Opinion
12646
April 24, 1929.
Before JOHNSON, J., Hampton, August, 1927. Affirmed.
Action by Hugh O. Hanna, as Receiver of the Planters' Merchants' Bank of Varnville, against the National Loan Exchange Bank of Columbia and another. Judgment for plaintiff and defendant W. Fred Lightsey, as Receiver of the Bank of Hampton, alone appeals.
The decree of Johnson, Circuit Judge, is as follows:
"In this cause, Hugh O. Hanna, as Receiver of Planters' Merchants' Bank, as plaintiff, brings an action against the defendant, National Loan Exchange Bank, and against the Receiver of the Bank of Hampton, claiming certain funds to wit, $2,077.37, being proceeds of certain checks forwarded by Planters' Merchants' Bank to defendant, National Loan Exchange Bank, for collection, which proceeds plaintiff alleges are now in the hands of National Loan Exchange Bank and the property of plaintiff. The amount of the funds and the circumstances and manner of origin and handling is more fully referred to in the agreed statement of facts which is set out below. The National Loan Exchange Bank accepted service of the summons and complaint on November 2, 1926, the Bank of Hampton being served about the same time. On or about that date, J.W. Manuel, Esq., as attorney for Lucy Ellis, Plaintiff, commenced an action against Hugh O. Hanna, as Receiver of Planters' Merchants' Bank, W. Fred Lightsey, as Receiver of Bank of Hampton and the National Loan Exchange Bank, alleging and claiming $1,334.71 of said funds as hers, a more detailed statement of which is given below, and a similar action was commenced by W.D. Connor, Esq., as attorney for Mrs. Dora E. Searson, as plaintiff, against Hanna, as Receiver of Planters' Merchants' Bank, W. Fred Lightsey, as Receiver of the Bank of Hampton and the National Loan Exchange Bank, alleging and claiming as hers the sum of $400 of said funds in the hands of the National Loan Exchange Bank. The Bank of Hampton, in answer, claims the entire funds as the property of W. Fred Lightsey, as Receiver. By order of this Court, with consent of counsel for all parties to the several suits, all the causes of action were consolidated in this cause and the matter referred to B.T. De Loach, as Special Referee, for the purpose of taking any and all testimony offered, and the order provided for the final determination of all of the causes in this proceeding. About the same time, R.P. Searson, Esq., attorney for W.J. Speaks, commenced an action against Hugh O. Hanna, as Receiver of Planters' Merchants' Bank, claiming part of said funds, or other funds, and by consent, this cause of action was heard at the same time with the others. The cause of action commenced by Speaks has been disposed of by a separate order and will not be referred to hereafter in this order.
"For purposes of brevity in this order, the Planters' Merchants' Bank of Varnville, S.C. will be designated as Varnville Bank, the Bank of Hampton as the Hampton Bank, and the National Loan Exchange Bank of Columbia, S.C. as the Columbia Bank.
"The record consists of the agreed statement of facts, the transcript of testimony taken at Varnville, and the transcript of testimony taken at Columbia, S.C. together with the exhibits introduced at said references. The matter was heard and argued before me at Allendale, S.C. on January 14, 1927. The agreed statement of facts, in the main, admits certain allegations of the complaint of Hanna, as Receiver of Varnville Bank, and admission of certain exhibits as correct and the dates of the collection of the items in the cash letter referred to in his complaint. As there are three different complaints, answers, and cross-answers and certain admissions and certain denials in all, the facts as agreed upon will be set out in full below to save the confusion of reference to the admissions by paragraph. The allegations of the complaint will be used as a basis and shortened whereever possible.
"The agreed statement of facts shows:
"That the plaintiff, Hugh O. Hanna, was, on August 6, 1926, by order of this Court, duly appointed Receiver of the Varnville Bank, that he has qualified and is now in the active discharge of his duties as such Receiver, and that the Varnville Bank was a banking corporation under the laws of the State of South Carolina, at the times named in the complaint; that W. Fred Lightsey was, on August 6, 1926, by order of this Court, appointed Receiver of the Hampton Bank, has qualified and is now in the active discharge of his duties as such, and that the Hampton Bank was, at the times named in the complaint, a banking corporation under the laws of the State of South Carolina; that the Columbia Bank is a banking corporation organized and existing under the laws of the United States, domesticated in the State of South Carolina and located at Columbia, S.C.
