In Re Merchants Bank of Durham

ClaRKSON, I. The petitioner H. T. Roycroft had on deposit in the Merchants Bank of Durham, N. 0., when it closed its doors and was taken over by the liquidating agent of the Commissioner of Banks, the sum of $2,136.64. It was in the name of Roycroft Warehouse. The evidence, undisputed, is that the deposit belonged to H. T. Roycroft individually. Roycroft also owed notes to the bank as follows: (1) -$1,100 endorsed by W. A. Hinton, (2) $1,100 endorsed by K. O. Yeasey. The endorsers had no security. (3) Note for $15,000 which is secured by a deed of trust on Roycroft’s home in the city of Durham, N. C., and a farm of 179 acres in Granville County, N. O., which Roycroft in his affidavit stated “in the opinion of your petitioner said note is adequately secured.” To relieve his endorsers on the two notes of $1,100 each, Roycroft requested and directed that the $2,136.64 on deposit in the insolvent bank be applied on these two notes, which was refused by respondent appellant. The court below found the facts and we think there was sufficient competent evidence to sustain the findings and directed the $2,136.64 to be credited, as requested and directed by Roycroft. We do not think the exception and assignment of error made by respondent, appellant, Commissioner of Banks, can be sustained. The question involved, as set forth by respondent, appellant, is as follows: “Whether or not a person (II. T. Roycroft, petitioner herein) has the right to have his deposit in an insolvent bank applied on a note or notes as he directs; said notes being owned and held by the bank.” We think so. In Dameron v. Carpenter, 190 N. C., at p. 598, citing many authorities, the law is thus stated: “A set-off is in the nature of a payment or credit when the debts are mutual. . . . Set-off exists in mutual debts, independent of the statute of set-off. Its flexible character is used in equity to prevent injustice.” In Coburn v. Carstarphen, 194 N. C., at p. 370, speaking to the subject, we find: “In Davis v. Mfg. Co., 114 N. C., 321, it was held that an endorser on a note held by an insolvent bank against an insolvent principal, upon which the receiver had brought suit is entitled to avail *475 bimself of bis claim against tbe bank, upon a-certificate of deposit issued by tbe bank, and beld by bim at tbe date of tbe bank’s insolvency. In Trust Co. v. Spencer, 193 N. C., 745, it was beld by tbis Court tbat a bank, notwithstanding tbat it bad taken a note signed by tbe directors of a corporation wbicb bad become insolvent, in payment of tbe corporation’s note to it, retaining, however, tbe corporation’s note as collateral security for tbe note of tbe directors, bad a right to apply a deposit to tbe credit of tbe insolvent corporation as a payment on tbe indebtedness for wbicb tbe bank beld tbe directors’ note.” In tbe Coburn case, supra, it was beld: “While ordinarily tbe right of equitable set-off does not exist where there is a want of mutuality or tbe one claiming it has no right of action against tbe other in bis own name, tbis principle is not applicable to county funds officially deposited in a bank since in a receiver’s bands, and for wbicb tbe depositor officially remains liable to tbe county, and be may offset bis personal liability to the bank with tbe amount be may receive as a depositor of tbe county funds.” See Burns v. Trust Co., 200 N. C., 260. Tbis very matter has been decided by tbe Supreme Court of Arkansas, Hughes v. Garrett, 234 S. W., p. 265: It is there beld: “When a bank failed, and bad made no appropriation of a general deposit to tbe payment of notes of tbe depositor due to tbe bank, tbe depositor may direct tbe receiver to apply tbe deposit on a note chosen by tbe depositor, and tbe remainder on other notes. Upon a bank becoming insolvent, a depositor indebted to tbe bank may set off tbe amount of bis deposit in an action by tbe receiver or assignee to recover tbe indebtedness due tbe bank.” We think tbe order of tbe former judge was primarily to settle tbe fact tbat “II. T. Roycroft” was tbe owner of tbe deposit in tbe name of “Roycroft Warehouse.” Tbe liquidating agent did not do what tbe order stated and tbe court below on tbe evidence was fully justified in finding: “It appearing to tbe court tbat prior to tbe signing of said order, tbe petitioner bad requested D. F. Siler, liquidating agent of said bank, to apply tbe amount on deposit to tbe said ‘Roycroft Warehouse’ as a credit on tbe two notes wbicb tbe petitioner bad in said Tbe Merchants Bank of Durham, N. C., in tbe sum of $1,100, one of wbicb said notes was signed by W. A. Hinton and tbe other of said notes signed by K. O. Yeasey,” etc. We can see no estoppel in tbe order of tbe former judge, as argued by counsel for respondent. In fact, tbe question in respondent’s brief does not raise tbis point, as will be seen from tbe question involved as set forth in respondent’s brief wbicb we quote above. For tbe reasons given, tbe judgment of tbe court below is Affirmed.