Syllabus.

Ib. 9, 700; 7 Ib. 567. Under the act of 1843 commitment is not resorted to until other means of collection have failed and then only upon a showing of property possessed, not accessible to levy, but enabling the owner to pay if he chooses, this constituting such misconduct as justifies the order. That law had been in existence for more than forty years at the time of this proceeding. We do not regard the collection in this way, founded on necessity and so long recognized by the State of New York as to be justifiably resorted to under the circumstances detailed in the act, and operating alike on all persons and property similarly situated, as within the inhibitions of the Fourteenth Amendment. The judgment is

Affirmed.

MR. JUSTICE BLATCHFORD did not take any part in the decision of this case.

PETERS v. BAIN.

GRIFFIN v. PETERS.

APPEALS FROM THE CIRCUIT COURT OF THE

UNITED STATES FOR

THE EASTERN DISTRICT OF VIRGINIA.

Nos. 87, 198. Argued November 7, 8, 1889.- Decided March 3, 1890.

This court accepts the construction given to a state statute against frandulent conveyances by the highest court of the State as controlling. It is settled law in Virginia that an assignment by a debtor for the benefit of creditors will not be declared void, as given "with intent to delay, hinder or defraud creditors, purchasers," etc., unless such an inference is so irresistible as to preclude any other; that the fact that creditors may be delayed or hindered, is not, of itself, sufficient to vacate the instrument; and that one creditor may be preferred over another. When an assignment for the benefit of partnership and individual creditors includes all the property of the grantors as partners and individually, it should be construed distributively, partnership assets being applied to the payment of partnership debts, and individual assets to individual liabilities.

As respects fraud in law, as distinguished from fraud in fact, in a conveyance, if that which is invalid can be separated from that which is valid,

Syllabus.

without defeating the general intent, the maxim "void in part, void in toto" does not necessarily apply, but the instrument may be sustained notwithstanding the invalidity of a particular provision.

An assignment for the benefit of creditors, with preferences, authorized the trustees to "make sale of the real and other personal estate hereby conveyed, at public auction or private sale, at such time or times, and place or places, and after such notice as to them shall seem best, and they may make such sale upon such terms and conditions as to them shall seem best, except that at any sale of said property, real or personal, at public auction, any creditor secured by this deed in the second class above enumerated shall have the right to purchase any part or parcel of said property so sold, and pay the said trustees therefor, at its full face value, the amount found due such purchaser secured by this deed, or so much thereof as may be necessary to enable such creditor to complete the payment of his purchase money, and to enable as many creditors as possible to become bidders on these terms, the said trustees may have the real estate hereby conveyed, or any part thereof, laid off into lots or parcels, as they may think best;" Held, that the deed was not void in law because of the insertion of this provision.

The individual members of a private banking house, who were also the controlling directors in a national bank, made an assignment of their property for the benefit of creditors, which assignment was assailed as fraudulent in several matters, among which were alleged frauds upon the national bank, and frauds upon their own depositors previous to the assignment; Held, that violations of their fiduciary relations to the bank, or their treatment of their own depositors did not render the assignment of all their property for the benefit of their creditors, fraudulent for that reason.

The knowledge by a director and stockholder in a national bank that the bank is insolvent, does not invalidate an assignment of all his property for the benefit of his creditors, with preferences, made with such knowledge.

The court below was right in finding no evidence in this case of a frauduleat intent on the part of the firm or either of its members to hinder and delay their creditors.

The individual partners in a private bank were also directors in a national bank, and, by reason of their position, became possessed of a large part of the means of the national bank which they used in their own business. They assigned all their property to trustees for the benefit of their creditors. The national bank also suspended, and went into the hands of a receiver; Held,

(1) That the receiver was entitled to the surrender of such of the property as had been actually purchased with the moneys of the bank as he might elect; but that purchases made and paid for out of the general mass could not be claimed by the receiver unless it could be shown that moneys of the bank in the general fund at the time of the purchase, were appropriated for that purpose.

Statement of the Case.

(2) That the receiver was not estopped by such election and taking, from receiving the full benefit of the deed of trust in favor of the national bank.

