In re Citizens' Exchange Bank of Denmark

• Decision Date: 13 July 1927
• Docket Number: 12238.
• Parties: In re CITIZENS' EXCHANGE BANK OF DENMARK. v. CITIZENS' EXCHANGE BANK OF DENMARK et al. KINARD STATE ex rel. BRADLEY, State Bank Examiner, v. SAME.
• Court: South Carolina Supreme Court

139 S.E. 135

140 S.C. 471

In re CITIZENS' EXCHANGE BANK OF DENMARK.

KINARD v. CITIZENS' EXCHANGE BANK OF DENMARK et al.

STATE ex rel. BRADLEY, State Bank Examiner, v. SAME.

No. 12238.

Supreme Court of South Carolina

July 13, 1927

Appeal from Common Pleas Circuit Court of Bamberg County; M. M Mann, Judge.

On ex parte petition the Citizens' Exchange Bank of Denmark was authorized to liquidate under the supervision and control of the State Bank Examiner. Thereafter W. W. Bradley, Examiner applied for order appointing T. P. McCrae as receiver, and J M. Kinard on behalf of himself and all other depositors applied for appointment of F. V. James as receiver. From an order of the circuit judge, declining to appoint either nominee as receiver and appointing J. E. Harley, Kinard, the depositors associated with him, and the directors appeal. Affirmed.

See also, 138 S.C. 426, 136 S.E. 888.

J. Wesley Crum, of Denmark, and Thos. M. Boulware, of Barnwell, for appellants.

Harley & Blatt, of Barnwell, and J. E. Steadman, of Denmark, for respondent.

BLEASE J.

On May 11, 1925, the board of directors of the Citizens' Exchange Bank of Denmark requested the state bank examiner to take charge of the property and business of that banking institution for not exceeding 30 days, pursuant to the provisions of section 3981 of the Code of 1922, vol. 3. On May 23, 1925, the stockholders of the bank, after reciting that on account of the circulation of false rumors as to the solvency of the bank, the deposits thereof had been withdrawn until the cash reserve was below the regular requirements, and that an inspection of the affairs of the bank by the state bank examiner had shown that the bank was solvent, adopted resolutions approving the action of the directors in calling in the examiner and indorsed a petition that an order should be obtained from the court of common pleas, authorizing the bank to liquidate its affairs under the sole supervision and control of the examiner, and subject to the order of the court. On the same day the directors of the bank passed a resolution, with the state bank examiner consenting, that proceedings be instituted for a court order, authorizing the bank to liquidate its affairs under the sole supervision and control of the examiner, subject to the order of the court. On June 9, 1925, on motion of J. Wesley Crum, Esq., attorney for the bank, in proper proceeding, with the written consent of the then state bank examiner, W. W. Bradley, his honor H. F. Rice, judge of the Second circuit, at chambers, passed an order that the bank proceed to liquidate its affairs under the direction of the examiner, subject to the order of the court of common pleas; therein, F. V. James, former president, cashier, and director, was appointed liquidating agent for the bank; and it was also provided therein that, during the period when the examiner should be in control of the corporation, no action or proceeding against the corporation or its stockholders should be instituted, except in the cause wherein the order of liquidation was granted. The title of the action in which this order was obtained was:

"Ex parte the Citizens' Exchange Bank of Denmark, South Carolina. In re the Liquidation of the Affairs of the Citizens' Exchange Bank."

No one of the creditors, depositors, or stockholders of the bank was made a party to this suit. After this order was made, Mr. James, with the consent of the other directors and the examiner, under the order of Judge Rice, was in charge of the liquidation of the bank, and he is now so engaged.

On January 24, 1927, Albert S. Fant, successor of W. W. Bradley, in the office of state bank examiner, through his attorneys, the Attorney General and Assistant Attorney General and J. E. Steadman, Esq., and Messrs. Harley & Blatt, gave notice to the Citizens' Exchange Bank of Denmark and the officers and directors thereof that he would apply to his honor J. Henry Johnson, Circuit Judge, then presiding in the Second circuit, at his chambers, on January 31, 1927, for an order appointing T. P. McCrae as receiver of the bank in the place and stead of the state bank examiner. With the notice there was filed a petition on part of Examiner Fant, in which it was stated that the proceeding instituted was brought under the provision of section 3985, vol. 3, Code of 1922. Examiner Fant, then but recently in office, was of the impression that, as the successor of Mr. Bradley, he had become receiver, but in this he was in error since no receiver had been appointed. This proceeding was entitled:

"The State of South Carolina ex rel. W. W. Bradley, State Bank Examiner, Petitioner, v. the Citizens' Exchange Bank, at Denmark, S. C., and F. V. James, President and Cashier, and Director, and St. C. P. Guess, J. A. Hartzog, H. C. Rice, S. S. Ray, H. B. Grimes, and C. W. Garris, Directors, Defendants."

