Opinion
13193
July 3, 1931.
Before JOHNSON, J., Bamberg, September, 1929. Reversed.
Action by the Atlantic Bank Trust Co. against G.M. Neeley, Receiver. From an order allowing a preference the defendant appeals.
The order of Judge Johnson was as follows:
"The Bank of Olar, Olar, S.C. a banking corporation of this State, closed its doors on December 10th, 1927. At that time this Bank was insolvent. Thereafter, a Receiver, G.M. Neeley, was appointed to liquidate its affairs. The State Bank Examiner, desiring to have all claims contending for preferences judicially determined, petitioned this Court to take the testimony in support of such claims and to report the same.
"Upon hearing this petition Judge Rice, in July, 1928, referred the cause to Hon. J.J. Brabham, Judge of Probate and Acting Master for Bamberg County, to take the testimony offered in support of all such claims and to report the same to the Court with all convenient speed.
"The Referee so appointed, after due notice to all preference claiming creditors of the Bank of Olar, held several references, and at these references took such testimony as was offered by such creditors in support of their claims and such as was offered by the Receiver in opposition thereto. The testimony so taken was reported to the Court by the said Referee, and, Judge Rice being disqualified, by agreement of counsel, the matter now comes before me for determination.
"Only four creditors who filed claims with the Referee, wherein preferences were claimed, offered testimony in support thereof. These creditors and the amounts of their claims are as follows: Mrs. Bessinger, $55.00; W.E. Kearse, $100.00; G.E. Kearse, Secretary and Treasurer, Federal Land Bank, $78.60; and Atlantic Bank Trust Company, $2,552.76. At the hearing before me only the Atlantic Bank Trust Company was represented by counsel. Mr. Adam H. Moss, of Orangeburg, represented this claimant, and Mr. Carl Kearse, of Bamberg, represented the Receiver of the Bank of Olar.
"I have carefully considered the testimony as reported by the Referee, and, in the light of the facts as I find them from this testimony, my conclusion is that the claims of G.E. Kearse, Mrs. Bessinger and W.E. Kearse are not entitled to preference.
"It is therefore ordered, that the claimed preferences of the claims of G.E. Kearse, Mrs. Bessinger and W.E. Kearse be, and the same are, disallowed.
"The claim of Atlantic Bank Trust Company stands upon a different footing, and I have reached the conclusion that it is entitled to preference.
"The facts pertinent to the claim of Atlantic Bank Trust Company, as I find them from the testimony, are as follows: C.F. Rizer, of Olar, S.C. was indebted to Atlantic Bank Trust Company, a banking corporation of North Carolina, with its principal place of business at Greensboro, in that State, upon his note to that bank upon which there was due a balance of $2,552.76, with interest from December 1st, 1927. Atlantic Bank Trust Company also held certain collateral which Rizer had pledged with it as security to this note. On November 29th, 1927, Rizer wrote Atlantic Bank Trust Company to draw on him through the Bank of Olar, of which he was President, for the balance due on this note and to attach the note together with the aforesaid collateral to the draft. On December 1st, 1927, Atlantic Bank Trust Company, in accordance with the request contained in this letter, drew on Rizer through the Bank of Olar for the sum of $2,552.76, the balance due on the aforesaid note, with the note and the collateral, above referred to, attached to the draft. The draft was sent direct to the Bank of Olar for collection and remittance, and not for credit, and it reached the Bank of Olar between the first and seventh days of December, 1927, probably not later than the 3rd, and was presented by that bank to Mr. Rizer on one of those dates, not later than the seventh. On that date, the seventh, Rizer had more than sufficient funds to his credit on deposit in the Bank of Olar to pay this draft. In fact the testimony shows that he had to his credit and subject to his check on that day $40,514.84. On that same day, the 7th, Rizer gave his check to the Bank of Olar for the amount of the aforesaid draft and took up and received from the Bank of Olar, the draft, his note to the Atlantic Bank Trust Company, and the collateral which was attached thereto.
