conferred. In these respects the case at bar differs from those cited by the appellants. Jones v. Green, 68 U. S. 330, 17 L. Ed. 553; Smith v. R. Co., 99 U. S. 398, 25 L. Ed. 437; Scott v. Neely, 140 U. S. 106, 11 Sup. Ct. 712, 35 L. Ed. 358; Nat. Tube Works Co. v. Ballou, 146 U. S. 517, 13 Sup. Ct. 165, 36 L. Ed. 1070; Hollins v. Brierfield Co., 150 U. S. 371, 14 Sup. Ct. 127, 37 L. Ed. 1113. In the first three of these cases the absence of a lien was especially noticed, and in the last the absence of both a lien and an enforcible trust. It is no doubt true that the mere insolvency of a corporation will not in itself justify the maintenance of a suit in equity by a simple contract creditor, and that the trust which is frequently spoken of as arising from that condition is. not an express trust which attaches to the property of the insolvent for the direct benefit of the creditor, but is merely one sub modo, which is recognized in the judicial administration of the affairs of the insolvent corporation. But when insolvency is accompanied, as in this case, by a conveyance of assets to a trustee and a pledge thereof for the benefit of creditors, and this is followed by affirmative proceedings in liquidation especially authorized by law and the selection by the shareholders of the same trustee as their liquidating agent, an express trust does attach to the assets of the insolvent corporation for the direct benefit of the creditors. Such a lien may be enforced and such a trust may be judicially administered at the suit of a simple contract creditor, and a court having lawfully acquired jurisdiction may, to give complete relief, proceed with the enforcement of the liability of the shareholders. Richmond v. Irons, supra; King v. Pomeroy, supra. In this connection it may be observed that while in section 1 of the act of 1876 it is expressly provided that a creditor who is entitled to call upon the Comptroller of the Currency to institute involuntary proceedings against a national bank must have reduced his demand to judgment, by section 2 "any creditor" may file a bill against the shareholders of a bank in voluntary liquidation.

It is contended that in making the contract, executing the notes, and transferring its assets the American National transcended its corporate powers, and that no debt was thereby created which could be enforced against its shareholders. Ward v. Joslin, 186 U. S. 142, 22 Sup. Ct. 807, 46 L. Ed. 1093. We may at the outset omit any consideration of what might be the case were these transactions dependent alone upon the authority of the officers and board of directors of the bank, for the evidence shows clearly that what was done by them was ratified and confirmed by the shareholders. The contract of December 21, 1895, was executed by Thomas L. Kimball as president of the American National pursuant to the instruction of a resolution of its board of directors. At the annual meeting of the shareholders held January 14, 1896, at which 1,665 out of a total of 2,000 shares of stock were represented, the contract was read, and an explanation made by the president of the condition of the bank which led up to and made its execution necessary. This was followed at the same meeting by the adoption of a resolution, by the votes of those representing more than 1,600 shares of stock, instructing the directors to take action looking to the liquidation of the bank. Pursuant to this resolution another meeting of the shareholders was held February 25, 1896, 1,696 shares.

being represented, at which a formal resolution for liquidation in accordance with sections 5220 and 5221 of the Revised Statutes was adopted by a vote of those owning 1,63934 shares, being some 300 more than were necessary under the law. In this resolution it was provided that "Thos. L. Kimball be and he is hereby appointed the agent and trustee of the shareholders of such bank to effect such liquidation." The significance of this appointment is apparent when it is recalled that Kimball was also designated as the agent or liquidating trustee in the contract of December 21, 1895. Another shareholders' meeting was held January 12, 1897, at which 1,531 shares were represented, and at this meeting there was presented a comparative statement over the signature of Thomas L. Kimball, trustee, showing the condition of the bank on December 21, 1895, when the contract was made, and on January 1, 1897. It included an account of transactions during the progress of the liquidation, and an expression of views as to the best course to be pursued with reference to the remaining assets. Reference was definitely and explicitly made in this statement to the Union National and to the payment to it of proceeds of collections which had been made. by the trustee. It was ordered to be spread upon the records of the bank. Shortly after the execution of the contract of December 21, 1895, and before the adoption of the resolution for liquidation, a writing containing an express ratification of the action of the directors in respect of the contract between the two banks was executed by the owners of more than two-thirds of the stock of the American National. At no meeting of the shareholders, so far as the record shows, was there any word of criticism or objection to the transaction with the Union National except so far as it may be gathered from the mere fact that a small number of shares were voted against the resolution for liquidation. When it is considered that the Union National was engaged in carrying out its part of the contract, was disbursing its funds in taking up and caring for the contracts, debts, and engagements of the American National, the duty of the shareholders of the latter in meeting assembled to then repudiate the transaction, if they ever desired to do so, was imperative. Instead of so doing they supplemented the transaction with the Union National by proceedings in voluntary liquidation adopted by a vote largely in excess of that required by law and conducted such liquidation in connection with and as part of the performance of the contract of December 21, 1895. Every consideration of equity, good conscience, and justice leads to the conclusion that the shareholders should be held to have ratified and approved of what was done and what was then being done.

