Article Text
IN THE SUPREME COURT OF THE STATE OF
NEBRASKA ne authority to pay his individual debt to the deposiSTATE EX REL SPILLMAN V. THEDFORD BANK, to by giving him credit in the bank and permitting KIRKMAN, CLAIMANT).
No. 24577-State ex Rel. Spillman V. Thedford thing of value therefor; that the entry of the credit Bank, (Kirkman, Claimant). Opinion filed April 9, unon the depositor's pass-book was an act beyond the 1926. scope of the president's power; that ecause nothing
1. The president of a bank organized under the appears on the books of the bank to give notice of the facts, and the bank having received nothing of laws of this state has no implied authority to pay his value, the bank was not bound; and that upon the individual debts by entering the amount of them as claimant, he having full knowledge of the facts that a credit upon the pass-book of his creditor, who the transaction was one in which the bank officer keeps an account with the bank, and permitting the was paying his individual obligations by and with the creditor to exhaust such account by checks which property of the bank, was imposed the duty of asare paid, the bank having received nothing of value certaining the authority and powers of the president to act for the bank in the transaction. That likewise in the transaction. there was imposed upon him the burden of showing, 2. If the president of a bank, without actual in absence of excess authority conferred on the authority so to do, should undertake to pay his inpresident, that money or its equivalent had actually dividual debts in the manner stated, the bank may been received by defendant to cover the entry made recover of his creditor the amount of money it may in the passbook. We find that the contention of the pay out upon checks drawn upon the faith of the defendant bank and its receiver is not only sustained unauthorized pass-book entries. by the great weight of authority but by the decisions 3. The fact that the president is personally in- of this jurisdiction. terested in a transaction of the character described On the subject presented here, the case of Hier is sufficient to put his creditor upon inquiry as to V. Miller, 68 Kan. 258, appears to be a leading case. the actual extent of the president's power. In this case a cashier of the bank in sole charge of 4. When it appears that the president of a its affairs, pretends to make payments to one of his bank, under the circumstances and the manner hereindividual creditors, a depositor of the bank, by givin set forth, has paid and satisfied his individual ining credit for such payments in the depositor's passdebtedness by entries of credits in the pass-book of a book. No money, however, was received by the bank depositor, and such transaction is challenged by a and no record of the transaction was made upon receiver of the bank, lawfully appointed, the burden the records of the bank. Ultimately a final settleof establishing that such bank has received the ment was had between this cashier and this cashmoney or its equivalent to cover the entries thus ier's individual creditor which resulted in the surmade is upon such depositor. render by the creditor to the cashier of the latter's Heard before Morrissey, C. J., Rose, Day, Good, individual promissory note and an entry of the Thompson and Eberly, JJ. amount then due upon the instrument surrendered EBERLY, J. by the cashier in the creditor's passbook as a deposit in the bank. This creditor, as depositor, then deThe Thedford State Bank, defendant, is an innanded her balance in the bank. Pursuant to teh solvent state bank organized under the laws of Nedemand the cashier then balanced the passbook, and braska, in the possession and control of a receiver she drew a check for the amount shown by the passduly appointed, and to whom the provisions of the "dok to be due her, and the cashier gave her a law guaranteeing lawful deposits was applicable. In cashier's draft upon a bank in St. Joseph, Missouri, this, proceeding, claimant Kirkman prosecutes two which draft was duly paid and returned. During this causes of action against the bank, its receiver, and transaction all checks issued by the depositor were the guaranty fund; one based upon a certificate of by the cashier paid as presented and charged on the deposit of $1,000 issued by the defendant bank, the books of the bank against the depositor. validity of which is not questioned, and one upon an alleged deposit of $450 in the form of a checking There were, however, no sums credited on this account on which it was alleged there was still un- account as deposits, and the total amounts of all paid the sum of $269.59 due claimant. Claimant checks drawn appeared as an "overdraft." No offiprevailed in district court. Judgment was there en- cer, of the bank had any actual knowledge of the tered as prayed, and from this determination the transaction except the cashier and the "depositor" defendant bank and receiver appeal. herself, who acted in good faith. On this state of facts the supreme court of Kansas in Hier V. Miller, The facts out of which this controversy arises supra, sustained the right of the bank and its reare practically without dispute in the record. Prior ceiver to recover from the cashier's creditor the to December 13, 1923, Nelson, then president of the entire amount of the overdraft thus created. The defendant bank, owned as his private property, a opinion of the court in this case contains a careful farm. Claimant was in the personal employ of Nelexamination of the authorities of all jurisdictions in son and engaged in the construction of improveaddition to its own, and states the conclusion of the ments thereon. On December 13, 1923, the work was court in the following language: "The cashier of a completed and there was due claimant under his bank organized under the laws of this state has no contract of employment from Nelson individually the implied authority to pay his individual debts by ensum of $450. On December 13, 1923, claimant called tering the amount of them as a credit upon the on Nelson at the banking house of the defendant and passbook of his creditor, who keeps an account with demanded from him the payment of the $450. To the bank, and permitting the creditor to exhaust such this demand Nelson responded: "The money is