Court Opinion

ID: 8033892
Source: CourtListenerOpinion
Date Created: 2022-09-09 03:18:32.59261+00
Date Added: 2024-06-11T16:37:03.687061
License: Public Domain

Good, Thompson, and Eberly, JJ.,
dissenting.
We respectfully dissent from the decision of the present *479majority opinion of this court in this case, from the reasoning upon which the decision proceeds, and from the statement of facts set forth therein upon which it purports to be based. We desire to announce our adherence to the views of the law heretofore expressed by Good, J., in Central Nat. Bank v. First Nat. Bank, ante, p. 444, as applicable to this controversy, and reiterate the statement as to law and facts set forth in the concurring opinion in this case, Central Nat. Bank v. First Nat. Bank, ante, p. 457.
Preliminary to a further discussion of the imperative reasons which compel us to continue our opposition to the rule announced by the majority, it may be said that this is an equitable proceeding tried here de novo; that the sole parties to the original transaction which furnishes the foundation of this litigation- were a national bank in Lincoln, Nebraska, and a national bank in Gering, Nebraska. The parties litigant now before us are the national bank in Lincoln, Nebraska, and a receiver of the Gering bank properly appointed by the United States comptroller of currency at Washington, D. C. The comptroller of currency, under and pursuant to the provisions of the national bank act, and prior to the commencement of this action, took possession of all of the assets of the Gering bank then wholly an insolvent institution which closed its doors December 31, 1923.. At that time the facts, as contained in the record, indicate that, with the exception of one note which is not a matter of dispute here, none of the physical properties embraced in the claim of the Lincoln bank, of any of their actual proceeds, formed any part of the assets of that institution.
The majority opinion admits, as all litigants agree, that the record before us wholly fails to identify any of the property constituting the foundation of plaintiff’s suit, or any of the proceeds thereof, as part or whole of any specific assets which reached the possession of the representative of the comptroller when this bank was taken over by that department.
*480As-to three items of property then carried on the books of the Gering bank as “Real estate, $11,940,” “Furniture and fixtures, $4,906.25,” “Other real estate, $14,000,” it is conceded that they became the property of the Gering bank long prior to the transactions before us; that, under the circumstances of the case, it was a physical impossibility for the property in suit, or of any of the proceeds thereof, to have entered into, or to have become incorporated in, any of the properties above named, or in the consideration parted with by the Gering bank for the same.
The majority opinion accords the Lincoln bank a preference against all the assets of the Gering bank, including even the items of real and personal property last set out, and makes the claim of that bank a prior charge and an equitable lien against the same. As bearing on the reasons upon which the majority opinion is based, attention is called to the following excerpt.: “The proposition that the trust fund did not enter into the purchase of the bank building, furniture, fixtures or bills receivable, as a reason for not granting plaintiff the relief sought, will not stand the test of analysis or justify the failure to charge the mass of assets with plaintiff’s claim. It destroys itself when reduced to a definite philosophy. The principal mediums of exchange in the business world are credits, commercial paper, checks, drafts and securities. Equity looks through the mere forms in which property is held to substance and reason for the purpose of dealing justly with conditions as they exist. Though the converted trust funds were not originally hid in or mingled with the kinds of property enumerated, the bank indebtedness was nevertheless reduced by the proceeds used for banking purposes. The general indebtedness with which those items of property were burdened was decreased to the extent of the trust fund wrongfully converted and used by the insolvent bank. The outstanding obligations of defendant would have been greater to the extent of $4,467.23, when the receiver took *481charge, if they had not been reduced by the proceeds of the notes. The financial disaster of the insolvent bank might have occurred earlier, with still greater liabilities, except for the unlawful use of the converted proceeds in banking transactions. All that seems to me to be ‘manifest’, in considering plaintiff’s right to a preference over general creditors, is that it is immaterial whether the converted proceeds were used to purchase the bank building, furniture, fixtures and bills receivable or reduced the insolvent bank’s indebtedness by which those items of property were burdened.” Central Nat. Bank v. First Nat. Bank, ante, p. 451, 455.
True, the language just quoted appears in the former dissenting opinion by Rose, J., but the following also appears in the present majority opinion: “Four members of the court entertain the view that the dissenting opinion contains the better solution of the question presented by the appeal, and it is therefore adopted as the opinion of the court.”
In this connection also appears in the majority opinion the further statement: “That the assets were augmented by proceeds of the notes is also a proper deduction from the evidence.”
While it is deemed that the conclusion last stated is refuted by the facts as detailed in the opinion by Good, J., and in the concurring opinion by Eberly, J., no good can be served by their further discussion'.
