Court Opinion

ID: 9417792
Source: CourtListenerOpinion
Date Created: 2023-08-02 20:37:38.221355+00
Date Added: 2024-06-11T17:21:50.423461
License: Public Domain

Mb. Justice White,
with whom concurred Me. Justice Háb-laN and Mb. Justice McKeNNA,
dissenting;
The court now decides: 1st. That on the failure of a national bank a creditor thereof whose debt is secured by pledge is entitled to be recognized and classed by the Comptroller 'of the Currency to the full amount of his debt, without in any way taking into account the collaterals by which the debt is secured, and on the amount so recognized he is entitled to be paid out of the general assets the sum of any dividends which may be declared. 2d. That this right to be classed for the full amount of the debt, without regard to the value of the collaterals, is fixed by the date of the insolvency and continues to the final distribution, whatever may be the change in the debt thereafter brought about by the realization of the securities, provided only that the sums received by the creditor by way of dividends and from the amount collected *148from the collaterals do not exceed the entire debt and therefore extinguish it.
I am constrained to dissent from these propositions, because, in my opinion, their enforcement will produce inequality among creditors and operate injustice, and, as a necessary consequence, are inconsistent with the National Banking Act.
It cannot be doubted that the acts of Congress, which regulate the collection and distribution of the assets of an insolvent national bank, áre controlling. It is clear that every creditor who contracts with such bank does so subject to the provisions directing the manner of distributing the assets of such bank in case of its insolvency, and therefore that the terms of the act enter into and form part of every contract which ^such bank may make. Now, • the act of Congress makes it the duty of the receiver appointed by the Comptroller to liquidate the affairs. of a failed national bank, to take possession of and realize its assets, Bey. Stat. § 5231; to call, by advertisement for ninety days, upon creditors,, to present and make legal proof of their claims, Rev. Stat. § 5235; and, from the proceeds of the assets, the Comptroller is directed to make a “ ratable dividend ” on the recognized claims, Rev. Stat. § 5236. To prevent preferences, the law, moreover, directs that air contracts from which preferences may arise, made after the commission of an act of insolvency or in contemplation thereof, “ shall be utterly null and void.” Rev. Stat. § 5242.
It seems to me superfluous to demonstrate that the rules now upheld by which a creditor holding security'is decided to be entitled to disregard the value of his security and take a dividend upon the whole amount of the debt from the general assets, violates the principle of equality and ratable distribution which the act of Congress establishes. Is it not evident that if one creditor is allowed to reap the whole benefit of his security, and at the same time take from the general assets a dividend, on his whole claim, as if he had no security, he thereby obtains an advantage over the other general creditors, and that he gets more than his ratable share of the general assets ? Let. me illustrate the unavoida*149ble consequence of the doctrine now recognized. A loans a national bank $5000, and takes as the evidence of such loan a note of the bank for the sum named, without security. The lender is thus a general or unsecured creditor for the sum of $5000. B loans to the same bank $5000, without security. He is applied to for a further loan, and agrees to loan another $5000 on receiving collateral worth $5000, and requires that a new note be executed for the amount of both loans, which recites that it is secured by the collateral in question. While theoretically, therefore, B is a secured creditor for $10,000, he practically has no security for $5000 thereof. Insolvency supervenes. The general assets received by the Comptroller equal only fifty per cent of the claims. Now, under the rule which the court establishes, A on his unsecured claim of $5000 collects a dividend of but $2500, thereby losing $2500; B, on the other hand, who proves $10,000, taking no account whatever of his collateral, realizes by way of dividends $5000, and by collections on collaterals a similar amount, with the result that though as to $5000 he was, in effect, an unsecured creditor, he loses nothing. B is thus in precisely as good a situation as though he had originally demanded and received from the borrowing bank collateral securities equal in value to the full amount loaned. It is thus apparent that the application of the rule would operate to enable B — who, I repeat, virtually held no collateral security for $5000 of the sums loaned — to be paid his entire debt, though the assets of the insolvent estate of the borrower paid but fifty cents on the dollar, while another creditor holding an unsecured claim for $5000 fails to realize thereon more than $2500.’ Is it not plain that this result is produced by practically a double payment to B, that is, by recognizing B as a preferred creditor in the specific property, of the value of five-thousand dollars, pledged to him, withdrawing that property from the -general assets, and allowing B to solely appropriate it, yet permitting him, when the secured part of his debt is thus virtually satisfied, to again assert the same secured portion of the debt against other assets, by a claim upon the general fund in the hands of the receiver for the full amount *150loaned. The consequence of the receipt of this extra sum upon account of the already fully secured portion of the original loan is that B is enabled to offset it against the deficient dividend on the unsecured portion of the debt, one equalling the other, thus closing the transaction without loss to him.
Let us suppose also the case of a creditor of a national bank who. recovers a judgnjent for $100,000 and levies the same upon real estate of the bank worth only $50,000. While- the legal title and possession is still in the. bank a receiver is appointed and takes possession of the real estate. Certainly it cannot be contended that this judgment lien holder is not in equally as good a position as the holder of a mortgage lien or other collateral security. The, doctrine of the court, however, if applied to the judgment lien holder, would authorize him to demand that the receiver treat the real estate as not embraced in the general assets, and that the creditor be allowed to enforce his whole claim against the other assets irrespective of the value of the specific security acquired by his lien.
