It is admitted that the shares of stock in question belonged to defendant’s testator, R. A. Brand, and that upon his death they passed to his executors under the provisions of his will. The will devises and bequeaths all of testator’s property, both real and personal, to his executors in trust to have and hold the same for the use and benefit of his wife, the defendant Margaret E. Brand, to pay to her the net income therefrom during the term of her natural life, and after her death the net income, “rents, profits, and interest,” to be paid to his three children, and at the death of his children, the remaining property to be divided among his grandchildren.
After the death of R. A. Brand the said shares of stock in the North Carolina Bank and Trust Company were transferred on the books of the bank to “North Carolina Bank and Trust Company and Margaret E. Brand, executors of the last will and testament of R. A. Brand, deceased.” In their names the stock has remained at all times since..
After the bank had closed and the plaintiff Commissioner of Banks had taken over its assets and affairs for the purpose of liquidation, the named executors filed their final settlement as such.
The plaintiff herein is acting in a capacity equivalent to that of a receiver (C. S., 218 [c]; Blades v. Hood, Comr., 203 N. C., 56), in the performance of his duty to collect and distribute all the assets of the bank for the benefit of its depositors and creditors. To that end he stands in the place of and represents the creditors.
The question presented by this appeal is whether bank stock, held by executors and trustees under a will, can avoid assessment for the statutory liability of stockholders, on the ground that the bank, one of the executors and trustees, negligently retained the shares of stock instead of selling them for proper investment, in breach of the trust created by the will.
The appellant contends that for this reason, and for the further reason that under the terms of the will the corpus of the estate was devised to *373the testator’s grandchildren as ultimate takers, the estate was not liable to assessment as stockholder, within the meaning of the statute, at the time the bank failed.
To determine this question, it becomes necessary to examine the pertinent statutes in force at the time and the decisions of this Court with reference to the nature and effect of the liability of the holders of bank stock to assessment for the benefit of depositors and creditors, on failure of the bank.
I. The statute, C. S., 219 (a), which imposes liability upon holders of bank stock, is as follows:
“The stockholders of every bank organized under the laws of North Carolina, whether under the general law or by special act, shall be individually responsible, equally and ratably, and not one for another, for all contracts, debts, and engagements of such corporation, to the extent of the amount of their stocks therein at par value thereof, in addition to the amount invested in such shares. . . . The term stockholders shall apply not only to such persons as appear by the books of the corporation to be stockholders, but also to every owner of stock, legal or equitable, although the same may be on such books in the name of another person.”
This statute was originally enacted by the North Carolina General Assembly of 1897, ch. 298, and was taken from section 12 of the National Banking Act of 1864, Rev. St. U. S., 5151.
The quoted provisions of the statute are very broad in their terms and impose liability upon every owner of stock in a bank “for all contracts, debts, and engagements of such corporation,” not for the benefit of the corporation but for the benefit of the depositors and other creditors. The liability of stockholders is statutory and attaches by virtue of the statute, to the owners of stock, and is imposed by statute for the benefit of depositors and creditors. Smathers v. Bank, 155 N. C., 283.
“The statutory liability of stockholders is created exclusively for the benefit of corporate creditors. It is not to be numbered among the assets of the corporation, and the corporation has no right or interest in it.” Cook on Stock and Stockholders, sec. 218. It is an additional security for creditors. Hill v. Smathers, 173 N. C., 642.
In Smathers v. Bank, 135 N. C., 410, it is stated that the statute imposing the liability of stockholders, “incorporates in the contract of subscription the additional obligation that, if necessary to pay the debts of the corporation, the subscriber will pay an amount in addition to his subscription equal to the par value of his stock. This obligation is in trust for the security of the creditors. The corporation may not, as against creditors, relieve him from the obligation.”
