Opinion
12516
November 7, 1928.
Before SHIPP, J., Florence, July, 1927. Modified and affirmed.
Suit by the Bank of Timmonsville against the Peoples Bank and others. From an order of reference, defendants appeal.
The complaint, answer, order of reference, and exceptions are as follows:
COMPLAINTPlaintiff herein, complaining, alleges:
1. That at all the times herein mentioned Bank of Timmonsville, plaintiff herein, was, and is now, a corporation duly created and organized under the laws of the State of South Carolina.
2. That at all the times herein mentioned the defendant, Peoples Bank, was, and is now, a corporation duly created and organized under the laws of the State of South Carolina, having its principal place of business at Timmonsville, S.C., and that the defendants, J. Ed Anderson, J.D. McLendon, J.T. Anderson, R.B. Cannon, J.W. Reddick, J.B. Sansbury, and M.Q. Anderson were, and are now, the directors thereof.
3. That heretofore, about the 27th day of October, 1924, plaintiff entered into an agreement with the defendant, Peoples Bank, whereby plaintiff agreed to assume the full deposit liability of the Peoples Bank, which at that time amounted to $89,522.36, and agreed to pay to the various depositors of Peoples Bank the full amount due them upon demand in the due course of business and in the usual manner, and whereby Peoples Bank, in consideration of the agreement of Bank of Timmonsville to assume its deposit liability, agreed to transfer, assign and set over to Bank of Timmonsville all of its assets of every nature and kind, both real and personal, including all notes and receivables then in possession of Peoples Bank and all notes, equities, and receivables then hypothecated or pledged with the Murchison National Bank of Wilmington, N.C., and the War Finance Board, to secure the indebtedness of Peoples Bank to those institutions; all furniture, fixtures and supplies, and all other property of every nature and kind then owned by Peoples Bank or to which it was entitled.
4. That in order to secure the amount for which it was liable to its depositors, which amount Bank of Timmonsville assumed and paid, the said Peoples bank executed and delivered to Bank of Timmonsville its five (5) promissory notes in writing and thereby promised to pay to Bank of Timmonsville twelve (12) months from date Fifty Thousand ($50,000.00) Dollars, with interest from date and after maturity at the rate of seven per cent. per annum, payable annually, and whereby it further promised to pay, in case of suit, ten per cent. of the amount due as attorney's fees, and at the same time executed and delivered to Bank of Timmonsville its four (4) certain promissory notes in writing, bearing date October 29, 1924, and thereby promised to pay to Bank of Timmonsville, six months after date, Thirty-nine Thousand, Five Hundred Twenty-two and 36/100 ($39,522.36) Dollars, with interest from date and after maturity at the rate of seven per cent. per annum, payable annually, and whereby it further promised to pay, in case of suit on said notes, ten per cent. of the amount due as attorney's fees.
5. That it was understood and agreed by all the parties to the written agreement aforesaid, and to the notes aforesaid that all of the assets, receivables, collaterals and equities of Peoples Bank therein described should be held by a liquidating officer as security for the payment of the nine (9) notes above referred to, and that all sums realized from said collateral should be applied, first, to the discharge and payment in full of the five (5) notes, each representing an indebtedness of ten thousand ($10,000.00) dollars of principal maturing one year from their date before any portion of the sums realized from such collateral should be applied upon the four (4) notes in which the defendants, other than the Peoples Bank, joined.
6. That under the provisions of the agreement entered into between Bank of Timmonsville and Peoples Bank, the Board of Directors of Peoples Bank selected the defendant, R.B. Cannon, as liquidating officer, and that, pursuant to that agreement, all of the property of Peoples Bank was transferred, set over and assigned to and placed in charge of and under the control of the said R.B. Cannon as liquidating officer, to be held by him as pledgee for the benefit of Bank of Timmonsville, the proceeds of collections and from sales to be applied in payment of the indebtedness, to secure which the transfer was made, and that the said R. B. Cannon has continued to the present time to act as such liquidating officer and is now in charge and control of all the property and assets not heretofore realized on by him.
