Court Opinion

ID: 3882170
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:13:18.716892+00
Date Added: 2024-06-11T07:41:57.694650
License: Public Domain

Sanders, who is claiming a preference, had a check for more than $3,000.00 given him by a depositor of Bamberg bank.
The check was good; he presented it, and at his request got part of it in cash, and the balance in a draft on a bank in Charleston.
He held the draft for about fifteen days, and then presented it to Charleston bank, when payment was refused, for the reason that, in the meantime, Bamberg bank had failed.
At the time draft was given him, and for many days thereafter, Bamberg bank had on deposit, in Charleston bank, sufficient funds to pay the draft, but payment was refused, because, at time of presentation, Bamberg bank had gone to the wall.
Sanders claims a preference out of the assets of Bamberg bank, first, under the Act of 1930 (now Section 6960, Code of 1932), and failing in that, a preference outside of that Act.
It is obvious, I think, that the Act of 1930 gives him no preference. *Page 333 
An analysis of the Act reveals that it provides a preference in two classes of insolvent banks: First, in a "drawee or payor Bank"; second, in an "Agent collecting bank, other than the drawee or payor."
The drawee or payor bank, in so far as Sanders is concerned, was the bank in Charleston, which has not failed.
He is claiming no preference there, and it is not necessary to discuss that situation; but it may not be unwise to analyze subdivision 2 of Section 6960, referring to drawee or payor bank, for the reason that many questions will arise in the future in reference thereto.
To get the benefit of subdivision 2, the claimant must show: That the drawee or payor bank has failed; that, before it failed, it had presented to it, for payment, an item drawn upon, or payable by or at such bank; that, at the time it had on deposit to the credit of the maker or drawer an amount equal to the item drawn; that it charged such item to the account of the maker or drawer before it closed; or that it otherwise discharged his liability thereon, but without such item having been paid or settled for by the drawee or payor; either in money, or by an unconditional credit given on its books, or those of any other bank at the request or with the consent of the drawer, so as to make such drawee or payor or other bank (debted) the creditor of the drawer.
The sentences are long and hard to understand without careful analysis.
Suppose we illustrate: Jones gives to Smith a check on the Bank of Commerce; Jones has funds in bank to meet the check; the check is presented, and Jones' account is charged with it; Bank of Commerce after this fails; it has not paid Smith his money in cash; nor has it, at the request of Smith nor by his consent, discharged the obligation of Smith in some other way, which he has agreed to or accepted. Then Smith has a preference in the "Drawee or Payor" bank. *Page 334 
The other class in which a preference is allowed is designated "an agent collecting Bank, other than the Drawee or Payor," which is provided for in subdivision 2 of the Act above referred to.
What are the requisites to a preference in such bank? Subdivision 3: It must be an agent collecting bank; it must fail; before it fails it must have received an item intrusted to it for collection; it must not have paid the item in money; or by an unconditional credit on its books, or the books of some other bank, at the request or with the consent of the owner — so as to constitute the collecting bank or some other bank the debtor of the owner of the item.
If the collecting bank gets the item for collection, collects it and then fails, the owner of the item has a preference, unless the agent collecting bank has paid it, either in cash or in some other way, which has been approved by the owner.
Collection, as agent, failure to pay, either in cash, or in some other manner, with the approval of the owner, insolvency. These are the requisites to a preference.
Illustration: Jones turns over to Bank of Commerce, for collection, a check; Bank of Commerce sends it for collection to Commercial bank, which collects it and then fails Commercial Bank has the money which it collected, as agent It has not paid it in cash, or, in some other way, acceptable to the owner. Result — preference to Jones.
It is clear that Sanders cannot get a preference out of the assets of the Bamberg bank, by virtue of the Act.
That bank never had intrusted to it by Sanders an item for collection. As to him, it was not "An Agent Collecting Bank." It never collected a dollar for him; it never was asked to do so. He was paid his check across the counter in cash and draft on Charleston bank; he undertook to collect the draft himself. The draft was given him, at his request, and he accepted it. *Page 335 
He occupies no better position than if bank had paid him the whole check in cash and he had then used part of the cash to buy a draft on Charleston, and this is leaving out of consideration his laches in keeping the draft some fifteen or more days.
The law may work a hardship, but thus it is written; and it is not ours to make, but to interpret.