"That for several years before and during the dates of the transaction referred to, the Columbia Bank was the correspondent bank of both the Varnville Bank and Hampton Bank, and that both of the said banks carried with the correspondent bank a deposit of money and had borrowed money from the said Columbia Bank and deposited with it, as collateral security, sundry notes and mortgages made to Varnville Bank and Hampton Bank. That on Monday, July 12, 1926, by resolution of the Board of Directors, the Hampton Bank was placed in the hands of the State Bank Examiner for a period of 30 days from said date under Section 3981 of South Carolina Code of Laws, 1922, Volume 3. That by a similar resolution of the board of directors the Varnville Bank was likewise placed in the hands of the State Bank Examiner on July 12th. The Hampton Bank did not open for business on July 12th, but the Varnville Bank remained open for business during banking hours of the 12th and closed after banking hours on that day. That both banks had to their credit several thousand dollars.
"That the method employed by Varnville Bank in collecting checks, drafts, and other items on the Hampton Bank or on the Hampton Loan Exchange Bank of Hampton, another bank in the City of Hampton, was to forward the checks, drafts, and other items in a letter, called a cash letter, to its correspondent, the Columbia Bank, and the said correspondent bank would then forward the checks, drafts, and other items to Hampton Bank to collect, and when the Hampton Bank had collected these checks, drafts, and other items and received the proceeds therefrom, it would mark the same paid and forward in payment an exchange draft on some bank in New York or on the Columbia Bank, its correspondent bank also.
"On July 3, 1926, a cash letter of Varnville Bank, including the checks set out below, for the sum of $2,924.43 was sent to and received by the Columbia Bank. In this amount were included checks totaling $2,077.37 which were sent to Hampton Bank by the Columbia Bank for collection. The form of the cash letter being as below set out, giving name of drawer, the name of the bank on which drawn, the payee, and the depositor accompanied by the checks:
======================================================================= Drawer | Bank | Payee | Depositor | Amount ______________________________|______________________________|__________ Crocketville Service St. | Hampton L. . E. Bank | $56.53 Gulf Refining Company | Gulf Refining Company | Almeda Turpentine Company | Hampton L. E. Bank | 28.18 | Varnville Hdw. Sup. Co. | Lucy Ellis | Hampton L. E. Bank | 1,334.71 Planters' Merchants' Bank | Lucy Ellis | E.C. Nix | Bank of Hampton | 93.65 Gulf Refining Company | Gulf Refining Company | B.C. Foy | Bank of Hampton | 58.10 Gulf Refining Company | Gulf Refining Company | W.A. J.T. Kearse | Bank of Hampton | 17.85 Gulf Refining Company | Gulf Refining Company | Williams Shuman | Bank of Hampton | 25.85 Planters' Merchants' Bank | Planters' Merchants' Bank | Dora E. Searson | Bank of Hampton | 400.00 Planters' Merchants' Bank | | J.G. Ellis | Bank of Hampton | 3.00 Jim Youmans | Wilson Gray | J.G. Ellis | Bank of Hampton | 4.50 Harry Youmans | Wilson Gray | J.A. Lightsey | Bank of Hampton | 25.00 Star Service Station | Star Service Station | Ellis Bowers | Commercial Bank of Estill | 30.00 Geo. Tindall | Wilson Gray | _______________________________________________________________________ "In this cash letter, which totaled $2,924.43, were the checks listed above totaling $2,707.37, of which $1,419.42 were items on Hampton Loan Exchange Bank, and the balance were items on the Bank of Hampton."On July 3, 1926, the Columbia Bank, on its ledger sheet in account with Varnville Bank, credited the amount to Varnville Bank and forwarded the items listed above to Hampton Bank, and which latter bank collected the same by presenting the items on Hampton Loan Exchange Bank and receiving therefor $1,419.42 in cash, and by collecting the items drawn on it, and collecting from its customers or by charging their accounts with the amounts, and by collecting the $30 item from Commercial Bank of Estill, being a total of $2,077.37, and by collecting the further sum of $135.53 which was for other items sent by Columbia Bank to Hampton Bank for collection, which sum of $135.53 is not involved in this suit; that on July 8, 1926, the Hampton Bank marked the letter coming down from Columbia Bank paid, and on that date mailed out their usual exchange draft on the Columbia Bank, dated July 6, 1926, No. 12448, and made payable to Columbia Bank and drawn on the Columbia Bank for the sum of $2,212.90, being for the $2,077.37 listed above and for other separate items of $135.53.
