South Carolina Nat. Bank v. Mortgage Loan Co.
| Decision Date | 31 August 1931 |
| Docket Number | 13233. |
| Parties | SOUTH CAROLINA NAT. BANK et al. v. MORTGAGE LOAN CO. et al. |
| Court | South Carolina Supreme Court |
Appeal from Common Pleas Circuit Court of Charleston County; M. M Mann, Judge.
Action by the South Carolina National Bank and others against the Mortgage Loan Company and others. From an adverse order, the named defendant appeals.
Affirmed.
Ernest L. Visanska and N. B. Barnwell, both of Charleston, for appellant.
J. N Nathans and Julian Mitchell, both of Charleston, for respondents.
The appeal in this case was heard at the October session, 1930 and on February 18 1931, an opinion was filed affirming the order appealed from. The appellant then filed a petition for a rehearing, which was granted, and the case set down for reargument. The reargument was had at the April session, 1931.
The former opinion is withdrawn and this substituted in its place.
This is an appeal from an order of his honor, Judge Mann, dismissing a rule to show cause, under the circumstances which will be detailed.
It appears that at the time of the closing of the Security Savings Bank (later the Security Corporation), it was the managing trustee of the estate of George W. Egan, deceased. The beneficiaries of this estate were A. E. Skinner, Jas. H. Egan, and E. C. Skinner. They each occupied a dual relation to the Security Savings Bank, namely, that they were the beneficiaries of the trust and they were severally debtors by note to the South Carolina Loan & Trust Company, with which the Security Savings Bank was affiliated.
The defendant Mortgage Loan Company was a corporation organized for the purpose of liquidating the affairs of both defunct banks in lieu of a receivership proceeding. The Mortgage Loan Company was in no sense a purchaser for value, but was a mere liquidating agency.
In the administration of the offices to perform which the Mortgage Loan Company was organized, in 1927 it brought three separate actions at law as follows:
1. Against E. C. Skinner and J. O. Skinner on a collateral note of E. C. Skinner to South Carolina Loan & Trust Company, indorsed and guaranteed by J. O. Skinner, dated July 15, 1926, for $12,200 due January 17, 1927, with interest from maturity at the rate of 8 per cent. per annum, secured by certain life insurance policies; commenced July 25, 1927.
2. Against James H. Egan and Daisy Egan on a collateral note of James H. Egan to South Carolina Loan & Trust Company, indorsed and guaranteed by Daisy Frances Egan, dated July 15, 1926, for $8,000 due January 17, 1927, with interest from maturity at the rate of 8 per cent. per annum, secured by a life insurance policy; commenced August 12, 1927.
3. Against A. E. Skinner on a collateral note of A. E. Skinner to South Carolina Loan & Trust Company, dated July 15, 1926, for $7,300 due January 15, 1927, with interest after maturity at the rate of 8 per cent. per annum, secured by life insurance policies and by a bond and mortgage for $10,000.00; commenced November 14, 1927.
In the several answers to the complaints in these actions, defendants set up counterclaims for damages on account of the mismanagement of the managing trustee and the dissipation of the assets of the estate to which the beneficiaries, defendants in those suits, would have been entitled if the trust had been properly managed, entailing a severe loss upon each of them. These counterclaims were ordered stricken out for the reason that the trustees of the estate of Egan were not parties to the suit; that they were necessary parties to the determination of the matters set up on the counterclaims.
Thereupon the trustees of the Egan estate on March 22, 1928, brought the present action for mismanagement by the former managing trustee, against the Mortgage Loan Company which had acquired the assets of the South Carolina Loan & Trust Company and the Security Savings Bank, the banks charged with mismanagement of the trust.
The beneficiaries of the trust above named then severally applied to the court for an order restraining the Mortgage Loan Company from prosecuting the suits upon the notes against them, until the mismanagement suit should be first heard and determined. On March 31, 1928, the motion came on to be heard before his honor, Judge Townsend, who signed an order reciting as follows: "To the petition (of the beneficiaries), the Mortgage Loan Company filed its objections, setting out among other things that the investments and changes of investments made by Security Corporation and Security Savings Bank for and on behalf of the trust estate, were made by one or more officers of Security Corporation and Security Savings Bank to-wit: H. H. Ficken, vice-president and subsequently president of South Carolina Loan and Trust Company, H. H. Ficken, president of Security Savings Bank and J. Arthur Johnston, president, Security Corporation; and O. B. Chisolm, trust officer of South Carolina Loan and Trust Company and of Security Corporation and counsel for Mortgage Loan Company insisting that they were parties necessary and proper to the final determination of the issues involved."
