Simpson v. First Nat. Bank

• Decision Date: 19 December 1917
• Citation: 74 Fla. 539,77 So. 204
• Parties: SIMPSON v. FIRST NAT. BANK OF PENSACOLA et al.
• Court: Florida Supreme Court

77 So. 204

74 Fla. 539

SIMPSON v. FIRST NAT. BANK OF PENSACOLA et al.

Florida Supreme Court

December 19, 1917

Appeal from Court of Record, Escambia County; Kirke Monroe, Judge.

Suit by J. J. Hooton and James C. Watson, copartners as Hooton &amp Watson, continued after the death of Hooton by R. B. Simpson as trustee in bankruptcy of James C. Watson, surviving partner, against the First National Bank of Pensacola, Fla W. H. Milton, its receiver, and another. From a decree dismissing the bill of complaint, the trustee appeals. Decree affirmed.

Syllabus by the Court

SYLLABUS

The findings of the chancellor on the facts where the evidence is taken before a special master should not be disturbed by an appellate court unless such findings are clearly shown to have been erroneous.

COUNSEL F. W. Marsh and B. R. Coleman, both of Pensacola, for appellant.

Watson & Pasco, of Pensacola, for appellees.

OPINION

ELLIS, J.

J. J Hooton and James C. Watson, copartners as Hooton & Watson brought suit in the court of record of Escambia county against the First National Bank, W. H. Milton, receiver of the First National Bank, F. E. Brawner, and W. K. Hyer. During the progress of the cause J. J. Hooton, one of the complainants, died, and James C. Watson was adjudged a bankrupt. Upon suggestion of the death of Hooton and the bankruptcy of Watson the judge of the court ordered that the cause proceed to final decree in the names of James C. Watson as surviving partner of Hooton & Watson, and R. B. Simpson as trustee in bankruptcy of James C. Watson.

