This is a controversy between A. F. Ackerman, receiver of the American State Bank of Aurora, an insolvent corporation, and Julia A. Strauss and her four children, John L. Strauss, Anna R. Livingston, Mamie E. Kingston and Alvin A. Strauss, claimants.
Through the agency of the Wentz Company claimants in 1919 sold 200 acres of land near Aurora, Nebraska, to Roscoe C. Thompson, J ames Winters and Prank Hogg for $40,000. The purchasers paid in cash $28,000 and the balance of $12,000 was paid by two notes, one for $8,000 and the other for $4,000, secured by mortgage on 120 acres of the land sold. Of the proceeds of the sale Charles W. Wentz, managing officer of both the bank and the Wentz Company, received for claimants, directly from the purchasers, $13,000 in cash and the notes and the mortgage for $12,000. Claimants had deeded their land to the purchasers, but they have never received the $25,000 thus paid to Wentz, who took the notes in his own name as payee. Claimants have, however, traced their funds and their securities through Wentz, the Wentz Company and the bank into the hand's of the receiver. They charge the bank with Wentz’s knowledge of their ownership and with the obligation to restore to them their property.
In a proceeding by the state of Nebraska to wind up the affairs of the bank, claimants, by formal pleas, presented for allowance the following items: A claim that they are the owners of the two notes described, one for $8,000 and ihe other for $4,000, aggregating $12,000, payable on their face to Charles W. Wentz and secured by mortgage on 120 acres of land sold by claimants to Roscoe C. Thompson, the knowledge of Wentz being imputed, to the bank and the latter being obliged to restore the property of claimants to them; a claim for the cancelation and the surrender *113of two promissory notes, one for $5,000 and the other for $3,750, aggregating $8,750, payable to the bank, executed by claimants Julia A. Strauss and Mamie E. Kingston, respectively, payment having been made according to agreement out of the proceeds which Wentz received for claimants directly from the purchasers of the land sold by claimants, $25,000 of the same, in money and securities, having been deposited in the bank to the credit of the Wentz Company, the bank knowing the rights of claimants; a claim for the balance of the purchase money to the extent of $4,250, being part of what Wentz received and deposited in the bank to the credit of the Wentz Company, claimants asserting the rights of depositors.-
The receiver pleaded that the notes were assets of the bank, and that it owed claimants nothing as depositors o" creditors.
The trial court found the issues in favor of claimants and directed the receiver to turn over to them the purchase money notes and securities in controversy; to cancel and surrender as paid the notes executed by claimants Julia A. Strauss and Mamie E. Kingston, respectively; to allow and pay as a deposit the claim for $4,250. From this judgment the receiver has appealed.
Questions of fact, of agency and of imputed knowledge are presented by the appeal and require a more detailed statement of the case.
The American State Bank commenced business as a commercial enterprise March 8, 1918. An officer of the state took charge of it in an insolvent condition March 17, 1920, and was succeeded by Ackerman, receiver, May 14, 1920. The bank has not since been open for the transaction of a general banldng business.
The Wentz company was a corporation dealing in real estate, farm loans, mortgages and insurance.
Charles W. Wentz was vice-president and managing officer of the bank. It had a president in name only. It had a cashier, but he recognized Wentz as the superior officer *114and deferred to Mm. In some capacity ‘Wentz bad exclusive control and management of tbe Wentz Company.. Tbe business of both corporations was generally transacted in tbe same building with Wentz tbe controlling spirit in both enterprises. Tbe transactions of tbe corporations, were more or less intermingled. Tbe bookkeepers in tbe bank kept tbe books for the Wentz Company. Tbe two-corporations occupied tbe same room and used tbe same counter, tbe same vault and tbe same safe. Each paid half tbe office rent. Tbe officers of tbe Wentz Company were officers of tbe bank. There was no public sign to-identify the corporate band that transferred paper in possession of tbe Wentz Company or disbursed, funds in the bank. Tbe Wentz Company bad kept a checking account, in tbe bank, but it was overdrawn more than $20,000 when tbe crash came.