In Foundry Co. v. Killian, 99 N. C., 501 (decided in 1888), it was held that the unpaid subscriptions to stock (and same rule applies to *374the statutory liability, Smathers v. Bank, 135 N. C., 410), constitute a trust fund for the benefit of the creditors of the corporation — a trust fund pledged for the payment of the debts of the corporation, citing Sawyer v. Hoag, 17 Wall., 620.
In Smathers v. Bank, 135 N. C., 410, Mr. Justice Connor, delivering the opinion, uses this language: “The doctrine that the capital stock of a corporation constitutes a trust fund has been accepted and acted upon by this Court,” and he quotes with approval from 10 Cyc., 553, the following: “It is a favorite doctrine of the American courts that the capital stock and other property of a corporation are to be deemed a trust fund for the payment of the debts of the corporation.” Foundry Co. v. Killian, supra; Cotton Mills v. Cotton Mills, 115 N. C., 475; Bank v. Cotton Mills, 115 N. C., 507.
It is an essential American doctrine, based upon the principle first enunciated by Judge Story, that the capital stock of a corporation is a trust fund to be preserved for the benefit of creditors. Foundry Co. v. Killian, supra.
“Statutes making stockholders individually liable to creditors create a right flowing directly from the stockholder to creditors.” Thomp. Corp., sec. 3560.
It is apparent from these and many other authorities, which could be cited, that it is the purpose of the statutes imposing the liability of stockholders to provide security, frequently referred to as a “trust fund,” for the depositors and creditors, in addition to the security furnished by the tangible property of the bank. Fuller v. Service Co., 190 N. C., 655; Redrying Co. v. Gurley, 197 N. C., 56.
As pointed out by McRae, J., in Bank v. Cotton Mills, 115 N. C., 507, the words, “trust fund,” used in this connection, are not to be understood in the strict sense to import a direct and express trust attaching to the property, but mean that all the assets will be equitably distributed for the benefit of all creditors.
Illustrating the nature and effect of the principié that the stockholder’s liability constitutes a fund to be preserved for the benefit of depositors and creditors, we have the rule that such liability may not be set off against the bank’s liability to depositors and creditors. As was held in In re Trust Co., 197 N. C., 613, a depositor, who is also a stockholder of an insolvent bank, is not entitled to have the total amount of his deposit applied as payment on his assessment. Only the dividends apportioned to him as a depositor may be so applied. Pritchard v. Hood, Comr., 205 N. C., 790.
II. But the defendants in the case at bar are not individually and in their own right the owners and holders of the stock in question. It was bequeathed to them as executors and trustees to be held for the pur*375poses expressed in the will of R. A. Brand. At common law, when stock was recorded on the books of the corporation in the name of a trustee for others, the trustee was personally liable as if the absolute owner; though the estate of a deceased shareholder was liable when shares came into the hands of an executor. Cook on Stock & Stockholders, secs. 244-248.
That rule, however, has been generally changed by statute. Tbe North Carolina statute appertaining to those who bold stock in a representative capacity, originally enacted in 1893 (C., 471), now C. S., 219 (c), is as follows: “Persons bolding stock as executors, administrators, guardians, or trustees shall not personally be subject to any liabilities as stockholders, but tbe estate and funds in their bands shall be liable in like manner and to tbe same extent as tbe testator, intestate, ward, or person interested in such trust fund would be if living and competent to bold stock in bis own name.”
This provision extends to every trust relation, however created, and attaches liability to tbe estate and funds in tbe bands of tbe trustee. In re Trust Co., 203 N. C., 238.
Tbe exemption of tbe personal liability of tbe trustee is limited to cases where there is a probability of some estate to respond to tbe liability. Trust Co. v. Jenkins, 193 N. C., 761; 7 C. J., 770.
Tbe appealing defendant contends that her codefendant, tbe bank, was negligent in tbe administration of tbe trust created by tbe will, in that, in spite of her protest, it continued to bold tbe shares of its own stock as a part of tbe fund until tbe bank became insolvent and was closed; that it was tbe duty of tbe bank to have invested tbe fund which came into its bands under tbe terms of tbe will in accordance with tbe statute, C. S., 4018.
