South Carolina State Bank v. Citizens' Bank

Decision Date27 September 1934
Docket Number13910.
Citation176 S.E. 346,173 S.C. 496
CourtSouth Carolina Supreme Court

Appeal from Common Pleas Circuit Court of Marion County; E. C Dennis, Judge.

Proceeding by the South Carolina State Bank, on behalf of L. B. Rogers against the Citizens' Bank, as receiver of the Farmers' & Merchants' Bank. From a judgment for the South Carolina State Bank, on behalf of L. B. Rogers, the Citizens' Bank, as receiver of the Farmers' & Merchants' Bank, appeals.


CARTER J., dissenting.

L. D Lide, of Marion, for appellant.

Gibson & Muller, of Dillon, for respondent.

W. C. COTHRAN, Acting Associate Justice.

In the consideration of this appeal we are forcibly reminded of a prophecy of the late Thomas P. Cothran, a justice of this court, made in 1926, in the case of Citizens' Bank v. Bradley, 136 S.C. 511, 134 S.E. 510, as follows: "" This court must take judicial notice of the unprecedented clashes of financial institutions and private enterprises, recently occurring, which have shocked the state, and must anticipate in their wake the presentation of innumerable problems for its determination. I regard this, therefore, as a most critical period in the judicial history of this state, and feel the deepest responsibility in deciding the questions, as they arise, upon the most painstaking consideration, lest an erroneous decision will be 'drawn into a precedent' fraught with disaster."

Many difficult questions have arisen and have been decided since the utterance of that prophecy, all going to the establishment of its complete fulfillment. It is recognized by both bench and bar that the decisions in various cases have not been in thorough accord, not only with the decisions of other states, but at times with the decisions as rendered by this very court. The vast difference in the facts of the various cases has on occasions caused the principles of law to become obscure, and confusion has been the inevitable result.

In this opinion it will not be attempted to review all of the bank cases which have been decided in the past few years, but the effort will be made to review only those bearing upon the situation as is developed by this case, the facts of which are simple and easy of comprehension, but the law apparently full of traps and pitfalls.

L. B. Rogers had some cotton seed and meal at Latta, S. C., which he sold to Swift & Co. The representative of Swift paid for the seed and meal by means of a "seed ticket" for $1,379.24; this seed ticket being to all intents and purposes a draft on Swift & Co. of Columbia and drawn through the Farmers' & Merchants' Bank of Latta. Rogers went to the Latta bank to cash his seed ticket, and was told by the cashier that the bank did not have sufficient funds on hand for that purpose. Rogers walked out of the bank and was followed by the assistant cashier who offered him $100 in cash and a cashier's check for the balance, $1,279.24. This arrangement was agreed to, the $100 in cash was paid, and Rogers stated, "So I swapped him the ticket for a cashier's check." Rogers then took the cashier's check to Dillon and deposited it with the bank there for collection. The bank at Latta was closed before its cashier's check was paid. It only remains to be said that the seed ticket was forwarded to Columbia on November 19, 1931, to the National Loan & Exchange Bank, and that the same was paid by Swift & Co. on November 20, 1931. It is important here to note that the record does not show what became of the money collected from Swift & Co. by the Columbia bank.

The Farmers' & Merchants' Bank at Latta, the bank which issued its cashier's check to Rogers, closed its doors on November 21st, at the end of the business day, and Citizens' Bank was appointed receiver. The South Carolina State Bank filed claim against the receiver for $1,279.24 on behalf of Rogers as a preferred claim. Testimony was taken before the probate judge, and his decision was duly rendered denying a preference. Upon appeal to the circuit court, the judgment of the probate judge was reversed, and Rogers' claim was declared entitled to preferential payment. From this ruling the receiver, on behalf of all creditors, has appealed upon exceptions which properly present the subject for decision.

The similarity of this case to the case of Ex parte Sanders, 168 S.C. 323, 167 S.E. 154, is shown below in the form of parallel columns.

The Sanders Case The Rogers Case
1. Sanders presented to Rogers presented to the

the bank to be cashed a bank to be cashed a seed

check of one of its depositors ticket which was good.

which was good.

2. The bank gave Sanders The bank gave Rogers a

a draft on a cashier's check on itself

Charleston bank and and some cash.

some cash.

3. The check was paid The seed ticket was paid

by charging the account by Swift & Co. upon presentation.

of the depositor who issued

the check.