That the doctrine maintained by the court also tends to operate a discrimination as between secured creditors, in favor of the one holding collateral securities not susceptible of prompt realization, is, I think, demonstrable. Thus a secured creditor who takes collaterals maturing on the same day with the debt owing to himself, which collaterals consist of negotiable notes, the makers of which and endorsers upon which are pecuniarily responsible, finds the collaterals promptly paid when deposited for collection, ancj. if his debtor should become insolvent the day after payment the creditor could only claimi for the residue of the debt still unpaid.- On the other hand, a creditor of the same debtor, the debt to whom matures at the same time as that owing the other creditor, and is secured by collaterals also due contemporaneously, has the collaterals protested for non-payment, and when the debtor fails the collat-erals have not been realized. While the first, debtor, who had received first class collateral, can collect dividends against the estate of his insolvent debtor only for the unpaid portion of the claim, losing a part of such residue by the inability of the *151estate to pay in full, the debtor who received poor collateral collects dividends out of the general assets on his whole claim, and if he eventually realizes on his. securities may come out of the transaction without the loss of one cent. These illustrations, to my mind, adequately portray the inequality and injustice which must arise from the application of'the rules of distribution now sanctioned by the court.
The fallacies which it strikes me are involved in the two propositions sanctioned by the court are these: First: The erroneous assumption that although the act of Congress contemplates that the dividend should be declared out of the general assets after the. secured creditors have withdrawn the amount of their security, it yet provides, that the secured creditor who has withdrawn his security and thus been pro tanto satisfied, can still assert his whole claim against the general assets, just as if he had no security and had not been allowed to withdraw the same. Second: The mistaken assumption that the act confers upon the secured creditor a new and substantial right, enabling him to obtain, as a consequence of the failure of the bank, an advantage and preference which would not have existed in his favor had the failure not supervened.. This arises from holding that the insolvency fixed the amount of the claim which the secured creditor may assert, as of the time of the insolvency; thereby enabling him to ignore any collections which he may have realized from his securities after the failure, and permitting him to assert as a claim, not the amount due at the time of the proof, but, by relation, the amount due at the date of the failure, the result being to cause the insolvency of the bank to relieve the creditor holding security from the obligation to impute any collections from his collateral to his debt, so as to reduce it by the extent of the collections, a duty which would have rested on him if insolvency had not taken place. .Third: By presupposing that, because before failure a secured creditor .had a legal right to ignore the collaterals held by him and resort for the whole debt, in the first instance, against the general estate of his debtor, it would impair the obligation of the contract to require the secured creditor in case of insolvency *152to take into account his collaterals and prevent him from asserting his whole claim, for the purpose of a dividénd, against the general assets. But the preferential right arising from the contract of pledge is in nowise impaired by compelling the creditor to first exercise his preference against the security received from the debtor, and thus confine him to the specific advantage derived from his contract. Further, however, as the contract, construed in connection with the law governing it, restricts the secured as well as the unsecured creditor to a ratable dividend from the general assets, the secured creditor is prevented from enhancing the advantage obtained as a result of the contract for security, by proving his claim as if no security existed, since to allow him to so do would destroy the rule of ratable division, subject and subordinate to which the contract was made. A forcible statement of the true doctrine on the foregoing subject was expressed in the case of Société Générale de Paris v. Geen, 8 App. Cas. 606. The question before the court arose upon the construction to be given to a clause of the English bankrupt act of 1869, incidental to the requirement of a section, expressly embodied for the first time=in a bankrupt act, that the secured creditor should in some form account for the collateral held by him in proving his. elaim against the general estate. In considering the restriction, upon the remedy of a secured creditor produced by the insolvency, and the consequent right of such creditor to receive only a ratable dividend on the balance of the debt after the deduction of the value of the collaterals,. Lord Fitzgerald said (p. 620):
“ Under ordinary circumstances each creditor is at liberty to pursue at his discretion, the remedies which the law gives him; but when insolvency intervenes, and the debtor is un-a ble-to pay his debts, the position of all parties is altered — the fund, has become inadequate, and the policy of the law is. to lead to equality. In pursuing that policy the bankrupt law endeavors to enforce an equal distribution, whilst it respects the rights of those who have previously j by grant or otherwise, acquired some security or some preferable right.”
To resort, however, to reasoning for the purpose of en*153deavoring to demonstrate that where a statute does not allow preferences in case of insolvency, and commands a ratable distribution of the assets, a secured creditor - cannot be allowed to disregard the value of his security and prove for the whole debt, seems to me to be unnecessary, since that he cannot be permitted to so do, under the circumstances stated, has been the universal rule applied in bankruptcy in England and in this country from the beginning.
In the-earliest English bankrupt act, 34 & 35 Hen. VIII, c. -it, the distribution of the general assets of the bankrupt was directed to be made, “ for true satisfaction and payment of the said creditors; that is to say, to every of the .said creditors, a portion rate and rate alike, according to the quantity of their debts.” In the statute of 13 Eliz., c. 7, (and which was in force in this particular when the consolidated bankrupt statute of 6 Geo. V, c. 16, was adopted,) the distribution of assets was directed in language similar to that just quoted from the statute of Henry Till. Under these statutes, from the earliest times, it was held by the Lord Chancellors of England, having the supervision of the execution of the bankrupt statutes, that a secured creditor could not retain his collateral security and prove for his whole debt, but must have his security sold, and prove for the rest of the debt only. Lord Somers, in Wiseman v. Carbonell, (1695) 1 Eq. Cas. Ab. 312, pl. 9; Lord Hardwicke, in Howel, petitioner, (1737) 7 Vin. Ab. 101, pl. 13, and in Ex parte Grove, (1747) 1 Atk. 104; Lord Thurlow, in Ex parte Dickson, (1789) 2 Cox Ch. 194, and in Ex parte Coming, (1790) 2 Cox Ch. 225; Cooke’s Bankrupt Laws, (1st ed. 1786) 114, and (4th ed. 1799) 119.
In 1794, 4 Brown’s Ch. Rep. star paging 550, the prevailing practice with respect to a sale of a mortgage security Avas regulated by a general order formulated by Lord Chancellor Loughborough, wherein, among other things, it was provided that in case the proceeds of sale should be insufficient to pay and satisfy Avhat should be found due upon the mortgage, “ that such mortgagee or mortgagees be admitted a creditor or creditors under such commission for such deficiency, and to receive a dividend or dividends thereon out of the bankrupt’s estate or *154effects, ratably and in proportion with the rest of the creditors seeking relief under the said commission,” etc.
