Case Name: Dwight J. McCann and The Nebraska City National Bank, impleaded with William H. James, plaintiffs in error, v. The State of Nebraska, defendant in error
Court: Nebraska Supreme Court
Jurisdiction: Nebraska
Decision Date: 1876-01
Citations: 4 Neb. 324
Docket Number: 
Parties: Dwight J. McCann and The Nebraska City National Bank, impleaded with William H. James, plaintiffs in error, v. The State of Nebraska, defendant in error.
Judges: 
Reporter: Nebraska Reports
Volume: 4
Pages: 326–338

Head Matter:
Dwight J. McCann and The Nebraska City National Bank, impleaded with William H. James, plaintiffs in error, v. The State of Nebraska, defendant in error.
Banks : liability of, for acts of president. The United States being indebted to the State of Nebraska, drew two drafts upon its treasury, in favor of “William H. James, acting governor, or order.” The drafts were indorsed by James and by him delivered to McCann, a stock-holder and the president of the Nebraska City National Bank. The drafts were given to McCann, in the banking house, the cashier indorsed the same, and the bank received the proceeds. A portion of the fund was paid by McCann to O’Hawes, who had been the agent authorized by James to collect the same from the general government, and a large part of the balance paid to James on individual checks drawn by him from time to time, some upon McCann, and others upon the bank, but none of the amount was ever paid into the state treasury. Held> in an action against James, McCann,and the bank,that the drafts being the property of the state, James had no interest therein whatever that he could transfer except to the state treasurer, who is the sole fiscal officer of the state; that the drafts contained on their face sufficient to put a purchaser on inquiry as to whether or not James was the owner; that notice to McCann was notice to the bank; that the bank was liable for the full amount of the drafts, nor could any deduction be made on account of payment to O’Hawes, such payments being made without authority of law.
Error to tbe district court for Lancaster county; tbe case being tbus:
In 1871 and 1872, Pat O’LIawes, with a power of attorney executed by William H- James, tben secretary of state aiid acting governor, collected for tbe state of Nebraska, from tbe United States, tbe sum of six thousand eight hundred dollars. This money was collected under an act of congress authorizing tbe re-imbursement to the territory of Nebraska of certain expenses incurred in repelling Indian hostilities, and by virtue of that act tbe amount proved up and allowed by tbe general government was paid by drafts on the treasury of tbe United States, which with all tbe subsequent indorsements are as follows:
Draft No. 3373.
No. 3619. War Warrant, Series of 1870, R. B. Treasury of United States C.
Pay to W. H. James, Acting Governor, or Order, four thousand eight hundred and thirty-four .94 dollars.
Washington, D. C., Dec., 7th, 1871.
E. E. SPINNER, Treasurer of the U. S.
Registered Dec. 7th,-1871,
John Allison,
Register of the Treasury,,
Ass’t Treasurer U. S.
$4834.94, New York.”
Indorsed on the bach as follows:
William H. James, Acting Governor.
D. J. McCann.
Pay Geo. T. Boker, Cashier, or Order, for collection for account of the Nebraska City National Bank.
W. W. BELL,
Yiee-President.
E. E. SCHOFIELD,
Paid January 5th, 1872. Cashier.
Draft on War Warrant No. 149.
No. 4119, Series of 1870, W. P.
Treasury of the United States,
Pay to Hon. W. H. James, Acting Governor, or Order, one thousand four hundred and sixty-four .10 dollars. Washington, D. C., January 15th, 1872.
L. R. TUTTLE,
Assis’t Treas. of the U. S.
Registered Jan’y 15th, 1872,
John Allison,
Register of the Treasury,
Assist. Treas. of the U. S.
“$1,464.10, New York.”
Indorsed on the baeTc as follows:
William H. James, Acting Governor.
Pay J. A. Beardsley, Cashier, or Order, for collection for account of Nebraska City National Bank.
J. P. METCALF, Cashier.
Jas. A. Beardsley, Paid Feb. 2d, 1872.”
The first draft was delivered in Washington on the day of its date to the agent, O’Hawes, who in turn delivered the same to Dwight J. McCann, at that time a stockholder and president of the Nebraska City National Bank, for conveyance to Acting Governor James. It was agreed between O’PIawes and McCann that the draft should be delivered, only upon the condition that J ames should allow O’PIawes a percentage of the amount, as a fee for collecting the same. Before leaving Washington, McCann paid O’PIawes five hundred dollars by draft on New York, and on his return gave James a certificate of deposit for the amount of the draft, less the five hundred dollars paid to O’PIawes. Prior to these transactions, and before the organization of the bank, McCann did business in Nebraska City by himself, and, associated with others, under the firm name of D. J. McCann & Go., The bank was the successor of D. J. McCann & Co., and had a sign over the place where it did business, to that effect.
