In re Hathorn and Batchelor.

ner in which the proceedings are required to be conducted. It is not, therefore, for the debtors, or for the debtors and some of the creditors, to say, we can devise a better, or safer, or more economical mode of reaching the same final result. If it were

true, it would be only saying, we will resort to an expedient to defeat the bankrupt law, and our reason therefor is, that we think our plan is wiser and better than that which congress has seen fit to prescribe." .WOODRUFF, Circuit Judge, In re Bininger, 7 Blatch., 275. See also Thornhill v. The Bank, 5 B. R., 367; In re Merchants Ins. Co., 3 Biss., 162; In re Independent Ins. Co., 6 B. R., 260; In re Safe Deposit Institution, 7 id., 398.

This is not the case where a creditor is proceeding in a state court to enforce his claim against the property of his debtor, and has had a receiver appointed before the proceedings in bankruptcy were commenced, but it is the case of a member of a firm against which a petition in bankruptcy is pending, seeking to have the assets of the firm administered by the state court for his own benefit, and that he may enforce his individual claim to the partnership assets against his copartners. To hold that such a proceeding bars the action of a court of bankruptcy, or protects the assets of the firm from administration in the bankrupt court, would be to allow all copartners at their option to defeat the bankrupt law, and transfer the power and jurisdiction of the bankrupt courts to the state courts in all cases of the insolvency of partnerships.

In my judgment, the assets of this firm ought to be preserved by the order of the bankrupt court to await the result of the trial of the issue of bankruptcy vel non, and the injunction ought to issue to restrain Hathorn as prayed for in the petition of the assignees.

Ordered accordingly.

Casey, Receiver, vs. La Societé de Credit Mobilier.

NOVEMBER TERM, 1874.

N. W. CASEY, Receiver of the New Orleans Banking Association, VS. LA SOCIETÉ DE CREDIT MOBILIER DE PARIS and others.

1. The preference of one creditor to another by a national bank, mentioned in sec. 5242, Rev. Stats., is a preference given to the creditor to secure or pay a preexisting debt.

2. When a national bank, being embarrassed and in need of assistance, receives a loan of money or other valuable material aid, from a person who knows its embarrassed state, on condition that the party making the loan or giving the aid shall be secured therefor, and the security is accordingly given by pledging a part of the assets of the bank, this is not giving him a preference over other creditors, within the meaning of sec. 5242, Rev. Stats.

3. The legislature of Louisiana has left it in doubt whether indorsement as well as delivery is essential to the pledge of a negotiable instrument.

4. The receiver of an insolvent national bank holds only the estate and title of the bank in its assets, and he has no greater rights in enforcing their collection than the bank itself would have had.

5. Neither the bank nor its receiver could recover possession of negotiable securities pledged by the bank for advances to it, on the ground that the pledge was ineffectual for want of indorsement of the securities, while at the same time holding on to the assets to secure repayment of which the pledge was given.

6. When a national bank agreed to deposit with a certain commercial firm in pledge a portion of its assets to secure a loan to be made to itself, and the loan was received by the bank, it was held, that there was no legal obstacle to the depositing of the assets according to the contract, arising from the fact that the president of the bank was a member of the firm with which the deposit was to be made.

7. A national bank which makes a contract not authorized by its charter cannot repudiate the contract, and at the same time retain its fruits.

8. When a national bank pledged a portion of its assets to secure a loan to itself, and the notes pledged were changed from time to time as they fell due, and others substituted in their stead, and this was according to the contract between the bank and the pledgee: Held, that the pledge of such substituted notes was not void.

The case as presented by the pleadings and proofs was substantially as follows: On the 12th of July, 1873, the New Orleans National Banking Association, a corporate body organized under

Casey, Receiver, vs. La Societé de Credit Mobilier.

the national banking act June 3, 1864 (13 Stat., 99), was engaged in the banking business in the city of New Orleans, and continued to carry on business until the 4th day of October, 1873, when it suspended payment. On the said 12th day of July, 1873, the defendant, "Societé de Credit Mobilier," of Paris, entered into an arrangement with the said banking association through Charles Cavaroc Sr., its president, whereby the "Societé" agreed on its part to accept bills of exchange to be drawn by the banking association, payable ninety days after sight, to the amount of one million francs, and the association agreed to place with the societé ten days before the maturity of said bills the amount thereof. The banking association further agreed to deposit securities in the hands of the commercial firm of C. Cavaroc & Son, of which said Charles Cavoroc Sr., was a member, for the purpose of securing the societé against loss from the failure of the association to place the amount required to meet said bills at maturity. The said firm of C. Cavaroc & Son was constitued by the societé its agent to receive and hold said securities.