In Virginia, trustees and beneficiaries in a deed of trust to secure bona fide debts occupy the position of purchasers for a valuable consideration. When the counsel of an insolvent debtor draws an assignment of his client's property to himself as trustee for the benefit of creditors, he may be presumed to have had knowledge of the dealings of the insolvent with his creditors.

Under the circumstances of this case a decree directing the payment of the costs of suit out of the trust fund is correct.

THESE were appeals from a final decree of the Circuit Court of the United States for the Eastern District of Virginia, entered on the 15th day of June, 1886, upon a bill in equity brought by William H. Peters, receiver of the Exchange National Bank of Norfolk, against Robert T. K. Bain, George M. Bain, Jr., and James G. Bain, late partners under the name and style of Bain & Brother, survivors of themselves and Thomas A. Bain, deceased; and John T. Griffin, William W. Old and John B. Jenkins, trustees under a deed of assignment from Bain & Brother; and upon a cross-bill filed by said trustees. The cause, after having been brought to issue, was referred to a special master, who took evidence and reported thereon, and was heard by Mr. Chief Justice Waite and the circuit judge.

The opinion of the court was delivered by the Chief Justice, and was as follows:

"This is a suit in equity begun by the receiver of the Exchange National Bank of Norfolk, an insolvent national bank, for a two-fold purpose, that is to say: 1, to set aside an assignment made by the partnership firm of Bain & Bro. and the several members thereof for the benefit of their creditors, and to subject the assigned property to the payment of debts due the bank; and, 2, to charge property in the hands of the assignees with the trust in favor of the bank because it was bought with moneys of the bank, which certain members of the firm, who were officers of the bank, had wrongfully used for that purpose.

"The material facts are these: The Exchange National Bank

Statement of the Case.

was organized May 13, 1865, with a capital of $100,000, which was increased November 13, 1866, to $150,000. Its place of business was Norfolk, Va.

"The firm of Bain & Bro., composed originally of R. T. K. and James G. Bain, began business in Portsmouth, Va., as brokers and private bankers in September, 1865, with an assumed capital of $5000, placed to the credit of the two partners on the books. George M. Bain, Jr., was admitted as a partner soon after the business was started and Thomas A. Bain in 1868 or 1869; but he died in 1877. The capital was never increased, but, on the contrary, the drafts of the partners soon exhausted the original credits and much more besides. At the time of the failure, the balances against the partners respectively were as follows:

"Portsmouth is separated from Norfolk by the Elizabeth River, one place being on one side of the river and the other immediately opposite on the other. On the 7th of July, 1870, the firm became shareholders in the bank, and the next day George M. Bain, Jr., was elected cashier. This office he held until April 2, 1885. R. T. K. Bain was elected a director January 2, 1872, and he served in that capacity all the time thereafter during the existence of the bank. James G. Bain was elected assistant cashier August 11, 1873, and he held that office until January 11, 1881, when he was made vice-president, in which capacity he acted until the end. Thomas A. Bain was elected a director January 11, 1876, and this office he held until his death.

"On the 9th of September, 1873, the capital stock of the bank was increased from $150,000 to $200,000. The names of the subscribers are not given and no money was paid on that day, but the whole amount of $50,000 was carried in the

VOL. CXXXIII--43

Statement of the Case.

receiving teller's cash as a cash item until October 14, 1873, when the following parties gave their checks on the bank for the following amounts:

"Certificates of stock were issued to these parties, respectively, for the shares represented by their several checks. On the 10th of May, 1874, the stock was increased to $300,000, R. H. McDonald, of California, taking and paying for the whole of the additional amount.

"At the time of the failure of the bank the following persons held shares as follows:

"George M. Bain, Jr., and John B. Whitehead

91 do.

91 do.

"In all

1187 do.

"Very soon after Bain & Bro. became connected with the bank they began to absorb its funds. As they wanted money they got it with or without security, as was most convenient for them. They had no direct connection in their own private banking business with the Bankers' Clearing-house at Norfolk, but they were represented in that association by the Exchange Bank, which paid all balances against them, and these at some times amounted to very large sums. The commercial and business paper which they took at their banking-house in Portsmouth was largely rediscounted for them at the bank, and on the 31st of March, 1885, their indebtedness to the bank has been stated approximately as follows: