Pelfrey v. Bank of Greer, 20683

Citation270 S.C. 691,244 S.E.2d 315
Decision Date11 May 1978
Docket NumberNo. 20683,20683
CourtUnited States State Supreme Court of South Carolina
PartiesLee D. PELFREY, Suing Derivatively on Behalf of Associated Railway Contractors, Inc., its Stockholders, Creditors and all other persons entitled to participate in the Distribution of its Assets, Respondents, v. BANK OF GREER, South Carolina, Appellant.

Ronald K. Edwards, William McB. Wood, and John B. Duggan, Edwards, Wood, Duggan & Reese, Greer, for appellant.

J. Kendall Few, Anderson, and John W. Fields, Seneca, for respondents.

LEWIS, Chief Justice:

This is a corporate stockholder's derivative action to recover damages on behalf of the corporation resulting from the alleged negligence and breach of fiduciary duty by the appellant Bank in the handling of the corporation's funds. This appeal is from an order of the lower court refusing the appellant Bank's motions (1) for a compulsory reference of the issues and (2) to strike several portions of the complaint.

The first question involves a determination of whether the stockholder's derivative action is one in equity or at law. It is undisputed that, if the action is in equity, it is to be tried by the court; if at law, it is triable by a jury and the lower court would have been correct in refusing a compulsory order of reference.

It is clear that the order of the lower court denying a compulsory reference of the issues affects the mode of trial and, contrary to the contention of respondent, is appealable. Alston v. Limehouse, 61 S.C. 1, 39 S.E. 192; Williford v. Downs, 265 S.C. 319, 218 S.E.2d 242. In Alston, the court concisely stated the principle:

It is settled beyond controversy in this state that it is error, from which an appeal will lie, to deny a party a mode of trial to which he is entitled by law.

In determining the right to a jury trial, the lower court relied upon Ross v. Bernhard, 396 U.S. 531, 90 S.Ct. 733, 24 L.Ed.2d 729, 733, where the United States Supreme Court held: ". . . the right to a jury trial attaches to those issues in derivative actions as to which the corporation, if it had been suing in its own right, would have been entitled to a jury." The lower court apparently concluded that, since the complaint in this action sought the recovery of damages, a legal cause was stated for trial by jury.

Ross was brought under the Seventh Amendment to the United States Constitution, which governs right to trial by jury in Federal courts. This amendment has never been held applicable to the States; and this Court has interpreted Article 1, Section 14, of the South Carolina Constitution, which preserves the right of trial by jury inviolate, to mean that right of jury trial shall be preserved only in those cases in which the parties were entitled to it under the law or practice existing at the time of the adoption of the constitution. State v. Gibbes, 109 S.C. 135, 95 S.E. 346; C. W. Matthews Contracting Company, Inc. v. S. C. Tax Commission, 267 S.C. 548, 230 S.E.2d 223.

Paraphrasing the rule stated in the last cited cases, the pertinent inquiry is whether, at the time of the adoption of the Constitution of 1868, either party to a stockholder's derivative action had the right, under the existing law or practice, to demand a jury trial of the factual issues. The mode of trial was unaffected by statute in this State and the inquiry thus becomes one of determining the common law with reference to the right to a jury trial. We have found no decision of this court dealing with the present question and none has been cited.

We have, however, in discussing a stockholder's derivative action recognized its equitable nature. In Johnson v. Baldwin, 221 S.C. 141, 69 S.E.2d 585, we quoted with approval the following from Meyer v. Fleming, 327 U.S. 161, 66 S.Ct. 382, 386, 90 L.Ed. 595, with reference to such actions: "They are one of the remedies which equity designed for those situations where the management through fraud, neglect of duty or other cause declines to take the proper and necessary steps to assert the rights which the corporation has."

Historically the shareholder's derivative suit has always been tried exclusively in equity. "Even where the only relief allowable is a recovery of damages the suit is nevertheless one in equity and not an action at law." 13 Fletcher Cyc. Corp. (perm. Ed.), Sections 5944, 5945; 19 Am.Jur.2d, Corporations, Section 528. See also dissenting opinion in Ross v. Bernhard, supra; comment, in 22 S.C.L.R. 482; and Prunty, The Shareholder's Derivative Suit: Notes on its Derivation, 32 N.Y.U.L.Rev. 980.

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17 cases
  • Anthony v. Padmar, Inc.
    • United States
    • South Carolina Court of Appeals
    • May 2, 1995
    ...in equity and thus this court may find facts in accordance with our view of the preponderance of the evidence. Pelfrey v. Bank of Greer, 270 S.C. 691, 244 S.E.2d 315 (1978) (holding a shareholder's derivative action, even where the only relief allowed is a recovery of damages, is neverthele......
  • Salmonsen v. Cgd, Inc.
    • United States
    • South Carolina Supreme Court
    • April 28, 2008
    ... ...          Kleiner v. First Nat'l Bank of Atlanta, 751 F.2d 1193, 1202 n. 19 (11th Cir.1985) (quoting Note, ... v. Royal Surplus Lines, 341 S.C. 68, 533 S.E.2d 331 (2000); Pelfrey v ... 661 S.E.2d 92 ... Bank of Greer, 270 S.C. 691, 244 S.E.2d 315 ... ...
  • Cobb v. South Carolina Dept. of Transp.
    • United States
    • South Carolina Supreme Court
    • August 15, 2005
    ...341 S.C. 68, 533 S.E.2d 331 (2000); Foggie v. CSX Transp., Inc., 313 S.C. 98, 431 S.E.2d 587 (1993); see also Pelfrey v. Bank of Greer, 270 S.C. 691, 244 S.E.2d 315 (1978) (an order allowing a jury trial is immediately appealable where there is no such entitlement as a matter of right). DOT......
  • Flavor-Inn, Inc. v. NCNB Nat. Bank of South Carolina
    • United States
    • South Carolina Court of Appeals
    • October 7, 1992
    ...of the bank's defenses. Ordinarily, a trial court's denial of a motion to strike is not immediately appealable. Pelfrey v. Bank of Greer, 270 S.C. 691, 244 S.E.2d 315 (1978). Flavor-Inn has shown no reason why this general rule should not be followed AFFIRMED IN PART AND REVERSED IN PART. G......
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