The opinion of the Court was delivered by
Mr. Justice Bonham.
The pleadings show that Bamberg Banking Company is a corporation which was engaged in the banking business at Bamberg. The 31st day of December, 1930, G. D. Sanders, petitioner and appellant herein presented at the window of the banking company for payment a check in the sum of $3,273.34, drawn by a customer of the Bamberg Banking Company, in favor of M. K. Sanders, who indorsed the same and delivered it to G. D. Sanders. The drawer of the check had in the banking company funds in sufficient amount to pay it. It was charged to the customer’s account, and G. D. Sanders was given, and accepted, the sum of $100.00 in cash and a draft on the South Carolina National Bank of Charleston for $3,173.34. The Bamberg Banking Company
had to its credit with the Charleston bank more than sufficient funds to pay the draft. January 15, 1931, Bamberg Banking Company failed; closed its doors for business; and was taken over by the state bank examiner. The respondent South Carolina Savings Bank was appointed receiver of the closed bank, and is now engaged in the business of such receivership. When the Bamberg Banking Company closed its doors, G. D. Sanders had not presented to South Carolina National Bank of Charleston, for payment, the draft given on it by Bamberg Banking Company on December 31, 1930. When the banking company failed and closed its doors for business, G. D. Sanders presented his draft to the receiver, demanding that it be paid in full as a preferred claim under the provisions of the Act of the General Assembly approved March 28, 1930, 36 Stat., 1368. The receiver declined to pay the claim as one of preference. Thereupon the claimant filed his petition in the Court of Common Pleas praying that the Court issue its order commanding the receiver to pay the claim in full as one of preference. The receiver answered, denying petitioner’s right of priority, for the several causes therein stated, and challenging the constitutionality of the Act of 1930, under the provisions of which petitioner claimed priority. The matter came on for hearing by Hon. T. M. Boulware, special Judge, upon an “Agreed Statement of Facts.” Judge Boulware filed an order in which he held that the Act of 1930 was unconstitutional, predicating his conclusion upon the decision of this Court in the case of
Ex parte Wachovia Bank & Trust Company (Nettles v. People’s Bank of Darlington),
160 S. C., 104, 158 S. E., 214, which decision declared the Act April 26, 1927 (35 St. at Large, p. 369), relating to the liability of banks doing business in this State when receiving for collection checks, or other negotiable instruments, to be unconstitutional. He also held that petitioner was not entitled to preference because the assets of the banking company were not swelled by reason of the
transaction of petitioner with it. From this order petitioner appeals upon three grounds, which may be thus briefly stated:
(1) That the Circuit Judge erred in holding that the Act of 1930 was not constitutional because that it violated Article 3, § 17, of the Constitution of South Carolina, which prescribes that an Act shall relate to but one subject, which shall be expressed in the title; (2) that his Honor erred in holding that the Act was unconstitutional because that it discriminated against corporations, partnerships, and individuals not engaged in receiving and paying deposits of money in this State; (3) that his Honor erred in holding that the petitioner was not entitled to a preference because the assets of the Bamberg Banking Company were not increased by petitioner’s transaction with it.
The respondent gave notice that he would ask the Court to sustain the Circuit Decree on these additional grounds: (l)that the Act of 1930 is not applicable to the facts of this case, because the record shows that the appellant requested, or accepted, the draft in question, and that he had such an unconditional credit as makes the Act inapplicable to him; (2) that the appellant held the draft received by him from the Bamberg Banking Company from the 31st day of December, 1930, until the 15th day of January, 1931, the day upon which Bamberg Banking Company closed its doors for business, without presenting it to South Carolina National Bank of Charleston, on which it was drawn, for payment, which was such failure to exercise due diligence as debars him from the relief which he claims; (3) that his Honor should have held the Act of 1930, in question, to be unconstitutional, because that it violates Article 1, § 8, of the Constitution of South Carolina, because the preference therein provided for impairs the obligations of stockholders in regard to their liability in a closed bank, and also impairs the obligation of the contract with depositors who made their deposits before the passage of the Act.
