Case ID: sc-eq_8/html/0168-01.html
Source: Caselaw Access Project
Author: {"author": "Johnson, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

John D. Beers, and Others, v. George T. Hearsy, Richard Maynard, and Others.
    The debtor of an insolvent bank is intitled to set off against his debt to the bank such of its bills as were held by him at the time when the bank stopped payment. And where, by mistake, the account of the cashier had been credited with a sum to which he was not intitled, and, after paying the balance which appeared against him on the books, he had parted, at a sacrifice, with bills of the bank, which were in his possession at the time when the bank stopped payment, more than sufficient to have paid the actual balance due by him, including the amount of the erroneous credit; held, that he was intitled to set off, against that amount, other bills of the bank, which he bad subsequently procured, although a receiver had been previously appointed, upon a bill filed by the creditors of the bank : and it made no difference, it seems, that the erroneous credit had been entered by the cashier himself.
    Before De Saussure, Chancellor, at Darlington, February, 1830.
    This cause came up upon exceptions to the commissioner’s report, on a bill filed by the creditors of the Bank of Cheraw against the president, directors, stockholders, and others, to obtain payment,'p,f their' demands out of the assets of the bank, which had stopped payment; to which bill the defendant, Richard Maynard, the cashier of the bank, was made a party, on the allegation that he was a debtor to the bank, and a defaulter to a considerable amount. In February, 1828, a receiver was appointed, and shortly afterwards the defendant, Maynard, delivered to the receiver all the assets of the bank in his hands ; and at the same time he paid the balance which appeared on the books to be due by him to the bank : whereupon his account was balanced in the books. This payment was made in bills of the bank, which were in his hands at the time when the bank stopped payment. At a meeting, on a reference of the accounts to the commissioner, in August, 1829, it appeared, that the defendant had been erroneously credited in his account, with a sum to which he was not intitled; and the error being corrected, he The remained indebted to the bank to the amount of that credit, circumstances were these. A check on New York, drawn by the Bank of Cheraw, had been indorsed by one Lazarus, and the defendant, and transferred to the Tarborough Bank, of North Carolina ; and this check not having been paid when the Bank of Cheraw stopped payment, the áefendant,-supposing that the indorsement of Lazarus and himself was a joint indorsement, and that they were jointly, and equally, liable, credited his own account with $1,200, being half the amount of the check, and at the same time credited the account of Lazarus with the other half. At the meeting in August, 1829, the check was produced by Lazarus, who was in fact the first indorser, and who had in consequence taken it up at the Tar-borough Bank; and he now claimed a credit for the whole amount. This was assented to by the defendant, who admitted that the credit in his account was erroneous, and that he was indebted to the bank for the amount; but he tendered in payment an equal amount of the bills of the bank. This was objected to, on the ground, that the bills now tendered by the defendant, were not in his possession when the bank stopped payment, but had been recently purchased, and at a great discount, for the purpose of making this tender. The fact, of the recent acquisition of the bills tendered, was conceded by the defendant, but he produced evidence to shew, that when the bank stopped payment, he was in possession of bills of the bank, more than sufficient to have discharged the entire balance due by him, including the $1,200, erroneously credited ; and that after he had paid the balance, which appeared against him on the books of the bank, he had disposed of the residue of these bills, at a great sacrifice. The facts in evidence were set forth port of the commissioner, who submitted the matter sion of the Court.
    Branding, for the creditors.
    The bills tendered^eannot b^xeri ceived in payment of the balance, admitted to be due wefériaant. It would be going very far, in any case, to bought up at a discount after a notorious insolvency, in discount against debts due by the purchaser. It mu^kdgadcU£^' cessarily, to a disgraceful and injurious scrambling in all cases of insolvency, and defeat every effort to obtain a fair and just distribution of the insolvent’s effects, through the instrumentality of this Court. But if it were allowed in other cases, it certainly will not be tolerated, where the debts were bought up after the appointment of a receiver. By the appointment of a receiver, the equitable property of the assets is in fact changed. From that time they belong to the receiver, as the agent of the Court, and creditors, whether parties, or not, are intitled to nothing more than their equal dividend; nor can a debtor to the insolvent, by purchasing a creditor’s claim, intitle himself to more than the dividend to be paid upon it.
    The circumstances of the defendant’s case, cannot make it an exception, to what must be regarded as the general rule. If he had bills of the bank in his possession, at the time of the failure, he might have paid his debt with them, or he might have disposed of them, as he pleased. He chose the latter, and must abide the consequences. It is said he was misled by the books of the bank; but he himself made the entry, by which he alleges that he was misled. Admitting that he was without fault, yet all that he can ask is,, that he should be allowed to do now, what he might have done at first, to pay his debt with bills, of which he was the owner, when the bank stopped payment. But he asks more than this. He asks not merely to correct his mistake, but to gain from it a right, which he did not possess before; namely, to pay his debt with bills, purchased since a receiver was appointed, It would be dan. gerous, in the extreme, to comply with such a request.
    Graham, contra.
    
