days in the payment of interest the Trustees were authorized to enter upon and take possession of "all and singular the charter, frar[653] chises and property * * * conveyed,” “and take and receive the income and profits thereof.” [654] It is well settled that the mortgagor of a railroad, even though the mortgage covers income, cannot be required to account to the mortgagee for earnings, while the property remains in his possession, until a demand has been made on him therefor, or for a surrender of the possession under the provisions of the mortgage. That is the effect of what was decided by this court in Galveston, H. & H. R. R. Co. v. Cowdrey, 78 U. S. 11 Wall. 459, 483 [20: 199, 207]. The Company failed to pay its interest falling due July 1, 1882, and thereafter. For this reason the Trustees began this suit against the Company in the Circuit Court of the United States on the 12th of February, 1884, praying In the present case a demand was made for that they might be put into the possession of the possession, by the bringing of this suit, Febthe mortgaged property in accordance with the ruary 12, 1884; and from that time, in our opin terms of the mortgage of May 2, 1877, and for ion, the Company must account. The bill was the purposes therein expressed, "and that the not filed to foreclose the mortgage, but to cndefendant may be enjoined from interfering force a surrender of possession to the Trustees with their possession, or disturbing it in any in accordance with its terms. The court below way." On the 24th of March they applied for decided that the Trustees were entitled to the the appointment of a receiver, and the court on possession when the suit was begun, and from the 27th of that month granted the parties un- the decree to that effect no appeal has been [655] til April 7 to file briefs on the motion, but or- | prosecuted. We must assume, therefore, that dered "that the defendant, until further order the demand was rightfully made, and ought to herein, hold the property mentioned in the bill have been granted. It follows that after the subject to the order of the court." On the 15th suit was begun the Company wrongfully withof April a receiver was appointed, and the held the possession; and under such circumCompany was ordered at once to "surrender stances equity forbids that it should retain, as possession of its said railroad, rolling stock, and against the mortgagee, the fruits of its refusal all other money and property of every charac- to do what it ought to have done. It is a matter" to him. To this order exceptions were ter of no consequence that a receiver was not taken by the Company, so far as it directed the appointed until April 15, or that an application delivery of money to the receiver, on the was not made for such an appointment until ground "that all the money in its hands or pos- March 24. If the surrender of possession had session was derived by it from the operation of been made, as we must assume it ought to the railroad and other property mentioned in have been, as soon as the suit was begun, a rethe bill, and was its income and the income of ceiver would have been unnecessary. All that said property, and that it had no money what- was done afterwards in that particular was in ever, save such as was thus derived and re- aid of the suit and because of the refusal of the ceived;" and that at no time had the plaintiff Company to comply with the demand that had demanded possession of the property. On the been made. It follows that from the time of 18th of April this motion was denied, but the the bringing of the suit the Company itself is receiver was directed to hold the moneys to be to be treated in all respects as a receiver of the paid him "subject to the order of the court, property, holding for the benefit of whomsoever and to be repaid to defendant should the court in the end it should be found to concern, and so adjudge.' liable to account accordingly. In Galveston, H. & H. R. R. Co. v. Cowdrey, before cited, the controversy was in respect to earnings before suit brought, and the suit was for foreclosure only, the