Court Opinion

ID: 3879768
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:11:38.849023+00
Date Added: 2024-06-11T09:18:18.707414
License: Public Domain

I think the judgment of the Circuit Court is sustained by the principles stated and the reasoning of the Court in the former appeal, 77 S.C. 305,57 S.E., 182. The facts are exactly the same as there appeared, except that Berger has since filed another petition and under it has shown that instead of taking from the Columbian Bank a check on the Bank of Commerce, in direct payment of his deposit, he received from the Columbian Bank the cash for it; and almost immediately, without leaving the bank, paid it back to the Columbian Bank, taking in its place the check on the Bank of Commerce.
The question is whether, under these circumstances, the bank being insolvent at the time and its assets being now in the hands of the Court for ratable distribution among all creditors, Berger must be held to have an equity against the depositors to the collateral held by the Bank of Commerce. It is argued this conclusion results from the words italicized below, taken from the opinion in the former appeal: "Therefore, the issuing of the checks to these depositors was inequitable with respect to other depositors, because the bank was *Page 253 
actually then insolvent and all of the depositors had the equity of equal distribution of the assets, including any surplus arising from the collateral held by the Bank of Commerce. The right of the Columbian Bank is not in question, and with that the Court will not interfere, but it is very clear that the Court should not stretch out its arm and by affirmative action, under the guise of subrogation, confer on the petitioners a lien on the collateral, thus defeating equitable distribution among all of the creditors to promote an inequitable preference. Had the checks been issued for cashpaid into the bank, or before insolvency, the other depositorscould have interposed no countervailing equity, and the petitionerswould have been entitled to subrogation. But the insuperable objection to subrogation in the case, as presented, is the fact that the checks were issued in payment of the debts of the bank after insolvency, and when the Court, at the very moment they were issued, would have taken charge of the bank's assets, and would have enjoined the issuing of the checks to the end that an equal distribution should be made among creditors without preference to any." 77 S.C. 311, 57 S.E., 182.
The context shows the Court in the sentence relied on was laying down the general proposition, that if the isolated fact had appeared that these parties, in the ordinary course of business, had paid their money to the Columbian Bank for the purchase of checks on the Bank of Commerce, then they would have been entitled to be subrogated to the rights of the Bank of Commerce in the collateral held by that bank. But much more that is vital appears here than the mere isolated fact that the petitioner purchased a check for cash.
The court of equity looks through the form to the substance, takes into account all the circumstances, and from all the facts determines the nature of the transaction and the rights of the parties. It may be assumed that Berger actually drew his deposit in cash from the bank; that he did not know the bank was insolvent, and that he could not have *Page 254 
been compelled to refund the money so drawn to the receivers, though there was a run on the bank at the time. Yet it does not follow from all this that substantial justice requires that he should receive at the hands of the court of equity the special consideration of subrogation against the interests of other creditors.
It is always to be borne in mind that Berger, as holder of the check, has no legal right whatever to the collaterals in question. For him to induce the Court to take them from the receivers and bestow them upon him, he must convince the Court he ought to have a preference in equity and good conscience. It may be the Court could not have found warrant in the statute law, or common law, or even under the principles of equity, to take away from a depositor the preference he obtains when payment is made to him under such circumstances; but it by no means results that the Court will set aside legal rights to aid such a preference.
When petitioner's deposit was paid to him the bank was insolvent; that is, in the condition in which the principles of equity required a ratable distribution among all its creditors, with preference to none, of all its assets, including the money representing petitioner's deposit, which was paid to him.
The repayment by Berger of the money into the bank for the check was merely an immediate restoration of conditions which enabled the Court to carry out the principle and policy of equity to require equal distribution.
Subrogation is a pure unmixed equity, having its principles not in any fixed law, but in the principles of natural justice. Gadsden ads. Brown, Speer's Eq., 41; Ex parteReynolds, 99 Am. St. Reports, 480. The proposition to allow to the defendant the advantage of subrogation, therefore, means that natural justice requires a court of equity to stretch out its arm to make to one creditor of a bank a preference over all others, to which he had no legal right. The equity of equal distribution is the paramount equity but, regarding the equities equal, the legal right represented *Page 255 
by the receivers should prevail. Galphin v. McKinney, 1 McC., 280.
At the moment of insolvency of the bank substantial justice, which in this case is that equality which equity always seeks to enforce, required ratable distribution of the assets. The payment to Berger of his deposit operated as a preference, whether unlawful or not, and tended to defeat the equity, the substantial justice of ratable distribution.
Looking at the transaction as a whole, therefore, the petitioner's contention comes to this: A preference over other creditors of an insolvent bank was obtained, which a court of equity would have enjoined with the real facts before it. After that preference, and by virtue of it, and with the funds obtained through it, a check was issued on the Bank of Commerce, which was in effect a second assignment of funds of the Columbian Bank held to its credit by the Bank of Commerce. But this check amounted to nothing in law, because the prior claim of the Bank of Commerce had absorbed the fund on which it was drawn. Nevertheless, the court of equity is asked to make good the preference it would have refused to allow by subrogating to the payment of the check the collateral held by the Bank of Commerce, now in the hands of the Court for the administration of the equity of ratable distribution.
It seems to me the statement of the proposition carries its refutation.