7. That under the provisions of the aforesaid agreement all of the assets of Peoples Bank were to be liquidated and collected as rapidly as possible in an orderly manner by the liquidating officer, who was to open a deposit account with Bank of Timmonsville, and to deposit therein all funds realized by him from the property intrusted to his care, and to make weekly reports to Bank of Timmonsville of the progress made by him in the performance of his duties.
8. That it was understood and agreed by all parties in interest at the time of the execution of the aforesaid agreement, which was duly authorized, ratified and approved by the Board of Directors and stockholders of Peoples Bank in duly constituted meetings, that stockholders of Peoples Bank should remain liable under the statutory provision in reference to the liability of holders of stock in banks, for an amount equal to the par value of their stock, in addition to the amount paid therefor, and that, in the event that it should become necessary for the directors of the Peoples Bank to pay any part or all of the deposit liability of the Peoples Bank to Bank of Timmonsville, then, and in that event, said directors should have recourse against the stockholders for their pro rata part of the indebtedness to the Bank of Timmonsville so paid by the directors.
9. That in the agreement between Peoples Bank and Bank of Timmonsville it was stipulated that the directors of Peoples Bank should each, individually, indemnify Bank of Timmonsville against any possible loss to the extent of $39,522.36 of the amount paid by Bank of Timmonsville to depositors of Peoples Bank; and further, that all the proceeds of collections from collateral and sales of all property hypothecated by Peoples Bank with the said liquidating officer, should be applied to the discharge in full of that part of the indebtedness, to wit, the sum of $50,000.00, as to which the directors did not agree to furnish indemnity before any of such proceeds should be applied upon that portion of the indebtedness for which indemnity was furnished by the directors, and that as evidence of this agreement and of their acquiescence and approval thereof, the defendants, J. Ed Anderson, J.D. McLendon, J.T. Anderson, R.B. Cannon, J.W. Reddick, J.B. Sansbury, and M.Q. Anderson, constituting the Board of Directors of Peoples Bank, signed the above-mentioned agreement, and in order to carry into effect their indemnity agreement, endorsed the four (4) notes hereinabove mentioned, aggregating $39,522.36, and thereby guaranteed payment of that sum, with interest from October 29, 1924, at 7 per cent. per annum, besides attorney's fees as provided for therein.
10. That, pursuant to the agreement referred to above, Bank of Timmonsville, on or about the 27th day of October, 1924, assumed all of the liability of Peoples Bank to its depositors, and has actually paid, in the due course of its banking business, the sum of eighty-nine thousand, five hundred twenty-two and 36/100 ($89,522.36) dollars to the various depositors of Peoples Bank, but that, although a period of considerably more than two years has elapsed since the making of the agreement herein referred to, and since it assumed the liability of Peoples Bank to its depositors, the liquidating officer appointed by Peoples Bank has failed to dispose of or to realize upon any considerable part of the property and assets placed under his control for that purpose; and, notwithstanding the repeated demands of Bank of Timmonsville, he still fails to dispose of the real estate or to collect the bills and accounts receivable, the total amount paid over by him on both principal and interest upon the indebtedness of Peoples Bank to Bank of Timmonsville being not in excess of the sum of eighteen thousand, ten and 46/100 ($18,010.46) dollars.
11. That a considerable number of the notes and accounts receivable transferred to the liquidating officer as security for the payment to the Bank of Timmonsville of the notes above mentioned have become worthless and uncollectible; that one member of the Board of Directors, who became responsible for the payment of thirty-nine thousand, five hundred twenty-two and 36/100 ($39.522.36) dollars of the indebtedness of Peoples Bank, has been adjudged a bankrupt, and is no longer responsible on account of his guarantee of the four notes guaranteed by directors; that another director has disposed of a considerable part of his property, and that the possibility of realizing on collateral or upon the endorsed notes is rapidly becoming more and more remote.
