Wichita Royalty Co. v. City Nat. Bank of Wichita Falls

This suit was instituted by the City National Bank of Wichita Falls against the Wichita Royalty Company, designated as a common-law trust, and against E. E. Scannell as its trustee, and against Scannell individually, to recover the balance due on a promissory note payable to the plaintiff bank executed by E. E. Scannell as trustee for the Wichita Royalty Company, on June 26, 1930, for the sum of $22,000, due 60 days after date, executed as a renewal and extension of original notes executed by the defendants to the plaintiff and secured by a deed of trust on oil royalties on land situated in Young county; also to recover $14,596 as one-half of the balance remaining due and unpaid on another note, of date June 9, 1930, in the sum of $43,000, executed by the Texas Investment Company, a corporation, and indorsed by the Wichita Royalty Company, by E. E. Scannell, trustee, and also by J. T. Harrell and J. A. Kemp. That note was secured by the pledge of 650 shares of capital stock of the Texas Investment Company, together with notes and accounts receivable. It was alleged that certain payments in money had been made on that note which were duly credited thereon and a further credit for collateral sold in the sum of $20,000, leaving a balance due of $29,192; and that the relative liability of the indorsers was one half to the Wichita Royalty Company, to wit, $14,596, and the other half jointly to the other two indorsers, J. T. Harrell and J. A. Kemp.

The trial judge instructed a verdict in favor of plaintiff for its alleged debt, and also as against defendant's cross-actions hereinafter noted; and, from a judgment in conformity therewith, defendant has appealed.

On June 20, 1930, R. R. Robertson, for the Wichita Royalty Company, executed an instrument in writing designated as a "Declaration of Trust," and in which he was named as trustee. That instrument contained the following provisions:

"First: That this Trust shall be designated and known as the Wichita Royalty Company, with principal office in Wichita Falls, Texas.

"Second: That the said Trustee shall hold all the funds and property now or hereafter held by or paid to, or transferred or conveyed to him or his successor or successors as trustee hereunder in trust for the purpose, with the powers and subject to the limitations hereinafter declared, for the benefit of the cestue que trustent (Hereinafter called the stockholders), and it is hereby expressly declared that a trust, and not a partnership or joint stock association is hereby created; that neither the trustee nor the stockholders shall ever be personally liable hereunder as partners or otherwise, but that for all debts the trustee shall be liable as such to the extent of the trust funds only. * * *

"Third: The general purposes of this company are to purchase and sell oil and gas royalties, and other oil and gas properties.

"Fourth: The capital stock of this trust shall be One Million Dollars ($1,000,000.00) divided into one million shares of par value of one Dollar ($1.00) per share.

"Fifth: The certificate of stock shall be issued and signed by the trustee, and shall be substantially in the following form, towit:

"``Wichita Royalty Company

"``Wichita Falls, Texas

"``(A common law Trust)

"``Members Certificate of Interest.

"``This is to certify that ______ is the owner of ______ fully paid shares of beneficial interest in the Wichita Royalty Company, a common law trust, transferrable only on the hooks of the trust by the owner thereof in person or by duly authorized agent upon the surrender of this certificate properly endorsed.

"``This certificate of interest is subject to the provisions and covenants contained in the Declaration of Trust of the Wichita Royalty Company, dated the first day of June, A.D. 1930, and any amendments thereto, and the by-laws of said trust, present or future, and the provisions hereof.

"``No member of said trust, or owner or holder of this certificate, as such, shall have any authority, power or right whatsoever to do, or transact any business whatever for, on behalf of, or binding on the trust, or any member thereof, and no member of this trust shall be personally liable for any debts, covenants, demands, contracts of any kind or torts of this trust beyond the payments in full of the price of which his share or shares were sold to him by the trust.

"``This certificate shall be the sole and only evidence of membership in said trust.

"``Witness the signature of the trustee of said trust, this the ______ day of ______ 19__.'

* * * * * * * "Sixth: Stockholders in this trust shall have no legal right to the trust property or funds held from time to time by the trustee, as herein provided for, and especially shall have no right to call for any partition of the trust property or funds, or dissolution of this trust, but the shares shall be personal property carrying the right of division of the profits; and at the termination of said trust by expiration of the period fixed for its existence or dissolution otherwise, the stockholders shall be entitled to a division of the principal and profits in due proportion to the number of shares held by each. * * * * * * * "Eighth: The entire affairs of this trust shall be managed by one trustee, who shall own at least one certificate of membership for not less than one share. The Trustee may from time to time hire suitable offices for the transaction of the business of this trust; and he may appoint, remove or reappoint such officers, agents and other assistants as he may think best, define their duties and fix their compensation provided, however, that any person to be eligible to hold office of Vice-President, Secretary or Treasurer must be the owner and holder of at least one certificate of membership in this trust for not less than one share.

"The title to all property acquired or to be acquired from time to time by this trust, and all investments shall be made and held in the name of the Trustee as such trustee, or his successors or successor, in office. The trustee in his capacity as such may sue and be sued in any court of law or equity.

"The trustee shall have full and exclusive power and authority to conduct the business and affairs of this trust, to purchase, contract for, lease, or otherwise acquire, any property necessary or proper for the purpose of the trust; to sell and convey all or any part of the property of the trust; to borrow money on the credit of the trust; and, if he deems advisable to execute notes therefor secured by a mortgage or deed of trust upon the property of the company, and generally to do all things which in his judgment is necessary and prudent in the management and conduct of the business of the company; and he shall receive compensation commensurate with his services, to be determined by the officers and as provided by the by-laws.

"Any debt incurred by the trustee shall be charge on the property of the trust in preference to the claim or claims of any stockholder as such; the trustee is authorized in the conduct of the business, to sell in due course of business the property, real or personal, of the trust, free of any incumbrance whatsoever, provided of course that any mortgaged property shall be sold in conformity with the terms of the mortgage or deed of trust theretofore given.

"In the event the trustee should die, resign, refuse or become incapable to act as trustee, the Judge of the District Court of the Thirtieth Judicial District, comprising at present the counties of Wichita, Archer, and Clay, State of Texas, shall fill the vacancy created thereby by the appointment of a person qualified under this Declaration of Trust to act as trustee.

"The trustee may select a manager or managers for all or any part of the property or business of the trust, and may employ such agents, servants and employees, fixing their compensation and entrusting them with such authority and the duties as he may deem wise; and the trustee may appoint or contract with any person, firm, corporation, joint stock association, trust or company as fiscal agents for the sale of the beneficial interests and shares, or may sell all or part of such shares to such fiscal agents upon such terms and conditions of sale as may be fixed by contract entered into by such fiscal agents and the trustee.

