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(Original S i l l - f i l e d . A p r i l 15,1928.) X-6028 L 4 10 THE H0IT0RA3LE JAIIES 3 . KEBiAS, CHANCELLOR HOLDING PART OF IH2 CHATCEEtY COURT AT NASHVILLE: THE BILL OF COMPLAHT OF THE UNIVERSITY OF THE SOUTH, a c o r p o r a t i o n , duly c h a r t e r e d and e x i s t i n g under t h e laws of Tennessee, w i t h i t s s i t u s a t Sew&nee, F r a n k l i n County, Tennessee, against ZTA3HVILLE 3RAZTCH FEDERAL RESERVE 3AITK OF ATLANTA, a c o r p o r a t i o n c h a r t e r e d arid e x i s t i n g under the laws of t h e U n i t e d S t a t e s , having i t s p r i n c i p a l o f f i c e a t F a s h v i l l e * Davidson County, Tennessee. Complainant r e s p e c t f u l l y shows to t h e Court: I That complainant i s a c h a r i t a b l e c o r p o r a t i o n ; chartered and e x i s t i n g under the laws of Tennessee, and i s an e d u c a t i o n a l i n s t i t u t i o n , w i t h i t s b u i l d i n g s and equipment l o c a t e d a t Sewanefe, in F r a n k l i n County, Tennessee. That the d e f e n d a n t ITashville Branch F e d e r a l Reserve Bank i s a banking i n s t i t u t i o n , c h a r t e r e d under t h e laws of t h e U n i t e d S t a t e s , and engaged i n b u s i n e s s i n ITashville, Davidson County, Tennessee. II That t h e N a t i o n a l Bank of F r a n k l i n was a c o r p o r a t i o n , c h a r t e r e d under t h e laws of the U n i t e d S t a t e s and i n Sep tember 1926 and f o r many y e a r s p r i o r t h e r e t o , was engaged in t h e "banking b u s i n e s s in Franlclin, Williamson County, Tennessee. The c h i e f o f f i c i a l s of s a r d bank were E. 3 . Green, i t s C a s h i e r , and B a t e s L. Green, i t s A s s i s t a n t C a s h i e r . P r i o r to September 1926, the Misses Claybrooke had on d e p o s i t in t h e s a i d N a t i o n a l Bank of F r a n k l i n a c o n s i d e r a b l e amount of money, mors than twenty thousand d o l l a r s ( $ 2 0 , 0 0 0 . 0 0 ) and a l s o a f u n d in e x c e s s of e i g h t thousand d o l l a r s ( $ 8 , 0 0 0 . 0 0 ) which s t o o d in the name of Miss E l i z a M. Claybrooke a s A d m i n i s t r a t r i x of t h e i r deceased s i s t e r , Miss Annie Claybrooke. The Misses Claybrooke, b e i n g members of t h e E p i s c o p a l Church, wished to c r e a t e a memorial f o r t h e i r deceased s i s t e r , and decided t o do t h i s by endowing a s c h o l a r s h i p in t h e U n i v e r s i t y of t h e South, which i s an i n s t i t u t i o n conducted under t h e a u s p i c e s of t h a t church. They, thereupon, e x p r e s s e d to t h e o f f i c i a l s of the complainant U n i v e r s i t y of t h e South t h e i r i n t e n t i o n to make a g i f t of e i g h t thousand d o l l a r s ( $ 8 , 0 0 0 . 0 0 ) f o r the p u r p o s e of endowing t h i s s c h o l a r s h i p which g i f t was t h a n k f u l l y a c c e p t e d by the c o m p l a i n a n t . Ill The Mi uses Claybrooke, about September 1, 1925, went to t h e s a i d N a t i o n a l Bonk of F r a n k l i n , and. asked t h e Cashier to w r i t e a check f o r e i g h t thousand d o l l a r s ( $ 8 , 0 0 0 . 0 0 ) p a y a b l e to t h e U n i v e r s i t y of t h e South, to be drawn a g a i n s t t h e account of Miss E l i z a M. Claybrooke, a s A d m i n i s t r a t o r . As h e r e t o f o r e s t a t e d , t h e r e was a sun i n e x c e s s of e i g h t thousand d o l l a r s ( $ 8 , 0 0 0 . 0 0 ) s t a n d i n g to the c r e d i t of t h i s account a t t h a t timo, and no o t h e r chock was ever drawn by s a i d A d m i n i s t r a t r i x against said account. -3- X-6028 The s a i d E. 3 . Green cad h i s son, B a t e s L. Green, L were then engaged in v i r i o n s f r a u d u l e n t t r a n s a c t i o n s , which caused t h e r u i n of s a i d "bank, as h e r e i n a f t e r s e t f o r t h , and were m a n i p u l a t i n g t h e books and the f u n d s on d e p o s i t so a s to conceal t h e f t s and f r a u d u l e n t a b s t r a c t i o n s amounting to many thousands of d o l l a r s p e r p e t r a t e d by the s a i d 3. 