court being careful to say in its opinion that it did not "appear that the complainants or their Trustees made any demand for the tolls and income until they filed the present bill," and that "the bill itself did not contain any allegation of such a demand." On the 27th of March the Company had in its hands $42,123.68. Between that date and April 15 the Company paid out $46,458.16, and its earnings were such that, when added to the $42,123.68, there was enough to make these payments and leave a balance of $32,216.20, which was paid over to the receiver. Certain persons, who were holders of bonds secured by the mortgage of May 1, 1877, recovered judgments at law against the Company for past due coupons amounting in the aggregate to more than the sum thus put in the hands of the receiver, and they presented petitions for payment out of the fund. Afterwards the court ordered the receiver to pay back the $32,216.20 to the Company, and to turn over the mortgaged property to the Trustees. The record does not show that there are any other creditors than such as are secured by the mortgages, which exceed in amount the value of the property. | It remains only to inquire when the money which is the subject matter of the controversy was actually earned; and we have no hesitation in deciding, upon the evidence, that it must have been after the suit was begun. The admission is that on the 27th of March the amount in the hands of the Company was $42,123.68. Between that date and April 15, the Company paid out $46,458.16, which was $4,334.48 in excess of what it had on hand at the beginning. On the 15th of April it had on hand $32,216.20, thus showing that its earnings from March 27 From that part of the decree directing the until then must have been 36,550.68. The restoration of the money to the Company the fair inference from the evidence is that the reTrustees took this appeal. The creditors who ceipts were all from the current earnings and presented petitions for the payment of their the disbursements for the current expenses. judgments did not appeal, so that the only ques- The railroad was all the time, before and after [656] tion presented here is whether the court erred the suit, a "going concern," and its receipts in ordering the receiver to pay the $32,216.20 | and disbursements the subjects of current into the Company instead of the Trustees. come account. Applying the disbursements as | they were made from the income to the pay- | cases is an appeal from a decree of the same ment of the older liabilities for the expenses, court, dismissing an action in equity, brought as is the rule in ordinary running accounts, it by the Receiver, to reduce securities to his posis clear that, in the absence of proof to the con- session, and to restrain attaching creditors. trary, the money on hand was earned pending Judgments in the first three cases affirmed. The decree in the last case reversed. the suit. (See S. C. Reporter's ed. 721–730.) Attachment against national bank-bond on attachment, when void-suit in equity by receiver. 1. An attachment cannot issue against a national bank before judgment in a suit begun in the Circuit Court of the United States. 2. A bond given to dissolve an attachment creates no liability when the attachment on which it is predicated was prohibited by law. Such a bond is not good under the statute, nor at common law. 3. A suit in equity may be maintained, by a receiver of a bank against attaching creditors and sureties on the bonds given to dissolve the attachments, to reduce to the possession of the receiver securities held by such sureties for their protection, and to restrain the attaching creditors from enforcing the attachment bonds, although such bonds are invalid, and a decree in such action will, if the sureties are held not to be liable, conclude the creditors from all further proceedings against them on the bonds. [Nos. 129, 130, 440, 439.] Argued Jan. 9, 10, 11, 1888. Decided Feb. 20, 1888. THE three first named cases were brought to this court by writs of error issued to the Circuit Court of the United States for the District