"While tbe fund came into tbe bands of defendants impressed with a trust, to be held for tbe purposes declared in tbe will, a portion of tbe fund, to wit, tbe five hundred shares of stock in question, came into their bands in tbe form of an investment which bad been selected and apparently approved by tbe testator; yet, conceding tbe bank committed a breach of duty in failing to sell tbe shares wben salable and reinvesting tbe fund, can tbe deposit creditors of tbe bank be made to suffer on that account ? There was no notice to them of tbe terms of tbe trusteeship. They were only chargeable with notice of tbe manner in which tbe names of tbe stockholders appeared on tbe stock books of tbe bank, and bad a right to rely in making deposits on tbe statutory liability of tbe stockholders as additional security for their deposits. Trust Co. v. Jenkins, supra.
And a breach of duty on tbe part of one of tbe trustees or of tbe bank could not injuriously affect tbe rights of creditors without notice. Tbe *376stock liability was to creditors an additional security, and notice to tbe bank is not necessarily notice to depositors or creditors. Trust Co. v. Jenkins, supra.
“The governing officers of a corporation cannot, by agreement or other transaction with the stockholders, release the latter from their obligation to pay, to the prejudice of creditors, except by fair and honest dealing and for a valuable consideration. Such conduct is characterized as a fraud upon the public, who were expected to deal with them.” Drug Co. v. Drug Co., 173 N. C., 502.
“The creditors of a company may well ask that the fund upon which they relied (the capital stock subscribed) shall really exist and be held sacred to discharge corporate liabilities.” Foundry Co. v. Killian, supra.
The Court was here speaking of unpaid stock subscription, but the principle applies to the statutory liability of bank stockholders. Smathers v. Bank, 135 N. C., 410.
“The liability which attaches to the ownership of the stock, which was held by him as a guardian, is statutory, and therefore would bind the estate of the wards in his hands.” Smathers v. Bank, 155 N. C., 283.
“The corporation may not, as against creditors or other stockholders, relieve him from the obligation of stock liability.” Smathers v. Bank, 135 N. C., 410. Nor can stockholders evade liability by any private or secret arrangement that may have been entered into among themselves. Foundry Co. v. Killian, supra.
It was held in Trust Co. v. Jenkins, supra, that where the rights of depositors and creditors of the bank are involved, it was immaterial that the officers of the bank had notice of the conditions under which stock was held by a trustee. The liability imposed by statute upon stockholders of a bank is for the benefit of the depositors and creditors and not for the bank.
In Corp. Com. v. McLean, 202 N. C., 77, the defendants in that case sought to avoid the statutory liability on the ground that those from whom they had purchased the shares had perpetrated a fraud upon them, but this Court denied relief on that ground, stating that “to hold otherwise would defeat the purpose of the statute, which is to provide an expeditious proceeding for the enforcement of the statutory liability of all persons who are stockholders of an insolvent banking institution at the date of its insolvency.”
Corporation Com. v. McLean, supra, is cited with approval in Commissioner of Banks v. Carrier, 202 N. C., 850, where a stockholder sought to escape liability for assessment by allegation that her purchase of stock was induced by fraud of the officers of the bank. There it was *377held she was. not entitled to have her purchase of stock canceled to the detriment of the depositors and creditors of the bank, she having held the stock for two years and having exercised the privileges of a stockholder.
In Scott v. Deweese, 181 U. S., 202, it is stated: “If the subscriber became a shareholder in consequence of fraud practiced upon him by others, whether they be officers of the bank or officers of the Government, he must look to them for redress, ánd is estopped as against creditors to deny that he is a shareholder within the meaning of sec. 5151 (O. S., 219 [a]), if at the time the rights of creditors accrued he occupied and was accorded the rights appertaining to that position.”