"(Paragraph 8 of the complaint is next set out and is admitted in the agreed statement of facts `Except so much thereof as alleges that the account of Planters' Merchants' Bank was unconditionally credited with the amount therein set out.)
"`8. That at the time the said draft was drawn and issued and at the time of its receipt and thereafter and now, the defendant, Bank of Hampton, had on deposit with the defendant, National Loan Exchange Bank, its correspondent, sufficient funds to meet the same, and had on deposit at the time the draft was issued and received in excess of Four Thousand Dollars ($4,000.00); this draft was received by the defendant, National Loan Exchange Bank of Columbia, on or before July 12th and on the 12th day of July, 1926, the defendant, National Loan Exchange Bank, honored the said draft, and on the ledger sheet showing the account of the Bank of Hampton with the National Loan Exchange Bank the amount of the draft was charged to the said Bank of Hampton and the charge entered upon the said ledger sheet and the Planters' Merchants' Bank of Varnville, S.C. was thereby unconditionally credited with the sum of two thousand seventy-seven and 37/100 dollars; thereafter, to wit; on the 14th day of July, the defendant, National Loan Exchange Bank, reversed the transaction by crediting the amount back to the defendant, Bank of Hampton, and by charging items as above set out against the Planters' Merchants' Bank of Varnville, S.C.'
"Plaintiff, in paragraph 9 of the complaint which is denied by defendants and not admitted nor included in the agreed statement of facts, alleges that, when the draft aforesaid given by Hampton Bank was received by the Columbia Bank, the same was payment in the hands of the Columbia Bank for the Varnville Bank and became in the hands of said bank the sole and absolute property of Varnville Bank, to which the Receiver thereof was entitled, and that the Columbia Bank thereby became indebted to the Receiver for the sum of $2,077.37.
"Likewise in paragraph 11 which is admitted, it is alleged that the Hampton Bank was made a party defendant, as it was understood that it claimed some interest in the funds.
"The Columbia Bank, by its answer, alleges that it has `not information sufficient to form a belief as to the relative rights of the Varnville Bank or the Hampton Bank in the premises, and that it is willing to credit the amount to either bank in accordance with instructions from the Court.' By the terms of the letter of its attorneys, Melton Belser, dated January 12, 1927, it agreed to turn over to the Court the excess funds and collateral now under its control and be released from any liability to any of the claimants under these suits. This was consented to by the attorneys for the Varnville Bank, the Hampton Bank, Mrs. Searson, and Mrs. Ellis (also Mr. Speaks). In other words, by consent of all counsel it was agreed that the Columbia Bank should be in the position of stakeholder of the $2,077.37, which it admits that it has in its hands and holds and offered to pay in to the Court at any time or to hold the said funds and pay them over as the Court directs, provided it is released from any liability. The attorneys interested did not require the Columbia Bank to pay the funds into the Court, but the Columbia Bank, under the agreement, holds the said funds in money, and stands ready to pay them over as the Court directs.
"The Hampton Bank, by answer, admits practically the agreed statement of facts entered into, but denies that the Varnville Bank or any other is entitled to the funds, and claims them for its Receiver.
