Court Opinion

ID: 3882010
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:13:11.966763+00
Date Added: 2024-06-11T07:41:57.490917
License: Public Domain

In the absence of any legislative enactment or former decision of this Court holding a director of a banking institution personally liable to a depositor for the loss of his deposit because of the mere negligence of the director in attention to his duties, without fraud, deceit, or misrepresentation on the director's part, I am not inclined to agree that such directors should be held liable. Throughout the history of banking in South Carolina, it has not been considered that directors of such institutions were personally liable to depositors for losses sustained by them for the mere negligence of the directors. While the General Assembly has not directly legislated as to this matter, I think its failure to legislate thereabout, taken in connection with the many statutes passed concerning the conduct of banking institutions and the officers and directors thereof, may be deemed to imply that the lawmaking body has not conceived it to be proper to hold directors responsible direct to depositors for the simple negligence of the directors.
Section 3973, Vol. 3, Code of 1922, and Section 241 of Volume 2 of the Code, which are identical, condemn as a felony the act of an officer or director of a banking institution in the receipt of a deposit, after such officer or director has become aware that the corporation is insolvent. The same sections provide that the officer or director of the failing corporation shall only become personally liable for the amount of the deposit actually received by him, or when it has been received by another with the officer's knowledge or assent; and, in either instance, only when he is aware of the insolvency.
Stockholders of banks (and only stockholders can become directors), when said banks become insolvent, are liable to *Page 469 
depositors therein in a sum equal in amount to their stock over and above the face value of the same. Section 3998, Vol. 3, Code of 1922.
Directors of banks are limited in certain ways in borrowing money from the institutions of which they are directors. Section 4000, Ibid.
Directors are forbidden from declaring dividends not actually earned, and they shall not make false statements in regard to the financial condition of their institutions, under the provisions of Section 244, Vol. 2, Code of 1922.
I take it that when the Legislature have been so active from time to time in making regulations concerning banking institutions, and have sought in so many ways, including some of those to which I have referred, to hold directors in these institutions civilly and criminally liable for certain acts of omission and commission, their failure to positively declare directors liable to depositors for negligent acts alone is an indication that it has not been the intention of the lawmaking power to hold directors responsible to depositors on that account.
In the organization and conduct of banks, those who have accepted places as directors, except when the law has specifically declared otherwise, have been led to believe that it was only required of them to elect or employ persons whom they thought honest and competent to manage the affairs of the bank. When a director has not knowingly committed some act, which tended to mislead or deceive some other person in his dealings with the bank, the director, because of the general view held by the people, may have been justified in feeling that he was without fault.
The truth of the matter is that in the past the position of bank director, generally, has been regarded as one of honor, with little or no work to be performed by him. Thousands of honest men, and many of these with no experience in banking and very little education, have accepted positions as *Page 470 
directors with the idea of contributing some service to the communities in which they resided. They doubtless knew that if they committed some positive act of wrongdoing in connection with the management of the bank, they would be liable both civilly and criminally. Most of them were aware also, if the bank failed, that they would have to pay losing depositors the statutory assessment on their stock. It never occurred to a single one of them, in my opinion, that because they failed to daily keep up with what the president, cashier, teller, and other employees of the bank were doing they would be held civilly liable to each and every depositor of the institution for any loss he might sustain. If this kind of liability had ever been understood, I doubt if there would have been many instances where a sufficient number of persons could have been secured to fill the directorate of any bank, unless all of the directors were given good paying positions in the institution. I think it would be a judicial wrong for this Court at this late day, without direct legislative authority to that effect, and with no precedent of this Court to sustain it, to declare a policy entirely inconsistent with that so generally held heretofore, not only by members of the bar, but by our people as a whole. In this situation, I feel that my view is supported by the reasoning of Hon. William R. Allen, a distinguished jurist of the Supreme Court of North Carolina, when he declared in a case where the people had been led to believe the law otherwise than that then suggested:
"As eminent authority may be found for either position, and we have no precedent in this State to guide us, we must adopt that rule which in our opinion accords with the habits and customs of our people, and which will, in the majority of cases at least, be conducive to the settlement of controversies of this character, according to the right."Wicker v. Jones, 159 N.C. 102, 74 S.E., 801, 40 L.R.A. (N.S.), 69, Ann. Cas., 1914-B, 1083. *Page 471 
It may be that an ordinary director of a bank should be, in the future, mere alert and active in the discharge of his duties than he has been in the past, and it may be proper for the General Assembly to expressly require him so to be. That is a matter, as I conceive it, for that authority rather than one for this Court.