12. That payments have been made by the liquidating officer from the sums realized by the liquidating officer from the property placed under his control as follows:
November 23, 1925 .............................. $ 4,800.00 December 21, 1925 .............................. 1,500.00 December 29, 1925 .............................. 1,616.20 March 30, 1926 ................................. 1,500.00 September 3, 1926 .............................. 1,500.00 September 21, 1926 ............................. 4,500.00 October 11, 1926 ............................... 1,000.00 December 31, 1926 .............................. 1,594.26 March 16, 1927 ................................. 500.00 __________ $18,510.46 — and that while under the agreement between Peoples Bank and Bank of Timmonsville all amounts so paid over to Bank of Timmonsville by the liquidating officer should have been credited on the five (5) notes of $10,000.00 each, maturing twelve months from date, a considerable sum was credited as interest on the four (4) notes aggregating $39,522.36, but that the last-mentioned credits should be canceled and the amount so credited should be applied towards the discharge of the indebtedness represented by the five (5) notes aggregating $50,000.00 and maturing twelve months from date; and that there is now due plaintiff by Peoples Bank the sum of $39,790.57, with interest on $39,741.45 thereof at 7 per cent. per annum, payable annually, from March 16, 1927, and that there is due by Peoples Bank and the defendants, J. Ed Anderson, J.D. McLendon, J. T. Anderson, R.B. Cannon, J.W. Reddick, J.B. Sansbury, and M.Q. Anderson, the additional sum of $39,522.36, with interest thereon from October 29, 1924, at 7 per cent. per annum, payable annually, besides 10 per cent. of both amounts as attorney's fees for collection.13. That plaintiff is now the owner and holder of all of the above-mentioned notes and is in equity entitled to a lien in the nature of an equitable mortgage upon all of the property heretofore transferred, set over and assigned to the defendant, R.B. Cannon, as liquidating officer, and is entitled to the foreclosure of its lien or equitable mortgage thereon and to a sale thereof on the order of this Court, the proceeds of such sale to be applied first, in payment of the balance due on the indebtedness of $50,000.00, as to which the defendants, other than Peoples Bank, have furnished no indemnity.
14. That there is a provision in the agreement entered into between Bank of Timmonsville and Peoples Bank that the directors who individually furnished indemnity to Bank of Timmonsville, shall not be called upon for payment of the notes endorsed by them until all assets of People Bank have been exhausted, and that all such collateral shall be deemed exhausted when same has been reduced to judgment and the liquidating officer has received settlement therefor, by execution or otherwise, or has received a nulla bona return from the Sheriff of the County in which the maker of such collateral is located, but that there is in said agreement no provision for the disposition by the liquidating officer of the real estate owned by Peoples Bank upon the date of said agreement or thereafter acquired by the liquidating officer in his efforts to realize on the securities transferred to him.
15. That a large proportion in value of the lands owned by Peoples Bank on the date of the agreement above mentioned remains undisposed of, and that the liquidating officer has acquired by foreclosure or otherwise considerable additional lands and that a large number of the notes and bills receivable now in the possession of the liquidating officer are totally worthless, and that others which have been reduced to judgment are likewise worthless, and that the expense of obtaining nulla bona returns would impose on plaintiff an unnecessary loss, with no corresponding advantage, and that plaintiff is now entitled to an order of this Court directing the liquidating officer to make a complete accounting of his actings and doings as such liquidating officer and directing the sales of all of the property and effects transferred, set over and assigned to the liquidating officer and not yet disposed of, and to judgment against the defendant, Peoples Bank, for the full amount of the indebtedness not yet paid, and against the other defendants in the amount as to which they have agreed to furnish indemnity which has not yet been paid.
Wherefore, plaintiff prays judgment against the defendant, Peoples Bank, in the sum of thirty-nine thousand, seven hundred ninety and 57/100 ($39,790.57) dollars, with interest on thirty-nine thousand, seven hundred forty-one and 45/100 ($39,741.45) dollars thereon, at 7 per cent. per annum, payable annually, from March 15, 1927; and against defendants, Peoples Bank, J. Ed Anderson, J.D. McLendon, J.T. Anderson, R.B. Cannon, J.W. Reddick, J.B. Sansbury, and M.Q. Anderson, in the sum of thirty-nine thousand, five hundred twenty-two and 35/100 ($39,522.35) dollars, with interest thereon from the 29th day of October, 1924, at 7 per cent. per annum, payable annually, together with 10 per cent. of said amounts as attorney's fees; that the defendant, R.B. Cannon, may be required to make a report of his actings and doings as liquidating officer of Peoples Bank and to make a complete accounting for all amounts which have been received by him as liquidating officer, and that an order may be made directing the sale of all the property, assets, and effects of Peoples Bank not heretofore disposed of by the liquidating officer; that the proceeds of sale may be applied to the payment of the judgments herein prayed for, and for such other and further relief as may be just.
