First v. Cheatham

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE FILED
September 30, 1998
Cecil Crowson, Jr.
Appellate C ourt Clerk
FIRST AMERICAN NATIONAL ) BRADLEY CIRCUIT
BANK, )
) NO. 03A01-9805-CV-00157
Plaintiff/Appellant )
) HON. JOHN B. HAGLER
v. ) JUDGE
)
KRISTE CHEATHAM, )
)
Defendant/Appellee ) AFFIRMED
India M. Henson and Shelley D. Rucker, Chattanooga, for Appellant.
Rex A. Wagner, Cleveland, for Appellee.
OPINION
INMAN, Senior Judge
This is an action against a purported guarantor of a debt which was evidenced by a
promissory note executed by Janet Bacon pursuant to a personal line of credit extended to her.1
In a banking transaction with the plaintiff on September 2, 1986, Janet Bacon and her
daughter, Kriste Bacon Cheatham [defendant], opened a joint checking account with right of
survivorship. Each signed a signature card, on which was printed:
Each depositor shall be responsible for all debts and obligations incurred by a
Depositor under any Personal Line of Credit Agreement or any other open-end
credit plan applicable to the account. [our emphasis]
On July 1, 1987, Janet Bacon’s application for a personal line of credit was approved by
the plaintiff. Printed checks were issued to Ms. Bacon, bearing her name alone.
The defendant did not participate in the application, had no notice of it, and received no
benefits from it. Ms. Bacon utilized the credit line as a revolving account for four years, and
eventually defaulted.
1
The actio n was co mme nced in th e Gene ral Session s Court o n a “swo rn accou nt.”
The plaintiff insists that Ms. Cheatham is liable as surety for Ms. Bacon because of the
card provision which we have recited. To add palatability to its insistence, plaintiff argues that
the line of credit - which was extended to Ms. Bacon more than one year after the joint account
was opened - was merely an “extension” of the joint checking account. This argument arises
from the language “any other open-end credit plan applicable to the account,” absent which the
plaintiff’s action could not withstand even casual scrutiny, and is allegedly buttressed by the fact
that the checks issued to Ms. Bacon for withdrawal of funds from the credit line bore the same
account number as the joint deposit. The latter account represented funds owned by the two
depositors, while the former represented funds owned by the bank.2
Each party filed a motion for summary judgment,3 and the briefs do not suggest a disputed
issue of material fact exists.
Janet Bacon, by affidavit, testified that the debt was hers alone, and that she alone drew
checks against the line of credit, and that her daughter signed the signature card solely for
survivorship purposes. This was not refuted.
The trial judge granted the motion of the defendant, stating that “the creation of such
ruinous liability for the debts of another must be attended by far greater notice of danger,
formality of instrument, detail of terms, and recitation of conditions than is even hinted in this
case.” It is difficult to disagree with this rationale simply as a matter of principle, but we think
the peculiar circumstances activate T.C.A. § 47-4-401(b), which provides that “a customer is not
liable for the amount of the overdraft if the customer neither signed the item nor benefitted from
the proceeds of the item.” While an overdraft in the traditional sense is not involved in the case
at Bar, since Ms. Bacon executed a promissory note for the funds and was discharged in
bankruptcy, we think the analogy is appropo.
The judgment is affirmed at the costs of the appellant.
_______________________________
William H. Inman, Senior Judge
CONCUR:
2
The ev idence d oes not ind icate that the b ank app roved th e line of cre dit to Ms. B acon on the strength
of any su retyship o r guaran ty of her d aughter . This theo ry of reco very ap pears to h ave bee n develo ped in
hindsigh t.
3
Neither party claims the existence of a disputed issue of material fact, and each concedes the case may
be disposed of by summary judgment pursuant to Byrd v. H all, 847 S.W.2d 20 8 (Tenn. 1993).
2
_______________________________
Houston M. Goddard, Presiding Judge
_______________________________
Charles D. Susano, Jr., Judge
3