Lauerhass v. Hood, 205 N.C. 190 (1933)

Sept. 20, 1933 · Supreme Court of North Carolina

205 N.C. 190

LUDWIG LAUERHASS v. GURNET P. HOOD, Commissioner of Banks, Ex Rel. CENTRAL BANK AND TRUST COMPANY, ASHEVILLE, N. C.

(Filed 20 September, 1933.)

Banks and Banking1 H e — Judgment that plaintiff was entitled to preference for bank’s mismanagement of trust estate is upheld.

Evidence in this case is held sufficient to support the findings of fact by the referee that defendant hank, in dealing with itself, bought certain collateral for plaintiff’s trust estate at a price in excess of its market value, and charged and received certain unlawful commissions in transactions with the estate, and thus augmented the cash in its vaults, and judgment affirming the referee’s findings and declaring plaintiff’s entitled to a preference in the bank’s assets upon its later insolvency is upheld.

Appeal by defendant from Alley, J., at April Term, 1933, of BuNCOMBE.

Affirmed.

This is an action brought by plaintiff against defendant contending that certain sums of money constitute a preference against the assets of the Central Bank and Trust Company, now in process of liquidation by Gurney P. Hood, Commissioner of Banks, for the State of North Carolina. By consent the matter was referred to Judge J. P. Kitchin, referee.'

Among the findings of fact of the referee, is the following:

“(17) That on the transactions herein set forth the trustee bank charged the account of the plaintiff with commissions for the year 1926-27, $387.64; for the year 1927-28, $216.50; for the year 1928-29, $317.70; for tbe year 1929-30, to tbe day of tbe closing of tbe bank, $554.20, wbicb commissions were added to tbe debit side of tbe income account of tbe plaintiff. Tbat on 2 April, 1927, tbe reasonable market value of tbe Robinson notes was $2,070.60, and in tbe sale of tbe said notes to bis account, tbe Central Bank and Trust Company profited in tbe amount of $5,642.73; tbat on 24 June, 1930, and 12 July, 1930, tbe reasonable market value of tbe fractional certificates hereinabove referred to were respectively $5,400 and $3,480, and tbat the trustee, Central Bank and Trust Company, in selling- said certificates to tbe account of tbe plaintiff, profited in tbe amount of $3,600 and $2,320; tbat the profits above referred to were paid into tbe Central Bank and Trust Company in cash and tbe cash on band in tbe said bank and tbe assets of said bank were augmented in these amounts.

“(18) Tbat tbe Central Bank and Trust Company, through its officers and agents, wrongfully and fraudulently appropriated tbe property of tbe plaintiff and knowingly and fraudulently permitted tbe trust funds to be unlawfully diverted from tbe trust estate and thereby became trustee ex maleficio, and has failed to account to tbe trust estate for tbe same, to wit: an unlawful profit of $5,642.73 on 2 April, 1927, in tbe transaction involving tbe sale of tbe Robinson note to tbe trust estate, and $3,600 and $2,320 respectively on tbe sale of said fractional certificates in the mortgage pool.

“(19) Tbat tbe Central Bank and Trust Company unlawfully, wrongfully and fraudulently charged commissions to tbe income account of tbe cestui que trust, involving tbe wrongful appropriation of tbe trust estate, amounting to $1,476.04, to wbicb tbe said Central Bank and Trust Company are not entitled, because of tbe wrongful appropriation and wrongful dealings with itself, in relation to tbe trust estate.

“(20) Tbat at all times during tbe period of tbe transactions involved in tbe controversy, tbe cash on band in tbe Central Bank and Trust Company was in excess of tbe amount claimed by tbe plaintiff in this proceeding and tbat upon tbe closing of tbe said Central Bank and Trust Company this cash passed into bands of tbe defendant, Gurney P. Hood, Commissioner of Banks.

“(21) That tbe plaintiff duly filed with tbe Commissioner of Banks, due proof of bis claim and the same was rejected by tbe said Commissioner of Banks; tbat this suit was instituted within tbe time provided by statute for tbe same.”

Conclusions of law: “Upon tbe foregoing findings of fact tbe referee is of tbe opinion and so bolds as a matter of law:

“(1) Tbat tbe plaintiff is entitled to judgment against tbe defendant for tbe sum of $11,562.73, by reason of tbe wrongful profits taken in dealing with itself in relation to tbe trust estate.

“(2) That tbe plaintiff is entitled to judgment against tbe defendant for tbe-sum of $1,416.04, for commissions wrongfully charged and taken in relation to tbe trust estate, subject to a credit in tbe sum of $726.29, tbe amount of tbe overdraft shown on tbe books.