ANSWERThe defendants J. Ed Anderson, J.D. McLendon, J.T. Anderson, R.B. Cannon, J.B. Sansbury and M.Q. Anderson, answering the complaint of the plaintiff herein, allege:
FOR A FIRST DEFENSE1. That these defendants admit the truth of the allegations contained in Paragraph 1 of the complaint.
2. That these defendants admit so much of the allegations of Paragraph 2 of the complaint as alleges the previous corporate existence of the Peoples Bank, and that these defendants, together with J.W. Reddick, were and at one time did constitute the Board of Directors of said Bank, but they deny the truth of each and every other allegation in said paragraph contained.
3. That these defendants admit so much of the allegations of Paragraph 3 of the complaint as alleges that on or about the 27th day of October, 1924, plaintiff entered into an agreement with the Peoples Bank of Timmonsville, but they refer to the said contract for its terms and provisions, and in connection therewith they deny the truth of the remaining allegation in the said paragraph contained.
4. That these defendants admit the truth of so much of the allegations of Paragraph 4 of the complaint as alleges the execution of the notes therein referred to, but they further allege that said notes constitute, were and are part and parcel of the said agreement or contract referred to in Paragraph 3 of the complaint, and the rights of the parties, plaintiff and defendant, with respect to said notes, are covered by the terms, conditions and provisions of said agreement, to which reference is hereby directed, and in connection therewith these defendants deny the truth of each and every other allegation in the said paragraph contained.
5. That these defendants, answering Paragraphs 5, 6, 7, 8 and 9 of the complaint, allege that the exact terms, conditions and provisions of the said contract are not set out therein, and to which contract reference is hereby directed, and in connection therewith these defendants deny the truth of each and every other allegation in the said paragraphs contained.
6. Answering Paragraph 10 of the complaint, these defendants allege that under the terms of the agreement aforesaid to which reference is hereby directed, the liquidating agent was the agent of the plaintiff, and that his negligence, if any, the existence of which is denied, was and is the negligence, if any, of the plaintiff, and in connection therewith they deny the truth of each and every allegation in the said paragraph contained.
7. Answering Paragraph 11 of the complaint, these defendants allege that they admit the truth of so much thereof as alleges that one member of the former board of directors of the Peoples Bank has been adjudged a bankrupt, but they deny the truth of each and every other allegation in the said paragraph contained.
8. Answering Paragraph 12 of the complaint, these defendants deny the truth of each and every allegation therein contained.
9. Answering Paragraph 13 of the complaint, these defendants deny the truth of each and every allegation therein contained.
10. Answering Paragraph 14 of the complaint, these defendants allege that the provisions of the said agreement therein referred to are not set out accurately or in full and they refer to said agreement for the exact terms, conditions and provisions thereof and deny the truth of each and every allegation in said paragraph contained.
11. The defendants above named, answering Paragraph 15 of the complaint, allege that they deny the truth of each and every allegation in the said paragraph contained.
The defendants above named, further answering the complaint of the plaintiff herein, and for a further defense thereto, allege:
FOR A SECOND DEFENSE1. That by the terms of the contract referred to in the complaint, all of the assets formerly owned by the Peoples Bank were duly, fully, wholly and unqualifiedly assigned, transferred, delivered and pledged by it to the Bank of Timmonsville as security and a primary source of repayment for its expenditure under and in connection with the assumption by it of the deposit liability of the Peoples Bank, and as a further security the answering defendants, together with the defendant Reddick, endorsed certain notes given by the Peoples Bank to the plaintiff as a last, final and ultimate security against eventual loss, but that said endorsement was made under and in accordance with the terms, provisions and conditions fully set forth in said agreement.
2. That these defendants, on their part, have fully and completely complied with all of the requirements, provisions, conditions and stipulations of said contract in so far as the same relates to them as endorsers but that the plaintiff has not exhausted the collateral nor has the Peoples Bank surrendered its charter, nor has the five years allowed by the terms of said contract expired, and therefore these defendants allege that the action of the plaintiff is premature and should be abated and suspended during the time and for the period and until the accomplishment of the purposes fully set forth in said contract.
