Rogers v. Marchant

• Decision Date: 06 August 1937
• Docket Number: No. 4195.,4195.
• Citation: 91 F.2d 660
• Parties: ROGERS et al. v. MARCHANT.
• Court: U.S. Court of Appeals — Fourth Circuit

91 F.2d 660 (1937)

ROGERS et al. v. MARCHANT.

No. 4195.

Circuit Court of Appeals, Fourth Circuit.

August 6, 1937.

J. Stokes Salley, of Orangeburg, S. C., for appellants.

J. M. Brailsford, Jr., of Orangeburg, S. C. (Zeigler & Brailsford and William C. Wolfe, all of Orangeburg, S. C., on the brief), for appellee.

Before PARKER and SOPER, Circuit Judges, and HENRY H. WATKINS, District Judge.

SOPER, Circuit Judge.

By a decree of the District Court certain voluntary deeds of conveyance of real estate in the City of Orangeburg, S. C., were set aside upon the complaint of the receiver of the Orangeburg National Bank of South Carolina that Ella D. Rogers, the grantor, had made the conveyances with intent to hinder, delay, and defraud him in the collection of an assessment levied by the Comptroller of the Currency upon shares of the capital stock of the bank which she owned. This appeal questions the correctness of the decree.

On March 1, 1927, runs on the bank had so depleted its cash resources that it became necessary to take some action to protect the depositors. On that day, upon the recommendation of the Comptroller of the Currency that the bank was solvent, an agreement was made between it and the Edisto National Bank, also located in Orangeburg, whereby the Edisto Bank assumed the liabilities of the Orangeburg Bank in consideration of the cash sum of $100,000, the conveyance of the banking house of the Orangeburg Bank at a valuation of $75,000, bonds, stocks, other cash, etc., of the Orangeburg Bank, amounting to $327,628.08, and certain notes held by the Orangeburg Bank of the face value of $262,224.72, together with a note of the Orangeburg Bank payable to the Edisto Bank in the sum of $710,198.14 representing the difference between the value of the assets transferred and the total liabilities of the Orangeburg Bank amounting to $1,481,048.94. This note was secured by the assignment to the Edisto Bank of a note of the General Land & Investment Company for $768,808.73 secured by real estate and real estate loans, in the sum of $868,808.73, which had been transferred by the Orangeburg Bank to the company in consideration of its note and the cash sum of $100,000; and the note of the Orangeburg Bank to the Edisto Bank was also secured by the assignment or pledge of all the remaining assets of the Orangeburg Bank of the aggregate face value of $249,448.62. The General Land & Investment Company had been formed to facilitate the liquidation of the real estate holdings of the Orangeburg Bank, and the cash sum of $100,000 had been raised for the most part by subscriptions to the capital stock of the company by stockholders of the Orangeburg Bank.

The Edisto Bank agreed to liquidate all the assets transferred directly to it except the banking house and all assets held by it as collateral to the deficiency note of the Orangeburg Bank; and it was agreed that the proceeds of liquidation should be applied (1) to the reimbursement of the Edisto Bank for any loss sustained by it in the collection of the assets; (2) to the payment of the deficiency note; and (3) to the payment of any balance remaining to the Orangeburg Bank. The Edisto Bank agreed to pay all the liabilities of the Orangeburg Bank except the statutory liability of the stockholders of the Orangeburg Bank. The General Land & Investment Company entered into a contract with the Orangeburg Bank to liquidate the assets transferred to it and employ the proceeds in discharging its obligation to the Orangeburg Bank after deducting costs and commissions.

When these agreements were made, Mrs. Rogers was the owner and holder of 86 shares of the stock of the Orangeburg Bank. She subscribed to $2,500 of the stock of the General Land & Investment Company. At that time it was clear that the Orangeburg Bank could not meet its obligations as they matured, but it was believed by the two banks and the Comptroller that the assets of the Orangeburg Bank, if liquidated in an orderly manner, would prove more than sufficient to pay its debts; and the stockholders believed that the purchase by them of $100,000 of stock in the Investment Company under the circumstances described would render unnecessary any assessment upon their stock in the bank and would constitute an investment upon which they might reasonably expect a return.

On October 12, 1928, nineteen months later, Mrs. Rogers made the three deeds in question. She conveyed an undivided one-third interest in her real estate in Orangeburg, constituting substantially all of her property, to each of three persons, that is, one-third to a daughter absolutely; one-third to the daughter in trust for the child of a deceased son; and one-third to a daughter-in-law. No consideration passed from the grantees other than an oral agreement on their part, not expressed in the deeds, that the grantor should have the income from the property as long as she lived. Rents in the annual sum of $600 were actually paid to the grantor under this agreement. There was evidence which led the master to conclude that the motive for the transfer in addition to the enjoyment of the income was the desire to give the grantees shares of her estate equal to advancements previously made by her to her other children, and to protect herself from indorsements for members of her family which she might otherwise be called upon to make. Both the special master and the District Judge held that at the time the Orangeburg Bank was actually engaged in the liquidation of its assets and was solvent, and that no actual fraud was intended by the parties to the conveyances.

On April 8, 1931, two and a half years later, a receiver for the Orangeburg Bank was appointed; and on July 3, 1931, a 100 per cent. assessment on the stock of the Orangeburg Bank was levied by the Comptroller of the Currency. On June 15, 1936, the receiver recovered a judgment in the District Court against Mrs. Rogers for the amount of her assessment with interest and costs in the sum of $11,417.69 and an execution thereon was returned unsatisfied. Thereupon the present suit attacking the conveyances was filed, resulting in a decree that they were invalid and of no effect. The court was of the opinion that a stockholder of a bank in course of liquidation may not avoid his stockholder's liability by a voluntary transfer of all of his property during the liquidation, although at the time of the transfer the bank is solvent.

The case turns upon the proper application of section 8696 of the South Carolina Code of 1932 concerning conveyances in fraud of creditors wherein the Statute of Elizabeth, 13 Eliz. c. 5, was enacted into the statute law of the state. The general rule under the statute is that fraudulent intent on the part of the grantor is necessary to bring a conveyance within its terms, but such an intent will be inferred when a conveyance is made under such circumstances that it will necessarily hinder and delay creditors, as for instance, when a voluntary conveyance of all of...