Metro. Nat. Bank v. Commercial State Bank

• Decision Date: 10 February 1898
• Citation: 104 Iowa 682,74 N.W. 26
• Parties: METROPOLITAN NAT. BANK ET AL. v. COMMERCIAL STATE BANK.
• Court: Iowa Supreme Court

104 Iowa 682

74 N.W. 26

METROPOLITAN NAT. BANK ET AL.

v.COMMERCIAL STATE BANK.

Supreme Court of Iowa.

Feb. 10, 1898.

Appeal from district court, Buena Vista county; Lot Thomas, Judge.

Action at law to recover the amount due on a promissory note. There was a trial by jury, and a judgment against the Commercial State Bank, from which it appeals. Reversed.M. J. Sweeley and T. D. Higgs, for appellant.

F. H. Helsell, for appellee.

ROBINSON, J.

In May, 1895, the defendant H. H. Bridge made to the Buena Vista State Bank of Storm Lake, Iowa, a banking corporation of this state, his promissory note for the sum of $299.12, payable on the 12th day of October, 1895. That note, with other notes, was transferred by the payee to the Metropolitan National Bank of Chicago, to be held by it as security for a loan it had made to the Buena Vista State Bank. On the 3d day of September, 1895, in a suit instituted by the attorney general, the district court of Buena Vista county adjudged the bank last named to be insolvent, and appointed as receiver S. C. Bradford, who was the clerk of that court. He executed a bond for the amount fixed by the court, which was approved by himself as clerk and by the court. About the 25th day of September, 1895, the Metropolitan National Bank sent to the defendant the Commercial State Bank the Bridge note for collection. On the 10th day of October, 1895, Bridge, who was a resident of Buena Vista county, had a public sale of property, at which sale notes were taken, and proceeds of those notes, to the amount of more than $1,800, were received by the Commercial State Bank on account of Bridge, nearly all of which were paid out to him or on his checks. On the 25th day of October, 1895, this action was commenced by the Metropolitan National Bank against Bridge to recover the amount of the note, and against the Commercial State Bank to recover the same amount, on the ground that it had failed to collect the note by reason of negligence on its part. The note had been indorsed by the Buena Vista State Bank, and, after the action was commenced, Bradford, as receiver, paid to the Metropolitan National Bank the amount due on the note; and that bank and Bradford, by an amendment to the petition, set out that fact, and asked that Bradford, as receiver, be substituted as party plaintiff, and that he have the relief which had been asked by the original plaintiff. Thereafter, by another amendment, they asked that they be joined as parties plaintiff. The verdict and judgment against the Commercial State Bank were for the full amount due on the note.

1. The first complaint made by the appellant is that the court erred in sustaining a demurrer to the second division of its answer. The defense alleged in that division was, in substance, as follows: That Bradford is not the receiver of the Buena Vista State Bank, and is not authorized to maintain this action, for the reason that, as he was clerk of the district court in and for Buena Vista county at the time the order purporting to appoint him receiver was made, he was disqualified to accept the appointment, because he was the only person authorized by law to approve the bonds of receivers appointed by the court and keep possession thereof, and the only person authorized to keep the records and entries of the appointment of such receivers, and to preserve the pleadings, papers, reports, bonds, records, and other proceedings connected therewith and arising therefrom; that his appointment as receiver was void, and that he is wholly without right or power to maintain this action. It is urged by the appellee that, even if it be true that the duties of clerk and receiver are such that one person should not hold both offices, yet that question cannot be considered on its merits in this action, for the reason that the second division of the answer is in the nature of a collateral attack upon proceedings had and an order made in another action, and that, we think, is true. The eligibility of Bradford was necessarily involved in the proceedings which were instituted to close the insolvent bank, and distribute its assets through the medium of a receiver. The court had jurisdiction of the subject-matter of the proceedings and of the parties, and its order appointing Bradford receiver involved a finding that he was eligible to the office. It may be that, if proper objection had been made, the order would have been set aside or reversed on appeal; but, if the bank and its stockholders and other persons interested in its assets are satisfied with the appointment, other persons should not be heard to complain, especially by a collateral attack, as attempted in this case. Van Fleet, Coll. Attack, § 3; Whittlesey v. Frantz, 74 N. Y. 459;Attorney General v. Insurance Co., 77 N. Y. 274;Bangs v. Duckinfield, 18 N. Y. 595;Jones v. Blun (N. Y. App.) 39 N. E. 954;Davis v. Shearer (Wis.) 62 N. W. 1050;Cadle v. Baker, 20 Wall. 650. See, also, Pursley v. Hayes, 22 Iowa, 11;McCandless v. Hazen (Iowa) 67 N. W. 256. But it is said, if it be conceded that the appointment of the clerk as receiver cannot be questioned in this action, yet the appellant may show that he never qualified as receiver, for the reason that he could not approve his own bond, and the court was not authorized to approve it. We think this objection is shown to be unsound by what has already been said, and by the fact that the approval by the court of the bond given by the receiver was, in effect, an adjudication in that proceeding that the bond was sufficient. Moreover, Bradford may have been a receiver de facto, although he had not given any bond. Manufacturing Co. v. Sterrett, 94 Iowa, 158, 62 N. W. 675. We conclude that the demurrer to the second division of the answer was properly sustained.