The certificate of deposit above mentioned was given in the name of D. J. McCann, and upon its delivery to James, the latter indorsed the treasury draft, it was handed to the officers of the bank, and by them sent on for collection. Afterwards James drew his checks for various amounts on McCann, all of which were paid by the bank. When James had drawn upwards of a thousand dollars in that manner, at the request of McCann, he returned the certificate of deposit, but continued to still draw checks, some upon McCann, some upon Mc-Cann and Co., and some upon the bank, all being honored, paid by the bank, and cancelled with the cancelling stamp usually in use in banking houses.
The second draft was brought by O’Hawes in person to Nebraska City, and by an agreement with James, seven hundred and fifty dollars of the amount was paid to O’Hawes, and the balance given to James, or placed to his credit upon the books of the bank.
James still continued drawing checks as above stated, until lie liad drawn all of said amount, except about fifteen hundred dollars, when by McCann’s direction further payments to James ceased, as McCann claimed to have an account against the state for that amount, on account of disbursements made by him at the time of the Indian hostilities before referred to; and in his answer in this action McCann alleged that, said claim was included in the amount allowed by the general government, and paid by the first of the above named drafts. None of the money paid to 'James, nor that retained under McCann’s direction, was ever paid into the state treasury, and the state brought this action in the district court against James, McCann and the bank, to recover the full amount of the drafts. The testimony introduced at the trial tended to. establish the facts above stated. It was in evidence,-on the part of the bank, that the proceeds of the first draft were placed to the credit of McCann on the books of the bank, and whenever checks came in from James, they were by McCann’s direction charged up to that account; and that a part of the proceeds of the second draft were paid to O’Hawcs, over the counter of the bank by direction of James, and the remainder either paid to James in the same manner, or else placed to his credit and checked out as above stated. The court charged the jury as follows :
“First. The governor of the state of Nebraska is not a fiscal officer of the state, and has no power or authority to negotiate, transfer, or dispose of any bond, draft, or money belonging to the state except to the state treasurer who is the sole fiscal officer of the state.
Second. The treasury drafts received by the governor from the United States, were received by him as a mere naked trustee for the state with no power or authority to negotiate, sell, indorse, or transfer the same, except to the state treasurer the proper financial officer of the state.
Third. And if the jury believe from the evidence that said treasury drafts were indorsed by the defendant James, acting governor, to the defendant McCann, or to the defendant, The Nebraska City National Bank, and that the defendants have collected and received the proceeds of such drafts, knowing the drafts to be the property of the state, then the sums so received were received in trust for the state,, and the jury will find for the plaintiff for the full amount of the proceeds of such drafts.
Fourth. If the jury believe from the evidence that the said defendant McCann, had notice of the character and ownership of the treasury drafts so disposed of, he then being president of the bank, notice to him was notice to the bank of which he was president.
Fifth. The fact that such drafts were made payable to the order of James, officially as governor, is notice presumptive that the drafts belonged to the state, and is sufficient to put parties receiving, negotiating or handling the drafts, upon inquiry as to their ownership.
Sixth. If the jury believe from the evidence that the treasury drafts, or either of them, were indorsed and transferred by the defendant James, and delivered to the defendant McCann, an officer of the bank, James believing that the transaction was with the bank, and he intending to deal with the bank; and that 'McCann on receiving such drafts, made and delivered, or caused to be made and delivered to James a personal obligation showing that the transaction was with McCann individually, James not reading the certificate at the time of its receipt, then the jury may find that the transaction was with the bank, and in respect thereto may find for the plaintiff and against the defendant bank, as well as against the defendant McCann.
Seventh. If the jury believe from the evidence that the said defendants, or either or any of them have negotiated or handled said drafts, or either of them, without indorsement or authority of the treasurer of the state, the defendants having notice that the drafts, or the proceeds arising therefrom, were the property of the state; or if the defendants without such authority, and knowing such facts, have received or collected the drafts or the proceeds to the credit of any person or officer other than the state treasurer, and that such funds have not been accounted for, or paid to- the state treasurer on demand, such acts amount to a conversion of the fund, and the jury will find for the- plaintiff and against all of the defendants handling, negotiating, or collecting such drafts, or the funds therefrom arising, with interest from the date or dates of such transactions.