The questions which challenge the constitutionality of the Act approved March 28, 1930 (36 Stat. pages 1368-1374) are disposed of, contrary to the contention of those who present the questions, by the opinion of this Court just filed in the case of W. H.
Witt, Receiver, v. People's State Bank of South Carolina,
166 S. C., 1, 164 S. E., 306, 307, which opinion upholds the constitutionality of that Act. The facts of this case bring it, in all respects, within the purview of that decision, in so far as the question of constitutionality is concerned.
Eet us, then, consider the other questions made by the appeal.
The appellant charges error to the Circuit Judge for that he held petitioner was not entitled to the preference which he claimed because the assets of the receivership were not increased by his transaction with the Bamberg Banking Company.
We find no error in this holding of the Circuit Judge. The petitioner presented his check for payment, and received $100.00 in cash and a draft on the South Carolina National Bank of Charleston for $3,173.34 in exchange. The check presented by petitioner to the Bamberg Banking Company was then charged to the account of the drawer, who was one of its customers; the bank’s assets were reduced by that amount. Its draft for the like amount on the Charleston bank was never presented for payment, and hence never paid. When the Bamberg bank failed, the Charleston bank paid to the receiver the amount of $7,000-00, which the Bamberg bank had on deposit with it. This simply restored the status as it was when petitioner presented his check. The amount by which the bank’s assets were depleted by charging the amount of the check to its customer’s account was restored when the Charleston bank paid that amount to the receiver. Certainly the funds of the banking company were not increased by the transaction.
The first of the additional grounds for sustaining the decree of the Circuit Judge must be sustained. It is to the effect that the Act of 1930, herein under review, is not applicable to this case because the record shows that the appellant requested, or accepted, the draft on South Carolina National Bank of Charleston, and that he had such an unconditional credit as would make the Act inapplicable to him.
The provisions of the Act pertinent to and controlling this question are contained in subdivision 2 of Section 13.
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The opinion of the Court was delivered by
Mr. Justice Bonham.
The pleadings show that Bamberg Banking Company is a corporation which was engaged in the banking business at Bamberg. The 31st day of December, 1930, G. D. Sanders, petitioner and appellant herein presented at the window of the banking company for payment a check in the sum of $3,273.34, drawn by a customer of the Bamberg Banking Company, in favor of M. K. Sanders, who indorsed the same and delivered it to G. D. Sanders. The drawer of the check had in the banking company funds in sufficient amount to pay it. It was charged to the customer’s account, and G. D. Sanders was given, and accepted, the sum of $100.00 in cash and a draft on the South Carolina National Bank of Charleston for $3,173.34. The Bamberg Banking Company
had to its credit with the Charleston bank more than sufficient funds to pay the draft. January 15, 1931, Bamberg Banking Company failed; closed its doors for business; and was taken over by the state bank examiner. The respondent South Carolina Savings Bank was appointed receiver of the closed bank, and is now engaged in the business of such receivership. When the Bamberg Banking Company closed its doors, G. D. Sanders had not presented to South Carolina National Bank of Charleston, for payment, the draft given on it by Bamberg Banking Company on December 31, 1930. When the banking company failed and closed its doors for business, G. D. Sanders presented his draft to the receiver, demanding that it be paid in full as a preferred claim under the provisions of the Act of the General Assembly approved March 28, 1930, 36 Stat., 1368. The receiver declined to pay the claim as one of preference. Thereupon the claimant filed his petition in the Court of Common Pleas praying that the Court issue its order commanding the receiver to pay the claim in full as one of preference. The receiver answered, denying petitioner’s right of priority, for the several causes therein stated, and challenging the constitutionality of the Act of 1930, under the provisions of which petitioner claimed priority. The matter came on for hearing by Hon. T. M. Boulware, special Judge, upon an “Agreed Statement of Facts.” Judge Boulware filed an order in which he held that the Act of 1930 was unconstitutional, predicating his conclusion upon the decision of this Court in the case of
Ex parte Wachovia Bank & Trust Company (Nettles v. People’s Bank of Darlington),
160 S. C., 104, 158 S. E., 214, which decision declared the Act April 26, 1927 (35 St. at Large, p. 369), relating to the liability of banks doing business in this State when receiving for collection checks, or other negotiable instruments, to be unconstitutional. He also held that petitioner was not entitled to preference because the assets of the banking company were not swelled by reason of the
transaction of petitioner with it. From this order petitioner appeals upon three grounds, which may be thus briefly stated:
(1) That the Circuit Judge erred in holding that the Act of 1930 was not constitutional because that it violated Article 3, § 17, of the Constitution of South Carolina, which prescribes that an Act shall relate to but one subject, which shall be expressed in the title; (2) that his Honor erred in holding that the Act was unconstitutional because that it discriminated against corporations, partnerships, and individuals not engaged in receiving and paying deposits of money in this State; (3) that his Honor erred in holding that the petitioner was not entitled to a preference because the assets of the Bamberg Banking Company were not increased by petitioner’s transaction with it.