Concerning the practice in bankruptcy, Lord Chancellor Eldon, in 1813, in Ex parte Smith, 2 Rose, 63, said: “ The practice has been long established in bankruptcy, not to suffer a creditor holding a security to prove unless he will give up that security, or the value has been ascertained by the sale of it. The reason is obvious: Till his debt has been reduced by the proceeds of that sale, it is impossible correctly to say what the actual amount of it is. . . . It is, however, clearly within the discretion of the court to relax this rule, and cases may occur in which.it would be for the benefit of the general creditors to relax it.”
The first two bankrupt statutes enacted in this country (April 4, 1800, c. 19, 2 Stat. 19; August 4, 1841, c. 9, 5 Stat. 440) required a ratable distribution of the assets, and it was conceded in argument that the universal practice enforced under these acts was to require a creditor holding collateral security to deduct the amount of his security and prove only •for the residue of the debt. This court, speaking through Mr. Justice Story, in 1845, in In re Christy, 3 How. 292, declared that under the act of 1841, “ if creditors have a pledge or mortgage for their debt they may apply to the court to have the same sold, and the proceeds thereof applied towards the payment of their debts pro tanto and to prove for the residue.”
As the universal rule and practice in bankruptcy in England and in this country, up to and including the bankrupt act of .1841, was solely the result of the statutory requirement that the assets should be ratably distributed among the general creditors, my mind fails to discern why the requirement for ratable distribution of the assets in the act for the liquidation of failed national banks, should not have the same meaning and produce the same result as the substantially similar provisions had always meant and had always operated in England for hundreds of years and in this country for many years before the adoption by Congress of the act for the liquidation of national banks. Indeed, the fact that the requirement of ratable distribution had by a long course of practice' *155and judicial construction in England and in this country required the secured creditor to account for his security, before proving against the general assets, gives rise to the application of the elementary canon of construction that where words are used in a statute, which words at the time had a settled and well-understood meaning, their insertion into the.statute carries with them a legislative adoption of the previous and existing meaning.
The reasoning by which it is maintained that the requirement for ratable distribution should not be applied in the act providing for the liquidation of an insolvent national bank may be thus summed up: True it is, that universally in bankruptcy in England and in this country the rule was as above stated, but outside of bankruptcy a different practice prevailed in England, known as the chancery rule; and as the winding up of an insolvent national bank does not present a case of bankruptcy, its liquidation is .governed by such chancery rule and not by the bankruptcy rule. The bankruptcy rule, it is said, is commonly so called because enforced by bankruptcy courts in the exercise of their “peculiar” jurisdiction, and the courts which refuse to apply the rule generally declare that it arose from express provisions in bankrupt statutes requiring a creditor to surrender his collaterals or deduct for their value before proving against the estate.
Pretermitting for a moment an examination of this reasoning, it is to be remarked in passing that the argument, if sound, l-ests upon the hypothesis that all the bankruptcy laws from the béginning in England and in our own country, and tüe universal course of decision thereon and the practice thereunder. have worked out inequality and injustice by depriving a secured 'creditor of rights which it is now asserted belonged to him and which could have been exercised by him. without producing inequality. This deduction follows, for it cannot be that, if not to compel the creditor to deduct produces no inequality or injustice, then to compel him to do so would .have precisely the same result. The two opposing and conflicting rules cannot both be enforced and yet in each instance equality result. At best, then, the contention admits that by *156the consensus of mankind not to compel the secured creditor to deduct the value of his collaterals before proving produces inequality, for of all statutes those relating to bankruptcy have most for their object an equal distribution of the assets of the insolvent among his creditors.
It is worthy also of notice, in passing, that the reasoning to which we have referred rests upon the assumption that the act of Congress providing for the liquidation of the affairs of a national bank and a distribution of the assets thereof among the creditors is not substantially a bankrupt statute. It certainly is a compulsory method provided by law for winding up the concerns of an insolvent bank, for preventing preferences, and for securing an equal and ratable division of the assets of the association among its creditors; And it assuredly can be safely assumed that Congress in adopting the rule of ratable distribution in the National Banking Act did not intend that the words embodying the rule should be so construed as to produce a result contrary to that which for hundreds of years had been recognized as necessarily implied by the employment of similar language. It may also, I submit, be likewise considered as certain that it was not intended, in using the words “ ratable distribution ” in the statute, to bring about an unequal instead of a ratable distribution of the general assets.
But, coming to the proposition itself, is there any foundation for the assertion that- the rule or practice in bankruptcy requiring the securéd creditor to account for his security was the result of something peculiar in the jurisdiction of bankruptcy courts, other than the requirement contained in bankruptcy statutes that the assets should be distributed ratably among creditors, and is there any merit in the contention that the rule was the consequence of an express provision in such laws imposing the obligation referred to on the secured creditor %
A careful examination of every bankrupt statute in England, from the first statute of 34 & 35 Hen. VIII, c. 4, down to and' including the Consolidated Bankrupt Act of 6 Geo. IV, c. 16, fails to disclose any provision sustaining the statement that *157the rule in bankruptcy depended upon express statutory requirement, and on the contrary shows that it was simply a necessary outgrowth of the command of the statute that there should be an equal distribution of the bankrupt’s assets.
