Bluff Springs Apartments, LTD. et al. v. Peoples Bank of the South et al.

R. L. Ayers operates several apartment complexes, some individually and some in his capacity as the general partner of the limited partnerships, Bluff Springs Apartments, Ltd., and Village Apartment, Ltd. As a consequence of these interests, he maintained several bank accounts with Peoples Bank of the South. This litigation focuses on seven of those accounts. Ayers has admitted – and in fact has pleaded guilty – to defrauding Peoples and two other local banks by “kiting” checks. It is undisputed that Peoples sustained substantial losses when the other banks discovered the scheme and dishonored checks, leaving Peoples holding several hundred thousand dollars worth of bad checks; however, the precise amount of the loss is in dispute. In August 2003, Peoples froze the accounts that had been opened by Ayers, but, with one exception, waited until September 29, 2006, to offset the monies in those accounts against its losses. Ayers, Bluff Springs and Village (collectively “the Plaintiffs”) filed this action asking for a declaration that Peoples wrongfully converted the funds in the seven accounts and violated the contracts under which the funds were deposited. The Plaintiffs also sought punitive damages. Peoples coupled its answer with a counterclaim. In its counterclaim, Peoples alleged that, after giving the Plaintiffs all credits to which they were due, it was left holding $429,300 in bad checks; it demanded a judgment for that sum. After a bench trial, the court held that Peoples only had a right of setoff against two accounts owned by Ayers individually. The court held that Peoples did not have a right of setoff against the accounts owned by the entities or the one opened in Ayers’ name for tenant deposits. However, the trial court found in favor of Peoples on its counterclaim and awarded it a judgment against Ayers in the amount of $429,221.65, subject to certain credits to be given. Initially, the trial court awarded both Peoples and the Plaintiffs prejudgment interest at the rate of 10%. On Peoples’ post-trial motion, the court cut the interest rate to 1%. Peoples appeals, arguing, primarily, that the three-year statute of limitations applicable to conversion claims bars all of the Plaintiffs’ claims. The Plaintiffs raise their own issuesincluding a challenge to (1) the trial court’s refusal to order the return of funds held in accounts designated for a special purpose, (2) the trial court’s reduction of pre-judgment interest on a post-trial motion, and (3) the amount of damages awarded on the counterclaim. We affirm.