that besides our yielding to that condition they would ask us to spend money for it. As for the supercargo, we agree to give him a first-cabin accommodation gratis on board, but he shall have to pay to the steward of the boat the food, as we do for the officers and crew. Marzo is now here in dry dock, and loads end of this week for Baltimore.

"Yours, truly, Aznar y Astigarraga.' "Indorsement on margin: If delivery is accepted Baltimore, to whom must boat be delivered there? or whom Philadelphia or New York? Please wire before steamer leaves this port. As agreed, we suppose payment shall be made in London one month in advance.'

"That on January 9, 1886, said Walker, Donald & Taylor transmitted a copy of said letter to Hurlbut at New York, and the latter, on January 18th, inclosed copy to Booth, the broker for charterers.]

"Ninth. [That the steamship Marzo sailed from Bilbao on January 15, 1886, for Philadelphia, where she duly arrived, and on the 18th of February was tendered to the charterers, who accepted her as in their service under the charter from the date of February 21, 1886.

"That the charterers, after acceptance of the vessel on February 21st, loaded and dispatched her to Cuba and return to Philadelphia, at which latter port she arrived about March 18, 1886.

"That upon her arrival at Philadelphia, Smith, the manager of the charterers, went over to Philadelphia, and for the first time stated to the master of the vessel that it was possible something would be required to be done towards fitting the tanks for petroleum on the voyage next after the one for which she was loading, to which the master replied that he must be notified in time, because the owners understood the fitting of the tanks would be at the cost of the charterers, to which Smith replied, That will be arranged.' "The vessel then for the second time proceeded to Cuba, and loaded thence for Boston, arriving at the latter port early in May; that while the vessel was still in Boston the charterers wrote to the agents of the vessel at New York as follows:

"New York, May 13th, 1886. "Messrs. Latasa & Co., City-Gentlemen: We learn from the captain of the Marzo that he will complete his discharge at Boston today, and that he will reach here to-morrow. We beg to again call your attention to the fact that we are now prepared to ship oil in bulk, and we shall expect the steamer to be put in proper condition to receive it this trip. We will gladly give you all the assistance we possibly can to hurry forward the work, for we do not wish the steamer to be unnecessarily detained any more than you do. "Yours, very truly, R. A. C. Smith,

66

Sec'y.' "And on May 17, 1886, again wrote as

follows:

"New York, May 17th, 1886. "Messrs. Latasa & Co., Agents for Owners of S. S. Marzo-Dear Sirs: Please take notice that we are prepared to ship oil in bulk, in the water-ballast tanks of the steamship Marzo, and that, according to the terms of the charter party, same are to be fitted up for the purpose at owners' expense, satisfactory to us. Until said tanks are put in the condition contemplated by said charter party the payment of the hire of the vessel Yours, very truly,

ceases.

"R. A. C. Smith, Sec'y.' "And also informed Latasa & Co. by another letter of the appointment of an engi. neer to supervise the fitting of the tanks.'

"That the letter of May 17th, above recited, was the very first intimation given to the owners, agents, brokers, or master of the steamship by the charterers that the latter had not accepted the refusal of the owners to confirm the words at owners' expense,' inserted in the charter party by Hurlbut without authority, as above recited.]

"Tenth. At the time of such delivery her owners supposed that the company was receiving her with the intention of fitting up the tanks at its expense, and the SpanishAmerican Company supposed that the owners were delivering her in accordance with the terms of the charter party which it had signed.

"Eleventh. Upon her receipt, and on or about February 21, 1886, the Spanish-American Company loaded and dispatched her on a voyage to Cuba, and returned to Philadelphia, at which latter port the vessel again arrived on or about March 18th. The Spanish Company again loaded her. She proceeded to Cuba, and thence to Boston, arriving at the latter port early in May.

"Twelfth. Thereupon the Spanish Company notified the ship's agents, Messrs. Latasa & Co., that it was prepared to ship oil in bulk, and should expect the steamer to be put in proper condition as to tanks, etc., to receive it.

"Thirteenth. Discussion thereupon arose between the ship's agents and the manager (Smith) of the Spanish Company, the latter demanding that the owners should fit the tanks at their expense, and the owners expressing an entire willingness to fit the tanks, but refusing to pay the expense, which correspondence resulted in the following agreement, viz.:

"It is hereby mutually agreed by and be tween the owners and the charterers of the steamship Marzo that the said vessel shall proceed to load oil and coal for Havana, Cuba, pending the settlement of matters in dispute between said owners and charterers, and that said loading shall not prejudice the claim of either party to said charter party. [Signed] R. A. C. Smith, Sec'y.

