Ex Parte Nat'l City Sec. Corp. v. Bank Of Clio, (No. 11547.)

• Court: United States State Supreme Court of South Carolina
• Writing for the Court: COTHRAN
• Citation: 123 S.E. 773
• Parties: Ex parte NATIONAL CITY SECURITIES CORPORATION. STATE ex rel. CRAIG, State Bank Examiner. v. BANK OF CLIO.
• Decision Date: 16 July 1924
• Docket Number: (No. 11547.)

123 S.E. 773

Ex parte NATIONAL CITY SECURITIES CORPORATION.
STATE ex rel. CRAIG, State Bank Examiner.
v.
BANK OF CLIO.

(No. 11547.)

Supreme Court of South Carolina.

July 16, 1924.

[123 S.E. 774]

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

Proceeding by the State of South Carolina on the relation of James H. Craig, State Bank Examiner, against the Bank of Clio, in which a receiver was appointed, and in which a petition was filed by National City Securities Corporation. Prom the decree of the circuit court, petitioner appeals. Reversed, and petition dismissed for want of jurisdiction.

Douglas McKay, of Columbia, and Gibson & Muller, of Dillon, for appellant.

J. K. Owens, of Bennettsville, for respondent.

COTHRAN, J. [1] Petition by the National City Securities Corporation, in the main cause above stated, to be allowed to return and have canceled certain notes of the Bank of Clio, which it had taken in exchange for certain certificates of deposit issued by the bank and held by the corporation as assignee. Since the exchange the bank has been placed in the hands of a receiver. It manifestly is to the advantage of the corporation to occupy the position of a depositor or of assignee of the certificates of deposit rather than that of a creditor, and this proceeding has been instituted for the purpose of having the corporation restored to its former position as assignee of the certificates of deposit. The basis of the application is a mistake of both law and fact with reference to the relation which the corporation bore to the bank and the effect of its exchange of old lamps for new"; a mutual mistake of the corporation and the officers of the bank; a constructive fraud on the part of the officers of the bank who knew of the injury which would result to the corporation from the exchange; want of consideration therefor; and finally because the notes did not carry out the true intention and agreement of the parties.

The underlying facts are these: Between June 18, 1920, and October 18, 1920, at various times the Bank of Clio issued to a corporation known as Fisheries Products Company certificates of deposit, 23 in all, aggregating $76,170; they were issued in various amounts, and payable one year from the date of each, the earliest maturing June 18, 1921, and the latest October 18, 1921; at sometime thereafter, and prior to March 25, 1921 (the exact date does not appear in the record for appeal), the National Securities Corporation of New York became the holder in due course of the $76,170 of certificates of deposit.

On March 25, 1921, for reasons satisfactory, the state bank examiner took charge of the bank under the statute, and closed its doors. The bank examiner, however, agreed that, if the directors should raise $35,000 in cash and procure extensions of 95 per cent. of depositors and creditors to January 1, 1922, he would allow the bank to reopen and continue business.

As stated, certificates of deposit to the amount of $76,170 bad been issued by the bank to Fisheries Products Company, and at this time they were held by the National City Securities Company, presumably upon the indorsement of the former. Negotiations were opened by the president of the bank, Mr. Cross, and a large stockholder and director, Mr. Jackson, with the officers of the Fisheries Products Company at Wilmington, N. C, for the purpose of securing an extension on the certificates of deposit referred to. On April 1, 1921, these officers of the Fisheries Products Company at Wilmington transmitted the proposition of Messrs. Cross and Jackson to the head office of that company in New York. On April 4, 1921, the treasurer in New York wrote to the bank, stating "it is your hope to have these items extended, " referring to the certificates of deposit, and offering to exchange them for "negotiable acceptances, " payable $16,200 in December, $20,970 in January, 1922, and $39,000 in February, making up the $76,170 bearing interest at 8 per cent. Having no reply to this letter from Mr. Cross, the treasurer in New York on April 21, 1921, again wrote to the bank:

"We wrote you on April 4th in reference to certain certificates which you were anxious to have deferred and exchanged for acceptances due December, 1921, January and February, 1922. Those holding the certificates are anxious to have you advise them whether or not it is your wish that arrangements be made in accordance with request made by your Mr. Jackson on his visit to our Wilmington office."

To this letter Mr. Cross, president of the bank, replied on April 23:

"We are counting on the renewal of the certificates you hold of ours. Suppose we make out these new certificates of deposit, drawing interest from the maturity of the old ones and send them to our New York correspondent for...