“(3) That tbe above two items constitute a preference in favor of tbe plaintiff over tbe depositors and general creditors of tbe Central Bank %and Trust Company, in any distribution or apportionment of tbe assets of said bank.

“(4) That tbe plaintiff is entitled to have returned to him tbe bond which be was required to deposit to indemnify tbe bank for tbe releasing of tbe security. If tbe bond cannot be returned or has been liquidated then tbe plaintiff be paid its value in cash, as- of tbe date of said transaction.”

Numerous exceptions were duly made to tbe report of tbe referee by defendant. Tbe court below rendered tbe following judgment, in part:

“It is, therefore, ordered, adjudged and decreed that tbe said report of J. P. Kitcbin, referee, be confirmed as to tbe findings of fact in eacb and every respect, and be confirmed as to tbe findings and adjudications of law in eacb and every respect, as appears in tbe sard report filed in tbe Superior Court of Buncombe County, State of North Carolina, on 15 March, A.D. 1933; and

“It is further ordered, adjudged and decreed that tbe plaintiff recover of tbe defendant, Gurney P. Hood, Commissioner of Banks, ex rel. Central Bank and Trust Company, of Asheville, North Carolina, tbe sum of eleven thousand, five hundred, sixty-two and 73/100 dollars ($11,562.73), together with tbe further sum of one thousand, four hundred seventy-six and 04/100 dollars ($1,476.04), tbe latter sum to be subject to a credit in tbe sum of seven hundred, twenty-six and 29/100 dollars ($726.29) ; that both of said amounts to which tbe plaintiff is entitled be and constitute a preference in favor of tbe plaintiff over tbe depositors and general creditors of tbe said Central Bank and Trust Company in any distribution or apportionments of tbe assets of said bank, and that tbe plaintiff share in eacb and every respect in any and all assets of tbe said Central Bank and Trust Company, as having-priority over general creditors and depositors, and be paid in pari passu with any and all other persons entitled to priority.

“It is further ordered, adjudged and decreed that tbe defendant return to tbe plaintiff tbe Universal Mortgage Company bond referred to in tbe complaint, said bond being retained by tbe defendant to secure tbe payment of an alleged overdraft in plaintiff’s account, which overdraft is hereby declared fully paid and satisfied.”

In tbe statement of case on appeal, is tbe following: “Tbe defendant hereby waives all of its objections and exceptions to tbe findings of fact from the said J. P. Kitchin, referee, except that portion of findings of fact No. 17 reading as follows: 'That on 24 June, 1930, and 12 July, 1930, the reasonable market value of the fractional certificates herein-above referred to were respectively $5,400 and $3,480, and that the trustee, Central Bank and Trust Company, in selling said certificates to the account of the plaintiff, profited in the amount of $3,600 and $2,320; that the profits above referred to (so far as profits on the sale of the fractional certificates of investment are concerned), were paid into the Central Bank and Trust Company in cash and the cash on hand in said bank and the assets of said bank were' augmented in these amounts.’ Defendant admits that if the Central Bank and Trust Company profited at all there is evidence in the record which would justify the amount of profits as set forth in the foregoing quotation from finding of fact No. 17. Its only contention being that there is absolutely no evidence in the record warranting a finding of fact to the effect that the Central Bank and Trust Company was a recipient of whatever profit, if auy, was made in the alleged transactions.”

William J. Cocke, Jr., for plaintiff.

Johnson. Smathers and Rollins for defendant.

Pbk CubiaM.

The defendant contends that the questions involved are: “(1) Is the plaintiff entitled to recover of the defendant as a preferred claim against the assets of the Central Bank and Trust Company the sum of $11,562.73, the same representing the difference between the face amount of certain collateral purchased by the bank for the plaintiff’s trust estate and the actual market value of said collateral, the market value being arrived at by opinion evidence as to the value of certain real estate and other notes, stock and bonds securing the collateral? (2) Is there evidence in the record supporting the finding of fact to the effect that the Central Bank and Trust Company was the recipient of whatever profit was realized in the 'Mortgage Pool Transaction.’ ” Both of the questions must be answered in the affirmative. •

It is conceded by defendant: "That it is a well established principle of law that findings of fact by a referee, supported by competent evidence and affirmed by a Superior Court on appeal, are conclusive on the Supreme Court.”

We think the evidence, though circumstantial and some opinion evidence, is sufficient to sustain the findings of fact. We do not think it necessary to set same forth. We think the cause is governed by Flack v. Hood, Comr., 204 N. C., 337. For the reasons given, the judgment of the court below is

Affirmed.