"The Trustee shall declare dividends from the net income of the trust quarterly, or oftener, and his decision as to the amount of dividends shall be final; provided, however, that at least once each year the total net profits arising from the operation of this trust shall be distributed among the stockholders in the ratio that the number of shares owned by each bears to the total number of shares then issued and outstanding.

"Tenth: The Trustee may adopt such bylaws in harmony herewith as he thinks proper. This Declaration of Trust and the bylaws so adopted shall be signed and acknowledged by the trustee in the manner required by the laws of the State of Texas for the registration of conveyances of real estate, to the end that the same may be recorded if it be deemed necessary or expedient. * * * * * * *

"Twelfth: The Trustee shall be responsible only for his own wilful and corrupt breach of trust, and not for any honest error of judgment.

"Thirteenth: No assessment shall ever be made upon the stockholders, nor shall they ever be personally liable in any event or have any rights hereunder except as provided herein.

"Fourteenth: At any (time) upon the expiration of twenty years after the death of the present trustee, R. R. Robertson, the trustee shall terminate this trust by dividing the trust property and funds among the stockholders, being first duly indemnified for any outstanding obligations or liability, and shall thereupon be forthwith discharged."

That declaration of trust was filed in the office of the county clerk of Wichita county and there recorded in the deed records of that county.

On January 2, 1923, R. R. Robertson tendered his resignation as trustee to Judge H.R. Wilson, judge of the Thirtieth judicial district, who thereupon appointed G. W. Peckham the sole trustee of the trust estate, to wit, the Wichita Royalty Company, with all the privileges, powers, and authority conferred by virtue of the declaration of trust.

The business of the Wichita Royalty Company was then continued by G. W. Peckhan from the date of his appointment until his death, which occurred on November 7, 1929. E. E. Scannell was secretary and treasurer during the entire time G. W. Peckham served as trustee. On November 12, 1929, Judge Allen D. Montgomery, of the Thirtieth judicial district, appointed E. E. Scannell, of Wichita county, sole trustee of the Wichita Royalty Company to fill the vacancy caused by the death of G. W. Peckham, with all the rights, privileges, powers, and authority conferred by the declaration of trust. On the same day of his appointment, E. E. Scannell filed his written acceptance thereof, and thereafter conducted the business, and has continued as such trustee ever since.

The origin of the note for $22,000 sued on by the plaintiffs was as follows:

On January 18, 1926, G. W. Peckham borrowed from the bank on account of the Wichita Royalty Company the sum of $15,300, executing therefor the promissory note of the company; and on March 1st he borrowed $25,000 additional on the same account, and executed a note of the company therefor; and the amounts so borrowed were placed to the credit of the Wichita Royalty Company.

On November 25, 1929, after the death of G. W. Peckham, E. E. Scannell, the substitute trustee, executed a renewal note for $27,846, the balance then due on those two notes. Thereafter, Scannell as trustee executed a second renewal note for the balance then remaining unpaid; and on January 26, 1930, after payment of $6,000 on the second renewal, he executed a third renewal note for $22,000, and that third renewal is the one in that amount sued on by the plaintiff herein.

All of those renewal notes were executed in the name of the Wichita Royalty Company by E. E. Scannell, trustee.

The history of the other note described in plaintiff's petition for the principal sum of $43,000 and on which plaintiff sought a recovery for $14,596 is as follows:

On September 19, 1925, J. A. Kemp, W. H. Peckham, George W. Peckham, and J. T. Harrell purchased from the Highland Irrigation Company 51.59 acres of land which had been platted into a town lot addition to the city of Wichita Falls for the purpose of sale as town lots and designated as the "Marlboro Addition" to that city. The total consideration for that purchase was $61,908; of which amount $15,577 was paid in cash and the balance evidenced by six promissory notes of the purchasers, each for the sum of $7,738.50, a lien being retained on the property to secure the deferred payments. Each of the four purchasers owned an undivided one-fourth interest in the addition, and on March 6, 1926, W. H. Peckham conveyed his one-fourth interest to Geo. W. Peckham, after which the latter owned an undivided one-half interest in the addition. On April 10, 1926, Geo. W. Peckham conveyed his one-half interest to the Wichita Royalty Company subject to the debts outstanding against it.

On August 28, 1929, J. T. Harrell, Geo. W. Peckham, and J. Will Gray procured a charter of a private corporation for the purpose of taking over the Marlboro addition and disposing of it as town lot property; the name of the corporation so chartered being the Texas Investment Company. The authorized capital stock was $25,000, divided into 250 shares of $100 each. On January 24, 1930, the charter was amended, increasing the capital stock from $25,000 to $75,000, divided into shares of $100 each. That amendment to the charter was procured by J. T. Harrell, J. Will Gray, and E. E. Scannell, who constituted a majority of the board of directors, and E. E. Scannell subscribed for one-half the increase of the stock, or $25,000, which was ordered issued to him as trustee of the Wichita Royalty Company. On March 17, 1930, another resolution was passed by the board of directors of the Texas Investment Company reducing the capital stock from $75,000 to $65,000, and at the same time a resolution was passed by the board of directors for the purchase of the Marlboro addition for a cash consideration of $65,000 and the assumption of all outstanding indebtedness against the addition, listing its liabilities, which included the note payable to the City National Bank for $43,500. E. E. Scannell was one of the board of directors and participated in that meeting. On September 30, 1929, G. W. Peckham, J. T. Harrell, and J. A. Kemp conveyed the Marlboro addition to the Texas Investment Company, and that conveyance was later ratified and confirmed in another deed executed by E. E. Scannell as trustee for the Wichita Royalty Company.

On June 9, 1930, the Texas Investment Company, by E. E. Scannell, its president, and J. Will Gray, its treasurer, executed its promissory note in favor of the City National Bank of Wichita Falls, Tex., for the sum of $43,000, with interest thereon at the rate of 8 per cent. per annum. The note was indorsed by J. T. Harrell, Wichita Royalty Company by E. E. Scannell, trustee, and J. A. Kemp. It recited that collateral was deposited with the bank to secure the payment of the note or any note given in extension or renewal thereof; the collateral recited being "640 shares of stock of the Texas Investment Company, notes and accounts receivable, approximately $35,000.00." One-half of the balance remaining unpaid on the note after giving credit thereon for the amount realized from the collateral represents plaintiff's claim of $14,546 on the second note.

