City Trust Company of Omaha v. Bankers Mortgage Loan Co.

• Decision Date: 17 May 1918
• Docket Number: 20051
• Citation: 167 N.W. 785,102 Neb. 532
• Parties: CITY TRUST COMPANY OF OMAHA, APPELLEE v. BANKERS MORTGAGE LOAN COMPANY, APPELLANT
• Court: Nebraska Supreme Court

167 N.W. 785

102 Neb. 532

CITY TRUST COMPANY OF OMAHA, APPELLEE v. BANKERS MORTGAGE LOAN COMPANY, APPELLANT

No. 20051

Supreme Court of Nebraska

May 17, 1918

APPEAL from the district court for Douglas county: GEORGE A. DAY JUDGE. Reversed.

REVERSED.

William Baird & Sons and McGilton, Gaines & Smith, for appellant.

E. W Simeral, contra.

CORNISH J. LETTON, J., not sitting.

OPINION

CORNISH, J.

Action for an accounting between the parties in reference, first, to an interest amounting to $ 35,000, in the note of $ 75,000, given by the W. D. Moore Lumber Company to the defendant, said $ 35,000 interest claimed by the plaintiff to have been assigned to it on February 8, 1915, as part consideration for the purchase from the plaintiff of safety deposit vaults, lease, and good will, the consideration for the vaults being $ 75,000; second, for an accounting for rental of the vaults. The defendant denied liability, contending that the alleged sale of the vaults was an unlawful transaction and in fraud of its rights. From a judgment in favor of plaintiff, defendant appeals.

In September, 1913, the City Trust Company (plaintiff) and the Bankers Mortgage Loan Company (defendant) made a working alliance under which the business of the two companies should be carried on under one management, the profits of the two companies to be divided between them pro rata in proportion to their capital stock, each company to retain its name, business, and separate identity. In February, 1915, one John F. Flack was president of both of these corporations, and also of another, the City National Bank. Eleven directors of the City National Bank were on the board of fifteen directors of the plaintiff, and seven of these eleven directors of plaintiff, which included five of the directors of the City National Bank, were on the board of fourteen directors of the defendant.

At this time the Moore Lumber Company was indebted to the City National Bank in the sum of $ 190,000, which the bank was required by the federal authorities to have reduced. It was reduced by the lumber company's payment of $ 75,000, loaned to it by the defendant, and further reduced by fourteen of the directors giving their personal notes for $ 3,500 each to the bank in lieu thereof.

The plaintiff was the owner of a set of safety deposit vaults and a considerable business in connection therewith. At a meeting of directors of the plaintiff, held February 8, 1915, it was moved and carried that plaintiff sell to the defendant its safety deposit vaults, with lease and good will, "at a price of $ 40,001, and receiving in payment therefor $ 40,000 in cash or securities, plus $ 35,000 of the $ 75,000 W. D. Moore Lumber Company note," above mentioned, held by the defendant. On the same day defendant gave its check for $ 40,000, and the City National Bank passed a resolution that the bank purchase the safety deposit vaults of the defendant for $ 75,000, giving in payment therefor 500 2/3 shares of the common stock of the plaintiff, then owned by the bank, at a valuation of $ 50,000, and giving other good securities to the extent of $ 25,000. On March 4 following, at a meeting of the directors of the City National Bank, a resolution was passed rescinding the action of the board of February 8. On March 4 the plaintiff also passed a resolution to rescind its action authorizing the sale of the vaults to the defendant, the motion reciting, "with the consent and approval of the Bankers Mortgage Loan Company."

At the time of these several actions of the respective boards, the vaults in question had a valuation of not to exceed $ 40,000. They were being carried as an asset on the books of the plaintiff at $ 32,000. On March 8 the defendant received from the plaintiff a list of assets and securities, and from that time forward the alliance, or working agreement, between them was in the main discontinued, entirely so after April 3 1915. On March 25 the plaintiff's board of directors reconsidered their resolution rescinding the sale contract and revoked the rescission. On April 3, 1915, plaintiff and defendant signed an instrument, entitled "Release, Waiver and Settlement," upon which plaintiff relies. It is signed on behalf of defendant by John F. Flack, president, and Walter Silver, secretary, and recites an executed sale to defendant of the vaults, etc., on February 8, "for the sum of forty thousand ($ 40,000) dollars, plus a portion of a seventy-five thousand ($ 75,000) dollar note, amounting to thirty-five thousand ($ 35,000) dollars;" that "John F. Flack, individually, is in controversy with the City Trust Company as to an irregularity in said sale;" that defendant "is desirous of selling said vaults to the City National Bank at a...