of Massachusetts, to review judgments against the plaintiffs in error, on debts owing by the Bank. The last of the above named See opinion below, 22 Fed. Rep. 694. The facts are fully stated in the opinion. Mr. A. A. Ranney, for plaintiffs in error and appellant: The appellant is a receiver of a national banking association, administering a trust in the winding up of the same; and the power of the court to enjoin the plaintiffs in suits at law is clear. Hendee v. Conn. & P. R. Co. 26 Fed. Rep. 677; R. S. § 5234. Injunction may be made after verdict. The sureties withhold personal securities which cannot be reached by an ordinary legal process of replevin. Brigham v. Home L. Ins. Co. 131 Mass. 319; Story, Eq. § 703, 906; Pierce v. Lamson, 5 Allen, 60. Section 5242 of the Revised Statutes has been construed and enforced in several cases. First Nat. Bank v. Colby, 88 U. S. 21 Wall. 609 (22:687); Harvey v. Allen, 16 Blatchf. 29; Robinson v. Newberne Nat. Bank, 81 N. Y. 385; Market Nat. Bank v. Pac. Nat. Bank, 30 Hun, 50; Raynor v. Pac. Nat. Bank, 17 Jones & S. 119; S. C. 93 N. Y. 371; Horton v. Pac. Nat. Bank (unreported), cited in the brief and opinion in 17 Jones & S. 119; Venango Nat. Bank v. Taylor, 56 Pa. 14; Case v. Citizens Bank, 2 Woods, 23; Irons v. Mfrs. Nat. Bank, 6 Biss. 301. The courts in New York have allowed at tachments in that State, in the state courts, of the property of solvent banking associationsthat is to say, of other States. Bowen v. First Nat. Bank, 34 How. Pr. 408; Southwick v. First Nat. Bank, 7 Hun, 96. A national bank could not be put into insolvency and wound up under the state Insolvency Acts. Re Mfrs. Nat. Bank, 5 Biss. 499. If evil intention is a material element, the court will find it. Case v. Citizens Bank, supra; Watson v. Taylor, 88 U. S. 21 Wall. 378 (22:576); Forbes v. Howe, 102 Mass. 427. The statute does not allow the attaching creditor a preference. Venango Nat. Bank v. Taylor, supra. As to what constitutes insolvency under Revised Statutes, § 5242, see Market Nat. Bank v. Pac. Nat. Bank, 30 Hun, 50; Robinson v. Newberne Nat. Bank, 81 N. Y. 385. When a national banking association becomes insolvent, the right of a creditor to prosecute a suit is a limited one. Bethel Nat. Bank v. Nat. Pahquioque Bank, Bank, 100 U. S. 446 (25:695). 81 U. S. 14 Wall. 383 (20:840); Case v. Citizens The principles of law which should preclude the defendants in error from getting judgment are established in the following cases: R. S. § 5242; First Nat. Bank v. Colby, 88 U. S. 21 Wall. 609 (22:687); Schmidt v. First Nat. Bank, 22 La. Ann. 314; Robinson v. Newberne Nut. Bank, 81 N. Y. 385; Stanton v. Wilkeson, 8 Ben. 357; Harvey v. Allen, 16 Blatchf. 29; Raynor v. Pac. Nat. Bank, 93 N. Y. 371; Market Nat. Bank v. Pac. Nat. Bank, supra. No attachment shall be issued before final judgment. Chesapeake Bank v. First Nat. Bank, 40 Md. 269; Cent. Nat. Bank v. Richland Nat. Bank, 52 How. Pr. 136. The power of the court over the judgment is clear. It has been exercised often. Bates v. Tappan, 99 Mass. 376; Peck v. Jenness, 48 U. S. 7 How. 612 (12:841); Upton v. Hubbard, 28 Conn. 277; Case v. Citizens Bank, supra; Leighton v. Kelsey, 57 Me. 85; Kittredge v. Emerson, 15 N.H. 227; Goodsell v. Benson, 13 R. I. 225. Messrs. Joshua D. Ball, Alfred D. Foster, Richard Stone and Henry Wheeler, for defendants in error and appellees: Grant v. First Nat. Bank, 97 U. S. 80 (24:971); Barbour v. Priest, 103 U. S. 293 (26:478); Stucky v. Masonic Sav. Bank, 108 U. S. 74 (27:640); Medsker v. Bonebrake, 108 U. S. 67 (27:654); Tiffany_v. Lucas, Dutcher v. Im porters & T. Nat. Bank, and Wilson v. City Bank, supra. It is no defense to the sureties upon a bond to dissolve an attachment, that the original attachment was invalid, or that no attachment was ever made. Coleman v. Bean, 1 Abb. App. Dec. 394; McMillan v. Dana, 18 Cal. 339; Bacon v. Daniels, 116 Mass. 474. Or that the property attached did not belong to the defendant. Beal v. Alexander, 1 Rob. (La.) 277; Hazelrigg v. Donaldson, 2 Met. (Ky.) 445; Pierce v. Whit Or that the sureties were induced to sign by