State v. Omaha National Bank
| Decision Date | 07 January 1903 |
| Docket Number | 11,795 |
| Parties | STATE OF NEBRASKA v. OMAHA NATIONAL BANK ET AL |
| Court | Nebraska Supreme Court |
ERROR from the district court for Douglas county. Action for conversion of public funds by a depositary bank. Tried below before BAKER, J. Judgment for defendants. Affirmed.
Under the constitution of 1867, a large floating debt had accumulated against the state. Section 1 of article 12 of the constitution of 1875 forbade the contraction of a debt in excess of $ 100,000, with exceptions named, none of which concern the matter in hand; but it was impossible that this section could impair the obligation of an existing contract because of a prohibition of clause 1, section 10, of article 1 of the constitution of the United States; and, too, the state constitution provided for the funding of outstanding warrants and other indebtedness of the state at a rate of interest not exceeding eight per cent. per annum. [*] To fund the floating debt, aforesaid the legislature of 1877 passed an act authorizing the governor and secretary of state to issue lithograph coupon bonds to the amount of $ 566,369.38. These bonds were payable twenty years from April 1, 1877, with interest at eight per cent., payable semi-annually. They were issued with an option clause. See Session Laws, 1877, pp. 120-135, inclusive, and records of state treasurer's office. The liquidation of this indebtedness was provided for by a sinking fund; and in June, 1879, $ 200,000 of the principal was paid. On the 21st day of January, 1893, the Capital National Bank of Lincoln failed. At the time of such failure, said bank was a state depositary, and had on deposit $ 180,101.75 of the state sinking fund. The legislature of 1895 included in their current-appropriation bill an item for the last-named amount to reimburse the sinking fund for money "tied up" in the Capital National Bank. This was tantamount to transferring that amount of money from the general fund to the sinking fund; and the excuse given, at the time, for not making it the subject of a separate bill was that it had been forgotten till the constitutional period was passed. On the 10th day of April, the governor approved the bill including this item, under the impression that it was necessary to save the credit of the state. He was not advised of the fact that the state held these bonds to the last dollar, as an investment of the permanent school fund. On the same day that the item was approved the then treasurer presented a voucher therefor, upon which the warrant, set forth in the reply brief of the state, was issued. On the same day the state treasurer indorsed said warrant: Said warrant was, thereafter, indorsed by the state treasurer and delivered to the Chemical National Bank of New York, through the Omaha National Bank. In the year 1896 the Chemical National Bank sent said warrant to the Omaha National Bank for collection. On the 2d day of January 1897, the treasurer drew his check for such warrant and accrued interest on the depositary fund in said bank, in the sum of $ 201,884.05. The latter bank was sued, as set forth in the opening statement of the case.--W. F. B.
AFFIRMED.
Constantine J. Smyth and Frank N. Prout, Attorneys General, Willis D. Oldham, Norris Brown, Ed P. Smith, Paul Pizey and William B. Rose, for the state.
Smyth, Attorney General, and Smith:
The defendants below are liable, as a matter of law, on the ground that the payment by the state treasurer of public money to one claiming to be the owner, by purchase, of a warrant drawn on the general fund, "to reimburse the sinking fund," was unauthorized. State v. Omaha Nat. Bank, 59 Neb. 483.
He who meddles with personal property which is not his own, must see to it that he is protected by the authority of one who is the owner or has authority to act, or he will, himself, be liable; and if he do an unlawful act, even at the command of another acting as principal, a liability will attach. Cook v. Monroe, 45 Neb. 349; Stevenson v. Valentine, 27 Neb. 338.
In handling the state's money and conveying it to the Chemical National Bank, the defendants were not protected, either by authority of the state, or one having authority to act; hence their liability.
In an action for conversion, the motive which prompted the defendant is immaterial.
Everyone who aids and assists in the conversion, is liable. Hill v. Campbell, 54 Neb. 59.