Eighth. If the jury believe from the evidence that the defendant bank, received, negotiated, or handled the treasury drafts in question, knowing them to be state property, and received and collected the same to the credit of any person except the state treasurer, and without his indorsement, then such transaction was not in the ordinary course of business, was unauthorized by law, and the bank is liable therefor.
Ninth. Payment t-o Pat O.’ITawes without warrant of the auditor, if so made, was utterly unauthorized, and the jury will give no credit or abatement from plaintiff’s demand therefor.
Tenth. If the jury believe from the evidence that said drafts were indorsed and transferred to or received by the defendant McCann, or to or by defendant bank, for the purpose and with the intention of keeping the same out of the state treasury for a time, such purpose was against public policy and unlawful, and all parties co-operating and assisting therein or consenting thereto are liable for the fund, and the jury will find for the plaintiff and against all the defendants conspiring thereto, or assisting or co-operating therein.
The defendants objected to the instructions so given, and also to the admission of evidence of O’Hawes relative to his transactions with McCann, which objections' were overruled by the court and exceptions taken. A. large number of instructions asked for by the defendants were refused, and exceptions taken. Yerdict for plaintiff against all of the defendants, for the sum of $8,067.52. Motion for new trial overruled. McCann and the bank come here by petition in error.
Mason & Wheedon and E. F. Warren, for plaintiffs in error.
I. These drafts are made payable to Acting Governor William H. James’ order. He alone could indorse the same. He had the possession of each of them, and the control thereof. He was authorized to receive the money thereon. The drafts were for all purposes commercial paper. Yet notwithstanding this, the first instruction says in plain terms, that Acting Governor W. H. James had no power or authority to negotiate, dispose of, or transfer these drafts except to the state treasurer.
II. If the second instruction be correct, no one could acquire title to, or property in said drafts except through the state treasurer; besides, these drafts are payable generally to the order of W. IT. James, Acting Governor. Suppose W. II. James, Acting Governor, had indorsed these drafts direct to the treasury of the Hnited States, and received the money and squandered the same, would the State have had a claim against the general government?
III. The third instruction is very broad and sweeping, and without qualification, and it seems to us does not contain the law, and is not supported by authority.
IY. Notice to McCann could be no notice to the bank, except in matters where he was dealing for and in behalf of the bank. The jury would, and doubtless did consider that the bank was bound by what took place between D. J. McCann and James, in Washington, and by what Pat. O. Flawes said to D. J. McCann in Washington, under this instruction.
Y. McCann acted for himself alone; indeed there is no evidence that he acted otherwise than for himself. Indeed, it is charged an the petition that the drafts were procured by D. J. McCann, and indorsed in pursuance of a fraudulent conspiracy between James and McCann to defraud the state. The bank was not a party to this fraud. The bank simply performed its whole duty in this matter. It should not be held responsible for the conspiracies of McCann made in Washington with Governor James and executed in Nebraska. See the case of the Bank of Columbia v. Patterson’s Adm’r, 7 Wend., in which it is said by Mr. Justice Parker, all the learning upon the subject of corporate liabilities is exhausted.
YI. . In all these matters D. J. McCann did not act officially as president of the bank, and he did not assume to do so, and if he had assumed to do so, it not being within the scope of his authority as president, his acts could not have bound the corporation. Foster v. Essex Bank, 17 Mass., 507.
YII. In this case it is to be borne in mind that D. J. McCann was acting out of the line of his duty as president of the bank, and as is alleged, and the proof tends to show, to commit a willful injury, and to perpetrate a fraud. Under such circumstances the bank is not liable.
The evidence in the jmesent case upon this question was not submitted to the jury; and the fact appears in this record that the acts complained of were done only by D. J. McCann, and in pursuance of an arrangement between him and Acting Governor James. It was error to hold the bank, and to charge the jury in effect, that the bank was liable for McCann’s illegal and unauthorized conspiracy with James.