During the period beginning October 8, 1925, and ending November 12, 1929, Geo. W. Peckham drew 49 checks on funds deposited in plaintiff bank to the credit of the Wichita Royalty Company, aggregating the sum of $134,712.14, the checks being signed by him as trustee for the Royalty Company, and after his death seven additional checks were drawn on the same account by Scannell, the substitute trustee, aggregating $10,055.42; 45 of the checks drawn by Peckham, aggregating $119,473.98, were made payable to the bank, and 4, totalling $9,238.16, in favor of Peckham, personally, and for those 49 checks which he deposited he was given personal credit on the books of the bank. Some of those checks were given in payment of interest on the two notes theretofore executed in the name of the Royalty Company in January and March for $15,300 and $25,000, respectively. Others for investments in oil properties for the Royalty Company; and others aggregating several thousand dollars in favor of holders of the purchase money notes executed by Peckham and his associates for the Marlboro addition, and one for purchase of W. H. Peckham's interest in that addition. After Scannell succeeded Peckham as trustee, he also drew checks on the account of the Royalty Company which he applied as payments on the two notes of the Royalty Company executed in January and March, 1926, already noted, and two checks in favor of the Texas Investment Company to be applied on the loan made to that company by plaintiff bank.

Peckham also received credit on his personal account for $6,000 realized from oil investments belonging to the Royalty Company which had theretofore been deposited to his personal credit in the Security National Bank.

At the time Peckham procured the two loans by the bank to the Royalty Company evidenced by the two notes mentioned aggregating $40,300, he was indebted to the bank on his promissory notes in the sum of $28,000. The evidence showed that beginning October 8, 1925, and ending with the date of his death, Peckham was personally indebted to the bank on his personal notes in varying sums, sometimes above $28,000 and sometimes below that sum, and amounting to $25,475 at the date of his death. He was insolvent at the date of his death, and left no estate out of which the demands asserted in the cross-action could be satisfied.

When Peckham executed the deed to the Wichita Royalty Company to the interest he had purchased in the Marlboro addition, he placed it with the papers in his office, and instructed E. E. Scannell, then the secretary and treasurer of the company and who had charge of the office, to tell no one of its execution. That instruction was obeyed until Peckham's death, but, after Scannell was appointed trustee, he, as trustee, asserted title under that deed for and in behalf of the Royalty Company, although in his cross-action he tendered a return of it, together with an offer to relinquish any claim of title thereunder. While he was secretary and treasurer of the company under the trusteeship of Peckham, Scannell kept the books of the company and had full knowledge of all the facts involved in Peckham's conduct of the business of the Royalty Company, including drawing checks and his investment in the Marlboro addition. He also made monthly reports to the 1,300 stockholders in the company residing in many other states and some in Canada with respect to the conduct of the business of the company, but never disclosed to them the action of Peckham in borrowing the $40,300 in the name of the Royalty Company, drawing checks against the account of the Royalty Company after depositing to its credit the amount so borrowed, the investment made by him in the Marlboro addition, and taking deed in his own name, and later executing his deed therefor to the company, with instructions to him not to disclose to any one knowledge of that instrument. Neither the bank nor any of its officers had knowledge of the failure of Scannell to keep the stockholders fully informed of those transactions and took no steps to convey such knowledge to them.

According to the testimony of Scannell on the trial, Peckham usually paid for oil royalties by checks drawn on his personal account, sometimes taking deeds therefor in his own name and then conveying them to the Royalty Company.

Notations on vouchers attached to the checks drawn by Peckham on his personal account for investment in the Marlboro addition, but separated and withdrawn when the checks were honored, although referred to on the faces of the checks, indicated that they were given for that purpose, although the checks were honored by the tellers of the bank and without knowledge of Harrell, its vice president, of such notations at the time the checks were honored.

The answer of defendant to plaintiff's suit on the $22,000 note included (a) want of consideration; (b) want of authority in the borrowing trustee to borrow for the purposes for which the same was made, which purposes were known to J. T. Harrell, vice president of the bank, who acted for the bank in making the loan and who personally profited therefrom; and (c) payment. As to plaintiff's alleged cause of action on the indorsement on the Texas Investment Company's note, the answer pleaded (a) non est factum; (b) want of authority on the part of the indorsing trustee to bind the trust by his indorsement; and (c) want of consideration.

Defendant's cross-action against plaintiff bank and against J. T. Harrell, its vice president, personally, was to recover $84,587.23 alleged to be the amount of funds belonging to the Wichita Royalty Company and misappropriated by Peckham and Scannell during their respective trusteeships for purposes not authorized by the declaration of trust, and principally for investment in the Marlboro addition. The deposits in the bank to the credit of the Wichita Royalty Company of the sums borrowed on the two notes executed in January and March, 1926, checks on the account of the Wichita Royalty Company by Peckham and Scannell as trustees during the period beginning October 8, 1925, and ending July 14, 1930, to whom given, and the purposes for which they were given, were all specifically alleged for purpose of an accounting, and as showing a misappropriation of trust funds.

It was further alleged that the uses so made of the trust funds were forbidden by the terms of the declaration of trust restricting its business to investment in oil royalties, and therefore the Royalty Company was not bound thereby; and that the bank and Harrell, with imputable knowledge of that restriction of authority and of the uses intended by the trustees at the time such funds were withdrawn, wrongfully participated in such misappropriation of trust funds in permitting the handling of the same in the manner so indicated, and in permitting the intermingling of trust funds with Peckham's personal funds in his personal account; and further that the bank and Harrell realized benefits from such misappropriation, and by reason of all which they were liable therefor.

To the cross-action the bank and Harrell, individually, pleaded laches, the statute of limitation of two years (Rev.St. 1925, art. 5526), ratification and estoppel; in response to which Scannell as trustee for and in behalf of the stockholders pleaded concealment from them by plaintiff and Harrell of the transactions complained of, repudiation thereof immediately upon their discovery thereof, and the filing of the cross-action immediately after such discovery.