I submit that not only an examination of the English statutes makes clear the truth of the foregoing, but that its correctness is placed beyond question by the statement of Lord Chancellor Eldon respecting proof in bankruptcy by a secured creditor, already adverted to, that “.till his debt has been reduced by the proceeds of that sale,” (that is, of the security,) “ it is impossible correctly to say what the actual amount of it is.” And, as an authoritative declaration of the origin of the rule, the opinion of Vice Chancellor Malins, in Ex parte Alliance Bank, (1868) L. R. 3 Ch., note at page 773, is in point. The Vice Chancellor said:
“ This rule ” (requiring a creditor to realize his security and prove for the balance of the debt only) “does not depend on any statutory enactment, but on a rule in bankruptcy, established irrespective of express statutory enactment, and under the statute of Elizabeth, which provides: ‘Or otherwise to order the same (i.e. the assets) to be administered for the due satisfaction and payment of the said creditors, that is to say, for every of the said creditors a portion, rate and rate alike, according to the quantity of his and their debts.’ ”
Indeed, not only was the obligation of the secured creditor to account for his security derived from the provision as to ratable distribution, but from that provision also originated the equally well-settled rule causing interest to cease upon the issuance of the commission of bankruptcy. As early as 1743, Lord Hardwicke, in Bromley v. Goodere, 1 Atkyns, 75, 79, in speaking of the suspension of interest by the effect of bankruptcy, said: “ There is no direction in the act for that purpose, and it has been used only as the best method of settling the proportion among the creditors, that they may have a rate-like satisfaction, and is founded upon the equitable power given them by the act.”
Whilst, generally, the claim that the bankruptcy rule was the creature of an express provision of the bankruptcy acts, *158other than the requirement as to a ratable distribution of assets, rests upon a mere statement to that effect without any reference to the specific text of the bankrupt, act which it was assumed made such requirement, in one instance, in the Brief of counsel in an early case in this country, Findlay v. Hosmer, (1817) 2 Conn. 320, the statement is made. in. a more specific form. A particular section of an English bankrupt statute is there referred to, as,, in effect, expressly requiring a secured creditor to account for his collaterals in order to prove agáinst the general assets. The statute thus referred to was section 9 of 21 Jac. I, c. 19. But an examination of the section relied on shows that it in nowise supports the assertion. The pertinent portion of the section reads as follows:'
“ . . . all and every creditor and creditors having security for his or their several debts, by judgment, statute, recognizance, specialty with penalty or without penalty, or' other security, or having no security, or having made attachments in London, or any other place, by virtue of any custom'there used, of the goods and chattels of any such bankrupt, whereof there is no execution or extent served and executed upon any the lands, tenements, hereditaments, goods, chattels and other estate of such bankrupts, before such time as he or she shall or do become bankrupt, shall not be relieved upon any' such judgment, statute, recognizance, specialty, attachments or other security fór any more than a ratable part of their just and due debts, with the other creditors of the said bankrupt, without respect to any such penalty or greater sum contained in any such judgment, statute, recognizance, specialty with penalty, attachment or other security.”
The securities other than attachment referred to in this section were manifestly embraced in the class known at common law as “ personal ” security, as distinguished from “ real ” security or security upon property. (Sweet’s Dict’y English Law, verbo Security.) In other words, the effect of the section was but to forbid preferences in favor of creditors which at law would have resulted from the particular form in which the debt was evidenced, and from which form a claim would *159be raised to a higher rank than a simple contract debt. That this is the significance of the word “ security ” as used in this section is shown by the following excerpt from Cooke’s treatise on bankrupt laws, published in 1786. At page 114 he says:
“ The aim of the legislature in all the statutes concerning bankrupts, being, that the creditors should have an equal proportion of the bankrupt’s effects, creditors of every degree must come in equally; nor will the nature of, their demands make any difference, unless they have obtained actual execution, or taken some pledge or security before an act of bankruptcy committed. For when a creditor comes to prove his debt he is obliged to swear whether he has a security or not; and if he has, and..insists upon proving, he must deliver it up for the benefit of his creditors, unless it be a joint security from the bankrupt and another person,” etc.
The fact that the expression “ security ” contained in the section referred to had no reference to security on property, is further demonstrated by the subsequent statute of 6 Geo. IV, c. 9, § 103, which reenacted in an altered form the ninth section of the statute of James; for the reenacted section, although it referred in broad terms to securities generally, yet especially excepted the case of a mortgage or pledge. The section is as follows:
“ Seo. 103. And be it enacted, That no creditor having security for his debt, or having made any attachment in London, or any other place by virtue of any custom there used, of the goods and chattels of the bankrupt, shall receive upon any such security or attachment more than a ratable part of such debt, except in respect of any execution or extent served and levied by seizure upon, or any mortgage of or lien upon any part of the property of such bankrupt before the bankruptcy.”
Is it pretended anywhere that after the reenactment of section 9 of the statute of James I, found in section 103, c. 9, 6 Geo. IV, that the obligation of a secured creditor to account for his collateral before he took a dividend out of the general assets ceased to exist ? Certainly, there is no such *160contention. If, however, that duty of the general creditor arose, not from the provision as to ratable distribution, but from the provisions of section 9 of the act of James as claimed, then necessarily such obligation on the part of the general creditor would haye ceased immediately on the enactment of the statute of 6 Geo. IV, which expressly excepted the mortgage creditor from the operation of the particular section which it is contended imposed the duty on the mortgage creditor to account. The continued enforcement of the rule which required the mortgage creditor to deduct the value of his security before proving against general assets after the reenactment of section 9 of the statute of George referred to, can lead to but jane conclusion; that is, that the duty of the mortgage creditor before existing arose from the provision for ratable distribution and not from the terms of section 9 of the. statute of James, since that duty continued to be compelled after the reenactment of that section in terms which renders it impossible to contend that that section created the duty.
A similar course of reasoning applies to bankrupt statutes of this country.
