Law v. Blowers
| Decision Date | 12 April 1935 |
| Docket Number | 14042. |
| Citation | 179 S.E. 480,175 S.C. 469 |
| Parties | LAW v. BLOWERS et al. |
| Court | South Carolina Supreme Court |
Appeal from Common Pleas Circuit Court of Spartanburg County; E. C Dennis, Judge.
Suit by John A. Law, Jr., as receiver of the Merchants' & Farmers' Bank of Spartanburg, S. C., against R. D Blowers and others. From an order sustaining master's finding against defendant T. P. Sims, such defendant appeals.
Affirmed.
The master's report and order of the circuit judge directed to be reported are as follows:
Master's Report.
This is a suit instituted by the receiver of the Merchants' & Farmers' Bank of Spartanburg, S. C., to recover, pursuant to the Constitution and statute laws of this state, the stockholders' liability due by certain stockholders of the insolvent Merchants' & Farmers' Bank of Spartanburg, S.C. After the institution of the action and after issue had been joined by certain of the defendants, the cause was referred to me to take the testimony and report my conclusions of law and fact as to the issues joined with all convenient speed to this court. In accordance with that order, I proceeded to take the testimony in the cause and beg leave to make the following report:
It appears that the Merchants' & Farmers' Bank of Spartanburg, S. C., was a banking corporation, organized and chartered as such under and pursuant to the laws of the state of South Carolina; and until October 3, 1931, it was engaged in the general banking business in the city of Spartanburg. Its capital was $100,000, divided into 1000 shares of the par value of $100 each. On October 3, 1931, it became insolvent and was forced to suspend its business and close its doors as an active banking institution. Thereafter, under due and proper proceedings had, a receiver was appointed for said bank; and, following such appointment, the receiver made an appraisal of the assets of the Merchants' & Farmers' Bank of Spartanburg, S. C., and determined upon the necessity for a demand upon the stockholders of such bank to pay their stock liability. It accordingly made demand upon all stockholders of record for the payment of their stock liability on or before December 1, 1931; and, upon the failure of the defendants in this action to pay such stock liability on or before December 1, 1931, this action was instituted. Only three of the defendants in the cause have filed answers, or set up any form of defense to the liability asserted. We shall consider these three defendants and their defenses, as set up, separately .
(a) T P. Sims.
The defendant T. P. Sims, who held fourteen shares of stock in the Merchants' & Farmers' Bank of Spartanburg, S. C., at the time of its suspension in his own name and 24 shares in the name of "T. P. Sims, Trustee," sets up two defenses.
With respect to the liability on the fourteen shares of stock standing in his own name, he asserts that the plaintiff is without the legal authority to institute this action, and that in any event interest is not recoverable upon the liability as asserted.
From a review of the authorities, it seems clear that neither of these positions is tenable, and the defendant T. P. Sims is liable upon such 14 shares of stock standing in his name upon the books of the Merchants' & Farmers' Bank at the time of its suspension, together with interest thereon at the rate of 7 per cent. per annum from December 1, 1931, demand having been made upon the defendant T. P. Sims previous to that date to pay such liability on or before that time. Fischer v. Chisholm (1931) 159 S.C. 395, 157 S.E. 139.
In addition to the 14 shares of stock above referred to, the defendant T. P. Sims, under the title "T. P. Sims, Trustee," appears, upon the books of The Merchants' & Farmers' Bank of Spartanburg, S. C., as the owner of 24 shares of the capital stock of said bank.
It is the premise of the defendant that the addition of the word "trustee" after his name fixed his ownership of the stock as fiduciary and insulated him against any personal liability by reason of the stockholders' liability upon the same. On the other hand, the plaintiff argues that the term "trustee," inserted after the defendant's name, is merely descriptio personæ, and is to be disregarded, and that, accordingly, the defendant appearing upon the books of the bank as a stockholder, he "is estopped from denying that he is a stockholder" and cannot assert that he held this stock in a fiduciary capacity.
