In Re Bank of Sampson

Stacy, C. J. Depositors who are also borrowers are allowed to set off their deposits in closed banks against their obligations to said banks, because both claims exist between the same parties and in the same right. In re Bank, 204 N. C., 472, 168 S. E., 676; Coburn v. Carstarphen, 194 N. C., 368, 139 S. E., 596; Williams v. Coleman, 190 N. C., 368, 129 S. E., 818 ; Davis v. Mfg. Co., 114 N. C., 321, 19 S. E., 371; Note, 25 A. L. R., 938; 3 R. C. L., 529; 7 C. J., 745. But this is as far as the doctrine of set-off has been applied in the liquidation of insolvent banks. Indemnity Co. v. Corp. Com., 197 N. C., 562, 150 S. E., 16; 7 C. J., 658. *335 Ordinarily, a partnership account may not be set off against tbe individual indebtedness of one of tbe partners even as between solvent debtors and creditors, because of tbe absence of mutuality. Hodgin v. Bank, 124 N. C., 540, 32 S. E., 887; Strauss v. Frederick, 91 N. C., 121. A fortiori, sucb set-off would not be available after insolvency when tbe rights of third parties have intervened. 34 Cyc., 736-737; 57 C. J., 464. Mutuality is essential to set-off. Dameron v. Carpenter, 190 N. C., 595, 130 S. E., 328; Bank v. Winslow, 193 N. C., 470, 137 S. E., 320. “Such right of set-off only exists between the same parties and in the same right.” Adams v. Bank, 113 N. C., 332, 18 S. E., 513. “Where the debts are not due to and from the same persons in the same capacity the right of set-off does not exist.” 7 C. J., 745. In Cotton v. Evans, 21 N. C., 284, suit was brought against a partnership firm by assignee of insolvent creditor. The defendant sought to set off an individual claim of one of the partners against the assignor: Held that such a set-off was not good against the claim of the assignee where there had been an assignment to bona fide creditors. As a general rule, joint and separate debts, or debts accruing in different rights, are not allowed to be set off against each other, due to want of mutuality. 34 Cyc., 727; 57 C. J., 462. The práctice may be otherwise in Pennsylvania, Montz v. Morris, 89 Pa., 392, and Maine, Collins v. Campbell, 97 Me., 23, 53 A., 837, 94 A. S. R., 458. Speaking to the identical question, here presented, in Fralick v. Coeur D’Alene Bank & Trust Co., 35 Idaho, 749, 208 Pac., 835, 27 A. L. R., 110, Budge, J., delivering the opinion of the Court, said: “We are of the opinion that the court was right in holding that the deposit which stood to the credit of the firm of Eeed and Boughton could not be set off against the individual indebtedness of either Eeed or Boughton, by the special deputy. We think the rule to be as stated in the case of Re Van Allen, 37 Barb., 225, at 230, 231: Where the debts are not due to and from the same persons in the same capacity, the right of set-off does not exist. Therefore, where, on the one side, the debt due to the bank is due from a firm, . . . and the credit belongs to an individual, or vice versa, equity does not require or justify an application of the rule of set-off. It cannot be said, in any just sense, that these are mutual debts or credits. . . . The rights of the receiver become fixed at the time of his appointment; the rights of creditors of the bank represented by him then attach.Parties must stand or fall by the condition of things in existence at the time of the appointment of the receiver, unless special equities exist.’ “The question presented here seems to have been squarely passed upon in the case of International Bank v. Jones, 119 Ill., 407, 9 N. E., 885, where the Court said: ‘The general rule is that a bank has a right of *336 set-off, as against a deposit, only when the individual, who is both depositor and debtor, stands in both these characters alike, in precisely the same relation, and on precisely the same footing- towards the bank, and hence an individual deposit cannot be set off against a partnership debt.’ “The converse rule is likewise true, that a partnership deposit cannot be set off against an individual debt. Neither, in our opinion, do the facts in this case fall within the exception, to the effect that the rule that mutuality is essential to the validity of a set-off does not apply where it is necessary to allow a set-off to do complete equity, or to prevent irremediable injustice. The firm of Beed and Boughton were depositors along with other depositors, and will suffer no greater injustice, in so far as their deposit is concerned, than others like situated.” It is true that a creditor or depositor may assign his claim against, or deposit in, an insolvent bank, but the assignee would take only the right assigned, i. e., the right to share pro rata with others of his class in the distribution of the trust estate. Brown v. Brittain, 84 N. C., 552. And if the assignee is himself a debtor of the bank, he will not be allowed to use the assigned claim as a set-off. Comr. of Banks v. White, 202 N. C., 311, 162 S. E., 736; Davis v. Mfg. Co., supra. For, to do so would be to give the assignee a greater right than the assignor had. Brown v. Brittain, supra; 7 C. J., 746. The demand of both partners that the partnership account be set off against the individual indebtedness of one of the partners is no more than an assignment of the partnership account to the individual partner; and as the individual partner or assignee here is already a debtor of the bank, he may not use the claim so assigned' as a set-off. Williams v. Williams, 192 N. C., 405, 135 S. E., 39; Davis v. Mfg. Co., supra. In a South Carolina case, Bank v. Allen, 146 S. C., 167, 143 S. E., 646, practically on all-fours with the one at bar, it was held (as stated in 2 and 3 head-notes) : 2. “A debtor of an insolvent bank will not be permitted to set off against his debt a claim for deposit assigned to him after insolvency of bank. 3. “Assignment of interest in partnership deposit to partner indebted to bank, made after bank’s insolvency, did not give to assignee the right of set-off against his individual debt for the interest so assigned to him.” No importance is attached to the license given the cashier to draw on the partnership account and pay the note in case the bank needed the money, for the privilege or license was never exercised while the cashier had authority to act. 37 C. J., 289. The ruling of the trial court is accordant with the decisions on the subject and will be upheld. Affirmed.