"Lucy Ellis, as against all others, claims $1,334.71, and in her complaint alleges the appointment of the Receivers of the Varnville and Hampton Banks, the closing of the two banks, that on July 2, 1926, she deposited with the Varnville Bank for collection a check for the said amount drawn on the Hampton Loan Exchange Bank, and alleges the forwarding thereof by it for collection of the funds from Hampton Loan Exchange Bank by the Hampton Bank, and the sending of said funds to the Columbia Bank and failure of the latter bank to transmit to Varnville Bank before it closed, and was taken in charge by the State Bank Examiner for liquidation, and that on July 2, 1926, it was well known to Varnville Bank and its officers, and so the bank was, that the said bank was insolvent, but held itself out to be solvent at the time, and that check, by reason thereof, did not become the property of Varnville Bank and she did not part with her title or interest in said check, but that it remained her property, and she is entitled to follow the same in the hands of the Columbia Bank. The complaint of Mrs. Searson was similar, except that it alleged the deposit of $400 on July 2, 1926, for collection, the insolvency of the bank, and that the proceeds of the check were hers. This is denied by the Receivers of the Varnville Bank and Hampton Bank, and by the Columbia Bank, with the specific denial in the answer of the Varnville Bank that the said check was deposited for collection, and the allegation that it was deposited for a deposit credit, and the title and proceeds of the check went to the Varnville Bank, and that Mrs. Ellis and Mrs. Searson became depositors and general creditors and denied the insolvency at the time the two checks were deposited. The main question is as to these two checks being deposited for collection and the insolvency, on July 2d, of the bank, and the knowledge thereof by its officers.
"The claim and contention of Mrs. Searson and Mrs. Ellis will be first disposed of. They appeared as witness in their behalf, and W.V. Bowers, cashier of the bank, was produced by the defendant Varnville Bank, and all witnesses were sworn, examined, and cross examined. It appears from the testimony, and I so find, that at the time of the depositing of these two checks on July 2, 1926, and prior thereto, the Varnville Bank was offering votes to a water carnival to all those who opened a savings account in the bank. The testimony of Lucy Ellis, page 2 of the testimony, being `On July 2nd I came to Varnville Bank and made a deposit so as to get some votes for my little niece to be Queen at the Carnival.' On this point, the testimony of Mrs. Searson is the same. There is some conflict as to whether it was specifically stated at the time when the deposit was made that the deposit was for collection only. As exhibits in the record, there was introduced the savings department passbook of Lucy Ellis, deposit slip in account with Varnville Bank, and the savings department passbook and deposit slip of Mrs. Searson in account with Varnville Bank. On the date above in the passbook, a regular deposit was entered for the respective amount to Mrs. Searson and Mrs. Ellis; also deposit slip of the bank, with the word "Savings" marked across the face thereof, shows deposits in the said amounts. The books of the bank show, and I so find, from consideration of the testimony, that the checks in question of both Mrs. Searson and Mrs. Ellis were handled by the bank as deposit items and not as a collection item. Mr. Bowers, page 10 of the testimony, testified that the deposit was taken and entered up as cash deposit and deposit made accordingly in the passbook and on the deposit slip, and no exception or special stipulation was made, except that the bank would waive its usual rule of requiring 60 days' notice before withdrawing the deposit, but that it could be withdrawn at will. It is true that both Mrs. Ellis and Mrs. Searson demanded their money on July 12th, when the bank had experienced and was experiencing a run and wholesale withdrawal of deposits, but Mr. Bowers testified that, had the check been presented on July 6th, 7th, or 8th, it would have been cashed. From all of the testimony and the records, I find and hold that the deposits of Mrs. Ellis and Mrs. Searson is a deposit item and not a collection item. I further find that there is no testimony or proof to show that the officers of the bank, or any of them, knew or had knowledge of any threatened run or unusual withdrawal of deposits or of the insolvency of the bank, if so, on July 2d, and hold that, when the two deposits were made, the relation of debtor and creditor was created between them and the bank, and they have no preferred claim to the funds in question, and that they are common creditors of the Varnville Bank and are entitled to whatever dividend has been paid to other depositors heretofore and to share ratably with other depositors in other dividends that may hereafter be paid out.