5. Green w i t h t h e connivance and a s s i s t a n c e of h i s son, t h e s a i d B a t e s L. Green. When t h e Misses Claybrooke made t h i s r e q u e s t t h e s a i d E. E. Green informed them t h a t under the law t h i r t y days' n o t i c e Was r e q u i r e d b e f o r e t h e y c o u l d draw out t h e i r money. The Misses Claybrooke, b e i n g a b s o l u t e l y i g n o r a n t of b u s i n e s s m a t t e r s , and h a v i n g t h e utmost c o n f i d e n c e i n t h e s a i d E. E. Green (who was c o n s i d e r e d one of the l e a d i n g c i t i z e n s of F r a n k l i n , and who then e n j o i n e d t h e r e s p e c t of t h e e n t i r e community) b e l i e v e d h i s f a l s e statement.' i n t h i s b e h a l f , and he a c c o r d i n g l y made o u t a check in f a v o r of t h e U n i v e r s i t y of the South, Sewanee, Tennessee, in the sum of e i g h t thousand d o l l a r s ( $ 8 , 0 0 0 . 0 0 ) b u t i t was d a t e d t h i r t y days ahead, namely, Oct. 1, 1926. Said check i s in words and f i g u r e s a s f o l l o w s : " F r a n k l i n Tenn. O c t . 1 s t , 1926 Mo. 'TAIieEAl 3AMK OF I3MKLUS 87-137 FT ankl i n , Tenn. Pay to U n i v e r s i t y of the South Sewanee Tenn. or o r d e r $8000.00 E i g h t Thousand Dollars For E l i z a M. Claybrooke, Admx. of e s t a t e of Annie W. Claybrooke" The o r i g i n a l i s i n p o s s e s s i o n of complainant and w i l l be f i l e d on o r b e f o r e t h e h e a r i n g . 4 1 8 IV L That s a i d check f o r $8,000.00 was sent to complainant and. was acknowledged by i t s V i c e - C h a n c e l l o r in t h e e a r l y p a r t of September, 1926. In accordance w i t h t h e reciuest made by t h e Misses Claybrooke, s a i d check d a t e d October 1, 1926, was n o t d e p o s i t e d when r e c e i v e d , b u t was h e l d by the o f f i c i a l s of s a i d U n i v e r s i t y u n t i l October 1, 1926, a t which time i t was d e p o s i t e d in t h e Bank of Sewanee a t Sewanee, Tennessee, to the c r e d i t of your c o m p l a i n a n t . The Bank of Sewanee in a c a s h l e t t e r . d a t e d October 1, 1926, f o r w a r d e d t h i s check to t h e Hamilton N a t i o n a l Bank a t Chattanooga, Tennessee; but s a i d l e t t e r p r o b a b l y m i s s e d t h e l a s t m a i l on October 1, 1926 and a i d n o t l e a v e Sewanee u n t i l October 2nd. The 3rd of October 1926 was Sunday, and t h e Hamilton N a t i o n a l Bank ( a s complainant i s informed and b e l i e v e s ) d i d n o t r e c e i v e t h i s l e t t e r u n t i l Monday, October 4 , 1926. On t h a t d a t e , t o - w i t , October 4, 1925, s a i d check was f o r w a r d e d to t h e d e f e n d a n t N a s h v i l l e Branch A t l a n t a F e d e r a l Reserve Bank a t N a s h v i l l e , Tennessee, and was r e c e i v e d by s a i d d e f e n d a n t on October 5, 1926. On s a i d d a t e , t o - w i t , October 5, 1926, s a i d d e f e n d a n t forwarded t h i s $8,000.00 item, t o g e t h e r w i t h v a r i o u s o t h e r i t e m s , d i r e c t to t h e drawee bank, v i z , t h e N a t i o n a l Bank of Franklin. Said $8,000.00 check was r e c e i v e d by s a i d N a t i o n a l Bank of F r a n k l i n on October 6, 1926, and was l i s t e d by s a i d bank a s a c a s h item a t the c l o s e of b u s i n e s s h o u r s on October 6, 1926, w h i l e s a i d N a t i o n a l Bank of F r a n k l i n was open and c a r r y i n g on i t s b u s i n e s s i n the u s u a l and customary manner. r-5- X-5028 No p r o t e s t was made, nor was any n o t i c e of non-payment g i v e n , f fcOf. a l t h o u g h such n o t i c e "by wire i s i m p e r a t i v e l y r e q u i r e d in c a s e of a l l items over $500<00 by the r u l e s of t h e F e d e r a l Reserve Bank. The n a t i o n a l 3aak of F r a n k l i n then had to i t s c r e d i t w i t h the d e f e n d a n t N a s h v i l l e Branch F e d e r a l Reserve Bank of A t l a n t a a l a r g e amount of cash - more than twenty thousand d o l l a r s ($20,000,00) and much more than s u f f i c i e n t to pay s a i d $8,000.00 check. 