Tbe question presented: Can tbe plaintiffs use past-due bonds of tbe county of Buncombe, owned at tbe commencement of tbe action, belonging to tbe estate of decedent, as a counterclaim against a promissory note executed by plaintiffs’ intestate and belonging to said county, or Board of Financial Control for Buncombe County? We think so, under tbe facts and circumstances of tbis case.
Tbe defendant Board of Financial Control for Buncombe County is created a corporation and, among other powers, is given tbe power “to sue and be sued” (sec. 1, ch. 253, Public-Local Laws 1931), and “to institute and maintain actions and proceedings of every kind and nature permitted by law to be brought and maintained in any court of competent jurisdiction brought for tbe purpose of aiding in tbe liquidation of any of such property, securities, cboses in action, claims and demands, and in any and all such actions to resort to any supplemental proceedings permitted by law.” (Sec. 36, ch. 253, Public-Local Laws 1931.) A county is authorized: (1) To sue and be sued in tbe name of tbe county. C. S., 1291. For tbe purpose of liquidating tbe securities held by tbe county of Buncombe, which tbe county acquired by reason of tbe insolvency of tbe Central Bank and Trust Company, tbe Board of Financial Control for Buncombe County is nothing more nor less than a liquidating agent designated by law for that purpose. These securities, property, cboses in action, rights, claims and demands delivered by tbe county of Buncombe to' tbe Board of Financial Control for Buncombe County, remain tbe property of tbe county of Buncombe, under tbe express provisions of chapter 253, Public-Local Laws 1931: “All moneys collected by tbe Board of Financial Control in tbe liquidation of securities under tbe provisions of tbis act, shall ... on tbe business day following tbe day on which such money is collected be deposited in a depositary designated by tbe Board of Financial Control. All amounts so deposited shall be secured in tbe manner now or hereafter required by law for securing deposits of public funds in such depositaries. Tbe funds secured on tbe liquidation of property, securities, cboses in action, claims and demands received from tbe county of Buncombe and tbe funds received on liquidation of such property, securities, cboses in action, claims and demands received from tbe city of Asheville, shall be deposited in separate accounts and thereafter kept separately.” Section 39, chapter 253, Public-Local Laws 1931. After tbe payment of expenses of liquidation, such funds are to be used for tbe benefit of tbe county of Buncombe or tbe city of Asheville, as set forth in section 40, chapter 253, Public-Local Laws 1931.
*178N. C. Code, 1931 (Michie), sec. 519, is as follows: “Tbe answer of tbe defendant must contain- — -(1) A general or specific denial of each material allegation of tbe complaint controverted by tbe defendant, or of any knowledge or information thereof sufficient to form a belief. (2) A statement of any new matter constituting a defense or counterclaim, in ordinary and concise language, without repetition.”
Section 521 is as follows: “Counterclaim — Tbe counterclaim mentioned in this article must be one existing in favor of a defendant and against a plaintiff between whom a several judgment might be bad in tbe action, and arising out of one of tbe following causes of action: (1) A cause of action arising out of tbe contract or transaction set forth in tbe complaint as tbe foundation of tbe plaintiff’s claim, or connected with tbe subject of tbe action. (2) In an action arising on contract, any other cause of action arising also on contract, and existing at tbe commencement of tbe action.”
Tbe above statute goes beyond tbe common-law system of pleading and practice and gives tbe power to settle two independent disputes between tbe same parties in tbe action.
McIntosh, in North Carolina Practice and Procedure in Civil Cases, part of sec. 463, pp. 491 and 492, says: “Tbe statute authorizes tbe defendant to plead by way of denial, or new matter constituting a defense in confession and avoidance, or new matter constituting a counterclaim. Tbe counterclaim is a creature of tbe Code; it did not exist at common law, except in tbe limited sense of set-off or recoupment, and it was recognized in equity in tbe cross-bill, by which tbe defendant might demand affirmative equitable relief. Tbe Court says: ‘Our statute on counterclaim is very broad in its scope and terms, is designed to enable parties litigant to settle well-nigh any and every phase of a given controversy in one and tbe same action, and should be liberally construed by tbe Court in furtherance of this most desirable and beneficial purpose.’ It is said to be ‘broader in meaning than set-off, recoupment, or cross-action, and includes them all, and secures to defendant tbe full relief which a separate action at law, or a bill in chancery, or a cross-bill would have secured to him on tbe same state of facts.’ It includes set-off and recoupment, but is different from them, and it is broader than tbe cross-bill, since it includes both legal and equitable claims. It is a cross-action by tbe defendant against tbe plaintiff; sufficient facts should be stated to constitute a cause of action, and they should be stated with tbe same degree of clearness and certainty as in a complaint, and show tbe relief to which tbe defendant considers himself entitled.”
Part of section 466, at p. 496: “If tbe plaintiff sues tbe defendant upon a contract, tbe defendant may set up as a counterclaim any other *179cause of action arising out of contract, and existing at the commencement of the action. This does not arise out of the contract or transaction set forth in the complaint, but is an independent cause of action which the defendant might assert against the plaintiff.”
The value of all real and personal property within the county of Buncombe as valued for purposes of taxation for the current year amounts to $79,889,458. The county of Buncombe is indebted to the amount of $26,273,483.08. It is in default to the amount of $3,591,476.17. Plaintiffs’ intestate owed the county (which it acquired from the Central Bank and Trust Company) a note of $17,500, with interest from 29 January, 1931, totalling, on 9 April, 1934, $20,915.09. The county of Buncombe, at the commencement of this action, owed the estate of plaintiffs’ intestate past-due bonds, with the coupons attached, legal obligations of the county, $20,895.
The court rendered judgment as follows: “It is therefore ordered and adjudged that upon the presentation of said past-due bonds of the county of Buncombe, with accrued interest coupons thereto attached, and cash in the sum of $20.09, to the county of Buncombe or the Board of Financial Control for Buncombe County, that said county or board accept the same and deliver up to the plaintiffs the said note of Louis M. Bourne, deceased, with the collateral thereto attached.”
We can see no error in this judgment. The question of what the bonds of the county of Buncombe were selling on the market is not material to this controversy. The plaintiffs’ intestate owed the county and the county owed the estate of plaintiffs’ intestate. We think that “honors are easy” and justice prevails.
This principle here declared does not apply to taxes. A tax is levied by the sovereign in support of the Government. It is not founded on contract or a debt in the ordinary sense, therefore the tax levied by a municipal corporation cannot be allowed as a set-off or counterclaim. Gatling v. Commissioners of Carteret, 92 N. C., 536; Piscataway v. First National Bank, 90 A. L. R., 423.
For discussion of different aspects of matters of this kind growing out of insolvent banks, see In re Bank, 204 N. C., 472; In re Bank, 205 N. C., 333; Lumberton v. Hood, Commissioner, 204 N. C., 171; Edgerton v. Hood, Commissioner of Banks, 205 N. C., 816.
For the reasons given, the judgment in the court below is
Affirmed.