"Under this finding and holding this leaves the decision as to whom the funds, now in the hands of the Columbia Bank, belong between the Varnville Bank and Hampton Bank, as the Columbia Bank makes no claim to the funds as, under the agreement with counsel not to hold them further responsible, they stated that they stand ready to pay over the same pursuant to the orders of this Court. In the reference held in Columbia, Mr. Burnell Sloan, cashier of the Columbia Bank, called as witness by the Varnville Bank, and by the Hampton Bank, was the only witness sworn, examined, and cross examined. Two notes of the Hampton Bank to the Columbia Bank, dated July 1st and April 13th, were introduced in evidence after question by Mr. Murdaugh, counsel for Hampton Bank; the testimony of Mr. Sloan was that on a collateral note of Hampton Bank, the Columbia Bank had authority to charge all money in their hands belonging to Hampton Bank to any indebtedness which the Hampton Bank might have been owing at that time, and such a clause is in the two notes which authorizes the Columbia Bank, at its option, in the event of the insolvency of the Hampton Bank, to apply all moneys in its hands on deposit or otherwise the credit of, or belonging to the Hampton Bank upon its obligation. Reference to the two notes show that at the time of the reference they were paid and not due and owing by the Hampton Bank to the Columbia Bank. In the further consideration of the case and the conclusions arrived at, in so far as the Columbia Bank is concerned, there is no question present as to the exercise of this option. (A similar paragraph was contained in the notes of Varnville Bank to the Columbia Bank.) In view of the agreement of the Columbia Bank to act as stakeholder or to pay over to the Court the excess funds and collateral now in its hands, I conclude that all indebtedness of both banks to the Columbia Bank has been paid, and that the funds held are excess funds to which the Columbia Bank has or makes no claim; the sole question is whether the Hampton Bank or Varnville Bank is entitled to these funds.
"The attorney for the Receiver of the Hampton Bank, after admitting the allegations of the complaint embodied in the agreed statement of facts, alleged, upon information and belief, that at the time of placing the said amount to the credit of Varnville Bank, the National Loan Exchange Bank did not know that the Bank of Hampton had been placed in the hands of the State Bank Examiner, and, when it learned that this had happened, it credited the account of the Hampton Bank with the amount which it had wrongfully, under the circumstances, charged against it, and alleged that at the time the draft of the Hampton Bank was honored and charged against it by the Columbia Bank, that the Hampton Bank had been placed in the hands of the State Bank Examiner, and that the funds belong to its Receiver.
"In addition to the agreed statement of facts, the ledger sheet of the Columbia Bank and Varnville Bank and the ledger sheet of the Columbia Bank and Hampton Bank were placed in evidence and form part of the record. It appears from the agreed statement of facts and from these exhibits and from the testimony that, as the Columbia Bank received cash letters from the Varnville Bank or the Hampton Bank, it placed the amount to the bank's credit, subject to payment, and on the condition that the bank would be liable only when proceeds and actual funds or solvent credits shall have come into its possession. The ledger sheet in account with Varnville Bank shows that the Columbia Bank, on July 3d, passed to its credit and made entry therefor, the sum of $2,924.43, which included the $2,077.37 forwarded to Hampton Bank for collection. On July 12th, there was charged or debited to Hampton Bank, on its ledger sheet in account with the Columbia Bank, the sum of $2,212.90, which included $2,077.37. On July 14th, on the ledger sheet this amount was credited back to the Hampton Bank, and items totaling this amount were charged back on the ledger sheet to Varnville Bank. The testimony of Cashier Sloan, on page 2 of the transcript, is to the effect that on July 3d the cash letter was received and credited to Varnville Bank, and check in payment was received on July 12th and charged to the account of Hampton Bank on that date `as we were not advised that Hampton Bank did not open for business on July 12, 1926.' This testimony further shows that, at the time the charge was made to Hampton Bank, it had to its credit with Columbia Bank something like $4,400.
"On the question as to whether or not the Columbia Bank knew at the time of the receipt of the Hampton Bank's draft and payment of the items and at the time on July 12th, when it charged the same to the account of the Hampton Bank, the only testimony is that of Cashier Sloan. He states that the officers of the Columbia Bank did not know at the time that the Hampton Bank did not open for business on July 12th, or that it had been placed in the hands of the State Bank Examiner, and testified, in direct question as to the reason why the items were charged back to Varnville Bank and credited to Hampton Bank on the 14th, that the officers in the bank did not know of the closing of the Hampton Bank. This testimony is not contradicted, and, while there is some testimony by Mr. Sloan that he and the other officers knew of the financial troubles of the Beaufort Bank prior to this time, and that the failure of the Beaufort Bank would probably involve the Hampton Bank, I find and so hold, from all the testimony that at the time the draft for $2,212.90 of the Hampton Bank was honored and charge made to Hampton Bank, that the Columbia Bank, nor its officers, did not know of the failure of the Hampton Bank to open and of it being placed in the hands of the State Bank Examiner. Mr. Sloan further testified, on page 3, in reference to said draft in direct examination by Mr. Hanna:
"`Q. When you charged that check to them (Bank of Hampton) you then took that much cash from their account and put to Planters' Merchants' Bank? A. Yes, the checks, consisting of that letter of the 3rd, would be counted as paid.