The respondent gave notice that he would ask the Court to sustain the Circuit Decree on these additional grounds: (l)that the Act of 1930 is not applicable to the facts of this case, because the record shows that the appellant requested, or accepted, the draft in question, and that he had such an unconditional credit as makes the Act inapplicable to him; (2) that the appellant held the draft received by him from the Bamberg Banking Company from the 31st day of December, 1930, until the 15th day of January, 1931, the day upon which Bamberg Banking Company closed its doors for business, without presenting it to South Carolina National Bank of Charleston, on which it was drawn, for payment, which was such failure to exercise due diligence as debars him from the relief which he claims; (3) that his Honor should have held the Act of 1930, in question, to be unconstitutional, because that it violates Article 1, § 8, of the Constitution of South Carolina, because the preference therein provided for impairs the obligations of stockholders in regard to their liability in a closed bank, and also impairs the obligation of the contract with depositors who made their deposits before the passage of the Act.
The questions which challenge the constitutionality of the Act approved March 28, 1930 (36 Stat. pages 1368-1374) are disposed of, contrary to the contention of those who present the questions, by the opinion of this Court just filed in the case of W. H.
Witt, Receiver, v. People's State Bank of South Carolina,
166 S. C., 1, 164 S. E., 306, 307, which opinion upholds the constitutionality of that Act. The facts of this case bring it, in all respects, within the purview of that decision, in so far as the question of constitutionality is concerned.
Eet us, then, consider the other questions made by the appeal.
The appellant charges error to the Circuit Judge for that he held petitioner was not entitled to the preference which he claimed because the assets of the receivership were not increased by his transaction with the Bamberg Banking Company.
We find no error in this holding of the Circuit Judge. The petitioner presented his check for payment, and received $100.00 in cash and a draft on the South Carolina National Bank of Charleston for $3,173.34 in exchange. The check presented by petitioner to the Bamberg Banking Company was then charged to the account of the drawer, who was one of its customers; the bank’s assets were reduced by that amount. Its draft for the like amount on the Charleston bank was never presented for payment, and hence never paid. When the Bamberg bank failed, the Charleston bank paid to the receiver the amount of $7,000-00, which the Bamberg bank had on deposit with it. This simply restored the status as it was when petitioner presented his check. The amount by which the bank’s assets were depleted by charging the amount of the check to its customer’s account was restored when the Charleston bank paid that amount to the receiver. Certainly the funds of the banking company were not increased by the transaction.
The first of the additional grounds for sustaining the decree of the Circuit Judge must be sustained. It is to the effect that the Act of 1930, herein under review, is not applicable to this case because the record shows that the appellant requested, or accepted, the draft on South Carolina National Bank of Charleston, and that he had such an unconditional credit as would make the Act inapplicable to him.