The defendants above named, further answering the complaint of the plaintiff herein and for a further defense thereto allege:
FOR A THIRD DEFENSE1. That the notes referred to in the complaint, endorsed and unendorsed, from part and parcel of a contract between the plaintiff and the Peoples Bank, to which these defendants were parties, and should be read, understood and construed as being a part and parcel thereof.
2. That the said notes represented the maximum liability of the Peoples Bank to the plaintiff, which in turn represented the maximum liability of the plaintiff under the terms of said contract and by the terms thereof it was distinctly and mutually understood and agreed and fully set forth therein that the plaintiff would procure its reimbursement with interest out of the assets of the Peoples Bank, which, by the terms of said contract and supplemental conveyances and assignments, were then and there transferred, assigned, and delivered to the plaintiff for administration and collection, and that while the collections should be made as rapidly as possible they should be made in an orderly manner so as to prevent injury or jeopardy to the endorsing defendants as well as to all parties in interest, and by the terms of which contract it was further provided in effect that should the assigned assets prove inadequate then the plaintiff might have recourse to the endorsers but not until the collateral so assigned to it had been exhausted either by payment, judgment, execution thereon and nulla bona return, it being specifically provided in said contract that the endorsement of these defendants, with the defendant Reddick, was given solely for the purpose of ultimate indemnity against loss on the part of the plaintiff.
3. It is further provided by the terms of said contract that so long as the assets were in process of liquidation the Peoples Bank should retain its charter but for no greater period than five years from the date of the contract, thereby by placing a limitation of time for five years within which for the assets of the Peoples Bank to be collected and applied to the payment of said indebtedness, which could be shortened or reduced only through the final collection of all of the bills receivable or the legal ascertainment of their uncollectibleness through the return of the nulla bona execution, and in reliance upon which construction these defendants endorsed the notes, which otherwise they would not have done, and they now allege that the premature action of the plaintiff in bringing this suit has operated to decrease the value of said assets to the injury and damage of these endorsers, the answering defendants herein, and they therefore further allege that by reason of the premature and unwarranted action on the part of the plaintiff these defendants are liable in no sum whatsoever to the plaintiff because of the endorsements as aforesaid.
The defendants above named, further answering the complaint of the plaintiff herein and for a further defense thereto, allege:
FOR A FOURTH DEFENSE1. That the notes set up in the complaint herein are part and parcel and should be construed together with the contract therein referred to and to which reference is hereby directed for its exact terms, conditions and provisions.
2. That by the terms of said contract all of the assets of the Peoples Bank were transferred to the Bank of Timmonsville as collateral to said notes, out of the collection of which the method of distribution was provided as follows:
1st. To the amount due the Murchison National Bank.
2nd. To the amount due the War Finance Corporation,
3rd. To the unendorsed notes, and
4th. To the endorsed notes.
3. That the plaintiff, through its agent, the defendant R. B. Cannon, has paid the amount due the said Murchison National Bank, the War Finance Corporation, and made certain payments aggregating the sum of eighteen thousand ten and 46/100 ($18,010.46) dollars to the plaintiff.
4. That by the terms of said contract it was further provided that the collections should be made as rapidly as possible but in an orderly manner, bearing in mind the interest of all parties concerned.
5. That the said assets have been transferred to the plaintiff with the method of collection defined and with the method of distribution likewise defined, and the contract further provided that the Peoples Bank should nominate, subject to the approval of the plaintiff, an agent to administer and collect the assets, which agent was required to execute bond to the plaintiff, to keep his funds on deposit with the plaintiff, make weekly reports of his official conduct to the plaintiff, and before he could employ counsel such counsel would have to be approved by the plaintiff. These defendants therefore allege that the liquidating agent was and is the agent of the plaintiff and being the agent of the plaintiff his conduct and actions are the conduct and actions of the plaintiff and it is therefore estopped to question its own progress in the administration and liquidation of the assets assigned to it so as to accelerate and defeat the provisions of said contract, to the prejudice, injury and damage of the defendants.