2. It is contended that, if the appointment of Bradford as receiver be sustained, his acceptance of that office had the effect to vacate the office of clerk of the district court, because the offices are so incompatible that they cannot be held by the same person at one time; hence that the acts of Bradford as clerk, after his qualification as receiver, were void; that his docketing of this case, the noting of papers filed, and the making of other entries were void; and that, as a result, the district court did not acquire jurisdiction to hear and determine this action. In what Bradford did as clerk after he qualified as receiver he acted as clerk de facto, and third persons dealing with him had the right to rely upon his acts so performed as being legal. It is the well-settled general rule that the acts of officers de facto are as valid and effectual, where they concern the public or the rights of third persons, as though they were officers de jure, and that their authority to act cannot be questioned in collateral proceedings. People v. Nelson (Ill. Sup.) 27 N. E. 226;People v. Payment (Mich.) 67 N. W. 689;Clark v. Town of Easton (Mass.) 14 N. E. 795;Petersilea v. Stone, 119 Mass. 465. See, also, Lufkin v. Preston, 52 Iowa, 238, 3 N. W. 58; Desmond v. McCarthy, 17 Iowa, 526. We do not think the fact that Bradford, in his capacity as receiver, is seeking to recover in this action, affects the application of the general rule, since his acts as clerk, and not his acts as receiver, are questioned by the objection now under consideration. It follows that the alleged fact that the office of clerk was vacated when Bradford qualified as receiver is not available as a defense in this action, since he continued to act as clerk.

3. It is said that Bradford, as receiver, cannot maintain this action, for the reason that the court has not authorized him to do so. It is not shown that he was authorized in express terms to prosecute this action, or to assist in doing so, but he was directed by the court to effect a settlement with the Metropolitan National Bank. The directions given to him also contemplated the collection of claims due the Buena Vista State Bank and litigation to enforce collection. This action was brought in the court which had jurisdiction of the receiver. He was an officer of that court, and asked permission to be substituted or to join as party plaintiff in this action, and was permitted by the court to do so. We think the authority thus shown to prosecute this action was ample.

4. It is claimed that a verbal agreement was made to which the receiver, the Commercial State Bank, and Bridge were parties, by virtue of which a sufficient amount of the proceeds of the sale notes deposited by Bridge should be used by the bank in paying the receiver the amount due on the note in suit, and that the bank, through its cashier, Tiede, neg ligently omitted to perform its part of the agreement, and permitted Bridge to withdraw the proceeds of the sale notes or use them for other purposes. Testimony was given in behalf of the plaintiff which tended strongly to support the claim thus made. That claim was denied by the bank, and testimony of Tiede and Bridge tended strongly to sustain that denial. After the evidence for the bank had been submitted, the receiver placed upon the stand A. C. Smith, who was permitted, notwithstanding objections made by the bank, to state that, during the fall of the year 1895, he heard a conversation between the receiver and Tiede in regard to the Bridge note, in which Tiede said “that he felt he was somewhat negligent or careless in the matter,” and that there was not enough money to pay the note. There can be no doubt that the testimony thus given was important to the plaintiff, and that it must have been prejudicial, if erroneously admitted. The question to which the bank objected was, “What, if anything, was said in that connection by Mr. Tiede to Mr. Bradford in regard to any negligence on the part of Mr. Tiede or the Commercial State Bank in the collection of this note of H. H. Bridge?” The objection made and overruled was that the question was “incompetent, immaterial, and irrelevant,...