The provisions of the Act pertinent to and controlling this question are contained in subdivision 2 of Section 13. So much of the subdivision as applies here is set out in this language: “When a drawee or payor bank has presented to it for payment an item or items drawn upon or payable by or at such bank and at the time has on deposit to the credit of the maker or drawer an amount equal to such item or items and such drawee or payor shall fail or close for business as above, after having charged such item or items to the account of the maker or drawer thereof or otherwise discharged his liability thereon but without such item or items having been paid or settled for by the drawee or payor either in money or by an unconditional credit given on its books or on the books of any other bank, which has been requested or accepted so as to constitute such drawee or payor or other bank debted [debtor?] therefor, the assets of such drawee or payor shall be impressed with a trust in favor of the owner or owners of such item or items for the amount thereof, * * * and such owner or owners shall be entitled to a preferred claim upon such assets. * *
Analyzed, that somewhat involved statement is reduced to this meaning: One who presents for payment at a bank an item drawn by one who has on deposit in the bank funds sufficient to pay it and the item is charged to the drawer or maker thereof, but the amount of the item is not paid to him who presents it, either in money or by an unconditional credit on the books of the payor bank, or on the books of
any other bank, and the payor bank fails, the owner of the item shall have a preferred claim upon the assets of the payee bank, unless he has been paid in money, or has requested or accepted an unconditional credit on the books of the payor bank or some other bank, etc.
Appellant comes directly within the exception. He received in money $100.00, and requested, or accepted, a draft on South Carolina National Bank of Charleston for the balance of the item, viz. $3,173.34. This was an unconditional credit on that bank given by the payee bank and accepted by appellant. The payee bank had in the Charleston bank the funds to meet the draft given to, and accepted by, appellant. He is not entitled to preference on this ground. If he had presented his draft to the Charleston bank, it would have been paid.
Nor is he entitled to preference under or by the provisions of subdivision 3 of Section 13 of the Act, which are as follows: “Where an agent collecting bank other than the drawee or payor shall fail or be closed for business as above, after having received in any form the proceeds of an item or items entrusted to it for collection, but without such item or items having been paid or remitted for by it either in money or by an unconditional credit given on its books or on the books of any other bank which has been requested or accepted so as to constitute such failed collecting or other bank debtor therefor, the assets of such agent collecting bank which has failed or been closed for business as above shall be impressed with a trust in favor of the owner or owners of such item or items for the amount of such proceeds and such owner or owners shall be entitled to a preferred claim upon such assets. * * *”
Appellant may not claim a preference upon the assets of Bamberg Banking Company, because it is not an agent collecting bank of the M. K. Sanders check. It was the payee bank. The check was drawn upon it by one of its customers and was charged to that customer’s account.
If it be attempted to be argued that he had a preferred claim against the South Carolina National Bank of Charleston on the ground that it is the payor bank of the draft given upon it by Bamberg Banking Company, the sufficient answer is that it has not received the proceeds of any item or items sent it for collection, nor has it failed, or closed its doors for business.
The question of due diligence in the presentation of a check or draft is a mixed question of law and of fact, to be determined by the law as applied to the facts of each case. The question of ordinary care (due diligence) as applied by the Act of 1930 to a bank receiving an item for deposit, or subsequent agent bank, for collection, is determined to be the presentation of the item by forwarding it by mail, or by presentation in person, not later than the next business day following the day after the item was received.
By analogy of reason it would seem that one who holds a draft for fifteen days after receiving it is guilty of want of ordinary care, or due diligence.
The Circuit Decree adjudges that the petition be dismissed, which conclusion is reached by unsound conclusions of law. Whilst concurring in that result, it is the judgment of this Court that the conclusions of law stated by decree are erroneous and are reversed. But the result of the holdings of the Court is to affirm the order of the Circuit Judge; therefore the appeal is dismissed.
Mr. Justice Stabler concurs in result.
Mr. Acting Associate Justice C. C. EeathErstone, Circuit Judge concurs.
Mr. Ci-iiee Justice Brease and Acting Associate Justice W. C. Cotitran dissent.