ruled in Marsh v. Fulton Co. supra, therefore, does not touch this case. Nor was there anything decided in Clearwater v. Meredith, 1 Wall., 25, 17 L. ed. 604, which sustains in any degree the defense set up on behalf of the defendants.

We have, then, in brief, this case: the people of Putnam County, in pursuance of law, voted a county subscription for stock in a railroad company, to be paid for with county bonds. The financial agents of the County agreed to make the subscription, and the company accepted it. The bonds were made payable to the company, or bearer, but before they were delivered, the company became consolidated with another, in pursuance of authority conferred by the law in force when the subscription was voted, and at the instance of the Board of Supervisors of the County. All the conditions precedent to the delivery of the bonds were complied with to the satisfaction of the county agents, certificates for the stock were received, and the bonds were delivered and sold. The plaintiff is a bona fide holder of some of the coupons for value paid. It would, we think, be a reproach to the administration of justice if he cannot enforce the payment of those coupons, and we see no principle of law or equity that stands in the way of his action. He found the bonds and the coupons upon the market, payable to the Kankakee and Illinois River Railroad Company, or bearer. Proposing to buy, he had only to inquire whether the County was, by law, authorized to issue them, and whether their issue had been approved by a popular vote. He was not bound to inquire further, and had he inquired he would have found full authority for the issue, and if he had also known of the consolidation it would not have affected him.

The judgment of the Circuit Court is reversed, and the cause is remitted with instructions to overrule the defendant's demurrer. Dissenting, Mr. Justice Davis and Mr. Jus

tice Miller.

1*]*THOMAS BARING et al., Doing Business, etc., as Baring, Brothers & Co., Maria Simmons, Jane V. Bowley, Exrx., etc., Edmund Bowley, Her Husband, and Amoldus V. Dawson et al., Plffs. in Err.,

v.

CHARLES H. DABNEY et al., Doing Business, etc., as Dabney, Morgan & Co., The Bank of South Carolina, Thomas R. Waring, et al.

(See S. C., 19 Wall., 1-12.)

Insolvent bank, application of assets of debts of State-trust for creditors-void legislative Act.

1. Though the stock of a bank be altogether owned by a State, if the bank is insolvent, its assets cannot be appropriated by legislative Act or otherwise to pay the debts of the State, as distinguished from the debts of the bank. Those as

Headnotes by Mr. Justice BRADLEY.

NOTE. What laws are void as impairing the obligation of contracts; Vested rights-see note to Fletcher v. Peck, 3 L. ed. U. S. 162.

sets are a trust fund, first applicable to the pay.

ment of the debts of the bank.

2. An Act of the Legislature requiring the managers of an insolvent bank belonging to the State to hold its assets appropriated to the payment of certain specified debts, creates a trust in favor of the creditors holding said debts, and if assented to by them, amounts to a contract with them to carry out said trusts.

propriate the assets of the bank to pay the debts 3. If such an Act, however, has the effect to apof the State to the prejudice of bill holders and other creditors of the bank, it is repugnant to that impairing the obligation of contracts, and is void. clause of the Constitution which prohibits a law

4. Such an Act, passed by the Legislature of South Carolina in reference to the assets of the Bank of the State of South Carolina, declared to be void.

[No. 153.]

Argued Dec. 12, 1873. Decided Mar. 3, 1874. IN ERROR to the Supreme Court of the State of South Carolina.

The case is stated by the court. Messrs. W. W. Boyce, J. B. Campbell and Isaac W. Hayne, for plaintiffs in error:

1. The language of the 11th section of the Act of 1865, referred to in the decision of the Supreme Court of South Carolina, it is submitted, evinces not merely an assertion by the State of its proprietary rights, as claimed by the Chief Justice, but is a dedication of the assets and property of the Bank to the purposes named.

In support of this view, we appeal to the language itself, connected with the fact that the Fire Loan bondholders had, for nearly thirty years, been taught by the Legislature and the Bank to look to the "assets and property of the Bank," as pledged and set apart for their security.