Is there error in tbe order requiring tbe receiver to transfer to claimants their purchase money notes? He takes tbe position that this ruling is without support in the-evidence and that it is contrary to law. He argues that in all tbe transactions relating to tbe sale, to tbe drawing; of tbe papers, to tbe collection of tbe purchase price, and to the handling of tbe funds, Charles W. Wentz and theWentz Company were tbe agents of claimants and not of tbe bank; that in these respects Wentz did not act in the-interest of tbe bank; that he procured the funds in controversy as agents of claimants while absent from the-bank; that bis knowledge was not imputable to it; that tbe bank or tbe state department of trade and commerce or tbe receiver became an innocent bolder for value before-maturity and that tbe purchase money notes went intotbe bands of tbe receiver by mesne assignments as assets-of tbe bank. These propositions are skillfully argued, but they cannot be accepted as determining factors in the case.
Tbe purchase money notes were tbe property of claimants. Others could bold, use or transfer them as trustees^ *115only unless protected by the negotiable instruments law as innocent purchasers or holders for value before maturity. The notes were traced into the hands- of the receiver in the following manner-: When the account of the Wentz ■Company was heavily overdrawn and the bank itself was in danger of going to the wall March 15,1920, Wentz took the notes to Lincoln and Omaha- intending to use them for the benefit of the bank in raising money to apply on the • overdraft of the Wentz Company. While he was a drunken, nervous wreck in Omaha he there entrusted the notes to his wife. Missed from his bank the state department of trade and commerce followed him and promptly found him. In Omaha the state sheriff took the papers from the wife of Wentz in his absence and gave them to the head of the state department of trade and commerce, to whom they were subsequently assigned by .Wentz while in a hospital. By mesne transfers the receiver procured them. Assuming that the officers of the state department of trade and commerce did not know that- the notes belonged -to claimants or that Wentz held them as trustee for claimants, was the receiver an innocent holder with authority to pay the debts or overdraft of the Wentz Company with the funds -of claimants? If the bank itself had previous knowledge of the facts or was chargeable with the knowledge of Wentz, the question must be answered in the negative. The answer is not found wholly in what Wentz did as agent for claimants while absent from the bank. It is important to inquire what he did as an officer of the bank after he returned with the property of claimants.
■ The bank’s connection with the purchase money note for f8,000 did not begin with -the seizure of the state officer ■or with Wentz’s transfer to the head of the state department of trade and commerce. Wentz had previously delivered it to the bank March 4, 1920, and then directed the cashier to credit it to the bank account of the Wentz Company, the same as if it had been a check payable to the latter. The cashier, recognizing Wentz as the superior officer *116and the manager of the bank, did as directed. The cashier’s act was the act of Wentz. The act of Wentz in this transaction was equivalent to the bank’s acceptance of the note under an agreement to credit the amount thereof to the account of the Wentz Company. The ultimate effect was to reduce the overdraft of the Wentz Company to the extent of $8,000 Avith the funds of claimants — a banking transaction of financial interest to the bank. In accepting for the bank the. purchase money note of claimants on the condition mentioned, Wentz did not represent claimants. They had no power to select an agent to perform corporate acts like that for the bank. In this transaction, through which the bank procured the property of claimants, Wentz performed a banking function for the bank, and for that purpose he Avas the bank itself, the cashier deferring to his superior. Wentz sold the land for claimants, drew the papers transferring the title to their land, and Avithout their authority or knowledge made the purchase money notes payable to himself. He knew all about the transactions. He had no authority to hold, use or transfer the negotiable paper of claimants for his oAvn benefit or for the benefit of the Wentz Company or for the benefit of the bank. He could lawfully hold, use or transfer the