Farley v. Matthews

• Decision Date: 23 January 1933
• Docket Number: 13562.
• Parties: FARLEY v. MATTHEWS et al.
• Court: South Carolina Supreme Court

167 S.E. 502

168 S.C. 294

FARLEY v. MATTHEWS et al.

No. 13562.

Supreme Court of South Carolina

January 23, 1933

Appeal from Common Pleas Circuit Court of Newberry County; C. C Featherstone, Judge.

Suit by W. Scott Farley, as receiver of the National Bank of Newberry, against B. C. Matthews and others. From an order referring all issues of law and fact to a special master defendants National Surety Company and Fred C. Gilbert appeal.

Affirmed.

The order of Judge Featherstone is as follows:

This is an action brought by the receiver of the National Bank of Newberry against certain officers and employees of the bank and the National Surety Company, which carried a fidelity bond on the officers and employees of the bank. The matter comes before me on a motion to refer. The motion was heard by me on August 12, and was fully argued by attorneys for the plaintiff and certain defendants. The motion was resisted by attorneys for the defendants, B. C Matthews, T. K. Johnstone, W. W. Cromer, Fred C. Gilbert, and National Surety Company. The attorneys for the National Surety Company stated that in appearing to resist the motion they did not waive any rights, including the right to appeal from an opinion and order of Hon. H. H. Watkins, United States District Judge, remanding this case to the state court.

I took the matter under advisement, and, after careful consideration of the pleadings and the argument of counsel, it appears to me to be clear that the complaint seeks an accounting from the officers and employees of the National Bank of Newberry to ascertain if there were any shortages in their accounts or any losses brought about through their wrongful acts, and, if so, in what amounts. The complaint alleges that the surety company is liable to the plaintiff for such losses to the limit of its bond, and that the only way to determine the liability of the defendant officers and employees and, therefore, the liability of the defendant surety company is by an accounting.

The law recognizes a fiduciary relation between a corporation and its officers, directors, and employees, and permits a suit in equity by the corporation against its officers, directors, and employees for an accounting. The complaint states such an action. However, even if the action were at law, the account is so long and complicated that it would be impractical for an ordinary jury to comprehend and decide the issues.

I am unable to distinguish this case from the recent South Carolina case of Anderson County v. Griffin et al., 164 S.C. 75, 161 S.E. 875, 876, decided by our court. This was an action brought by the county for an accounting against a former county treasurer and two surety companies, which had bonded the treasurer for different periods. In this case the court in a well-considered and logical opinion held that there was no improper joinder of several causes of action, and said:

"The complaint in this action alleged really but one cause of action, that for an accounting, and it set up allegations showing a fiduciary relationship existing on the part of Griffin, the county treasurer, and the plaintiff Anderson county."

It seems to me that the nature of this case is such that it can best be heard by a referee, who can go into the testimony fully and report his conclusions of law and fact.

It appears that the judge of probate and ex officio master of Newberry county is disqualified to hear this matter by reason of the fact that he is a depositor in the bank.

It is, therefore, ordered, adjudged, and decreed that this cause be and is hereby referred to John K. Hood, Jr., Anderson, S. C., as special referee, to take testimony and hear and determine the issues of law and fact and report the same to the court, with leave to report any special matter.

C. G. Wyche, of Greenville, and Nicholls, Wyche & Russell, of Spartanburg, for appellants.

Mays & Featherstone, of Greenwood, and Steve C. Griffith, of Newberry, for respondent.

G. DEWEY OXNER, Circuit Judge, A. A. J.

This is an appeal from an order signed by his honor, Judge Featherstone, upon motion of plaintiff, referring all issues of law and fact to a special master. The defendants opposed the motion, and defendants National Surety Company and Fred C. Gilbert have appealed from said order. There are five exceptions, but, as stated in the brief of appellants, there is but one question involved, viz., "Is the cause of action one for compulsory order of reference?"

The allegations of the complaint may be briefly summarized as follows: That on July 1, 1929, the National Bank of Newberry closed by reason of insolvency, and was placed in the hands of the Comptroller of the Currency; that plaintiff is the duly qualified receiver of said bank; that for many years prior thereto said bank carried on a banking business at Newberry, S. C., and that the defendants, other than the National Surety Company, were officers or employees of said bank; that each of said officers and employees was covered by a fidelity bond of the defendant National Surety Company indemnifying the bank against pecuniary loss either of money or other personal property, including money or property for which the said bank was responsible, which might occur through the fraud, dishonesty, forgery, theft, embezzlement, wrongful abstraction, misapplication, misappropriation, or any other dishonest act or omission of any of said officers or employees of said bank which should be committed alone or in connivance with others; that said bank between July 1, 1926, and July 1, 1929, while said bonds were in force, suffered tremendous losses through the dishonest and wrongful acts of the defendant officers and employees thereof, acting jointly and in connivance one with the others, which the plaintiff is unable to accurately determine, because some of the records have been removed from the bank by the defendant officers and employees, or some of them. The complaint does, however, contain certain specifications of losses, as "among such losses." The specifications are numerous and cover a long list of items aggregating in excess of $70,000. They include the following: About 9 transactions representing alleged profits due the bank on various items; about 143 items representing discount or interest of which said bank is alleged to have been deprived; various transactions in which it is alleged the bank sustained losses through the wrongful acts of defendant officers or employees in charging interest as paid on savings accounts which was not paid, and which was misapplied by them; various transactions in cashing personal checks of...