#### W. C. WHITE v. H. P. WHITEHURST, Receiver of Bank of Vanceboro, and the NATIONAL BANK OF NEW BERN.

(Filed 5 October, 1927.)

Basics and Banting — Bills and Notes — Payment—Bant Purchasing Its Own Shares of Stoct — Statutes—Consideration—Collateral.

A bant may not cancel a note made to it in consideration of shares of its stoct delivered to it by the maker of the note he had purchased from another, it not appearing that the maker of the note thus canceled was insolvent, or that the transaction was necessary to prevent loss to the payee bank, and payment so made is not a valid defense in the hands of another bank to which the note had been endorsed before maturity by the payee bank as collateral security. 3 C. S., 220 (t) ; C. S., 224; Laws of 1921, ch. 4, sec. 45.

Appeal by plaintiff from *Cranmer, J.,*at February Term, 1927, of CraveN.

No error.

Action to have note for $500, executed by plaintiff, payable to the Bank of Yanceboro, and now held by the National Bank of New Bern, canceled and delivered to plaintiff, upon his allegation that same has *306been paid. Defendants deny this allegation. Tbe National Bank of New Bern prays tbat it recover of plaintiff npon said note tbe sum of $500 and interest, together witb its costs.

Issues submitted to tbe jury were answered as follows:

“1. Did plaintiff pay tbe note as alleged in tbe complaint? Answer: No.

2. If so, is plaintiff entitled to bave tbe note delivered up and canceled? Answer: No.

3. If not, wbat amount, if any, is plaintiff entitled to recover'from tbe receiver? Answer: Nothing.

4. Is tbe defendant, National Bank of New Bern, tbe bolder of said note in due course? Answer: Yes.

Upon tbe foregoing verdict, judgment was rendered (1) tbat plaintiff take nothing by bis action; (2) tbat tbe National Bank of New Bern recover of tbe plaintiff the sum of $500, witb interest and costs.

From this judgment plaintiff appealed to tbe Supreme Court.

*iD. L. Ward for plaintiff.*

*H. P. Whitehurst and Ward & Ward for defendants.*

ConNob, J.

On 7 April, 1923, plaintiff executed bis note in tbe sum of $500, payable to tbe order of tbe Bank of Yanceboro. On 13 December, 1923, tbe Bank of Yanceboro was adjudged insolvent, and tbe defendant, H. P. Whitehurst was duly appointed as its receiver. Tbe said note, prior to its maturity, was endorsed by tbe Bank of Yance-boro, and deposited witb tbe National Bank of New Bern as collateral security.

Plaintiff alleges tbat be paid tbe said note to tbe Bank of Yanceboro on 22 September, 1923, but tbat tbe bank failed to cancel and deliver tbe note to him; tbat be thereafter was informed tbat tbe National Bank of New Bern bad possession of said note; and tbat said National Bank of New Bern has refused, upon bis demand, to deliver tbe note to him. Both defendants denied tbat plaintiff bad paid tbe note as alleged.

In support of bis allegation tbat be bad paid tbe note to tbe Bank of Yanceboro, prior to tbe appointment of tbe receiver, plaintiff testified tbat shortly before 22 September, 1923, be became tbe owner, by purchase, of five shares of tbe capital stock of tbe Bank of Yanceboro, standing on tbe books of tbe bank in tbe name of one Gaskins; tbat pursuant to an agreement witb tbe cashier of said bank, be caused tbe certificate for said shares to be endorsed by tbe said Gaskins, and thereupon delivered tbe same to tbe bank; and tbat tbe bank accepted said *307certificate in full payment of Ms note. He testified tbat tbe casbier said, upon bis delivery of tbe certificate to bim, “I will give you tbe note in a day or two.”

There was evidence tending to sbow tbat tbe directors of tbe bank authorized tbe casbier to accept tbe certificate for tbe shares of stock in payment of plaintiff’s note. There was no evidence tbat plaintiff, at tbe time was insolvent; tbat tbe note was not collectible in money, or tbat it was necessary for tbe Rank of Yanceboro to purchase tbe shares of stock in order to collect tbe note, or to prevent loss upon a debt previously contracted.

Plaintiff excepted to tbe instruction of tbe court to answer tbe first and second issues, “No,” and tbe third issue “Nothing.” Assignment of error based upon this exception cannot be sustained. There was no error in tbe instruction.

It is provided by statute in this State tbat “it shall be unlawful for any bank to make any loan secured by tbe pledge of its own shares of stock, nor shall any bank be tbe bolder as pledgee or purchaser, of any portion of its capital stock, unless such stock is purchased or pledged to it to prevent loss upon a debt previously contracted in good faith.” 3 C. S., 220 (t). Laws 1921, eh. 4, sec. 45. See, also, C. S., 224.

In tbe absence of evidence tending to sbow affirmatively tbat tbe shares of its capital stock were purchased by tbe Bank of Yanceboro from plaintiff to prevent loss upon tbe note, such purchase was in violation of tbe statute, and therefore void. *Phosphate Co. v. Johnson,*188 N. C., 419. Neither party thereto acquired any rights by reason of said transaction. Tbe delivery of tbe certificate for such shares was not a payment of plaintiff’s note. Tbe judgment tbat plaintiff recover nothing in this action is affirmed.

Tbe evidence tended to show tbat plaintiff’s note was transferred by endorsement of tbe Bank of Yanceboro to tbe National Bank of New Bern, prior to its'maturity, as collateral security for tbe payment of indebtedness of tbe Bank of Yanceboro to tbe National Bank of New Bern. There was no evidence tbat such indebtedness bad been paid, nor was there any evidence tending to show tbat plaintiff has any defense or equity in respect to said note available to bim against tbe Bank of Vanceboro. Tbe amount due upon tbe note was not in controversy. There was no error in tbe instruction of tbe court upon tbe fourth issue. Tbe judgment tbat tbe National Bank of New Bern recover of tbe plaintiff tbe sum of $500, interest and costs is affirmed.

No error.