State v. Bank of Commerce of Grand Island

• Decision Date: 05 December 1900
• Docket Number: 10,701
• Citation: 84 N.W. 406,61 Neb. 22
• Parties: STATE OF NEBRASKA v. BANK OF COMMERCE OF GRAND ISLAND, MODERN WOODMEN OF AMERICA ET AL., APPELLEES, AND HENRY W. MERRIAM ET AL., APPELLANTS
• Court: Nebraska Supreme Court

84 N.W. 406

61 Neb. 22

STATE OF NEBRASKA v. BANK OF COMMERCE OF GRAND ISLAND, MODERN WOODMEN OF AMERICA ET AL., APPELLEES, AND HENRY W. MERRIAM ET AL., APPELLANTS

No. 10,701

Supreme Court of Nebraska

December 5, 1900

APPEAL from the district court for Hall county. Tried below before THOMPSON, J. Affirmed.

AFFIRMED.

John L Webster and James H. McIntosh, for appellants.

Constantine J. Smyth, Attorney General, for the state.

W. H Thompson and A. R. Talbot, contra.

OPINION

SULLIVAN, J.

This case comes here by appeal from an order of the district court of Hall county recognizing and enforcing the claim of appellee, a belated creditor, to share with other creditors in the assets of an insolvent bank which is in the hands of a receiver and being wound up in accordance with the provisions of the state banking law. Compiled Statutes, 1899, ch. 8. The Modern Woodmen of America, a fraternal insurance organization incorporated under the laws of the state of Illinois, had, prior to July 19, 1895, through its head banker, David C. Zink, deposited with the Bank of Commerce of Grand Island the sum of $ 27,269.33, no part of which has ever been checked out or otherwise withdrawn. In June, 1895, Zink's term of office as head banker expired and his official authority was thereupon extinguished. On January 20, 1896, the Bank of Commerce became insolvent and suspended business. The insurance association, the appellee herein, did not present its claim to the receiver within the time limited by the order of the court for the presentation of claims, nor for more than two years thereafter. It knew that the affairs of the bank were being wound up, but refrained from filing a claim because its managing officers were of opinion that the Union National Bank of Omaha, which it had sued, and which it is still pursuing in the federal court, had become liable to it for the amount of the deposit in the Grand Island bank. The claim against the Omaha bank is grounded on a paper transaction between the cashier of that bank and the cashier of the Bank of Commerce. Briefly stated the transaction was this: On January 6, 1896, the Bank of Commerce, being in financial distress and desiring to conceal from the public the fact that it was indebted to the Modern Woodmen of America in a large amount, obtained from the cashier of the Union National Bank the following certificate:

"January 6th, 1896.

"I, Charles E. Ford, cashier of the Union National Bank of Omaha, Nebraska, do hereby certify that at the close of business on the 31st day of December, A. D. 1895, the Modern Woodmen of America had on deposit in this bank the sum of $ 27,269.33, designated 'General Fund.' CHARLES E. FORD, Cashier."

This certificate was sent to the appellee to enable it, in accordance with its usual custom, to prepare and publish an annual statement showing its assets and liabilities, together with the names of its depositaries. The certificate was false; it was made by Ford for a fraudulent purpose and without authority from his principal. The fund in the Grand Island bank was never transferred to the Omaha bank, and it was not intended that it should be. Neither Ford nor O. J. Smith, the cashier of the Bank of Commerce, intended that the transaction should have any legal efficacy. It was not intended to create any new rights or liabilities, and as between the two banks it is clear, of course, that the effect of the transaction could not go beyond the intentions of those who participated in it. Since the fund in question was never in the hands of the Omaha bank, it is certainly not liable to the appellee upon an implied promise; and it does not appear that it made, or that its cashier attempted to make, any express agreement to pay the money. Neither does it appear that the gratuitous and unauthorized act of Ford in issuing the certificate above set out would preclude the bank from denying liability. In the light of the record before us we do not see how the appellee can succeed in the case pending in the federal court. Surely it can not succeed upon any theory which implies that the Bank of Commerce has been absolved from its obligation to the insurance association. Appellants, who are creditors and stockholders of the insolvent bank, object to the appellee's claim, because its allowance will result in reducing the dividends which they will receive as creditors and increase their liability as stockholders.

Their first contention is that the petition does not state a cause of action. The facts heretofore stated are clearly set forth, but in explanation of the delay in presenting the claim to the receiver it is alleged "that it was a disputed question by and between the Union National Bank of Omaha, Nebraska, and the said Modern Woodmen of America, as to who was in fact the owner of the said indebtedness; whether or not the said indebtedness was owing from the said Bank of Commerce to the said Modern Woodmen of America, or whether or not the same was owing from the said bank to the said Union National Bank of Omaha, and that said question has been in a state of litigation ever since, and is now." That the ownership of the claim and the liability of the Bank of Commerce to the Modern Woodmen of America were disputed questions does not by any means negative or break the force of the facts pleaded. All the facts stated in the petition are consistent with appellee's right to have its claim adjudged to be a charge upon the assets of the insolvent bank.

The next contention is that appellee having, with full knowledge of the essential facts, elected to proceed against the Union National Bank, it can not now retrace its steps, but is conclusively bound by its election. It may be conceded that if the doctrine of election is here applicable, the appellee has forever lost its remedy against the Grand Island bank by choosing to pursue a different one. But we are of opinion that the doctrine...