Elliott v. Flynn Bros.
| Decision Date | 22 July 1937 |
| Docket Number | 14519. |
| Parties | ELLIOTT et al. v. FLYNN BROS. |
| Court | South Carolina Supreme Court |
Appeal from Common Pleas Circuit Court of Greenville County; G Duncan Bellinger, Judge.
Action by William Elliott and Robert Gage, as receivers of the Peoples State Bank, of Greenville, against Flynn Bros., a partnership composed of J. W. Flynn and B. F. Flynn. From a directed verdict and judgment for the plaintiffs, defendants appeal.
Judgment affirmed by a divided court.
Price & Poag, and Hodges & Hodges, all of Greenville, for appellants.
Blythe & Bonham, of Greenville, for respondents.
I am unable to agree wholly with the main opinion in this case. This I regret because I have for the ability and legal acumen of the writer thereof a very high regard.
The facts of the case are fully set out in his opinion, and I need not repeat them.
My disagreement rests mainly upon two grounds which, in my judgment, are fundamental principles of law in this jurisdiction, which it would be unwise to disturb. They are of prime importance to the business interests of the state. They are:
First. A tender to be effective must be for the full amount due, and must be unconditional.
Second. The individual deposit of a partner cannot be set-off against the partnership debt.
It is patent from the record that in making the tender to the receivers of the Peoples State Bank of the amount he thought due on the note of Flynn Bros. to the bank J. W. Flynn deducted the amount of his individual deposit in the bank and demanded that the note be cancelled.
The case of Salinas v. Ellis, 26 S.C. 337, 2 S.E. 121 decided in March, 1887, established the rule of law that a tender properly made discharged the lien of the mortgage and stopped the running of interest.
In the case of Reynolds v. Price, 88 S.C. 525, 71 S.E. 51 55, the Salinas v. Ellis case was overruled to the extent of holding that a mortgagee must be given a reasonable time in which to consider a tender before, upon his refusal of the tender, the lien of his mortgage is declared discharged. In all essential elements the Salinas v. Ellis case was affirmed. Mr.
Justice Woods concurred in the main opinion on the ground that no lawful tender had been proven, but he dissented from the holding as to the doctrine of the Salinas v. Ellis case, relating to the discharge of the lien of the mortgage. He said: "In view of these considerations, it seems to me that the conclusion of the court in the case of Salinas v. Ellis, supra, was thoroughly sound."
The Reynolds v. Price Case, supra, reiterates the principle that a tender to have the effect of stopping the running of interest and of preventing the recovery of costs must be for the full amount due and must be unconditional.
The tender made by J. W. Flynn on or about March 1, 1932, after the closing of the doors of the bank, was for the sum of the principal and interest due on the note up to that date, less the sum of Flynn Bros., checking account, $573.94, Flynn Bros., saving account, $40, and J. W. Flynn's checking account, $148.40.
All of these items were allowed when the note came back to the hands of the receivers, except the item of $148.40, the individual deposit of J. W. Flynn.
Unquestionably, if J. W. Flynn, when he made the tender, deducted from the amount due on the bank note, which it is undisputed was the note of Flynn Bros., the sum of $148.40, which was the individual deposit of J. W. Flynn, and he had no authority to do so, then his tender was null and void, and did not entitle him to demand the cancellation of the note. The tender was conditional and thus not effective.
J. W. Flynn seeks to show that he had the right to deduct his individual deposit from the partnership debt for the following reasons:
Claud Flynn, the other member of the firm of Flynn Bros., died December 13, 1931, intestate, and left him surviving as his heirs at law two brothers and two sisters, all of age. These four entered into an agreement by which J. W. Flynn was to have the interest of Claud in the partnership, and was to assume the obligations of the firm and was to have its assets. The other heirs were to receive certain real estate and other property. J. W. Flynn claims that the debt of Flynn Bros. on the note to the bank became his individual debt and that he was entitled to set-off against it his individual deposit in the bank.
I cannot accede to this view. The agreement of the heirs of Claud Flynn was doubtless binding among themselves, but it could not change the attitude of the creditors of Claud's estate and of Flynn Bros. without the consent of the creditors.
Section 8988, vol. 3, Code 1932, prescribes that: (Italics added.)
Here is the mandate of the law which makes it obligatory upon the survivor of a partnership to file a statement of the assets and liabilities of the partnership. Manifestly, it is intended to protect the interests of the creditors of the firm. Where does J. W. Flynn, in the face of this provision of the law, find the authority to disregard it and enter into a family arrangement which sets it at naught? It is true that the law favors family settlements of family disputes and family property, but it does not favor family agreements which disregard the rights and interests of third persons, and which are counter to the express provisions of the law.
Such a proposition is fraught with danger to those who deal with partnerships and firms.
In the case Schenk et al. v. Lewis et al., 125 S.C. 228, 118 S.E. 631, 636, this court said:
It seems that argument should not be required to convince one that this trust is not discharged by a surviving partner who, upon the death of his copartner, enters into an agreement with the heirs at law of the deceased partner by which he, the trustee, becomes the sole owner of the deceased partner's share in the assets of the firm, even though he assumes its liabilities.
It is against just such conditions, however honest they may be in intention, that the provisions of section 8988 were enacted, and surviving partners were made trustees of partnership assets upon the death of a partner.
If J. W. Flynn may on this ground apply his individual deposit upon the partnership note to the bank, which is in liquidation, he thereby obtains a preference denied others.
"It is the duty of the receivers of a bank to collect and conserve its assets for the equal and pro rata benefit of creditors." McColl v. Cottingham, 124 S.C. 380, 117 S.E. 415. See, also, Livingstain v. Columbian Banking & Trust Co., 77 S.C. 305, 57 S.E. 182, 22 L.R.A. (N.S.) 442, 122 Am.St.Rep. 568.
To my mind it is clear that J. W. Flynn did not tender the amount due on the Flynn Bros. note, because he had no right to deduct his personal deposit from it. When he did this the note was not paid, and he had no right to have it canceled. His tender was therefore conditional.
He did not make another tender after the note was returned to the receivers, but, if he had done so, still demanding the right to deduct his personal deposit, the tender would have been ineffectual and could not have the effect of stopping the running of interest on the note and of preventing the recovery of costs.
I do not think there is any merit in the contention which challenges the verdict against Flynn Bros. and J. W. Flynn, partner. Nor do I think the facts of this case uphold the conclusion of the main opinion that the set-off contended for should be allowed. I am of the opinion that the motion for nonsuit made by defendant could not have been granted; the defendant admitted liability on the note for some amount, and there is no merit in the contention that the action was against a partnership not in existence, and named the wrong persons as partners.
The judgment appealed from should be affirmed.
Since the court is evenly divided, the judgment of the court below is affirmed, but under the rule of the court it does not set a precedent. This opinion becomes the main opinion, and the opinion of Mr. Justice BAKER becomes the dissenting opinion.
CARTER, J., did not participate in this decision on account of illness.
On September 30, 1931, Flynn Bros., a partnership composed of J. W. Flynn and Claud Flynn, gave to Peoples State Bank, located at Greenville, in this state, a promissory note for $3,000, which became due and payable ninety days after date. The note was signed "Flynn Brothers, by J. W. Flynn, partner." On December 13, 1931, Claud Flynn died intestate, at which time J. W. Flynn owned two-thirds of the partnership and Claud Flynn one-third. Claud Flynn was inactive and took no part in the management of the business, J. W. Flynn being in entire control thereof.
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