Section 31 of our first, .bankrupt statute, act April 4, 1800, c. 19, 2 Stat. 19, 30, was, in substance and effect, similar to the provision in the act of .James: The statute of 1800 is said to have been a consolidation of the provisions of previous English bankrupt statutes, Tucker v. Oxley, 5 Cranch, 34, 42; Roosevelt v. Mark, 6 Johns. Ch. 266, 285; and in Tucker v. Oxley, Chief Justice Marshall declared that, for that reason, the decisions of the English judges as. to the effect of those acts might be considered as adopted with the text that they expounded. Section 31 reads as follows:
“ Sec. 31. And be it further enacted, That in the distribution of the bankrupt’s effects, there shall be paid to every of the creditors a portion-rate, according to the amount of their respective debts, so that every creditor having security for his debt by judgment, statute, recognizance or specialty, or having an attachment under any of the laws of the individual States, or of the United States, on the estate of such bank*161rupt, (provided, there bé no execution executed upon any of the real or personal estate of such bankrupt, before the time he or she became bankrupts) shall not be relieved upon any such judgment, statute, recognizance, specialty or attachment, for more than a ratable part of his debt, with the other creditors of the bankrupt.”
This provision of the act of 1800 was, however, omitted from the bankrupt act of 1841, manifestly because it had be-. come unnecessary. The later statute contained in the fifth section a general provision forbidding all preferences except in favor of two classes of debts, thus rendering it superfluous, to enumerate cases in which there should be no preference. It was, however, under the act of 1841, which was drafted by Mr. Justice Story, (2 Story’s Life of Story, 407,) that this court, speaking through that learned justice, in In re Christy, already cited, declared that a secured creditor must account for his security when proving against the bankrupt estate. How it can be now argued that the requirement that such creditor should only so prove his claim was the result of a provision not found in the act of 1841, and clearly shown by all the antecedent legislation not. to refer to a creditor holding property security, my mind fails to comprehend.
True it is, that both in our own act of 1867 and in the English bankrupt act of 1869, there were inserted express provisions requiring a secured creditor to account for his collaterals before proving against the general assets. But this was but the incorporation into the statutes of the rule which had arisen as a consequence of the requirement for a ratable distribution and which had existed for hundreds of years before the statutes of 1867 and 1869 were adopted. In other words, the express statutory requirement only embodied in the form of a legislative enactment what theretofore from the earliest time had been universally enforced, because of the provision for a ratable distribution.
The rule in bankruptcy imposing the duty upon the creditor to account for his security before proving being then the result of the provision of the bankrupt laws requiring ratable distribution, I submit that the same requirements upon such *162creditor shohld be held to arise from a like provision contained in the act of Congress under consideration.
But, coming to consider the chancery rule which it is contended lends support to the doctrines applied in the cases at bar.
The foundation upon which the so called chancery rule rests is the case of Mason v. Bogg, 2 Myl. & Cr. 443, decided in 1837, where Lord Chancellor Cottenham expressed his approval of the contention that a mortgage creditor, despite the death and insolvency of his debtor, possessed the contract right to assert his whole claim against general assets in the course of administration in chancery, without regard to his mortgage security. The question was not directly decided, however, as to whether the creditor might, prove in the administration for the whole amount of the debt, but was reserved. As stated, however, the reasoning of the court favored the existence of such right, upon the. theory that a court of chancery, when administering assets, in the absence of a statute regulating the subject, could not deprive a secured creditor of legal rights previously existing which he might have asserted.at law, although by permitting the exercise of such rights preferences in the general assets would arise.
The next case in point of time in England, and indeed the one upon which most reliance is placed by those favoring the chancery rule, is Kellock's case, reported in L. R. 3 Ch. 769, involving two appeals, and argued before Sir W. Page "Wood, L. J., and Sir O. J. Selwyn, L. J. The cases arose in the winding up of companies by virtue of the statute of 25 & 26 Victoria, c. 89. The issue presented in each case was whether a creditor having collateral security was entitled to dividends upon the full amount of the debt without reference to the value of collaterals; and in one of the cases the lower cdu»t applied the doctrine supported by the reasoning in Mason v. Bogg, while in the other the lower court decided the bankruptcy rule governed. The appellate court held that the •chancery practice should be followed. The claim was made that the secured creditor ought not to be allowed to take a dividend on the full amount of his claim, because, among *163other reasons, of section 133 of the. act, which provided as follows:
“133. The following Consequences shall ensue upon the voluntary. Winding-up of a Company:
“ (1.) The Property of the Company shall be applied in satisfaction of its Liabilities pari passu, and, subject thereto, shall, unless it be otherwise provided by the Eegulations of the Com- ■ pany, be distributed amongst the Members according to their Eights and Interests in the Company.”
This contention, however, was answered by Lord Justice Wood, who said (p. 778):
“There is a clause in tlie Companies Act of 1862 which says that, in a voluntary winding up equal distribution is to be made among creditors; an expression similar to which, in 13 Eliz. c. 7, appears to have led to the establishment of the rul¿ in bankruptcy.”
He then called attention to the fact that a voluntary winding up was not limited to cases of insolvent companies, but might be resorted to on behalf of a solvent one; and he proceeded to comment upon the fact that in previous winding-up acts, “when the legislature intended proceedings to be conducted according to the .course in bankruptcy, it said so,” concluding with the declaration that the omission to do so in the case before the court indicated the purpose of Parliament that the. court should be governed by the chancery rule. Lord Justice Selwyn, in a measure, also adopted this view, saying (p. 782):
“I think, therefore, that the onus is clearly thrown on those persons, who come here and say that when the legislature, with a knowledge of the existence of the difference between the practice in bankruptcy and the practice in chancery, entrusted the winding up of the companies to the Court of Chancery, and said in express terms that the practice of the Court of Chancery was to prevail, they intended by some implication or inference to diminish, prejudice or affect the rights of creditors. I can find no trace of any such intention. I think, therefore, we are bound to follow the established practice of the Court of Chancery, especially when we find that *164that practice has been followed ever since the passing of the "Winding-up Act, and so long as winding-up orders have been made in the Court of Chancery.”