The facts related above were all established without controversy, and it is our conclusion that they were of themselves sufficient to show misappropriation of trust funds in the first instance, by both Peckham and Scannell as trustees, and chiefly by Peckham. The question then is whether or not the evidence introduced was sufficient to support a finding by the jury, if they had been permitted to pass upon the weight of it, that the bank and Harrell, individually, were guilty of such a participation with either of the trustees, and especially Peckham, in such a manner as to render them liable for the tort jointly with the trustees. To support their contention of such liability, appellants rely upon the facts above related and many other facts and circumstances, a detailed statement of which would unduly lengthen this opinion. I believe it sufficient to give a general statement which will reflect the principal facts relied on as follows:

Permitting Peckham to pass to the credit of his personal account the two deposits aggregating $40,300, credited to the account of the Royalty Company from the two loans made to the Royalty Company in January and March, respectively, by checks drawn on such deposits by Peckham as trustee in his favor personally, at which time his account with the bank showed him indebted thereto more than $25,000. Testimony that the loan of $25,000 to the Royalty Company on March 1, 1926, was made to Peckham as trustee through J. T. Harrell, as vice president of the bank, who was Peckham's personal friend, and at which time Peckham's personal indebtedness to the bank evidenced by his personal note was more than $28,000, and as soon as that loan was made Peckham, by check on his personal account, paid to J. T. Harrell and C. E. Basham $5,060 owing to them arising from a joint investment with them in certain oil royalties from which Peckham realized a profit to himself which belonged to the company. Evidence that on March 1, 1926, the bank honored Peckham's check on his personal account for $11,811.85 in favor of W. H. Peckham, his brother, in payment for the fourth interest owned by that brother in the Marlboro addition. Testimony that Harrell was a banker of long experience and that he made no inquiry of Peckham as to what use the latter expected to make of the $25,000 at the time the same was loaned to the Royalty Company; Harrell testifying that such an inquiry is frequently made by a lending bank under like circumstances. Testimony that Harrell required Peckham to personally indorse the $25,000 note, although the Royalty Company was possessed of a good deal of property at that time, and owed no debts except the prior loan of $15,300; and further testimony of Harrell in answer to the question whether or not it was material to him "whether the trust account was carried in the name of the Wichita Royalty Company or G. W. Peckham," he saying it was "all alike to him," Harrell. Testimony that prior to the two loans made to the Royalty Company that company borrowed money to purchase oil properties, all of which was paid at maturity without renewal. Other testimony tending to show that, but for the $40,300 borrowed from the bank in the name of the company, he (Peckham) would have been unable to pay Harrell and Basham the $5,060 mentioned, and the amount paid W. H. Peckham, his brother, for the latter's interest in the Marlboro addition, and also unable to make all of his subsequent payments on the purchase-money notes given for the Marlboro addition. It is insisted that that evidence, in connection with the undisputed facts related above, was sufficient, prima facie, to show a collusive participation by the bank and Harrell, its president, with Peckham in the misappropriation of trust funds by using the same for purposes not authorized by the declaration of trust; notice of which was chargeable to the bank and Harrell.

The universal rule of decisions is that, if a bank carries on its books two accounts, one in the name of a trustee as such and the other in his name as an individual, it will be held liable to the cestui que trust for trust funds applied in payment to it of the personal indebtedness of the trustee to the bank. And, although the relation of the bank to the depositor is that of debtor and creditor, the deposit in favor of the trust is treated as a trust fund to the same extent as though the bank holds the money deposited in kind.

It is a further rule equally as well recognized that the bank will be held liable to the cestui que trust for trust funds misappropriated by the trustee in favor of persons other than the bank if the bank has colluded with the trustee in such misappropriation under such circumstances as will constitute it a joint tort-feasor with the trustee.

The leading decision in this state is Interstate National Bank v. Claxton, 97 Tex. 569, 80 S.W. 604, 606, 65 L.R.A. 820, 104 Am. St. Rep. 885. In that case it appeared that Tamblin Tamblin were live stock commission merchants in Kansas City engaged in selling live stock consigned to them as factors; they kept an account with the Interstate National Bank engaged in the banking business in Kansas City, and deposited in that bank the proceeds of all cattle sold by them as factors. Claxton, who resided in Texas, shipped cattle to them for sale, and the proceeds of the sale were deposited with the bank along with the proceeds of the sale of cattle of other owners. On October 28, 1901, Tamblin Tamblin sold cattle belonging to Claxton and other parties, and realized therefor the sum of $4,529.65, of which amount $1,604.40 was the gross proceeds of the Claxton cattle. Payment for all those cattle were made by checks of the purchasers drawn in favor of Tamblin Tamblin, and those checks were deposited in the bank and there credited to the account of Tamblin Tamblin. On October 28, 29, and 30, 1901, Tamblin Tamblin drew checks against the deposit in favor of the owners of cattle so sold other than Claxton's for the entire deposit except the sum of $160.94, and failed to pay Claxton for his cattle, and the bank applied that balance to the payment of Tamblin Tamblin's personal indebtedness to it. In an opinion by Justice Williams, Claxton was awarded a judgment against the bank for $160.94 so applied to the personal indebtedness of Tamblin Tamblin, but denying Claxton any further relief. The evidence showed that, when the deposit of $4,529.65 was made, Tamblin Tamblin were then insolvent, and their insolvency was known to the bank when they accepted it. In that opinion reference was made to the opinion in Commercial Agricultural Bank v. Jones, 18 Tex. 811, in which the bank was held liable for money belonging to Jones and his partner Ufford, which had been consigned by them to George Dye and which Dye had deposited in the bank in his own name but for and on account of the owners of the money, with full knowledge on the part of the bank of such ownership. In that case the court said: "There was therefore a privity between the Bank and the plaintiffs, and the Bank became directly and immediately responsible to the plaintiffs, and not merely to the agent employed by the plaintiffs in making the deposit. Being so responsible, there can be no clearer proposition than that they had no right to pass the deposit to the private account of Dye. Whenever they did so, they were guilty of a fraudulent conversion."

Judge Williams in the Claxton Case referred to that opinion with this comment: "In that case the bank applied the money to its claim against Dye, and it was upon that ground that the liability was at last rested."

Judge Williams then held that the deposit in question by Tamblin Tamblin of proceeds of sale of Claxton's cattle was with his full authority, and that the right of the bank to accept the same and place it to their credit and honor their checks thereon as was done was not affected by the known insolvency of Tamblin Tamblin at that time. The court then proceeded to a discussion of the rules of law applicable to the relation existing between banks and their depositors, and we quote the following as showing the conclusions reached:

"We therefore hold that the deposit made by Tamblin Tamblin was within their authority, and that they thereby became depositors; and the further questions must depend upon the rules of the law regulating the relation existing between banks and such customers.

