Third Nat. Bank in Nashville v. Carver

• Decision Date: 03 December 1948
• Parties: THIRD NAT. BANK IN NASHVILLE v. CARVER et al.
• Court: Tennessee Court of Appeals

218 S.W.2d 66

31 Tenn.App. 520

THIRD NAT. BANK IN NASHVILLE v. CARVER et al.

Court of Appeals of Tennessee, Middle Section.

December 3, 1948

Certiorari Denied by Supreme Court March 11, 1949.

Appeal from Chancery Court, Davidson County; Thomas A. Shriver Chancellor.

Suit by the Third National Bank in Nashville against David L. Carver and Mrs. A. P. Carver and another to settle a controversy arising out of payment of a check, after a stop order had been issued thereon, wherein named defendants filed a cross-bill. From a judgment dismissing the cross-bill, the named defendants appeal.

Reversed and judgment rendered on cross-bill.

Where stop payment order on check by depositor received by telephone was accepted by authorized agent in bank and put into effect, payment of check in disregard of stop payment order three hours thereafter made bank guilty of breach of duty to its depositor and liable to joint depositors for amount of check paid.

Charles L. Cornelius and W. Ovid Collins, Jr. both of Nashville, for Third National Bank.

Williams Cummings & West of Nashville, for David L. Carver and Mrs. A. P. Carver.

Burt Francis, of Nashville, for Jesse R. Olive.

FELTS Judge.

This suit was brought by the Third National Bank against two of its joint depositors and the payee of a check of one of them, to settle a controversy arising out of its payment of the check after they had instructed it by telephone not to pay the check.

Mrs. A. P. Carver and her son David L. Carver carried in the bank a joint account in the names of both but subject to the check of either of them. The son gave his check for $500 to Jesse Olive for the purchase of a boat. He decided to stop payment of the check because Olive had misrepresented the condition of the boat. His mother accordingly telephoned the bank about 8:30 A.M. before it opened and before the check was presented.

The bank averred in its bill that its employee told Mrs. Carver to bring it a stop-payment-order signed both by herself and her son, that she did this about noon, that in the meantime, about 10:30 A.M., it paid the check to Olive and charged the amount to their account, but that they were denying its right to do this and threatening to sue it for the $500, it had paid from their account on the check.

It averred that it was not liable to them, but if it should be held liable to them, it would be entitled by way of subrogation to recover either against David L. Carver or Jesse R. Olive, depending on whether the latter had misrepresented the boat. It also alleged that neither of them was claiming the boat and that it was entitled to have a receiver to sell the boat for its partial reimbursement. It prayed for appointment of a receiver and for a decree whether it was liable to the Carvers and, if so, whether David L. Carver or Jesse R. Olive was liable to it.

On the day the bill was filed a receiver was appointed. Two days later he reported that he had examined the boat and found it was of no substantial value. On the same day a decree was entered confirming this report, adjudging the boat to be 'wholly without value,' and discharging the receiver.

The Carvers demurred to the bill upon the grounds, among others, that it showed no right in the bank to any relief, it showed the bank had no equity and no interest in the transaction between David L. Carver and Jesse R. Olive, it was multifarious, it stated no cause of action but at most merely showed the bank was threatened with a lawsuit to which it had a valid defense and that the court had no jurisdiction to entertain the bill. Jesse R. Olive filed a similar demurrer.

Before these demurrers were acted upon the bank filed a supplemental bill averring that, since the discharge of the receiver, doubt had arisen as to the court's jurisdiction; but that there existed an actual controversy among the parties within the court's jurisdiction under the Declaratory Judgments Act; that the Carvers were claiming the bank was liable to them for paying the check after receiving the stop-payment-order; that if they should sue and succeed in establishing the bank's liability to them, it would become entitled to be subrogated to the rights and equities either of the payee or of the drawer of the check, depending upon which was at fault in the transaction; and that it was entitled to a declaratory judgment as to the rights of the parties in the premises.

The Carvers demurred to the bill and its supplement upon the grounds that it showed that the bank had no right of subrogation; that it was multifarious, setting up different and disconnected matters against the defendants; and that it was repugnant, averring one state of facts to justify the bank's payment of the check and another and contradictory state of facts to make out its right to subrogation.

The Chancellor overruled all the demurrers, Olive filed an answer, and the Carvers filed an answer and cross bill. They averred that they had stopped payment of the check because of Olive's misrepresentations, that the bank accepted the stop-payment-order by telephone and agreed to stop payment of the check, and that it thereafter wrongfully paid the check and charged the amount to their account and was liable to them therefor.

The cause was heard orally before the Chancellor according to the forms of chancery. He found that the bank's agent accepted the telephone stop-payment-order by the mother and agreed to stop payment of the check. But he was of opinion that it was not bound to do so without an order of the son, the drawer of the check; and that the bank had properly paid the check, charged it to their account, and was not liable to them. He was further of the opinion that even if the bank had wrongfully paid the check, still they could not recover against the bank because it would be entitled to recover against David L. Carver by way of subrogation to the rights of Olive, to whom it paid the check. The Chancellor accordingly entered a decree dismissing the cross bill and taxing the costs against the Carvers.

They appealed and insist that the Chancellor ought to have sustained their demurrers to the original and the supplemental bill; and that he ought to have sustained their cross bill, held the bank liable to them for wrongfully paying the check, and decreed them a recovery for the amount of it.

It is said for the bank that the Chancellor overruled the demurrers without granting appellants leave to rely upon the demurrers in their answers and that this ruling was final and is not now open to review. It is true it was final and binding upon the Chancellor. Upon appeal, however, it is open to review by the appellate courts. Gibson's Suits in Chancery, 3d Ed., sec. 315; Boyd v. Sims, 87 Tenn. 771, 774, 11 S.W. 948; Evans v. White et al. 184 Tenn. 435, 441, 201 S.W.2d 207.

As we have seen, the bill and its supplement presented these two theories: (1) The bank properly paid the check for the Carvers and was not liable to them, and (2) if it should be held liable to them, it would become entitled to be subrogated to the rights of the payee or to the rights of the drawer of the check. According to the first theory, the bank, as agent for the Carvers, paid the check for them by their authority and with their money. The payment was theirs, not the bank's, and it gave them the check as its voucher. This would extinguish the rights of all the parties to that instrument, cancel it, and leave nothing to which the bank could be subrogated.

So these theories could not both be true. To avoid the repugnancy, the bill stated the second only hypothetically. It said if the bank should be held liable to the Carvers for the unauthorized payment of the check, it would become entitled to subrogation, i.e., would become the owner of the check, have the right to treat the check as still alive, and be substituted to the rights the payee would have had if the check had not been paid, or to the rights the drawer (David L. Carver) would have had against the payee for the latter's fraud, if any.

But this latter theory is not correct. Mere liability on the part of the bank to the Carvers would not entitled it to the remedy of subrogation. Before it would have the right to the cancelled check, the right to treat it as still subsisting, and the right to be substituted to the rights and remedies of the payee or drawer, the bank would first have to pay the Carvers their money back. To entitle one to subrogation he must have paid the debt of the creditor to whose rights he seeks to be subrogated.

Gibson's Suits in Chancery, 4th Ed., sec. 964; Knaffl v. Knoxville Banking & Trust Co., 133 Tenn. 655, 182 S.W. 232, Ann.Cas.1917C, 1181; see Northampton Nat. Bank v. Smith, 169 Mass. 281, 47 N.E. 1009, 61 Am.St.Rep. 283; Usher v. A. S. Tucker Co., 217 Mass. 441, 105 N.E. 360, L.R.A.1916F, 826.

We think the bill and its supplement failed to state a cause under the Declaratory Judgments Act. That Act deals only with present rights that have accrued under presently existing facts. It gives the courts no power to determine future rights or possible controversies in anticipation of events that may or may not occur. Ball v. Cooter et al., 185 Tenn. 631, 634, 207 S.W.2d 340, 342; Coleman v. Henry, 184 Tenn. 550, 554, 201 S.W.2d 686; Jared et al. v. Fitzgerald et al., 183 Tenn. 682, 688, 689, 195 S.W.2d 1, 4; Newsum v. Interstate Realty Co., 152 Tenn. 302, 278 S.W. 56; Annotations, 12 A.L.R. 52, 69, 87 A.L.R. 1205, 1215-1219.

It does not enable the courts to give advisory opinions upon what the law would be upon a theoretical or hypothetical state of facts. Hodges v. Hamblen County, 152 Tenn. 395, 399 277 S.W. 901; Ball v. Cooter et al., supra; Jared et al. v. Fitzgerald et al.,...