"`Q. Equivalent to actually receiving the money when you cashed that check which the Hampton Bank sent you? A. Yes.'
"I further find, and so hold, that upon receipt of the draft of the Hampton Bank, and charging of the account to the Hampton Bank by the Columbia Bank with the said amount, not knowing at the time of the failure of the Hampton Bank to open, that this was equivalent to the Columbia Bank receiving in solvent funds the amount of the cash letter previously credited to Varnville Bank, and that the Varnville Bank thereby became the owner of the funds and is entitled to the same.
"I am mindful of the principle of law that the death of a drawer of a check revokes the authority of the bank to pay his checks, but that the exception to the rule, and I so hold, is that the death of the drawer of a check operates as revocation of the authority of the bank to pay after notice of the death, but, if it pays without notice, it incurs no liability thereby.
"The condition under which the cash letter went to the credit of the Varnville Bank was performed. The funds were collected by Hampton Bank, were paid to Columbia Bank, they received them, the transaction was completed and went to the credit of the Varnville Bank before any question as to the closing of the Hampton Bank was present or known. Under all of the facts and all the equity of the case, I am of opinion, and so hold, that the Varnville Bank is entitled to the funds, and, therefore, it is
"Ordered that the National Loan Exchange Bank pay over to the Receiver of the Planters' Merchants' Bank, or his attorney, the funds now in its hands, and to surrender to this bank and the Bank of Hampton any collateral which it may have of each bank in compliance with their agreement so to do."
Mr. Randolph Murdaugh, for appellant, cites: Insolvency and closing of bank destroys rights of holders of checks to funds called for by them: 120 U.S. 511; 154 N.Y.S., 667; 152 N.Y.S., 717; 159 N.Y.S., 1128; 172 Ill. App., 518; 135 S.C. 417.
Messrs. George Warren and Hugh O. Hanna, for respondent, cite: Findings of fact by Master concurred in by Circuit Judge not disturbed unless against preponderance of evidence: 115 S.C. 385; 135 S.C. 33; 144 S.C. 70. No revocation of authority of bank to pay until actual notice of death of drawer; if paid before notice held valid: 7 C. J., 702; 1 Peton's Digest, 1680; 5 R.C.L., 530. Cases distinguished: 120 U.S. 511; 81 S.C. 244.
April 24, 1929. The opinion of the Court was delivered by
The issues in this case are stated in the decree of the Circuit Judge, Hon. J. Henry Johnson, who heard the case on the testimony taken before a Special Referee. After careful consideration of the entire record in the case, we are satisfied that his Honor, Judge Johnson, reach a correct conclusion. The exceptions are, therefore, overruled, and it is the judgment of this Court that the judgment of the Circuit Court be affirmed.
MR. CHIEF JUSTICE WATTS and MESSRS. JUSTICES BLEASE and STABLER concur.
This is an action by the plaintiff, as Receiver of the Planters' Merchants' Bank of Varnville, against the National Loan Exchange Bank of Columbia, to recover the proceeds of certain items transmitted to it by the Varnville Bank for collection and alleged to have been collected by the Columbia Bank. The Receiver of the Bank of Hampton has been made a party defendant as claiming an interest of some kind in the fund in dispute.
For convenience I shall refer to the National Loan Exchange Bank of Columbia as the Columbia Bank, the Planters' Merchants' Bank of Varnville as the Varnville Bank, and the Bank of Hampton as the Hampton Bank. There are two other banks remotely connected with the litigation, the Loan Exchange Bank of Hampton and the Bank of Estill, but, as their connection is so remote and they will appear so seldom in the case, no abbreviated title is necessary. The contest, as will appear, is between the Receiver of the Varnville Bank and the Receiver of the Hampton Bank.