However, a careful examination of the majority opinion, especially in view of the language of Rose, J., quoted, inevitably leads to the conclusion that we have before us a recrudescence of the philosophy and principles promulgated in the once leading, but now overruled, and almost universally discredited, case of McLeod v. Evans, 66 Wis. 401. The result arrived at, the controlling principles announced, and application made to the facts as assumed to be reflected by the record in the Wisconsin court, are in all respects *482identical with the majority opinion in the present case. Cole, C. J., in that opinion says in part: “The conclusion is irresistible, from the facts, that the proceeds of the trust property found its way into Hodges’ (the insolvent trustee) hands, and were used by him either to pay off his debts or to increase his assets. In either case, it would go to the benefit of his estate. * * * We do not understand that it is necessary to trace the trust fund into some specific property in order to enforce the trust.” Accordingly, that court awarded a lien by preference for the entire amount received by Hodges.
But, as set forth in the former majority opinion by Good, J., in this case, this doctrine was expressly overruled in Nonotuck Silk Co. v. Flanders, 87 Wis. 237. Without further discussion we will content ourselves with a reference to note in 3 Pomeroy, Equity Jurisprudence (4th ed.) 2386, sec. 1049, where, after stating the rule as announced in the opinion by Good, J., it continues: “The contrary holding confuses the lien with the trustee’s personal liability. Such confusion is harmless in its results when the trustee is solvent; but where his assets are insufficient to pay his debts, the question becomes important as between the bene-ficiary and the general creditors. To extend the (lien in such case to the general mass of the trustee’s assets is to pervert the character of the personal liability of the trustee, —a ‘simple’ equitable debt, — and to render the cestui que trust a preferred creditor, irrespective of his inability to establish any right of property in a specific portion of the trustee’s estate. , Such, however, was the result attained, for a time, by the decisions in a group of western states, nearly all of which have since been repudiated by the courts which rendered them: McLeod v. Evans, 66 Wis. 401, 57 Am. Rep. 287 (but see Nonotuck Silk Co. v. Flanders, 87 Wis. 237; Burnham v. Barth, 89 Wis. 362) ; Davenport Plow Co. v. Lamp, 80 Ia. 722, 20 Am. St. Rep. 442 (but see Bradley v. Chesebrough, 111 Ia. 126; compare Whitcomb *483v. Carpenter, 134 Ia. 227, 10 L. R. A. n. s. 928; McCutchen v. Roush, 139 Ia. 351); Myers v. Board of Education, 51 Kan. 87, 37 Am. St. Rep. 263 (but see Travelers Ins. Co. v. Caldwell, 59 Kan. 156; Kansas State Bank v. First State Bank, 62 Kan. 788); Carley v. Graves, 85 Mich. 483, 24 Am. St. Rep. 99 (but see Board of Fire & Water Commissioners v. Wilkinson, 119 Mich. 655, 44 L. R. A. 493); State v. Bruce, 17 Idaho, 1, 134 Am. St. Rep. 245, L. R. A. 1916 C, 1 (see Bellevue State Bank v. Coffin, 22 Idaho, 210); Capital Nat. Bank v. Coldwater Nat. Bank, 49 Neb. 786, 59 Am. St. Rep. 572 (but see State v. Bank of Commerce, 54 Neb. 725; City of Lincoln v. Morrison, 64 Neb. 822, 57 L. R. A. 885.)”
The note, quoted, correctly indicates that in State v. Bank of Commerce, 54 Neb. 725, and in City of Lincoln v. Morrison, 64 Neb. 822, this court refused to follow McLeod v. Evans, supra, and denied a preference as to trust funds which “might have been” or “were dissipated” in payment of the indebtedness of the trustee. In City of Lincoln v. Morrison, supra, this position is reaffirmed, and Pound, C., who delivers the opinion of this court, says, in substance: “We are not able to agree” with the rule stated in McLeod v. Evans, supra.
Certainly, these former opinions, last referred to, have been seriously limited, or materially modified, if not wholly overruled, by the latest pronouncement of the present majority.
Conceding that the majority are right in the instant case (which we do not), the profession is entitled to know the full effect of the same as applied to previous decisions. We earnestly protest that the public is entitled to have the law stated from this bench, not only with clearness and certainty as to the disposition of the case now before the court, but also to have its full effect upon prior decisions declared.
Other serious objections to the majority opinion are that it overlooks the fact that the fundamental issue here presented is controlled by the “national bank act,” ignores the *484policy and interpretation of that act as made by the federal decisions, and fairly denies to the receiver here the right which that statute secures. Then, too, it is in opposition to the trend of legal development which, as evidenced both by statute and decision, is towards greater uniformity.