So far as the Union National was concerned the transaction between the two banks was in the exercise of its ordinary powers as a banking association. Schofield v. Bank, 97 Fed. 282, 38 C. C. A. 179. When the contract was entered into the American National was confronted by an emergency. A withdrawal from the bank of a large amount of deposits was anticipated, and it had not the money or available cash resources to meet it and thereafter continue business. At the time, as subsequent experience demonstrated, the bank was in fact hopelessly insolvent. But in the light of the conditions which were known it was within the power of the officers and directors of that bank to make the

contract of December 21, 1895, with the approval of the shareholders owning a larger proportion of the capital stock than was necessary under the law in case of a voluntary liquidation.

The expression "usual course of business" as one of limitation upon the powers of a corporation is generally referable to the activities of a going concern, and has little, if any, application to one which is upon the threshold of liquidation because of insolvency. In the latter condition the managing officers of a corporation, with the approval of the shareholders, may make any fair and equitable disposition of its assets which, not being in violation of any provision of law, will insure the payment of all of its debts and is reasonably calculated to preserve the largest equity for its shareholders. In such an emergency a corporation should not be held to be helpless and incapable of an act of duty to creditors, and of preservation of the interests of its shareholders merely because it may be outside of the usual routine or course of its business.

In the case at bar all of the obligations of the American National to the government were fully performed, no duty was omitted which called for the interposition of the Comptroller of the Currency, and no federal statute was violated. Upon insolvency and the institution of proceedings in liquidation the assets of a national bank stand pledged by law to the payment of the debts, and the surplus, if any, to a ratable distribution among the shareholders. The contract which is attacked by the appellants was intended to accomplish nothing substantially different. Instead of many creditors to be dealt with, it was arranged that there should be one whose demands should embrace those of all of the others. And in considering the relation of the Union National and the complainant, its assignee, to the American National, we need not stop at the three notes which they hold. In the same sense that a shareholder may go behind a judgment recovered against his corporation to show the character of the indebtedness which it represents, so in a case like the one in hand may a creditor, holding a note of the bank, show, if necessary, the nature of the debt which is evidenced thereby. In equity the claims of the complainant and the Union National represent the "contracts, debts, and engagements" of the American National for which the stockholders of the latter are responsible in accordance with the provisions of section 5151 of the Revised Statutes [U. S. Comp. St. 1901, p. 3465].

The complaint made on behalf of some of the appellants on account of the computation of interest upon the claims of the creditors was not made the subject of an assignment of error, and is therefore not considered.

The decree of the Circuit Court is affirmed.

68 C.C.A.-4

(135 Fed. 296.)

REES et al. v. OLMSTED.

(Circuit Court of Appeals, Sixth Circuit. February 7, 1905.)

1. FEDERAL COURTS-FOLLOWING STATE DECISIONS-VALIDITY OF MUNICIPAL BONDS.

The federal courts, in determining the validity of a legislative act, under which municipal bonds in suit were issued, under the state Constitution, will follow the construction placed upon the Constitution by the highest court of the state at the time the bonds were issued and sold. [Ed. Note. For cases in point, see vol. 13, Cent. Dig. Courts, § 956. State laws as rules of decision in federal courts, see notes to Wilson v. Perrin, 11 C. C. A. 71; Hill v. Hite, 29 C. C. A. 553.]

2. MUNICIPAL BONDS-ROAD IMPROVEMENT-VALIDITY OF OHIO STATUTE.

Act Ohio March 21, 1894 (91 Ohio Laws, p. 543), which authorized counties of a certain population, on petition of a majority of the landowners in any election precinct, to levy an extra tax thereon, and an issuance of bonds in anticipation of such tax, for improvement of the public roads, was not a law of a general nature within the meaning of Const. Ohio, art. 2, § 26, providing that "all laws of a general nature shall have a uniform operation throughout the state," as such provision was judicially construed by the Supreme Court of the state when such act was passed, and bonds issued thereunder are valid and enforceable, although, subsequent to their issuance, a construction was placed upon the constitutional provision which would render the act invalid.