New York, May 26, 1886.' "And that a further arrangement was made by which $1,500 was paid by the char

*495

"Fourteenth. Upon return of the vessel to Philadelphia the Spanish Company again renewed the demand that the tanks should be fitted by the owners at their expense, and refusing to pay the hire until it was done, and the owners, through the ship's agents, again refused to pay the expense, but expressing an entire willingness to fit the tanks at the expense of the Spanish Company. Much correspondence ensued, but finally the owners, after notifying the Spanish Company that they would be held for the expense, to avoid further delay, proceeded to fit the tanks under the supervision of the engineer appointed by said company. The fitting was completed on July 30th, and on that day the Spanish Company were notified that as soon as the bills for the expense thereof were received they would be presented to it for payment. They were so presented a few days later, amounting in the aggregate to the sum of $5,520.97, but the said company refused to pay the same, [or any portion of the hire remaining unpaid, which hire amounts to the further sum of $5,108.97, and have ever since refused to do so.]

"Fifteenth. The sum of six hundred and seventy-five pounds, British sterling, per calendar month, payable monthly in advance, was a fair and reasonable consideration for the use of said steamer during the time she was actually used by the said Spanish Company.

"Sixteenth. The said company has paid the owners of the Marzo for the use of said steamship at the said rate for said time during which she was so used, except the sum of eighteen hundred dollars, which was due May 21, 1886, [but has not paid any hire for the time employed in fitting the tanks, viz., from July 3 to August 3, 1886.]"

The conclusions of law accompanying the original findings of the circuit court were as follows:

"First. The charter party, signed December 18, 1885, was not a valid contract, because the agent of the owners had no authority to agree to the disputed clauses, and his action in signing a charter party with such clauses contained in it was never ratified by said owners.

"Second. The Spanish-American Company never executed a charter party with those clauses omitted, nor ever authorized any one to execute such a charter party in their behalf.

"Third. The owners of the steamer never agreed with the Spanish Company that they would fit up the tanks at their own expense.

"Fourth. The Spanish Company never agreed with the owners that they would pay for the expense which might be incurred in fitting up the tanks.

"Fifth. For the actual use of the vessel, which, with the assent of the owners, the

"Sixth. The libel and cross libel should therefore be each dismissed, except as respects the hire unpaid (eighteen hundred dollars, with interest from May 21, 1886) for the time of the actual use of the vessel by the Spanish Company.

"Seventh. The decision of the district court is affirmed, without costs of this court."

There were no further conclusions of law accompanying the supplemental findings of fact.

The libelant has appealed to this court, but the respondent*has not appealed. The libel-* ant contends in this court that it ought to recover all the items claimed in its libel, and not merely the $1,800, with interest from May 21, 1886.

It is quite clear that the libelant could not, in any event, recover from the respondent any part of the expense of fitting up the tanks in the vessel to carry petroleum in bulk. There was nothing in the acts of the parties to throw on the respondent any obligation to fit up the tanks, or to pay the expense thereof, if the work should be done. The respondent never promised to make or to pay for any such alteration. On the contrary, it always refused to recognize any such liability on its part, and insisted it was the duty exclusively of the libelant to pay therefor. If the libelant chose to fit up the tanks, that was a voluntary act on its part in regard to work upon its own property, for which it has no remedy against the respond

ent.

It is contended, however, that, as the respondent refused to retain or use the vessel unless the tanks were fitted up by the libelant, as provided in the charter party, an implied contract arose; and that, as the libelant did such fitting up, the respondent must bear the expense. But it is found, in effect, that the respondent always and constantly refused to assume the expense, and insisted, as the ground for the making of the altera tions, that under the charter party it was the duty of the libelant to make them. No duress by the respondent is alleged in the libel. or shown.

The position of the libelant is that, although the charter party is a binding instrument on the respondent, so far as relates to the hire of the vessel, it has no effect against the libelant as to the provision contained in clause 18, as to the fitting up of the waterballast tanks at the expense of the libelant, in order to have petroleum shipped in bulk. If the libelant seeks to enforce any part of the charter party, it must rely on the instrument as a whole; and it cannot affirm the charter party for one purpose and repadiate it for another. The respondent refused at all times to enter into an express contract that it would pay for fitting up the tanks, and the charter party as executed indicated

the respondent's intention not to do so. On the facts as found, no such contract can be implied. The charter party never became a binding contract.

