Ford Et Al., (No. 12163.)

• Court: United States State Supreme Court of South Carolina
• Writing for the Court: COTHRAN
• Citation: 136 S.E. 888
• Parties: FORD et al. v. SAULS et al. Ex parte CITIZENS' EXCHANGE BANK. In re LIQUIDATION OF CITIZENS' EXCHANGE BANK.
• Decision Date: 26 February 1927
• Docket Number: (No. 12163.)

136 S.E. 888

FORD et al.
v.
SAULS et al. Ex parte CITIZENS' EXCHANGE BANK. In re LIQUIDATION
OF CITIZENS' EXCHANGE BANK.

(No. 12163.)

Supreme Court of South Carolina.

Feb. 26, 1927.

[136 S.E. 888]

Appeal from Circuit Court of Bamberg County; E. C. Dennis, Judge.

Action by Sarah Ford and others against Laura Sauls and others, as stockholders of the Citizens' Exchange Bank. From an order denying a motion to set aside the summons and complaint, and to abate action, defendants appeal. Order affirmed, and case remanded.

J. Wesley Crum and R. C. Hardwick, both of Denmark, S. C, for appellants.

Thos. M. Boulware and Brown & Bush, all of Barnwell, for respondents.

COTHRAN, J. This is an appeal from an order of his honor, Judge Dennis, refusing a motion by the defendants to set aside the summons and complaint and abating the cause of action, upon certain grounds, and also from an order of the same judge, signed on the same day, December 18, 1925, overruling the demurrer interposed by the defendants to the complaint upon the general ground, with specifications.

It appears that on May 11, 1925, the board of directors of the Citizens' Exchange Bank of Denmark, under section 3981, vol. 3, Code 1922, by proper resolution, requested the state bank examiner "to take and retain sole possession and control of the property and business of the bank "for not exceeding 30 days"; that immediately the examiner complied with said request; that on May 23, 1925, the stockholders adopted a resolution that with the consent of the examiner application be made to the court for an order authorizing the bank "to liquidate its affairs under the sole supervision and control of the examiner and subject to the order of the said court." To this application the examiner consented, and on June 9, 1925, his honor, Judge Rice, passed an order conformable to the application.

The bank then proceeded to liquidate its affairs, we assume with the directors as liquidating trustees, as indicated as the proper course in Browne v. Hammett, 133 S. C. 446, 131 S. E. 612.

On August 13, 1925, the present proceeding was instituted by Sarah Ford, suing on behalf of herself and all other depositors of the Citizens' Exchange Bank, against Laura Sauls and others, stockholders in said bank, upon their constitutional and statutory liability, alleging the insolvency of the bank. The writing setting forth the alleged cause of action was denominated a complaint; was accompanied by a summons served with the complaint upon the defendant Laura Sauls and perhaps others; it was entitled: "Sarah Ford, Suing on Behalf of Herself and Other Depositors of the Citizens' Exchange Bank of Denmark, S. C, Plaintiff, against Mrs. Laura Sauls [then follows a long list of other names], Defendants. Ex parte the Citizens' Exchange Bank of Denmark. In re Liquidation of the Affairs of the Citizens' Exchange Bank of Denmark, S. C."—apparently an effort to comply with the proviso in section 3981, which will hereinafter be considered.

The defendants then made the motion and interposed the demurrer referred to in the opening paragraph of this opinion. The grounds of same need not be set forth, as in the argument of counsel for the appellants it is stated, "The real question to be determined by this appeal is whether this action can be maintained under section 3981 of the Code;" and so it will be considered.

Counsel for the appellants contends that the action instituted by the plaintiff is not a proceeding "in the cause in which the order of liquidation was granted, " and for that reason comes within the inhibition of the proviso in section 3981:

"That during the periods when the examiner is in control of said corporation no action or proceeding against said corporation or its stockholders shall be instituted except in the cause in which the order of liquidation was granted."

We think that the counsel is correct in this contention, and that the proceeding is really an independent action, in the nature of a creditor's bill, for the recovery of the statutory liability of all of the stockholders, for the benefit of all of the depositors, a matter that does not concern the liquidating trus-

[136 S.E. 889]

tees of the bank, and, for that reason, not within the inhibition of the proviso, which refers only to actions or proceedings affecting the liabilities or assets of the bank.

The right of action upon the statutory liability of a stockholder has been invariably held by this court to be a personal right of the depositors, enforceable by them in an action in the nature of a creditor's bill. It can therefore be no part of the assets of an insolvent bank, with which the liquidating trustees or the receiver, as the case may be, are charged with the duty of assembling and distributing.

In Parker v. Bank, 53 S. C. 5S3, 31 S. E. 673, 69 Am. St. Rep. 8S8, certain creditors of the defunct bank, who were also stockholders, sought to set off their claims as creditors against their statutory liability as stockholders. Their claims were disallowed, for the very good reason stated by the court:

"The statutory liability is exclusively for the benefit of the creditors, and is enforceable by the creditors and not by the corporation. Creditors sue in their own right and not by or through the corporation."

For this reason it was held that a single creditor might maintain a creditor's bill on behalf of all creditors, avoiding a multiplicity of suits.

In Buist v. Williams, 81 S. C. 501, 62 S. E. 861, the court said:

"Creditors of an insolvent bank are not required to exhaust the assets of the bank before suing the stockholders on their liability fixed by law. Bird v. Calvert, 28 S. C. [22 S. C] 292, Parker v. Bank, 53 S. C. 583, 31 S. E. 673 [69 Am. St. Rep. 888]. Hence, when a bank becomes insolvent the creditors have two remedies which they may enforce, simultaneously. They may sue the bank and have a receiver appointed for the collection of the assets and application of them to the debts, and, at the same time, sue the...