Lee v. Marion Nat. Bank

• Decision Date: 21 September 1932
• Docket Number: 13476.
• Parties: LEE et al. v. MARION NAT. BANK et al.
• Court: South Carolina Supreme Court

166 S.E. 148

167 S.C. 168

LEE et al. v. MARION NAT. BANK et al.

No. 13476.

Supreme Court of South Carolina

September 21, 1932

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

Suit by D. J. Lee and others against the Marion National Bank and another. From the judgment for plaintiffs, the defendants appeal.

Reversed.

The decree of the circuit judge, directed to be reported, is as follows:

Decree.

The above entitled suit was begun in the Court of Common Pleas for Dillon County on or about February 3, 1930, for the purpose of having the funds hereinafter referred to adjudged and determined by the Court to be a special or trust fund for the payment of the checks mentioned hereinafter upon the ground that plaintiffs have a special equity therein under all of the facts and circumstances of the case giving them such right; for the purpose of requiring the bank to account as to said trust or special fund and for such other and further relief as the plaintiffs might be entitled to under the allegations of the complaint.

After the allegations of the incorporation of certain of the plaintiffs and defendant, Marion National Bank, and the appointment of J. H. McLaurin as administrator of the estate of J. N. Hargrove, deceased, it is alleged that during the cotton season for the year 1929, and for several seasons prior thereto, J. N. Hargrove was a cotton buyer at Dillon South Carolina, operating upon a large scale, doing a considerable amount of his business through The Marion National Bank, and that it was the custom or agreement between the said J. N. Hargrove and the bank, of which custom and agreement plaintiffs had full knowledge, that the said Hargrove was permitted to buy cotton from various customers and producers and give his checks therefor on the said bank which it was agreed and was accustomed to pay from the proceeds of drafts deposited by the said J. N. Hargrove to the credit of his cotton account in said bank; that the bank was thoroughly familiar with and had full knowledge of this custom and approved and acquiesced in same; that on the 3rd day of January, 1930, the said J. N. Hargrove drew his two checks, one for four hundred twenty six and 18-100 ($426.18) dollars, the other for two thousand eighty and 68-100 ($2,080.68) dollars, in favor of and covering the purchase of twenty nine (29) bales of cotton from the Carolina Textile Corporation, one in favor of D. J. & E. P Lee in the sum of sixteen hundred fifteen and 61-100 ($1,615.61) dollars covering twenty (20) bales of cotton, one in favor of H. J. McCutcheon for four hundred eighty six and 53-100 ($486.53) dollars covering seven (7) bales of cotton, three in favor of Dillon Agricultural Loan Association totaling six hundred thirty and 93-100 ($630.93) dollars covering eight (8) bales of cotton, and one in favor of L. Cottingham in the sum of three hundred fifty five and 58-100 ($355.58) dollars covering five (5) bales of cotton, all of which checks purported to have been drawn on his cotton account in said bank and to cover said checks the said J. N. Hargrove, at the close of business on the 3rd day of January, 1930, deposited with the said bank his two drafts, one in the sum of two thousand three hundred fifty and 24-100 ($2,350.24) dollars drawn on Joseph Walker & Company of Columbia, South Carolina, the other in the sum of three thousand one hundred fifty two and 02-100 ($3,152.02) dollars drawn on Alexander Sprunt & Sons of Wilmington, North Carolina, both of which drafts were duly paid and the proceeds actually went into the hands of the said defendant bank; that the said checks were duly presented for payment and payment was refused and they were protested on the ground of insufficient funds to meet same; that the payment of said checks was improperly refused because the proceeds of the drafts were duly collected, and that the plaintiffs have an equity in said funds for the payment of said indebtedness; that notwithstanding said equities the said defendant, Marion National Bank, has attempted to convert the proceeds of the drafts to the payment of past indebtedness due to it by the said Hargrove which the said defendant had no legal or equitable right to do. The answer of the defendant, Marion National Bank, denies that plaintiffs have any equity to the said funds and claim the right to charge the said proceeds to an overdraft and to a past due note of the said Hargrove. The administrator answered, alleging that the death of J. N. Hargrove closed the account and as the funds were not collected until after his death he was entitled to same for pro rata distribution among the creditors as provided by statute. The cause was referred to the Master to take the testimony by order of his Honor, Judge Dennis, bearing date of August 14, 1930, and in pursuance of said order references were duly held and all of the testimony offered was taken and reported to this Court. From the testimony so taken I find the following facts:

