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numbered, &c., and they were subscribed with the printed name of Walter Mead, cashier.

The above mentioned first half million trust deed, and the bonds, bore the same date, were in the same form, and in all respects like those of the million trust, except that the bonds were payable in seven instead of five years. The number of bonds was four hundred and fifty instead of nine hundred, as in the million trust, and each was for £250, amounting in all to $500,000. The amount of securities embraced in this deed (being also bonds and mortgages upon lands in the State of New-York,) was $600,000. The bonds and mortgages embraced in both the trusts were selected from amongst those in and by which the subscribers to the capital stock of the company had paid their subscriptions. The object of both trusts was to borrow money by a sale of the nine hundred million trust, and four hundred and fifty half million trust bonds of the company in England.

Prior to the execution of said trust deed, the only action of the board of directors of the company tending to authorize the trusts to be created, was a resolution of January 6, 1840. By that resolution the directors declared it to be expedient to issue nine hundred bonds for £250 each (amounting to $1,000,000,) payable at the banking house of Palmer, Mackillop, Dent & Co., in London, and authorised Joseph D. Beers, John Lorimer Graham, and Daniel Tylee, to select and cause to be assigned to themselves as trustees, an amount of mortgages belonging to the company as nearly equal as practicable to the amount of the nine hundred bonds so to be issued. This resolution related to a million trust only. The million trust deed was intended to carry into effect the general design of the resolution. The terms of the resolution, however, were departed from in respect to the persons named as trustees, and the amount of securities to be assigned. There was no previous resolution in relation to the half million trust; that trust as well as the million trust deed were authorised by the committee of investments and

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finance. The bonds of the company issued under both trusts were sold or pledged as hereafter more particularly stated, and the company received the moneys raised by such sale or pledge, and applied the same in the payment of its debts or otherwise in its business. Both trusts, moreover, were expressly recognized in proceedings of the board of directors subsequent to their creation. One of those proceedings, under the date of July 30, 1840, was a resolution authorizing the execution by the officers of the company of instruments supplemental to the trust deeds for the purpose of annulling the classification made in each deed, so that all the bonds issued by the company under each trust, should be secured by all the bonds and mortgages thereby assigned without discrimination. Supplemental agreements were executed accordingly by all the parties to the trust deeds, which changed the trusts in that respect.

At the time of the creation of the aforesaid trusts, the company owed debts to the amount of at least $4,000,000, some of which were maturing rapidly, and in large sums. Its assets, however, consisting in the main of bonds and mortgages received in payment of subscriptions to the capital stock (about $3,000,000), and of state bonds or stocks which had been purchased principally for resale or to raise money upon, amounted nominally to about $3,000,000 more than the debts. Notwithstanding the apparent preponderance of assets, the situation of the company was extremely critical. It had on hand little or no cash resources to meet its maturing engagements. Its circulating notes had been returned to it for redemption, and its credit generally was very greatly impaired. Its embarrassments, in short, were so great that it could not go on in business, or even maintain its existence, without raising large sums of money by loan. The managers, therefore, as a last resource, resorted to the plan of issuing bonds, to be sold in England, first for a million, and then half a million of dollars, to be secured by the trusts aforesaid; and it was avowed in all the letters on

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the subject, between the officers of the company and the Palmers, &c., its correspondents in London, that on the success of that plan the existence of the company must depend. With the aid derived from selling or pledging the trust bonds, as hereafter stated, and from some other arrangements made about the same time, the company maintained itself for a year longer, and continued to pay its debts as they matured. The causes of its ultimate insolvency in 1841, were in operation when the trusts were created. Those causes consisted partly in the previous purchase on credit of some millions of state stocks at par valuation or there abouts, which had considerably depreciated when the trust deeds were made, and which depreciated still more after wards. The company had also embarked in other hazardous and imprudent dealings. Its original cash capital was very small, and it sustained ultimately great losses upon the bonds and mortgages in which the capital stock was chiefly paid by the subscribers. A very great amount of evidence was taken upon the question of the company's solvency or insolvency, which tended to the conclusion that taking the time when the trusts were created as the period for observation and estimate, all the property and assets of the company were worth nearly two millions of dollars more than the sum of its debts. The evidence also justified the conclusion that the trusts were created with a view and in the expectation on the part of the officers and directors, that with the aid to be derived from such trusts, the insolvency of the company would be averted and its business would be continued.

