Branchville Motor Co. v. Adden

• Decision Date: 30 September 1930
• Docket Number: 12979.
• Citation: 155 S.E. 277,158 S.C. 90
• Parties: BRANCHVILLE MOTOR CO. et al. v. ADDEN et al.
• Court: South Carolina Supreme Court

155 S.E. 277

158 S.C. 90

BRANCHVILLE MOTOR CO. et al. v. ADDEN et al.

No. 12979.

Supreme Court of South Carolina

September 30, 1930

Appeal from Common Pleas Circuit Court of Orangeburg County; M. M Mann, Judge.

Suit by the Branchville Motor Company and others against L. H. Adden and others. From decree sustaining demurrers to the complaint, the plaintiffs appeal.

Affirmed.

Kearse & Kearse, of Bamberg, for appellants.

Brantley & Zeigler, W. C. Wolfe, and Lide & Felder, all of Orangeburg for respondents.

COTHRAN J.

There were two demurrers, by separate defendants, to the complaint herein, but it will be convenient to treat them as one, as they present the same question of law, namely, whether the remedy provided by the act of 1929, 36 Stat. 199, for the enforcement of the statutory liability of stockholders of banks to depositors, is exclusive of the previously existing direct remedy of depositors against the stockholders.

The Planters' Bank of Orangeburg closed its doors on November 26, 1929, and, by action of the directors, was placed in the hands of the state bank examiner, under section 3981, Civ Code of 1922, for a period not exceeding 30 days.

On the very next day, November 27th, the present action was instituted by two depositors of the bank, having deposits of $1,100 and $700, respectively, against 122 of the stockholders, the complaint alleging the insolvency of the bank, practically a creditors' bill in equity, asking for the appointment of a receiver and a distribution of the funds to be realized from the liability of the stockholders under the Constitution, article 9, § 18, and section 3998 vol. 3, Code of 1922.

It will be observed that the action was commenced before the bank examiner could take any steps looking to a liquidation of the bank under sections 3981 or 3985, or under the Act of 1929, 36 Stat. 199.

The defendants demurred to the complaint upon the ground, mainly, that an action against stockholders of an insolvent bank can be maintained only by a receiver appointed under the act of 1929; in other words, that the remedy provided in that act, superseded the remedy that the depositors theretofore had.

The demurrers were sustained by his honor, Judge Mann, in a decree dated December 17, 1929, which will be reported. ^[1] From it the plaintiffs have appealed.

The controlling enquiry is as to the legislative intent in passing the act of 1929. A natural and safe guide to that intent is the statutory and judicial status of the subject at the time of its enactment.

The Constitution, article 9, § 18, provides: "The stockholders of all insolvent corporations shall be individually liable to the creditors thereof only to the extent of the amount remaining due to the corporation upon the stock owned by them: provided, That stockholders in banks or banking institutions shall be liable to depositors therein in a sum equal in amount to their stock over and above the face value of the same."

This section was (needlessly) enacted into statute law; that part relating to corporations other than banking corporations, in section 4251, and that relating to banking corporations in section 3998 of vol. 3, Code 1922; the latter being: "The stockholders of all insolvent banks and banking institutions, whether heretofore or hereafter incorporated under Act of Assembly of this State, either general or special, shall be individually liable to the creditors thereof, other than depositors, only to the extent of the amount remaining due to the corporation upon the stock owned by them: Provided, That stockholders in all such banks and banking institutions shall be liable to depositors therein in a sum equal in amount to their stock over and above the face value of the same."

Exactly what the expression " in a sum equal in amount to their stock over and above the face value of the same" means, it is difficult to divine; but the general acceptation appears to have been that, if one owns one share, par value $100, his statutory liability is $100, and so on.

In an early case, Hall v. Klinck, 25 S.C. 352, 60 Am. Rep. 505, under a somewhat similar statutory provision, it was held that any creditor might bring his individual action at law against any stockholder. In the later case of Parker v. Bank, 53 S.C. 583, 31 S.E. 673, 674, 69 Am. St. Rep. 888, it was said that that case (Hall v. Klinck) was based upon the peculiar statute therein involved. Applied to the facts in the Parker Case the court declined to take that view of the provision in the Constitution of 1868 saying: "To leave each creditor to single out for suit one or more stockholders at law would entail a multiplicity of suits, and result in an unequal distribution of the assets for creditors, all of which is prevented by entertaining this proceeding in equity."

