Funk v. Young

• Decision Date: 03 March 1919
• Docket Number: 132
• Citation: 210 S.W. 143,138 Ark. 38
• Parties: FUNK v. YOUNG
• Court: Arkansas Supreme Court

210 S.W. 143

138 Ark. 38

FUNK v. YOUNG

No. 132

Supreme Court of Arkansas

March 3, 1919

Appeal from Benton Circuit Court; J. S. Maples, Judge; reversed.

STATEMENT OF FACTS.

Towne Young, trustee, brought suit against Funk & Son, E. M. Funk and Erwin C. Funk to recover the sum of $ 149.40 and the accrued interest alleged to be due him on a promissory note. The note is dated April 27, 1914, at Rogers, Arkansas, and is signed by Funk & Son, E. M. Funk and Erwin C. Funk. The face of the note was for $ 200 and was due and payable to the order of the Bank of Rogers sixty days after date with interest at the rate of ten per cent. per annum from maturity until paid. The note had the following endorsements on the back of it:

"Bank of Rogers by W. E. Talley, Pres."

"Paid Dec. 18-16 $ 100, J. R. D."

"For value received I hereby assign and transfer the within note to Towne Young, Trustee. John M. Davis, Bank Commissioner."

The defendant filed an answer to the complaint as follows "They deny that they are indebted to the plaintiff in the sum of $ 149.40, or in any other sum.

"Second. Defendants further answering, admit that on April 27, 1914 they executed their promissory note to the Bank of Rogers for the sum of $ 200, bearing ten per cent. interest from date and admit that there was endorsed as paid thereon $ 100 December 18, 1916.

"Third. That on the day of July, 1914, the said Bank of Rogers being insolvent closed its doors and was with all its assets taken over by John M. Davis, State Bank Commissioner, and the affairs of said bank are now in process of settlement in the Benton Chancery Court. That at the time the said bank failed defendant Erwin C. Funk, had on deposit in said bank subject to check the sum of $ 25.06; that the firm of Funk & Son had on deposit in said bank subject to check, the sum of $ 8.37. That there is due and owing the defendants, E. M. Funk and Erwin C. Funk, members of the firm of Funk & Son, $ 33.43, and interest which they are entitled to have set off against the said note in suit.

"Fourth. Defendant, E. M. Funk, further answering for himself, says: That on the day of the 19 , he, as trustee for S. C. Walters, deposited in said bank, for which he was personally responsible to S. C. Walters, on time deposit, the sum of $ 300; that at the time the aforesaid bank failed there was due and owing him as such trustee from said bank the sum of $ 300. That about July, 1914, a short time before the said bank closed its doors he received from said bank, a bank draft for $ 4.20, being for the interest due on the aforesaid time deposit; that the bank failed before the draft could be presented for payment, and defendant avers that he is entitled to have the same applied towards the payment of said note.

"Fifth. That the said several sums above mentioned as owing from the Bank of Rogers to defendants, Funk & Son, E. M. Funk and Erwin Funk, have been filed with the bank commissioner and have been allowed as subsisting claims against the bankrupt estate of the said Bank of Rogers; that 27 per cent. of said claims have been paid, leaving due and owing these defendants, jointly 73 per cent. thereof.

"Defendants pray that the amount of the several sums unpaid and found due and owing these defendants as above set forth and mentioned, or so much thereof as may be necessary be allowed as set-off against the amount that may be found due and owing plaintiff on the note in suit; that the plaintiff take nothing from defendants, for their costs and for all proper relief."

Subsequently they filed an amendment to the answer which is as follows: "Wherein they say that on the 22nd day of January, 1916, subsequent to the maturity of the note sued on plaintiff purchased from John M. Davis, State Bank Commissioner, all of the assets of the said Bank of Rogers, including the note in controversy, and defendants aver that plaintiff purchased the said note subject to the equities of the defendants."

The answer was duly verified by E. M. Funk. The defendants also filed a motion to transfer the case to equity. The plaintiff filed a demurrer which was sustained by the court. The judgment recites that the defendants refused to plead further, but elected to stand upon their answer and cross-complaint and that the court found that the defendants were indebted to the plaintiff in the sum of $ 174.50 as principal and interest on the note.

