135 Tenn. 426 | Tenn. | 1916
delivered the opinion of the Court.
The Pemiscot County Bank, a corporation under the laws of the State of Missouri, and authorized to do a general hanking business, was on the 21st day of July, 1914, insolvent, and the Citizen’s Trust Company was duly appointed and qualified as receiver of the insolvent institution, and thereafter, on the 22d day of August, 1914, the receiver filed a bill in this cause' against the defendant Wilson-Ward Company, a corporation under the laws of Tennessee, with its situs at Memphis, in the county of Shelby. The bill prayed for a decree against the defendants for the aggregate sum of two drafts, the first of which was dated at Caruthersville, Mo., January 29, 1912, and payable to the order of Wilson-Ward Company for the sum of $5,373.28, drawn by Pemiscot County Bank, by A. C. Tindle, cashier, and drawn on Security
The stipulation shows that defendants had no actual knowledge of any misconduct or fraud on the part of A. C. kindle at the time the drafts signed by him were given' them; nor did they have any actual knowledge that said drafts were not paid for when issued; nor any actual knowledge that any funds of the bank had been used improperly until just before and at the time the suit herein was filed. Defendant did not know at the time it received the proceeds of the drafts that Tindle was embezzling the amount of each draft from the Pemiscot County Bank, nor did it know that the amount of each draft was not charged on the books of the bank to either Tindle, W. A. Ward, or Salle M. Roberts, or any other person. Defendant did not know at said time that no consideration was received by the Pemiscot County Bank for the amount of each of the drafts.
Under these facts is the defendant liable? If so, its liability must be predicated on something beyond what appears on the face of the drafts; for these do not carry notice, either actual or constructive, of any misappropriation by Tindle of the funds of the bank. Each draft shows that a fund of the bank is drawn
“Among the powers or dinar ly inhering in the office or position of cashier is that of issuing and signing drafts drawn on funds of his bank on deposit with a correspondent bank. 1 Morse, Banks & Banking, Section 154; 1 Michie, Banks & Banking, Section 102, page 710.
“By way of exception to this rule of law a cashier, as such, has no implied power to draw such drafts in his own favor, or in favor of a creditor in payment of his own debts; and a person who accepts a draft drawn by a cashier, payable to himself, or used in payment of the individual indebtedness of himself, is put on notice that the fiduciary is discharging, his own obligation with the funds of his principal, the bank, and the recipient is not to be treated as an innocent holder of the draft or its money product, and may be called to account for the proceeds by the bank. As Lord Denman observed of commercial paper so drawn: ‘It bears its death wound on its face.’ The duty of the recipient is to make inquiry to ascertain whether, there being a lack of inherent power, there existed authority on the part of the cashier from his corporate principal, by way of special or express grant, or by way of implication from a course of like conduct for a long time, acquiesced in by the bank.”
The opinion cites numerous authorities to sustain its text. We think the present case falls within the general rule stated in Bank v. Bank, and not within the exception above quoted.
The law does not allow that a bank may hold out its officers to the public as worthy of confidence, and yet reap profit from frauds which they are thereby enabled to perpetrate. 3 R. C. L. Section 86, and cases cited in note 10. Every man is presumed to be innocent of violation of law, and to obey it. Polk v. Kirkland, 9 Heisk. (56 Tenn.), 292. The presumption of law is always in favor of the performance of duty. Railroad v. Stewart, 13 Lea (81 Tenn.), 432.
Believing, as it did, that the gin company was solvent, why should defendant have supposed that the cashier had defrauded the bank in the issuance of the drafts. The defendant could not have supposed that the motive of the cashier was to avoid his secondary liability for the debts of the gin company because, as is admitted, defendant believed the gin company to be solvent, and knew that the primary liability on the debts was against the gin company, and not against the cashier. Commerce is conducted largely on the faith which man has in the integrity of his fellows, and that considerable portion of commerce which is done by means of such drafts as those used in this case would be paralyzed if each recipient of such paper were required to institute a private investigation to determine whether or not the bank of issuance was defrauded when the paper left its hands.
We think the decree of the chancellor was correct, and it is affirmed at appellant’s cost.