The defendants above named, further answering the complaint of the plaintiff herein, and for a further defense thereto, allege:
FOR A FIFTH DEFENSE1. That the notes set up in the complaint are part and parcel of the written contract or agreement in said complaint referred to and are to be construed in connection therewith as a part thereof and to which contract reference is craved as often as may be necessary.
2. That when the said contract was entered into between the two banks and these defendants, with the defendant Reddick, and when these defendants, with the defendant Reddick, endorsed the notes referred to in the complaint it was well known to all the parties in interest that conditions existing in the community in which both banks did business and where the debtors and creditors of both banks resided, as was well known to all parties in interest that it would require a long period of time, estimated and limited in the contract at five years, to effect the full, complete and orderly disposition, collection and liquidation of the assets assigned by the Peoples Bank to the plaintiff and it was contemplated, as appears from the provisions of said contract, that within such period and as rapidly as possible, having a due regard for the interest of all parties concerned, that such liquidation should be made, and that at the time of the commencement of this suit the conditions aforesaid still obtained without appreciable improvement, if any, and that the liquidation had made substantial and satisfactory progress under such conditions, but, without cause or excuse, in breach of the terms, conditions and provisions of said contract, the plaintiff has precipitated the entire matter into litigation, destroying the efficiency of the liquidation, demoralizing debtors and creditors alike by threat to sell the assets for the collection thereof, all in violation of the terms of said agreement, to the irreparable and incalculable loss, injury and damage to these defendants.
3. That such precipitate, premature and unwarranted conduct on the part of the plaintiff in the bringing of this suit against these defendants has gained notoriety and publicity in the community in which they live, where the debtors to the Peoples Bank reside and has resulted in not only a serious personal and injurious detriment to these defendants but has likewise resulted in exciting the debtors to the Peoples Bank, destroying the value of promised extensions and indulgences as made by the liquidating agent as an inducement for payment by them to him in installments which were made in the orderly course of liquidation as provided for by the terms of said contract and has greatly reduced the value of said assets, notwithstanding which these defendants further and finally allege that the value of said assets even now are such that with present crop and market prospects and with proper handling in accordance with the provisions and contemplations of said contract they should produce, with the stockholders' liability, an amount sufficient to fully and completely pay the liability of the Peoples Bank to the plaintiff.
Wherefore these defendants pray judgment that the complaint herein may be dismissed at the cost and expense of the plaintiff and that the defendants be forever discharged and released from liability as endorsers on said note because of the breach of contract on the part of the plaintiff in the commencement of this suit, with the resulting prejudice, loss, damage and injury to the value of assets and to these defendants, personally, individually and collectively, and
Finally, for such other and further relief as may be just.
ORDER OF REFERENCEThis matter came on for hearing upon the motion of plaintiff for an order referring the case to the Master for Florence County to take and report the testimony, notice of which motion was duly made. Counsel for plaintiff and defendants were heard and the matter taken under consideration.
A careful review of the complaint and answer discloses that this is an equity case, and, since the reference desired is only for the purpose of taking and reporting testimony, it follows that it is in the discretion of the Court to grant the order. Peoples Bank v. Helms et al., 140 S.C. 107, 138 S.E., 622, decision filed June 20, 1927; Westbrook's opinions of June 25, 1927, and cases therein cited.
The attorney for defendants takes the position that the cause should not be referred because the suit has been prematurely brought. This issue cannot be determined upon motion. It is necessary to its proper determination that the testimony be taken and that issue, with other issues made, can be determined upon the trial of the case.
I have concluded that it is proper that the case should be referred.
It is therefore ordered, That this case be, and it is hereby, referred to H.A. Brunson, Esquire, Master for Florence County, to take and report the testimony with all convenient speed.
EXCEPTIONS1. It is respectfully submitted that his Honor erred in refusing the motion to require the Bank of Timmonsville to proceed to enforce the liability of the stockholders of the Peoples Bank because it had by payment of said deposits become subrogated to the rights of the said depositors and under the terms of the contract was the rightful and proper person to maintain such action.
2. It is respectfully submitted that his Honor erred in concluding that the Court was without authority to grant the motion when he should have held that the Court not only had the authority and jurisdiction to so order, but that it was to the interest of the Bank of Timmonsville as well as the endorsers on the notes of indemnity to so require it.
