Opinion of the Court. business on the 19th, amounting to $17,806.84. Thereupon, and as part of the same transaction, the manager paid from the $70,005.36, which by his settlement sheet appeared to the credit of the Keystone as owing from other banks to the Keystone Bank for the checks surrendered by that bank, the amount of the due bills referred to, viz., $41,197.36. This left to the credit of the Keystone the sum of $28,808.10, and this amount was by the manager, acting under direction of the committee of the association, credited on the loan certificate account of the Keystone Bank with the association. The result of the transaction was a reduction of the claims which had been originally made against the Keystone Bank in the exchanges of the 20th of March, 1891, from $117,035.21 to $41,197.36, and a return to the various banks of $75,837.85 of checks and drafts received from their customers. Whilst the record does not affirmatively show the fact, it is fairly inferable from it that these checks, etc., aggregating $75,837.85, were immediately charged back by the banks by whom they had been received and were returned to the depositors from whom they had received them, and therefore reached ultimately the drawers, who were depositors in the Keystone Bank, thus leaving the Keystone Bank liable for their amount in its deposit account with its depositors. On February 19, 1894, the receiver of the Keystone Bank filed his bill in this cause in the Circuit Court of the United States for the Eastern District of Pennsylvania, setting forth the relations between the Keystone Bank and the clearing house, and detailing the transactions of the 20th of March, 1891, substantially as we have stated them; alleged an appropriation by the association to its own use, after the insolvency of the Keystone Bank, and in violation of the statutes of the United States, of the checks and drafts which had been surrendered at the clearing house by the Keystone Bank on the morning of the 20th of March, as herein before stated, and also alleging an appropriation and application to the use of the association of bonds of the Baltimore Traction Railway Company of the par value of $100,000, which it was claimed had been specifically deposited by the Keystone Bank as security Opinion of the Court. for the payment of any balance which might be owing by it in the daily clearing. It was averred that demand had been made on the association, and that it had refused to account to the receiver for the said checks, drafts and bonds. A discov ery was asked and relief prayed that the association surrender the checks, drafts and bonds, or, in the alternative, that the association be decreed to pay the amount collected thereon with interest. The answer of the association detailed most of the facts heretofore recited and averred the lawfulness of the appropriation made of the $70,005.36. As to the traction bonds, it was averred that they were deposited as security for loan certificates, and that they had been sold and the proceeds duly accounted for in the account as to such certificates. The claim of the receiver as to these bonds was subsequently abandoned. A decree was entered in the Circuit Court adjudging that the receiver recover from the defendants $70,005.36 with interest from March 20, 1891. 58 Fed. Rep. 746. On appeal, the Circuit Court of Appeals reversed that decree, and remanded the cause to the trial court with directions to dismiss the bill of complaint. 17 U. S. App. 647. From this latter decree an appeal was taken to this court. The opposing judgments rendered by the Circuit Court and by the Circuit Court of Appeals well define the conflicting contentions of the parties, since the conclusion of the Circuit Court entirely sustained the position taken by the complainant while the Court of Appeals justified the rights asserted by the defendants. The receiver of the Keystone Bank argues that the result of the transactions at the clearing house on March 20, 1891, after the failure of the bank, was to wholly dismiss the Keystone Bank from the clearing and leave it with a claim of $70,000 against the clearing house, which it is entitled to have paid in full without reference to all or any of the debts due by it, which otherwise would have been properly chargeable in the clearing. In other words, the Keystone Bank, although it put into the clearing only claims against other banks sufficient to partially discharge its obligations, and failed subsequently to perform the duty, owing by it, to pay VOL. CLXVII-23 Opinion of the Court. in cash a sum adequate to make up the difference, that is, to discharge all its debts resulting from the clearing, asserts that as a consequence of its failure to pay all it has been absolved from thereafter paying anything whatever in the clearing. Or, stated in another form, the argument is this: As the banks which held checks on the Keystone Bank, when they received these checks from the clearing house, charged them back to their depositors, and therefore made them obligations due by the Keystone Bank on its deposit account with its depositors, these banks elected to consider the Keystone Bank as no longer connected with the clearing house, and hence also lost their right to compensate the credit of the Keystone Bank by such other obligations, outside of the checks, which were properly entitled to and had actually figured in the clearing, such as due bills, etc., which these banks had not charged back, because they were not of the nature to be so charged, as they were when presented in the morning clearing held by the banks for their own account. It is clear then that the claim of the receiver of the Keystone Bank is that, by the default