John L. Webster, Richard S. Hall, I. H. McCullough, W. J. Connell and William C. Ives, contra.
Webster:
The state presents this case on the theory that the good faith or innocence of the defendants is an immaterial issue in an action for conversion. While that may be true in some cases, it is not true where the plaintiff, its agent or servant, having lawful control over the property, consents to or requests the defendant to receive and dispose of it. Such is this case. In such case the defendants are not required to investigate the motive or intent with which the plaintiff's agent or servant is acting, and the defendants are not liable for conversion unless they knew there was an actual unauthorized disposal of the property. In such case guilty intent on part of defendant is an essential element of conversion.
It is a rule of law that an innocent person can not be held liable for a conversion, if his acts can be justified as having been in any manner authorized by the owner of the property.
A purchase, in good faith, from one who has no title and no right to transfer the property, will not constitute a defense. Even an auctioneer or broker who sells property for one who has no title, and pays over to the principal the proceeds, with no knowledge of the defect of the title or want of authority, is held to be liable for its conversion to the real owner. Williams v. Merle, 11 Wend. [N. Y.], 80; Hoffman v. Carow, 20 Wend. [N. Y.], 21, 22 Wend. [N. Y.], 285; Courtis v. Cane, 32 Vt. 232. But this severe rule of law will not be applied when the act of appropriation can be justified as having been authorized in any manner by the owner of the property. Thus, when upon a conditional sale, the property is delivered and time given for a compliance with the condition, one who purchases and resells the property before the right to perfect the title, by such compliance, has been terminated, is not liable for a conversion to the general owner, who subsequently resumes his right to its possession. Vincent v. Cornell, 13 Pick. [Mass.], 294. When the owner has given to another, or permitted him to have, control of the property, no one can be held responsible in tort for its conversion who merely makes such use of the property, or exercises such dominion over it, as is warranted by the authority thus given. Strickland v. Barrett, 20 Pick. [Mass.], 415; Burbank v. Crooker, 7 Gray [Mass.], 158. See Hills v. Snell, 104 Mass. 173.
If defendants had read recitals in warrant, it would not prove they acted wrongfully or fraudulently.
Prout, Attorney General, Brown and Rose, in reply:
This is not an action of trover at common law, but an action for conversion under the Code. Counsel do not comprehend the nature of the case.
The warrant was prima-facie void. Its face impeached its validity. Here it is:
Under the title, "An act making appropriation for current expenses of the state government * * * and to pay miscellaneous items of indebtedness owing by the state," the insertion of an item to reimburse the state sinking fund is a violation of the constitutional provision forbidding legislation on a subject not within the title of the act, and a state warrant for the amount of such an item is absolutely void.
The intention to appropriate "sums out of any money in the treasury" and the passage of an act for that purpose alone, show conclusively that the legislature did not intend by the same act to increase the funds in the treasury by borrowing money on a warrant.
A state warrant issued for the purpose of borrowing money to reimburse the sinking fund to the extent of $ 180,101.75 by a sale of such warrant is void because the creation of such a debt is inhibited by section 1, article 12, of the constitution, which denies to the state the power to contract a debt in excess of $ 100,000.
Under the express provisions of this act, no warrant could be legally issued to J. S. Bartley for $ 180,101.75.
DAY, C. KIRKPATRICK, C., took no part. SEDGWICK, J., HOLCOMB, J., concurring. SULLIVAN, C. J., HASTINGS, C., dissenting.
This case was before this court upon a former hearing, being reported in 59 Neb. 483, wherein the judgment of the district court, based upon a verdict for the defendants, returned in obedience to the peremptory direction of the court, was reversed and remanded. A retrial resulted in a verdict and judgment for the defendants, to review which the state has brought the case on error to this court. Upon the former hearing the present chief justice [*] took no part; Justice HARRISON joined in the reversal, but expressly stated he did not concur in the reasons for reversal announced in the opinion of Justice SULLIVAN. It is for these reasons we are asked to again...
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