South Carolina State Bank v. Stokes

Decision Date07 March 1933
Docket Number13595.
Citation168 S.E. 541,169 S.C. 173
CourtSouth Carolina Supreme Court

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

Action by the South Carolina State Bank, as receiver of the Bamberg Banking Company, against J. W. Stokes. From an order affirming the master's report in favor of defendant except as to the master's finding that the banking company was solvent at the time defendant withdrew certain money, upon which question the circuit judge did not pass plaintiff appeals.

Reversed and remanded, with directions.

The order of E. C. Dennis, Presiding Judge, directed to be reported, is as follows:

This matter comes before me on exceptions to the master's report. The action was brought by the receiver of the Bamberg Banking Company for the purpose of requiring the defendant J. W. Stokes, to return the sum of $500, which amount he drew out of the bank by a check drawn on his open checking account on the last day that the bank was open. The contentions of the plaintiff and of the defendant are stated fully in the master's report.

The master, who took the testimony and who had an opportunity to observe all of the witnesses, found against the contentions of the receiver, and in favor of the defendant.

I have given the case careful consideration, and I am convinced that the master arrived at a proper conclusion. The master, among other things, found that the bank was solvent when the check was paid. I understand that there are other cases of a somewhat similar nature pending, and for that reason I will not pass upon the findings of the master as to the solvency of the bank. I do not wish to prejudice the rights of the receiver in those cases, and I do not deem it necessary to pass upon this finding in order to confirm the master's report in this case.

The attorney for the plaintiff contends that this case should be governed by the principles announced in the cases of Rice v. City of Columbia, 143 S.C. 516, 141 S.E. 705, and Mortgage Loan Company v. Townsend, 156 S.C. 203, 152 S.E. 878. It appears to me that the facts in this case can be easily distinguished from the facts in those cases, and that this case should be governed by the principles announced in the cases of Livingstain v. Columbian Bank & Trust Company, 81 S.C. 244, 62 S.E. 249, 22 L. R. A. (N. S.) 445; and Harlem Corporation v. Eadie, 152 S.C. 242, 149 S.E. 401. Also see the cases of McCallum v. Twiggs County Bank, 172 Ga. 591, 158 S.E. 302, and McDonald v. Chemical National Bank, 174 U.S. 610, 19 S.Ct. 787, 43 L.Ed. 1106.

It appears from the testimony in this case that the defendant, J. W. Stokes, who was sick at the time, gave a check to his son, H. H. Stokes, who was president of the bank, and requested his son to bring him $500. The check was signed by Mr. Stokes, but he did not fill out the amount; however, he gave his son specific instructions as to the amount to be filled out. Mr. H. H. Stokes carried the check in his pocket for a few days, and on January 15th filled the check out for $500, and handed same to the cashier of the bank who cashed it. Mr. J. W. Stokes testified that he made no specific request upon his son to cash the check immediately, but that he expected him to cash same promptly, and to bring him the money. The plaintiff contends that Mr. J. W. Stokes constituted H. H. Stokes his agent, and left the time of the cashing of the check in his discretion, and that, when Mr. H. H. Stokes had the check cashed, he knew that the bank was insolvent. This contention of the plaintiff is in direct conflict with the testimony of its main witness, Mr. Hinnant, who testified that the check was not signed by J. W. Stokes at all, but was signed "J. W. Stokes per H. H. Stokes." The original check was introduced in evidence, and the master found that same was signed by J. W. Stokes himself, and I am convinced that the evidence amply supports the finding of the master. Mr. J. W. Stokes testified that when he signed the check and requested his son to bring him the money that he had no idea that the bank was in a weakened condition, and that he did not know that the bank had closed until the following morning. The facts in the case strongly indicate that Mr. Stokes had no knowledge that the bank was in a weakened condition, as the testimony shows that he made a deposit a few days before the bank closed, and when he gave the check he had $1,117.45 on deposit, and only withdrew $500, and, further, when the check for $500 was signed he did not request his son to immediately bring him this amount. If he had had any knowledge or suspicion that the bank would close, it is most likely that he would have drawn out the full amount of his deposit, and certainly would not have permitted his son to have waited several days before cashing the check. I do not think that Mr. Stokes constituted his son his general agent when he gave him the check, but only made him a special agent for the one purpose of bringing him the money, and that he would not be bound by information which Mr. H. H. Stokes might have had as to the bank. There is absolutely no evidence in the record to indicate that Mr. H. H. Stokes ever told his father of the condition of the bank.