The order directed as follows: "It is ordered that the petitioners be required to amend their complaint by adding as parties defendants, H. H. Ficken, J. A. Johnston and O. B. Chisolm, and that upon the service of the amended summons and complaint upon the attorneys for the defendants, The Mortgage Loan Company, and upon the defendants H. H. Ficken, J. Arthur Johnston and O. B. Chisolm, if he can be found within the jurisdiction, and if not then without such service, the suits instituted by The Mortgage Loan Company respectively against James H. Egan and Daisy Frances Egan; against A. E. Skinner, and against J. O. Skinner and E. O. Skinner, be and the same are hereby stayed until the final adjudication in the above entitled action as amended, and that if the suit of petitioners aforesaid against The Mortgage Loan Company eventuate in favor of said petitioners as plaintiffs therein, then the defendants be permitted to amend their answers in the suits brought respectively against J. H. Egan, et al., by said The Mortgage Loan Company in such respects as the Court upon application may allow, in order to set up therein as a counter-claim and set-off such interests as each of them may be entitled to as beneficiaries of such estate."
It does not appear that any notice of intention to appeal from this order was given.
The summons and complaint were amended accordingly; the names of the three defendants mentioned were added to the caption, and a paragraph was added seeking to charge them according to their several degrees of culpability.
The amended pleadings were properly served upon the Mortgage Loan Company which answered the amended complaint on May 5, 1928. It is assumed, although it does not so appear in the record, that at the same time a demurrer was interposed by each of the defendants Ficken, Chisolm, and Johnston to the amended complaint; the matter came on to be heard by his honor, Judge Mann, who sustained the demurrers of Chisolm and Johnston, but overruled the demurrer of Ficken, in an order dated February 18, 1930. There was no appeal from this order, so far as it sustained the demurrers of Johnston and Chisolm; the defendant Ficken, however, did appeal from it so far as it overruled his demurrer. His appeal was decided by this court in an opinion filed October 2, 1930, 159 S.C. 359, 157 S.E. 74, affirming the order overruling the demurrer of Ficken.
The appellant suggests that the Mortgage Company had no right to appeal from this order sustaining the demurrers of Johnston and Chisolm upon the ground that they were codefendants of the Mortgage Company which had no interest in that fight. The cases of Bank v. Pruitt, 121 S.C. 484, 113 S.E. 469, and Bank v. Spratt, 122 S.C. 48, 113 S.E. 473, are cited to sustain the position; we do not think that they do so; it was of great moment to the Mortgage Company to establish the liability of all three officers who would be liable over to it, if judgment should go against the Mortgage Company. We do think, too, that The Mortgage Company was deeply interested in the order of Judge Townsend directing a suspension of the actions which it had brought against the Skinners and Egans upon the notes referred to. It did not do so, but recognizing the validity of the order, it applied for and obtained from his honor, Judge Mann, on March 31, 1930, a rule directed to South Carolina National Bank et al. as trustees under the will of George W. Egan, deceased, James H. Egan, Daisy Frances Egan, Anna C. Veronee as executrix of the will of J. O. Skinner, Anna C. Veronee and Mary S. Culler as executrices of the will of Mrs. E. C. Skinner, and A. E. Skinner, requiring them to show cause before him on April 4, 1930, "why this Court should not issue its order setting forth that inasmuch as trustees of the estate of Egan have failed to comply with the order of his honor Judge W. H. Townsend of March 28 (31?), 1928, that the Mortgage Loan Company have leave to proceed forthwith in the suits brought by it against J. O. and E. C. Skinner, A. E. Skinner and James H. and Daisy Frances Egan."
The parties against whom said rule to show cause was directed, made return thereto as follows:
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