Worth v. Bank of New Hanover , 122 N.C. 397 ( 1898 )

This case has been argued very ably and elaborately and with great wealth of citation. In deference to counsel, time has been taken to consider the arguments and the opinions cited to sustain them. But in the view we take of the case, the decision of the controversy depends upon a very few simple propositions.

The Bank of New Hanover was chartered by an act of the General Assembly, ratified 12 January, 1872, with the usual powers of a banking corporation, and established its principal place of business at Wilmington. Section 9 of said act provided: "Agencies of the bank may be established at such times and places as the president and directors may designate, and such agencis [agencies] may be removed at any time and shall be subject to such rules and regulations as may be prescribed by the president and directors of the bank." Agencies under this authority were established at Goldsboro, Wadesboro and Tarboro, N.C. and Marion, S.C., styled in their reports respectively, "The Bank of New Hanover at Goldsboro" and "The Bank of New Hanover at Wadesboro," etc. Some time since, the agencies at Goldsboro, Tarboro and Marion were discontinued and removed as authorized by said section 9. On 19 June, 1893, the Bank of New Hanover made an assignment of all its property "of every description whatsoever and wheresoever situate, including all that belongs or may belong to its agency or branch bank (403) at Wadesboro." On the same day the agency or branch bank at Wadesboro made a separate assignment, but without any authority from the bank at Wilmington. The property and deposits at Wadesboro, if appropriated solely to the depositors at that point and other creditors dealing directly with the agency, would be sufficient to satisfy them in full, but if this property is placed with the other assets of the Bank of New Hanover and the depositors and creditors dealing directly with the agency at Wadesboro are to share generally with all the creditors of the Bank of New Hanover, the pro rata dividend will be small. Hence, the effort of the Wadesboro depositors and creditors to have the assets at that point declared a trust fund for their benefit, the surplus alone, if any, to go into the assets of the Bank of New Hanover. But it is found as a fact by the referee that "There was no stock issued by the branch bank (as it is called for convenience) and there was no charter therefor distinct from the Bank of New Hanover; that the branch bank derived its authority solely from the provisions of the act chartering the Bank of New Hanover and the action of the directors of the bank, establishing the branch bank, was in pursuance of the powers given by its charter." It necessarily followed that the relation existing between the Bank of New Hanover and the agency at Wadesboro was that of principal and agent, and all the assets of the agency belong to the principal, and all the debts of the agency were debts of the Bank of New Hanover. Prince v. Oriental Bank, Eng. L. R., 3 App. Cases, 325; Garnet v. McKewar, L. R., 8 Ex., 10; Irvin v. Bank, U. C., Q. B., Webb v. Bank, 50 N.C. 288. This being so, the rule of (404) distribution upon the insolvency of a corporation, both under the general law and section 670 of The Code, is that all creditors shall share equally and ratably. No corporation can create a subordinate corporation without express legislative warrant. This is not only an uncontrovertable proposition of law, but the evidence is conclusive that in point of fact the bank did not attempt to create a subordinate corporation at Wadesboro. The Bank at Wilmington sent $25,000 to Wadesboro to start the branch bank business, and by resolution established a local board of three directors to manage it, and these directors, together with all the other officers, were from time to time elected by the parent bank in Wilmington, to which the officers and directors in immediate charge of the bank at Wadesboro transmitted their reports twice every year. In the published reports of the Bank of New Hanover in Wilmington, the items of capital and surplus funds always included the capital and surplus fund of the Wadesboro Bank, and the dividends were declared upon the total earnings, including those of the branch bank. There could be no charter for a bank at Wadesboro under the general incorporation law, since The Code, section 684, expressly forbids it, and, indeed, there is no evidence of any effort to that end. There could be no estoppel on the Bank of New Hanover requiring it to treat the bank at Wadesboro as an independent bank, since that would be to create a subordinate corporation, which it could not do, and its conduct in electing the officers of the branch at Wadesboro, which besides had no stockholders, and their having to transmit regular statements to the Bank of New Hanover at Wilmington, negative any other view than that the Wadesboro branch was a mere agency. Besides, if there could possibly be an estoppel on the bank from its dealings with the branch bank at Wadesboro, it would not affect the (405) creditors of the Bank of New Hanover, who are the real parties in interest, represented by the receiver, and who are entitled to have "its property of every description, wheresoever found" applied ratably (after discharging expenses and valid liens, if any) to all the creditors thereof, whether living at Wilmington or at Wadesboro, or elsewhere.

After full and careful consideration, each and all of the exceptions to the judgment of the Court below are sustained.

Error.

Cited: Banking Co. v. Tate, ante, 315; Bank v. Bank, 127 N.C. 434;Fisher v. Bank, 132 N.C. 776.