The Parker Case involved a consideration of a provision in the Constitution of 1868, which went further than that of 1895, in that creditors, whether general creditors or depositors, were entitled to participate in the liability of the stockholders. It was there held, quoting syllabus: "The court of equity has jurisdiction of an action by a creditor of an insolvent bank, who sues for himself and all other creditors, to compel payment by stockholders of statutory liability. ***"

In several cases since the decision of the Parker Case it has been consistently recognized that under the Constitution of 1895 one or more depositors may bring an action assimilated to a creditors' bill in equity, against all of the stockholders for the purpose of realizing from them their statutory liability and of distributing it, as would be done in a creditors' bill proceeding among the depositors entitled thereto.

In several succeeding cases it has been held that "the liability of stockholders to depositors, under the Constitution and statute, is not an asset of the bank, but is the basis of an individual, personal, joint right in the depositors, with which the corporation or its receiver or its board of liquidating trustees have absolutely nothing to do." Johnson v. Adams, 138 S.C. 409, 136 S.E. 885, 887; Ford v. Sauls, 133 S.C. 426, 136 S.E. 888; Bradley v. Aimar, 140 S.C. 14, 138 S.E. 401; Ex parte Fant, 147 S.C. 167, 145 S.E. 34; State v. Bank of Clio, 129 S.C. 109, 123 S.E. 773; Gary v. Matthews, 148 S.C. 125, 145 S.E. 702.

Thus stood the constitutional and statutory provisions, relating to the liability of stockholders in banking institutions, and the judicial decisions at the time of the enactment of the act of 1929. The constitutional provisions of course have not been changed by statute; the liability remains as it was therein established.

Neither in the Constitution nor in the statutory enactment of section 3998 was there any provision indicating or providing for a remedy by which the depositors may have enforced the liability of the stockholders.

Under these circumstances this court has held as stated, that the proper remedy was a suit in the nature of a creditors' bill in equity; a remedy which has not infrequently been invoked and sustained; the court stating at the same time that the remedy could be invoked only by depositors; that the liability was personal to them and no part of the assets of the estate in the hands of a receiver.

This Court in more than one instance has entertained, if not expressed, the regret that the law was such as to require separate proceedings by the receiver and the depositors; that the matters of the administration of the receivership and the collection and distribution of the stockholders liability were so closely related as to make it greatly expedient that both should be settled in the same general proceeding; that the method which obtains in the receiverships of national banks was greatly to be preferred.

We cannot but think that the same considerations moved the General Assembly to enact the act of 1929.

Neither the statute, section 3998, nor the act of 1929 confers upon the depositor an enforceable right; that is accomplished by the Constitution, to which the legislation adds nothing. Until the act of 1929 was passed the depositor looked to the inexhaustible fountain of equity jurisprudence for his remedy, which, as we have seen, was a suit in the nature of a creditors' bill in equity. The equitable principles established in England have been here adopted as a part of the common law, and applied to the instance in point upon the ground that, where there is a right, there must be a remedy.

It must be conceded that, where there is an existing established right, and an existing remedy, either statutory or at common law, a new statute, recognizing the right and providing a new remedy, will not be held to have superseded the existing remedy unless:

1. There is in the new act an explicit repeal of the old remedy; or

2. The enforcement of the new remedy necessarily presents a situation incompatible with the continued existence of the old remedy; or

3. It clearly appears that by the new act the Legislature intended to take over the entire field of operations, to the necessary exclusion of the old remedy.

While there is, in the Act of 1929, no explicit negation of the continued existence of the old equitable remedy, from a consideration of that act, in view of the then statutory and judicial status of the subject it clearly appears that the Legislature intended to radically change the existing method of the administration of insolvent banks, to take over the entire field of operations and to provide a uniform, fair, just, and efficient method of administration by one person, duly elected by the parties most vitally interested and appointed by the court; that when so appointed such person, duly bonded, under the supervision of the court as an...