First Nat. Bank v. Nye County

• Decision Date: 31 December 1914
• Docket Number: 2042.
• Citation: 145 P. 932,38 Nev. 123
• Parties: FIRST NAT. BANK OF SAN FRANCISCO v. NYE COUNTY.
• Court: Nevada Supreme Court

145 P. 932

38 Nev. 123

FIRST NAT. BANK OF SAN FRANCISCO v. NYE COUNTY.

No. 2042.

Supreme Court of Nevada

December 31, 1914

Appeal from District Court, Nye County; John S. Orr, Judge.

Action by the First National Bank of San Francisco against Nye County. Judgment for plaintiff, and defendant appeals. Reversed, with directions.

This action is one to recover on four distinct causes of action three of which are based upon three promissory notes executed by the county commissioners of Nye county to the Nye & Ormsby County Bank, dated respectively October 2, 1907, October 15, 1907, and April 8, 1908. The fourth cause of action is for the amount of the aggregate of the three notes upon the theory of money had and received.

The demurrer of the defendant to the amended complaint having been overruled, the defendant answered, and to the answer of defendant the plaintiff demurred, and made a motion to strike, the demurrer and motion to strike reaching every allegation and defense in the answer. The demurrer was sustained, and the motion to strike granted. The defendant declined to amend its answer, and a judgment was given for the plaintiff, from which judgment appeal is taken to this court.

The facts, therefore, must be taken from the allegations of the answer. It therefore appears that on September 5, 1907, the board of county commissioners of the defendant, Nye county adopted a resolution purporting to authorize the negotiation of an emergency loan, which resolution was thereafter approved by the state board of revenue on the 23d day of September, 1907, and the resolution of the state board of revenue was, on the 25th day of September, 1907, recorded in the minutes of the board of county commissioners of Nye county. Assuming to act under and by virtue of the authority of said resolution, the county commissioners of Nye county executed, on the 2d day of October, 1907, on the 15th day of October, 1907, and on the 8th day of April, 1908, three promissory notes in respectively the sums of $2,514.95 $10,000, and $10,000, each of these notes bearing interest at the rate of 12 per cent. per annum from the date thereof until paid, and being payable, under the terms thereof, on December 31, 1908, and also providing for attorney's fees in the event of suit. The notes all being in the same form except as to date and amount, a copy of one only will be set out. It reads:

"Whereas, on the 5th day of September, A. D. 1907, the board of county commissioners of Nye county passed and entered upon their minutes a resolution indorsed by the respective members of that board to the effect that a loan be negotiated in the sum of forty thousand dollars in order to conduct the affairs of Nye county; and

Whereas, the said resolution was forwarded to the honorable state board of revenue; and

Whereas, that body, consisting of the Honorable John Sparks, as Governor, J. F. Eggers, as Comptroller, and the Honorable R. C. Stoddard, as Attorney General, duly authorized the said board of county commissioners of Nye county in accordance with law to negotiate said emergency loan:

Now, therefore, the said board of county commissioners, consisting of W. T. Cuddy, as chairman, and S. F. Lindsay and J. J. McQuillan, in order to carry out the provisions of said resolution as passed on September 5th, do hereby enter into this promissory note binding the credit of Nye county for the payment thereof:

Tonopah, Nevada, October 2, 1907.

On or before December 31, 1908, without grace, the county of Nye, in the state of Nevada, promises to pay to the Nye & Ormsby County Bank, or order at its banking office in Tonopah, Nye county, Nevada, the sum of two thousand five hundred and fourteen ($2,514.95) dollars and ninety-five cents, in gold coin of the United States, with interest at the rate of twelve (12%) per cent. per annum from date until paid, for value received, and in case of suit or action being instituted to collect this note, or any portion thereof, the said county promises to pay such additional sum as the court may adjudge reasonable as attorney's fees in the said suit or action.

[Signed] W. T. Cuddy,

Jas. J. McQuillan,

S. F. Lindsay,

County Commissioners of Nye County, Acting in and for Said County, Binding the Said County for the Payment of the Above Note."

Some time prior to December 31, 1908, the Nye & Ormsby County Bank assigned these notes to the First National Bank of San Francisco, the plaintiff in the action. The notes were never presented to the board of county commissioners for allowance and approval either within six months, or at any time thereafter.