George P. Roberts, Attorney General (with whom was T. M. Marquette), for defendant in error, in support of the various instructions given by the court, cited the following cases: Gerrarcl v. Pittsburgh li. R., 29 Penn. State, 154. State v. Bank, 45 Mo., 544. Porter v. Bank, 19 Vermont, 410. Blaisdell v. Stevens, 16 Id., 179. Sugden on Vendors, 522. Anderson v. Van Alen, 12 Johns., 343. Punter v. Field, 20 Ohio, 340. They also contended that the objection made to the admission of parts of the deposition of Pat O’Hawes were made for the first time at the trial of the cause, and the only-objection that could then be insisted upon was irrelevancy and incompetency; that the evidence' all tends to show: First. That the money paid on the drafts belonged to the state. Second. That the defendants had knowledge of the facts. Some of the evidence may be immaterial, but not irrelevant or incompetent. Mich. Gen. R. R. Go. v. Goleman, 28 Mich., 445.

Opinion:
Maxwell, J.
The drafts in question were drawn in favor of W. H. James, acting governor, or order, and were drawn for money due the state from the United States. McCann was a stockholder and president of The Nebraska City Nati onal Bank, and was fully aware that the drafts in question belonged to the state, and that James had no interest in them whatever, but was merely the medium to transfer them to the state treasmw. James testified in regard to the first draft received, that "the transaction took place in The Nebraska City National Bank. All my con ver sation with McCann was there. I indorsed the treasury draft at the counter of the bank, and received from him, or some one in the bank, a certificate of deposit. I supposed it to be the certificate of the bank, and not that of D. J. McCann, or D. J. McCann & Co. I did not know there was such a firm, or that he was a member of it. I dealt with him in the bank, and as an officer of the bank, and I supposed I was dealing with The Nebraska City National Bank." In regard to the second draft he testified: "McCann was present, during all the conversation with O'Hawes, and knew the source from whence the fund was derived. The second draft was also a part of the militia indemnity fund, received from the United States, and was part of the same fund as the first draft which McCann brought from Washington. It was not handed to me until I had consented to allow Pat. O'Hawes to be paid the seven hundred and fifty dollars. It was then handed to me, and I indorsed it and handed it to McCann, who turned and handed it to the cashier or clerk that stood near, who must have heard the previous conversation, for without directions or instructions from McCann as to what was to be done with it, he took the treasury warrant so indorsed, and paid O'Hawes, as I supposed, the seven hundred and fifty dollars." This testimony is not contradicted.
The rule is well settled that notice to a director or knowledge derived by him, while not engaged officially in the business of the bank, cannot operate to the prejudice of the latter;' but notice to the cashier of a bank ordinarily will be notice to the bank. Conant v. Seneca County Bank, 1 Ohio State, 298. Sturges v. Bank of Circleville, 11 Id., 153.
The president of a national bank, being a stockholder and director, is presumed to be desirous of promoting its welfare. He is its chief executive officer, and has a gen eral supervision of its affairs. Notice to him will be notice to the bank. Porter v. Bank, 19 Vt., 410.
In this case McCann is shown to have drawn on New York, as president of the bank, for five hundred dollars, in favor of 0'IIawes as fees, which appears to have been paid and charged to the bank. It also appears that he received the drafts in the bank, as an officer of the bank; and he as presiding officer has verified the answer of the bank in this case. It is claimed, however, that McCann received the drafts in his own name, and in a transaction of his own separate and apart from the bank, and that after having so received them, he transferred them to the bank and was credited the amount thereof on his account. Therefore, although' a cause of action may exist against him, the bank is not liable.
There is no proof whatever of any arrangement between James and McCann, whereby McCann was to take these drafts as an individual, or as a member of the firm of D. J. McCann & Co., while on the other hand James swears positively that he supposed he was dealing with the bank.
The intention of James being, as shown by the testimony, to deliver the drafts to the bank, the fact that Mc-Cann received them and afterwards indorsed them, does not change the character of the transaction, nor make it a personal one between McCann and James.
The drafts having been delivered to McCann as an officer of the bank, at its counter during business hours, were delivered to the bank; and notice to McCann that James was not the owner of the drafts, and had no interest therein whatever, was notice to the bank of those facts. And the drafts themselves contained on their face sufficient to put the purchaser upon inquiry as to whether James was the owner or not. It is unnecessary to examine the case farther. The bank having purchased these drafts, with notice that they belonged to the state, and having collected the same, is indebted to the state for the amount so re ceived ; and no deduction can be made for the amount paid by the bank to O'Hawes, it having been paid without authority of law. The judgment of the district court is clearly right, and must be affirmed.
Judgment affirmed.