Opinion
12628
April 4, 1929.
Before TOWNSEND, J., Charleston, February, 1928. Affirmed.
Action by the Federal Reserve Bank of Richmond against A.S. Fant, Receiver, and another. Judgment for defendants, and plaintiff appeals.
The order of Judge Townsend directed to be reported was as follows:
"This matter coming on to be heard upon a demurrer filed by the defendant A.S. Fant, as Receiver of South Carolina Loan Trust Company's Bank, on the ground that the complaint does not state facts sufficient to constitute a cause of action against the said A.S. Fant, as Receiver of South Carolina Loan Trust Company's Bank, in that it appears upon the face of the complaint that the plaintiff has no cause of action whatsoever against said Fant, as Receiver of South Carolina Loan Trust Company's Bank, the checks which are the basis of the action being checks drawn by the South Carolina Loan Trust Company, and the facts as alleged in the complaint constitute no cause of action against the said A.S. Fant, as Receiver of the South Carolina Loan Trust Company's Bank, and a demurrer likewise having been filed by the defendant, A.S. Fant, as Receiver of the South Carolina Loan Trust Company, the Security Corporation, formerly Security Savings Bank, and by the Mortgage Loan Company, on the ground that the complaint does not state facts sufficient to constitute a cause of action, in that it appears upon the face of the complaint that the checks therein mentioned were presented to the banks on which they were drawn after the insolvency of the South Carolina Loan Trust Company, and the plaintiff, the Federal Reserve Bank of Richmond, as payee of said checks, is a general creditor of the said South Carolina Loan Trust Company, and is entitled to only such pro rata share of its assets as other creditors of the said South Carolina Loan Trust Company, and entitled to share in dividends thereof with other creditors as and when paid, and after hearing argument by counsel for the plaintiff and for the defendants —
"It is ordered that the demurrer of A.S. Fant, as Receiver of The South Carolina Loan Trust Company's Bank, be sustained and the complaint as to him dismissed.
"And inasmuch as it appears that the funds of the South Carolina Loan Trust Company were in no wise increased by the transactions set out in the complaint and the only result thereof was to substitute one creditor for another; nothing was added to the assets of the bank and nothing passed to the Receiver, it is clear under the decisions of our Supreme Court that the plaintiff is not entitled to be preferred over the other creditors of the bank and
"It is therefore ordered that the demurrer of the Receiver of the South Carolina Loan Trust Company and the Mortgage Loan Company be sustained and the complaint dismissed without prejudice however to any right the plaintiff may have to prove his claim as he may be advised."
Messrs. Middleton Middleton, and M.G. Wallace, for appellant, cite: Cases distinguished: 134 S.E., 510; 139 S.E., 783. Before enactment of uniform negotiable instruments act check drawn upon a bank balance was an absolute and irrevocable assignment: 12 Rich., 518; 41 S.C. 177; 69 S.C. 375; 74 S.C. 210; 77 S.C. 305; 87 S.C. 79. Operation of rule: 74 S.C. 210; 165 U.S. 634. Act construed: 165 U.S. 634; 93 Fed., 330; 174 N.W., 42; 115 N.W., 476; 126 N.W., 779; 30 L.R.A. (N.S.), 517; 140 A.S.R., 336; 133 N.W., 669; 150 Pac., 922; L.R.A., 1916-A, 711; 146 Fed., 257; 5 C.J., 920; 129 Pac., 462; 88 N.W., 618; 88 A.S.R., 979; 96 Am. Dec., 146; 80 N.W., 932; 129 Pac., 462; 123 S.E., 161; 186 Fed., 250. Distinguished: 129 S.E., 793. Payment of debt by check does not discharge indebtedness until check is paid: 126 S.C. 219; 21 R.C.L., 62; 199 N.W., 869; 1 McC., 449, 454.
Messrs. Julian Mitchell, Ernest L. Visanski, and Hagood, Rivers Young, for respondents, cite: Conclusive of case at bar: 136 S.C. 511; 141 S.C. 370. Relationship between bank and depositor that of debtor and creditor: 136 S.C. 511; 60 S.C. 122.
April 4, 1929. The opinion of the Court was delivered by
On December 13, 1926, the Federal Reserve Bank of Richmond sent to the South Carolina Loan Trust Company a letter containing checks drawn upon the latter bank and likewise a letter containing checks drawn upon the South Carolina Loan Trust Company's Bank (a subsidiary bank of the South Carolina Loan Trust Company). These letters were received on December 15th and the amounts of the checks were charged to the accounts of the various drawers on that day in both banks, and in settlement thereof the South Carolina Loan Trust Company sent its three checks drawn on banks in Richmond, Baltimore, and New York to the order of the Federal Reserve Bank.
All of these three checks were refused payment for the reason that before they were presented for payment the South Carolina Loan Trust Company, the drawer of the checks, had closed its doors and ceased transacting business.
Thereafter the Federal Reserve Bank filed its complaint against A.S. Fant as Receiver of the South Carolina Loan Trust Company, Security Savings Bank, and South Carolina Loan Trust Company's Bank, and also against the Mortgage Loan Company, alleging the facts above stated, and further alleging that because of these facts it was entitled to payment in full, or in the alternative to have its claim arising from the checks drawn on the South Carolina Loan Trust Company's Bank established as a claim against the assets of that bank so as to receive the dividend payable to depositors in the South Carolina Loan Trust Company's Bank for checks that were drawn on it.
By stipulation of counsel the Federal Reserve Bank has received payment of the dividend of 25 per cent. from the assets of the South Carolina Loan Trust Company upon its entire claim, and there is no dispute as to its right to prove its claim against the South Carolina Loan Trust Company, as an unsecured creditor.
To this complaint a demurrer was interposed by Fant as Receiver of the South Carolina Loan Trust Company and by the Mortgage Loan Company, which raises the question of law arising on the face of the complaint that the Federal Reserve Bank is not entitled to preference, but to share only as other creditors in the assets of the South Carolina Loan Trust Company.
The demurrer of Fant, Receiver of the South Carolina Loan Trust Company's Bank, raised the question that there was no cause of action against that bank arising on the three checks drawn by the South Carolina Loan Trust Company in payment of the checks sent by the Federal Reserve Bank, both those which had been drawn on South Carolina Loan Trust Company and also those drawn on South Carolina Loan Trust Company's Bank, and that any claim arising thereon was a claim against the South Carolina Loan Trust Company, the drawer of said checks.
The exceptions are overruled, and Judge Townsend's order will be reported; he was right under Citizens' Bank v. Bradley, State Bank Examiner, 136 S.C. 511, 134 S.E., 510; Peurifoy v. First National Bank of Batesburg, 141 S.C. 370, 139 S.E., 793; Manuel v. Bradley, 140 S.C. 321, 138 S.E., 815.
Judgment affirmed.
MESSRS. JUSTICES COTHRAN, BLEASE, STABLER and CARTER concur.