#### C. L. WILLIAMS, Receiver of the Commercial National Bank of Wilmington, v. EDGAR D. WILLIAMS.

(Filed 27 October, 1926.)

1. Descent and Distribution — Statutes—Husband and Wife — Banks and Banking — Counterclaim—Offset—Receivers—Deposits.

Where a husband is entitled to a child’s distributive part in the personal property of his deceased wife, 3 O. S., 137(8), and she had a certain amount of money deposited in a bank since becoming insolvent and in a receiver’s hands, he may not successfully set up this interest under the provisions of O. S., 521, as a counterclaim against his note, in an action by the receiver therein, until his wife’s administrator has accounted for his trust or distributed the assets of his intestate’s estate.

2. Same — Executors and Administrators.

Under the provisions of C. S., 521(2), allowing a counterclaim to be set up in an action arising on contract, matters arising also on contract between the parties, the subject of the counterclaim, must have existed at the time of bringing the action when this defense is relied upon.

*4063. Same — Insolvency.

Where a bank has become insolvent and in the hands of a receiver, the right of its debtor to successfully set up, as a counterclaim in an action by the receiver on his note, an interest in a deposit of his deceased wife he claims as a distributee under 3 O. S.,. 137 (8), is governed by the conditions existing at the time of the insolvency of the bank.

Appeal by defendant from Daniels, J., at December Term, 1925, of New HaNOvek.

Controversy without action on facts agreed. The plaintiff was appointed receiver on 1 February, 1923, and afterwards brought suit to recover the balance due on a note for $325, executed by the defendant and discounted at the Commercial National Bank of Wilmington. The note was listed as an asset in the hands of the receiver, and on 23 July, 1923, the defendant paid the bank $162.50 and directed that it be credited on the note. When the receiver was appointed the defendant had on deposit in the bank $2.14 and filed a verified proof of claim which was allowed as an offset against the note. At the time of the failure the defendant’s wife had on deposit in the bank $895.12, for which she filed her proof of claim on 19 March, 1923. She died on 5 July, 1923, leaving surviving her the defendant and three children, one of whom qualified as her administrator on 21 February, 1924. On 8 August, 1924, her administrator collected and receipted for the first and only dividend on her deposit, amounting to $89.51. Mrs. Williams owed no debts and the funeral expenses were paid by her husband. Upon these facts judgment was rendered against the defendant for the balance due and he excepted and appealed. Affirmed.

H. Edmund Rogers for plaintiff.

Herbert McGlammy for defendant.

Adams, J.

In the statute of distributions .it is provided that if a married woman die intestate leaving a husband and more than one child, the estate shall be distributed in equal portions and the husband shall receive a child’s part. 3 C. S., 137(8). The parties admit that the only question for decision is whether upon the agreed facts the defendant has the right to pay his note out of his interest in his wife’s deposit — whether he can offset such interest against the demand of the bank.

A counterclaim may arise out of one of the following causes of action: 1. A cause of action arising out of the contract or transaction set forth in the complaint as the foundation of the plaintiff’s claim, or connected with the subject of the action. 2. In an action arising on contract, any other cause of action arising also on contract and existing *407at tbe commencement of tbe action. C. S., 521(2). In Smith v. French, 141 N. C., 2, tbe Court said tbat “counterclaim” is broader in meaning tban “set-off,” “recoupment,” or “cross-action,” and includes tbem all, but tbat tbe counterclaim, if it arises under tbe second subdivision of tbe statute, must exist at tbe commencement of tbe action. There is nothing in tbe statement of facts showing tbat Mrs. Williams’ administrator has rendered an account of bis trust or distributed tbe assets of bis intestate’s estate. Tbe defendant’s “interest” as distributee is, therefore, not yet available' to him, and as be has no control over it be cannot direct its application. In any event bis “interest” would be subject to tbe limitation in tbe second subdivision of tbe statute; bis alleged counterclaim did not exist at tbe commencement of tbe action. Tbe right of set-off against tbe receiver of a bank is to be governed by conditions existing at tbe time of insolvency, and as against tbe receiver a debtor cannot set off a claim which is assigned to him after tbe bank becomes insolvent and tbe receiver is appointed. Davis v. Mfg. Co., 114 N. C., 321; 7 C. J., 746, sec. 536.

The judgment is

Affirmed.