With reference to the national bank act, the supreme court of the United States said at a very early day: “We consider that act as constituting by itself a complete system for the establishment and government of national banks, prescribing the manner in which they may be formed, <the amount of circulating notes they may issue, the security to be furnished for the redemption of those in circulation; their obligations as depositaries of public moneys, and as such to furnish security for the deposits, and designating the consequences of their failure to redeem their notes, their liability to be placed in the hands of a receiver, and the manner, in such event, in which their affairs shall be wound up, their circulating notes redeemed, and other debts paid or their property applied towards such payment. Everything essential to the formation of the banks, the issue, security, and redemption of their notes, the winding up .of the institutions, and the distribution of their effects, are fully provided for, as in a separate code by itself, neither limited nor enlarged by other statutory provisions with respect to the settlement of demands against insolvents or their estates.” Cook County Nat. Bank v. United States, 107 U. S. 445.
The controlling question before the court in Cook County Nat. Bank v. United States, supra, was whether the United States was entitled to a preference against the receiver of the bank under section 3466, Rev. St. U. S., then existing, which provided: “Whenever any person indebted to the United States is insolvent, or whenever the estate of any deceased debtor, in the hands of the executors or administrators, is insufficient to pay all the debts due from the deceased, the debts due to the United States shall be first satisfied; and the priority hereby established shall extend as *485well to cases in which a debtor, not having sufficient property to pay all his debts, makes a voluntary assignment thereof, or in which the estate and effects of an absconding, concealed, or absent debtor are attached by process of law, as to cases in which an act of bankruptcy is committed.” This claim of preference on part of the government was denied by the court in the following language: “This secr tion (national bank act) provides for the distribution of the entire assets of the bank, giving no preference to any claim except for moneys to reimburse the United States for advances in redeeming the notes. When this reimbursement is fully provided for, the balance of the assets, as the proceeds are received, is subject to a ratable dividend on all claims proved to the satisfaction of the receiver, or adjudicated by a court of competent jurisdiction. Any sum remaining after the payment of all these claims is to be handed over to the stockholders in proportion to their respective shares. These provisions could not be carried out if the United States were entitled to priority in the payment of a demand not arising from advances to redeem the circulating notes. The balance, after reimbursement of the advances, could not be distributed, as directed, by a ratable dividend to all holders of claims; that is, to all creditors.”
It may be said in this connection that this decision is in line with the executive practice as evidenced by an opinion rendered by the attorney general of the United States in 1871. 13 Opinions of Attorneys General, 528.
This federal statute was again before the supreme court of the United States in Davis v. Elmira Savings Bank, 161 U. S. 275. New York had enacted a law providing: “All the property of any bank or trust company which shall become insolvent shall, after providing for the payment of its circulating notes, * * * be applied * * * in the first place to the payment in full of any sum or sums of money deposited therewith by any savings bank.” The receiver of an insolvent national bank, under authority of the comptroller of currency, declined to accede to a demand for pre*486ferred payment under the terms of the state law, predicating his refusal on the ground that the preference was prohibited by the national bank act. The state law was sustained by° the state courts, but on appeal to the supreme court of the United States the courts of New York were reversed, the state law held invalid, and the preference denied.
Mr. Justice White, who reviews the previous decisions of the court, in delivering the opinion of the court, says in part: “National banks are instrumentalities of the federal government, created for a public purpose, and as such necessarily subject to the paramount authority of the United States. It follows that an attempt, by a state, to define their duties or control the conduct of their affairs is absolutely void, wherever such attempted exercise of authority expressly conflicts with the laws of the United States, and either frustrates the purpose of the national legislation, or impairs the efficiency of these agencies of the federal government to discharge the duties, for the performance of which they were created. These principles are axiomatic, and are sanctioned by the repeated adjudications of this court.” Davis v. Elmira Savings Bank, supra.
All must concede that the term “assets” and the requirement that the comptroller of currency must “make a ratable dividend,” etc., must be defined and determined in view of all the provisions of the national bank act; that this act being a federal statute and each of the parties litigant being creatures of the same statute, its provisions are binding upon this court and its construction by the supreme court of the United States must be conformed to by us.
The majority opinion seeks to control the.comptroller of currency through the receiver of the Gering bank. It is to be remembered in this connection, as stated by Caldwell, Circuit Judge, in McDonald v. State of Nebraska, 101 Fed. 171: “A receiver of a national bank appointed by the comptroller of the currency in pursuance of the act of congress is charged by the laws of the United States with the execu*487tion of certain duties in the performance of which he acts as an agent and officer of the United States. His office is created and his duties defined by an.act of congress. In contemplation of law every action brought by or against him in his official capacity arises under the laws of the United States. This action is brought against the receiver in his official capacity for an alleged breach of his official duty to the plaintiff imposed on him by the laws of the United States, and the circuit court had undoubted jurisdiction of the case. Myers v. Hettinger, 37 C. C. A. 369, 94 Fed. 370; Price v. Abbott, 17 Fed. 506; Platt v. Beach, 2 Ben. 303, Fed. Cas. No. 11215; Stanton v. Wilkeson, 8 Ben. 357, Fed. Cas. No. 13299; Kennedy v. Gibson, 8 Wall. 498; Bank v. Kennedy, 17 Wall. 19; United States v. Hartwell, 6 Wall. 385; Armstrong v. Ettlesohn, 36 Fed. 209; Stephens v. Bernays, 41 Fed. 401; Bock v. Perkins, 139 U. S. 628; Hot Springs Independent School Dist. v. First Nat. Bank, 61 Fed. 417.”