The contention of the libelant is that the instrument became binding on the parties, with the exception of the particular clauses referred to, if the libelant should dissent from those clauses. Thus the same effect is claimed as if the charter party had been returned to the persons who had signed it, and the clauses referred to had been erased by | mutual consent. But if there is any part of it in regard to which the minds of the parties have not met, the entire instrument is a nullity as to all its clauses. Eliason v. Henshaw, 4 Wheat. 225; Insurance Company v. Young's Adm'r, 23 Wall. 85; Tilley v. County of Cook, 103 U. S. 155; Minneapolis & St. L. Ry. Co. v. Columbus Rolling-Mill Co., 119 U. S. 149, 151, 7 Sup. Ct. Rep. 168.

Nor did the delivery of the vessel to the respondent, and her acceptance by the latter, constitute a hiring of her under the charter party as it would stand with the disputed clauses omitted. The proposition of Hurl- | but to the respondent on December 19, 1885, was that if the libelant did not agree to the two disputed clauses, those clauses should "be arranged or compromised by mutual consent, by cable." The libelant was apprised of that proposition prior to December 31, 1885, as on that day the London brokers of the libelant, Walker, Donald & Taylor, wrote to Hurlbut, the agent of the libelant, the letter of that date. On January 4, 1886, the libelant wrote to Walker, Donald & Taylor the letter of that date, and the latter, on January 9, 1886, sent a copy of that letter to Hurlbut at New York, and he, on January 18, 1886, inclosed a copy of it to Booth, the broker for the respondent. Without any direct communication with the respondent, and without receiving any communication from it, the vessel was dispatched to Philadelphia, and tendered to the respondent on February 18, 1886, not a word being said at the time to the respondent as to the disputed clauses. On these facts, the respondent had a right to conclude that the dissent of the libelant from the two disputed clauses was not insisted & upon.

It was important to the respondent to know promptly if the charter party which had been signed was binding, and it was the duty of the libelant, before delivering the vessel to the respondent, to have the latter understand distinctly that the libelant did not deliver her under the charter party which had been signed. It is expressly found, in the tenth original finding of fact, that the respondent, at the time the vessel was delivered to it, supposed that the libelant was delivering her in accordance with the terms of the charter party which the respondent had signed. Under these circumstances, the delivery of the vessel to the respondent by her master was, in legal effect, the adoption by

the libelant of the existing charter party, and not an acceptance of the vessel by the respondent with the omission from the charter party of the two clauses in question. Drakely v. Gregg, 8 Wall. 242, 267.

The legal effect of the transaction was that the libelant thus waived its former objections to the charter party, whether it intended to do so or not. It follows that the libelant cannot claim rent for the use of the vessel during the time she was undergoing alterations. As the libelant was bound to pay the cost of fitting up the tanks, if it did the work, it cannot recover the rent for the time during which such work was being done. The loss of the use of the vessel by the respondent during the time the alterations were being made was a part of the expense of fitting up the tanks, the eighteenth clause of the charter party meaning that the tanks were to be fitted at the expense of the libelant before the delivery of the vessel under the charter party. No interpretation of the charter party can be allowed which would permit the libelant to take its own time to fit up the tanks, and yet collect full rent from the respondent during the time that work was being done, and while the respondent was necessarily deprived of the use of the vessel.

Moreover, the respondent, insisting that the libelant should fit up at its own expense the water-ballast tanks, delivered the vessel back to the libelant, which accepted her for that purpose, and kept her for a month. This necessarily stopped the running of the rent, under the charter party. The respondents can be liable to pay rent for the use of the vessel only while she was in its service. The libelant recovered all that it was entitled to

recover.

Decree affirmed, but without interest, and with costs.

(146 U. S. 499)

SCOTT et al. v. ARMSTRONG. FARMERS' & MERCHANTS' STATE BANK et al. v. ARMSTRONG. (Dec. 12, 1892.)

Nos. 53, 1,025.

NATIONAL BANKS-INSOLVENCY PREFERENCESFEDERAL COURTS-FOLLOWING STATE PRACTICE. 1. Rev. St. §§ 5234, 5236, 5242, which require a pro rata distribution of the assets of an insolvent national bank and forbid preferences, do not invalidate liens, equities, and rights arising prior to and not in contemplation of insolvency.

