Statement of the Case. was organized May 13, 1865, with a capital of $100,000, which was increased November 13, 1866, to $150,000. Its place of business was Norfolk, Va. "The firm of Bain & Bro., composed originally of R. T. K. and James G. Bain, began business in Portsmouth, Va., as brokers and private bankers in September, 1865, with an assumed capital of $5000, placed to the credit of the two partners on the books. George M. Bain, Jr., was admitted as a partner soon after the business was started and Thomas A. Bain in 1868 or 1869; but he died in 1877. The capital was never increased, but, on the contrary, the drafts of the partners soon exhausted the original credits and much more besides. At the time of the failure, the balances against the partners respectively were as follows: "Portsmouth is separated from Norfolk by the Elizabeth River, one place being on one side of the river and the other immediately opposite on the other. On the 7th of July, 1870, the firm became shareholders in the bank, and the next day George M. Bain, Jr., was elected cashier. This office he held until April 2, 1885. R. T. K. Bain was elected a director January 2, 1872, and he served in that capacity all the time thereafter during the existence of the bank. James G. Bain was elected assistant cashier August 11, 1873, and he held that office until January 11, 1881, when he was made vice-president, in which capacity he acted until the end. Thomas A. Bain was elected a director January 11, 1876, and this office he held until his death. "On the 9th of September, 1873, the capital stock of the bank was increased from $150,000 to $200,000. The names of the subscribers are not given and no money was paid on that day, but the whole amount of $50,000 was carried in the VOL. CXXXIII-43 Statement of the Case. receiving teller's cash as a cash item until October 14, 1873, when the following parties gave their checks on the bank for the following amounts: "Certificates of stock were issued to these parties, respectively, for the shares represented by their several checks. On the 10th of May, 1874, the stock was increased to $300,000, R. H. McDonald, of California, taking and paying for the whole of the additional amount. "At the time of the failure of the bank the following per'sons held shares as follows: "Thos. A. Bain's estate. "George M. Bain, Jr., and John B. Whitehead "In all 1187 do. "Very soon after Bain & Bro. became connected with the bank they began to absorb its funds. As they wanted money they got it with or without security, as was most convenient for them. They had no direct connection in their own private banking business with the Bankers' Clearing-house at Norfolk, but they were represented in that association by the Exchange Bank, which paid all balances against them, and these at some times amounted to very large sums. The commercial and business paper which they took at their banking-house in Portsmouth was largely rediscounted for them at the bank, and on the 31st of March, 1885, their indebtedness to the bank has been stated approximately as follows: Statement of the Case. "Bain & Bro.'s notes &c., unendorsed and unse "Bain & Bro.'s notes endorsed by bank and dis 50,000 00 $1,443,462 99 "In addition to this George M. Bain, Jr., and James G. Bain each owed the bank very considerable sums. Such being the condition of affairs, the Comptroller of the Currency required. the bank to reduce at once the unsecured debt of Bain & Bro., and to make good the deficiency in its reserve fund. In consequence of this the firm on the 31st of March sold to the bank the following stocks and bonds: "Seaboard Compress Company stocks "Southern telegraph bonds, of the par value of "Meherrin Valley railroad bonds $300,000 200,000 70,000 $570,000 and guaranteed that the same should yield the amount for which they were taken whenever put on the market and sold. This guaranty was secured by a transfer of the interest of the firm in the Richmond Cedar Works, and also in $80,000 of Southern telegraph bonds held as collateral security. This being done, and the firm also agreeing not to assign their other property for the benefit of creditors with preferences against the bank, notes of the firm and other indebtedness to the amount agreed on as the value of the stocks and bonds were surrendered and the unsecured debts thereby nominally reduced. While some of the stocks and bonds thus transferred had been before that time in the possession of the bank, or some of its officers, the evidence does not establish the fact that they had been in any way pledged, or that they could be legally held by the bank as security. They were all, so far as appears, the property of the firm, free of any specific claim of Statement of the Case. the bank. The value of the stocks and bonds thus transferred falls between two and three hundred thousand dollars short of the amount for which they were taken, and the Richmond Cedar Works stock and Southern telegraph bonds, held as collateral to the guaranty against this deficiency, are of but little value. "What was thus done did not satisfy the Comptroller, and on the 2d of April, 1885, he took possession of the bank for the purpose of winding up its affairs. The banking-house in Portsmouth closed its doors at the same time. This produced great excitement both in Portsmouth and Norfolk, and resulted in the assignment which is now attacked. Mr. Old, one of the assignees, is an attorney-at-law, and was retained as counsel for the firm. He advised them in all their matters and drafted the assignment. He was informed of the agreement which had been made not to assign with preferences against the bank, and knew generally of the large indebtedness of the firm and of its members to the bank. He also knew of the transaction between the bank and the firm on the 31st of March, and, hearing that it was the intention of the creditors of the bank to enjoin the assignment, he made haste to have it executed and recorded before anything of that kind was done. "The actual value of the property which passed by the assignment does not exceed five hundred thousand dollars. The property consists very largely of real estate in Portsmouth and Norfolk County, the title to most of which was in R. T. K. Bain. The books of the firm are entirely unreliable. In fact, no general ledger was ever kept, and transactions to enormous amounts can only be traced by memoranda on slips of paper with the help of the explanations of R. T. K. Bain, who was the principal manager. No accounts at all were kept with the bank, and everything, so far as Bain & Bro. were concerned, was found in the greatest confusion. "After the death of Thomas A. Bain the business of the firm was conducted in all respects as it had been before. The indebtedness of the firm to depositors and otherwise at the time of the failure has not been accurately determined, but Statement of the Case. claims of depositors have already been proved against the trust to more than $750,000, and it is not unlikely that the entire indebtedness, other than that to the bank, may approach a million of dollars. "The money received by the firm from the bank was generally mingled with that which was got from other sources, and it has been impossible to trace it directly into property now in the hands of the assignees, except in the following "1. Inventory No. 22, bought May, 1876 "2. Inventory No. 50, bought September, 1881 "Colorado Mines. "5. Boomerang, bought August 30, 1884 "Personalty. "7. Dismal Swamp canal bond, bought December, "8. Seaboard and Roanoke Railroad Co.'s stock, 1 share, bought about 1879. "9. Ocean View Railroad and hotel stock, 122 shares, bought October, 1880 . "10. Chesapeake and Idaho Gold and Silver Min $650 00 500 00 1,137 45 : 2,633 50 2,100 00 90 00 6,100 00 ing Co.'s stock, 625 shares, bought after 1881 7,812 00 "11. Guanò 'ex. Mt. Edgecomb,' paid for by Exchange National Bank, February 15, 1884, $59,725.97, part thereof on hand April 6th, 1885, and other parts in open accounts due for sales thereof . "12. Norfolk and Ouray Mining Co.'s stock, 6114 shares, whereof the assignees hold 3602 shares, which cost $25 per share "13. Personal estate of Jas. G. Bain 15,034 51 90,050 00 1,931 25 |