time of this transaction and for many years later, Haun enjoyed a reputation in banking circles and with the public as a young man of high integrity and unusual ability. It seems that the chief reason for the acquisition of the Knoxville Savings Bank by the City National Bank was to enable the latter institution to procure the services of Haun.

When the Knoxville Savings Bank was thus absorbed, Haun was immediately made cashier of the City National Bank, and for ten years exercised to the fullest extent his authority as cashier of that institution. The president and the directors of the City National Bank had the highest confidence in the honesty and efficiency of Haun, and accorded him very large influence in the conduct of the affairs of that institution.

The complainants had a savings account at the Knoxville Savings Bank which was transferred to the City National Bank when the consolidation took place. Later they opened another savings account at the City National Bank, and they also kept a checking account at that bank during the Haun regime. They continued to advise with Haun about their affairs after he went to the defendant bank and continued to buy for investment from him or through him notes supposed to be secured by real estate liens. There is a controversy as to whether complainants were dealing with Haun as an individual or dealing with him as cashier of defendant bank, which is to be later noticed.

The Court of Appeals finds that some time in 1920 complainants rented a safety deposit box from the City National Bank; that they kept their notes in this box until a day or two before maturity, at which time they would turn them over to Haun for collection; that with the proceeds they purchased other notes, "as they claimed they thought, from the City National Bank through Haun, as its cashier," and put these new notes with their other notes in their safety deposit box, continuing to take the notes out a day or two before maturity, and turning them over to Haun for collection and reinvestment.

In this connection, it may be noted that the Court of Appeals found that the City National Bank never sold notes which it owned to individuals, and that the only transactions of this character in which it engaged were rediscounts of its paper with the Federal Reserve Bank or with its correspondent bank. However, it seems that Haun would sometimes lend complainants money and take a note payable to the City National Bank and indorse it in the name of the City National Bank to the complainants, but this without the knowledge of other officers of that bank. This conclusion of the Court of Appeals is supported by the evidence, except as hereafter noted.

Complainants sold out their business in Knoxville, a jewelry and pawnbroking establishment, on April 23, 1920. J. C. Kenner was in bad health, and was spending most of his time in Florida. S. H. Kenner began to spend his winters in Florida.

About October 13, 1920, as set out by the Court of Appeals, Haun told the complainants that the makers of complainants' notes frequently come to the bank to pay them, or pay the interest on them, when complainants were not available, and, the notes being in complainants' box, Haun said he was embarrassed. Haun suggested to complainants that they turn over all their notes to him so that he could at any time accept payment of a note, stamp it paid, and deliver it to the maker. He told them he would give them a receipt for the notes which would, in all respects, be good and binding. Complainants agreed to this, turned over their notes to Haun, and he executed a typewritten list of the notes, and at the bottom of this list he signed a receipt for the same. It further appears that Haun would at somewhat regular intervals give complainants a receipt for their notes on hand, taking up the previous receipt issued by him. Each receipt would show an increase in the amount of securities held by reason of profits reinvested. The receipts were all in form similar to that one heretofore set out.

It was found by the Court of Appeals that on October 13, 1920, the complainants took out of their safety deposit box and turned over to Haun notes amounting to $130,038.40, that on January 3, 1921, they delivered to Haun another batch of notes aggregating $11,665, and that thereafter the complainants turned over to Haun from time to time other notes and cash. It may be again observed just here that defendant bank has filed no petition for certiorari.

Further finding the facts disclosed by the record, the Court of Appeals says that, after turning over their notes to Haun as aforesaid on October 13, 1920, and January 3, 1921, complainants seem to have permitted and authorized Haun to attend practically to all of their business-- "certainly all of it with the bank." The court relates that as a note would mature Haun would either collect the interest and take a renewal note or collect both interest and principal; that he would put the money thus gotten into complainants' saving account and would then lend it out to other persons, taking their notes; that this process would be repeated as the various notes matured; that Haun was not required to consult with the complainants, and did not consult with them about making loans; that complainants trusted to his judgment; and that in handling their affairs Haun was authorized to draw on their savings account whenever he saw fit to do so.

Continuing, the Court of Appeals set out that, while complainants were in Florida, Haun would look after the collection of rents on their real estate, and that he would pay their taxes; that he would make out their income tax returns for them and pay their income taxes; that he had full authority to withdraw money from their savings account for these purposes and for the purpose of buying notes for them and for the purpose of lending their money for them.

The court states that the only checks which the complainants drew were against their checking account, and that these checks were for money with which to pay their living expenses; that when their checking account would get low, Haun would either make the necessary entries or direct a clerk to make entries transferring money from complainants' savings account to...