#### State of Nebraska v. Bank of Hemingford et al., appellees, and Hamilton-Brown Shoe Company et al., appellants.

Filed September 21, 1899.

No. 8964.

1. Insolvent State Banks: Duties or Receivers. A receiver of a state bank appointed in proceeding's under the provisions of section 34, chapter 8, Compiled Statutes, takes possession anil holds the assets of a bank in favor of, and to assert and guard the claims of, the depositors and other creditors as the paramount and suj)erior claims against the assets.

2. --: Preferred Claims. In the adjustment and settlement of claims, those of depositors and oilier general creditors who trusted the bank in the course and transaction of its legitimate business may bo preferred over claims which origina led .in the pursuit and conduct of a business by the bank in which it had no legal authority or power to engage.

Appeal from the district court of Bos Butte couniy; Heard below before Westover, J.

*Affirmed.*

*Charles B. Keller,*for appellants.

*Smilh P. Tuttle,*for receiver.

Harrison, C. J.

The Bank of Hemiugford, a corporation formed under ihe laws of this state, and located and in business at Hcmingford, purchased a store building and lots upon *819which it stood, also the -stock of merchandise contained in the store, of all of which the bank afterward, made a conditional sale to Mary E. Jones. The vendee defaulted, in fulfillment of the conditions of the sale, and the bank took possession of the property on or about March 7, 1893, from which time until October 2, 1895, when the bank was closed and taken in charge by the state banking board, the bank had conducted the mercantile business. In the due course of proceedings to “wind up” the affairs of the bank a receiver was appointed, who took possession of the assets of the bank, inclusive of the store building, the real property upon which it was situated, also the stock of merchandise. The appellant had sold merchandise to the bank during the time the latter was running the store, and which had been placed therein as a part of the stock for sale, and sold in the course of the retail trade; and for the unpaid portions of the bill or accounts due and unpaid claims were duly presented to the receiver, each of which was returned indorsed: “Not filed, for the reason it is not a legal claim against the Bank of 1-Iemingforcl. Dated December 20, 1895. Ira E. Tash, Receiver Bank of I-Iemingford.” The appellants, by petition of intervention in the proceeding in district court wherein the receiver had been appointed, set up and asserted their respective claims, and after trial a decree was rendered by which certain claims for parties of amounts collected by the bank on accounts against a party who had owned and conducted the store (it was the conditional vendee of the bank and the debt contracted by her) were preferred, the depositors of the bank ordered paid, in full; and if any assets remained they were to be applied in payment of the claims of appellants and others who had similar claims and who had also asserted them in the same manner as appellants had their claims. Appellants claim that they should have been accorded preferred claims against any amount in the hands of the receiver derived or realized from the sale of the store property, inclusive of the merchandise, *820or at least should not have been postponed in favor of the other creditors of the bank. It is conceded by all parties, and is true, that the bank was not authorized to engage permanently or as a venture in the business of selling merchandise at retail, or to use the common general expression, “in keeping a store,” and in so doing it proceeded without warrant in its articles of incorporation and hence without legal right. It lias boon decided that if a bank not authorized, by'its articles of incorporation engages in a business other than banking, an account for articles furnished it in and about the conduct of such business may be collected from if, and that it had no power to make the contract out of which the debt arises is of no avail to it as a defense in an action against it to recover the amount of the account. *(American Nat. Bank v. National Wall Paper Co.,*77 Fed. Rep. 85.) But a receiver appointed, as in this case, under the provisions of our banking act will answer in such matters as herein in controversy, not alone for the bank or as representing or “standing in the shoes of the banlc,” but will guard, protect, and preserve the lights and interests of creditors, and look to and secure their proper adjustment relatively to all claims and each to the other. *(Barrington v. Connor,*51 Neb. 214.)

In the absence of evidence to the contrary, and there is none, it will be presumed that the depositors dealt with the bank as a bank and not as a store-keeper, and believed it to be and trusted it as engaged in legitimate banking and not in'ventures or transactions not contemplated in the articles of its incorporation, and in which its capital and funds, or a portion thereof, must be used, and they are entitled to demand of right that the funds diverted and employed, for purposes other than the banking business, if such funds have been returned to or are in the possession of the bank, or, in the event of its insolvency, .have been taken by its duly appointed receiver, together with any funds or property which in the course of the outside dealing have been mingled with what were *821originally put to the unauthorized use by the bank, be appropriated to the payment of their just claims against the bank to the exclusion of parties who have accounts against the bank which originated exclusively in the unauthorized business. The parties Avho trusted the bank as a store-keeper kneAV that it ay as an incorporated bank, and must have known, or will be charged with the knowledge, that it was not properly in- the retail mercantile business.

It is urged with considerable stress that quite a large percentage of the goods, the accounts or bills for which Avere presented to the receiver as claims by the appellants, Avas in the stock in the store at the time it passed into the possession of the receiver of the bank; also, that there Avas an account in the books of the bank, in which the store figured as a party and by or from which it was possible to ascertain Avliat money had come to the bank from the store business as a source, and in this connection that the creditors of the bank, as a store-keeper, ought to be preferred as to funds or property Avhich came from the store to the bank or its receiver, or at least to share equally in them with the other creditors of the bank. There Avas evidence to the effect that “ninety per cent” of one bill of goods, the account for Avkick Avas the basis of the claim of one of the appellants, remained unsold and in the stock in the store Avken the receiver took possession,- and relative to some others of the claims of appellants similar conditions prevailed, except the per cents of goods named were smaller; but here it must be said that this is not an action to recover the specific articles or goods or their proceeds, but is in the nature of an action to recover on an account against the bank, and the evidence to Avhich attention has been dirécted can have but little, if any, weight, .except as it might avail to awaken and move the equitable feelings and powers of the court; but the appellants are in no position to invoke the equity poAvers of the courts as against the rights of the depositors and general creditors of the bank, *822There was also testimony to the effect that in the books of the bank an account had been kept with the store, and the record states that some pages of the books of the bank were introduced in evidence to show portions at least of the account with the store, but these are not in the record presented here, and from all that is before us on the subject it cannot be said that there is evidence which in any degree tends to show that funds taken from the bank to the store business had been fully repaid and that there were funds or profits from the store business to which the appellants might possibly, equitably, be said to have any light to demand they be paid on their claims as distinctively and specifically, to coin an expression, store funds. The decree of the district court was right and must be .

Affirmed.