Ex parte Miller

• Decision Date: 03 March 1939
• Docket Number: 14831.
• Parties: Ex parte MILLER et al. CLAFFY et al. v. MECHANICS BUILDING & LOAN ASS'N OF SPARTANBURG et al.
• Court: South Carolina Supreme Court

1 S.E.2d 512

191 S.C. 260

Ex parte MILLER et al.

CLAFFY et al. v. MECHANICS BUILDING & LOAN ASS'N OF SPARTANBURG et al.

No. 14831.

Supreme Court of South Carolina

March 3, 1939

Perrin & Tinsley, Horace L. Bomar, Jr., and DePass & DePass all of Spartanburg, for appellants.

S R. Watt and C. E. Daniel, both of Spartanburg, for respondents.

BAKER Justice.

In November, 1934, the Mechanics Building & Loan Association of Spartanburg, S. C., discontinued receipt of monthly payments on investment stock. The following February, at a stockholder's meeting held after due notice, a plan of voluntary liquidation by an executive or liquidating committee of its stockholders was adopted. Partial liquidation was carried out by this committee. On November 16, 1932, before voluntary liquidation was undertaken, the board of directors of the association, under authority of the by-laws, declared Series No. 36 matured and ordered stockholders of that series paid. As of April 23, 1938, no dividends had been paid to the stockholders of any series other than Series No. 36, and the latter had been paid approximately 93% of the par value of $100 per share totaling approximately one hundred eighty thousand ($180,000) dollars, leaving a balance due thereon of principal and interest of approximately twenty-six thousand ($26,000) dollars. During this period the Board of Bank Control made periodical audits and suggestions and recommendations to the committee regarding liquidation.

On April 23, 1938, Mrs. Bertha R. Claffy, a stockholder in Series 37, suing for herself and all other stockholders who might join in the action, brought suit against the association alleging mismanagement and that a preference had been committed by those in charge, alleging insolvency, and asking for the appointment of a receiver. Mrs. Claffy owned stock with a face value of $5,000. A rule to show cause was issued against the association on April 23, 1938, returnable before Hon. T. S. Sease, Circuit Judge.

The respondent association filed a demurrer to the petition on the ground that it did not state facts sufficient to constitute a cause of action. The first hearing was held on May 7, 1938, at which time the plaintiffs were allowed to amend their petition and ask for judgment, and the demurrer was overruled. At the hearing, attorneys for Mrs. Claffy presented petitions of three other stockholders owning additional stock in the amount of $8,500, asking that they be allowed to join in the action. These parties were allowed to come in. Mr. E. A. Wayne, chief examiner for the Board of Bank Control, appeared at the direction of the board on request of the association, and testified. His testimony was that the Board of Bank Control had exercised control over the association and made audits annually, and concluded, and was still of the opinion that no insolvency existed, and if there had been any danger of it, the Board would have acted.

After this first hearing, Judge Sease announced orally that he was going to deny the receivership, and instructed attorneys for the association to prepare an order to that effect. On the same day (May 7, 1938), the attorneys for the association wrote and delivered to Mr. Wayne a letter requesting the Board of Bank Control to immediately appoint a conservator. It is correctly set out in the board's intervening petition and in Judge Grimball's order of October 24, 1938. On May 9th, 1938, attorneys for the association notified the Board of Bank Control by telephone that no order had been signed. On May 10, 1938, before any order was signed, attorneys in the action were notified by Judge Sease that a second hearing would be held on May 14, 1938. Between the first and second hearings, on May 9, 1938, the Board of Bank Control appointed a conservator for the association. A second hearing was held before Judge Sease on May 14, 1938, at which time he announced that he would file an opinion within sixty days. On June 4, 1938, Judge Sease signed his order appointing J. C. Grier and A. C. Willard receivers of the association. Such order definitely decided that Mechanics Building & Loan Association was not insolvent, but had on hand sufficient assets "which, if managed with the same degree of care and good business judgment as has been shown in the past, will pay off all the remaining stockholders of said respondent (the association) in full and no doubt will have additional funds with which to pay a bonus to its stockholders." It is pointed out in the order that receivers were being appointed not on the ground of insolvency, but for the purpose of conserving the assets of the association, and preventing waste, and for other reasons therein mentioned. There has never been an appeal from this order. The receivers subsequently qualified and filed bond, and an order was signed by Judge Sease on June 7, 1938, appointing Perrin & Tinsley attorneys for the receivers. The conservator, however, had taken possession of the assets of the association upon his appointment and has not turned them over to the receivers appointed by Judge Sease, although demand was made upon his agent, W. N. Query.

Thereafter, on June 10, 1938, the State Board of Bank Control filed in the Supreme Court of South Carolina its petition against Honorable T. S. Sease, as Judge of the Seventh Judicial Circuit, seeking an adjudication that it had complete and exclusive jurisdiction to liquidate the financial institutions of the State enumerated in the Act of its creation. The board also asked for a writ of prohibition to prevent Circuit Judges from appointing receivers for such institutions. A rule to show cause was issued by Chief Justice Stabler directed to Judge Sease. Thereafter, Judge Sease made return and the matter was argued in the Supreme Court. On September 6, 1938, the Supreme Court filed its opinion dismissing the petition and the rule to show cause on procedural grounds. State Board of Control v. Sease, 188 S.C. 133, 198 S.E. 602.

On September 7, 1938, attorneys for the Board of Bank Control presented to Hon. A. L. Gaston, Judge of the Sixth Judicial Circuit, a petition asking that their conservator be allowed to intervene in the Claffy action, and for an adjudication that Judge Sease was without authority to appoint receivers. On the same day, an order was signed by Judge Gaston ordering that the existing possession and custody of the assets of the Mechanics Building & Loan Association in E. A. Wayne as conservator be continued and that all interference therewith be restrained. This order also required the parties to the Claffy action to show cause before the Judge presiding in the Seventh Circuit why the relief sought in...