As heretofore stated I am not passing upon the solvency of the bank at the time that the check was cashed; however, there is no direct or convincing evidence in the case to the effect that the president or other officers knew of the insolvency of the bank, if it was insolvent, or that they knew that the bank would not reopen on January 16th. The testimony of the bank examiner is that when he came to Bamberg that he was apprehensive that he would have to close the bank, but no definite action was taken towards closing the bank until a meeting was held with the directors on the night of January 15th. The testimony shows that all checks which were presented on January 15th were promptly paid, and that all items received through the mail were paid, and that when the bank closed it had more than $5,000 in its vault, and something over $8,000 in other banks.

As was stated in the case of McDonald v. Chemical National Bank, 174 U.S. 610, 19 S.Ct. 787, 790, 43 L.Ed. 1106: "It is matter of common knowledge that banks and other corporations continue, in many instances, to do their regular and ordinary business for long periods, though in a condition of actual insolvency, as disclosed by subsequent events. It cannot surely be said that all payments made in the due course of business in such cases are to be deemed to be made in contemplation of insolvency, or with a view to prefer one creditor to another. There is often the hope that, if only the credit of the bank can be kept up by continuing its ordinary business and by avoiding any act of insolvency, affairs may take a favorable turn, and thus suspension of payments and of business be avoided. *** The Chemical National Bank was no more preferred by these remittances several days before suspension than were the depositors whose checks were paid an hour before the doors were closed." The McDonald Case was cited with approval, and the case of McCallum v. Twiggs County Bank, 172 Ga. 591, 158 S.E. 302, which case was instituted by the receiver of a closed bank to require a depositor to return money drawn out of the bank shortly before it closed.

In the recent case of Harlem Corp. v. Eadie, 152 S.C. 242, 149 S.E. 401, 408, our Supreme Court in upholding the assignment of certain mortgages to Eadie stated: "The transaction in question was as readily sustainable as were the transactions by depositors who drew checks upon their deposits. We do not suppose that it would be contended that the receiver of the bank, which was closed three days later on December 16th, could require a return of the funds withdrawn by depositors upon checks, unless it distinctly appeared that on December 13th the bank was in an insolvent condition and known so to be by its managing officers."

It is true that there are some circumstances in this case which are suspicious, but these circumstances are not strong enough to overcome the clear and positive findings of the master.

It is therefore ordered that the master's report be, and the same hereby is, confirmed in all respects, except as to his findings in reference to the solvency of the bank. I have purposely omitted passing on this finding for the reasons heretofore stated.

It is further ordered that the judgment prayed for by the plaintiff be refused.

E. H. Henderson, of Bamberg, for appellant.

Kearse & Kearse, of Bamberg, for respondent.

G. B. GREENE, Acting Associate Justice.

This action was brought by South Carolina State Bank, as receiver for Bamberg Banking Company, in liquidation, against the respondent, J. W. Stokes, for the purpose of recovering from him the sum of $500, which he as a depositor had withdrawn from said Bamberg Banking Company on the last day that said bank was open for business. The complaint in substance alleged that Bamberg Banking Company, hereinafter called the bank, was insolvent at the time of said withdrawal; that in making payment to respondent of said sum of money the bank intended to give respondent an unlawful preference over its other depositors and creditors; that respondent had reasonable cause to believe that said bank was insolvent, and that said payment to him would be an unlawful preference over the other creditors of the bank. The answer admitted the withdrawal by respondent of the sum of $500 from the bank on January 15, 1931, the last day the bank was open for business, but alleged that said sum of money was withdrawn from his open checking account while the bank was open and receiving deposits and paying checks in...

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