It has been held that where stock is left by will or descends to an infant, the estate in the hands of the guardian is liable for the assessment. 7 C. J., 770; Clark v. Ogilvie, 111 Ky., 181.
In Clark v. Ogilvie, 111 Ky., 181, the father of the infant defendants died while owning certain shares of stock in a national bank. This stock came into the hands of defendants’ guardian, who continued to hold it until the bank failed. Upon action by the receiver of the bank the guardian admitted these facts and judgment was rendered against the estate of the wards. The Federal statute, 5152, U. S. Revised Statute, is in the same words as C. S., 219 '(c). Subsequently, the defendants, then of age, set up that the guardian had violated the trust in holding the stock. It was held that, while the personal judgment against the infant defendants was unauthorized, the judgment was properly entered against the estate of the wards in the hands of the guardian. Further referring to section 5152, U. S. Rev. St., our C. S., 219 (c), the Kentucky Court used this language:. “It will be observed that in fixing the liability of stockholders of a national bank, so far as the persons beneficially owning stock may be under the legal disability of infancy are concerned, as well as instances where the stock is held by executors, administrators, or other trustees, it is the estate and not the person that is made liable for assessment. The infants could not bind themselves by contract, or otherwise, as stockholders of the bank, nor could their father have bound them, had he intended to do so, by having this stock conveyed to them directly.”
Mr. Justice Connor, speaking for. the Court in Corp. Com. v. McLean, supra, uses this language: “The only issues of fact that may be raised by such an appeal (from an assessment against stockholders), ordinarily, are: (1) Was the appellant a stockholder of the insolvent banking corporation at the date of the assessment? (2) If so, how many shares did he own at said date ?”
The fact that the bank itself, coexecutor, was negligent in that it retained the shares and, together with the appealing defendant (though over her protest), maintained the status of holders of the stock in the *378capacity of executors as shown by the stock books of the bank, could not change the rule of liability as against the claims of depositors and creditors.
It was held in Hood, Comr., v. Darden, 206 N. C., 566, that when the bank became insolvent after the death of a testator who owned shares therein, judgment should be rendered against his executrix for the stockholders’ liability, payable out of the funds of the estate, the liability being contractual, though no preference was created for priority of payment of such assessment from the assets of decedent’s estate.
In Corp. Com. v. Latham, 201 N. C., 342, it was held that where bank stock was transferred before the failure of the bank, and in good faith, to trustees for infants “without any estate,” no personal liability was imposed on the transferor. There the trustees were legally capable of holding the stock. C. S., 219 (d), exempts from personal liability those who in good faith transfer stock to any person of full age.
While an unlawful investment in, or negligent retention, of bank stocks among trust funds would subject the trustee to individual liability, it does not follow that the cestui que trust should be entitled to have the fund relieved of liability at the expense of creditors who deposited their money in the bank on the faith of the liability of the stock to assessment for their benefit.
In In re Trust Co., 203 N. C., 238, Adams, J., thus states the law: “It is an established rule of law that a transfer of stock in a corporation must be made to a person who is not only legally capable of holding the stock, but is legally bound to respond when an assessment is made. . . . An infant cannot be held liable on his subscription, for he is without legal capacity to bind himself by contract. ... To transfer stock directly to a minor leaves the transferor liable for assessment. Early v. Richardson, 280 U. S., 496.”
However, in Hood, Comr., v. Martin, 203 N. C., 620, and in Hood, Comr., v. Paddison, 206 N. C., 631, it was held that the fact that a stockholder was induced to purchase the stock by the false and fraudulent representation of the president of the bank as to the condition of the bank, could be set up as a defense to the enforcement of an assessment for stock liability, when the stockholder had acted with promptness and diligence. And Chamberlain v. Trogden, 148 N. C., 139, is cited as authority for this holding.
