First Nat. Bank of Greenville v. United States Fidelity & Guaranty Co.

• Decision Date: 11 July 1945
• Docket Number: 15749.
• Citation: 35 S.E.2d 47,207 S.C. 15
• Parties: FIRST NAT. BANK OF GREENVILLE v. UNITED STATES FIDELITY & GUARANTY CO.
• Court: South Carolina Supreme Court

35 S.E.2d 47

207 S.C. 15

FIRST NAT. BANK OF GREENVILLE v. UNITED STATES FIDELITY & GUARANTY CO.

No. 15749.

Supreme Court of South Carolina

July 11, 1945

Rehearing Denied Aug. 22, 1945.

Appeal from Common Pleas Circuit Court, of Greenville County; E. H Henderson, Judge.

Action by the First National Bank of Greenville against the United States Fidelity & Guaranty Company, as surety on the official bonds of Fannie C. Scott as Probate Judge for Greenville County. Judgment for plaintiff, and defendant appeals. [Copyrighted Material Omitted]

The order of Judge HENDERSON in the trial court follows:

In 1924, Lillie Chamberlain, a minor, lost both feet in a railroad accident, and as compensation the sum of $1,500 was paid to her guardian. The plaintiff, the First National Bank of Greenville, maintains a trust department and is duly qualified to act as guardian of the estates of minors. On March 17, 1924, it was appointed guardian of this estate by the Probate Judge for Greenville County. After a short time the bank desired to discontinue its duties as guardian, since the infant ward had moved her residence from Greenville County. The bank as guardian thereupon applied for a discharge to Mrs. Fannie C. Scott, who was then the Probate Judge. On October 22, 1925, at the suggestion of the Probate Judge the trust officer of the bank delivered the unexpended funds in his hands, amounting to $1,055.26, to Mrs. Scott, as Judge of Probate, and received a discharge.

This fund was never paid over by Mrs. Scott. Some time later an action was brought in a case entitled Ola Snyder v. Mrs. Scott, as Probate Judge, and Others, in which United States Fidelity & Guaranty Company, the surety of the Probate Judge, was a party. All persons having claims against the Probate Judge or her bondsman were called in, and among many others Lillie Chamberlain was duly made a party to the proceeding. Upon the payment by the surety of the sum of $12,000, it was ordered that it be released and discharged from all further liability on its $20,000 bonds. In that case it was held that Lillie Chamberlain was not entitled to relief against the Probate Judge or her bondsman. The Court pointed out the distinction 'between the failure or neglect of a public official to discharge some duty imposed upon him by the law and where he acts without any authority of the law,' and held that as there is no statutory law in this state authorizing or permitting Mrs Scott to receive in her official capacity funds from guardians, she acted without authority of law, and her official bond was held not liable to Lillie Chamberlain. This decision in the Supreme Court is found at 174 S.C. 403, 177 S.E. 665, 666.

Some time thereafter Lillie Chamberlain brought an action against her guardian, the First National Bank of Greenville, for recovery of the balance of $754.25 of the funds which had been wrongfully paid by the bank to the Probate Judge. In this case, reported at 202 S.C. 115, 24 S.E.2d 158, 162, it was held that Lillie Chamberlain was entitled to a judgment against the bank, her guardian. The Court said that the payment of the funds by the bank to Mrs. Scott as Probate Judge was no more effective than the payment of such funds to a stranger to the proceeding, and that as no proper steps had ever been taken by the bank to secure its discharge as guardian, it was liable to the ward for the funds. It was further stated that 'it follows from this that the act of the Bank in improperly--although I am sure the Bank acted in good faith--paying over these funds to the Probate Judge was the proximate cause of the loss which resulted. The act of the Bank in improperly paying these funds over to the Probate Judge made possible the manipulation of the funds which followed', but that 'the question as to whether the surety on the Probate Judge's bond is also liable for dereliction on the part of the Probate Judge in receiving these funds is not before this Court, as said surety is not a party to this proceeding.'