"The principles governing are clearly stated in the opinion of the Chief Justice in the case of Coleman v. Bank, 94 Tex. 607, 608,63 S.W. 867, 86 Am. St. Rep. 871, with copious citations from leading authorities. From these authorities it is clear that a depositor, although holding the money in a fiduciary capacity, may draw it out of the bank ad libitum. The bank is bound to honor his checks, and incurs no liability in so doing, as long as it does not participate in any misapplication of funds or breach of trust. The mere payment of the money to, or upon the checks of, the depositor, does not constitute a participation in an actual or intended misappropriation by the fiduciary, although his conduct or course of dealing may bring to the notice of the bank circumstances which would enable it to know that he is violating his trust. Such circumstances do not impose upon the bank the duty or give it the right to institute an inquiry into the conduct of its customer, in order to protect those for whom the customer may hold the fund, but between whom and the bank there is no privity."

And the court also cited section 317 of Moss on Banks and Banking.

I quote further from the Claxton Case as follows:

"This case is to be distinguished from those in which a bank undertakes to acquire title to, an interest in, or benefit from a fund held in trust by a depositor. In attempting to acquire such a right or benefit the bank becomes a party to the action of the trustee, and stands as any other person dealing with one holding property in a fiduciary capacity. The question of notice of the title of the person holding the property and his power over it arises, and a bank cannot, any more than any other person, acquire that which belongs in equity to another, if it have notice of his rights; and, if it thus aid a trustee in diverting trust property from the beneficiary, it becomes liable as a wrongdoer.

"Other cases to be distinguished are those in which a principal is the depositor, and occupies a contractual relation to the bank, but an agent is given authority to draw checks against the deposit for the benefit of the principal or of his business. In such cases the bank is not authorized to pay checks drawn by the agent for his own benefit if it knows, or, it is sometimes said, if it have good reason to know, the fact. It is mainly from expressions in opinions discussing these two classes of cases that the courts below reached the conclusion that it was the duty of the bank to avail itself of the means it had of knowing of the misappropriation of defendant's money by his agents. Wolffe v. State, 79 Ala. 201, 206, 58 Am.Rep. 590; Gerard v. McCormick, 130 N.Y. 266,29 N.E. 115, 14 L.R.A. 234; Duncan v. Jaudon, 82 U.S. [15 Wall.] 165,21 L. Ed. 142, 145; Central Nat. Bank v. Insurance Co., 104 U.S. 54,26 L. Ed. 693; Union Stock-Yards Nat. Bank v. Gillespie, 137 U.S. 411,11 S. Ct. 118, 34 L. Ed. 724; Duckett v. Bank, 86 Md. 400, 38 A. 983,39 L.R.A. 84, 63 Am. St. Rep. 513; Union Stock Yards Nat. Bank v. Moore, 79 F. 705, 25 C.C.A. 150; Merchants' Planters' Nat. Bank v. Clifton Manufacturing Co., 56 S.C. 320, 33 S.E. 750, 755.

"In other cases cited, money was deposited to the credit of one person, and drawn out by another without authority, and in still others the original deposits were held to have been wrongfully entered in the name of one who was not the owner of and not authorized to so deposit the fund. This case is distinguishable from all of those by the fact that the deposit was rightfully entered in the name of Tamblin Tamblin, from which arose the power in them, which the bank was bound to recognize, of drawing it out by their personal checks. The principles laid down clearly make the bank liable for the sum applied to the debt of Tamblin Tamblin. As to the sums paid out on checks, the most that is claimed is that the facts brought to the attention of the bank furnished it with the means of knowing that the money in question belonged to defendant, and that, in checking it out, his agents were misappropriating it. That, as we have seen, is not enough to make the bank liable further than stated."

In Coleman v. First Nat'l Bank of Waxahachie, 94 Tex. 605, 63 S.W. 867,868, 86 Am. St. Rep. 871, a widow was denied a recovery of money belonging to her separate estate which had been deposited in bank by her husband to his credit and later drawn out and dissipated by him to the loss of the plaintiff. The evidence showed that her husband was a man of dissolute habits and unsafe to be trusted with his wife's money, and the bank, with full knowledge of that fact, allowed him to withdraw the money, and was therefore guilty of gross negligence. In that opinion, by Chief Justice Gaines, the following is said: "The principle applicable to bank deposits by trustees is thus stated by Mr. Justice Matthews in the case of Central Nat. Bank v. Connecticut Mut. Life Ins. Co., 104 U.S. 63. 26 L. Ed. 693,698: ``A bank account, it is true, even when it is a trust fund, and designated as such by being kept in the name of the depositor as trustee, differs from other trust funds which are permanently invested in the name of trustees for the sake of being held as such, for a bank account is made to be checked against, and represents a series of current transactions. The contract between the bank and the depositor is that the former will pay according to the checks of the latter, and, when drawn in proper form, the bank is bound to presume that the trustee is in the course of law fully performing his duty, and to honor them accordingly.' This language was quoted with approval, and the principle applied, in the case of State National Bank v. Reilly, 124 Ill. 464, 14 N.E. 657. Again, in Freeholders of Essex v. Newark City National Bank, 48 N.J. Eq. 53,21 A. 185, the court say: ``The contract arising by implication of law from a deposit of money in a bank is that the bank will, whenever required, pay out the money in such sums and to such persons as the depositor shall designate by his checks. The deposit is made to subserve the convenience of the depositor, with the understanding that he shall have the right to draw checks against it at his pleasure. And, even when it is known that the money deposited is held by the depositor as a trustee, the bank is bound to presume, in the absence of knowledge to the contrary, that a check drawn against the money by the depositor has been drawn by him in the proper discharge of his duty as trustee, and to pay the check accordingly.'"

Further announcements to a like effect were also referred to. Quoting further from the opinion in the Coleman Case:

"The principle is that, since the trustee has control of the money, and has deposited it in the bank to be drawn out upon his checks, he has the right to draw for it, and the bank is not permitted to deny that right. When the beneficiary asserts his claim, and gives the bank notice, the rule does not apply. In the New Jersey case just cited the general rule was followed even as to the custodian of public funds.