The admitted facts are these:
On July 3, 1926, the Varnville Bank transmitted in what is termed a "cash letter," certain items to the Columbia Bank for collection and account. The sum total of these items was $2,924.43. They were received by the Columbia Bank and credited to the deposit account of the Varnville Bank, subject to the collection of the items by the Columbia Bank and the receipt by it of the actual funds represented by the items.
Among them, a part of the $2,924.43, were the following checks drawn by depositors in the named banks upon them, payable to various parties who had placed them in the Varnville Bank for collection:
Checks upon the Hampton Bank ................... $ 627.95 Checks upon the Loan Exchange Bank of Hampton ...................................... 1,419.42 A check upon the Bank of Estill ................ 30.00 _________ Total ........................................ $2,077.37(Note. How the difference between $2,924.43, the total amount of the items transmitted, and the total of the foregoing items, $2,077.37, $847.06, is accounted for, does not appear in the record, and I assume is of no consequence in this litigation.)
Between July 3d and 8th the foregoing items, aggregating $2,077.37, were transmitted by the Columbia Bank to the Hampton Bank for collection and account. The Hampton Bank collected the items drawn upon the Loan Exchange Bank of Hampton, $1,419.42 and the item drawn upon the Bank of Estill, $30, and charged to the several depositors who had drawn upon it, the amount of the checks so drawn, $627.95.
On July __th the Hampton Bank, which had a credit balance upon its deposit account with the Columbia Bank sufficient to meet it, transmitted to the Columbia Bank, on account of said items, its check on the Columbia Bank for $2,077.37, which was received by the Columbia Bank on July 12th and charged against the deposit balance to the credit of the Hampton Bank upon its books.
The Hampton Bank closed at the usual hour on July 10th, which was Saturday, and did not open for business on the 12th, which was Monday, having been taken over by State Bank Examiner on the morning of that day, or possibly on the Saturday night preceding.
On July 14th, the Columbia Bank having learned of the collapse of the Hampton Bank, the transaction above related, in which it charged the $2,077.37 upon its books to the deposit account of the Hampton Bank, was reversed by a counter credit of that amount; at the same time it charged the account of the Varnville Bank with the same amount, included in the credit which had been given to it on the 3d when the items were transmitted by it as above stated.
Later both the Varnville Bank and the Hampton Bank were put into the hands of Receivers, and the contest here is between the Receivers of these banks over the $2,077.37 fund. The Columbia Bank has no interest in the controversy, and it has by agreement of counsel been permitted to hold the disputed fund subject to a determination of the controversy between the Receivers of the two banks stated.
The Receiver of the Varnville Bank contends that, when the Columbia Bank received the check of the Hampton Bank in payment of the items which had been transmitted by the Varnville Bank to the Columbia Bank for collection, and by the Columbia Bank to the Hampton Bank for the same purpose, and charged the same to the deposit account of the Hampton Bank, the credit which the Columbia Bank had conditionally allowed to the Varnville Bank on July 3d, as stated above, was completed; that the transaction had the same effect as if the Columbia Bank had received the actual cash from the Hampton Bank; that the Columbia Bank had no right on July 14th to reverse the transaction by crediting the Hampton Bank with the amount of the alleged erroneous charge and debiting the Varnville Bank with the same amount.
The Receiver of the Hampton Bank, on the other hand, contends that, at the very moment on Monday, July 12th, that the Columbia Bank received the check of the Hampton Bank transmitted to it in payment of the collection of the items, and charged the Hampton Bank with it upon its books, the Hampton Bank, with all of its assets, had been taken over by the State Bank Examiner; that the check was the same as that of a dead man which died with the drawer, an insolvent corporation, in the hands of the Examiner under the statute, in exclusive possession and control of the assets of the corporation whose activities and powers of a corporation had passed from it. The Receiver also contended that the cashier of the Columbia Bank was fully informed, before the Columbia Bank received the check, that the Hampton Bank had failed to open its doors on Monday, July 12th, and was in the hands of the Examiner.
The testimony by agreement was taken before a Special Referee, and the case was heard by his Honor, Judge Johnson, at Allendale, on January 14, 1927. On August 22d he filed a decree holding that, at the time the Columbia Bank received the check of the Hampton Bank and charged it to the account of that bank, it did not know of the failure of the Hampton Bank to open its doors on Monday, July 12th, and of its being taken over by the Examiner; that the transaction amounted to a compliance of the condition upon which the credit of July 3d was given to the Varnville Bank; and that the Varnville Bank became thereby the owner of the fund and entitled to recover it from the Columbia Bank, the stakeholder.
