# Capital National Bank v. First National Bank

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United States Supreme Court
172 U.S. 425
Capital National Bank v. First National Bank
This was an action brought by the First National Bank of Cadiz, Ohio, against the Capital National Bank of Lincoln, Neb., and Macfarland, the receiver thereof, in the district court of Lancaster county, Neb.
The petition contained five counts for moneys belonging to plaintiff received by defendant from notes transmitted to it for collection and remittance.
Each of the counts concluded thus:
'Plaintiff further says that on or before the 21st day of January, 1893, the said defendant bank then and there became, and for some time prior thereto had been, insolvent, and that under and in pursuance of the laws of the United States the said defendant Macfarland was duly appointed, and is now acting, as a receiver thereof, and that all the assets and trusts in and belonging to said bank and the beneficiaries thereof passed into the possession of, and are now held by, the said Macfarland for the said bank, and all trusts or moneys held or obtained by said bank in a fiduciary capacity passed into the hands of said defendant Macfarland, and he now holds the same in the same capacity that the said bank did before he took possession thereof.
'That in the collection of said note the said Capital National Bank was acting as the agent of this plaintiff for the purpose aforesaid, and the money so collected was the property of and belonged to this plaintiff; that said amount so collected never was a part of the assets of said bank, and never belonged to the stockholders thereof; that whether or not said amount was ever mixed or mingled with the true assets of said bank plaintiff is unable to state, but does allege that, if the same was mixed or mingled with the assets of said bank, the same was done wrongfully and fraudulently by the officers of said bank, and without the knowledge or consent of this plaintiff; that a part of the business and powers of said bank was the collection and remittance of moneys for persons and corporations; and that the said defendant bank was acting as agent for that purpose, as hereinbefore alleged.'
The prayer was 'that an account may be taken of the trust funds to which the plaintiff may be entitled, and that a decree be entered against the said Capital National Bank and the said John D. Macfarland, directing the payment or delivery to plaintiff of the amount of said collections, and that the said amount be decreed to be a trust fund in the hands of said bank and receiver, to be first paid to this plaintiff, together with interest thereon, as damages, out of any money that may have passed to or afterwards come into the possession of said bank or receiver as a preferred or special claim, and that plaintiff may have such other or further relief as in equity it may be entitled to.'
Macfarland having resigned the receivership, Hayden was appointed to succeed him, and filed an answer (stating preliminarily that he answered 'as well for the said defendant bank as for and on his own account as receiver thereof'), admitting the insolvency of the defendant bank, the appointment of Macfarland as receiver, and his taking possession of the bank, 'with, all and singular, its rights, credits, effects, trusts, and duties,' and setting up his own subsequent appointment. With the exception of the admissions, the answer amounted to a general denial, there being a special denial of the receipt or collection by the bank or the receiver of the note mentioned in the first count.
The cause came on for hearing, and, after the default of the bank was taken and entered, was tried by the court, which made certain findings of fact, and entered the following judgment: 'It is, therefore, considered, ordered, adjudged, and decreed by the court that the said plaintiff, the First National Bank of Cadiz, Ohio, do have and recover of and from the said defendant the Capital National Bank of Lincoln, Nebraska, the amount of the trust fund hereinbefore found to belong to plaintiff, to wit, eight thousand and fifty ($8,050) dollars, with interest thereon at the rate of seven per cent. per annum from January 20, 1893, principal and interest amounting to the sum of eight thousand and seven hundred twenty-two and 95/100 ($8,722.95) dollars at the date of this decree. And it is further ordered, adjudged, and decreed by the court that the said defendant Kent K. Hayden, receiver of the said defendant the Capital National Bank, be, and he is hereby, ordered to pay the plaintiff the amount of said trust fund in his hands, as hereinbefore found, to wit, the sum of eight thousand and fifty dollars, together with seven per cent. interest thereon from January 20, 1893, as damages for the detention thereof, the said principal and interest at the date of this decree amounting to the sum of eight thousand seven hundred twenty-two and 95/100 ($8,722.95) dollars, out of any money now in his hands, or that may come into his hands, as such receiver; that when said money, or any part of it, is paid under this order, the same shall apply on the above judgment against said defendant bank; that the said defendant bank and said defendant Hayden pay the costs of this action, taxed at $50.03.'
Thereupon the defendant bank, 'by Kent K. Hayden, its receiver,' moved for a new trial on these grounds: '(1) The judgment is not sustained by sufficient evidence. (2) The judgment is contrary to law. (3) Errors of law occurring at the trial, duly excepted to. (4) There is error in the assessment of the amount of recovery, in this: that the judgment allows the plaintiff interest on his claim from and after the failure of the Capital National Bank.' The motion was overruled, a bill of exceptions duly taken, and the cause carried to the supreme court of Nebraska on error.
The application to that court for the writ of error assigned 27 errors. Some of these asserted that certain enumerated findings of fact were not 'sustained by the law,' and the 21st, 22d, 23d, 24th, 25th, 26th, and 27th were:
'(21) The court erred in rendering judgment against the plaintiff in error for interest upon the amounts collected by the plaintiff in error for the defendant in error.
'(22) The court erred in rendering judgment against the plaintiff for the costs.
'(23) The court erred in holding that money collected by the Capital National Bank was a trust fund in the hands of the receiver for the benefit of the defendant in error.
'(24) The court erred in rendering judgment against the plaintiff in error for the full amount of the notes collected by the Capital National Bank.
'(25) The court erred in rendering a judgment which had the effect of making the defendant in error a preferred creditor over the other creditors of the Capital National Bank
'(26) The court erred in ordering that the amount of the judgment should be paid out of any money then in the hands, or that might thereafter come into the hands, of the plaintiff in error.
'(27) The court erred in rendering a judgment which would become a lien upon all the assets of the Capital National Bank.'
The supreme court affirmed the judgment of the district court (69 N. W. 1151), and, its judgment having been entered, the receiver applied for a rehearing, assigning five reasons therefor, of which the fifth was as follows: 'Because said judgment and decree of said district court so affirmed by said judgment and decree of this court adjudged the amount found due the plaintiff therein to be a lien upon the property and assets now in the possession of the appellant, or which shall hereafter come into his possession, and to be paid out of the proceeds thereof in preference and priority to other creditors of said bank, and is in violation of the provisions of the national bank act of the United States, under whose authority this appellant was appointed and is acting.'
The petition for rehearing was denied, and thereafter this writ of error was allowed.
After the case had been docketed, the death of Hayden was suggested, and the appearance of John W. McDonald, appointed his successor as receiver, was entered.
A. E. Harvey and John H. Ames, for plaintiffs in error.
N. C. Abbott, for defendant in error.
Mr. Chief Justice FULLER, after stating the facts in the foregoing language, delivered the opinion of the court.

## Notes

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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