Commissioner of Banks Ex Rel. Citizens Bank v. White

Adams, J. When tbe Citizens Bank closed its doors it held tbe defendant’s promissory note on which tbe remainder due was one thousand dollars. The defendant admits tbis indebtedness and therefore has tbe burden of showing payment or other matters in avoidance. Bank v. Wilson, 124 N. C., 561. He undertakes to avoid liability by proof of tbe alleged counterclaim set out in tbe statement of facts. We are unable to see bow tbis defense can avail him. Tbe county treasurer deposited in tbe bank $18,541.61; tbe Maryland Casualty Company issued its depository bond in tbe sum of $10,000 to indemnify tbe county; tbe defendant and other directors executed a bond to save tbe bonding company from loss. After tbe bank bad failed *314 the Casualty Company paid the county .$10,000. It is said that the county then assigned to this company $10,000 of its deposit in the bank, that some of the directors reimbursed the' company, and that the company assigned to the directors “the $10,000 assigned to it by the county.” Afterwards, the liquidating agent of the bank issued to the nine paying-directors certificates showing proof of their claims, each in the sum of $.1,111.11. The defendant sets up his certificate against the indebtedness of the bank. There are several barriers in his way. In 'the first place, his counterclaim did not exist at the time the bank failed. He then owed the bank $1,000 and the bank owed him nothing. Between them there was no mutuality of demand. On account of insolvency the bank went out of business on 27 December, 1930. On that day was the defendant its creditor? In Davis v. Mfg. Co., 114 N. C., 321, 329, it is said that creditors of an insolvent bank are those to whom the bank is indebted at the time of its failure, and that if one who is then indebted to the bank afterwards takes the assignment of a claim against it he will not be allowed to use the assigned claim .as a set-off. The defendant derives his claim from the assignment of the bonding company. If the bonding company had presented its claim to the plaintiff it would not have been entitled to more than a pro rata part in the distribution of the bank’s assets. Brown v. Brittain, 84 N. C., 552. The defendant succeeds to no greater rights than his assignor had. The right of set-off against the commissioner of banks is to be governed by conditions existing at the time of insolvency; and as against the commissioner a debtor cannot set up a claim which is assigned to him after the bank becomes insolvent and the commissioner or a liquidating agent takes charge of its assets. Williams v. Williams, 192 N. C., 405. In the second place, there is no proof that the county’s claim has been fully paid. It is credited with the payment of $10,000 only. Until the whole amount is paid the county is entitled as against the bank to dividends on $18,541.61, the sum of its deposits. Brown v. Merchants’ Bank, 79 N. C., 244; Winton v. Biggs, 117 N. C., 206; Bank v. Flippen, 158 N. C., 334; Milling Co. v. Stevenson Co., 161 N. C., 510. If the defendant’s counterclaim is allowed the dividends- paid the county will be reduced pro tanto.' It will be observed by apjdying this principle that the Maryland Casualty Company could not share in the assets of the bank until the amount due the county had been fully paid. In Jenkins v. National Surety Co., 277 U. S., 258, 72 L. Ed., 874, i't is said: “If the principal is insolvent, any dividends paid the surety on its claim for indemnity *315 before tbe creditor’s whole claim has been satisfied would decrease the creditor’s dividends by his proportionate share of the payments to the surety. They would also result in a species of double proof, detrimental to the principal’s other creditors, for the secured creditors would, under the applicable ‘chancery rule,’ still be entitled to dividends on his entire original claim.” The opinion is in recognition of the doctrine that the surety may not claim subrogation against an insolvent debtor until the creditor is paid in full. The plaintiff is entitled to recover the amount due on his note without any set-off or counterclaim in favor of the defendant. Error.