The whole subject has been set at rest, however, in Great Britain, by section 25 of the Judicature Act of August 5, 1873, c. 66, and by an amendment thereto adopted August 11, 1875, c. 77, which expressly required that in the administration in chancery of an insolvent estate of one deceased and in proceedings in the winding up of an insolvent company under the Companies Acts, “ the same rule shall prevail and be observed as to the respective rights of secured and unsecured creditors, and as to debts and liabilities provable, . . . as may be in force for the time being under the law of bankruptcy, with respect to the estates of persons adjudged-bankrupt.”
So that now, in Great Britain, in all proceedings involving the distribution of an insolvent fund, a secured creditor can only prove for the balance which may remain after deduction of the proceeds or value of collateral security.
In view, therefore, of the English legislation in 1873 and 1875, which has rendered it impossible in cases of insolvency to apply the doctrine of the Kellock case, we need not particularly notice decisions rendered in England subsequent to 1868, when the Kellock case was decided, particularly as the tribunals which rendered such decisions were subordinate to the Court of Appeal and necessarily bound by its rulings.
Now, I submit, as' the English Chancellors, from the date of the enactment of the earliest English bankrupt law, felt constrained to compel a secured creditor to account for his security before proving against the general assets of tbe bankrupt estate, because Parliament had directed a ratable distribution of all such assets, it cannot in consonance with sound reasoning be said that this court is to apply the chancery rule to the distribution of the assets of an insolvent national bank as to which Congress has directed .a ratable distribution, because in England a different rule was for a time applied to an act of Parliament providing not solely for the liquidation of an insolvent estate, but equally to a solvent and *165insolvent one, and which rule was so applied in England because a particular statute was construed as requiring that the practice pursued in chancery in administering upon estates should govern.
It is worthy of note that Lord Justice Wood, after stating in his opinion in the Kellock case that the bankruptcy rule was “ adopted by a court having a peculiar jurisdiction, • established for administering the property of traders unable to meet their engagements,” conceded that the provision in the statute of 13 Eliz. c. 7, requiring equal distribution, “led to the establishment of the rule in bankruptcy.” But the Lord Justice took the cases then under consideration out of the operation of the provision of the statute of Elizabeth because of provisions found in the Company Act which, in his opinion, gave rise to a contrary view in cases governed by that act. The distribution of the assets of a failed national bank under the act of Congress, it is obvious, presents the “peculiar” features which Lord Justice Wood had in mind, since the requirement of ratable distribution is the exact equivalent of the provision contained in the statute of Elizabeth. But the reasoning now employed to cause the rule announced in the Kellock case to apply so as to defeat the ratable distribution provided by the act of Congress, is made to rest upon the assumption that the act of Congress does not contain the peculiar requirement which was found in the bankruptcy acts, from which the duty of the secured creditor to account for his security before taking a dividend from the general assets arose. It comes, then, to this: That the theory by which the obsolete doctrine of the Kellock case is made to apply rests upon an assumption which repudiates the reasoning of that case; in other words, that the result of the Kellock case is taken and applied to this case, whilst.,the reasoning upon which the decision of the Kellock case was based is in effect denied.
That to permit a secured creditor to retain his specific contract security and also to prove against the general assets of his insolvent debtor for the whole amount of the debt was deemed to work out inequality is shown not only by the fact *166that it was not applied in bankruptcy, but that in the administration of equitable, as contradistinguished from legal, assets, courts of equity, following the maxim Equitas est quasi equalitas, would not permit claimants against equitable assets to share in the distribution of such assets, until they had accounted for any advantage gained by the assertion against the general estate of the debtor of a preference permitted at law. Morrice v. Bank of England, Cases Temp. Talb. 218; Sheppard v. Kent, 2 Vern. 435; Deg v. Deg, 2 P. W. 412, 416; Chapman v. Esgar, 1 Sm. & G. 575; Bain v. Sadler, L. R. 12 Eq. 570; Purdy v. Doyle, 1 Paige, 558; Bank of Louisville v. Lockridge, 92 Kentucky, 472; 1 Story Eq. Jur. 12th ed. p. 543; Watson, 1 Comp. Ex. 2d rev. ed. ch. 11, p. 35.
It was undoubtedly from a consideration of. this fundamental rule of equity, in construing the statutory requirement for ratable division of general assets, t^iat the bankruptcy rule was formulated. That rule, however, in effect, declared that secured creditors might retain their preferential contract rights in particular portions of the estate of the insolvent debtor, but that it was the purpose of Parliament, in commanding ratable distribution, that general assets, that is, assets disencumbered of liens, should be distributed only among the general or unsecured creditors; the necessary effect being that a secured creditor could not prove against general assets without surrendering his security, thus becoming a general or unsecured creditor for the whole amount of the debt, or realizing upon the security or in some form accounting for its value, in which latter contingency he would be general or unsecured creditor only for the deficiency. That the bankruptcy rule was deemed to be founded upon equitable principles, I think, is demonstrated by the statement of Lord Hardwicke in a case already mentioned, Bromley v. Goodere, 1 Atk. 77, where, after referring to the act of 13 Eliz. c. 7, he said:
“ It is manifest that this act intended to give the commissioners an equitable jurisdiction as well as a legal one, for they have full power and authority to take by their discretions such order and direction as they shall think fit; and that this has *167been the construction ever since; and therefore when petitions have come befofe the Chancellor, he has always proceeded upon the same rules, as he would upon causes coming before him upon' the bill, The rules of equity.”