notes in the capacity of trustee only. Claimants were not guilty of any dishonest, deceitful or fraudulent conduct. They confided in Wentz, the managing officer of the bank —a chartered institution under the constant supervision of the state department of trade and commerce. The experts of that department did not keep the two corporate agencies of Wentz separate and distinct in the eyes of those who dealt with the bank or of the public at large. In a situation like that his agency for claimants should not be extended beyond strict legal bounds to justify payment of the Wentz Company’s debts or overdraft Avith the funds of claimants. It was through the banking transaction of Wentz in directing the cashier to accept the note that the bank first accepted it. This Avas the agency of the *117bank and tbe agent had full knowledge of tbe facts. Furthermore tbe bank bad a previous arrangement to accept through Wentz tbe proceeds of tbe sale. Through him tbe bank bad agreed to lend Julia A. Strauss, claimant, $5,000 and Mamie E. Kingston, claimant, $3,750. Each bad accepted her loan and bad executed and delivered her note for tbe amount of it, payable to the bank, with tbe distinct understanding that it would be paid out of tbe purchase money when entrusted to Wentz for claimants by purchasers of tbe land. This was a legitimate banking transaction in which Wentz was tbe sole representative of tbe bank. His knowledge in respect to it and bis knowledge of tbe rights of claimants, ■ when be directed tbe bank as its officer through its cashier to accept tbe purchase money note for $8,000, are in law imputable to tbe bank. This purchase money note for $8,000 and tbe other one for $4,000 grew out of tbe same transactions and there is no lawful way for tbe bank to escape either tbe knowledge or tbe agency of Wentz. It follows that neither tbe bank nor tbe receiver is an innocent purchaser or an innocent holder. There is no error in tbe order directing tbe receiver to transfer these notes to claimants.
Did tbe trial court err in directing tbe receiver to cancel and return to tbe makers tbe note for $5,000 and the note for $3,750, payable to the bank and executed by claimants Oulia A. Strauss and Mamie E. Kingston, respectively? It was agreed between tbe bank itself and tbe makers of He notes that tbe notes should be marked “Paid” and returned when Wentz received for claimants tbe proceeds of claimants’ land. At a time when tbe knowledge of Wentz was imputable to tbe bank he procured for claimants $13,000 in cash and $12,000 in securities, both being proceeds of tbe sale, and deposited in tbe bank, in tbe name of the Wentz Company, tbe equivalent of $25,000 belonging to claimants. Tbe bank accepted and held these proceeds while chargeable with knowledge of Wentz’s trusteeship. Under siicb circumstances neither tbe bank *118nor the receiver could lawfully hold, use or transfer the trust funds or trust securities of claimants to pay the debts or overdraft of the Wentz Company. As between the bank and claimants the- entries on the bank books did not change the relations of the parties or the liabilities of the bank.- On this phase of the case the decision is controlled by the -ruling in Kremer v. Ackerman, ante p. 92. The order directing the receiver to mark the notes involved in this item “Paid” and turn them over to the makers must therefore be affirmed.
The remaining item to be considered is the claim for $4,250 allowed by the trial court as the balance of a deposit. This balance is explainable as follows: Out of the purchase price Wentz received for claimants $25,000 in cash and securities. The receiver is entitled to credit for the two purchase money notes, aggregating $12,000, which he is ordered to transfer to claimants. He is also entitled to credit for the two other notes, aggregating $8,750, which he is ordered to return to the makers marked “Paid.” The sum of these two credits is $20,750. The difference between the latter item and the $25,000 received by Wentz for claimants is $4,250, the amount of the claim. Was it properly allowed by the trial court as a deposit? It belonged to claimants. Wentz received it as trustee for them and it was in fact deposited in the bank. Knowledge of claimants’ rights and of Wentz’s trusteeship was imputable to the bank. The deposit, therefore, though made in the name of the Wentz Company, inured to the benefit of the beneficiaries of the trust, the claimants, and they are entitled to protection as depositors. -
Affirmed.