Gering v. Buerstetta
| Decision Date | 16 February 1929 |
| Docket Number | No. 26248.,26248. |
| Citation | 118 Neb. 54,223 N.W. 625 |
| Parties | GERING, COUNTY TREASURER, v. BUERSTETTA ET AL. |
| Court | Nebraska Supreme Court |
Evidence examined, and held, that claimants, as against the defendant receiver representing the general creditors of an insolvent national bank, have traced “trust funds” involved in this controversy, to the extent of $2,520.73 only, into assets coming into the possession and under the control of such receiver, and that they are entitled, as to such sum, to an order granting them a preference thereto.
Under the facts in this case, claimants are not entitled to interest on and after December 14, 1926.
As to defendant George O. Dovey, the issues in this case were properly triable by a jury and the court erred in overruling his application and demand therefor.
Where national bank, being insolvent, receives a deposit with knowledge that it cannot pay its debts and must fail in business, depositor may rescind for fraud and reclaim the deposit, or its proceeds, out of funds, if traced into specific assets of insolvent bank coming into hands of receiver.
Where public funds, deposited by county treasurer without authority of law and in express violation of its inhibitions, are received by a national bank with full knowledge of the facts, they constitute a trust fund, and can be recovered as such.
Appeal from District Court, Cass County; Begley and Raper, Judges.
Suit by Mia U. Gering, County Treasurer of the County of Cass, against Fred Buerstetta, receiver of the First National Bank of Plattsmouth, George O. Dovey, and others, impleaded with the United States Fidelity & Guaranty Company of Baltimore, Md., and another. From a decree awarding certain preferences to the County of Cass and others, defendants named appeal. Reversed and remanded, with directions.Blackburn & King, of Omaha, and A. L. Tidd, of Plattsmouth, for appellants.
W. A. Robertson, of Plattsmouth, for appellee Gering.
D. O. Dwyer and W. G. Kieck, both of Plattsmouth, and Sidney W. Smith and Kennedy, Holland, De Lacey & McLaughlin, all of Omaha, for appellee U. S. Fidelity & Guaranty Co., of Baltimore, Md.
This is an appeal separately prosecuted by the receiver of the First National Bank of Plattsmouth, an insolvent institution, and George O. Dovey, former cashier thereof, from a decree entered in a proceeding in equity in the district court for Cass county, awarding certain preferences to the county of Cass and others, all of whom will be hereafter referred to as claimants, to the extent of $10,882.19, as to certain assets of that institution, and further adjudging the defendant George O. Dovey personally liable for that amount.
[1] On this trial de novo the preponderating evidence in the record fairly establishes the following facts: That on the 2d day of December, 1926, and continuously thereafter, the First National Bank of Plattsmouth, though still open and transacting business, was an insolvent institution and was known to be such by its officers in charge. The evidence indicates that this insolvency was of such degree that its general creditors will not now receive more than 35 cents on the dollar. This bank was a county depository of Cass county, properly designated as such, and had given a bond as required by the Nebraska statute in the sum of $20,000 only. That at the close of business December 1, 1926, there was a balance of public funds deposited in this institution of $17,040.67. On December 2, 1926, there was received by the First National Bank of Plattsmouth from the county treasurer of Cass county a deposit of public moneys in the sum of $25,712.34, which on said date was credited to the account of Cass county, and that the total amount of the public money on deposit in that institution, after such credit, was the sum of $42,753.01. Of this amount, $22,753.01 was in excess of the statutory bond in force given to secure the deposits of public moneys. The conclusion follows: Such part of that deposit in excess of the $20,000 bond then in force was not only unauthorized and illegal, but was necessarily made and received in express contravention of the provisions of the statutes of Nebraska. Dovey v. State, 116 Neb. 533, 218 N. W. 390. A part of the deposit thus made by the county treasurer on the 2d day of December, 1926, was a certain check drawn by the Missouri Pacific Railroad Company for the sum of $24,663.68, payable to the county treasurer of Cass county, in satisfaction of taxes, and duly indorsed and deposited by such county treasurer as part of the deposit already referred to. This Missouri Pacific check, which forms the sole basis of the present action, after it had been deposited, was on the same date delivered by the First National Bank of Plattsmouth to, and deposited with, the Omaha National Bank, its correspondent at Omaha, Nebraska, and by the latter institution, on that date, entered as a credit in favor of the First National Bank of Plattsmouth
According to the account of the First National Bank of Plattsmouth with the Omaha National Bank, as disclosed by the ledger of the latter institution, at the time this deposit was received, there was an apparent balance to the credit of the First National Bank of Plattsmouth of $1,878.82, which had been carried forward from the preceding day, and that $1,331.80 additional deposits were also made on December 2. The record further indicates that as part of the transaction, and, indeed, contemporaneous with the receipt by the Omaha National Bank of this Missouri Pacific check, $7,000 was by the direction of the First National Bank of Plattsmouth transferred by the Omaha National Bank to the Federal Reserve Bank at Omaha and placed by that institution to the credit of the First National Bank of Plattsmouth; that a corresponding charge was made by the Omaha National Bank against the First National Bank of Plattsmouth. It also appears that just prior to the reception of this transfer by the Federal Reserve Bank (Omaha) the First National Bank of Plattsmouth had with it an apparent credit balance as shown by its ledger of $410.46.