That for many years the said J. N. Hargrove had been buying cotton on the market at Dillon and at various other points in the State, and among other banks during the season of 1929 did considerable business with the defendant, Marion National Bank. According to the testimony of the officers of the bank, Mr. Hargrove opened his account with the defendant on the 8th day of September, 1928, and it was closed on the 13th day of January, 1930. The bank account which was offered in evidence frequently showed large overdrafts, sometimes running from thirteen to fifteen thousand dollars. All of the checks drawn against the account were marked "cotton account" and signed "J. N. Hargrove, Cotton Account." They were so handled by the bank without any question and the cashier of the bank testified that he knew Mr. Hargrove was accustomed to draw checks on his account in payment of cotton purchased by him and that the bank always paid his checks whether he had the money in the bank with which to pay them or not; that the bank knew Mr. Hargrove's custom of buying cotton from various producers and others and giving checks for the purchase price, and would subsequently deposit cotton drafts to the account and the bank would pay the checks. This custom was also known to plaintiffs and they relied upon it in accepting the checks.

As above set forth, on the 3rd day of January, 1930, the said J. N. Hargrove purchased the various lots of cotton alleged in the complaint and gave his checks therefor on the Marion National Bank. He had deposited in that bank on the 3rd day of January various drafts and checks amounting to eight thousand and eight hundred sixty seven and 33-100 ($8,867.33) dollars, one of the checks being a personal check of three thousand ($3,000) dollars drawn on the South Carolina Savings Bank at Dillon. On the 4th day of January he deposited in the same bank the sum of five thousand four hundred ninety six and 76-100 ($5,496.76) dollars, the same being made up of the two drafts above referred to and being the proceeds of sale of the cotton purchased from the various plaintiffs, which drafts were actually collected and went into the defendant bank on the 7th day of January, 1930. At the close of business on January, 4, 1930, his account at the defendant bank showed a balance of fourteen thousand three hundred sixty four and 09-100 ($14,364.09) dollars, and on January the 6th a check in favor of the Peoples State Bank of Dillon was paid by the defendant bank and charged to Mr. Hargrove's account 36-in the sum of ninety one hundred and 100 ($9,100.36) dollars, leaving a balance as of January 6th the sum of five thousand two hundred sixty three and 73-100 ($5,263.73) dollars. One of the checks issued to The Carolina Textile Corporation, those to the other plaintiffs being of like form, was as follows:

"J. N. Hargrove,

"Cotton Account

"Dillon, S. C., January 2, 1930.

"Pay to the order of Carolina Textile Corp. $2,080.68 Two Thousand Eighty and 68-100 Dollars. For their interest in 24 bales cotton. His endorsement to certify unincumbered ownership. This check not good after thirty days from date issued.

"J. N. Hargrove,

"Cotton Account,

"By J. M. SPRUNT .

"Marion National Bank,

"Marion, S. C."

These checks were duly deposited in various banks and were presented at the defendant bank for payment in the letter of the Federal Reserve Bank of Richmond, Virginia, on the morning of January the 8th and payment was refused on all of them, most of them being protested and all returned on the ground that there was insufficient funds to meet them. On the same date, January 8th, the three thousand ($3,000)dollar check above referred to, drawn on the South Carolina Savings Bank, having been returned, was charged against the balance of five thousand two hundred sixty three and 73-100 ($5,263.73) dollars, leaving a balance due on the account of two thousand two hundred sixty three and 73-100 ($2,263.73) dollars, which on January 13, 1930, was charged out of the account and credited on a past due note due by the said J. N. Hargrove to the defendant bank.

During these transactions and on the 6th day of January, about noon, Mr. J. N. Hargrove had died, his estate being entirely insolvent. The draft drawn on Joseph Walker & Company was as follows:

"Marion, S.C. Jan. 3, 1930.

"B-L 29 B-C attached. Pay to the order of Marion National Bank $2,350.24 Twenty Three Hundred Fifty and 24-100 Dollars

"J. N. Hargrove

"Value received and charge to to account of

"To Joseph Walker & Co., Columbia, S. C."

Attached to said draft was an invoice of twenty-nine (29) bales of cotton and the bill of lading attached also called for the same number of bales with the same numbers as the invoice. The two...