Peurifoy v. Gamble

Decision Date02 November 1928
Docket Number(No. 12306.)
Citation142 S.E. 788
PartiesPEURIFOY. v. GAMBLE.
CourtSouth Carolina Supreme Court

On Petition for Rehearing, April 3, 1928.

Cothran, J., dissenting.

Appeal from Common Pleas Circuit Court of Richland County; W. H. Townsend, Judge.

Suit by James E. Peurifoy, receiver of the American Bank & Trust Company, against N. B. Gamble, receiver of the Home Bank of Barnwell. Decree for plaintiff, and defendant appeals. Reversed and remanded, with directions.

The order of Judge Townsend directed to be reported is as follows:

"It is admitted that the American Bank & Trust Company became insolvent, and on the 25th of June, 1926, was placed in charge of the state bank examiner, and there remained until 19th July, 1926, when it was placed by this court in charge of Jas. E. Peurifoy, receiver. That when the American Bank & Trust Company ceased to do business, and became insolvent, it owed the Home Bank of Barnwell as depositor, $13,104.14. That thereafter said Peurifoy, as such receiver, deposited $7,000 of the receivership funds in his hands in the Home Bank of Barnwell. That thereafter the Home Bank of Barnwell became insolvent, and was placed in the hands of N. B. Gamble as receiver. I conclude that, upon the insolvency of the American Bank & Trust Company in June, 1926, the Home Bank of Barnwell's claim as depositor was reduced to the right to share equally with the other unsecured depositors in the distribution of the assets of the American Bank & Trust Company in the hands of Peurifoy, receiver.

"Judge Peurifoy, as receiver, reduced the assets of the American Bank & Trust Company to cash, and deposited the $7,000 part of such assets in the Home Bank of Barnwell belonging equally to all creditors of the American Bank & Trust Company, to be distributed amongst them as dividends under the orders of the court. The Home Bank of Barnwell had no greater rights in the deposit than any other creditor, and could only claim the dividends ordered by the court to be paid upon its claims as a depositor in the American Bank & Trust Company. The Home Bank then owed Judge Peurifoy, as receiver, the deposit of $7,000, and Judge Peurifoy as receiver owed the Home Bank only the dividends ordered by the court to be paid upon its claim for $13,104.14 against the American Bank & Trust Company. When the Home Bank became insolvent, and Mr. Gamble was appointed its receiver, he had no greater interest in the $7,000 deposit as a creditor of the American Bank & Trust Company than the Home Bank had at the time of his appointment. Gardner v. Chicago Title & Tr. Co., 261 U. S. 453, 43 S. Ct. 424, 67 L. Ed. 741, 29 A. L. R. 622, State v. Corning St. Sv. Bank, 128 Iowa, 597, 105 N. W. 159.

"It is therefore ordered, adjudged, and decreed that James E. Peurifoy, as receiver of the American Bank & Trust Company, do withhold the payment of any dividends from the assets of American Bank & Trust Company on the claim of N. B. Gamble as receiver of the Home Bank of Barnwell for $13,104.14, until the amount of such dividends shall equal the amount of $7,000, heretofore deposited by said Peurifoy as receiver in said Home Bank of Barnwell, which amount of dividends is hereby ordered offset against said deposit, and to be retained by said Peurifoy as receiver for equal distribution amongst the creditors of the American Bank & Trust Company."

Brown & Bush, of Barnwell, for appellant.

D. W. Robinson, of Columbia, for respondent.

STABLER, J. On June 25, 1926, the American Bank & Trust Company of Columbia (hereinafter referred to as the Columbia bank), finding itself unable to meet its obligations, closed its doors; and on July 19, 1926, James E. Peurifoy was appointed receiver, and duly qualified as such. At that time the Home Bank of Barnwell (hereinafter referred to as the Barnwell bank) had on deposit with the Columbia bank approximately $33,000, and owed it on notes approximately $20,000. After deducting and offsetting the amount of the notes, the Columbia bank still owed the Barnwell bank $13,104.14, the balance on the deposit account. Some time after his appointment Mr. Peurifoy, as receiver, deposited with the Barnwell bank the sum of $7,000, money collected by him from the assets of the insolvent Columbia bank; shortly after such deposit was made, the Barnwell bank itself became insolvent and closed its doors, and the defendant, Gamble, was appointed receiver of same.

Out of the peculiar situation thus created this action has arisen. The contention of the receiver of the Columbia bank is that he is entitled to offset pro rata dividends, declared or to be declared by him, and ordered paid by the court, on the $13,104.14 deposit claim of the Barnwell bank, against the $7,000 deposit made by him in the Barnwell bank to the full extent of such deposit. The purpose of this suit, brought by him against the receiver of the Barnwell bank, is to obtain an order of court allowing him to make such set-off.

