Meriden National Bank v. Turner

Supreme Court of North Carolina

Meriden National Bank v. Turner

2 S.E.2d 848, 215 N.C. 665, 1939 N.C. LEXIS 336

DecidedMay 24, 1939

StatusPublished

This text of 2 S.E.2d 848 (Meriden National Bank v. Turner) is published on Counsel Stack Legal Research, covering Supreme Court of North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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Meriden National Bank v. Turner, 2 S.E.2d 848, 215 N.C. 665, 1939 N.C. LEXIS 336 (N.C. 1939).

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Opinion

*666 DeviN, J.

Appellants’ principal assignment of error relates to the judge’s charge to the jury on the second issue with respect to the burden of proof. The trial judge charged the jury upon that issue that the burden of proof was upon the defendants to satisfy the jury by the greater weight of the testimony that the plaintiff bank did not exercise reasonable diligence and good faith in the disposition of the described property. In this we think there was error entitling the defendants to a new trial.

The plaintiff having admitted the receipt of the property as collateral security for the defendants’ notes, it occupied a fiduciary relationship in connection therewith, and when it was testified by the president of plaintiff bank that all of this property, real and personal, had been disposed of at private sale for much less than its face value and for less than defendants’ notes, the duty was imposed upon the plaintiff to show that it acted with reasonable diligence and good faith in the disposition of said property and in the application of the proceeds to the discharge of defendants’ notes. Cook v. Guirkin, 119 N. C., 13, 25 S. E., 715; 49 C. J., 992.

Ordinarily, when a defendant sets up an affirmative defense or pleads payment in whole or in part, the onus of establishing such affirmative defense rests upon the defendant. Wilson v. Casualty Co., 210 N. C., 585, 188 S. E., 102; Davis v. Dockery, 209 N. C., 272, 183 S. E., 396. But where a debtor deposits property with a creditor as security for a debt, to be applied to the discharge of the obligation, and subsequently that property is disposed of by the creditor at private sale and at a substantial loss, and these facts are admitted or established by proof in a suit by the creditor upon the debt, the law casts upon the pledgee the burden of showing reasonable diligence and good faith in the disposition of the property and the proper application of the proceeds. The reasonableness of this rule finds additional support where the essential facts are within the peculiar knowledge of the creditor. Cook v. Guirkin, supra; Meredith v. R. R., 137 N. C., 478, 50 S. E., 1; Walker v. Parker, 169 N. C., 150, 85 S. E., 306; Hunt v. Dure, 189 N. C., 482 (490), 129 S. E., 593.

In Bank v. Knox, 187 N. C., 565, 122 S. E., 304, where a draft was placed in the hands of a bank by a debtor, the proceeds of the draft to be applied as a credit on the debtor’s note to the bank, it was said: “The burden was on the bank to show due diligence and care, that is such diligence and care as a man of ordinary prudence would exercise in the same or similar circumstances in collecting and enforcing the aforesaid draft.”

In Bright v. Hood, Commissioner of Banks, 214 N. C., 410, it was held that where bonds were placed with a bank as a special deposit, a *667 duty ivas imposed upon the bank with respect thereto, and where there was failure to return the bonds the burden was on the bank to account for them. This court said: “The court below charged that under the circumstances mentioned the burden of proof as to this phase of the case rested on the defendant in this action. We can see no error in this.” 119 A. L. R., 820.

As the case goes back for a new trial, we deem it unnecessary to discuss other matters debated in the briefs and on the argument.

New trial.

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*666 DeviN, J.

Appellants’ principal assignment of error relates to the judge’s charge to the jury on the second issue with respect to the burden of proof. The trial judge charged the jury upon that issue that the burden of proof was upon the defendants to satisfy the jury by the greater weight of the testimony that the plaintiff bank did not exercise reasonable diligence and good faith in the disposition of the described property. In this we think there was error entitling the defendants to a new trial.

The plaintiff having admitted the receipt of the property as collateral security for the defendants’ notes, it occupied a fiduciary relationship in connection therewith, and when it was testified by the president of plaintiff bank that all of this property, real and personal, had been disposed of at private sale for much less than its face value and for less than defendants’ notes, the duty was imposed upon the plaintiff to show that it acted with reasonable diligence and good faith in the disposition of said property and in the application of the proceeds to the discharge of defendants’ notes. Cook v. Guirkin, 119 N. C., 13, 25 S. E., 715; 49 C. J., 992.

Ordinarily, when a defendant sets up an affirmative defense or pleads payment in whole or in part, the onus of establishing such affirmative defense rests upon the defendant. Wilson v. Casualty Co., 210 N. C., 585, 188 S. E., 102; Davis v. Dockery, 209 N. C., 272, 183 S. E., 396. But where a debtor deposits property with a creditor as security for a debt, to be applied to the discharge of the obligation, and subsequently that property is disposed of by the creditor at private sale and at a substantial loss, and these facts are admitted or established by proof in a suit by the creditor upon the debt, the law casts upon the pledgee the burden of showing reasonable diligence and good faith in the disposition of the property and the proper application of the proceeds. The reasonableness of this rule finds additional support where the essential facts are within the peculiar knowledge of the creditor. Cook v. Guirkin, supra; Meredith v. R. R., 137 N. C., 478, 50 S. E., 1; Walker v. Parker, 169 N. C., 150, 85 S. E., 306; Hunt v. Dure, 189 N. C., 482 (490), 129 S. E., 593.

In Bank v. Knox, 187 N. C., 565, 122 S. E., 304, where a draft was placed in the hands of a bank by a debtor, the proceeds of the draft to be applied as a credit on the debtor’s note to the bank, it was said: “The burden was on the bank to show due diligence and care, that is such diligence and care as a man of ordinary prudence would exercise in the same or similar circumstances in collecting and enforcing the aforesaid draft.”

In Bright v. Hood, Commissioner of Banks, 214 N. C., 410, it was held that where bonds were placed with a bank as a special deposit, a *667 duty ivas imposed upon the bank with respect thereto, and where there was failure to return the bonds the burden was on the bank to account for them. This court said: “The court below charged that under the circumstances mentioned the burden of proof as to this phase of the case rested on the defendant in this action. We can see no error in this.” 119 A. L. R., 820.

As the case goes back for a new trial, we deem it unnecessary to discuss other matters debated in the briefs and on the argument.

New trial.

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2 S.E.2d 848, 215 N.C. 665, 1939 N.C. LEXIS 336, Counsel Stack Legal Research, https://law.counselstack.com/opinion/meriden-national-bank-v-turner-nc-1939.

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