The .foregoing reasoning renders it unnecessary to review at length the opinion delivered by the Circuit Court of Appeals for the Sixth Circuit in Chemical National Bank v. Armstrong, 16 U. S. App. 465, to which the court has referred, as the conclusions announced by the Circuit Court of Appeals were rested on the assumption that the bankruptcy rule was the creature of an express statutory requirement, and that to prevent a secured creditor from proving for his whole debt, as of the time of the insolvency, without regard to his col-laterals, would deprive him of a contract right, both of which contentions have been.fully considered in what I have already said. Nor is the case of Lewis v. United States, 92 U. S. 619, also referred to in- the opinion of the court in the case at bar, controlling upon the question here presented. True, it was said in the Lewis case, in passing, and mpon the admission of counsel, that “ It is a settled principle of. equity that a creditor holding collaterals is not bound to apply them before enforcing his direct remedies against the debtor;” citing the Kellock case and two other English. and two Pennsylvania cases involving the question of the 'rights of a creditor having the securities of distinct estates of separate debtors. But the controversy before the court in the Lewis case was of this latter character being between the United States, as creditor of a partnership and holding-collaterals belonging to the partnership, and the trustee in bankruptcy of the separate estates of individual members of the partnership. The government was seeking to assert against such separate estates a right of preference given to it by statute. The court decided that as the United States had a paramount, lien upon all the assets of every debtor for the full satisfaction of its claim, it was unaffected by the bankruptcy statutes, and therefore was not controlled by any provision found therein for ratable distribution or otherwise.' It is apparent, therefore, that the court, by the quoted statement did not decide that a court of equity *168would apply the doctrine there set forth, where the rights of the secured creditor were limited and controlled by statute. If the secured creditor, who is allowed in the case now decided to disregard' his security and prove for the whole amount of his claim had' a paramount lien not only upon his collaterals, but upon each and every asset of the insolvent bank, the rule in the Lewis case would be apposite. But that is not the character of the case now before the court, since here a secured creditor has no paramount lien upon anything but his collaterals, and is governed in his recourse against the general assets by the requirement that there should be a ratable distribution. ■
As the case before us is to be controlled by the act of Congress-,it would appear unnecessary to advert to state decisions construing local statutes; but inasmuch as those decisions were referred to and cited as authority, I will briefly notice them. They are referred to in the margin and divide themselves into four classes: 1. Those which maintain that where ratable dis-. tribútion is required, the creditor must account for his security before proving.1 2. Those cases which,;on the contrary, decide that to allow the creditor to prove for his whole claim without deduction of security, is not incompatible with ratable distribution, and hold that the security need not be taken into account.2 3. Those cases which, whilst seemingly deny*169ing the obligation of the secured creditor to account for his security, yet, practically, work out a contrary result by requiring deduction upon collaterals as collected, and affording remedies to compel prompt realization of collaterals.1 4. Those which originated in purely local statutes and which hold that the secured creditor can prove for the whole amount without reference to either the bankruptcy or the chancery rule.2 And in the margin I supplement the compilation heretofore made by a reference to some state statutes and decisions referring to statutes which expressly provide that the claimants upon an insolvent estate can only prove for the balance due, after deduction of any security held.3
Of course, for the purposes of this case, only the first two classes of cases need be considered. The first class is well represented by two Massachusetts cases: Amory v. Francis, 16 Mass. 308, and Farnum v. Boutelle, 13 Met. 159. In the first-named case Chief Justice Parker said (p. 311): “If it were not so, the' equality, intended to be produced by the *170bankrupt laws, wouid be grossly violated, and the creditor holding the pledge would, in fact, have a greater security than that pledge was intended to give him. For originally it . would have been security only for a portion of the debt equal to its value; whereas by proving the whole debt, and holding the pledge for the balance, it becomes .security for as much more than its value, as is the dividend, which may be received upon the whole debt.”
In the later case, Chief Justice Shaw announced the rule as follows : 13 Met. 164:
“ If the mortgage remained in force at the time of the decease of the debtor, then it is very clear, as well upon principle as authority, that the creditors cannot prove their debt, without first waiving their mortgage, or, in some mode, applying the amount thereof to the reduction of the debt, and then proving only for the balance. Amory v. Francis, 16 Mass. 308.”
The second class of cases may be typified by the case of People v. Remington, 121 N. Y. 328, where the conclusion of the court was placed upon the ground that the rule in bankruptcy originated in an express requirement in the bankrupt acts other than that for a ratable distribution. The court, speaking through Gray, J., said (p. 332):
“Some confusion of thought seems to be worked by the reference of the decision of the question to the rules of law governing the administration of estates in bankruptcy; but there is no warrant for any such reference. The rules in bankruptcy cases proceeded from the express provisions of the statute, and they are not at all controlling upon a court administering, in equity, upon the estates of insolvent debtors. The bankruptóy act requires the creditor to give up his security, in order to be entitled to prove his whole debt; or, if he retains it, he can only prove for the balance of the debt, after deducting the value of the security held. The jurisdiction in bankruptcy is peculiar and special, and a particular mode of administration is prescribed by the act.”
