Rice v. City of Columbia

• Decision Date: 14 January 1932
• Docket Number: 13327.
• Parties: RICE et al. v. CITY OF COLUMBIA. PEURIFOY v. CONTINENTAL FINANCE CO.
• Court: South Carolina Supreme Court

162 S.E. 458

164 S.C. 261

RICE et al. v. CITY OF COLUMBIA.

PEURIFOY v. CONTINENTAL FINANCE CO.

No. 13327.

Supreme Court of South Carolina

January 14, 1932

Appeal from Common Pleas Circuit Court of Richland County; C.J Ramage, Judge.

Action by James E. Peurifoy, appointed receiver of the American Bank & Trust Company, in a suit by John Rice, and others, against the City of Columbia, against Continental Finance Company seeking instructions as to the payment of a claim filed by defendant with him. From a decree denying defendant a preference, defendant appeals.

Affirmed.

See also Peurifoy v. Boswell, 161 S.E. 927; 162 S.C 107, 160 S.E. 156.

Decree of circuit judge, directed to be reported, follows:

This was an action brought by the plaintiff Jas. E. Peurifoy, as receiver of American Bank & Trust Company, for the purpose of having the court to pass upon and determine whether or not the defendant was entitled to have its claim under four certificates of deposit declared a trust or preferred claim and to be paid in full out of the assets of American Bank & Trust Company which closed its doors on June 25, 1926, as insolvent, and which has been in course of liquidation since that time.

The defendant undertook to file its claim as a preferred one entitling it to payment in full, and the plaintiff Jas. E Peurifoy, receiver, brought this action in March, 1928, denying that the defendant was entitled to preference and asking the court to pass upon it.

The defendant appeared and filed its answer which admitted a number of the allegations of the complaint not material to the issues here, and then set up by way of further answer and as a basis of its claim of preference or trust:

(a) Paragraph 5. That on March 25, 1926, defendant borrowed $49,200 from American Bank & Trust Company and gave notes therefor, payable to itself at the Dayton Savings & Trust Company, Dayton, Ohio, in denominations of $1,000 for the most part and $100 for a part thereof, payable $4,100 on April 25, 1926; and a like amount each month thereafter up to March 25, 1927, and that the notes were indorsed by the defendant; and such are the facts.

(b) Paragraph 6. That all of these notes were unconditionally guaranteed as to payment of principal and interest, by the Metropolitan Casualty Insurance Company; and such is the fact.

(c) Paragraph 7. This paragraph alleges also that on each of the notes is a provision on the back thereof, over the signature of the Continental Finance Company, as follows: "To Whom It May Concern: The Metropolitan Casualty Insurance Company is secured hereunder: (1) By pledge of conditional sales contracts, chattel mortgages or lease agreements between The Continental Finance Company and the purchasers of automobiles. (2) By the assets of The Continental Finance Company. (3) By a reserve cash deposit." I find that there is such a provision on the back of each of the notes.

(d) Paragraphs 9, 10, and 11 allege: "That under agreement this defendant was required by the said American Bank & Trust Company and the said The Metropolitan Casualty Insurance Company" to have and keep on deposit with American Bank & Trust Company fifteen per cent. of the amount so borrowed, to wit, $7,380, to be applied in liquidation of the notes, and that this was a condition of the loan to the defendant, or discount of its notes. That at the time of the loan, on March 25, 1926, American Bank & Trust Company, in evidence of the 15 per cent. reserve deposit required, issued and delivered its four certificates of deposit, not subject to check, each for the sum of $1,845, and each payable to the Metropolitan Casualty Insurance Company on the return thereof properly indorsed, three, six, nine, and twelve months from the dates thereof; and these certificates, duly indorsed, were delivered by the Metropolitan Casualty Insurance Company to the defendant which is the owner and holder thereof.

That this $7,380, represented by the four separate certificates of deposit, was left and required to remain on deposit under the contract, agreement, and understanding with American Bank & Trust Company, the Metropolitan Casualty Insurance Company, and this defendant for the specific, special, and particular purposes of being paid and applied and credited to the payment and liquidation of the $49,200 of notes, one certificate to be surrendered and used in part payment of the notes then due at the expiration of three months from March 25, 1926, and a like certificate at the expiration of each additional three months.

