Livingstain v. Columbia Banking & Trust Co.

Decision Date03 September 1908
Citation62 S.E. 249,81 S.C. 244
CourtSouth Carolina Supreme Court

Appeal from Common Pleas Circuit Court of Charleston County; R. W Memminger, Judge.

Action by Harris Livingstain against the Columbia Banking & Trust Company, in which Martin K. Berger filed an intervening petition against the receivers appointed, B. A. Hagood and E W. Hughes. From a decree denying the petition, petitioner appeals. Reversed.

See 57 S.E. 182.

Legare Holman & Baker, for appellant.

Benj. H. Rutledge, for respondent.


The record contains the following statement: "After the Supreme Court of this state filed its opinion in the case of Livingstain v. Columbian Banking & Trust Co., 77 S.C. 305, 57 S.E. 182, the said Martin K. Berger filed his petition and affidavit, setting forth that he came within the exception, as recognized in said decision, and was entitled to subrogation, for that he obtained New York exchange, drawn on the National Bank of Commerce, for and in consideration of cash money paid into the bank. The defendant's receivers controverted the position of Berger, and gave a different version of the position, under which the said New York exchange was obtained. His honor, Judge Gage, presiding, said that he could not determine the question on affidavits, and therefore referred the matter to G. H. Sass, Esq., one of the masters of said county, to take the testimony and report conclusion of fact thereon, with all reasonable dispatch. The master made his report, stating and setting forth his finding of fact, and no exception was taken thereto; that the bank was not put in the hands of a receiver until the 9th day of February, 1906." The master's findings of fact are as follows: "That the petitioner, Martin K. Berger, holding, along with his wife, certain deposits in the Columbian Banking & Trust Company, and being advised by rumors that the affairs of the bank were in an unsatisfactory condition, determined to withdraw the said deposits, and that on the 8th of February, 1906, he sent his wife to the bank with the two checks representing their combined deposits, and amounting to $2,015.75. Mrs. Berger presented the checks at the teller's window, and the same were paid to her in about one-fourth in currency and the balance, $1,500, in three bags of silver dollars, containing $500 each. Finding that the silver was too heavy for her to remove, she called to her husband, who had by this time reached the bank, and turned the money over to him. He received the same from the teller. The testimony is conflicting as to whether he removed the money from the window and carried it to another counter to count it, but there is no doubt at all that he did receive the money, and did count the currency. After having thus received the money from the bank, he resolved to exchange the same for a check on New York, and paid the money back to the teller, and requested that he would give him a New York check for the amount. This was done, and the said check upon New York was taken by Mr. Berger to the Bank of Charleston on the same day, and deposited to his account in that bank. I find that these were two separate and distinct transactions; that is to say, that the depositor's check was paid by the bank in the manner above stated, and that transaction closed, and that immediately thereafter the New York check was purchased with the same money which had been paid to Mr. Berger upon the depositor's checks." In refusing the petition, his honor, the presiding judge, assigned the following reasons: "The bank was insolvent when Berger put his money back there, and it became again an asset available for all, to be distributed among them under high principles of equity and justice. It has judicially been determined that the bank was insolvent on February 8, 1906, the date of this Berger transaction. Therefore all its assets constituted a trust fund, and could not lawfully be paid over to any one certain creditor in preference to others. Berger heard rumors of the insolvency, and, acting on that belief, went to draw out his money, and received the amount of his deposit. The money he received was not held by him as an innocent outside customer of the bank, but was really part of a trust fund, which was the property of all the creditors; therefore he was not within the exception set forth from the case cited. 77 S.C. 305, 57 S.E. 182. Under the statute in bankruptcy any payment to a person having reason to believe that the payer is insolvent is a void act. Equity will not go beyond this principle. Berger never parted with the money, so that its identity was lost. The identification of the money is important here, because it affects the bank with knowledge that the money for which it exchanged the New York draft was not 'cash paid into the bank,' but was really the money of the general depositors, part of a trust fund which the bank had no right to appropriate to Berger's check."

The assignments of error are as follows: "First. Because his honor erred in dismissing the petition of the said Martin K. Berger, in that the undisputed testimony in the case showed, from the report of the master, that Martin K. Berger paid into the Columbian Banking & Trust Company the sum of $2,015.75, and obtained from said bank a check on New York, drawn on the National Bank of Commerce, and that the same was drawn to his order by said bank in good faith, and without any knowledge on the part of the said Martin K. Berger that the said bank was insolvent, and that therefore the said Martin K. Berger was subrogated to the right of the National Bank of Commerce to the collateral, which it held to secure a note, which was discharged by applying money against which this check was drawn in favor of Martin K. Berger.

"Second. Because his honor erred in holding that the Columbian Banking & Trust Company was insolvent when Berger put his money back there, and that it became again an asset of the bank for the purpose of distribution among the creditors and depositors of the bank, 'under high principles of equity and justice,' whereas his honor should have held and found that Berger did not put his money back into the bank, but on the contrary that he purchased in good faith, while the bank was a going concern, New York exchange for $2,015.75, and that he should have been held subrogated to the assets held by the National Bank of Commerce to the collaterals, which were deposited as a security to a note, the money on which, said check being drawn, having been exhausted in the payment of said note.

"Third. Because his honor erred in holding and concluding that the money received by Berger from the bank on his check, while it was a going concern, was a part of the trust fund, which was the property of all the creditors.

"Fourth. Because his honor should have held and concluded that, when Berger drew his money out of the bank, while it was a going concern, he had a right to do so, and that after it was withdrawn from said bank, it was not impressed with any trust or equity in favor of the other depositors of the bank, and that Berger had a right, if he saw fit, to purchase said New York exchange.

"Fifth. Because his honor erred in holding that the Columbian Banking & Trust Company was judicially determined to be insolvent, on the 8th day of February, 1906, the date that Berger obtained New York exchange, whereas, on the contrary, said bank was not adjudged insolvent until the 9th day of February, 1906; and there is no evidence going to show any knowledge or notice of such insolvency, further than a reported rumor that the bank was in an embarrassing condition."

The vital question in the case is whether the money when paid to the petitioner by the bank was impressed with a trust. His honor, the presiding judge, based his conclusion on two grounds: (1) The insolvency of the bank, and (2) that "Berger heard rumors of the insolvency, and, acting on that belief, went to draw out his money, and received the amount of his deposit." The circuit judge should also have found from the uncontradicted testimony that, conceding there was enough to put the petitioner upon inquiry, he followed it up with due diligence by going to the proper sources of information-the officers of the bank-and became satisfied the bank was insolvent.

M. K Berger, the petitioner, testified: "I had a conversation with several of the men, one of which was Mr. Pearlstine, and several others who knew the circumstances of the bank; and they assured me that they would pay out every dollar to the depositors. *** I took it [the money] from the window, and counted all the money-the paper money. Then I started to count the silver; then I decided to help out the bank, and I asked the cashier of the bank, Mr. Seel, to be so kind as to give me a New York exchange for the money, which I paid him in cash. *** Q. They had satisfied you about the solvency of the bank? A. Yes, sir. *** Q. About what time of day did you get this money? A. About 10:30, I think. Q. And the bank did not close until next day? A. I think so." Mrs. Bessie Berger, wife of the petitioner, testified as follows: "Q. Do you remember whether anybody went to the window after Mr. Berger left? A. Why, yes; plenty of people went to the window. Q...

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