Hirning v. Live Stock Nat. Bank

• Citation: 1 F.2d 307
• Decision Date: 04 August 1924
• Docket Number: No. 6444.,6444.
• Parties: HIRNING, Superintendent of Banks of South Dakota, et al. v. LIVE STOCK NAT. BANK.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

1 F.2d 307 (1924)

HIRNING, Superintendent of Banks of South Dakota, et al. v. LIVE STOCK NAT. BANK.

No. 6444.

Circuit Court of Appeals, Eighth Circuit.

August 4, 1924.

E. E. Wagner, of Sioux City, Iowa (George J. Danforth, of Sioux Falls, S. D., and Robert B. Pike and Karl J. Knoepfler, both of Sioux City, Iowa, on the brief), for plaintiffs in error.

E. A. Burgess, of Sioux City, Iowa (F. E. Gill, of Sioux City, Iowa, on the brief), for defendant in error.

Before LEWIS, Circuit Judge, and BOOTH and SYMES, District Judges.

BOOTH, District Judge.

In this action plaintiffs in error, hereafter called plaintiff bank, sought to recover from defendant in error, hereafter called defendant, the value of certain negotiable paper which plaintiff bank claimed to own, and which it further claimed had been converted by defendant.

The complaint, after setting out the incorporation and citizenship in South Dakota of the plaintiff bank, and the taking possession of the bank by the plaintiff superintendent of banks, and the citizenship of defendant in the state of Iowa, alleged further in substance as follows: That on December 4, 1919, one L. S. Taylor executed a promissory note for $12,500, payable to the order of P. D. Magnusson on June 4, 1920, with interest at the rate of 8 per cent. per annum; that on December 31, 1919, one Wenzloff and Magnusson indorsed and sold to the defendant said note; that at the same time Wenzloff sold to the defendant another note executed by one Wagner to Wenzloff in the sum of $6,318, which note was also indorsed by Magnusson; that defendant at the time was a regular correspondent of plaintiff bank; that, when said notes were sold and delivered to defendant, it entered upon its books the amount of the proceeds of the two notes to the credit of the account of plaintiff bank; that Wenzloff caused a portion of the proceeds of the sale of said notes to be placed to the credit of his account, and the balance to the credit of the account of Magnusson, upon the books of plaintiff bank; that they appropriated to their own use such credits; that plaintiff bank did not own or have any interest in said notes, and did not indorse the same, and received no part of the proceeds from the sale of the same; that about June 21, 1920, when said Taylor note was past due, defendant wrongfully and without authority, and acting collusively with Wenzloff, charged said Taylor note and other notes to the account of plaintiff bank on the books of defendant, and in so doing transferred from said account the sum of $12,905.27 as payment of the principal and interest of the said Taylor note; that the defendant thereby wrongfully appropriated to its own use the sum of $12,905.27 of the property and assets of plaintiff bank, which it has at all times refused to return; that, when defendant charged said sum of $12,905.27 to the account of the plaintiff bank in payment of the Taylor note, it knew that plaintiff bank was not in any manner obligated for the payment of said note, knew that it was appropriating the funds of plaintiff bank to the payment of the personal obligation of Wenzloff, and that at the time plaintiff bank was insolvent. The complaint further alleged that the capital and surplus of plaintiff bank did not exceed $35,000; that under the laws of the state of South Dakota it was forbidden to loan or extend credit to or purchase, own, or indorse the paper of any one person in any sum in excess of 20 per cent. of its capital and surplus; and that Taylor was, at all times mentioned in the complaint, indebted to said bank in a sum equal to 20 per cent. of its capital and surplus.

The defendant's answer admitted the jurisdictional facts, denied generally the other allegations of the complaint, and further alleged in substance: That all of the transactions with respect to the Taylor note were had directly with plaintiff bank through its officers Wenzloff, president, Reich, cashier, and Pfeifer, assistant cashier; that defendant purchased said note from plaintiff bank, paying said bank the sum of $12,500 therefor, and, acting under instructions of plaintiff bank, credited the account which it carried with defendant with the full proceeds of said note; that defendant had no knowledge or notice that Wenzloff either had or claimed to have any interest in said note or in the proceeds thereof; that plaintiff bank at all times during the transaction held itself out to be the owner of said note, sold the same as its own note, and took credit for, and itself used, the proceeds thereof; that defendant in purchasing said note had no knowledge or notice of any defect in the title of plaintiff bank thereto, and acted in good faith and relied upon the belief that the plaintiff bank owned said note; that on or about June 21, 1920, plaintiff bank paid defendant the full amount due on said Taylor note, and defendant thereupon surrendered said uncanceled note to plaintiff bank; that defendant on said date held said Taylor note and two other notes which it had purchased from plaintiff bank, all of which were then past due and which aggregated the sum of $29,530.19; that plaintiff bank on said date sold to and rediscounted with defendant certain other bills receivable, for which defendant paid plaintiff bank the sum of $29,828.20; that plaintiff bank used $29,530.19 of the proceeds realized from the sale of said bills receivable in paying said Taylor note and the two other past-due notes, and took credit on the account which it carried with defendant for the balance, to wit, $298.01; that plaintiff bank orally instructed defendant to charge its account with the amount due on the Taylor note and the two other past-due notes, and to credit its account with $29,828.20, the proceeds realized from the sale of said bills receivable, and to transmit to it the three notes so paid, including the Taylor note; that the bills receivable so purchased from plaintiff bank by defendant on June 21, 1920, have all been fully paid, and said entire transaction was fully closed before the commencement of the present suit; that plaintiff bank is estopped to deny the ownership of the Taylor note and sale thereof to defendant, or to question said transaction, for the reason that said plaintiff bank directed the proceeds of said note to be credited to its own account on the books of defendant, was informed that such credit had been given, made no...