On January 24, 1927, J. M. Kinard, on behalf of himself and all other depositors of the Citizens' Exchange Bank, through his attorney, J. W. Crum, Esq., presented to Judge Johnson his application for the appointment of F. V. James, the president and cashier of the bank, as receiver of the institution. Numerous depositors and the directors joined in asking the appointment of Mr. James. The title of this action was:

"J. M. Kinard, on behalf of himself and all other depositors of the Citizens' Exchange Bank of Denmark, S. C., Petitioner, against the Citizens' Exchange Bank of Denmark, S. C., F. V. James, Liquidating Agent of the Citizens' Exchange Bank of Denmark, S. C., and S. S. Ray, H. C. Rice, F. V. James, St. C. P. Guess, C. W. Garris, J. H. Hartzog and H. B. Grimes, Directors, Defendants."

The verified petition of Kinard contained allegations that it then appeared that the bank was insolvent, and that it was to the interest of the depositors, stockholders and creditors and all persons interested in the bank that a receiver be forthwith appointed by the court. Judge Johnson issued a rule against McCrae, requiring him to show cause why James should not be appointed receiver. To this rule, both McCrae and State Bank Examiner Fant made returns, which conceded the insolvency of the bank and requested the appointment of McCrae as receiver.

Later Judge Johnson learned that some of the persons interested in the affairs of the involved bank were related to him, accordingly, he ordered all the pending matters transferred to Hon. M. M. Mann, circuit judge, for hearing. All the petitions and returns were heard by Judge Mann as being in the proceeding first instituted-that of "In re the Liquidation of the Affairs of the Citizens' Exchange Bank." At the hearing many affidavits were submitted, and some oral testimony was taken. Judge Mann declined to appoint either Mr. James or Mr. McCrae as receiver, and on his own motion, without suggestion from the state bank examiner, or any interested party, and without solicitation on his part, named J. Emile Harley, Esq., of Barnwell, as receiver.

From the order of the circuit judge, Kinard, the depositors associated with him, and the directors have appealed.

The appellants have twelve exceptions. In their arguments, they have reduced the questions involved to eight. These may be further reduced to three. Accordingly, without passing upon the exceptions seriatim, or even finding it necessary to state them, we enter upon the consideration of the issues, which, in our opinion, affect the determination of the appeal.

First. Should a receiver have been appointed at all?

Included in the findings of Judge Mann, set forth in his order, were those stated in his own language, as follows:

"Among other things, Kinard sets out in his petition that it now appears that the Citizens' Exchange Bank is insolvent, and it is to the best interest of all parties connected to have a receiver appointed. The state bank examiner sets out in his petition that the Citizens' Exchange Bank is now an insolvent corporation. So there is no question as to the insolvency of the bank and the necessity for the appointment of a receiver. In its final analysis, the only question before me to be determined is who should be appointed receiver of the bank."

Those holdings of the circuit judge are supported by the record. The main thing asked in the petition of the examiner was the appointment of McCrae as receiver. Kinard asked for the appointment of James to the position. Indeed, it seems there was a hot race between the supporters of these two gentlemen to secure the receivership for their respective candidates. Both of them were shown by their respective backers to be men of high character and well fitted for the trust sought. The supporters of each attacked the qualifications of the other for lack of business ability and because of their former connections with the bank, but there was no reflection upon the personal integrity of either of the gentlemen.

The respondent takes the position that since the appellants conceded below that the court should appoint a receiver, and made a losing fight for the appointment of Mr. James, they are precluded here from raising the question they now make. This position is sustained by many authorities, including Robinson v. Mills, 124 S.C. 415, 117 S.E. 424, State v. Langford, 86 S.C. 217, 68 S.E. 533, and Davis v. Elmore, 40 S.C. 533, 19 S.E. 204, cited by respondent. Because of a question of some interest, however, raised by the appellants in this connection, and with the purpose of endeavoring to clear up some apparent confusion among the bar as to the procedure in relation to the liquidation of insolvent banks, we do not rest the disposition of the matter under investigation on the ground that the appellants have lost their right to protest against a receivership.

The appellants...