Is Sanders entitled to a preference without the aid of theAct of 1930? To sustain this position, he plants himself uponRailway Express Agency v. Bethea, reported in 165 S.C. 230,163 S.E., 637, 638. At first blush it looks as though that case is conclusive in his favor. But a careful reading reveals that it was bottomed upon Hampton Loan  ExchangeBank v. Lightsey, 155 S.C. 222, 152 S.E., 425. And, when we go to that case, we find, beyond all doubt, that the preference was allowed solely upon the ground of subrogation; the elements of which were present, viz.: (1) That the party claiming it shall have paid the debt; (2) that he was not a volunteer but had a direct interest in the discharge of the debt, or lien; (3) that he was secondarily liable for the debt or the discharge of the lien; (4) that no injustice will be done to the other party by the allowance of the equity Enterprise Bank v. Federal Land Bank, 139 S.C. 397,138 S.E., 146.
If we go to the facts in the instant case, we will search in vain to find the elements: (1) Sanders did not pay any debt due by Bamberg bank to Charleston bank. There was no such debt, for the Charleston bank was debtor to Bamberg bank; (2) if there had been such a debt, Sanders was in no way bound for it secondarily or otherwise; (3) if he is given a preference, injury will be done to the creditors of the bank.
Mr. Justice Stabler, speaking in the Bethea case, expressly states that it is decided upon the authority of theLightsey case.
I have not access to the record in the Bethea case, but the *Page 336 
opinion contains this statement: "The correspondent banks also held securities of the Dillon bank;" so unquestionably, one of the elements of subrogation was present to wit, indebtedness by Dillon bank to the correspondent banks, upon which the express company bought the checks.
Again the statement is made that the express company presented the checks promptly to the banks upon which they were drawn.
Subrogation is a mere creature of equity and subject to equitable principles; and "equity aids the vigilant." A person who loses by his own laches cannot invoke the doctrine. The party seeking subrogation must not be guilty of laches. 37 Cyc., 373; Id. 383.
"The right to subrogation, being one of equity merely, must ordinarily be exercised with due diligence. It may be lost through laches." 99 Am. St. Rep., 482, Note. See, also, 66 Am. St. Rep., 523, Note.
It will not be applied, when it will injure others.
There can be found no better statement of the rule as applied to the facts of the instant case, than that given by Mr. Justice Woods, in Livingstain v. Columbian Banking Trust Company, 77 S.C. 305, 310, 57 S.E., 182, 184, 22 L.R.A. (N.S.), 442, 122 Am. St. Rep., 568.
"But the issue here is not between the petitioners and the Bank of Commerce or the Columbian bank as a solvent institution, able to pay all creditors, but it is between the creditors of the Columbian bank, an insolvent institution, and the petitioners, who are claiming a preference in the distribution of the assets.
"No rule of equity appeals more to the judicial conscience than that which requires the assets of an insolvent corporation to be distributed ratably among creditors. Against this equity there is no principle of subrogation which can avail petitioners." And the doctrine embodied in that language has been recognized by our Supreme Court time and time again. *Page 337 
It is quoted by Mr. Justice Cothran in the Lightsey case;
but held not to apply because it did not appear that the Hampton Bank was insolvent at time right to subrogation arose; and, that the right having matured before the Receivership, the receiver took the assets of the bank subject to it.
Having shown, I venture to think, that Sanders is not entitled to a preference on the ground of subrogation, then upon what ground can he get it?
He cannot get it upon the doctrine that the draft amounted to an assignment pro tanto of the fund; for that rule was changed by the Negotiable Instruments Act of 1914 (28 St. at Large, 668). This being so declared in Peurifoy,Receiver, v. First National Bank of Batesburg, 141 S.C. 370,386, 139 S.E., 793.
Before the Circuit Judge, the only ground upon which he (Sanders) rested his claim to a preference was that the effect of the course of dealing between him and the bank was to swell the assets of the bank.
Counsel for receivers makes the point that, such being his only claim in the Court below (outside of his claim under the Act of 1930), he cannot now avail himself of other grounds, no notice being given to that effect. And in this I think counsel is correct. It is not necessary to argue that there was no swelling of the assets. A statement of the facts shows to the contrary.
The check that he presented was one drawn by a depositor; it was charged to account of depositor, and, in so far as the assets were concerned, they remained the same. Not a dollar of new money went into the bank.
In the Bethea case the assets were swelled. The statement is made that the agent bought the checks with cash, and checks which he had accumulated as agent. There is nothing in the opinion to show that the checks were on the Bank of Dillon. Assuming that they were not, then he paid all *Page 338 
cash for the exchange, thereby swelling the assets to the extent of his entire purchase.
If we assume that the checks were on Bank of Dillon, then the assets were increased to the extent of the cash paid.
My conclusion is that Mr. Sanders is not entitled to a preference — with or without the Act of 1930 — and that he must share ratably with the general creditors.