Upon the facts already stated, and without reference to others hereafter to be mentioned, some of the most important questions of the case arose. On the part of the appellant, the receiver, it was insisted:

I. That the North American Trust and Banking Association was a moneyed corporation, and, as such, was subject to all the general statuter of this state relating to such corpora

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tions, especially to the statute which took effect in January, 1828, "to prevent the insolvency of moneyed corporations," &c. (1 R. S., 588). On this ground it was urged that both the trusts in question were void under the eighth section of that statute, because they were not authorized by any "previous resolution" of the board of directors. If the association was subject to the provisions of that act, then some of the inquiries under this head were: 1. Whether the resolution of the directors, of January 6th, 1840, was sufficient to authorize the million trust deed. 2. If not, then whether both the trusts could be confirmed by the corporation in any other mode, and at any other time. 3. Whether the parties holding the trust bonds were "bona fide purchasers" of the property embraced in the trusts within the meaning of the said statute. There was no evidence tending to show that the bondholders knew that the trusts were not authorized by previous resolutions of the directors.

II. That the trust conveyances were void under the ninth section of the said statute, because they were made by the company "when insolvent, or in contemplation of insolvency, and with intent to give a preference to particular creditors over other creditors."

III. That they were void according to 2 R. S., 135, § 1, because they were made "in trust for the use of the grantor." In support of this objection the provisions of the trust deeds, reserving to the company benefits or interests in the property conveyed, and especially the final reservation in favor of the company after the trust bonds should be paid, were referred to.

IV. That the deeds were made with intent to hinder, delay or defraud creditors, and were void on that ground. This objection was founded on the provisions for the benefit of the company contained in the trust deed, and on the power of the trustees to borrow money upon the trust fund.

V. That the company, being a banking corporation, had no power or authority to borrow money, and especially none SMITH.-VOL. I.

4

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to borrow as a substitute for cash capital. On this ground it was insisted that the trusts having been created as part of the scheme for borrowing money, and being collateral to the bonds of the company to be issued and negotiated for money loaned, were void.

VI. That the nine hundred bonds in the million trust, and the four hundred and fifty in the half million trust, were unsealed obligations, because the corporate seal was impressed directly on the paper, without the use of wax or other tenacious substance. They were, therefore, in legal effect, promissory notes, and were issued in violation of the laws and policy of this state in restraint of unauthorized banking. (1 R. S., 712.) They were also issued in violation of the thirty-fifth section of the safety fund act, so called (Laws of 1829, ch. 94, p. 167), which prohibited banks "subject to the provisions" of that act, from "issuing bills or notes, unless payable on demand and without interest." The company, furthermore, had no right or authority, under the general banking act of 1838, from which all its powers were derived, to issue such notes, it being insisted that banking associations organized under that statute had no right to issue paper of any description, except circulating notes payable on demand, secured by a pledge of mortgages and public stocks, and countersigned and registered in the office of the comptroller of the state. Upon all these grounds, and another hereafter to be mentioned, it was insisted that the trust bonds were illegal, unauthorized and void, and therefore, that the trust deeds, being made solely to facilitate the negotiation of such bonds and to secure their payment, were also void.

One of the questions in the case was, whether the nine hundred and four hundred and fifty bonds in the two trusts, dated as before stated, February 1, 1840, were issued by the company before June 3, 1840, when the statute took effect, passed May 14, 1840, which prohibited not only the chartered banks of this state, but also, in terms, banking associations, from issuing bills or notes payable at a future day. All