of that bank, its liability to have its claim in the clearing compensated by its due bills held by other banks. was cancelled, and hence that it was in a much better position by its failure than it would have been if it had not suspended and had furnished the funds to pay all the claims presented against it in the clearing. On the other hand, the claim of the Clearing House Association is that it owes nothing, and that by the default of the Keystone Bank the clearing house became entitled to appropriate the balance of the credit due the Keystone Bank in the clearing, to debts due to the clearing house, although such debts were not of a nature to have authorized them to be charged against the clearing if the failure had not taken place. That is, the clearing house also contends that the effect of the failure was to give it rights against the Keystone Bank which it would not have had if the failure had not taken place. The claims of both parties, therefore, when analyzed, amount to the assertion, as a proposition of law, that they both have greater rights in consequence of the insolvency than they Opinion of the Court. would have had if the insolvency had not taken place. The self-evident error of this proposition points to the unsoundness of the claims of both parties to the controversy. We will demonstrate that this is the case by considering the situation of the parties in order thereby to determine their respective rights against and obligations towards each other. A clear ascertainment of the legal status of the parties will be at the outset greatly facilitated by first considering a matter much discussed in argument, viz.: what, if any, bearing the payment of $117,035.21 to the manager of the clearing house by sundry members of the association has upon this controversy. In the manager's settlement sheet of the daily clearings between the banks, made up from the data contained in the settlement sheets prepared by the settling clerk of each bank at the close of the clearing, there was set out in the centre of the sheet, running from top to bottom, a list of banks, each bank being given a number ranging from 1 to 43. In a column to the left of the number and name of each bank there was a list of debit items, each item indicating that the sum stated was owing from the bank opposite to which it was placed, for checks and drafts and due bills which had been presented against that bank by other banks in the association. The banks which had presented these checks, drafts and due bills were given credit therefor on the credit side of the sheet, in a column to the right of the name of each bank, as being claims in their favor against the debit items due from other banks. The aggregate of the debit items was therefore the fund from which the aggregate of the credit item was to be paid. The two necessarily balanced each other. If, as the result of the failure of the Keystone Bank and the return to the banks, which had presented them, of the packages in question, the sum of $117,035.21 had been stricken from the debit side of the manager's sheet, the effect necessarily would have been that the totals on the credit side would have been just that much greater than the total of the debit side, and, therefore, there would have been a shortage of that amount in the execution of the clearing. It follows that in paying the aggregate credits the manager of the clearing house would Opinion of the Court. have been short that much money. In other words, to have paid the banks who had presented the checks against the Keystone Bank the sum of their claims against all the banks in the association, as shown by the credit side of the manager's sheet, the manager necessarily would have had to make good the shortage by paying less to that amount to the banks who had received an increased credit because of the expected payment of the debit item charged against the Keystone. That is to say, the deficiency on the credit side which would have resulted from taking out the $117,035.21 debit due by the Keystone would have caused the loss to fall on the banks which had presented the claims against the Keystone, because they would have received that much less on the aggregate amount due to them from the entire clearing, that is, from all the other banks. Instead of doing this, however, and in order to render his settlement regular in form, the manager called upon the banks who had presented the claims against the Keystone Bank to substitute money for these claims, so that this money, paid in by them in response to the call, might take the place of the amount of $117,035.21, and thus cause the debit and credit side to agree, and enable him to carry out the clearing just as it had been made in the early morning. The effect of this was not to change the situation at all, since if the $117,035.21 had not been paid in, the loss would have fallen on the banks who had received credit, because they had presented claims against the Keystone amounting to $117,035.21. It results that by paying in the amount called for and having it put fictitiously on the sheet, in lieu of the $117,035.21 due from the Keystone Bank the banks paying in the amount neither gained nor lost, since they immediately received back the amount when the clearing was carried out. Whilst the transaction then assumed the form of a payment of $117,035.21 by the banks called upon, it was in reality no payment at all, for it simply enabled the money paid in to be considered as on one side of the account in order to be handed back to them on the other. This is the inevitable result of the transaction, which, besides, is clearly shown by the testimony of Mr. Boyd, the manager of the clearing house, who |