the fraud of the principal, unless the attaching plaintiff was party to the fraud. There is nothing which prevents a suiting, 63 Cal. 538. against even an insolvent bank, and the prosecution of the suit to a final judgment. The appointment of a receiver does not abate the suit, or prevent its further prosecution. Bethel Nat. Bank v. Nat. Pahquioque Bank, 81 U. S. 14 Wall. 383 (20:840); Central Nat. Bank v. Conn. Mut. L. Ins. Co. 104 U. S. 54, 76 (26:693, 702); Rosenblatt v. Johnston, 104 U. S. 463 (26:833); Com. Nat. Bank v. Mechanics Nat. Bank, 94 U. S. 437 (24:176); Watson v. Phænir Bank, 8 Met. 217; Security Bank v. Com. Nat. Bank, 2 Hun, 287; Tracy v. First Nat. Bank, 87 N. Y. 523; Folger v. Col. Ins. Co. 99 Mass. 276; White v. Knox, 111 U. S. 784 (28:603); Taylor v. Columbian Ins. Co. 14 Allen, 353. Bankruptcy or the insolvency of a corporation, and the appointment of an assignee, do not prevent suits against the corporation. New Lamp Chimney Co. v. Ansonia Brass & C. Co. 91 U. S. 656 (23:336); Coburn v. Boston Papier Maché Mfg. Co. 10 Gray, 243; Johnson v. Somerville Dyeing & B. Co. 15 Gray, 218; Chamberlin v. Huguenot Mfg. Co. 118 Mass. 532; Munson v. Boston, H. & E. R. Co. 120 Mass. 81; Athol Nat. Bank v. Hingham Mfg. Co. 121 Mass. 399; First Nat. Bank v. Hingham Mfg. Co. 127 Mass. 563; Phanix Warehousing Co. v. Badger, 6 Hun, 293. A receiver takes merely the rights of the bank. Casey v. La Société de Credit Mobilier, 2 Woods, 77; Hubbard v. Hamilton Bank, 7 Met. 340, 346; Watson v. Phonix Bank, 8 Met. 217, 222; Curtis v. Leavitt, 15 N. Y. 44, 45, 106; Lincoln v. Fitch, 42 Me. 456, 469; High, Receivers, $359; Beach, Receivers, § 474. There was no intent to prefer. The pursuit by a creditor of his legal remedies cannot be an illegal preference. An intent to prefer is essential to constitute a preference. Wilson v. City Bank, 84 U. S. 17 Wall. 473, 484-488 (21:723, 727, 728); Tenth Nat. Bank v. Warren, 96 U. S. 539 (24:640); Mays v. Fritton, 87 U. S. 20 Wall. 414, 420 (22:389, 391); Tiffany v. Lucas, 82 U. S. 15 Wall. 422 (21:199); Jones Howland, 8 Met. 377, 386-388; Smith v. Mer rill, 9 Gray, 144; Curtis v. Leavitt, 15 N. Y. 109-112. Payment of a check by a bank, insolvent, the depositor being wholly ignorant of its financial condition, will be protected. Dutcher v. Importers & T. Nat. Bank, 59 N. Y. 5; Wilson v. City Bank, supra. The attaching creditors believed the Bank solvent. Dair v. U. S. 83 U. S. 16 Wall. 1 (21:491); Carroll Co. v. Ruggies, 69 Iowa, 269; Coleman v. Bean, supra. Or the discharge in bankruptcy, of the defendant, after the judgment was obtained. McCombs v. Allen, 82 N. Y. 114; N. E. Steam & G. Pipe Co. v. Parker, 10 Gray, 333. Refusal to pay a disputed claim cannot be considered as any evidence of insolvency. Re Westcott, 7 Nat. Bank. Reg. 285; Re Her cules Mut. L. Assur. Society, 6 Nat. Bank. Reg. 338, 349; Re Manheim, 7 Nat. Bank. Reg. 342. By the execution of the bond to dissolve the attachment, the defendant Whitney does not obtain any preference over the other creditors. Petty v. Cooke, L. R. 6 Q. B. 790; Newington v. Levy, L. R. 5 C. P. 612; Watson v. Poague, 42 Iowa, 582. A certificate of deposit has all the attributes of an ordinary promissory note. Pardee v. Fish, 60 N. Y. 265; Miller v. Austen, 54 U. S. 13 How. 218 (14:119); Kilgore v. Bulkley, 14 Conn. 363. The bond is not a substitute for the property attached. Mass. Pub. Stat. chap. 161, § 122; U. S. R. S. § 933; Tapley v. Goodsell, 122 Mass. 182; Carpenter v. Turrell, 100 Mass. 452; Gass v. Smith, 6 Gray, 112; Irvin v. Howard, 37 Ga. 18. Even if the attachment had been void, the sureties would not be discharged. McMillan v. Dana, 18 Cal. 339; Hazelrigg v. Donaldson, 2 Met. (Ky.) 445; Beal v. Alexander, 1 Rob. (La.) 277; Bacon v. Daniels, 116 Mass. 474; Brandt, Sureties, $408. Being merely a substitution of one security for another, this transfer cannot be avoided, unless the previous transfer of the certificate was invalid. Cook v. Tullis, 85 U. S. 18 Wall. 332 (21:933); Tiffany v. Boatman's Sav. Inst. 85 U. S. 18 Wall. 375 (21:868); Clark v. Iselin, 88 U. S. 21 Wall. 360 (22:568); Sawyer v. Turpin, 91 U. S. 114 (23:235); Stevens v. Blanchard, 3 Cush. 169. The transfer of the certificate of deposit to these defendants is legal and valid, unless it was in violation of some provision of the Banking Act. Reed v. McIntyre, 98 U. 8. 