Eastern Bank & Trust Co. v. Shaw, 206 N.C. 367 (1934)

April 11, 1934 · Supreme Court of North Carolina

206 N.C. 367

EASTERN BANK AND TRUST COMPANY v. W. R. SHAW and His Wife, RUTH SHAW, BRADHAM DRUG COMPANY et al.

(Filed 11 April, 1934.)

Banks and Banking H d — Maker may not set off deposit in assignor bank against assignee when assignment is made prior to assignor’s insolvency.

Where a bank, the holder of a note in due course, endorses and assigns same before maturity to another bank, and thereafter the assignor bank becomes insolvent, the maker of the note, having a sum on deposit in the assignor bank sufficient to pay the note at the time it closed its doors, may not contend that the assignment was void in the absence of evidence that the assignor bank was insolvent at the time of its assignment or contemplated insolvency at that date, and the assignee bank may maintain an action on the note as a holder in due course.

Appeal by defendants, W. R. Shaw and Ms wife, Ruth Shaw, from Daniels, J., at January Term, 1934, of Craven.

No error.

On 25 April, 1927, the defendants, ~W. R. Shaw and his wife, Ruth Shaw, executed and delivered to the defendant Bradham Drug Company their note for the sum of $500.00. The said note is payable to the order of the Bradham Drug Company, and was due on 25 October, 1929. Before its maturity, the Bradham Drug Company endorsed said note, and transferred and assigned the same, for value, to the First National Bank of New Bern.

On 9 October, 1929, the First National Bank of New Bern endorsed the said note, and transferred and assigned the same, for value, to the plaintiff. The plaintiff is now the holder in due course of the said note. Interest accrued on said note was paid to 25 April, 1929.

The note sued on in this action is one of a series of notes executed by the defendants V. R. Shaw and his wife Ruth Shaw, and payable to the order of the Bradham Drug Company. The said notes were secured by a chattel mortgage executed by the makers and duly recorded in the office of the register of deeds of Graven County. All the notes secured by said chattel mortgage, except the note sued on, have been paid. The said chattel mortgage was wrongfully canceled in the record by the Bradham Drug Company. There is now due on the note sued on the sum of $500.00, with interest from 25 April, 1929.

From judgment that plaintiff recover of the defendants, W. R. Shaw and his wife, Ruth Shaw, the sum of $500.00, with interest on said sum from 25 April, 1929, and the costs of the action, and that the cancellation of the chattel mortgage entered on the record by the defendant Bradham Drug Company be stricken therefrom, the defendants, ~W. R. Shaw and his wife, Ruth Shaw, appealed to the Supreme Court.

Warren & Warren for plaintiff.

Ernest M. Green for defendants.

CoNNOR, J.

Tbe First National Bank of New Bern was tbe bolder in due course of tbe note sued on in tbis action on 9 October, 1929. At said date, tbe said National Bank endorsed and assigned said note, for value, to tbe plaintiff. Tbe note was due and payable on 25 October, 1929.

Tbe First National Bank of New Bern closed its doors and ceased to do business on 25 October, 1929, because of its insolvency. At said date, tbe defendant, W. R. Sbaw, bad on deposit witb tbe said First National Bank of New Bern, a sum more tban sufficient for tbe payment of said note. There was no evidence at tbe trial of tbis action tending’ to sbow tbat tbe First National Bank of New Bern was insolvent on 9 October, 1929, or tbat it contemplated insolvency at said date. For tbat reason, tbe contention of tbe defendants tbat tbe transfer and assignment by said National Bank of tbe note sued on was void, and tbat tbe plaintiff did not become tbe bolder in due course as tbe result of said transfer and assignment, cannot be sustained.

There was no error in tbe instruction of tbe court to tbe jury to tbe effect that if tbe jury should find tbe facts to be as all tbe evidence tended to sbow, they should answer tbe third issue “Yes.” Tbe judgment is affirmed.

No error.