See report of Investigating Committees of the Legislature, 1841, Bank Compilation, p. 251; Resolutions passed by the Senate, in 1846; Vide Bk. Comp. p. 87; Report of President of the Bank, 1843, Bk. Comp., 555; RePort of President of the Bank, 1847, Bk. Comp.,

317.

2. When the Legislature, as expressed by Chief Justice Moses, not representing the sovereignty of the State, but in its capacity as sole stockholder, imposed upon the President and Directors of the Bank the duty of collecting and holding the assets and property of the Bank, especially appropriated to the payment of the preferred creditors, and proclaimed the dedication in a public Act, the relation of trustee and cestui que trust between the President and Directors and the preferred creditors, was at once established.

3. The Act proclaiming the dedication thus became a contract in the nature of an assignment; the consideration moving being the indebtedness, and the assent of preferred creditors being presumed.

4. A change of legal title was not necessary to vest in the cestui que trust their equitable rights, and once vested, the dedication was irrevocable.

The second, third and fourth propositions are sustained by the following authorities:

(a) As to rights of cestui que trust. Sunbar v. Winding, Cheves, 218; Woodruff v. Trapnall, 10 How., 190; Paup v. Drew, 10 How., 218; Curran v. Ark, 15 How., 304.

(b) As to presumptions of assent.

Burr. on

Assignments, 330; Brooks v. Marbury, 11 Wheat., 78; North v. Turner, 9 Serg. & R., 244; Lawrence v. Davis, 3 McLean, 177; Halsey v. Whitney, 4 Mas., 207; Tompkins v. Wheeler, 16 Pet., 118; Nicoll v. Mumford, 4 Johns. Ch., 522; Cunningham v. Freeborn, 11 Wend., 240; Ingram v. Kirkpatrick, 6 Ired. Eq., 463; Evans v. Lamar, 21 Ála. 333.

(c) As to consideration. Burr, on Assignments, 239; Halsey v. Whitney, 4 Mas., 206; Dey v. Dunham, 2 Johns. Ch., 182; Lawrence v. Davis, 3 McLean, 177.

(d) As to change of legal title.

This was unnecessary, because the President and Directors were already the "legal owners." They held upon such trusts as their principal, the Legislature, chose to impose. The Act of 1865 directed them to hold upon new trusts, hence it did not change the legal title though certain equitable rights, quite as sacred as a legal title, sprung up under it, and the beneficial interest became irrevocably fixed in the cestui que trust, and was enforceable through the courts.

5. If the provisions of the 11th section of the Act of 1865 were originally revocable, for the want of expressed assent of the preferred creditors, the acceptance of the trust by the President and Directors, their action under it for more than two years, the acquiescence of the creditors, their claim and assertion of their rights in this case (begun before Sep. 15, 1868, continued up to that time and not yet closed) prove conclusively that the revocation or repeal, Sep. 15, 1868, was too late. The rights of creditors had surely vested then, and the contract become complete. Burr. Assignments, 458; Siggers v. Evans, 32 Eng. L. & E., 139.

The fourth and fifth assignments of error would be irrelevant under the old practice, but as the effect of the Act of Congress of 1867 has not been determined, we present the following authorities in support of the proposition implied in the 4th assignment of error, namely: that, by the lien created by the Act of 1838, the Bank and all its property and assets were pledged in the pledge of profits; pledged until the debt for which they stand as security is paid; and that, upon condition broken, the court had authority to order a sale of the entire corpus.

Stewart v. Garnett, 3 Sim., 398; Inhabitants of Rehobath v. Hunt, 1 Pick., 224; Legard v. Hodges, 3 Bro. Ch., 531, 1 Ves., Jr., 477 and 4 Bro.Ch.,421; Phillips v. Chamberlaine, 4 Ves.51. As to the fifth assignment of error if, as the Supreme Court of South Carolina decides, the Fire Loan stockholders are not creditors of the Bank, every presumption is against their holding a lien upon the assets of the Bank. The bond holders are unquestionably creditors of the Bank by reason of its indorsement on the bonds, and the negotiations of Mr. McDuffie, the accredited agent of the Bank. Upon the faith of that lien, urged by said agent as an additional security for the debt, the loan was made. The dealings were direct and explicit between the bond creditors and the Bank, and the whole transaction was part and parcel of the "arrangement" sanctioned by Mr. McDuffie. It was the action of the accredited agent of the Bank and of the State under the powers conferred by section 2 of the Act of 1838, added

to the provisions of sections 11 and 12, which perfected the lien claimed by the bond holders. When the stock was issued, the agency of Mr. McDuffie had ceased, and no similar arrangement and negotiation took place. The stockholders rely on the naked Act, under the 1st section of which the stock was issued.