Moss v. Johnson (1892) 36 S.C. 551, 15 S.E. 709, 710, appears conclusive against the defendant. In the cited case, the defendant signed a note and mortgage, "R. A. Johnson, trustee." When sued individually upon these obligations, the defendant argued that he was not liable individually by reason of the manner of his signature to the obligations, which determined his character as fiduciary. In overruling this contention, Mr. Chief Justice McIver said: "The fact that the defendant saw fit to append to his signature to these papers the word 'trustee' certainly could not have the effect of making him trustee for any one, but must be regarded simply as descriptio personæ.' D'
In the course of the opinion in the above case, the court very clearly intimates that, in order to protect one who signs an obligation in a fiduciary capacity from a personal liability thereon, such person must obligate himself ""as trustee," Mr. Chief Justice McIver putting it:
In 17 American & English Encyclopedia of Law, 494, 495, that text expresses the general rule thus:
The importance of the talismanic word "as" in this connection is emphasized in Porter v. Jefferies (1893) 40 S.C. 92, 18 S.E. 229, 231, which was an action upon a warranty signed "John R. Jefferies (L. S.) Eber C. Allen (L. S.), executors of W. Allen, deceased." From the decree sustaining the personal liability of the signers of the warranty thereon, appeal was taken. In sustaining the lower court, it is stated: "The seventh ground of appeal, which imputes error to the circuit judge in holding that the covenant of warranty in the mortgage was the personal covenant of the defendants, and binding upon them as individuals, need scarcely be considered, for it is admitted by counsel for defendants that the authorities sustain the view taken by the circuit judge; and we need not go further back than the cases of McDowall v. Reed, 28 S.C. 466, 6 S.E. 300, and Moss v. Johnson, 36 S.C. 551, 15 S.E. 709, to show that such admission was amply justified."
Again in Wallace v. Langston (1898) 52 S.C. 133, 153, 29 S.E. 552, 562, our court stated that "the addition of the word 'trustees,' not the words 'as trustees,' amounts to nothing more than mere descriptio personæ.' D'
In Neely v. Love (1928) 144 S.C. 271, 282, 142 S.E. 623, 626, the question involved centered about a note payable to "J. S. Brice, Attorney." This note was subsequently transferred by J. S. Brice individually, and the issue hinged upon the power of J. S. Brice individually so to transfer. In sustaining such power, the learned referee, whose report was confirmed and adopted by the Supreme Court, tersely sums up the matter in these words: "I believe the general doctrine, and that of our own state to be, that such a suffix to the name of the payee of a note or other obligation, without more, is merely descriptio personæ.' D'
Flynn v. American Banking & Trust Co. (1908) 104 Me. 141, 69 A. 771, 777, 129 Am. St. Rep. 378, 19 L. R. A. (N. S.) 428, is in direct point. There, upon the stock register of the insolvent bank, the word "Trustee" appeared after the name of one of the shareholders against whom an assessment had been made. The stockholders, whose position is in all particulars analogous to that of the defendant Sims, asserted that he was thus absolved of personal liability to the stockholders' assessment upon such stock. The court disposed of this contention with these words: "So far as appeared, he purchased the shares, became the legal owner, and entitled himself to the dividends on them, as well as to represent them in corporation meetings. He thereby assumed the statutory liability attached to them. The addition of the word 'trustee' was only descriptio personæ.' D'
The general rule in this connection, culled from all the cases, is thus tersely set forth in the annotation in 57 A. L. R. 772: "It appears to be the general rule that, where shares of stock appear on the books of the corporation to be held in the name of one as trustee or in some other fiduciary capacity for another, without giving the nature of the trust or other capacity, such description does not confer notice of the relationship, and the holder is liable personally as stockholder on the subscription, or for the statutory liability to creditors for debts of the corporation."
A recent decision from a sister state goes so far as to state that, "unless the said record or the stock certificate issued to him shows that he holds the said stock as trustee for a cestui que trust named on the record or in the certificate," one who holds stock under the designation of trustee is personally liable to the stockholders' liability thereon. American Trust Co. v. Jenkins (1927) 193 N.C. 761, 138 S.E. 139, 142.
Recognizing then, that the addition of the word "trustee" after the defendant's name is mere...
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