Court Opinion

ID: 9826438
Source: CourtListenerOpinion
Date Created: 2023-09-01 15:56:33.947547+00
Date Added: 2024-06-11T07:42:03.741134
License: Public Domain

Each of the Justices of the Court • delivered a separate opinion, as follows:
Mr. Justice Watts:
This was an action by plaintiffs as stockholders thereof, for the purpose of placing the Peoples Bank of Union, South Carolina, in the hands of receivers. B. P. Arthur and Wm. H. Gist, by order of the Eton. D. E. plydrick, then Judge of Seventh Judicial Circuit, were duly appointed receivers, and later H. B. O’Shields was appointed a coreceiver with Arthur and Gist, and duly executed bond, took charge of the assets of the said bank, and proceeded to administer the same. Creditors were called in and the appellants established their claims against the bank as nondeposit creditors, and under the terms of the order of the Court became the plaintiffs in the cause. Numerous depositors of said bank also established their claims against the bank as such. • While litigation, which was protracted, .growing out of the failure of the bank was going on, certain depositors, who had received dividends along with the creditors of said bank from the receivers from the general assets of the bank, brought an action in the Court of Common Pleas for Union county against the stockholders on their statutory liability to *355depositors, and after protracted litigation a judgment was obtained in favor of the depositors against the stockholders and judgment duly entered thereon. A number of stockholders paid into Court an amount sufficient to pay the balance due the depositors, after they had received their dividends, along with the general creditors of the bank, from the general assets, to wit: sixty-eight per cent, having been paid to depositors and all other creditors of the bank at this time by the receivers of the said bank from its general assets. Some of the stockholders did hot pay their pro rata, and it could not be collected out of them, and the others had to pay about sixty-six per cent, of their statutory liability. After this from notes of the bank the receivers after much litigation succeeded in collecting about $4,000. The receivers now have this amount on hand, a portion of which was collected from the general assets of the bank since the payment of sixty-eight per cent, to creditors and the depositors. The depositors have been paid in full by what they got as dividends from the general fund, along with other creditors, and the sixty-six per cent, assessed against and collected from the stockholders. Out of this fund now in the hands of the receivers certain fees and cost must be first paid. The appellants have received only sixty-eight per cent, on their claims, and the balance is unpaid. Their contention in the Circuit Court was, and is here, that as general creditors of the bank out of the funds now in receivers’ hands they are entitled to be paid in full, less proper fees and costs, before any of the stockholders, who are required by the judgment entered against them fixing their liability under the statute to pay depositors in full, under assessments made against them being sixty-six per cent., can be allowed to come in and share ratably in the fund now in receivers’ hands and thereby be subrogated to the claims of depositors. The matter came on for a hearing before his Honor, Judge Prince, who sustained the contention of the stockholders, and held that the *356stockholders of the bank, who paid in their assessments under the judgment of the Court upon their statutory liability in favor of the depositors, have by this become subrogated to the rights of the depositors, and are entitled to share ratably, who have established their claims herein, and have not been paid in full in the distribution of the funds realized from the general assets of the bank. From this decree appellants appeal and allege error in this holding, and the question to be determined is: “How shall this fund now in the receivers’ hands be disbursed ?”
Article IX, sec. 18, Constitution of 1895, is as follows: “The stockholders of all insolvent corporations shall be individually liable to the creditors thereof only to the extent of the amount remaining due to the corporation upon the stock owned by them: Provided, That stockholders in banks or banking institutions shall be liable to the depositors therein in a sum equal in amount to their stock over and above the face value of the same.” See, also, sec. 2660, vol. I, Code of Laws 1912, page 729.
The matters to be determined by this appeal have not been before any Court that I know of, and no authority can be found by me that aids me in arriving at a conclusion. There is no doubt that if the bank could have reduced to money all debts due it by any one when it was put in the hands of the receivers before any distribution at all was made, and before any assessment was made on the stockholders, the general creditors, including the depositors, vtould have shared in this fund ratably, and the stockholders would have been assessed in a less amount than they finally had to pay. The stockholders could have promptly paid into Court a sum equal in amount to their stock, over and above the face value of the same, and this would have gone to the depositors and left a large percentage to the general creditors, and at the same time the depositors, as creditors, would haves shared in the general assets of the bank. The liability of the stockholders of the bank under the Consti*357tution and laws of the State is a primary liability. When' they take stock they contract that in addition to a depositor of the bank becoming a creditor of the bank that the stockholders guarantee that they will become liable to such depositors in a sum equal in amount to the face value of the stock held and owned by them. Paying the amount of assessment by stockholders, as the law required, and as he had contracted to do, in no sense made the stockholder a creditor of the bank. They were only discharging a primary liability voluntarily incurred by them when they became stockholders in the bank and they are not entitled to be subrogated to the claims of the depositors. What they paid in was by judgment of the Court obtained against them after long litigation by them denying the right of depositors to make them liable. The language of the Constitution clearly shows that it was the intention to give the depositors of a bank an additional safeguard for their deposits, but in no way intended to abridge or circumscribe the rights of creditors against an' insolvent bank, or cause them to be postponed in any matter whereby a stockholder could be a preferred creditor and come in ahead of a regular creditor. To sustain the Circuit decree would make the depositor a preferred creditor. It would allow him to collect out of the stockholder, and then allow the stockholder to come in and collect ratably out of the fund with the creditor. I know of no law, or any reason in sense, morals, or public policy, why a stockholder in a bank should share with a creditor in the distribution of the fund of an insolvent bank simply because he has done what the law requires him to do — pay his primary obligation to the depositors. It would be contrary to public morals and good conscience to allow the assets of this insolvent bank to go to any one else than the creditors. Under the law the creditors are justified when they extend credit to a bank in thinking that they and the depositors are creditors, entitled to be equally paid out of the general funds and assets of the bank, and if there is *358'not enough to pay both then the depositors have the further right to call upon the stockholders to pay the amount fixed by their holding of stock. The funds of this bank are held by the receivers as a trust fund solely for the benefit of the creditors of the corporation, and no part of these funds can be paid over to the stockholders until all the debts and obligations of the bank are discharged; the payment of assessment by stockholders did not make them creditors of the bank; they were liable to the depositors under the Constitution and statute, and by paying simply discharged their liability, and when the depositors were paid they had no further claim to the fund in Court, and there is not equity enough in it to subrogate them to the rights that the depositors once had against .the, general assets as it would be an injustice to the general creditors, who have superior rights. There is no doubt that the debt, discharged when stockholders were paid, was really the debt of the stockholders. There would be no natural justice in allowing these stockholders to come in and share with the general creditors the funds that properly ought to be paid to the general creditors. I do not think that a stockholder of an insolvent bank can become a creditor and entitled to be subrogated to the rights of another because he pays a debt that the law recognizes as hisi debt and will force him to pay, but can only be subrogated in such cases as the law allows subrogation. I think the exceptions should be sustained and the judgment reversed.