If, in the case of the stock issued, a lien existed at all, it was intended only as a security to the State, and the State, in 1865, had a right to waive this security and did so, to a certain extent, by the Act of 1865.

Messrs. D. H. Chamberlain, and A. G. Magrath, for defendants in error:

I. Although the State owned and controlled this Bank, from its creation to its close, the legal relations of the Bank to its creditors, and of its creditors to the Bank, are precisely the same as if it had been the property of private stockholders.

U. S. Bk. v. Planters' Bk., 9 Wheat., 904; Briscoe v. Ky., 11 Pet., 257; Curran v. Ark., 15 How., 304.

It is claimed on behalf of the Fire Loan bond holders and stockholders (that is, the holders of the bonds and stock issued under the Act of 1838) that the provisions contained in the Act of 1838, in the 10th, 11th and 12th sections, now quoted, constitute a pledge in legal effect of the present assets of the Bank.

So far as the words of this Act go, this is a pledge and setting apart of nothing but the profits of the Bank.

That the word "fund" employed in the 11th section has reference to the profits just before named, seems entirely clear.

II. In order to determine whether the Fire Loan creditors have a lien in the present assets of the Bank, under the Act of 1838, it becomes necessary to inquire next, of what the present assets consist, or what they represent.

If they do not represent profits then they are not covered by the lien or pledge of the Act of 1838.

By the 11th section of the Act of 1838, the Bank was directed to keep a separate account of the profits arising from the $2,000,000 of additional capital created under that Act.

It appears, however, by the testimony of Mr. Waring, Cashier of the Bank, and connected with it since 1838, that such an account was never kept.

How, then, can it be said that the present assets are the result of or represent the profits pledged by the 11th section of the Act of 1838? For, in order to sustain their present claim, the Fire Loan creditors are bound to show that the assets which they claim are what was pledged by the Act of 1838. If this cannot be done, their claim must fail.

The question, therefore, arises: if the present assets of the Bank do not represent the profits of the $2,000,000 of additional capital pledged by the 11th section, do they represent the general profits of the Bank pledged by the 12th section?

It is conceded that the Bank is insolvent. Its capital is, therefore, wholly gone. Nothing remains but the assets in question. On what ground can these assets be held to be profits? Have they ever been so considered by the Legislature?

As has already been shown, in 1821 the Leg

ward.

In 1852, 12 Stat. at L., 150, by Act of the Legislature, the Bank was directed to "Carry the profits of the Bank to the credit of the sinking fund, and to keep the account of that fund so as to show at all times what particular bonds, notes, stocks and other securities belong to said fund."

No such account was ever kept, and it is in evidence that the sinking fund was banked upon like other capital, and its proceeds commingled with the other property of the Bank. Report of Comp.-General, 1831, Bk. Comp., 692; Report of Bank President, 1843, Bk. Comp., 555; Report of President, Reports and Res. 1863, pp. 72, 73.

If, therefore, the sinking fund represented the "profits" of the Bank, which, in the first instance would have been included in the pledge of the Act of 1838, how may we know that the present assets represent the sinking fund?

III. We come now to consider the more general, as well as more decisive question: what do the assets of an insolvent bank represent? Or, to put the question more specifically: do they represent, in any sense, profits?

What are profits?

A sound definition is found in 1 Lindley on Partnership, 695, where it is said that the word "profit" presupposes an excess of the value of returns over the value of advances.

If the exact amount advanced is returned, there is no loss or profit. If less, there is loss. If more, profit.

If, at any previous period, there were profits which were again employed as capital, and the result at the end is insolvency, it may be that some part of the remaining assets are the result of the previous profits; but how does that fact alter the other fact that at the time when the assets are to be disposed of, there has been a loss, not only of all profits previously made, but of all the capital, so that the entire assets fail to pay the debts?