The receiver of the Barnwell bank does not agree with this contention. He claims that neither the petitioner nor the defendant is entitled to a set-off, as there is a lack of mutuality of claims; but that the correct and just method of payment would be that he, as receiver of the Barnwell bank, should be paid the regular dividends, whenever declared and ordered paid, on the deposit of $13,104.14, which constitutes the claim of the Barnwell bank against the Columbia bank; and that, likewise, the receiver of the Columbia bank should be paid bis pro rata dividends on the $7,000 deposit placed by him in the Barnwell bank, whenever dividends may be declared by the receiver of that bank and ordered paid by the court.

Judge Townsend, before whom the matter was heard at the May, 1927, term of the court of common pleas for Richland county, held with the plaintiff, and ordered that the receiver of the Columbia bank withhold the payment of any dividends on the claim of the receiver of the Barnwell bank for $13,104.14, until the amount of such dividends should equal the $7,000 that had been deposited by the receiver of the Columbia bank in the Barnwell bank, such dividends to be an offset against the deposit.

The defendant, Gamble, as receiver of the Barnwell bank, appeals to this court from the order of Judge Townsend. He makes four exceptions, but, as stated by his counsel in their argument, the law applicable to each exception is applicable to all, as they raise the same question from different angles.

The ground of imputed error may be thus stated: That the presiding judge erred in refusing to order the receiver of the Columbia bank to pay to the receiver of the Barnwell bank a pro rata dividend upon the deposit of the Barnwell bank along with other depositors of the said Columbia bank.

Judge Townsend, in his decree, says:

"Judge Peurifoy, as receiver, reduced the assets of the American Bank & Trust Company to cash, and deposited the $7,000 part of such assets in the Home Bank of Barnwell belonging equally to all creditors of the American Bank & Trust Company, to be distributed amongst them as dividends under the orders of the court. The Home Bank of Barnwell had no greater rights in the deposit than any other creditor, and could only claim the dividends ordered by the court to be paid upon its claims as a depositor in the American Bank & Trust Company. The Home Bank then owed Judge Peurifoy as receiver the deposit of $7,000, and Judge Peurifoy as receiver owed the Home Bank only the dividends ordered by the court to be paid upon its claim for $13,104.14 against the American Bank & Trust Company. When the Home Bank became insolvent, and Mr. Gamble was appointed its receiver, he had no greater interest in the $7,000 deposit as a creditor of the American Bank & Trust Company than the Home Bank had at the time of his appointment."

Counsel for respondent contend that the conclusions arrived at by the learned circuit judge may be sustained upon two grounds: (1) Under the general doctrine of legal offset; and (2) upon the principle of equitable set-off.

The assets of an insolvent bank are a trust fund in the hands of the receiver, to be reduced to money and ratably distributed among all the creditors. Livingstain v. Bank, 77 S. C. 305, 57 S. E. 182, 22 L. R. A. (N. S.) 442, 122 Am. St. Rep. 568.

In the Livingstain Case the court said:

"No rule of equity appeals more to the judicial conscience than that which requires the assets of an insolvent corporation to be distributed ratably among creditors."

In the case of Citizens' Bank v. Bradley, 136 S. C. 514, 134 S. E. 510, this language of the Livingstain Case is quoted with approval; the court adding:

"He who claims a departure from this rule must establish his right clearly."

As to the respondent's first proposition, there is no disagreement that, ordinarily, a bank has a right to apply the deposit of an insolvent debtor to the payment of the bank's claim against him, and that one owing an insolvent bank has a right to have his deposit applied as an offset against such debt.

Scott v. Armstrong, 146 U. S. 507, 13 S. Ct. 148, 36 L. Ed. 1062. But it must be shown that the debts are mutual ones and exist between the same parties in the same right. To illustrate: In the present case, when the Columbia bank went into the hands of a receiver, the Barnwell bank had on deposit with it approximately $33,000, and owed it on notes approximately $20,000. These claims were clearly mutual debts between the same parties, and an offset was proper and was made, leaving a balance of the deposit, the sum of $13,104.14, owing the Barnwell bank by the insolvent Columbia bank.

Arguing further, the respondent contends that the general doctrine of legal offset is permissible and applicable in this case, because, as he claims, the $7,000 deposited by the receiver of the Columbia bank in the Barnwell bank before its insolvency is a debt owing him in this official capacity as receiver, and that whatever dividends are declared by him on the...

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