Bank Of Spartanburg v. Mahon

• Decision Date: 26 October 1907
• Citation: 59 S.E. 31,78 S.C. 408
• Parties: BANK OF SPARTANBURG. v. MAHON.
• Court: South Carolina Supreme Court

59 S.E. 31

78 S.C. 408

BANK OF SPARTANBURG.

v.MAHON.

Supreme Court of South Carolina.

Oct. 26, 1907.

1. Contracts—Consideration—Moral Obligation.

A perfect moral obligation is a sufficient consideration for a contract.

[Ed. Note.—For cases in point, see Cent. Dig. vol. 11, Contracts, §§ 257—381.]

2. Bills and Notes — Accommodation Indorser — Collateral — Misapplication — Accounting.

An accommodation indorser or surety on a note may require the creditor to account for the value of any collateral held for his protection and released or misapplied to the indorser's prejudice.

[Ed. Note.—For cases in point, see Cent. Dig. vol. 7, Bills and Notes, §§ 604-603.]

3. Contracts—Consideration.

A firm, being indebted to a bank on notes indorsed by M. and for an unsecured overdraft, and also indebted to M. personally, agreed to sell its stock of goods and use the proceeds to pay all the notes on which M. was indorser, and prorate the surplus between the overdraft and the personal debt of the firm to M. Neither the bank nor M. had any lien on the goods, nor was there any extension of time given, nor any change of possession, either by the bank or M., by virtue of such agreement. Held, that the agreement was unenforceable against the firm for want of consideration, and that, at least before the time the proceeds of the goods were deposited in the bank, the bank and M. were free from all responsibility to each other for the application of such proceeds.

[Ed. Note.—For cases in point, see Cent. Dig. vol. 11, Contracts, § 240.]

4. Banks and Banking — Application ov Deposits.

Where an agreement of a firm to sell its assets and apply the proceeds to certain notes held by a bank, indorsed by M., and to prorate the surplus between an unsecured overdraft and a personal debt to M., was without consideration, the proceeds, on being deposited in the bank to the credit of the firm's general account, were subject to check and were not assets under the control of the bank, which it could apply without the firm's consent in accordance with the agreement.

[Ed. Note.—For cases in point, see Cent. Dig. vol. 6, Banks and Banking, §§ 353, 354.]

5. Same—Unmatured Notes.

A bank cannot apply a depositor's account, subject to check, to his unmatured notes.

[Ed. Note.—For cases in point, see Cent. Dig. vol. 6, Banks and Banking, §§ 353-354.]

Appeal from Common Pleas Circuit Court of Greenville County; R. C. Watts, Judge.

Action by the Bank of Spartanburg, as indorsee, against G. H. Mahon. From a judgment for plaintiff, defendant appeals. Affirmed.

Jos. A. McCuIlough, for appellant.

Simpson & Bomar and M. F. Ansel, for respondent

WOODS, J. The Bank of Spartanburg, as indorsee and holder, brought this action against G. H. Mahon as indorser on three promissory notes. On the first trial of the cause the circuit court granted a nonsuit holding that Mahon was never liable on the notes. This court held otherwise and re versed the judgment. 75 S. C. 255, 55 S. E. 529. On the second trial the sole issue was whether the plaintiff bank had come into possession or control of funds of the principal debtors, James & Stewart, which it should have applied to the payment of the notes. The circuit judge held there was no evidence to support defendant's contention, and instructed the jury to find a verdict in favor of the plaintiff for the amount claimed. The exceptions charge error in this instruction. In stating the material facts, the defendant's version of those in dispute must be taken; for, If there was any evidence from which the jury could have found the bank had control of the funds which it ought to have applied to the payment of the notes in suit, then it was error to direct a verdict for the plaintiff.

In the spring of 1904 James & Stewart, a firm doing business in the city of Spartanburg, owed the Bank of Spartanburg notes aggregating $10,200, indorsed by defendant, Mahon, who lived In Greenville, and also an unsecured overdraft of about $4,000. At the same time the firm owed Mahon an unsecured debt of $10,000. In April Mahon had a conference with James, one of the partners, and Boyd, the cashier of the Bank of Spartanburg, at which it was agreed, as Mahon testified, the stock of goods of James & Stewart should be sold and the proceeds of the sale be first applied to the payment of the notes indorsed by Mahon, and the surplus pro rata to the overdraft due the bank and the debt due Mahon. These are the words in which Mahon states the agreement: "It was In Mr. James' store, and Mr. Boyd was there; and it was agreed that we would sell the stock of goods, and several parties' names were mentioned that would probably buy the stock of goods, and these notes which I was indorser on were to be paid off, and then the surplus was to be prorated to the overdraft and to my...