Bank of Ashe v. Sturgill

• Decision Date: 12 January 1944
• Docket Number: 741.
• Citation: 28 S.E.2d 511,223 N.C. 825
• Parties: BANK OF ASHE et al. v. STURGILL et al.
• Court: North Carolina Supreme Court

28 S.E.2d 511

223 N.C. 825

BANK OF ASHE et al. v. STURGILL et al.

No. 741.

Supreme Court of North Carolina

January 12, 1944

Motion by plaintiff Federal Deposit Insurance Corporation to amend its reply. This was allowed, and defendants excepted and appealed.

Francis C. Brown, of Washington, D. C., James M. Kane and Arthur C Bernard, both of Chicago, Ill., R. A. Doughton, of Sparta Ira T. Johnston, of Jefferson, and Fred S. Hutchins, and H Bryce Parker, both of Winston-Salem, for plaintiffs appellees.

Bowie & Bowie, of West Jefferson, for defendants, appellants.

DEVIN Justice.

The question involved in this appeal may be better understood by a brief statement in chronological order of the events leading up to the ruling complained of.

In 1927 the Bank of Ashe took over the assets and assumed the liabilities of the Bank of Lansing. The defendants, who were stockholders and directors of the Bank of Lansing, executed an agreement to indemnify the Bank of Ashe from loss. March 27, 1933, a statement of the liquidation of the Lansing Bank showed a loss to the Bank of Ashe of approximately $12,000, and the defendants executed to the Bank of Ashe their promissory notes in that amount due December 30, 1933. Subsequently action on the notes was instituted by plaintiff Bank in 1934, voluntary nonsuit taken in 1935, and this action begun in 1936. The defendants denied liability and set up several defenses, and thereafter at May Term, 1938, the cause was referred to R. F. Crouse, referee. In June 1938 the Federal Deposit Insurance Corporation, which before the beginning of this litigation had insured the deposits of the Bank of Ashe, made a loan to the Bank to pay its creditors, and as security therefor acquired by assignment certain of its assets, including the notes sued on. In 1939 by consent the Federal Deposit Insurance Corporation was made a party plaintiff and adopted the complaint and replyA nd also filed a separate reply, which the defendants answered. July 12, 1940, the referee filed his report in which he found the facts in favor of the defendants, and concluded that they were not liable on the notes. Plaintiffs filed exceptions, and these were heard by Judge Pless at October Term, 1940. Certain exceptions to the findings of fact were allowed, and, the defendants having preserved right to trial by jury thereon, the cause was ordered to stand for trial in the Superior Court on the issues of fact raised by the exceptions allowed. These related to defendants' claims, (1) that the notes sued on were executed in reliance upon the false representation of the cashier of the Bank of Ashe that there were sufficient assets of the Lansing Bank to discharge the notes; that the notes were executed on condition that they be discharged in that manner, and would only be used for the purpose of opening the Bank; that the liquidation of the Lansing Bank had not been completed; and that the notes were not executed in settlement of an ascertained loss in the liquidation of Bank of Lansing; (2) that the Bank of Ashe failed to exercise diligence in collecting assets of the Lansing Bank, resulting in substantial loss; and (3) that by the exercise of diligence a sufficient amount could have been collected from assets and stockholders' liability to have discharged all the liabilities of the Bank of Lansing.

At April Term, 1943, plaintiff Federal Deposit Insurance Corporation moved to amend its reply by alleging that the defendants were estopped to set up as a defense to this action transactions and agreements between the parties prior to the execution of the notes; that the notes were executed as evidence of an ascertained indebtedness by the defendants to the Bank of Ashe, and were accepted and carried on the books of the Bank as valid obligations, and, without notice of any claim of...