Having thus eliminated the bankruptcy rule, the court reviewed the decisions in Mason v. Bogg and Kellock's case, and held those cases to be controlling. The Remington case, *171therefore, as well as those of which it is a type, need not be further reviewed, as tlie fundamental error upon which they rest has been fully stated in what I have previously said. ,
It is necessary, however, to call attention to the fact that in the cases which decline to apply the rule in bankruptcy and refuse to enforce the provision for ratable distribution, there is an- entire want of harmony as to the time when- the rights of creditors are fixed with respect to the amount of the claim which may be proved against general assets, Some holding that dividends are to be paid on the amount due at the date of insolvency, others on the amount due at the time of proof; and others upon the sum due when dividends are declared. This confusion is the necessary outcome of the erroneous premise upon which the cases rest. A similar confusion, moreover, I submit, is manifested by the rule now announced by the court; since whilst it is avowedly.rested upon the defunct chancery rule, exemplified in Mason v. Bogg and the Kellock case, yet in effect it fails to follow the very rule upon which the decision is based. This is clear when it is borne in mind that the chancery rule was decided in both Mason v. Bogg and the Kellock case to be that the amount of the claim of the creditor was fixed by the date when proof was actually made, and yet under the authority of the chancery rule and the cases in question the court now decides that the rights of the secured creditor are fixed by insolvency. Thus the chancery rule is applied and at the same time repudiated in an important particular, for the grave difference between allowing a secured creditor to prove only for the amount due when proof was made and therefore compelling him to account for all collections realized on collaterals up to that time, and allowing him long after insolvency to prove, by relation, as of the date of the insolvency, and disregard the collections actually made, is manifest. In this connection it may not bo .amiss to call attention to the fact that if the bankruptcy rule was applied in the proof of claims, the amount of the claim would not vary, wdhether the date of insolvency or the time when proof was made was held to be the date when the rights of the creditor in the fund were fixed.
*172Moreover, I submit that the propositions now adopted, which reject the bankruptcy rule, rest on reasoning which, if it be logically applied, requires the enforcement of the bankruptcy rule in its integrity. It seems to me it has been shown by the doctrine announced by Lord Hardwicke, in 1743, Bromley v. Goodere, supra, that the stoppage of interest on the claims of all creditors was but an essential evolution of the principle of ratable distribution. This stoppage of interest at the period named is now upheld by the. rule sanctioned by this court. This, then, takes the provision of the bankruptcy rule which favors the secured creditor and which arises alone from ratable division, and gives him the benefit of it whilst at the same time rejecting the obligation to account which arises from and depends on the very principle of ratable distribution which- is in part enforced. . To repeat, it strikes my mind that the conclusion now announced is this, that the obsolete chancery rule both applies and does not apply, that the bankruptcy rulé at the same time does not apply and does apply, the result of this conflict being to so interpret the act of Congress as to strike from it the beneficent provision for equality of distribution among general creditors.

 Amory v. Francis, (1820) 16 Mass. 308; Farnum v. Boutelle, (1847) 13 Met. 159; Vanderveer v. Conover, (1838) 1 Harr. 487; Bell v. Fleming's Executors, (1858) 1 Beasley, (12 N. J. Eq.) 13, 25; Whittaker v. Amwell National Bank, (1894) 52 N. J. Eq. 400; Fields v. Creditors of Wheatley, (1853) 1 Sneed, (Tenn.) 351; Winton v. Eldridge, (1859) 3 Head, (Tenn.) 361; Wurtz v. Hart, (1862) 13 Iowa, 515; Searle, Ex'or, v. Brumback, Assignee, (1862) 4 Western Law Monthly, (Ohio) 330; In re Frasch, (1892) 5 Wash. 344; National Union Bank v. National Mechanics Bank, (1895) 80 Maryland, 371; American National Bank v. Branch, (1896) 57 Kansas, 327; Investment Co. v. Richmond National Bank, (1897) 58 Kansas, 414.

 Findlay v. Hosmer, (1817) 2 Conn. 350; Moses v. Ranlet, (1822) 2 N. H. 488; West v. Bank of Rutland, (1847) 19 Vermont, 403; Walker v. Baxter, (1854) 26 Vermont, 710, 714; In the matter of Bates, (1886) 118 Illinois, 524; Furness v. Union National Bank, (1893) 147 Illinois, 570; Levy v. Chicago National Bank, (1895) 158 Illinois, 88; Allen v. Danielson, (1887) 15 R. I. 480; Greene v. Jackson Bank, (1895) 18 R. I. 779; People v. Remington, *169(1890) 121 N. Y. 328; Third National Bank of Detroit v. Haug, (1890) 82 Michigan, 607; Kellogg v. Miller, (1892) 22 Oregon, 406; Winston v. Biggs, (1895) 117 N. C. 206.

 In re Estate of McCune, (1882) 76 Missouri, 200; State v. Nebraska Savings Bank, (1894) 40 Nebraska, 342; Jamison v. Alder-Goldman Commission Co., (1894) 59 Arkansas, 548, 552; Philadelphia Warehouse Co. v. Anniston Pipe Works, (1895) 106 Alabama, 357; Erle v. Lane, (1896) 22 Colorado, 273.

 Shunk’s and Freedley's Appeals, (1845) 2 Penn. St. 304; Morris v. Olwine, (1854) 22 Penn. St. 441, 442; Keim’s Appeal, (1856) 27 Penn. St. 42; Miller’s Appeal, (1860) 35 Penn. St. 481; Patten's Appeal, (1863) 45 Penn. St. 151. And see a reference to the cases in Pennsylvania, in Boyer's Appeal, (1894) 163 Penn. St. 143.

 Indiana: — Combs v. Union Trust Co., 146 Ind. 688, 691; Kentucky: — Statutes, 1894, (Barbour & Carroll’s ed.) c. 7, sec. 74, p. 193; Bank of Louisville v. Lockridge, 92 Kentucky, 472; Massachusetts: — Act of April 23, 1838, c. 163, sec. 3; General Statutes, 1860, ch. 118, sec. 27; Michigan: — 2 How. St. sec. 8824, p. 2156; Minnesota:—By statute March 8, 1860, the security is made the primary fund, to which resort must be had before a personal judgment can be obtained against the debtor for a deficit, Swift v. Fletcher, 6 Minn. 550; New Hampshire: — Laws 1862, ch. 2594; South Carolina: — Piester v. Piester, 22 S. C. 139; Wheat v. Dingle, 32 S. C. 473; Texas: — Civil Stats. 1897, art. 83; Acts 1879, ch. 53, sec. 13; Willis v. Holland, (1896) 36 S. W. Rep. 329.