Case Name: FIRST NATIONAL BANK OF WINSTON v. H. L. RIGGINS
Court: Supreme Court of North Carolina
Jurisdiction: North Carolina
Decision Date: 1899-04-15
Citations: 124 N.C. 534
Docket Number: 
Parties: FIRST NATIONAL BANK OF WINSTON v. H. L. RIGGINS.
Judges: Faircloth, C. J., writes the opinion of tbe Court.
Reporter: North Carolina Reports
Volume: 124
Pages: 534–539

Head Matter:
FIRST NATIONAL BANK OF WINSTON v. H. L. RIGGINS.
(Decided April 15, 1899).
Stock Note — Set-off.
1. Where a Bank is in course of liquidation, and a stockholder is indebted to the Bank by note secured by pledge of stock, his supposed share in the assets is not available as a set-off, legal or equitable, in a suit upon the note.
2. Stock pledged as collateral must be released by payment or sale ' before it is entitled to prorate in the assets of a Bank winding up its business. The general rule is, in such cases, that the net balance must be distributed pro rata among the beneficiaries.
3. Douglas, J. (Concurring in the judgment but not in the opinion of the Court), expresses as his view of the case (concurred in by Montgomery, J.) that it does not involve any equitable principles, hut simply a question of legal set-off or counterclaim, and as defendant’s share was not demandable at the bringing of the action, or at any time before judgment, it was not the subject of set-off or counterclaim; creditors having been settled with, if a partial dividend payable out of remaining assets on hand, had been declared, it would have been available as a set-off in this action.
Civil Action upon a promissory note for $1,300, payable to the Bank, and passed due, secured by pledge of ten shares of the capital stock lodged as collateral security — tried before Allen, J., at February Term, 1899, of the Superior Court of Eobsyth County.
The relief asked was judgment on the note and order of sale of the stock, unless the judgment was paid in some reasonable time. The defendant set up a counter-claim of $800, alleging that when the debts due the Bank are collected and its property reduced to money, his distributive share in the assets would amount to at least that stun. Judgment was rendered in favor of plaintiff for $1,300 and interest. After judgment, tbe defendant moved tbe Court for tbe appointment- of a receiver, a referee to take and state all accounts, and ascertain tbe amount to be credited on tbe judgment, and an order of restraint in tbe meanwhile — all of wbicb motions were refused by tbe Court, and defendant excepted and appealed.
Messrs. Watson, Buxton & Watson, and Jones & Patterson, for appellee.
No counsel for appellant.
Faircloth, C. J., writes the opinion of tbe Court.
Douglas, J., concurring in tbe judgment but not in tbe opinion.
MONTGOMERY, J., concurs in tbe concurring opinion.

Opinion:
EaiRCLotji, C. J.
Tbe plaintiff, tbe First National Bank, is in liquidation, and a committee duly appointed has charge of its property, to collect tbe assets and pay its debts, and distribute the balance among tbe stockholders. Tbe defendant is a stockholder in plaintiff bank, and is indebted to it for his stock, wbicb was deposited as collateral security, and this action is brought to collect tbe amount due on said stock, and to sell tbe stock in payment, or part payment of the amount found to be due.
Tbe defendant alleges that upon a final settlement of tbe bank's affairs, be will be entitled to $800, as bis distributive share of the assets, and demands a credit on bis debt for that amount. This allegation and this right are denied, and it does not appear what will be bis distributive share. In cases of insolvency, private or corporate, tbe general rule is that tbe net balance must be distributed pro rata among the beneficiaries.
Under the National Banking Act, when an assessment is made, each stockholder is required to pay his part in full, regardless of whether he is a debtor or creditor of the bank, and when the collections are made, and all debts and expenses axe discharged an equitable distribution of the assets is made. The same rule applies in the settlement of insolvent estates by executors and administrators. And so it is in winding up the business of insolvent Building and Loan Associations, as was held by this Court in Meares v. Duncan, 123 N. C., 203, and cases cited.
If the defendant's contention was allowed, lie would get the full value of his stock, at least pro tanto, and thus the net amount for the other stockholders would be reduced, and the principle of an equitable settlement would be disturbed, as the liability of the stockholder would be diminished, and that of the other stockholders increased, which would be a result not contemplated in law or equity. As a stockholder, he is liable to an amount equal to his stock, or to a just proportion if all is not required; but as a creditor, he is entitled only to a dividend in proportion to other creditors. His liability as a contributor for the benefit of creditors must be distinguished from his character as a simple contract debtor to the bank upon ordinary business transactions. The money arising from unpaid shares is a trust fund for all the creditors, and can not be affected by any individual transactions of the stockholder, to the prejudice of the other stockholders. Hobart v. Gould, 8 Fed. Rep., 57; Morse on Banks and Banking, p. 500.
Besides, the distributive share of the defendant is unknown, and it seems it would be impracticable to ascertain it with any certainty.
The above authorities do not stand upon facts on all fours with the present case, but they all enunciate a principle plainly applicable to the present case; and that principle is so manifestly just that we have no hesitation in adopting it. We think therefore that the defendant can not set-off wliat he supposes to be his distributive share against his individual indebtedness to the bank.
Affirmed