3. It is respectfully submitted that his Honor erred in concluding that it would not be equitable to require this procedure, whereas he should have held that under the plain intendment of said contract it was the right and duty of the Bank of Timmonsville to exhaust every asset of the Peoples Bank in the manner provided by the contract before having recourse to the endorsers on the notes of indemnity.
4. It is respectfully submitted that his Honor erred in concluding that the defendants were entitled to no equitable treatment because of their denial of liability because there is no known rule or maxim of equity which denies equitable, auxiliary and ancillary relief to the main proceeding because of a denial of ultimate liability.
5. It is respectfully submitted that his Honor erred in construing the complaint and answer to make this a case in equity, whereas he should have held that this was a straight suit against endorsers on notes for a money demand, the equitable features of the complaint and answer being subsidiary, auxiliary and secondary to the main purpose and object of the action, and these ancillary contents should not have been permitted to give color and character to the whole action.
6. It is respectfully submitted that his Honor erred in holding that it was necessary to refer the case in order to take testimony to determine whether or not suit had been prematurely brought, whereas he should have held that the complaint had for its primary object the recovery of a money judgment against the defendants as endorsers upon notes alleged by the defendants to have been extended from the date of execution for a period of five years by contemporaneous instrument of writing and damages resulting from the premature and improvidential bringing of the suit before the expiration of such extended period, not only affecting but determining the fact of ultimate liability and the extent thereof, if any, all of which presented questions of fact for decision by the jury as guaranteed by the Constitution of this State.
Mr. Philip H. Arrowsmith, for appellants.
Messrs. Willcox Hardee, for respondent, cite: Equity case: 140 S.C. 107, 1 Sheets Fed. Eq. Proc., Secs. 64, 52, 3 Id., Sec. 2812, 10 R.C.L., 265, 26 R.C.L., 1387, 2 Hill Ch., 167, 47 S.C. 453, 19 R.C.L., 273, 74 A.S.R., 380, 141 S.E., 278, 93 S.C. 487.
November 7, 1928. The opinion of the Court was delivered by
The complaint in this case contains four alleged causes of action, not separately stated as the Code requires (no objection appears to have been entered thereto, and it has been thereby waived):
1. An accounting by the liquidating agent;
2. The enforcement of certain equities in the assets of the Peoples Bank placed in the hands of the liquidating agent:
3. The obligation of the Peoples Bank upon the nine notes aggregating the amount of the deposit liability assumed by the Bank of Timmonsville;
4. The obligation of the individual defendants, directors, upon the four six-months notes aggregating $39,522.35, indorsed by them.
It does not appear that the defendant, Peoples Bank, has answered the complaint. If not, the plaintiff is entitled to judgment by default against it.
The first and second alleged causes of action are equitable. The matter of referring the issues raised in connection with them, for the purpose of having the testimony taken and reported, was within the discretion of the trial Judge, and we think properly exercised.
The fourth alleged cause of action is upon its face legal, but by reason of the terms of the contract: "Such endorsers shall not be called upon for payment, however, of the respective notes thus endorsed by them until all assets of the liquidating institution have been exhausted, and all such collateral shall be deemed exhausted when same has been reduced to judgment and the liquidating officer has received settlement therefor by execution or otherwise, or has received a nulla bona return thereupon from the sheriff of the County in which the maker of such collateral is located."
And the defense interposed by the defendant directors under this clause, the liability of the directors upon their indorsement of the four six-months notes, is so directly connected with the final liquidation of the bank demanded by the plaintiff as to make the directors proper parties to such proceedings, so as to bind them thereby; the proper course is to allow those proceedings to advance under the order of reference. If upon the hearing of the case, upon the testimony reported, after deciding the equitable issues presented, the Court shall be satisfied that the defendants have, in addition to their equitable defenses, legal defenses upon the issues of which the defendants would be entitled to a jury trial, he may direct that course to be taken.
The judgment of this Court is that the order of reference appealed from be affirmed with the modification herein indicated, and that the case be remanded.
MR. CHIEF JUSTICE WATTS and MESSRS. JUSTICES BLEASE, STABLER and CARTER concur.