Knoxville Water Co. v. East Tennessee Nat. Bank

• Decision Date: 12 November 1910
• Citation: 131 S.W. 447,123 Tenn. 364
• Parties: KNOXVILLE WATER CO. v. EAST TENNESSEE NAT. BANK.
• Court: Tennessee Supreme Court

131 S.W. 447

123 Tenn. 364

KNOXVILLE WATER CO. v. EAST TENNESSEE NAT. BANK.

Supreme Court of Tennessee.

November 12, 1910

Appeal from Chancery Court, Knox County; H. L. McClung, Chancellor.

Action by the Knoxville Water Company against the East Tennessee National Bank. From a decree for defendant, complainant appeals. Reversed, and decree entered for complainant.

Shields Cates & Mountcastle, for appellant.

Cornick Wright & Frantz, for appellee.

GREEN J.

This suit was brought by the Knoxville Water Company against the East Tennessee National Bank concerning the matters and things hereinafter set out, and from a decree in favor of the defendant the complainant has appealed to this court.

The Knoxville Water Company is a Tennessee corporation engaged in the business of furnishing water to the inhabitants of Knoxville and vicinity. It formerly had in its employ I. A Martin, who was called the "cashier" of the company, and whose duties will be more fully noticed further in the opinion. From September 26, 1906, to February 26, 1908, Martin deposited to his individual credit in defendant bank five checks, drawn by customers of the water company in its favor, aggregating $2,392.54. These checks were drawn on Knoxville banks, payable to the order of the Knoxville Water Company, were indorsed by Martin, "Knoxville Water Co., by I. A. Martin, Cashier," also indorsed by him individually, "I. A. Martin," were collected and passed to Martin's personal account by the bank, and the proceeds checked out by Martin for private purposes, presumably. He afterwards proved a defaulter.

It is insisted for the complainant that Martin was without authority to indorse for, or in the name of, the Knoxville Water Company, and, further, that these checks showed upon their face that they were the property of the water company, and that the bank, by taking such checks as these and allowing Martin to check out the proceeds for his own use, became liable to the water company, as one assisting in the misappropriation of trust funds with knowledge of their character. Both propositions are controverted by the bank, and it denies that Martin was without authority to indorse the checks of the water company, and further denies that it was under obligations to look after the disposition of the proceeds of these checks by Martin.

As to Martin's authority in the premises, we find these facts: He was employed by the water company to render bills against the company's customers, collect them, and deposit these collections in the Third National Bank of Knoxville. He was also required to pay the local bills of the company, pay roll, office expenses, interest on the company's bonds, and other such claims. He was not given authority to indorse the company's name, by himself, even on the checks collected by him. His duties in this connection were to indorse these checks for the company in the name of "Elbert Wheeler, Treasurer," by a rubber stamp furnished him for that purpose, and to deposit these checks, so indorsed, to the credit of the "Knoxville Water Company, Elbert Wheeler, Treasurer," daily, in the Third National Bank. Martin had no authority whatever over this account, to check against it, or otherwise. He was furnished money by the treasurer for the expenses above referred to; this money being kept in a separate account at the same bank. This account, over which Martin did have control, was not in the name of the "Knoxville Water Company" at all; but the funds were deposited to the credit of "I. A. Martin, Cashier." He was therefore prevented from using the company's name even in this connection. The company took the extra precaution to place this expense account in Martin's own name, not in its own. So that, in disbursing and checking out the company's funds for legitimate purposes, he was required to do so in his own name as cashier, and the company gave him no authority or excuse for using its name in any banking transaction. It would seem that this company took every possible step to refute the idea that Martin had authority to use its name in any banking business at all.

We accordingly reach the conclusion that Martin was without express authority to indorse in the company's name the checks, which are the basis of this suit, or any other checks, but have yet to determine whether such indorsement was within the apparent scope of his authority, as "cashier" of appellant.

In the first place, it should be said that no such office as that of cashier was provided for, either in the charter or by-laws of this water company. Martin was therefore not an officer of the corporation at all, but merely an employé, designated as "cashier." He was not the managing agent of the company; those duties being performed by an official known as "resident manager."

There is a marked distinction between the cashier of a bank and the cashier of any other corporation. By law and by usage of years, the cashier of a bank is regarded as an executive officer by whom the whole moneyed operations of the institution are to be conducted. Of a bank cashier, Mr. Thompson says:

"The cashier of an incorporated bank is regarded in law as its chief executive officer. He is in no sense the agent of the board of directors. He is a statutory officer, not of the directory, but of the corporation. The directors make the contracts of the corporation, and he carries them into execution. He is an independent officer of a corporation, in a sense analogous to that in which the Governor of a state, or the mayor of a city, is an independent officer of the law. As they are not the servants of the legislative body of the state, nor municipality, neither is he in a legal sense the servant of the directors, who constitute the legislative body of the banking corporation. Though chosen by the directors, he is as much the statutory agent of the corporation as the directors themselves. Therefore the acts and doings of a cashier, carrying into execution a lawful

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