If there were a pledge of the profits of the business, it might be that that pledge would cover any specific assets which could be pointed out as the representative of profits previously made; but, unless this can be done, the assets represent simply what remains of all that was invested, the entire capital of whatever kind, and not profits.

Such is the condition of this Bank of the State of South Carolina. Whatever it has heretofore had to do business with, to bank upon, all its capital is gone, so far as its sole stockholder is concerned, and that capital exists only in the form of assets, unequal in amount to the debts it owes.

Certain creditors of the State had a pledge of the profits of this Bank; but now, when they seek to assert that pledge, there are no profits in existence, and nothing which can be pointed out as the result of the profits of former years. Dinham v. Bradford, L. R., 5 Ch. App. Cas.,519. But it has been urged, in this case, that the State has, from time to time, withdrawn large amounts from the profits of the Bank, equal in amount to more than the entire capital advanced, with seven per cent. interest.

But how does that affect the present ques

assets of the Bank.

To show that large profits have been received by the State, does not tend to show that these present assets are profits.

IV. We have thus far considered the Act of 1838, in its relations to the entire Fire Loan debt; the Fire Loan bond holders represented by Baring Brothers & Company, and the Fire Loan stockholders represented by the other plaintiffs in error?

The next question is: is there a difference between these two classes in respect to their claims upon these assets?

We have maintained that neither of these two classes of creditors have any lien or prior claim upon the assets. So far, they stand upon a level.

We now maintain that there is a difference between these two classes of cases, which consist in this: that the Fire Loan bond holders, by reason of the guaranty by the Bank indorsed on their bonds, became creditors of the Bank, and are entitled to take alike with the other creditors of the Bank, and that the Fire Loan stockholders, having no such guaranty, are creditors of the State only, and not of the Bank.

V. But the plaintiffs in error, if their claim to be the bond holders of a specific and prior lien on these assets is not allowed, make a further claim, under the 11th section of the Act of 1865, already quoted.

The Act of 1868, entitled "An Act to Close the Operations of the Bank of the State of South Carolina," 14 Stat. at L., 22, by its 11th section expressly repeals the 11th section of the Act of 1865.

The question, therefore, is of the effect of the 11th section of the Act of 1865 on the assets of the Bank; and of the validity of the subsequent repeal of that section by the Act of 1868.

For the purposes of this argument, it may be conceded that the State, in passing the 11th section of the Act of 1865, acted in the capacity of sole stockholder, and that the Act of 1865 has the same effect as a similar resolution of the body of stockholders of a private bank would have.

It may be further conceded that a preference, if fair and honest, may be given by an insolvent person or corporation to certain creditors, to the exclusion of other creditors.

A corporation, unless restricted by its charter or prevented by the operation of some Bankrupt or Insolvent Law, may, by virtue of its general power to contract, make an assignment of its effects, entire or partial, with or without preferences, if made bona fide for the payment of its debts.

Abb. Dig. Law of Corp., and cases there cited; Ang. & Ames, Corp., 155, 156.

Does the Act of 1865 amount, in a legal sense, to an assignment of the assets of the Bank? In the first place, the title to this property was in the Bank, and not in the State.

The State, though the sole stockholder, was not the Corporation, nor the legal owner of the assets and property of the Corporation.

The Act of 1865 could not, therefore, operate, of its own force, to effect an assignment, because, the legal title being in the Corporation

If it was intended to be an assignment, it could not be so in legal contemplation without the action of the Bank itself.

An assignment, when once it takes effect, changes the legal title and ownership of the property. It passes by the assignment, ex vi termini, from the ownership of the assignor to that of the assignee.

Inasmuch, then, as the legal title was never in the State, no Act of the Legislature could, of itself, work an assignment or change of own ership. The title must pass from the one who holds it.

The Act of 1865, so far as it attempts to apply any portion of these assets to the payment of the Fire Loan stock, is, consequently, an attempt to divert the funds, which are only applicable to the payment of the creditors of the Bank.