(e) Paragraph 12. That the deposit funds represented by these certificates of deposit were for a special, specific, and particular purpose and were impressed with a special, specific, and particular trust and preference, and are a specific charge for the full amount thereof on the assets of the American Bank & Trust Company. And those paragraphs, numbers 9 to 12, constitute the crucial point in the question before the court.

(f) Paragraph 13 alleges that American Bank & Trust Company some time before its failure transferred and pledged these notes to and with South Carolina state highway department as collateral security for certain deposits; and there is no issue on this question.

(g) Paragraph 14. That defendant had paid four of its notes, leaving unpaid the sum of $32,800.

(h) Paragraph 15. That the bank failed to pay its first certificate of deposit which came due on June 25, 1926, the same day the bank closed.

(i) Paragraph 16 alleges that a 50 per cent. dividend had been paid on the four certificates of deposit and that these payments were made under an express stipulation by which no rights of the defendant were waived to claim a preference or trust. And I find such to be true.

(j) Paragraph 17 likewise alleges that the defendant had paid its remaining $32,800 of notes to the state highway department under an express stipulation that such payment should not prejudice the defendant's rights. And the court finds that all the rights of the plaintiff receiver and of the defendant have been duly preserved.

(k) Paragraph 18 claimed that the defendant was entitled to $3,690, the remaining 50 per cent. necessary to pay defendant in full, if it was entitled to such payment, after having received the 50 per cent. of dividends up to that time. Since that time defendant admittedly has received a dividend of 10 per cent. and a dividend of 5 per cent. on each of said certificates of deposit, or a total of 65 per cent.

There was offered on the hearing of this cause an agreed statement of facts proposed by defendant, some of which were assented to by the plaintiff and some of which were not. There were also offered by defendant several affidavits, just as if the testimony were being taken in court and subject to objections to their competency.

From all of the evidence and the admissions of counsel I find:

1. That the defendant borrowed from the American bank & Trust Company on March 25, 1926, the sum of $49,200 for which it gave its notes as specifically alleged and set forth in the further answer paragraph 5.

2. That the said notes were at the time of the execution, as stated on the face, in consideration of an agreed premium, receipt of which was acknowledged, unconditionally guaranteed by the Metropolitan Casualty Insurance Company.

3. That each of said notes bore on its back, over the signature of the defendant, an indorsement as set forth in paragraph 7 of the further answer.

4. That at the time of borrowing said money and executing said notes, the American Bank & Trust Company issued four certificates of deposit, each dated March 25, 1926, each in the sum of $1,845, and each certifying that the Metropolitan Casualty Insurance Company "has deposited in this bank Eighteen Hundred and Forty-five ($1,845.00) Dollars, payable to the order of themselves." The first of said certificates was due three months after date, and the others in six, nine, and twelve months, respectively. Each certificate states on the margin at the end in printing: "Certificate of Deposit not subject to check."

Each of said certificates of deposit is indorsed on the back: "Pay to the Order of The Continental Finance Co. (sd) The Metropolitan Casualty Ins. Co., J. M. Hollett, Attorney-in-fact." And then below this is indorsed: "The Continental Finance Co. By A. M. Klepinger, Treas."

5. The certificates of deposit are entered on the records of American Bank & Trust Company in a book marked "Certificates of Deposit," which contains no other or further entry than merely the following headings at the top of the columns and the following entries thereunder:

Deposited By	Date	No.	Amt.	Time
Metropolitan Cas. Ins. Co.		61	1845	-3
Metropolitan Cas. Ins. Co.		62	1845	-6
Metropolitan Cas. Ins. Co.		63	1845	-9
Metropolitan Cas. Ins. Co.		64	1845	-12

6. Defendant, in its further answer, claimed that there was an agreement by which American Bank & Trust Company and the Metropolitan Casualty Company required defendant to keep the amount of these certificates on deposit, such certificates to be used each at the end of the three, six, nine, and twelve months' period in part liquidation of the notes.

When we turn to the affidavit of David Kempner, president of G. B Bergin & Co., Inc., who states that he negotiated on behalf of Continental Finance Company, of Dayton, Ohio, a loan of $50,000 from American Bank & Trust Company, which was evidently these notes less the discount, he seems with care to state that the Metropolitan Casualty Insurance Company, before guaranteeing the notes, insisted that 15 per cent. of the amount of the loan be left on deposit and that certificates therefor...