In the action now before the court, the First National Bank of Greenville is suing the United States Fidelity & Guaranty Company, the bondsman of the Probate Judge, alleging in its complaint that when the plaintiff requested that it be relieved of the guardianship, Mrs. Scott, as Probate Judge, advised the plaintiff to turn all of the guardianship estate over to her as public guardian, and that acting upon these instructions and representations of the Probate Judge, the plaintiff in good faith turned over to Mrs. Scott, as public guardian, the funds of the estate; and that a purported discharge was prepared by the Probate Judge in which it was recited that advertisement was not necessary, and that the funds had been turned over to her as public guardian. The plaintiff also alleges that Mrs. Scott was not qualified and required by law to receive funds as public guardian and that the instructions and representations made by her were willfully and fraudulently made for the purpose of inducing the plaintiff to turn the funds over to her so as to enable her unlawfully to manipulate and control the same, and that but for such instructions and fraudulent representations of the Probate Judge, and the discharge she purported to give the plaintiff, it would not have turned the funds over to her. The complaint then sets forth that as a result of the suit brought by Lillie Chamberlain, it was obliged to pay her $754.25, with interest and expenses aggregating $1,669.19. The plaintiff contends that the acts of Mrs. Scott constituted a breach of her official duty and consequently a breach of the terms and conditions of her official bond, and asks for judgment in the sum of $1,669.16.

In the answer the defendant, as bondsman for the Probate Judge, among other things pleads that the judgment in the case of Snyder v. Scott is a bar to the plaintiff's cause of action in this case. It further pleads that the plaintiffs stand in the shoes of Lillie Chamberlain and can have no greater rights than she had; that Lillie Chamberlain was a party to the suit of Snyder v. Scott and the Court there held that she had no cause of action on the Probate Judge's bond, and the plaintiff in this case, therefore, is barred.

As another defense it is alleged that the loss, if any, of the plaintiff was caused by its negligent and unlawful acts in turning money belonging to Lillie Chamberlain over to Mrs. Scott without warrant of law and in her individual capacity, and that such negligent and unlawful acts were the proximate cause of its alleged loss and damage, and that the judgment in the case of Chamberlain against the bank is res adjudicata of all questions upon which demand is now being made by the plaintiff. Finally the defendant contends that the negligent and unlawful acts of the plaintiff were the cause of its loss and that it is therefore estopped from recovering against the defendant.

The case was referred to the very able Master for Greenville County to take the testimony and to report it, together with his findings of fact and conclusions of law. He duly filed his report on October 6, 1944, in which he holds that in the Snyder case the plaintiff was in privity to Lillie Chamberlain. He says that 'the plaintiff bank was privy to Chamberlain and is bound whereever Chamberlain is bound,' and he concludes 'that the law of this case has been laid down in the Snyder and Chamberlain cases, supra; that any loss suffered by the plaintiff was due to its own negligent conduct which, in the Chamberlain case, supra, has been adjudged by the Supreme Court as being the proximate cause of the loss which resulted; that what it did made possible the manipulation of the funds which followed; that the bank is in no better position than if the funds in controversy had been paid by it to a stranger; that the bond by defendant herein has already been adjudged not to be liable and that plaintiff is estopped and should not recover.'

The case comes before me upon exceptions filed by the plaintiff bank to the report of the Master.

It clearly appears from the evidence, and I so find as a fact, that the former Probate Judge fraudulently induced the plaintiff to pay over the money to her. This payment was made upon the advice and instructions of the Probate Judge, who represented that she had authority as public guardian to receive them, though she well knew that she had not qualified as public guardian. The plaintiff acted upon these instructions and in good faith turned the funds over to Mrs. Scott. The Probate Judge prepared the discharge, though well knowing that she had no authority to issue it without proper advertisement and notice to the ward. These representations were fraudulently made by Mrs. Scott for the purpose of obtaining possession of the funds. The plaintiff relied upon the instructions, and but for them would not have parted with the funds.

As a result of the action brought against it by Lillie Chamberlain, the bank had to pay to her the sum of $1,251.11 and incurred the expense of $154.30 as Court costs, $143.75 for printing the appeal, and $150 as attorney fees.

I think that a proper determination of the action revolves about the cases of Snyder v. Scott, Chamberlain v. Bank, and Hunter v. Boykin, 195 S.C. 23, 10 S.E.2d 152.

In my opinion, unless the Snyder case operates as res adjudicata, the plaintiff in this action is entitled to a recovery under the case of Boykin and Hunter.

Indeed, in the order of former Circuit Judge Oxner, overruling a demurrer to the present complaint, he states that considering the facts alleged as being true on the demurrer, 'I think the case comes within the principle expressed' in the Hunter case.

In that case the distributees at law of Simpson Hunter brought the...