3. STATUTES-CONSTITUTIONALITY-ACT CONFERRING CORPORATE POWERS.

The mere fact that a special legislative act authorizing the appointment by a county board of road commissioners for a district in certain cases declares that such commissioners "shall be a body corporate with the powers and duties hereinafter specified" does not render the act invalid under Const. Ohio, art. 13, § 1, providing that "the General Assembly shall pass no special act conferring corporate powers," as such provision is construed by the Supreme Court of the state, where the powers and duties enumerated are only such as are ordinarily conferred and imposed upon officers or boards charged with the supervision of public improvements.

4. MUNICIPAL BONDS-ROAD IMPROVEMENTS-ESTOPPEL BY RECITALS.

Under Act Ohio March 21, 1894 (91 Ohio Laws, p. 543), which authorizes the board of commissioners of a county, on petition therefor, to appoint road commissioners for a district, who shall have power to issue bonds for road improvements, to be attested and registered by the county auditor, and at once reported to the county board, which has general charge of the improvement and the levying of the tax to pay the bonds, with power to remove any of the road commissioners and fill the vacancy, such commissioners, in the issuance of the bonds, as well as in supervising the work done, act simply as agents for the county board, and recitals made by them in the bonds that all things required by the act as conditions precedent to their issuance have been properly done and performed must be regarded as having been made by authority of the county board, and create an estoppel in favor of a bona fide purchaser of the bonds, which precludes a defense thereto on the ground of any irregularity in the action of the board as well as of the road commissioners.

In Error to the Circuit Court of the United States for the Northern District of Ohio.

Saltzgaber, Hoke & Osborn, Brown & Geddes, and Chas. A. Schmettau, for plaintiffs in error.

William B. Sanders (Squire, Sanders, & Dempsey, of counsel), for defendant in error.

Before LURTON, SEVERENS, and RICHARDS, Circuit Judges.

RICHARDS, Circuit Judge. This action involves the validity of $30,000 of bonds, $10,000 issued on August 14, 1894, and $20,000 on February 15, 1895, the proceeds of which were used for the improvement of the public roads within a precinct of Van Wert county, Ohio, known as "Venedocia Pike No. 1." The suit was brought against the plaintiffs in error, "Commissioners of Venedocia Pike No. 1," by George G. Olmsted, a bona fide purchaser for value of coupons aggregating $2,010. The bonds and coupons were issued under authority of the act of March 21, 1894 (91 Ohio Laws, p. 543), providing for the improvement of public roads in Van Wert county, describing it by population. A demurrer to the petition was overruled on the authority of the Board of Commissioners v. Gardiner's Savings Institution, 119 Fed. 36, 55 C. C. A. 614, decided by this court December 2, 1902, and an answer filed. The defenses relied on were the unconstitutionality of the act, and the irregularity of the action of the county commissioners under it. On the trial, testimony tending to establish the various defenses was excluded, and a verdict for the plaintiff directed, on the grounds, first, that the act was constitutional, and, second, that the recitals in the bonds estopped the defendants from setting up any lack of regularity in their issue.

1. It is urged the act violates section 26 of article 2 of the Constitution of Ohio, which provides that "all laws of a general nature shall have a uniform operation throughout the state." The act provides that upon the petition of a majority of the landowners in any election precinct of a county, residing in the county, the county commissioners, if they deem it advisable, may improve the public roads within such precinct, and for that purpose may levy an extra tax on the property within the precinct; the work of improvement to be done, and the bonds in anticipation of the collection of the tax to be issued, by three road commissioners to be appointed by the county commissioners. The act in terms applies to "any county of this state which, at the last federal census had, or which at any subsequent federal census shall have, a population of not less than 29.050, and not more than 29,800." It may be conceded that the act did not have a uniform operation throughout Ohio, because Van Wert was the only county answering to this description. Field v. Com'rs Highland Co., 36 Ohio St. 476; Ry. Co. v. Martin, Treas., 53 Ohio St. 386, 400, 41 N. E. 690. Was it "a law of a general nature"? This must be determined by the construction placed upon this clause by the Supreme Court of Ohio at the time the act was passed. Board of Commissioners v. Gardiner's Savings Institution, 119 Fed. 36, 47, 55 C. C. A. 614; Loeb v. Trustees, 179 U. S. 472, 491, 21 Sup. Ct. 174, 45 L. Ed. 280; Wilkes Co. v. Coler, 180 U. S. 506, 531, 21 Sup. Ct. 458, 45 L. Ed. 642. The rule then in force was laid down in State ex rel. Hibbs v. Commissioners of Franklin Co., 35 Ohio St. 458, decided at the January term, 1880, in which an act directing the commissioners of Franklin county to levy a special tax