Opinion
13396
April 29, 1932.
Before TOWNSEND, J., Bamberg, November, 1931. Affirmed.
Action by South Carolina State Bank as Receiver of Bamberg Banking Company against the Santee Mills. From an adverse judgment, plaintiff appeals.
The decree of Judge Townsend, in the lower Court, is as follows:
It is alleged in the fourth to seventh paragraphs of the complaint:
4. That the defendant, Santee Mills, for some time prior to and after the time of the failure and closing of Bamberg Banking Company, kept an inactive deposit account with the Bamberg Banking Company in the sum of $2,000.00, which amount was on deposit with the Bamberg Banking Company to the credit of the Santee Mills on the 15th day of January, 1931, the day of the closing of the Bamberg Banking Company, which said balance the plaintiff is informed and believes was maintained by the Santee Mills as compensation to the Bamberg Banking Company for accommodating the Santee Mills each week by furnishing it with funds to meet its pay rolls, which pay rolls would be supplied by Bamberg Banking Company against the check of Santee Mills drawn on the Chase National Bank of New York.
5. That on the 14th day of January, 1931, the day before the Bamberg Banking Company closed, the defendant, Santee Mills, drew its pay roll of $1,215.45 from the Bamberg Banking Company in cash, for which the Santee Mills gave its check on the Chase National Bank of New York for said amount of $1,215.45, and that this check did not pass through and was never credited to the account of the Santee Mills on the books of the Bamberg Banking Company, and was in fact never paid.
6. That this plaintiff is informed and believes that Santee Mills after learning of the closing of the Bamberg Banking Company on January 15, 1931, telegraphed to the Chase National Bank of New York an order to stop payment of its check, and the Chase National Bank of New York accordingly declined payment and returned the check unpaid to the Bamberg Banking Company, and the amount of said check has never been paid or made good to the said Bamberg Banking Company or to its receiver by any one in any form.
7. That the plaintiff has made demand upon the Santee Mills for the payment of said check of $1,215.45, but the defendant has refused to pay, alleging that it should be allowed to set off its deposit of $2,000.00 as a set-off against the said check of $1,215.45 for which it received full value in cash from the Bamberg Banking Company on the eve of its closing.
The defendant claims that its deposit in the Bamberg Banking Company was on open account subject to check, and further alleges: "Further answering the complaint and by way of set-off the defendant alleges that at the time said check was drawn and at the time said check was cashed the said Bamberg Banking Company was then insolvent, unknown to the defendant, and was at such times and still is indebted to the defendant in the sum of Two Thousand ($2,000.00) Dollars, and defendant further alleges that in any event it is entitled to set off the said sum of One Thousand Two Hundred Fifteen and 45/100 ($1,215.45) Dollars against its deposit of Two Thousand ($2,000.00) Dollars now standing to its credit with the said Banking Company, and is entitled to share equally with other unsecured depositors in the distribution of the assets of Bamberg Banking Company to the extent of the balance due it, to wit: the sum of Seven Hundred Eighty-four and 55/100 ($784.55) Dollars."
The facts quoted from the complaint and answer were admitted at the hearing before me.
From the facts, I conclude that on the 15th day of January, 1931, when the Bamberg Banking Company closed because of its insolvency, the defendant was primarily liable to the bank as drawer of the check for $1,215.45, the payment of which was stopped on order of the defendant to the drawee before presentation or payment. The debt evidenced by that check was the debt of defendant to the Bamberg Banking Company, when the latter closed. National Bank of Chester v. Gunhouse Co., 17 S.C. 496, Civ. Code 1922, § 3840. On discovering the insolvency of the Bamberg Banking Company, payee, the defendant, drawer, had the right to direct the drawee bank to stop payment of the check, in order that the amount of deposit due defendant, drawer, by the Bamberg Banking Company at time of insolvency might be offset in equity against defendants' liability as drawer of the check in question; and the rights of the parties adjusted in accordance with the status of the mutual debtors existing the day the Bamberg Banking Company closed. Carwile v. Metropolitan Life Insurance Company, 136 S.C. 139, 140, 134 S.E., 275; Id., 136 S.C. 197 to 199, 134 S.E., 285. See, also, Falconer v. Porve, Bailey, Eq., 156; Scott v. Armstrong, 146 U.S. 499, 13 S.Ct., 148, 36 L.Ed., 1059, and Yardley v. Philler, 167 U.S. 344, 17 S.Ct., 835, 42 L.Ed., 192.
It is, therefore, ordered, adjudged, and decreed that the complaint be dismissed, with leave to defendant to share equally with other unsecured depositors in the distribution of the assets of the Bamberg Banking Company to the extent of the balance due it, after offset of the amount of plaintiff's deposit against defendant's liability to the bank on said check, to wit, the sum of $784.55.
Messrs. Mitchell Horlbeck and E.H. Henderson, for appellant, cite: Right to set off against insolvent bank is governed by facts existing at insolvency and not by conditions created later: 143 S.E., 646; 1 F.2d 312; 264 U.S. 160; 44 Sup. Ct., 296; 68 L.Ed., 617; 167 U.S. 344; 17 Sup. Ct., 835; 42 L.Ed., 192; 146 U.S. 499; 13 Sup. Ct., 148; 36 L.Ed., 1059; 167 U.S. 344; 88 Fed., 53. Assets of insolvent corporation should be distributed ratably among creditors: 136 S.C. 511; 105 N.E., 360; 8 C.J., 62; 151 S.C. 67.
Messrs. Elliott, McLain, Wardlaw Elliott and B.D. Carter, for respondent, cite: Insolvency of creditor against whom set-off is claimed creates an equity permitting set-off: 136 S.C. 197; 134 S.E., 285; 146 U.S. 499; 13 S.Ct., 148; 36 L.Ed., 1059.
April 29, 1932. The opinion of the Court was delivered by
The decree of his Honor, Circuit Judge Townsend, appealed from, sufficiently states the facts of the cause, and, in our opinion, correctly disposed of the legal issues made. It will be reported and is affirmed.
MESSRS. JUSTICES STABLER and BONHAM concur.