The reasoning in Hood, Comr., v. Martin, supra, is based to some extent on the fact that by statute, in the final settlement of the bank’s affairs, after all the depositors and creditors have been paid in full, the surplus should be distributed pro rata to the stockholders, and that under the facts and circumstances of that case it would be inequitable for the officer of the bank, a stockholder, who perpetrated the fraud, to profit by his wrong.
*379Considering it in that aspect, due weight seems not to have been given the view that in the event there be a surplus after all the depositors and creditors are paid in full (which in the nature of things would rarely happen), such inequity should be corrected among the shareholders in the division of the surplus, rather than at the expense of innocent creditors, who deposited their money in the bank in faithful reliance on the security of the liability of all stockholders as their names appeared on the stock books of the bank.
Chamberlain v. Trogden, supra, cited in Hood, Comr., v. Martin, supra, was an action on a note given for subscription to the capital stock of a manufacturing corporation. Fraud on the part of the officers of the corporation in procuring the subscription was set up as a defense to the note. It was determined in that case, however, that the defendant there had not exercised due care and diligence in discovering the fraud and repudiating the contract, and his defense was not sustained, recovery being had on the note. In delivering the opinion of the Court, Hoke, J., uses this language: “The weight of authority in this country seems to establish that, under exceptional circumstances, the subscriber may avail himself of the position suggested (right to rescind) even after insolvency. (Citing authorities from other jurisdictions.) All of the authorities, however, are to the effect that, in order to do so, the subscriber must act with promptness and due diligence, both in ascertaining the fraud and taking steps to repudiate his obligation.”
So that, applying the rule in Hood, Comr., v. Martin, supra, to the case at bar, the appealing defendant cannot be said to have acted with the diligence and promptness necessary to make this defense available, even if it had been predicated on the fraud of an officer of the bank. There is here no contention that fraud was practiced upon her. There is no imputation of lack of good faith. She bottoms her defense upon a negligent breach of duty on the part of her coexecutor and trustee. In the facts agreed, she states her contention as follows: “The defendant Margaret E. Brand contends that said estate was not a stockholder in the North Carolina Bank and Trust Company at the time it suspended business, or within sixty days prior thereto, and that said estate is not liable for said assessment.” The facts agreed further set forth that on numerous occasions one of the legatees, acting for her, urged the trust officer of the bank to sell the stock for reinvestment, but the trust officer maintained the stock was a good and safe investment and declined to sell it. "With -full knowledge of the facts, and without taking any action to require her coexecutor to comply with her request, the shares of stock were permitted to remain on the stock books of the bank in the name of herself and the bank as executors of E. A. Brand for nearly three years, and until the bank was closed.
*380The appealing defendant’s counsel, Mr. Burgwin, in his able oral argument and in his brief, calls our attention to Rutledge v. Stackley, 162 S. C., 173, 160 S. E., 429, as authority for his position. There the owner of bank stock, in good faith, transferred the shares to trustees for his minor children, and it was held by a divided court that neither the trustees personally nor the estates of the infants were liable to assessment on failure of the bank, citing Early v. Richardson, 280 U. S., 496. However, it is pointed out in the dissenting opinion that in McNair v. Darragh, 31 E. (2d), 906, a different conclusion from that in Early v. Richardson, supra, seems to have been reached, and that the Supreme Court of the United States denied writ of certiorari to review it. (Gamble v. Darragh, 280 U. S., 563.)
We are also referred to the case of Mobley v. Phinizy (Ga. App.), 155 S. E., 73. In the last named case it appears that one who owned certain shares of stock in a bank, by will created a trust estate for the benefit of his imbecile son, appointing trustees with full power to manage the estate. Included in this fund, so set apart, were seven shares of bank stock. After the death of the testator the trustees acquired 139 other shares of stock in the bank, an investment not authorized by law, and all these shares were held by them as trustees at the time the bank failed. It was held that the estate of the incompetent was not liable to assessment under the terms of the banking act for the benefit of depositors, nor under the terms of the charter of the bank, and that any such liability was the liability of the trustees making such illegal investment.