It also affirmatively appears from the pleadings of the case that the note of April 8, 1908, was executed pursuant to said resolution of the 5th day of September, 1907, and after the first Monday in March, 1908, the time for the first tax levy following the passage of the emergency resolution.

It further appears from the answer that for a long time prior to the 23d day of February, 1909, the Nye & Ormsby County Bank was a designated depository of Nye county, and that the county treasurer had, at divers and sundry times during the period intervening, placed on special deposit for safekeeping, and as a trust, with the Nye & Ormsby County Bank at its branch office at Tonopah, upon open account for the use and benefit of the defendant, a balance aggregating the sum of $66,686.36; that the Nye & Ormsby County Bank became insolvent, and finally closed its doors upon the 23d day of February, 1909, at which time it had upon deposit of the moneys of Nye county aforesaid said sum of $66,686.36; that no part of that amount has ever been paid to the county by the Nye & Ormsby County Bank; that the defendant never had any notice or knowledge of the assignment of the so-called promissory notes or indebtedness from the Nye & Ormsby County Bank to the plaintiff; and that the plaintiff failed and neglected to apprise the defendant, Nye county, of the transfer of said notes, or the amount due thereon, until long subsequent to the maturity thereof, and a long time subsequent to the 23d day of February, 1909, after the Nye & Ormsby County Bank had closed its doors and ceased business.

It is further alleged in the answer that at the time of the transfer and indorsement of the promissory notes set forth, and of the transfer of all the causes of action set forth in plaintiff's complaint, by the Nye & Ormsby County Bank, the said Nye & Ormsby County Bank was insolvent and unable to pay plaintiff, or any of its depositors or other creditors, and that the plaintiff in this action well knew the same.

It is further alleged that on the 31st day of December, 1908, this defendant had on deposit with the Nye & Ormsby County Bank ample funds with which to liquidate and pay the notes, together with the interest thereon, having on deposit $77,753.79, which sum included the $22,703.09, the emergency tax fund, which had been levied and collected against the taxable property of Nye county for the express purpose of paying the indebtedness set forth in plaintiff's complaint, all of which the plaintiff well knew and was fully advised; that the amount of said emergency tax fund on deposit with the Nye & Ormsby County Bank on the 31st day of December, 1908, and thereafter and up to the 23d day of February, 1909, the date of the closing of said Nye & Ormsby County Bank, was ample and sufficient to settle the emergency indebtedness and pay the so-called notes and obligations held by the plaintiff; that the demands of plaintiff are counter-claimed by the deposit aforesaid, and thereby amply paid and compensated.

It further appears that the defendant had no notice at any time prior to March, 1909, of the transfer of the so-called promissory notes from the Nye & Ormsby County Bank to the plaintiff in this action, and that, on the contrary, they were given to understand and were informed by the officers of the Nye & Ormsby County Bank that no transfer of any kind had ever been made of the said notes, and that this defendant relied upon such information; that at the time of the transfer of said notes from the Nye & Ormsby County Bank to the plaintiff the Nye & Ormsby County Bank was insolvent, and that plaintiff had knowledge and notice of its insolvency, and that these notes, and other notes and collateral in the hands of the Nye & Ormsby County Bank, were transferred to the plaintiff as collateral security for pre-existing indebtedness due plaintiff from the Nye & Ormsby County Bank, and that the plaintiff in this case knew, and had knowledge, that the Nye & Ormsby County Bank was a depositary of the public funds of defendant, Nye county, and in constant receipt of money from the defendant.

It is further alleged in the answer that the plaintiff, in connection with the Nye & Ormsby County Bank, and with its officers, and well knowing the insolvency of said bank, conspired and contrived to obtain an undue advantage and preference over other creditors and depositors of the bank, and particularly to the wrong and injury of the defendant, and did obtain an unlawful preference in the payments of its obligations from the Nye & Ormsby County Bank to the wrong and injury of this defendant.

It is further alleged in the answer, as a defense, that the First National Bank of San Francisco obtained an unlawful preference over this defendant in having transferred to it not only the notes of Nye county, but other collateral securities and negotiable commercial paper, all of which were transferred, according to the allegations of the answer, as security for pre-existing indebtedness due and payable from the Nye & Ormsby County Bank to the plaintiff; that the pre-existing indebtedness due from the Nye & Ormsby County Bank to the...