"Notwithstanding the fact that the Bank of Olar had received Rizer's check for the amount of the draft, and not withstanding the fact that it had surrendered to Rizer his note to Atlantic Bank Trust Company and all collateral pledged as security thereto, and notwithstanding the fact that Rizer had on deposit in the Bank of Olar at that time to his credit and subject to his check, an amount more than sufficient to have paid this check, the Bank of Olar failed to remit the proceeds of this draft to Atlantic Bank Trust Company. Demands were duly made on the Bank of Olar and the Receiver for the proceeds of this draft, the amount paid to the bank by Rizer by his check as aforesaid. All of these demands were refused. No part of the proceeds of this draft has ever been paid in any way, and there are no deductions or offsets of any kind against Atlantic Bank Trust Company, and that bank holds no collateral or security of any kind.
"C.F. Rizer was President of the Bank of Olar and owned the majority of the stock of the bank. When he gave his check to the Bank of Olar and took up the draft and note and collateral attached, that bank was a going concern. It did business that day in the usual way, receiving deposits and paying all claims, drafts, and checks presented, except the aforesaid draft on Rizer. At the close of business on that date it had on hand, available for the payment of checks, drafts and other demands, $13,757.25. This amount was held by it and in corresponding banks with which it kept balances as follows: Cash in Hanover National Bank, $920.19; cash in Columbia National Bank, $2,272.50; cash in South Carolina National Bank, $5,337.13, and in its own vault, $3,923.53. No one of these banks had any claim upon any of these amounts and the sum total thereof was available for the payment of checks, drafts, and other demands, and the Bank of Olar could easily have remitted to Atlantic Bank Trust Company on the 7th the amount for which Rizer had given his check in payment of the aforesaid draft, and should have done so.
"The Bank of Olar was a going concern and did business in its usual way on the 8th and on the 9th days of December, 1927, and had on hand at the close of business on those days, and available for the purpose, an amount more than sufficient to pay all checks, drafts and other demands made upon it, including the draft on Rizer. In fact, the Bank of Olar carried on, doing business in its usual way, with sufficient funds on hand, and available for the purpose, to have paid Atlantic Bank Trust Company's draft upon Rizer up until the morning of the 10th, when, not being able to meet one of its notes to the South Carolina National Bank of Charleston, which fell due on that date, the 10th, it closed its doors.
"When G.M. Neeley was appointed Receiver the Bank Examiner turned over to him only $540.82. At the time of the report of the Referee the Receiver had on hand cash, $1,063.07, and the following unpledged assets of the bank: bank building and lot and papers, evidences of debts to the bank, amounting, face value, to $68,420.43.
"In the light of the foregoing facts I conclude that the claim of Atlantic Bank Trust Company is entitled to preference. In reaching this conclusion, the right of the bank is predicated solely upon the Act of the Legislature entitled `An Act to Define the Liability of Banks doing Business in This State When Receiving for Collection any Check, Note or Other Negotiable Instrument,' and approved the 26th day of April, A.D. 1927 (35 St. at Large, p. 369).
"It is therefore ordered, that the claimed preference of the claim of Atlantic Bank Trust Company be, and the same hereby is, allowed."
Messrs. Kearse Kearse, for appellant, cite: Facts the same as in 136 S.C. 511; 134 S.E., 510. Theory on which preferences are allowed: 140 S.C. 321; 138 S.E., 815; 150 S.C. 25; 147 S.E., 653; 141 S.C. 370; 137 S.E., 793; 60 S.C. 122; 38 S.E., 453; 77 S.C. 305; 57 S.E., 182.
Mr. Adam H. Moss, for respondent cites: Plaintiff entitled to preference under Act 1927 No. 202: 35 Stat., 369.
July 3, 1931. The opinion of the Court was delivered by
The decision of this Court in the case of Ex Parte Wachovia Bank (Nettles v. Bank), 160 S.C. 104, 158 S.E., 214, is conclusive against the right of the respondent bank to priority in the distribution of the assets of the insolvent bank. The Court sua sponte will take notice of the fact that the Act of 1927 (Act April 26, 1927 [35 St. at Large, p. 369]), upon which the plaintiff relies, was declared unconstitutional in the case cited. The order appealed from, which will be reported, is accordingly reversed.
MR. CHIEF JUSTICE BLEASE, and MESSRS. JUSTICES STABLER and CARTER concur.