4. The bank failed, and The bank failed, and the

the draft on Charleston cashier's check was not

was not paid. paid.

5. Sanders was not, and Rogers was not, and never

never intended to be, a intended to be, a depositor

depositor in the bank. in the bank.

6. Sanders brought suit Rogers brought suit upon

upon his claim, alleging his claim, alleging

a preference. a preference.

7. The circuit judge held The circuit judge held

that Sanders was not a that Rogers was a preferred

preferred creditor. creditor.

8. Sanders appealed to The receiver appealed to

this court from the ruling this court from the ruling

of the circuit judge. of the circuit judge.

9. The judgment was affirmed What?

and Sanders is

held to be a common


Practically the only difference between the two cases is that Sanders accepted a draft and Rogers accepted a cashier's check. As between the two, it would appear that Sanders occupied the stronger position. The draft on the Charleston bank was perfectly good and would have been paid if presented in time. The cashier's check apparently was never good. Just why Rogers would accept a cashier's check for the amount of the seed ticket on a bank which did not have sufficient funds on hand to pay the amount we are at a loss to understand. However, it seems that he was willing to make the swap and must accept the consequences even as did Sanders, who failed to present his draft in time.

In the case of Fant v. Easley Loan & Trust Co., 170 S.C. 61, 169 S.E. 659, the South Carolina National Bank and the First National Bank of Blakeley, Ga., claimed preferences in the assets of the closed Easley Loan & Trust Company upon the ground that the Easley bank had sent them checks in payment of their items, which checks were dishonored, and that the checks were a legal assignment of the funds in the bank. The claims for preferences were denied. It is true that the preferences were claimed on the ground of legal assignment pro tanto of the funds in the bank which issued its checks, and this claim was denied under the provisions of the Negotiable Instruments Law (Code 1932, § 6752 et seq.) and the cases of Citizens' Bank v. Bradley, 136 S.C. 511, 134 S.E. 510, and Loan & Savings Bank v. Peurifoy, 141 S.C. 318, 139 S.E. 783. However, if the claims could not be sustained upon the ground of equitable assignment, there was no other ground upon which they could rest; the question of their being a trust having been eliminated.

The cases relied upon in the opinion of Mr. Justice CARTER as giving a preference will now be considered.

Loan & Savings Bank v. Peurifoy, supra. In this case a preference was allowed on the double ground that the relation of principal and agent existed and also that a trust ex maleficio had arisen, neither of which conditions exist in the present case.

Hampton Loan & Exch. Bank v. Lightsey, 155 S.C. 222, 152 S.E. 425. In this case the sole reason for the allowance of the preference was that the Hampton Bank by the payment of the draft had become subrogated to the rights of the Savannah bank, which bank was clearly entitled to payment in full. Not one of the four elements of subrogation, as outlined in that case, can be found in the present case.

Ex parte Berger, 81 S.C. 244, 62 S.E. 249, 22 L. R. A. (N. S.) 445. This case is based entirely on subrogation, is the basis for the decision in the Lightsey Case, and contains no principle of law applicable to the case now under consideration.

Reviewing briefly some of the other so-called bank cases decided by this court, we refer to the following:

Railway Express Agency v. Bethea, 165 S.C. 230, 163 S.E. 637. This case appears to be somewhat out of line with some of the other decided cases, unless it can be sustained under the principle that at the time Bridges, the agent of the plaintiff, purchased the drafts from the Bank of Dillon, the Bank of Dillon was insolvent. If insolvent, then the conduct of the bank may have been considered as a breach of trust ex maleficio and the preference allowed under the case of Ex parte Bank of Aynor, 144 S.C. 147, 142 S.E. 239, and subsequent cases affirming that much-disputed and rather doubtful doctrine. The Bethea Case, however, is not decided on that rule, but follows the Lightsey Case, supra, on the ground of subrogation, although it appears to be conceded in the briefs filed herein by the attorneys for both parties that the doctrine of subrogation has no foundation in the Bethea Case.

Citizens' Bank v. Bradley, supra. This case deals with several claims for preference, all of which were denied, but, as illustrative of the question now being considered, we refer to only one, the Seabrook claim. Mr. Seabrook, an attorney collected a claim for one of his clients; the claim being paid by check on the Pinewood bank, where the drawer of the...

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