Ex parte Michie

• Decision Date: 20 July 1932
• Docket Number: 13454.
• Parties: Ex parte MICHIE. v. PEOPLE'S BANK OF DARLINGTON et al. NETTLES et al.
• Court: South Carolina Supreme Court

165 S.E. 359

167 S.C. 1

Ex parte MICHIE.

NETTLES et al. v. PEOPLE'S BANK OF DARLINGTON et al.

No. 13454.

Supreme Court of South Carolina

July 20, 1932

Appeal from Common Pleas Circuit Court of Darlington County; E. C Dennis, Judge.

Action by J. Lide Nettles and another against the People's Bank of Darlington, in which Donald E. Michie administrator of the estate of J. L. Michie, deceased intervened. From the judgment, G. B. Brasington, as receiver of the People's Bank of Darlington, appeals.

Judgment reversed, and petition dismissed.

The decree of the Circuit Judge is as follows:

This is a proceeding against the receiver of the People's Bank of Darlington. It is founded upon an intervening petition in the main cause, with authority of the court first had and obtained.

The People's Bank of Darlington, hereinafter called the bank was the duly qualified executor under the will of J. L Michie, deceased. The receiver for the bank resigned the executorship, and the petitioner was appointed administrator c. t. a. of the goods, chattels, and credits of the said J. L. Michie, deceased. The petitioner claims that the bank as such executor, prior to the closing of its doors, collected and received $6,310.17, in cash over and above its cash disbursements as such executor; and the petitioner claims the right to payment in full of the $6,310.17, less the sum of $2,839.53 paid by the receiver as dividends. A return was served by the receiver, and the matter was heard by me at chambers.

On most of the material issues of fact in the cause, the parties are in substantial agreement. I find the facts to be as follows:

That the bank is a South Carolina banking corporation, at Darlington, S. C., with the power to act as executor and trustee under the law, which power it exercised from time to time.

That J. L. Michie was a director of the bank and secretary of the board for a number of years prior to his death, which occurred -- day of May, 1928. That in his last will and testament he appointed the bank his executor, and on the 21st day of May, 1928, J. L. Michie's will was admitted to probate and letters were given the bank on June 6, 1928, and it qualified on said day.

At the time of Mr. Michie's death, there was on deposit to his credit in the bank the sum of $1,054.42, in a checking account, and the sum of $7,066.29 in a savings account, but savings accounts in said bank were payable on demand, or at least within 30 days after notice or demand, and, when the bank closed, it had collected, received, and disbursed various sums of money as executor of the estate, all of which, including the said deposits, are shown in the following sworn statement of George Onslow, cashier of the bank, and clerk to the receiver: Amount of charges to the People's Bank of Darlington as executor, $8,883.93; total amount of disbursements $2,573.78.

That on account of withdrawals of deposits for some time prior to and including the 29th day of October, 1928, the bank closed its doors on October 29, 1928, and G. B. Brasington was appointed receiver. That G. B. Brasington resigned the executorship which was duly accepted by the judge of probate on November 17, 1928, and the petitioner, Donald E. Michie, was appointed administrator c. t. a., and demanded of the receiver the sum of $6,310.17, and the receiver refused payment as a preference, but allowed the claim as a general claim, and paid thereon the regular dividends which have amounted to $2,839.53.

That said bank at all times had more than $6,310.17, and more than all other trust funds collected and not disbursed, on hand and in other solvent banks; and said bank turned over to its receiver, the said G. B. Brasington, more than $25,000 at the time of his appointment and qualification.

That the said bank had the conveniences, means, and facilities of taking care of, providing for, and safely keeping all such funds held and collected as aforesaid intact; in that it had adequate iron and regular bank safes, and a large and substantial safety deposit vault.

The attorneys for the petitioner and receiver agreed by way of stipulation to all of the above-stated facts.

I further find that the bank, upon its acceptance of the executorship, transferred on the bank's books to itself as executor of the estate of J. L. Michie, deceased, the aforesaid deposit accounts standing to the credit of J. L. Michie at the time of his death, and the bank at all times treated the said deposits and all other collections or receipts for the said estate as deposits to the credit of itself as executor, and did not segregate any of the estate funds, and all of the estate funds were mingled with the bank's own funds.

