Sections 5234, 5236 and 5242 of the Revised Statutes of the United States forbid preferences by insolvent national banks and require a pro rata distribution of its assets among its general creditors after prior claims are satisfied. Every transfer in contemplation of insolvency, as well as transfers by insolvent banks, are declared void. Insolvency under this statute is the general meaning of the phrase, not such an act alone as gives the comptroller the right to close the bank.1 The bank is insolvent when it is reasonably certain that it must suspend.2 But the payment to a depositor, though a director, by a bank insolvent, though long before suspension, in the ordinary course of business, has been held to be no preference.3 The rules governing the payments to depositors, during the course of a run, would be those stated in the last section. If insolvency actually exists, known to the directors, any transfer which results in a preference is conclusively presumed to be fraudulent.4 The creditor's ignorance of the insolvency is immaterial.5 Thus, a clearing-house which has issued loan certificates had in its possession paper for collection upon which it had no lien when it received, notice of the bank's insolvency. It also held what might be termed due-bills for balances on settlements for former days as a set-off against proceeds of collections. It naturally desired to offset against the proceeds of collections the due-bills and the loan certificates which the insolvent bank owed. After the circuit court of the United States and the circuit court of appeals had both entangled themselves in errors upon the question, the Supreme Court held that the clearing-house could set off the due-bills against the proceeds of the collections made after notice of the insolvency, but not the loan certificates.6 The propriety of the holding was obvious, but the diverse rulings of the lower courts show the uncertainty of judicial conclusions. In another case a certain bank used a second bank as its clearing agent. On Saturday evening the directors determined to close the first bank. The comptroller appointed a receiver at ten o'clock on Monday morning, but a half hour before that time the cashier of the insolvent bank sent to the clearing agent a lot of checks and drafts and its check for its deposit with the clearing agent, and the clearing agent sent back its negotiable certificate for the amount. At the time the clearing agent held the first bank's certificate of deposit. This attempt to give the clearing agent an offset against its certificate in the hands of the insolvent bank was frustrated by the holding that it was an attempt to fraudulently prefer.7 But this statute does not invalidate liens, equities or rights between parties which arose prior to and were not instituted in contemplation of insolvency;8 nor does it invalidate a set-off which another bank has against the insolvent bank.9 It has been held that security given to protect a loan which was perfectly legal at the time it was made is not invalidated though the creditor knew of the threatened insolvency.10 This ruling can be justified on the ground that insolvency was not certain; otherwise it gives a preference as to certain assets. Another case held that after a suspended bank had resumed with the consent of the comptroller, and in order to lift an attachment gave a bond with sureties, the bank transferring property to the sureties, this preference of the sureties was not unlawful.11 The fallacy of this case is that the attachment was not good,12 and the comptroller's action was no proof that the bank was not insolvent. The fact is that this statute ought always to be so construed as to defeat any inequality among creditors. It is the duty of the courts to be exceedingly vigilant, and every doubt ought to be resolved against the creditor who obtains an advantage. Many and devious will be the ways in which it will be attempted to avoid this statute, for even if men are made upright some of them are capable of seeking out " many inventions."

1 Irons v. Manufacturers' Nat. Bank, 6 Biss. 301.

2 Roberts v. Hill, 24 Fed. R. 571, which was a rehearing of Roberts v. Hill, 23 Fed. R. 311, where the court delivered itself of the following astounding proposition: A transfer of collateral to prevent a failure is not fraudulent, even though the bank is insolvent; but a transfer in order to keep the securities out of the assets would be fraudulent. But Stapylton v. Stockton, 91 Fed. R 326, lends some little countenance to this idea. An Alabama court held that renewals of notes, where the originals were not given up, were not evidences of debt under the statute. First Nat. Bank v. Johnston, 97 Ala. 655. "Hand equidem invideo, miror magis."

3 Hayes v. Beardsley, 136 N. Y. 299. See the next note.

4 Nat Security Bank v. Price, 129 U. S. 223. Although this is the statement of this case a late decision of the court should be consulted. It seems that any payment made while the bank is a going concern, in the due course, without any intent to prefer, is not forbidden. See McDonald v. Williams, 174 U. S. 397.

5 Case v. Citizens' Bank, 2 Woods, 23.

6 Yardley v. Philler, 167 U. S. 344, reversing both 62 Fed. R. 645, and 58 Fed. R. 746. The case of Philler v. Jewett, 166 Pa. 456, is distinguishable because the clearinghouse there had a lien. So it may be said of Philler v. Patterson, 168 Pa. 468. But it may be said that the clearing-house arrangement was made because the bank was in difficulties, and hence there was notice of insolvency.

7 Nat. Security Bank v. Butler, 129 U. S. 223. But the clearing agent ought to have been permitted to set off the first bank's deposit. See note 9 to this section.

8 Scott v. Armstrong, 146 U. S. 499.

9In re Armstrong, 41 Fed R. 381. 10 Armstrong v. Chemical Nat.

Bank, 41 Fed. R. 234; Casey v. Credit Mobilier, 2 Woods, 77.

11 Price v. Coleman, 22 Fed. R. 694.

12 It was against a national bank, which is protected from an attachment either from a state court or from a United States court See Sec. 336, post.