7 That the s a i d N a t i o n a l Bank of F r a n k l i n opened i t s doors f o r b u s i n e s s i n the u s u a l way on t h e morning of October 7 , 1926, b u t b e f o r e the c l o s e of b u s i n e s s h o u r s suspended payment and c l o s e d i t s doors. The suspension of t h e bank was caused by the d i s c o v e r y of t h e t h e f t s and d e f a l c a t i o n s on t h e p a r t of t h e s a i d E. E. Green and Bates L. Green, which r e s u l t e d in the i n s o l v e n c y of s a i d bank. Shortly t h e r e a f t e r , a r e c e i v e r was a p p o i n t e d , and the a s s e t s of t h e bank a r e b e i n g l i q u i d a t e d under s a i d r e c e i v e r s h i p . Complainant s t a t e s , on i n f o r m a t i o n and b e l i e f , t h a t n o t more than ten (10) o r f i f t e e n (15) c e n t s on t h e d o l l a r w i l l be p a i d to t h e d e p o s i t o r s . VI That on October 7 , 1926, the day of s a i d s u s p e n s i o n , t h e d e f e n d a n t N a s h v i l l e Branch F e d e r a l Reserve Bank of A t l a n t a sent - an employee and agent to F r a n k l i n , and a l t h o u g h s a i d $8,000.00 check had r e g u l a r l y gone through a s a cash item, in the r e g u l a r c o u r s e of b u s i n e s s , on October 5, 1926, w i t h o u t p r o t e s t or w i r e , a s r e q u i r e d by t h e F e d e r a l Reserve r u l e s where -o- X-6028 a check i s not p a i d , the s a i d d e f e n d a n t , through i t s s a i d a g e n t ^ and employee, brought s a i d check back to N a s h v i l l e , and t h e r e a f t e r r e t u r n e d t h e same to t h e Hamilton N a t i o n a l Bank which r e t u r n e d i t to t h e Bank of Sewanee, c l a i m i n g t h a t s a i d check was "unpaid f o r l a c k of s u f f i c i e n t f u n d s . On and p r i o r to October 7 , 1926, t h e s a i d N a t i o n a l Bank of f r a n k l i n was i n d e b t e d to t h e d efen d an t in l a r g e amounts, some of them s e c u r e d by n o t e s or o t h e r c o l l a t e r a l ; and t h e p u r p o s e of s a i d d e f e n d a n t in c a u s i n g s a i d $8,000.00 check to be taken from t h e bank, a f t e r i t had r e g u l a r l y gone" through on t h e p r e c e d i n g day in due c o u r s e of b u s i n e s s , was to o b t a i n f o r i t s e l f t h e b e n e f i t of s a i d $ 8 , 0 0 0 . 0 0 , a f t e r i t l e a r n e d of the c l o s i n g and p o s s i b l e i n s o l v e n c y of s a i d F r a n k l i n Bank. VII Complainant i s a d v i s e d and charges t h a t under the law of Tennessee the d e f e n d a n t was the agent of c o m p l a i n a n t , and a s such was a c t i n g in a f i d u c i a r y c a p a c i t y in c o l l e c t i n g s a i d check; and t h a t a s such a g e n t , i t could n o t l a w f u l l y t a k e any s t e p in f u r t h e r a n c e of i t s own i n t e r e s t , a s opposed to t h e i n t e r e s t of i t s p r i n c i p a l , t h e h o l d e r of the check. That i n a t t e m p t i n g to r e c a l l s a i d $8,000.00 item, and charge t h e same b a c k , a f t e r t h e check had been p u t through in t h e o r d i n a r y c o u r s e of b u s i n e s s , on t h e p r e c e d i n g day, s a i d d e f e n d a n t was e n d e a v o r i n g to conserve f o r i t s e l f and to i t s own i n d e b t e d n e s s the cash which i t h e l d f o r t h e c r e d i t of t h e N a t i o n a l Bank of F r a n k l i n , and complainant i s a d v i s e d t h a t t h i s c o n s t i t u t e d a b r e a c h of t r u s t on t h e p a r t of s a i d d e f e n d a n t , and a v i o l a t i o n of t h e duty owed by agent to p r i n c i p a l and t h a t s a i d defendant i s in e q u i t y l i a b l e to account to c o m p l a i n a n t , a s t h e h o l d e r of s a i d check, i n t h e sum of X-6028 -7e i g h t thousand d o l l a r s ($8,000.00) with i n t e r e s t . L PREMISES CONSIDERED, OOMPLAIKAltT PRAYS; 1. That p r o c e s s i s s u e , r e q u i r i n g the s a i d defendant to andwer t h i s t i l l , b u t n o t under o a t h , which is waived. 2. That complainant be given a decree a g a i n s t the d e f e n d a n t in t h e sum of e i g h t thousand d o l l a r s ($8,000.00) with i n t e r e s t . 3. That i f complainant has in aught mistaken i t s remedy, i t be given such o t h e r and f u r t h e r r e l i e f as i t in e q u i t y may be e n t i t l e d to a s k . 4. And f o r g e n e r a l r e l i e f . Thomas E. Malone, Wm. J . Wade, SoIrs f o r Coraplt. I am s u r e t y f o r c o s t s , Thomas H. Malone.
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