2. A promissory note was executed to a national bank in consideration of the amount being placed to the credit of the maker on the books of the bank. The maker thought, and had good reason for thinking, that the bank was solvent, but the managing officer of the bank knew it to be insolvent. Before the note matured, the charter was forfeited for insolvency and a receiver appointed. Held, that the undrawn balance should be allowed as an equitable set-off to the note, and such allowance is not a "preference" forbidden by the national banking law. Rev. St. §§ 5234, 5236, 5242, 36 Fed. Rep. 63. reversed.

3. Equitable defenses to an action at law

In a federal court sitting in a state where such defenses are permitted are not authorized by Rev. St. § 914, providing that federal courts shall follow state practice and procedure.

In error to the circuit court of the United States for the southern district of Ohio. versed.

On a certificate from the United States court of appeals for the sixth circuit.

Statement by Mr. Chief Justice FULLER: *No. 53 was an action brought by David Armstrong, receiver of the Fidelity National Bank of Cincinnati, Ohio, against Levi Scott and the Farmers' & Merchants' State Bank, in the circuit court of the United States for he southern district of Ohio, upon a promissory note for $10,000, dated at Cincinnati on June 6, 1887, payable 90 days after date, at said Fidelity Bank, with interest after maturity at the rate of 8 per cent. per annum, signed by Scott and indorsed by the Farmers' Bank to the order of the Fidelity Bank.

The defendant Scott was the cashier of his codefendant, and pleaded that he signed the note for the accommodation of the banks under an agreement that he should not be looked to for its payment. The Farmers' Bank made the same averments as to Scott, and pleaded a set-off to the amount of $8,809.94 as arising on certain facts, in substance as follows: That the Fidelity Bank lent the Farmers' Bank the $10,000 at a discount at the rate of 7 per cent. per annum, for 90 days, under an agreement that the money so borrowed, less the discount, should be placed to the credit of the Farmers' Bank on the books of the Fidelity Bank; that the note in suit was executed accordingly, dated and discounted on June 6, 1887, and the proceeds, $9,819.17, were placed to the credit of the Farmers' Bank upon the books of the Fidelity Bank, to meet any checks or drafts of the Farmers' Bank, and to pay the note when it became due; that afterwards, and before June 20th, the Fariners' Bank drew against the deposit the sum of $1,009.23, and the balance, $8,809.94, remained to the credit of the defendant to meet the note, and was so to its credit at the time the receiver was appointed; that upon the maturity of the note, and before suit was brought, defendant tendered to the receiver the sum of $1,190.06, the balance due on the note; and that the tender had since that time been kept good, and the money was now brought into court.

Demurrers to the pleas were sustained, and judgment was entered for the plaintiff for $10,833.33, with interest and costs. The judgment, as provided by section 5419 of the Revised Statutes of Ohio, contained a certifiIcate that the Farmers' Bank was liable as principal and Scott as surety. *The opinion of the circuit court, by the district judge, will be found in 36 Fed. Rep. 63, and states that the circuit judge concurred in its conclusions as being in accord with his opinion in Bung Co. v. Armstrong, reported in 34 Fed. Rep. 94. The case being brought here by writ of error, it was assigned for error that the court

The bill, as summarized by the court, rehearsed the facts set forth in the answers in the suit at law somewhat more in detail, and among other things stated that "on the 20th day of June, 1887, said Fidelity Bank was closed by order of the bank examiner of the United States, and thereafter remained closed;" that "on June 27, 1887, the comptroller of the currency of the United States, having become satisfied that said Fidelity Bank was insolvent, appointed the appellee, David Armstrong, receiver of said bank to wind up its affairs, as provided under the authority given by the laws of the United States in such case made and provided, and said receiver qualified and entered upon the performance of his duties as such. On July 12, 1887, the charter of said Fidelity Bank was forfeited and said banking association dissolved by decree of the circuit court of the United States for the southern district of Ohio;" and that "said Fidelity Bank was in good credit at the time said discount was made, and was then thought by said Scott and said State Bank, with good reason for so thinking, to be solvent, but was in fact insolvent, and known so to be by said Harper," its managing officer, with whom the trans| action had been had.

*The recovery of the judgment and pendency of the writ of error were also set forth, and it was averred "that said Scott and said State Bank were advised said circuit court sitting as a court of law had not jurisdiction to entertain and adjudge upon the set-off pleaded as aforesaid, and that relief should be sought in a court of equity." The tender was reiterated, and it was prayed, among other things, "that the collection of the judgment at law might be enjoined, and that the set-off might be established and allowed." The grounds of demurrer were:

"(1) That it appeared from the bill that the complainants were not entitled to the relief sought.

"(2) That the complainants had an adequate remedy at law for the relief sought, which had been already adjudicated.'

$502