Judgment was rendered against the defendants in favor of the plaintiff for that amount and the defendants have appealed.

Judgment reversed and cause remanded.

The appellants pro se.

The court erred in sustaining the demurrer. Defendants admit the execution of the note and their joint and several liability and the only question is, did the court err in sustaining the demurrer to the answer as amended? At the time the note was executed--the note to the Bank of Rogers--it was a going corporation and defendants were regular patrons of the bank carrying deposit accounts, joint and several, and at the time it closed its doors and was taken over by the bank commissioner, Funk & Son and Erwin Funk had small deposits. A demurrer to an answer admits the allegations thereof to be true. 102 Ark. 470; 104 Id. 466. Thus the bank was indebted to defendants on these several deposits when it failed and the note sued on being a joint and several obligation, defendants are entitled to have credited the amounts of their deposits or enough to extinguish their joint and several liability on the note. By a general deposit the bank becomes debtor of the depositor and bound to pay same upon demand or order, and the depositor is entitled to offset the amount of his deposit against the bank's demand. 98 Ark. 299; 69 Id. 47; 146 U.S. 499; 13 Sup. C. Rep. 627. Since the passage of Act 267, Acts 1917, a cause of action of either on contract or tort may be the subject-matter of counter-claim in action for recovery of money. Coats v. Miller, Ark. Law Rep., July 13, 1918, p. 318. Hence defendants may offset against their joint and several liabilities on the note any debt due them from the Bank of Rogers or its assigns. 54 Wis. 103; 2 Ann. Cases 600 and note; 1 Ala. 95; 14 Ark. 668; 5 B. Mon. (Ky.) 376. Plaintiff did not purchase the note in due course, but took an assignment after maturity from the bank commissioner, and he took subject to all the defenses which the makers had against the assignor. Receivers of insolvents are not purchasers for value without notice but personal representatives of the insolvents and take their assets subject to all set-offs, liens and encumbrances as they exist at the time of their appointment. 94 Ark. 294; 34 Cyc. 195-6. The pleadings show that the note was past due and that appellee did not purchase in due course of business. An endorsee of a note after maturity takes no greater rights than his endorser had. 76 Ark. 245; 10 P. 331; 69 Cal. 124; 4 Words and Phrases 3566. See also 2 Words and Phrases (2 series) 163; 41 L. R. A. (N. S.) 391; 38 Ark. 127; 39 Id. 306. The demurrer is a general one and if either one or more of the items set out in the answer states a cause of defense the demurrer should have been overruled. 72 Ark. 29; 37 Id. 32.

If a cause of action can be reasonably inferred from the allegations of a complaint it is not subject to a general demurrer. 93 Ark. 371; 102 Id. 287. In determining the sufficiency of any pleading, either action or defense, every intendment must be indulged in support of such pleadings. 96 Ark. 163; 110 Id. 130; 125 Id. 464.

Where a complaint at law states a good cause of action in equity and defendant demurs, the demurrer should be treated as a motion to transfer to equity. 107 Ark. 70.

W. N. Ivie, for appellee.

The demurrer, which was general, was sustained properly, as the answer set up no valid offset or defense to the complaint. The many cases cited by appellants are not in point. No case of set-off was alleged in the answer. 51 Ark. 368; 36 Id. 228; 3 Cyc. 750; 72 Ark. 44; 23 Id. 33; 7 Id. 520. As to the $ 300 deposited by Erwin Funk as trustee that could not have been a good offset even against the Bank of Rogers. 13 Ark. 563.

Where a bank fails there is no legal obligation that its notes shall be received as a set-off against debts due it. 13 Ark. 563.

Under the act of March 3, 1913, our banking law, it was appellants' duty upon the failure of the bank to file their claims with the Bank Commissioner, and if not allowed suit must be brought within six months. The admitted facts show that this note was not sold to appellee until long after the six months allowed by law had expired. No cause of action was stated in the answer against appellee.

The appellants pro se in reply cite 72 Ark. 83.

OPINION

HART, J., (after stating the facts).

The court erred in sustaining the plaintiff's demurrer to the defendants' answer and cross-complaint and in rendering judgment in favor of the plaintiff against the defendants for the amount sued for.

In Steelman v. Atchley, 98 Ark. 294, 135 S.W 902, the court held that the relation between a bank and a...