State ex rel. Davis v. Welpton

• Decision Date: 08 June 1926
• Docket Number: No. 23984.,23984.
• Citation: 114 Neb. 664,209 N.W. 249
• Parties: STATE EX REL. DAVIS, ATTY. GEN., v. EXCHANGE BANK OF OGALLALA. IN RE WELPTON.
• Court: Nebraska Supreme Court

114 Neb. 664

209 N.W. 249

STATE EX REL. DAVIS, ATTY. GEN.,

v. EXCHANGE BANK OF OGALLALA.IN RE WELPTON.

No. 23984.

Supreme Court of Nebraska.

June 8, 1926.

Syllabus by the Court.

The department of trade and commerce is vested with general supervision and control of state banks with authority to do all things reasonably necessary for the protection of depositors therein throughout the state. It also stands in the nature of a trustee for the state bank guaranty fund, and it is its duty as such to take such precautions as may be reasonably necessary to conserve and protect this fund.

Evidence examined, and held, that the finding of the district court that the Exchange Bank of Ogallala paid more than five per cent. interest per annum on deposits in suit, wholly unsupported by the evidence.

Where a trustee acts in good faith in discharge of the duties imposed upon his trust, and in a fiduciary capacity, he and the fund represented by him are not ordinarily subject to the limitations and disabilities which, under the facts in this case, would be imposed on and attached to him when acting in his individual capacity only, because of the fact that he was a stockholder in and an officer of the bank.

Where, pursuant to an agreement made by the duly authorized officers of a state bank and the department of trade and commerce, and relied upon by all parties concerned, a trust fund is created by contributions, and the use of the property in part made and furnished by persons not stockholders, officers, or employees of the bank involved, which trust fund is placed in charge of a trustee (who is the president of and stockholder in such bank) and by such said trustee, as such, pursuant to said agreement, such fund is deposited in said bank as a “general deposit,” relying upon the express agreement that the same shall be within the protection of the state bank guaranty fund, and such trustee and cestui que trust concerned act in good faith without fraud or concealment of any material facts, and after insolvency of the bank, in a procedure to determine the right of such fund so deposited to participate in the state bank guaranty fund, held, that the deposit thus made by such trustee must be deemed a “general deposit” within the protection of the state bank guaranty fund.

Evidence examined, and held, that under the facts shown in the record, the claimant should be allowed the sum of $64,918.67, and interest as provided by law, as a valid claim against the state bank guaranty fund.

Additional Syllabus by Editorial Staff.

“Trust” is confidence reposed in person termed “trustee,” for benefit of another called “cestui que trust,” respecting property held by trustee for his benefit.

Appeal from District Court, Keith County; Tewell, Judge.

Suit by the State on the relation of Clarence A. Davis, Attorney General, against the Exchange Bank of Ogallala, in which Hester Welpton intervened as claimant. From an order denying the intervener's claim against the State Bank Guaranty Fund, she appeals. Reversed and remanded.

C. E. Herring, of Omaha, and Halligan, Beatty & Halligan, of North Platte, for appellant.

W. C. Dorsey, of Omaha, L. O. Pfeiffer, of Chappell, and C. M. Skiles, of Lincoln, for Exchange Bank of Ogallala.

Heard before MORRISSEY, C. J., and ROSE, DEAN, DAY, GOOD, THOMPSON, and EBERLY, JJ.

EBERLY, J.

Hester Welpton, plaintiff and intervener, prosecutes this appeal from a final order of the district court of Keith county denying a claim filed in the above entitled cause, and adjudging:

“That the said sums ($66,525) were placed in the said bank by the said intervener, Hester Welpton, under an arrangement whereby the said bank agreed to pay interest upon the said sums at a rate in excess of five per cent. per annum; that each and all of said sums constitute and was a loan to said bank and not a deposit, and that said Hester Welpton is not entitled to have said sums repaid to her out of the state bank guaranty fund of the state of Nebraska.”

At the time of the inception of the transactions which form the basis of this controversy, the Exchange Bank of Ogallala was a state bank duly organized as such and a going concern. The intervener was its president though not active, and was the owner of 595 shares of the 750 shares of stock at $100 a share which formed the capital stock of this institution. Her daughter, Mabel, who was a director and stockholder, was the owner of 30 shares of this capital stock, and the remaining 125 shares were owned by persons other than the parties herein named.