507, 510 (25:171, 172); Yeatman v. New Orleans Sav. Inst. 95 U. S. 765 (24:589). "Insolvency," as applied to a national bank, means an inability to pay its debts in the ordinary course of business, as banks usually do; an "act of insolvency" is a failure so to pay its debts; and "contemplation of insolvency is an expectation that it will be unable so to pay its debts. Toof v. Martin, 80 U. S. 18 Wall. 47 (20:482); Wager v. Hall, 83 U. S. 16 Wall. 599 (21:505); Paige v. Loring, 1 Holmes, 275, 277; Beals v. Quinn, 101 Mass. 262. If it is found that no preference was in fact intended, then the transaction is not in law a preference, even if the result is to give one creditor an advantage over another. Tiffany v. Lucas, 82 U. S. 15 Wall. 410 (21: 198): Tiffany v. Boatmans Sav. Inst. 85 U. S. 18 Wall. 875 (21:868); Re McKay, 1 Low. 562; Rice v. Grafton Mills, 117 Mass. 228, 232. The refusal to pay disputed claims was not an act of insolvency. Re Hercules Mut. L. Assur. Soc. 6 Nat. Bank. Reg. 338; Re Westcott, 7 Nat. Bank. Reg. 285; Re Manheim, 7 Nat. Bank. Reg. 342. The bonds stand in place of the attachments. Lehman v. Berdin, 5 Dill. 340; Bildersee v. Aden, 62 Barb. 175; Cadwell v. Colgate, 7 Barb. 253; Homan v. Brinckerhoff, 1 Denio, 184; Gass v. Williams, 46 Ind. 253; Egan v. Lumsden, 2 Disney, 168; Love v. Voorhies, 13 La. Ann. 549. The bond, even if it does not conform to the requirements of the statute, is good at common law. mained until March 18, 1882, when its doors were opened for business with the consent of the Comptroller of the Currency. By statute in Massachusetts civil actions are begun by original writ, which "may be framed either to attach the goods or estate of the defendant, and, for want thereof, to take his body; or it may be by original summons, with or without an order to attach the goods or estate." Pub. Stat. Mass. 1882, chap. 161, §§ 13, 14. "All real and personal estate liable to be taken on execution *** may be attached upon the original writ in any action in which debt or damages are recoverable, and may be held as security to satisfy such judgment as the plaintiff may recover." Sec. 38. A person or corporation whose goods or estate are attached on mesne process in a civil action may, at any time before final judgment, dissolve such attachment by giving bond with sufficient sureties, with condition to pay to the plaintiff the amount, if any, that he may recover within thirty days after the final judgment in such action.' Sec. 122. At the time the Bank resumed business, it was indebted to George Mixter in the sum of $15,000; to Henry M. Whitney also in the sum of $15,000; to Daniel L. Demmon in the sum of $25,000; and to Calvin B. Prescott in the sum of $5,000. On the 24th of March, 1881, Mixter and Prescott each began a suit against the Bank in the Circuit Court of the United States for the Dis Mosher v. Murphy, 121 Mass. 276; Smith v.trict of Massachusetts, by writ directing an atMeegan, 122 Mass. 6; Sweetser v. Hay, 2 Gray, 49: Central Mills Co. v. Stewart, 133 Mass. 461. The breach of the Bank's agreement would be no defense to an action on the bond against the suretics. Butler v. U. S. 88 U. S. 21 Wall. 272 (22-614); York County M. F. Ins. Co. v. Brooks, 51 Me. 506; Ordinary v. Thatcher, 41 N. J. L. 403; Dixon v. Dixon, 31 Vt. 450; Passumpsic Bank v. Go88, 81 Vt. 315; Brown v. Hazen, 11 Mich. 219; Yorkshire Railway Wagon Co. v. Maclure, L. R. 19 Ch. Div. 478; Chambers v. Manchester & M. R. Co. 5 Best & S. 588, 612; Dair v. U. S. 83 U. S. 16 Wall. 1 (21:491); Carroll County v. Ruggles, 69 Iowa, 269; Brown v. Kent County Probate Judge, 42 Mich. 501. Even if a surety be induced to sign by the fraud of the principal, this will afford him no defense if the obligee be not a party to the fraud. Mason Lumber Co. v. Buchtel, 101 U. S. 633 (25:1072); Coleman v. Bean, 