From this decree the Receiver of the Hampton Bank has appealed, claiming the fund as an asset of the Hampton Bank for distribution by him as Receiver.
The main points raised by the appellant are:
1. That there is error in the decree, to the effect that the Columbia Bank had no knowledge of the closing of the Hampton Bank at the time that its check was received and charged to its account.
In view of the fact that this is a law case in which the finding of fact by the Circuit Judge is opposed to the appellant's contention, and of the admission in the appellant's answer in conformity with the finding of the Circuit Judge, this contention of the appellant may be dismissed without further comment.
2. That even if the Columbia Bank had no such knowledge, it had no authority to charge the check to the account of the Hampton Bank, by reason of the fact that at the time of such transaction the Hampton Bank was insolvent, closed, and in the hands of the State Bank Examiner; that the charge was properly reversed when the clerical force of the Columbia Bank received information of the closing of the Hampton Bank.
The record is unfortunately lacking in two very important matters: It is alleged in the complaint, and admitted in the answer, that the check of the Hampton Bank transmitted to the Columbia Bank, in payment of the collected items, was dated July 6th; the cashier of the Columbia Bank testified that it was received on the 12th; where was it in the meantime and when was it transmitted? We may take judicial notice that a letter moving by mail from Hampton to Columbia will be delivered in less than a day.
It is assumed that the State Bank Examiner took charge of the Hampton Bank at the request of the directors of that bank evidenced by a resolution. When was the meeting held, and when did the Examiner take over the bank?
The letter containing the check evidently was not mailed until Sunday the 11th or Saturday the 10th. Is it possible that it was mailed after the Examiner took over the bank? I think that it was incumbent upon the Receiver of the Hampton Bank to clear up these matters in doubt, and that, in the absence of evidence to the contrary, it must be assumed that the letter was mailed before the directors requested the Examiner to take over the bank.
It is evident that the check was not received by the Columbia Bank until after the Examiner took over the bank, for it appears that the bank did not open again after the usual closing hour on Saturday the 10th. The validity of the transaction, therefore, in which the Columbia Bank received the check on Monday the 12th and debited it to the Hampton Bank, depends upon the effect of completing this transaction after the Examiner took charge.
The Receiver of the Hampton Bank attempts to assimilate the practical payment of the check by the Columbia Bank (the debiting of the deposit account of the Hampton Bank with the amount of it) to the payment by a bank of a check drawn by an individual depositor who may have died between the date of the check and its presentation to the bank for payment; his position being that, when the Examiner took over the exclusive possession and control of the bank, its corporate activities were at an end, that it was dead, and that the same rule as in the case of an individual drawer should apply.
I think that there are two very sound reasons why this contention cannot be sustained:
1. Section 3981 of the Code provides that, upon request of the directors, the Examiner shall take over the bank for 30 days, and that during that period the bank may be allowed either to resume business or to liquidate its affairs. Certainly during that period its animation may be suspended, but, as long as the possibility of resuming business exists, the closed bank cannot be said to have breathed its last. The loss of its corporate activities does not take place, as is shown in the case of Brown v. Hammett, 133 S.C. 446, 131 S.E., 612, until the Court upon the application of the Examiner has ordered a liquidation by the directors as trustees.
2. While it has been held by quite a number of cases that the death of the drawer of a check, before its presentation for payment, produces a revocation of the authority of the bank to pay it, I think that the contrary is sustained by convincing logic by Mr. Morse and by Mr. Daniel. Morse Bank (6th Ed.), § 400; 2 Daniel Neg. Inst. (5th Ed.), § 1618b.
No reason is urged that on account of insolvency the Hampton Bank was without right to prefer the Columbia Bank as a creditor or the Varnville Bank, for whose benefit the remittance was made; the Hampton Bank had therefore the right to make the remittance in question, which completed the conditional credit which the Columbia Bank had given to the Varnville Bank on July 3d.
I therefore concur in the result of the decree of his Honor, Judge Johnson.