[4] It is also a conceded principle of law that where a national bank, being insolvent, received a deposit with knowledge that it cannot pay its debts and must fail in business, the depositor may rescind for fraud and reclaim the deposit or its proceeds out of funds, if traced into specific assets of such insolvent bank, which come into the hands of the receiver. Brennan v. Tillinghast (C. C. A.) 201 F. 609.
[5] It is also well established that, where public funds deposited by a county treasurer without authority of law and in express violation of its inhibitions are received by a national bank with full knowledge of the facts, they constitute a trust fund and can be recovered as such. State v. Bank of Commerce, 54 Neb. 725, 75 N. W. 28;Allen v. United States (C. C. A.) 285 F. 678;United States Nat. Bank v. City of Centralia (C. C. A.) 240 F. 93;Empire State Surety Co. v. Carroll County (C. C. A.) 194 F. 593;American Surety Co. v. Jackson (C. C. A.) 24 F.(2d) 768.
It follows that the $24,663.68 check and its proceeds, when collected, because of the facts surrounding its receipt by the First National Bank of Plattsmouth, was in truth and in fact trust funds in the technical sense of that term, and that the claimants, as the parties entitled thereto, were entitled to disaffirm the transaction and recover the same from the receiver so far as capable of identification. It appears that the transaction was in fact properly disaffirmed, and the suit to recover the funds as trust funds was commenced by claimants on the 13th of December, 1926; that this bank finally “closed its doors” on the 14th of that month, and that the receiver who was thereafter appointed by the United States comptroller of currency took possession of its assets as of that date. The conclusion is: (1) That the physical facts of the transaction disclose that the trust funds were on the 2d day of December, 1926, wholly within the possession of the Omaha National Bank and the Federal Reserve Bank (Omaha) and constituted a part of the credits of the First National Bank in such institutions; that this possession of such funds on part of the institutions last named was at all times in good faith and in ignorance of their trust character; and that at no time was any knowledge or notice of the trust character of the fund brought home to either of the same; that the making of the deposit in suit with the First National Bank of Plattsmouth was not disaffirmed in whole or in part, and no demand was made upon the defendant or his predecessors for return of the railway check or its proceeds until December 13, 1926; and that the right of preference to which the claimants are entitled must be determined, as questions of fact, solely by their ability to affirmatively establish and identify such funds either as remaining in possession of the Omaha National Bank or of the Federal Reserve Bank (Omaha); or by tracing the same therefrom into specific assets in a manner in accord with the equitable doctrine of tracing funds, as applied to insolvent national banks. Schuyler v. Littlefield, 232 U. S. 707, 34 S. Ct. 466, 58 L. Ed. 806;Central Nat. Bank of Lincoln v. First Nat. Bank of Gering, 117 Neb. 161, 219 N. W. 894;Dudley v. Richards (C. C. A.) 18 F.(2d) 876;Marvin v. Martin (C. C. A.) 20 F.(2d) 746;Peoples Nat. Bank v. Moore (C. C. A.) 25 F.(2d) 599;Farmers Nat. Bank v. Pribble (C. C. A.) 15 F.(2d) 175;State v. Citizen's State Bank of Potter, 117 Neb. 358, 220 N. W. 593.
1. Prior to receipt of these trust funds by the First National Bank of Plattsmouth and their transmission to the Omaha National Bank, on the 2d day of December, there were existing credit balances, in...
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