    It is clear, from the evidence, that when the bank stopped payment, the defendant was in possession of its bills, to an amount more than sufficient, to discharge the whole of the debt due by him ; and it is conceded, that he was intitled to have paid his debt with these bills. This being the case, it is obviously a matter of indifference, whether his debt is paid with these bills, or bills subsequently acquired ; inasmuch, as the surplus bills, after the payment of the debt, no matter when acquired, could only be used by the defendant, to obtain' a dividend of the estate, in common with the other creditors. The whole argument, therefore, founded on the injury to creditors, in permitting subsequently purchased bills to be set up in discount, falls to the grouud. So, too, it is a mistake, to say that the defendant claims a new privilege, in consequence of the error in the account. He asks no new privilege, but merely to be protected against the consequences of a mistake, which has worked, and can work, no injury to the creditors; and he claims to be permitted to do now, only that, which it would never have been questioned, but that he might have done, if he had not been led, by the mistake in the account, to dispose of the bills originally in his possession. It is true, that the mistake originated with the defendant himself; but that is immaterial. It is of no consequence, who made the mistake, as it has injured no one. It is sufficient, that it is a mistake, and not fraud, which is,not surmised ; and that being the case, the defendant is intitledto be relieved.
    De Satjssure, Ch. The question in dispute involves many circumstances, which require a minute examination, in order to come to a sound conclusion. The facts in evidence, are very fully set forth in the commissioner’s report -; and after a careful consideration of them, I am of opinion, that the defendant, Maynard, ought not to be charged with the balancé claimed of him, by the creditors of the bank. That was extinguished by the entry,' crediting him with half the amount, of the check indorsed by himself, and Lazarus. At that time, he had bills of the Bank of Cheraw in his hands, of his own property, which he could have applied to the payment of the balance due by him, if that had not been already effected, by his being credited, as stated. The entry of that credit, however, was an error, as Lazarus was his indorser, and therefore liable to him. But the correction of that error, ought not to prejudice the defendant. He is intitled to be placed in the same situation, that he would have been in, if it had not been committed, when it is conceded, that he was at liberty to have paid off the balance he owed to the bank, with its bills, which he had in his hands.
    This case is distinct from the general one, of debtors of the bank seeking to pay their debts, by buying up its notes after failure. I decide nothing as to that. My decision rests upon the special circumstances of this case. In my view, if it be correct, the defendant, Maynard, has settled his account, as cashier of the Bank of Cheraw ; and having delivered over to the receiver, appointed by the Court, all the funds of the bank, in his hands, it is ordered, and decreed, that the receiver deliver up to him his bond, given for the faithful performance of his duty, as cashier, to be cancelled.
    From this decree, the complainants appealed, on the grounds urged in the Circuit Court.
   Johnson, J.

This Court concurs with the Chancellor, in the view which he has taken of this case ; and the appeal is therefore dismissed.

O’Neali., J., concurred. Harper, J., absent from indisposition.

Decree affirmed.