The Welpton Investment Company also forms a party to the transaction out of which the litigation before us in this case arises. This company was a corporation organized as such under the laws of Nebraska, having a paid up capital stock of 697 shares, each share with a face value of $100. Hester Welpton was the president of this company and the owner of 258 shares of its stock. Mabel Welpton was the owner of 405 shares of its stock of similar denomination, and 34 shares of stock were owned by persons who, so far as the record discloses, had no connection whatever with the Exchange Bank of Ogallala.

It would seem that the following provisions of our statute are applicable to some of the different phases which make up this transaction. Section 284, Rev. St. 1913, provides:

“There is hereby created a state banking board which shall consist of the following state officers: The governor, who shall be ex officio chairman thereof; the auditor of public accounts and the attorney general, a majority of whom shall constitute a quorum for the transaction of business. Said board shall have general supervision and control of banks and banking under the laws of this state.”

This act was amended in 1919 (Laws 1919, c. 190, art. 16, § 1) so that at the time of this transaction it read as follows:

“The department of trade and commerce shall have general supervision and control of banks and banking under the laws of this state. * * * Said department of trade and commerce shall succeed to all the rights, powers, duties and responsibilities of the state banking board as now existing and as such shall be entitled to all the records, books, files and papers thereof, and shall exercise all the powers and discharge all the duties of such board under the laws of this state.” Section 7982, Comp. St. 1922.

[1] In construing that portion of the language found in section 284, Rev. St. 1913, which is identical with section 7982, Comp. St. 1922, both of which are quoted above, this court said:

“We think the intention of the Legislature was to vest the banking board with general control and with authority to do all things reasonably necessary for the protection of depositors throughout the state. The board also stands in the nature of a trustee for this guarantee fund, and it is its duty to take such precautions as may be necessary to protect its integrity. The terms ‘general supervision and control’ vest the banking board with duties of a very high order, and they are not to be perfunctorily discharged, but to be administered with the highest degree of intelligence and discretion.” State v. Morehead, 99 Neb. 146, 155 N. W. 879.

This language was approved in the dissenting opinion of Rose, J., in State v. Morehead, 100 Neb. 864, 161 N. W. 569, L. R. A. 1917D, 310.

Section 8029, Comp. St. 1922, provides that under conditions specified the department of trade and commerce shall communicate certain facts to the attorney general who shall thereupon cause an application to be made in the district court of the county where such corporation maintains its bank for the appointment of a receiver to take charge of the business and assets and property of the corporation and to wind up its affairs.

Section 8033, Comp. St. 1922, provides that the claims of depositors, for deposits, and claims of holders of exchange, shall have priority over all other claims, except federal, state, county and municipal taxes, and subject to such taxes, shall at the time of the closing of a bank be a first lien on all the assets of the banking corporation. There is the further provision that in event the cash in the hands of the receiver, available for the purpose of paying such claims, be insufficient, the court, in which the receivership is pending, shall determine the amount required, which, in the manner therein specified, shall be paid upon the order of such court out of the state bank guaranty fund and applied on the claims of depositors and holders of such exchange.

Section 8035, Comp. St. 1922, provides for the subrogation of the department of trade and commerce for the use and benefit of such guaranty fund to all rights of creditors thus paid, and to participate in the assets of the bank.

[2] The evidence in the record is undisputed as to the following facts. Prior to November 5, 1921, the Exchange Bank of Ogallala was in critical condition. The depositors had been making withdrawals to such an extent that the officers of the bank were unable to meet the same from current collections. Following an examination by the state banking department, Attorney General Davis, representing the department of trade and commerce, went to Ogallala, together with another representative of that department, and called Hester Welpton and Mabel Welpton to the bank for a conference. The result of that conference was that in reliance upon the unconditional statement of the then attorney general and the representative of the department of trade and commerce, then present, that the moneys to be raised and deposited as hereinafter set out would be and constitute a general deposit, and as such would be within the protection of the state bank guaranty law, in compliance with the recommendations and pursuant thereto, an agreement was entered into, and arrangements were made by and between Hester Welpton, Mabel Welpton, and the Welpton Investment Company, a corporation, that the private property of Mabel Welpton, ...