In pursuance of this arrangement, on or about the 12th of July, 1873, bills of exchange were drawn upon the societé by the banking association at ninety days' sight to the amount of one million francs, and the same were sold by the banking association, and the proceeds, amounting to $218,450.34, were appropriated by the banking association-were credited on its books to the societé, and the bills were accepted by the societé.

On the day of the date of the drafts, or the day following, a list was made out of notes due the association, amounting to $220,021.43, and the notes named in the list were put in an envelope and handed to C. Cavaroc & Son, by direction of C. Cavroc Sr., the president of the association, to be held as security for the societé, to protect it from loss by reason of its acceptance of the drafts.

It was subsequently stipulated by C. Cavaroc Sr., on behalf of the association, that as soon as any of said notes matured, they should be replaced by others of like amount. Some time subsequent to the 12th of July, C. Cavaroc Sr., fearing that the notes already set apart would not be sufficient to secure the societé for its acceptance of said bills, caused another list of notes, amount

Casey, Receiver, vs. La Societé de Credit Mobilier.

ing to about $100,000, to be made out, and the notes to be deposited with C. Cavaroc & Son, as additional security.

As notes matured and were paid or renewed, they were replaced by others, in pursuance of the agreement above stated.

The evidence showed that on the 12th of July the association was embarrassed, and that long before its suspension, on the 4th of October, it was insolvent.

When the banking association suspended payment, C. Cavaroc & Son claimed to hold all of said notes then in their hands, amounting to $325,011.26, to secure the societé for its acceptance of said bills.

After the suspension of the bank it was placed by the order of the comptroller of the currency, in the custody of John Cockrem, as receiver. Cockrem having resigned, the present complainant was appointed receiver in his stead.

The bill asks the court to adjudge and decree that all of the said notes held by C. Cavaroc & Son belong to and are the property of said banking association, and that the same, and all the proceeds thereof be placed in the hands of complainant as receiver, to be administered and applied to the payment of the claims of the creditors of said association.

The bill is based upon the 52d section of the national currency act (Rev. Stat., sec. 5242), which declares as follows:

"That all transfers of the notes, bonds, bills of exchange and other evidences of debt to any association, or of deposits to its credit, all assignments of mortgages, securities on real estate, or of judgments or decrees in its favor, all deposits of money, bullion, or other valuable thing for its use or for the use of any of its shareholders or creditors, and all payments of money to either, made after the commission of an act of insolvency, or in contemplation thereof, with a view to prevent the application of its assets in the manner prescribed by this act, or with a view to the preference of one creditor to another, except in payment of its circulating notes, shall be utterly null and void."

Messrs. J. D. Rouse and J. R. Beckwith, for complainant. Messrs. Thomas Allen Clarke, Thomas L. Bayne and Henry Renshaw Jr., for La Societé de Credit Mobilier, of Paris.

Casey, Receiver, vs. La Societé de Credit Mobilier.

Messrs. Edward C. Billings, John Finney and H. C. Miller, for various other defendants.

WOODS, Circuit Judge. The claim of the complainant is that the alleged transfer of the notes and assets of the banking association to C. Cavaroc & Son, to secure the societé for its acceptance of the bills of the association, was a transfer thereof in contemplation of insolvency, with a view to prevent the application of the assets in the manner prescribed by the national currency act, and with a view to the preference of one creditor to another; that such transfer is therefore null and void, and that said notes are still the property of the association, and applicable to the payment of its debts.

It has been held by this court that to make "transfers, assignments, deposits and payments" void under the 52d section of the currency act, it is only necessary that the insolvency should be in the contemplation of the bank making the transfer, and not that it should be known to or contemplated by the party to whom they are made. Case, Receiver, v. The Citizens Bank, ante, p. 23; Peckham, Assignee, v. Burroughs, 3 Story, 554.

The evidence in the case satisfies my mind that the banking association, at the time it made the arrangement already recited with the societé, to wit: on the 12th of July, 1873, was in an exceedingly embarrassed condition, if not actually insolvent. Although C. Cavaroc Sr., its president, testifies that he did not at that time think that the bank was insolvent, he had abundant reason to know soon after that date that it was embarrassed and in a critical situation. This is evidenced by his application for assistance to other banks of the city of New Orleans. In my judgment the evidence shows so much clearly, but it does not show more.

But conceding that C. Cavaroc Sr., the president of the bank, at the time he transferred the notes to C. Cavaroc & Son, for the security of the societé, knew that the association was insolvent, will that fact render the transfer made under the circumstances recited void?

That alone is not sufficient. One of two alternatives must exist: