Wood v. Green

• Decision Date: 12 April 1915
• Citation: 175 S.W. 1139,131 Tenn. 583
• Parties: WOOD v. GREEN ET AL.
• Court: Tennessee Supreme Court

175 S.W. 1139

131 Tenn. 583

WOOD v. GREEN ET AL.

Supreme Court of Tennessee.

April 12, 1915

Appeal from Chancery Court, Davidson County; John Allison Chancellor.

Action by Mrs. B. L. Wood against W. H. Green and others, as receivers. From disallowance of two claims against the insolvent, the City Savings Bank of Nashville, the intervening petitioner, the Memphis Bank & Trust Company appeals. Decree affirmed.

H. H Barr and W. B. Marr, both of Nashville, for defendants.

NEIL C.J.

The case styled in the margin is a proceeding pending in the chancery court of Davidson county to wind up the City Savings Bank as an insolvent corporation. Two receivers were appointed, and the estate is in course of settlement there. The Memphis Bank & Trust Company, also a corporation, is an intervening petitioner, seeking to have allowed as a debt against the assets certain claims as follows: One for $14,422.24, and another for $8,525, with interest. The chancellor disallowed these claims, and the petitioner has appealed and assigned errors.

The first error assigned is in the following language:

"The chancellor erred in excluding from the hearing all evidence tending to show oral statements by Moreau P. Estes in the transactions involved under the petition herein, and particularly that part of such evidence as is set out at length in the wayside bills of exception filed by both parties."

This assignment is overruled because not in compliance with Rules of the Court, § 14, subsec. 3 (160 S.W. ix), which requires that:

"When the error alleged is to the admission or rejection of evidence, the specification shall quote the full substance of the evidence admitted or rejected, with citation of the record where the evidence and ruling may be found."

The other errors assigned may all be disposed of by determining, firstly, whether a certain charge of $20,000 against the Memphis bank appearing in the current account of the Nashville bank was a proper charge against the former, and, secondly, whether a certificate of deposit of $8,525, held by the Memphis bank on the Nashville bank, is a valid charge against the latter.

1. As to the $20,000, this may be briefly disposed of by the statement that the money was furnished on request by the Nashville bank to the Memphis bank, by placing that sum to the credit of the latter bank in New York. The Memphis bank was duly notified that the money had been sent, and subsequently its vice president was in Nashville, saw the entry against his bank on the books of the Nashville bank, and made no objection, and none was ever made until the present petition was filed more than a year thereafter. This would amount to a settled account. No pleadings are filed justifying a reopening of the account for fraud, mistake, or surprise.

2. As to the certificate of deposit for $8,525, the evidence shows that this was issued in exchange for a draft of the same amount on New York, issued by the Memphis bank, but under instructions from Moreau P. Estes, the vice president of the Nashville bank and president of the Memphis bank, the draft was held as a cash item, and was never collected by the Nashville bank. It was not even presented until after the failure of the Nashville bank, and then it was presented by the receiver of that bank. Payment was refused on the ground that no money was in the bank to meet it. So there was nothing on which the certificate of deposit could rest.

3. But it is insisted that the foregoing presents only the outward aspects of the testimony.

It is contended by petitioner that the two items arose in the following manner:

That the Nashville bank, through its then vice president, Moreau P. Estes, bought the majority of the stock of the Memphis bank for $28,525, and gave the latter bank drafts for the amount on New York, to be collected and used by the said Memphis bank, as a trust fund, to pay its stockholders who had sold their stock to the said Nashville bank; that for some reason, which the petition does not set forth in its statement, the drafts last mentioned were not collected; and that in lieu of these the Nashville bank placed to the credit of the Memphis bank in New York the $20,000 mentioned, and to cover the residue of the $28,525 of purchase money the Nashville bank sent to the said Memphis bank the certificate of deposit for $8,525.

The Nashville bank, through its receivers, denies that it ever purchased the stock referred to in the Memphis bank, insists that such purchase was the individual enterprise of Moreau P. Estes, about which it knew nothing until the deal had been consummated, and that the items of $20,000 and $8,525 arose in the manner already stated in divisions numbered 1 and 2.

4. We think the evidence sustains the contention of the Nashville bank.

5. But it is urged by petitioner that, inasmuch as the deal was made by Estes, who was vice president of the Nashville bank, and he made it in the name of the latter bank, it is bound, whether he had formal authority or not. This is sought to be worked out on several theories, each of which we shall briefly consider.

Estes carried with him a letter, addressed to the Memphis bank, signed by the cashier of the Nashville bank, introducing him, and bespeaking proper courtesies, such a general letter as might be given to any stranger visiting a community or persons new to him. This letter was typewritten, all open-spaced, except certain significant additional words, single-spaced, and crowded into the bottom of the letter, just above the signature, viz.:

"He has full authority to represent this bank in all matters, including signing New York exchange."

The cashier testifies that this was not in the letter when he signed it, and Estes was not introduced to contradict this evidence. We must therefore conclude that it was an interpolation, was not binding on the Nashville bank, and furnished no authority for action on the part of the Memphis bank or its stockholders. Moreover, it bore a suspicious character on its face.

It is next insisted that, although Estes was only the vice president of the Nashville bank, he dictated its policy and dominated it. Such is the evidence. Still the Memphis bank had no knowledge of this fact, and hence did not rely on it, and therefore no estoppel could arise out of it.

It is urged that, since Estes was an officer of the Nashville bank, his knowledge was its knowledge; hence the Nashville bank must be treated as present in Memphis making the deal. The principle is not applicable, because the facts show that Estes was acting in his own individual interest, and perpetrating a fraud on both banks. Ruohs v. Bank, 94 Tenn. 57, 71-72, 28 S.W. 303; 31 Cyc. 1595.

It must be remembered that there had been no previous holding out of Estes to the Memphis bank, or to the public of Memphis, as having such power, or any power other than that shown by the by-laws, and they gave him no such authority. So the Memphis bank was not misled by any false appearances, except that of the changed letter, for which, as we have already stated, the Nashville bank was not responsible.

Estes conceived the scheme of buying for himself a controlling interest in the Memphis bank. He gave no information of this to any officer of the Nashville bank. He went to Memphis, and without authority used the name of the Nashville bank in buying the controlling interest in the Memphis bank. He gave drafts on New York in the name of the Nashville bank for the purchase price, $28,525, and had himself elected president of the Memphis bank, took a letter from Mr. Becker, then cashier of the Memphis bank, introducing him to the New York bank reached New York by the time the drafts for $28,525 got there, saw the New York bank, told its officers that there was some mistake about these drafts (there were two of them, together making the $28,525), and as president of the Memphis bank had them returned to that bank, where in due course they were received, and subsequently turned over to Estes. All this happened in April, 1909. In May or June of the same year the Memphis bank, without explaining that it had any connection with Estes' deal, asked the Nashville bank to place $20,000 to its credit in New York. The Nashville bank did so, but at once drew on the Memphis bank for $15,000, which, with $5,000 already to the credit of the Memphis bank in the Nashville bank, made good the $20,000 sent to New York. This $20,000 so placed in New York was subsequently used by Estes, through the Memphis bank, in paying this much of the $28,525 he had agreed to pay. The rest of it, $8,525, the Memphis bank borrowed in Memphis and completed the payment. The stock was issued directly to Estes, and never to the Nashville bank. The result of this series of frauds was that Estes bought the controlling interest in the stock in the Memphis bank with that bank's own money. This fact...