Petition Of Fant v. Allan, (No. 12502.)

• Court: United States State Supreme Court of South Carolina
• Writing for the Court: COTHRAN
• Citation: 145 S.E. 34
• Parties: Petition of FANT et al. LEE . v. ALLAN et al.
• Docket Number: (No. 12502.)
• Decision Date: 27 September 1928

145 S.E. 34

Petition of FANT et al.
LEE .
v.
ALLAN et al.

(No. 12502.)

Supreme Court of South Carolina.

Sept. 27, 1928.

[145 S.E. 35]

Appeal from Common Pleas Circuit Court of Charleston County; T. S. Sease, Judge.

Action by Robert E. Lee, as a depositor of the South Carolina Loan & Trust Company, in behalf of himself and all other depositors, against Sarah C. Allan and others, stockholders of the South Carolina Loan & Trust Company, A. S. Fant, receiver thereof, and another. From an order dismissing petition of receiver and another to enjoin prosecution of the action and discharging a rule to show cause, receiver and another appeal. Reversed and remanded.

Hagood, Rivers & Young, Julian Mitchell, and Ernest L. Visanska, all of Charleston, for appellants.

Simeon Hyde, Jr., and John J. Murray, both of Charleston, for respondent.

COTHRAN, J. This is an appeal from an order of his honor, Judge Sease, issued in the main cause of Robert E. Lee, as a depositor, in behalf of himself and all other depositors of the South Carolina Loan & Trust Company, against the stockholders of that bank, to enforce their statutory liability. The order appealed from was upon the petition of A. S. Fant, receiver of the bank and the Mortgage Loan Company (whose connection with the matter will be explained). It sought to have enjoined the prosecution of the action which Lee had brought. His honor, Judge Sease, dismissed the petition and discharged the rule to show cause, and from this order the receiver and the Mortgage Loan company have appealed.

The somewhat complicated details of the matter appear to be as follows:

On December 16, 1926, there were in operation three affiliated banking institutions in the city of Charleston: (1) The South Carolina Loan & Trust Company; (2) the Security Corporation, formerly the Security Savings Bank, a subsidiary corporation of the South Carolina Loan & Trust Company; and (3) the South Carolina Loan & Trust Company's Bank, a corporation largely owned and entirely controlled by the South Carolina Loan & Trust Company. On the day mentioned, all three institutions closed their doors and were placed in the hands of A. S. Fant, the state bank examiner.

On January 12, 1927, after an advertised call by certain of the depositors of all three of the institutions, a largely attended meeting of the depositors was held. The committees from the depositors of the South Carolina Loan & Trust Company and the South Carolina Loan & Trust Company's Bank were appointed, with power to investigate any offer that might be made looking to the prompt liquidation of the affairs of the South Carolina Loan & Trust Company, to approve or disapprove the same on behalf of the depositors, and to take such action as might be deemed expedient for the best interests of the depositors.

On January 13, 1927, the South Carolina National Bank, entirely disconnected from any of the institutions in trouble, submitted an elaborate proposition to the committees for the liquidation of the several corporations. The plan recognized the fact that the assets consisted of items of such different characteristics as to require different methods of handling, in order to secure an orderly liquidation and one without sacrifice. They consisted of real estate, real estate mortgages, commercial loans, individual loans, cash, bank balances, bank buildings, and miscellaneous items. The proposition accordingly was that the South Carolina National Bank would take over certain liquid assets of the institutions and immediately pay to the stockholders of the South Carolina Loan & Trust Company and of the Security Corporation 25 per cent. of their deposits, and to the stockholders of the South Carolina Loan & Trust Company 5¹/₂ per cent. of their deposits.

In reference to what has commonly come to be designated as "frozen" assets, the proposition was that there be organized a corporation to be known as "the Mortgage Loan Company, " to which these assets should be assigned. The capital stock of that corporation was to be $150,000, $100,000 of which was to be subscribed and paid for by Henry H. Fickon, then president of the three corporations in liquidation, "in full settlement and discharge of any claim against or liability of said Henry H. Fickon and Security Corporation, by reason of his or its statutory stockholders'

[145 S.E. 36]

liability"; the remainder of the capital stock, $50,000, "to be subscribed and paid for by such stockholders who may desire so to do and which payment shall, to the extent that it equals or exceeds the amount of stockholders' liability of such subscriber, release and discharge him from his statutory stockholders' liability"; all of the stock "to be issued to and held by trustees under a voting trust, wherein said stock shall be held by said trustee for the benefit, first of all, of the depositors, and then for the benefit of the creditors of said bank and corporation and of the South Carolina Loan & Trust Company's Bank, until payment to them in full, and then for the benefit of such persons subscribing and paying for such stock, according to their respective interests." Upon such assignment to the Mortgage Loan Company, it should issue to the depositors of the South Carolina Loan & Trust Company and of the Security Corporation certificates to the amount of 75 per cent. of their deposits (the South Carolina National Bank having paid them 25 per cent.), entitling the holders to share in all the assets of the corporation prior to any distribution to the stockholders. A similar provision was made for the South Carolina Loan & Trust Company's Bank, except that the depositors therein were to receive in cash from the South Carolina National Bank 51¹/₂ per cent. of their deposits and 38¹/₂ per cent. in certificates of the Mortgage Loan Company, the remaining 10 per cent. to be taken care of out of collections from the remaining assets of the bank.

Other provisions appear in the proposition which do not appear particularly pertinent to the present issue. The proposed plan of the South Carolina National Bank was accepted and approved by the committees of the depositors and by the president of the three corporations on January 13, 1927, and by the state bank examiner. On January 15, 1927, application was made by the bank examiner to his honor, Judge Grimball, for an order appointing the bank examiner receiver of the said banks, which he granted, and in this order he approved of the plan of liquidation attached to the bank examiner's petition, as submitted by the South Carolina National Bank and approved by the depositors' committees and the state bank examiner.

On January 22, 1927, the Mortgage Loan Company was chartered specifically to take over the assets of...