That this cannot be done by the State as sole stockholder any more than by the body of private stockholders, has been emphatically held by this court in Curran v. Ark., 15 How.. 304, and again in R. Co. v. Howard, 7 Wall., 409, 19 L. ed. 120.

Mr. Justice Bradley delivered the opinion of the court:

In 1812, the Legislature of South Carolina by Legislative Act created a Bank to belong wholly to the State and the capital to consist of all the stocks, bonds and securities which belonged to the State. The President and directors were to be elected by the Legislature and were made a Corporation or body politic. The faith of the State was pledged for the support of the Bank for the supply of any deficiency in the funds specially pledged and for making good all losses arising from such deficiency. The usual powers were conferred upon the Corporation; to purchase, hold and transfer property of all kinds; to sue and be sued; to adopt its own rules and by-laws; to issue notes and to make loans by way of discount secured by mortgage; and to do all acts which might appertain to its functions as a Bank.

In December 1821, by another legislative Act the future profits of the Bank were pledged and set apart for the payment of the six per cent. stock previously issued by the State.

In 1838, the City of Charleston suffered from an extensive fire, and the Legislature passed an Act entitled "An Act for Rebuilding the City of Charleston."

By the 1st section of this Act the Governor was directed and required in the name of the

State to issue bonds or other contracts not exceeding $2,000,000 for the purpose of procuring a loan on the credit of the State to rebuild the burnt portion of the City of Charleston; and the faith and funds of the State were pledged for the punctual payment of the bonds or contracts with interest.

By the 3d section the money when realized in Charleston was to be deposited in the Bank of the State of South Carolina and become a part of the capital of the Bank.

By the 10th, 11th and 12th sections it was enacted as follows to wit:

Sec. X. "It shall be the duty of the President

Sec. XI. "It shall be the duty of the President and Directors of the Bank of the State of South Carolina to cause to be opened in the books of said Bank an account in which they shall debit themselves with the profits arising [*3 out of the additional capital created out of the $2,000,000 loan aforesaid for the year ending October 1, 1839, and with all the future profits of the said loan as the same shall hereafter be annually declared; which said fund with its annual accumulations shall be considered solemnly pledged and set apart for the payment of the interest of said loan and the final redemption thereof: and it shall be the duty of the President and Directors of the said Bank annually to report to both branches of the Legislature the exact state of that fund.”

Sec. XII. "When the profits of the said Bank of the State of South Carolina shall have paid the interest of certain stocks for which they had been heretofore pledged and set apart, the said profits shall also be considered solemnly pledged and set apart for the payment of the interest on the said loan and the final redemption thereof."

Under this Act a large amount of bonds known as "fire loan" bonds, were issued and negotiated of which £109,000, payable in London and due in 1868, are still outstanding in the hands of Baring Brothers & Co. These bonds by an indorsement thereon were guarantied by the Bank.

Other certificates of state stock known as "fire loan" stock were also issued under the Act, payable at the State Treasury and not expressly guarantied by the Bank; of which $318,000 are still outstanding in the hands of the other plaintiffs in error.

At the close of the war the Bank became insolvent and the General Assembly passed an Act Dec. 21, 1865, entitled "An Act to Raise Supplies For the Year, etc.;" by the 11th section of which it was enacted as follows:

Sec. 11. "That the President and Directors of the Bank of the State of South Carolina be, and they are hereby authorized and required to close the branches and agencies of said Bank, and that the principal Bank at Charleston shall cease to be a Bank of issue but shall continue to act as a Bank of deposit until further action of the Legislature; and the said President and Directors are hereby authorized and required to collect the assets and property of the Bank and hold the same especially appropriated, first to the payment of the principal and interest of the bonds known as the Fire Loan bonds, payable in Europe; second, to the payment of the principal and interest of the Fire Loan bonds payable in the United States; and third, to the redemption of outstanding notes hitherto issued by said Bank."

In October, 1867, before the scheme, provided in this Act, was carried out, Dabney, Morgan & Co., holding bills of the Bank, filed the bill in this case in the chancery court in the State

for Charleston District on behalf of themselves and all other bill holders of the Bank insisting that the Fire Loan bond holders and Fire Loan stockholders were not creditors of the Bank and