"The principle does not allow the bank to collude with the depositor in a misapplication of the trust fund, nor does it permit the bank to apply the fund to the individual debt due to it from the trustee. Commercial Agricultural Bank v. Jones, 18 Tex. 811. If such be the rule as to ordinary agents and trustees, it certainly is the rule in this state as to the husband with respect to the wife's separate funds, of which, under our law, he has the ``sole management.' If the money had been deposited by the wife before her marriage, and the fund had remained in custody of the bank after that event, it would seem that he, as sole manager of her separate estate, and he alone, would have had the right to withdraw it. Clearly, therefore, having himself made the deposit with the understanding that it was to be drawn out upon his checks, the bank was bound to honor the checks so drawn. It was not charged with the duty of inquiring into the purpose for which each check was given. The fact that the husband was improvident in the use of money did not, under the law, detract from his authority as manager of his wife's separate estate, nor did it impose upon the bank an additional duty to guard her interest."

To the same effect are the following authorities: U.S. Fid. Guar. Co. v. Adoue Lobit, 104 Tex. 379, 137 S.W. 648, 138 S.W. 383,37 L.R.A. (N.S.) 409, Ann.Cas. 1914B, 667; Steere v. Stockyards Nat'l. Bank, 113 Tex. 387, 256 S.W. 586, 258 S.W. 1042; Silisbee State Bank v. French Market Gro. Co., 103 Tex. 629, 631, 132 S.W. 465,34 L.R.A. (N.S.) 1207; Perry on Trusts (7th Ed.) § 122, p. 177; article 7425b, Vernon's Ann.Civ.St.

The acts of the bank in giving credit to Peckham on his personal account for checks drawn by him as trustee on the account of the Royalty Company and later honoring checks drawn on his personal account for investment in the Marlboro addition, in which the bank acquired no interest, did not of themselves constitute a wrongful participation in the misappropriation of such funds, notwithstanding evidence tending to show that the bank had reason to believe that such investment was not authorized by the trust agreement. Especially so in view of the uncontradicted testimony of Scannell, who was secretary-treasurer of the Royalty Company at the time and thoroughly familiar with its affairs, to the effect that Peckham's custom was to use the two accounts as suited his convenience, buying nearly all oil royalties for the Royalty Company with checks on his personal account, sometimes taking them in his own name, then transferring same to the Royalty Company. Interstate National Bank v. Claxton, 97 Tex. 569, 80 S.W. 604, 65 L.R.A. 820,104 Am. St. Rep. 885; Coleman v. Bank, 94 Tex. 607, 63 S.W. 867,86 Am. St. Rep. 871; Childs v. Empire Trust Co. (C.C.A.)54 F.2d 981, 984, and authorities there cited. See, also, notes to Empire Trust Co. v. Cahan, 57 A.L.R. page 925; also Bischoff v. Yorkville Bank, 218 N.Y. 106, 112 N.E. 759, L.R.A. 1916F, 1059, and authorities cited in the opinion in that case; and the forceful opinion of Justice Martin of the Amarillo Court of Appeals in Quanah, Acme Pacific Ry. Co. v. Wichita State Bank Trust Co. (Tex.Civ.App.) 61 S.W.2d 170, filed April 19, 1933; Maryland Casualty Co. v. City Natl. Bank (C.C.A.) 29 F.2d 662; Munnerlyn v. Agusta Savings Bank, 88 Ga. 333, 14 S.E. 554, 30 Am. St. Rep. 159.

The decisions cited above represent the views of the majority of the courts throughout the country, and I believe are founded on better reasoning, expressly recognized and followed by our Supreme Court in the Claxton and Coleman Cases and other cases of like character which in my opinion are controlling in this state. While other decisions of our state courts cited by appellants, upon first reading, may seem to adopt a stricter rule of liability of banks for trust funds deposited with them and later withdrawn and misappropriated by those acting in the capacity of trustees, yet they cannot be reasonably construed as announcing principles contrary to those made the basis of the Claxton and Coleman Cases and other cases following them; especially since those cases have been cited with approval in many of the later decisions of our appellate courts. The Texas cases last referred to including the following: Bacon v. Wright (Tex.Civ.App.) 52 S.W.2d 1111; Moore v. Hanscom (Tex.Civ.App.) 103 S.W. 665; Id., 101 Tex. 293, 106 S.W. 876, 108 S.W. 150; First State Bank v. Shannon (Tex.Civ.App.) 159 S.W. 398 (writ of error refused); Miller Co. v. Hobdy (Tex.Civ.App.) 159 S.W. 96; Pierce Petroleum Co. v. Guaranty Bond State Bank (Tex.Civ.App.) 22 S.W.2d 520; U.S. Fid. Guar. Co. v. Adoue Lobit, 104 Tex. 379, 137 S.W. 648,138 S.W. 383, 37 L.R.A. (N.S.) 409, Ann.Cas. 1914B, 667. It might be added that many of those decisions are distinguishable from the Claxton and Coleman Cases by reason of different facts involved.

Appellants have cited many decisions of other states which seemingly would support their contention of liability of the bank in this case. However, I shall not undertake to discuss them, since at all events we must follow the established rule in this state. Among those cases are the following: Duckett v. National Mechanics' Bank, 86 Md. 400, 38 A. 983,39 L.R.A. 84, 63 Am. St. Rep. 513; U.S. Fid. Guar. Co. v. People's Bank, 127 Tenn. 720, 157 S.W. 414; Ducker v. Latonia Deposit Bank,242 Ky. 374, 46 S.W.2d 493; Niagara Woolen Co. v. Pacific Bank,141 A.D. 265, 126 N.Y.S. 890; Tingley v. North Middlesex Savings Bank,266 Mass. 337, 165 N.E. 119, and notes of many other decisions shown in L.R.A. 1915C, page 519. A later case cited by appellants is Robbins v. Passaic Nat'l Bank Trust Co., 109 N.J. Law, 250, 160 A. 418,82 A.L.R. 1368, with notes to that publication. In that case the bank was held liable to the owner of a check drawn to his order which his agent took to the bank for deposit to the owner's credit, and there had it credited to the personal account of the agent, who later withdrew the money and misappropriated it. In other decisions cited in the notes banks were likewise held liable for proceeds of checks payable to the order of the owners which agents of the owners took to the bank for deposit to the owners' credit and had the same deposited to their personal credit, later withdrawing and misappropriating the funds. Those decisions are manifestly distinguishable from the present case, in that the checks of owners so handled showed on their face that the agents had no authority to deposit them to their personal credit; while in the present case the trustees were vested with title and full control over all the trust funds; and one of the facts stressed in the decision in the Claxton Case was that trust funds belonging to Claxton had with his consent been deposited to the credit of his agents, Tamblin Tamblin, who were employed to sell his cattle.