I further find that, while the petitioner filed a claim for $6,310.17, as a general claim, without any claim of preference, but that Samuel Want, Esq., was attorney for both the petitioner and the receiver; and, in this connection, the receiver in his return states: "This respondent does not wish to rely upon the defense of waiver or estoppel by reason of filing of the Petitioner's claim as a general claim, and the acceptance of dividends thereon, and if in the opinion of the Court, this respondent has the right, as an Officer of the Court and the representative of the depositors to waive such defense, he desires to express such waiver herein."

The receiver in his return denies that the cash receipts by the bank as executor exceeded the cash disbursements to the extent of $6,310.17, but admits that the bank had on hand in various accounts to the credit of itself as executor of the will of J. L. Michie, deceased, the sum of $6,310.17, and alleged that almost the whole of said sum represents bank balances held by the said J. L. Michie, prior to his death, and standing to his credit at the time of his death; the receiver further alleged that the funds of the testator's estate were not segregated from the general assets of the bank either directly or indirectly, that the only thing that was done was to make entries on the deposit ledgers of the bank to show the name of the bank, in its capacity as executor, as the depositor, in the place and instead of J. L. Michie.

The receiver also denied that $6,310.17 came into his hands as receiver, as funds of the executor of the will of J. L. Michie, deceased.

The petitioner contends: (1) That the bank collected the said funds; (2) that the bank was a trustee; (3) that the funds were trust funds, and that the bank never at any time acquired title to same; (4) that the fund is traced and identified into the receiver's hands; (5) that, under the law, the bank was required to keep the funds separate; (6) that, on account of the funds being mingled, the trust extends to the combined fund to the extent of the trust, and also created a lien on the entire mass; (7) that, on account of the bank's conduct in mingling the funds, it committed a fraud and constituted an ex maleficio trust; (8) that the term "Capital Stock" in the sense used by the Legislature in section 3995, vol. 3, of the 1922 Code, means the bank's entire assets as security; (9) that under the law he is entitled to be paid in full out of the remaining unpledged assets in the receiver's hands.

The defenses urged by the receiver are: (1) That a bank acting as executor is not required to keep funds separate from its own; (2) that the bank was not a trustee, and that funds held by it as executor were not trust funds; (3) that the bank did not collect the $6,310.17, as claimed by the petitioner, in that almost the whole of the sum represented bank balances standing to the credit of J. L. Michie at time of his death, and that the only thing that was done was to make entries transferring the accounts to itself as executor on the books; (4) that the bank, acting as executor, had the right to deposit the estate funds with itself as a banker; (5) that the phrase "Capital Stock" referred to in section 3995 of the Code as security only means the money paid in by the subscribers; (6) that the cash funds turned over to the receiver did not include the claim of the petitioner, except to the extent that said cash included the claims of all other depositors.

I will now consider the defenses urged by the receiver.

(1) To determine the soundness of this defense, it will be necessary to consider section 3994 of volume 3 of the 1922 Code. It is my opinion, and I so hold, that this section is a grant right, or privilege accorded banks, and that it merely gives banks the right or privilege to act as executors, trustees, etc.; and I further hold that this section should be strictly construed. 26 Am. & Eng. Cyc. of L. 662, 666; Black, Const. of Laws, 220; State v. City of Columbia, 12 S.C. 370. Further construing this section, I hold that it does not change or alter the long-established rules governing executors, and the long-established principles should be read into the statute, and subjects banks to the same restrictions and requirements as individuals acting as executors; if the Legislature had intended otherwise, it would have said so in plain and appropriate words. Columbia Real Estate & Trust Co. v. Royal Exchange Assur., 132 S.C. 427, 128 S.E. 865; Black, Const. of Laws, pp. 84, 85, 345, 346, 349, 361; 25 R. C. L. 1054-1056; 26 Am. & Eng. Cyc. of Law (2d Ed.) 649; Keister's Adm'r v. Keister's Ex'rs, 123 Va. 157, 96 S.E. 315, 316, 1 A. L. R. 439; Strother v. Lynchburg Trust & Sav. Bank, 155 Va. 826, 156 S.E. 426, 428, 73 A. L. R. 166; 36 Cyc. 1144, 1145; Millhiser Mfg. Co. v. Gallego Mills Co., 101 Va. 579, 44 S.E. 760; Kidd v. Bates, 120 Ala. 79, 23 So. 735, 41 L. R. A. 154, 74 Am. St. Rep. 17. Having concluded that the statute merely gave banks the right to act as executor, etc., that it should be strictly...