According to the allegations of the bill of complaint, Hooton & Watson in January, 1913, bought from F. E. Brawner, as the agent of the First National Bank, and William K. Hyer, 100 shares of the capital stock of the Pensacola State Bank belonging to Hyer, agreeing to pay therefor $10,000. Hooton & Watson executed their four promissory notes each for $2,500, payable to the order of F. E. Brawner in 2, 12, 18, and 24 months, respectively. The first note bore interest at 8 per cent. per annum, and the others at 6 per cent. per annum. The bank stock was transferred by Hyer to Hooton & Watson, and the certificates numbered 212, 213, and 214 were attached to the three notes maturing in 12, 18, and 24 months as collateral security. The last three notes and the certificates of stock were transferred and delivered by Brawner to the First National Bank, and the first note Brawner, as the First National Bank's agent, discounted with the Citizens' & People's National Bank, and turned the proceeds thereof over to the First National Bank. Hooton & Watson paid the first note, with interest, to the Citizens' & People's Bank at maturity, and on July 17, 1913, paid to the First National Bank the semiannual interest due on the remaining three notes, and on January 17, 1914, they paid to R. W. Goodhard, receiver of the First National Bank, the second note and semiannual interest due on the three. It is alleged that on the 5th day of December, 1913, the Pensacola State Bank suspended payment, and receivers were appointed to liquidate and wind up the affairs of the bank. The bill alleges that, when Brawner made the sale of the stock in the Pensacola State Bank to Hooton & Watson, Brawner, as agent for Hyer and the First National Bank, represented that he (Brawner) wes president of the Pensacola State Bank, and as such was fully acquainted with its financial condition; that the bank was solvent, in good financial condition, and making money; that an examination of the bank's affairs showed that its assets exceeded its liabilities to such an amount as to make its capital stock worth $120 per share; and that the Hyer stock was worth more than $110 per share. These representations it is alleged were untrue, and that the Pensacola State Bank at the time was insolvent, and continued so until its failure; that its condition was known to Brawner and the First National Bank, and unknown to Hooton & Watson, who relied upon the representation made by Brawner. It is alleged that the Hyer stock in the Pensacola State Bank at the time of the sale to Hooton & Watson was held by the First National Bank as collateral security, or as a pledge for the payment of an indebtendess due by Hyer to the bank; that the First National Bank and Hyer employed and authorized Brawner to sell the stock. It is alleged that the First National Bank during the years 1909, 1910, and 1911 by the use of its own funds purchased a controlling interest in the stock of the Pensacola State Bank, and certificates were issued therefor in the name of W. A. Blount, Jr., who executed to the First National Bank a note for the purchase price, and delivered it with the certificates of stock to the bank upon an understanding that the bank was the equitable owner; that these facts became known to a national bank examiner, who required the 'transaction to be modified,' which requirement resulted in the transfer of the stock held by Blount, Jr., as trustee, to parties owning and controlling a majority of the stock of the First National Bank 'in the ratio of their ownership of the stock' in the bank, notes being executed by them to the bank in sums aggregating the amount of the W. A. Blount, Jr., note; certificates of stock in the Pensacola State Bank were then issued to each purchaser, and the notes and certificates of stock delivered to the First National Bank; that the Hyer stock which was sold to Hooton & Watson constituted part of the stock originally acquired by the National Bank in the manner stated; that the policies and business activities of the Pensacola State Bank were thereafter conducted by a board of directors chosen and selected by the vote of the stock so held as the equitable property of the First National Bank. It is then alleged that the Pensacola State Bank was wrecked by this management in a series of obviously unprofitable transactions with its own directors, who were also directors of the First National Bank; this was the condition of the Pensacola State Bank, a condition of inevitable insolvency, when the sale was made to Hooton & Watson; that the notes of Hooton & Watson were made payable to the order of Brawner at the request of the First National Bank, and by him transferred to the bank without consideration, the 'bank being the real beneficiary and payee thereof'; that in the transaction with Hooton & Watson the First National Bank advised Brawner and was cognizant of the price he was to demand for the stock, and authorized him to sell it, and was cognizant of all the details of the transaction; that the First National Bank knew that the Pensacola State Bank was insolvent, that its assets had been dissipated, and that the stock was of no value, and that Hooton & Watson had been induced by Brawner to make the purchase; that the First National Bank had become insolvent, and W. H. Milton had been appointed receiver; that Hooton & Watson had offered to return the stock to Hyer, which offer was declined; that the first note was paid by Hooton & Watson without knowledge of the facts above recited, and that they paid the second note in the belief that the First National Bank held the same in due course for value; that Hyer was insolvent; that the First National Bank knew of his insolvency when the sale of the Hyer stock was made; and that the stock was sold because a national bank examiner objected to the character of the loan and the collateral, and in an effort of the First National Bank to better its condition. It is claimed by Hooton & Watson that the notes given by them for the stock are voidable because of the fraud perpetrated by the First National Bank, Hyer, and Brawner, and that Hooton & Watson are entitled to have the notes delivered up for cancellation. Many interrogatories were propounded in the bill which the defendants were required to answer. The bill contained prayers to the effect that the First National Bank and its receiver be required to surrender the last two notes for cancellation; that it be enjoined from instituting suit upon them or disposing of them to innocent purchasers; that certificates of stock numbered 213 and 214 of the capital stock of the Pensacola Bank be surrendered; that the amount paid on the first note and the interest be declared to be a valid claim against the First National Bank, and the amount paid on the said note and interest be decreed to be a trust fund in the hands of the receiver and a lien upon the funds held by him prior in dignity to the claims of the general creditors; that the sum of $10,000 be declared a valid claim against the First National Bank, or so much thereof as complainants shall be required to pay by reason of their apparent ownership of the stock of the Pensacola State Bank from January, 1913, to December 5, 1913; that a reference of the matter be made to a master to make a report as to the true amount; and that the same when ascertained shall be decreed to be paid as other claims of general creditors and share in the dividends from the assets of the bank. As to the defendant William K. Hyer the bill prayed that the sale of the stock be declared to be void, and for an accounting as to whatever sums the complainants may be required to pay on account of their apparent ownership of the said stock, and on account of the notes held by the other defendants, and on account of the purchase price of the stock, and that complainants have a decree for the amounts so found to be due to be satisfied from either the assets of the First National Bank if found entitled thereto, or from the assets of Hyer as the complainants may elect. There was a prayer for general relief and for subpoenas.

The First National Bank answered the bill of complaint incorporating therein a general demurrer for...