It is sufficient to say that, although the evidence in this case showed that the trustee Peckham misappropriated trust funds by using the same for the purchase of an interest in the Marlboro addition, which was not authorized by the terms of the declaration of trust, yet it was insufficient to support a further finding that the bank, through Harrell as its vice president and acting within the scope of his authority as representative of the bank, or Harrell individually, collusively participated with him in such diversion of the trust funds, or that either was chargeable with any obligation to the stockholders in the Royalty Company to prevent the same by refusing to honor his checks as trustee drawn on the deposits made to the credit of the company; some in his favor personally and some in favor of the bank, or in accepting those checks as credits to his personal account and thereafter honoring his personal checks on the same.

The evidence stressed by appellants in addition to the undisputed facts related above, to support their claim of Harrell's personal liability for misappropriation by Peckham, was the fact that he was severally liable as one of the makers of the Marlboro addition notes for the full payment thereof, which liability was reduced to the extent of such payments, coupled with testimony tending to show notice to him at the time Peckham's checks for investment in the Marlboro addition were cashed that they were to be so used and in possible violation of the trust agreement. Also evidence tending to show notice to him that in the joint venture between him and Basham and Peckham wherein Peckham used trust funds for the purchase of oil royalties and then conveyed the same to the Royalty Company for a profit to himself.

The full import of that evidence was to warrant a surmise or suspicion of wrongful collusion by Harrell with Peckham in a scheme by the latter to misappropriate trust funds, in spite of Harrell's positive testimony to a contrary effect, and therefore it amounted to no more than a scintilla of proof, which was insufficient as a matter of law to support the charge so made against him personally. Joske v. Irvine, 91 Tex. 574,44 S.W. 1059; Garrett v. Hunt, 283 S.W. 489 (writ of error refused) and authorities there cited. See, also, Ft. Worth Belt Ry. Co. v. Jones,

106 Tex. 345, 166 S.W. 1130; Penn. Ry. v. Chamberlain, 288 U.S. 333,53 S. Ct. 391, 77 L. Ed. 819; authorities cited above holding that payment of a check drawn by a trustee against a deposit in his name does not of itself show a participation in a misappropriation of funds so drawn from the bank. It has been often held that an action which is lawful within itself does not of itself become actionable even when it is prompted by an improper motive. Knowles v. Gary Burns Co. (Tex.Civ.App.)141 S.W. 189 (writ of error refused); Salado College v. Davis, 47 Tex. 131; 1 Texas Jurisprudence, p. 628, § 21; Pye v. Cardwell, 110 Tex. 572,222 S.W. 153; Amuny v. Seaboard Bank Trust Co. (Tex.Com.App.)23 S.W.2d 287; 12 R.C.L. p. 237; 26 R.C.L. pp. 757 and 760.

To hold that the evidence was sufficient to sustain a finding that the bank and Harrell, individually, were guilty of a wrongful participation in the alleged misappropriation of trust funds would be to make them super trustees, with superior control over Peckham and Scannell as trustees, to the exclusion of powers expressly vested in them by the trust agreement, and without regard to the principle, "he who trusts most must lose most." And the very broad extent of the trust imposed in the trustees is evidenced by the stipulation in the twelfth article of the trust agreement, copied above. 17 Texas Jurisprudence, p. 53, § 52. Nor can it be said that Peckham's conveyance to the Royalty Company of the interest he acquired in his name in the Marlboro addition was ineffective for lack of a binding delivery, since, not only was delivery made to Scannell, the secretary and treasurer at the time, for the use and benefit of the company, but, after he became the duly appointed substitute trustee, he elected to claim title thereunder and to continue payments on the purchase money notes given therefor, and thereby waived any claim of lack of proper delivery, notwithstanding Peckham's instruction to him at the time of delivery to him not to disclose its execution to any one, and which request became ineffective after his death, at all events. And, since title to all trust property, together with authority to recover that which had been lost by suit in his own name and with exclusive management of the business of the trust, was all expressly vested in Scannell as trustee, that waiver was binding upon the stockholders in favor of the bank and Harrell. Equitable Life Assurance Society v. Ellis, 105 Tex. 526, 147 S.W. 1152, 152 S.W. 625.

It is to be noted further that there was no privity of contract between the bank and the stockholders growing out of the deposits to the account of the Royalty Company, since under the express terms of the declaration of trust title to all the funds of the Royalty Company was vested in the trustee; the stockholders having no rights except to share in the profits arising from the handling of the properties by the trustee and with no right to share in the principal until the trust is terminated by expiration of the period fixed for its duration, or its dissolution in some other manner — neither of which contingencies has yet happened.

The bank accounts introduced in evidence show deposits credited to Peckham's personal account during the period in controversy in the aggregate sum of $511,130, and deposits credited to the Royalty Company in the aggregate sum of $149,196.43, with debits made against each of those accounts evidenced by a large number of checks, aggregating many thousands of dollars. Although there was a plea, in general terms, of payment by the Royalty Company of the notes sued on by the bank, yet there was neither pleading nor evidence that funds belonging to the Royalty Company and deposited to its credit were in fact applied to payment of those notes further than as shown by some of the checks upon which the cross-action was based. Scannell, who was secretary-treasurer of the Royalty Company during that period, keeping the books and being thoroughly familiar with its affairs, did not undertake to testify that this was in fact done. On the contrary, as recited above, he testified that it was Peckham's custom to use both accounts in handling the affairs of the Royalty Company; usually paying for oil royalties by checks drawn on his personal account. To sustain the plea of payment, it would be necessary to hold that the deposits so made automatically liquidated the notes; and the writer is unable to so conclude.

Most of the 57 checks on which the crossaction was based were made payable to the bank while others were made payable to Peckham, but all of them were given in payment for oil royalties, investments, and improvements in the Marlboro addition and as payments on outstanding promissory notes, and they were all so applied. The checks so given for investments and improvements in the Marlboro addition and covering one-half of the total amount of such investments aggregated $55,719.44. The checks applied to investments in oil royalties and oil properties aggregated $57,240. Thirty-three of the checks were given as payments on promissory notes, of which 26, aggregating $23,751.75, were drawn by G. W. Peckham, and 7, being Nos. 856, 880, 890, 898, 908, 920, and 930, aggregating $10,055.42, were drawn by Scannell as trustee after Peckham's death. Some of the checks so given by Scannell were applied on the Royalty Company's notes to the bank given for the two loans above mentioned, and the rest as payments on the Marlboro addition notes; 19 of the checks drawn by Peckham were likewise applied as payments on the same notes; but 7 of them, being Nos. 584, 620, 628, 635, 650, 657, 710, aggregating $10,750, were credited on the books of the bank as payments on Peckham's personal notes. The evidence showed that prior to the date of check No. 584 Peckham had paid to the Royalty Company $500 to be applied on the Royalty Company's note to the bank. And the books of the Royalty Company showed that Peckham had been given further credits on his account with the company as follows: August 31, 1927, for $500 to be applied on the company's notes to the bank; October 9, 1927, for $1,336; November 25, 1927, for $1,500 to be used in payment of the Royalty Company's note to the bank; and February 15, 1928, for $3,485. Those five items aggregate $7,321, and, if it be said that the seven checks show payments to the bank of trust funds on Peckham's personal debts to the bank, then, as insisted by the bank, we believe there should be deducted therefrom $7,321 shown above, leaving a balance of $3,429 only.

