Brown v. Lowe

• Decision Date: 29 October 1936
• Docket Number: 14366.
• Citation: 188 S.E. 182,182 S.C. 9
• Parties: BROWN et al. v. LOWE et ux.
• Court: South Carolina Supreme Court

188 S.E. 182

182 S.C. 9

BROWN et al. v. LOWE et ux.

No. 14366.

Supreme Court of South Carolina

October 29, 1936

Appeal from Common Pleas Circuit Court of Marion County; E. C Dennis, Judge.

Action by W. J. Brown and others, as co-receivers of the Bank of Mullins, against J. E. Lowe and Mrs. J. E. Lowe. From a judgment in favor of the defendants, the plaintiffs appeal.

Affirmed.

The decree of Judge Dennis follows:

The above-stated case was docketed on calendar 1 and regularly called for trial before the court and a jury. After the jury was sworn and the pleadings were read, upon suggestion from the court that the paramount and substantially controlling issue appeared to be one of law, it was agreed by counsel that the case be withdrawn from the jury and heard by the court, but with the understanding that any disputed questions of fact, not conceded by counsel on the hearing by the court, might be later determined in the usual and regular way.

On or about November 1, 1932, on account of its insolvency, Bank of Mullins closed its doors, and the plaintiffs subsequently were appointed receivers. This suit was instituted by the receivers against the defendants on two promissory notes executed and delivered by the defendants to Bank of Mullins one for the principal sum of $900, dated October 5, 1931, and payable on September 15, 1932, and the other for the principal sum of $2,000, dated March 2, 1932, and payable on November 15, 1932. The complaint alleges that there have been certain partial payments on the note for $900, but that no payments have been made on the note for $2,000, and judgment is asked for the balance alleged to be due on the first note and the total amount of the second note according to its terms. The defendants separately answered the complaint, the answers however, being substantially the same, admitting the execution and delivery of the notes, but alleging that J. E Lowe was the principal debtor and that Mrs. J. E. Lowe signed the notes merely for accommodation at the request of J. E. Lowe and Bank of Mullins, that J. E. Lowe was a depositor in Bank of Mullins before and at its closing, and that they are entitled to have the notes retired by offsetting against them the deposit of J. E. Lowe. The plaintiffs filed a reply to the answer of the defendants setting up an instrument in writing signed by J. E. Lowe on January 21, 1932, by which he agreed to leave on deposit with the bank 45 per cent. of his then existing deposit until November 15, 1932, and another 45 per cent. until November 15, 1933, and it was alleged by the plaintiffs that, since the funds of J. E. Lowe never became subject to withdrawal, the receivers were without power to permit them to be used as an offset against the notes, and that to do so would be in violation of the agreement and would result in the unlawful preference of one depositor over the others.

During December, 1931, in order to prevent an apprehended run and to conserve its deposits, Bank of Mullins temporarily closed, and at that time J. E. Lowe had on deposit subject to check the sum of $3,024.71. With a view to reopening under favorable circumstances, the bank obtained from J. E. Lowe on January 21, 1932, an agreement to leave 45 per cent. of his deposit in the bank until November 15, 1932, and 45 per cent. until November 15, 1933, a copy of the agreement being set forth in the reply filed by the plaintiffs. Similar agreements were also obtained from numerous other depositors, although it is not apparent whether such an agreement was obtained from every depositor. Shortly after obtaining these agreements the bank reopened and continued in business in a regular and apparently normal manner until on or about November 1, 1932, when it was permanently closed. At the closing of the bank J. E. Lowe had a total balance of $2,898.73 to his credit as a depositor, and of this amount $2,722.74 represented the funds not subject to check under agreement of January 21, 1932, and $175.99 represented funds subject to check and deposited after the agreement.

It is conceded by the plaintiffs that the principal debtor is the defendant J. E. Lowe, and that Mrs. J. E. Lowe signed the notes merely for accommodation at the request of the bank and her husband, J. E. Lowe. It is further conceded that the defendants are entitled to have their claim of offset allowed against the note for $900, and that they are entitled to have $175.99, the funds deposited after the agreement above referred to, used as an offset against the note for $2,000, but they deny that the defendants are entitled to any further offset. It is therefore apparent that the sole issue for determination is the propriety of allowing the funds left in the bank under the agreement of January 21, 1932, to be used as an offset against the note for $2,000.

When a bank closes, it cannot be denied that a depositor who has borrowed from the bank occupies a much more desirable position in relation to his deposit than one who has not borrowed, and that in a certain sense the borrowing depositor may seem to be preferred, yet the right of offset under such circumstances is now too well settled to admit of question. Ex parte Rice, 161...