ready." Claimant replied that he wanted it in check- account by checks which are paid, the bank having received nothing of value in the transaction. If the ing account in the bank. Nelson' then entered the cashier of a bank, without actual authority so to do. sum of $450 in claimant's depositor's pass-book, undertakes to pay his individual debts in the manner claimant then being a patron of the bank and posstated, the bank may recover of his creditor the sessed of a checking account therein. It is conceded amount of money paid on checks drawn upon the that in this transaction the bank actually received faith of the unauthorized passbook entries. The fact nothing. No money or credit of value was ever dethat the cashier is personally interested in a transacposited by Nelson or any other person with the tion of the character described is sufficient to put bank for claimant. It further appears that the sole his creditor upon inquiry as to the actual extent of record of the transaction is the record in the passthe former's power." See, also, Home Savings Bank book, and that no entries were made of this deposit V. Otterbach, 135 Ia. 157; 112 N. W. 769. DeBaca V. on the books of the bank, nor was any memorandum Higgins, 58 Colo. 75; 143 Pac. 832. Bank of Procpreserved in the records thereof of that institution. torville V. West, 184 N. Car. 220; 114 S. E. 178. So far as the record discloses, all knowledge of the transaction was confined to Nelson and claimant. The conclusion above set forth is based upon the Commencing on the day of the transaction and con- familiar rule of the law of agency which forbids tinuing until February 4, 1924, eleven checks were that an agent shall act for himself and his principal drawn by claimant upon the defendant bank, which in one and the same transaction. "This doctrine has checks it paid and charged to his accoont which re- its foundation, not so much in the commission of sulted in an overdraft as shown by the bank records in the sum of $180.41. The defendants contend that the president had him to draw checks without its having received some- actual fraud as in that profound knowledge of the human heart which dictated that hallowed petition, 'Lead us not into temptation but deliver us from evil,' and that caused the announcement of the infallible truth that a man cannot serve two masters." From this follows the rule that an agent may not deal in the business of his agency for his own benefit. His duty to his principal requires that his efforts shall be in behalf of, and for the benefit of, his principal alone. He cannot perform this duty if he attempts to use his agency for his own purposes. It really appears that this court has taken more advanced ground on this subject than that evidenced by the supreme court of Knasas in Hier V. Miller, supra. Pursuant to the principles above set forth, this court has announced the rule as applied to managing officers of banks as follows: "The general authority of a cashier of a bank does not authorize him to issue drafts of the bank for himself or for his private use.
"When it appears that he has thus isssued drafts, there is no presumption that they were paid for when issued, and the burden is on the party claiming that they were thus paid for to prove it." Mendel V. Boyd, 71 Neb. 657. In the case above cited, a cashier of an Iowa bank became indebted to James E. Boyd, a former Governor of this state in certain business transactions. The indebtedness was his individual obligation. He attempted to discharge this indebtedness by drafts on the correspondents of the bank of which he was cashier. Some of these drafts were signed by this cashier and some by the assistant cashier employed in the bank, but all of the drafts, irrespective of the signature thereto, were actually issued by the cashier himself to James E. Boyd, the payee therein named, and for the purpose of satisfying and discharging the individual debt of the cashier to Boyd. The bank drawing these drafts received nothing in value for them and sought to recover the moneys thus received by the payee named in the instruments. The effect of the judgment of this court, affirming the bank's right to discover, is that a person accepting payment of the individual debt of a bank officer, through the medium of funds or credits received from such officer in his official capacity, must take notice of the fact that in the transaction the interests of the bank officer are adverse to the principal (the bank), and that upon the party taking advantage of such transaction and receiving the benefits thereof was imposed the burden of establishing express authority of the bank officer involved or proving that the bank had received actual value for what was turned over for the individual benefit of the bank officer. The case of Mendel V. Boyd, supra, has never been in any manner qualified by this court. It has been twice cited approvingly in State V. Farmers State Bank, 111 Neb. 585, and Packers Nat. Bank V. Rushart, 98 Neb. 354. If this.1 be true, and certainly the case of Mendel V. Boyd, supra, so holds, then in the instant case we have a situation wherein the president, who is managing officer of the bank, without authority, pays his individual obligations by an entry of a deposit in a passbook which deposit was, in truth and in fact, not made. The relation of the parties and the situation was known to the claimant in this case. He knew he made no deposit. If he trusted the president of the bank to make it for him, he did so at his peril. Under the rule announced in Mendel V. Boyd, supra, and in the event the validity of the transaction is challenged, the claimant must be held to know that under the circumstances of this case the general authority of the president did not authorize nor justify him to make the entry of the "deposit" without the prior or contemporaneous receipt by the bank of the money or its equivalent. The burden of proof was imposed on claimant to establish these facts as a condition precedent to the bank's liability. No proof appears in the record and no proof was offered.
It follows therefore that the district court erred in its determination of this case. The judgment of the district court is reversed and remanded for further proceedings.
REVERSED.
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