While there is a statutory right of counterclaim and set-off in certain instances, tbe statutory provisions are not such as would authorize a bank to appropriate a deposit to tbe payment of a debt due tbe bank by tbe depositor. This is permitted under tbe principles of equity, to do justly between tbe parties. When, however, a party seeks to invoke an equitable remedy or to assert an equitable right, or to rely upon an equitable defense, bis conduct must have been equitable, fair and aboveboard. It is a familiar and oft-quoted maxim of equity that “be who comes into equity must come with clean band,” or, as it is frequently expressed, “be who has not done equity, cannot have equity.” A right cannot arise to anyone out of bis own wrong and tbe misconduct need not necessarily be fraudulent.
Tbe defendant knew that tbe promissory representations made to tbe plaintiff when be gave tbe purchase money notes described in tbe pleadings bad not been complied with. It knew that the. promoters bad abandoned all effort to make such improvements and bad assigned tbe notes to another party. It knew that there was litigation attacking this transfer on tbe grounds of fraud. It bad accepted a transfer of tbe purchase money notes and tbe capital stock of W. I. Phillips Company as trustee to collect and pay off tbe indebtedness of W. I. Phillips Company and to make tbe promised improvements. It terminated tbe trust *328at a time when it knew that the property had not been developed to the extent and in the manner promised. It advanced money upon the notes with knowledge of the conditions and at a sale of the collateral purchased notes of the par value of several hundred thousand dollars for $10,000. It was fully advised that the plaintiff had repudiated said notes and had consistently refused to make any payment thereon. With this knowledge it accepted deposits from the plaintiff, issued a passbook therefor, showing that the plaintiff had on deposit in its institution subject to withdrawal by him, the amounts therein noted. In the meantime it had put a latch on this account. In other words, it had issued an order to its employees directing them not to honor any check against this account, of which procedure it did not advise the plaintiff. So that, the account was kept open for deposits but closed for withdrawals so long as the plaintiff would make deposits in said account. This was done by the defendant for the purpose of finally appropriating the account to the payment of the notes it held against the plaintiff. It well knew that so soon as, or in the event that, it should advise the plaintiff that the amounts deposited by him could not be withdrawn he would cease to make deposits. It concealed the true facts in respect to the account from the plaintiff for the purpose of benefiting therefrom. The conduct of the defendant is not such as would appeal favorably to the conscience of a court of equity. In our opinion, the defendant is in no position to successfully assert the right recognized in equity to appropriate the account of the plaintiff to the payment of notes it holds signed by the plaintiff in this cause.
This cause has heretofore been before this Court, Stelling v. Trust Co., 208 N. C., 838. It was there held that the complaint sufficiently alleged a cause of action. As heretofore stated, the evidence offered is amply sufficient to establish an unauthorized application of plaintiff’s account to the payment of his alleged indebtedness to the defendant as alleged in the complaint, and the defendant by its conduct is now estopped from setting up the equitable defense relied upon by it. It follows that there was error in the judgment of nonsuit.
The court below rendered judgment against the plaintiff on his notes upon the admissions contained in the pleadings. It is true the plaintiff admits that he signed the notes and that he has paid no part thereof except the first semiannual installment of interest. He alleges, however, a breach of the contract of which the notes were a part, and even if it be conceded that he does not sufficiently allege or prove fraud, he has sufficiently alleged and offered evidence tending to show that there has been a breach of the contract by Phillips & Company, and at least a partial failure of consideration, to the full knowledge of the defendant at the time it acquired title to said notes. As to this, he has a right to *329be beard and to submit his cause to a jury. His rights under these pleaded defenses, even if established, are dependent upon the findings of the jury on defendant’s plea that it is a holder of the notes in due course.
Upon the admitted facts the plaintiff is entitled to judgment for the amount of his deposit, with interest from 5 June, 1934. He is likewise entitled to have a jury determine the validity of his defense to the notes set up in the counterclaim, both as to whether he is relieved from the payment thereof by the breach of the contract by the payees in said notes, and as to whether there has been a failure of consideration either in whole or in part. In this connection it is well to say that defendant’s loss of its right in equity to apply plaintiff’s account to the payment of the notes held by it does not affect its right of offset under the statute.
We are of the opinion that the evidence is not sufficient to establish actionable fraud in the procurement of the execution of said notes.
Eeversed.
DeviN, J., took no part in the consideration or decision of this ease.