1 Abb. App. Dec. 894; Lepper v. Nuttman, 35 Ind. 384; Western N.Y. L. Ins. Co. v. Clinton, 66 N. Y. 326; Ladd v. Trustees, 80 Ill. 233; Anderson v. Warne, 71 Ill. 20; Graves v. Tucker, 10 Smedes & M. 9; Kelly v. Christal, 16 Hun, 242. tachment, to recover the amounts due them respectively. Demmon also began a suit in the same court and in the same way on the 28th of March, to recover the amount due him, and Whitney another on the 28th of April, upon the claim in his favor. At the time these suits were begun, the Bank had money on deposit to its credit in the Maverick National Bank and in the Howard National Bank, and the necessary steps were taken to subject these deposits to the attachments which were issued in the several suits. The Bank arranged with Lewis Coleman and John Shepard to become its suretics upon bonds to dissolve attachments in any actions that might be brought against it, and placed in their hands a certificate of deposit in the Maverick National Bank for $100,000, to be held as their protection against all liabilities which should be thus incurred. This certificate was afterwards exchanged for $121,000 of the bonds of the Nantasket Company, $20,000 of the bonds of the Toledo, Delphos and Burlington Railroad Company, and $15,000 of the bonds of the Lebanon Springs Railroad Company. Immediately after each of the attachments in the above actions had been made, the Bank executed a bond to the plaintiff in a penal sum Mr. Chief Justice Waite delivered the opin-suited to the amount of the claim, with Coleman ion of the court: end Shepard as its sureties, reciting the attachAll of these cases involve the same generalment, and that the Bank" desires to dissolve question, and they may properly be considered and decided together. From the records it appears that the Pacific National Bank of Boston was an association for carrying on the business of banking, organized under the National Bank Act. On the 20th of November, 1881, it became embarrassed, and was placed in charge of a bank examiner, in whose control it re said attachment according to law," and conditioned to be void "if the Pacific National Bank of Boston shall, within thirty days after the final judgment in the aforesaid action, pay to the plaintiff therein named the amount, if any, which he shall recover in such action." Upon the execution of the bond in each case, the attachment was dissolved. [722 [723 4] 25] After this the Bank closed its doors a second | or its property, before final judgment in any When the Receiver was appointed he found the several suits which had been commenced still pending. In the cases of Mixter, Whitney and Demmon he appeared, answered for the Bank, filed motions to discharge the attachments, and motions to dismiss the suits. His motions were all overruled, and, his defenses not being sustained, judgments were rendered against the Bank in each of the cases, for the amounts found to be due the several plaintiffs respectively. For the review of the action of the court in these cases the writs of error which are now under consideration were brought. The suit of Prescott still remains undisposed of in the circuit court. Section 52 of the original National Bank "That all transfers of the notes, bonds, bills This was evidently intended to preserve to In the view we take of the case, the most im- In the Revision of the Statutes, section 52 of aid to the enforcement of the principle of equality among the creditors of an insolvent bank. But however that may be, it is clear to our minds that, as it stood originally as part of section 57 after 1873, and as it stands now in the Revised Statutes, it operates as a prohibition The amending Act was as follows: upon all attachments against national banks "That section fifty-seven be amended under the authority of the state courts. That by adding thereto the following: 'And provided was evidently its purpose when first enacted, further, That no attachment, injunction, or exe-1or then it was part of a section which, while cution shall be issued against such association, I providing for suits in the courts of the United |