The reasoning upon which this case was decided seems to have been based on the view that when the bank issued stock to the trustees as trustees, it was apprised of the fact that it was dealing with trust funds, and therefore participated in the mismanagement of trust funds, and was in pari delicto with the trustees; that, though depositors knew nothing of these illegal investments, the bank was one of their own selection, and if they selected a bank whose officials disregarded the law and participated in illegal investment, they should suffer rather than one who was non compos mentis.
While we are not disposed to follow this line of reasoning to the conclusion reached, the facts in the Georgia case, as well as those in the South Carolina case, are distinguishable from those in the case at bar.
Here the stock was at all times held by the defendants as executors of R. A. Brand, and there was nothing to take it out of the rule of liability fixed by the statute. The will of R. A. Brand made the defendant Margaret E. Brand the beneficiary for her life, and those who took the income in succession to her were also of full age at the time the bank failed. There was nothing on the books to indicate a trusteeship for the benefit of minors.
*381It is interesting to note that it was held in McNair v. Darragh, 31 E. (2d), 906, Circuit Judge Stone delivering the opinion, that when shares of bank stock were transferred, in good faith, to defendant as trustee for infant children, the liability for assessment on failure of the bank fell, not upon the transferor, but on the estate, in accordance with the provisions of Rev. St., 5152 (O. S., 219 [c]). It is stated in the opinion in this case that it was to remedy the uncertainty which arose where stock was held by an executor, guardian, or trustee, that the quoted section, Rev. St., 5152, was enacted to make certain in all instances the liability for assessment. We quote further from the opinion in this case:
“It states that the executors, administrators, guardians, or trustees shall not be personally subject to the stockholder liability for stock belonging to the estate. Also, the section states that the estates and funds in their hands shall be liable. It states the extent of the liability of such funds to be the same as the 'person interested in such trust funds would be, if living and competent to act and hold the stock in his own name.5 'If living,5 as thus used, refers, of course, to where the stock was owned by a deceased person whose estate is in course of administration and refers back to 'executors, administrators,5 'competent to act and hold the stock in his own name,5 clearly primarily carries the thought of guardianship or trusteeship, and specifically covers the point of incompetency. As the only reason suggested here by appellant why appellee should be held personally liable, is the incompetency of the minors, under the trust, and as section 66 specifically covers trusts, declares trustees not personally liable, and declares the trust estate liable to the extent that the beneficiary would be 'if . . . competent to act and hold the stock in his own name,5 we think the section exactly fits this situation. It is one kind of the situations which the statute was enacted to cover. See Fowler v. Gowing, 165 E., 891 (C. C. A., 2).”
The defendant seeks to invoke the equitable principle set forth in the maxim: “Equity regards that as done which ought to be done.55 This salutary principle, that equity will sometimes consider that property has assumed certain forms with which it ought to be stamped, or that the parties will perform certain duties or carry out the terms of contracts which they ought to fulfill, will not be enforced to the injury of innocent third parties. Casey v. Cavanoc, 96 U. S., 467, 21 C. J., 201.
Though it may have been due to the negligence of the bank in failing to dispose of the shares of stock when salable, still the appealing defendant and her codefendant, as executors, were the holders thereof when the bank closed, and the estate to which the stock belonged as a part thereof must bear the burden of the liability to assessment rather than the loss fall upon the depositors and creditors for whose benefit the statute created the liability.
*382The question of the liability of the bank to the estate of R. A. Brand for alleged breach of trust is not presented by this appeal.
Therefore, upon consideration of the facts agreed as shown by the record and an examination of the pertinent statutes as interpreted by the authorities cited, we conclude that the defendants were holding the shares of stock in question, as executors of R. A. Brand, deceased, at the time the bank closed, and that pursuant to the provisions of the statute the estate and funds in their hands must be held liable for the assessment levied by the plaintiff Commissioner of Banks.
The learned judge who heard the case below properly decided that the defendant’s appeal should be dismissed.