Furthermore, the policy of this federal statute, and of its administration, as construed by the comptroller of currency, and as judicially interpreted by the federal courts, necessitates the presumption “that promissory notes, bonds, and other property coming to the hands of the receiver were not procured by the use of, and are not, trust property.” Empire State Surety Co. v. Carroll County, 194 Fed. 593. Hence, the burden of proof is expressly imposed on claimant to identify property. Schuyler v. Tittle field, 232 U. S. 707.
It must be conceded that the national bank act makes no distinction between claims of creditors by contract and claims of creditors based on tort. The comptroller is required to make a “ratable dividend” on both. Both classes of claims thus share equally. The line of demarcation between the respective rights of owners of “trust funds” and assets subject to the claims of creditors is necessarily involved in determining what of the properties of the insolvent bank are statutory “assets,” from the proceeds of which the “ratable division is to be made.”
As construed by the federal courts, all property coming *488to the receiver is presumed to constitute statutory “assets,” save and except property affirmatively shown by claimant to be property owned by him, or its proceeds likewise affirmatively traced to, and identified in, specific property in such receiver’s possession. The use of trust funds in the payment of trustees’ debts in this connection is universally held an insufficient foundation on which to base a claim of preference. This construction of the federal statute is binding upon this court, and to fail to conform to it is to deny the receiver a right which it secures.
Indeed, we are not without cases directly in point. As we have already stated, the majority opinion herein is substantially identical with McLeod v. Evans, supra. The latter case affirms the proposition that— “The conclusion is irresistible, from the facts, that the proceeds of the trust property found its way into Hodges’ hands (the trustee) and were used by him either to pay off his debts or to increase his assets. In either case, it would go to the benefit of his estate. * * * We do not understand that it is necessary to trace the trust fund into some specific property in order to enforce the trust. If it can be traced into the estate of the defaulting agent or trustee, this is sufficient.”
In Philadelphia Nat. Bank v. Dowd, 2 L. R. A. 480, 38 Fed. 172, Seymour, J., reviewed McLeod v. Evans (not at that time overruled) and other cases, and announced the following conclusion: “The statute forbidding preferences in the distribution of the assets of insolvent national banks is not believed to prevent a beneficiary from following any trust money, held for him by a bank, into any new investment thereof made by the bank. If, however, the doctrine could be carried to the extent claimed in the Wisconsin or even in the Texas case, it would seem to be an unlawful preference under the act of congress.”
This case, last referred to, is not cited as a controlling authority, but merely as an interesting judicial appraisement of the principles underlying the present majority opinion and which form its essential foundation.
*489“The right of congress to determine to what extent a state court shall be permitted to entertain actions against national banks, and how far these institutions shall be subject to state control, is undeniable.” 3 R. C. L. 688, sec, 320.
The supreme importance and unqualified necessity of having the powers of the comptroller of currency, a national federal officer, exercised in all states in accordance with one uniform rule construed in one uniform manner, is beyond dispute or cavil.
As our majority now have it, on the question of right to preference, if the comptroller of currency, by his representative, the national bank receiver, is haled before a Nebraska tribunal, one course of action will be required of him; while, if, in the same city, the action can be before a federal court, the direct opposite will be necessarily enjoined.
All this, as part of an orderly (?) course of judicial administration, is now established for the first time in Nebraska, in face of the admitted trend of juridical development (especially in matters pertaining to commerce and commercial law) toward even greater uniformity, as evidenced both by statutes and decisions. Truly, the mere statement of the conditions created is an unstinted con-demnation of the cause.
Remembering our duty to enforce federal statutes, as construed by the supreme court of the nation, and' that whatever power this court has in the case before us is derived, not from state laws, but from federal enactments, and conferred, at least, upon an implied condition that the rule of uniformity should ever prevailf for the reasons stated, and, in particular, because it is in effect a denial of a right created and vested by a federal statute, we dissent from the disposition of this case made by the majority, the effect of which is to unlawfully require the comptroller of currency, as a sworn officer of the United States, to exercise his official powers in the instant case in contravention of the terms of the federal statute of his creation.1