Whether or not on the cross-action those seven checks or at least that balance of $3,429 was chargeable to the bank as trust funds received by it on Peckham's personal indebtedness, with right of appellants to recover therefor, it is unnecessary for us to decide, since it is my conclusion that, at all events, appellant's demand therefor was barred by the statute of limitation, hereinafter discussed.

Furthermore, the lack of authority of trustee Peckham to place trust funds to his personal credit in the bank and then withdraw the same for investment in the Marlboro addition and take title thereto in his own name was waived by E. E. Scannell, the trustee, by his acts in ratification thereof indicated above, with full knowledge of all the facts relied on by the appellants to support their action to recover therefor, and that he, as the legal and exclusive owner of title to the funds of the Royalty Company, and vested with the right and powers expressly stipulated in the trust agreement, had full authority to bind that company and also the 1,300 stockholders in it by such waiver. Equitable Life Assurance Co. v. Ellis, 105 Tex. 526, 147 S.W. 1152,152 S.W. 625.

Moreover, the cross-actions against the bank and Harrell were both barred by the statute of limitation of two years pleaded thereto, since the evidence showed that more than two years elapsed after the transactions on which the same were based occurred before the filing of the cross-action on February 14, 1931. The theory upon which appellants sought to avoid that defense was that, by reason of the receipt by the bank of funds belonging to the Royalty Company and deposited to its credit, it became a trustee of the funds wrongfully withdrawn and misappropriated by the trustees, and therefore the bar of limitation did not begin until a demand was first made for those funds by the filing of the cross-action. If such a trust was created, it was a resulting or constructive trust only, and therefore subject to the statute of limitation of two years as against the trustee holding legal title to the trust funds and every right of action belonging to the trustee and in which the stockholders had an equitable interest, with exclusive authority under the express terms of the trust agreement to institute suit therefor in their own names. Nor was the operation of that statute against the cross-action instituted in behalf of the stockholders suspended by reason of appellants' further contention that the misappropriation of funds was fraudulently concealed from them until the institution of the cross-action, which was well within two years after they discovered it, since the evidence conclusively shows that neither the bank nor Harrell was guilty of the alleged concealment, or was charged with the duty in law or equity to ascertain the names and addresses of the 1,300 stockholders and notify them of such disposition of the funds by Peckham. If there was such concealment or wrongful failure of any one to notify the stockholders of such misappropriation of trust funds, then the two trustees and Scannell, as secretary-treasurer under Peckham and who made regular reports to the stockholders of the business transacted by the trustees, were alone chargeable. And, according to Scannell's testimony, his cross-action in behalf of the 1,300 stockholders was in fact filed and prosecuted upon his own initiative in his own name and without the knowledge of the stockholders. Furthermore, the right of action for any misappropriation of trust funds accrued as soon as the same occurred; and, under express terms of the declaration of trust, even Peckham himself as trustee could have sued at any time to recover for such as he had misappropriated. Indeed, the right to bring suits for benefit of the trust was vested exclusively in the trustee by the trust agreement. And the amount which Scannell sought to recover on his crossaction for the use of the stockholders included sums paid out by himself on the Marlboro notes after he was appointed trustee, as well as the amount misappropriated by Peckham for the same investment. The following is quoted from 1 Perry on Trusts (7th Ed.) § 122: "The trustee may also recover the funds notwithstanding his own fraud."

Nor have appellants presented any complaint in behalf of the stockholders that the failure of Scannell to sooner seek recovery of damages claimed in the cross-action was prompted by fraud on his part and participated in by the bank. The only excuse pleaded as a reason for such failure consisted of facts alleged to show that he was guilty of no negligence in failing sooner to sue; but such facts were insufficient to arrest the bar of limitation.

The authority of the trustee to institute such an action was as full and complete as that of a corporation, to the exclusion of any right in the stockholders to institute the suit in their own behalf, especially in the absence of a wrongful refusal of the corporation or trustee to sue. That power in the trustee was not restricted by the general rules governing the relation of principal and agent. American Bonding Co. v. Fourth Nat'l Bank, 205 Ala. 652, 88 So. 838; Kennedy v. Baker, 59 Tex. 150; Cole v. Noble, 63 Tex. 432; Collins v. McCarty, 68 Tex. 150, 3 S.W. 730,2 Am. St. Rep. 475; Bates v. Preble, 151 U.S. 149, 14 S. Ct. 277,38 L. Ed. 106. There is no merit in the further contention that limitation did not begin until the institution of the cross-action, on the theory that that was the first authorized demand for the funds belonging to the Royalty Company and deposited in the bank, and wrongfully withdrawn by Peckham, since the trustees could not postpone the beginning of the period of limitation by failing to sooner make a demand of the bank for payment of trust funds theretofore so withdrawn, after knowing of the same, especially as did Scannell, according to his own testimony.

In the absence of any competent evidence to show fraudulent participation by the bank or Harrell with Peckham in the misappropriation of trust funds, the statute of limitation of four years has no proper application in this case.

For the reasons indicated, it is the opinion of the writer that the errors, if any, in the exclusion of testimony complained of in other assignments, were harmless; and that all assignments of error should be overruled and the judgment of the trial court, from which this appeal has been prosecuted, should be affirmed, leaving undisturbed the judgment that the bank recover nothing on its plea over against E. E. Scannell, J. T. Harrell, and W. H. Peckham, individually, and against Flora A. Kemp and Charles Q. Francis, independent executors of the estate of J. A. Kemp, deceased, and against W. H. Peckham as independent executor of the estate of Geo. W. Peckham, deceased, of which no complaint is made here.