Counsel for Plaintiffs in Error. hereunder, holding the remainder subject to the order of the said W. H. Duncan. It is hereby especially provided that should the trustee named herein from any cause whatever fail or refuse to act or become disqualified from acting as such trustee, then the beneficiaries aforesaid, S. M. Huntley, S. M. White, Samuel Paul, and James Rennie, shall have full power to appoint a substitute, in writing, who shall have the same power as trustee herein before named, and I, by these presents, ratify and confirm any and all acts which said trustee or substitute may do hereunder. "Witness my hand this 27th of July, 1889. "W. H. DUNCAN." Kingman & Co. subsequently filed an answer to this interplea, averring that the notes secured by the deed of trust were void for usury, and for want of consideration; denied that the interpleaders were accommodation endorsers or sureties, or that the trust deed was valid, or gave to the interpleaders any right of property, and alleged that the instrument was made by Duncan for the purpose of placing his property beyond the reach of his creditors, and for the purpose of hindering and delaying them in the collection of their debts; denied that Salters was acting for the beneficiaries named, and averred that he was a clerk of Duncan's and was assisting him in fraudulently disposing of his property, and that he took possession for the purpose of protecting the property from Duncan's creditors. The case was tried upon the issue joined between Kingman & Co. and the interpleaders. Upon the trial, the court instructed the jury that the deed of trust under which the interpleaders claimed the property was fraudulent on its face; that the same was sufficient for plaintiffs' attachment, and that the jury should return a verdict in its favor, which was accordingly done. The defendants in the proceeding sued out this writ of error. Mr. John J. Weed for plaintiffs in error. No appearance for defendants in error. Opinion of the Court. MR. JUSTICE BROWN, after stating the case, delivered the opinion of the court. This case turns upon the validity of the so-called deed of trust executed by Duncan to Salters to indemnify the plaintiffs in error for their signatures upon Duncan's notes. The property conveyed consisted of a storehouse and its fixtures, together with all the goods, wares, and merchandise contained therein, and the books, notes, and accounts of Duncan in his business as a general merchant, as well as all cattle and horses owned by him at Beef Creek. The testimony indicated that the deed did not include all the property of Duncan, but that he also had a farm near Beef Creek, although the proof was not clear as to its size or value. No brief was filed by the defendants in error, but in the court below the following clauses appear to have been relied upon as invalidating the deed: 1. The deed was to become null and void upon the payment of the notes secured by it, and there is an inference, though no express provision, that Duncan was to remain in possession until default. 2. Upon default in the payment of either of the notes it was made the duty of the trustee, upon the request of the beneficiaries, or either of them, to sell the property to the highest bidder for cash, either at public or private sale, with or without advertisement. 3. Upon such sale being made, the trustee was to pay to the beneficiaries in proportion to the amounts for which each might be surety at the time of the sale, holding the remainder subject to Duncan's orders. The court instructed the jury that, by the reservation of the surplus, the deed was fraudulent upon its face, and was sufficient ground for the plaintiffs' attachment, and the jury were accordingly instructed to return a verdict for the plaintiffs. The case must be determined by the application of the general principles of the common law to the questions involved. It is true, that, by act of Congress of May 2, 1890, c. 182, 26 Stat. 81, certain general laws of the State of Arkansas, among Opinion of the Court. which was a chapter relating to assignments for the benefit of creditors, were extended and put in force in the Indian Territory, until Congress should further provide. But the instrument in question in this case was made July 27, 1889, before this statute was enacted, so that neither the statutes of Arkansas, nor the decisions of the Supreme Court of that State, construing those statutes, constituted at the time a rule of decision of the United States court in the Indian Territory. There is upon this record but little evidence of actual fraud in the execution of the instrument in question. The notes mentioned, the payment of which it was designed to secure, were given for money borrowed of Stevens & Henning, bankers of Gainesville, for the purchase of grain to feed certain cattle in which Stevens & Henning had an interest. The beneficiaries were joint makers with Duncan of the notes so given. to Stevens & Henning. It is entirely well settled, both in England and America, that at common law a debtor in failing circumstances has a right to prefer certain creditors to whom he is under special obligations, though by such preference the fund for the payment of the other creditors be lessened or even absorbed. If, as must be conceded, he has the right to pay one creditor in preference to another, even where he is aware of his inability to pay all in full-in other words, where he is insolvent there is no just reason why, in making provision for all, by way of assignment, he may not make special provision for some. Marbury v. Brooks, 7 Wheat. 556, 577; Brashear v. West, 7 Pet. 608; Clarke v. White, 12 Pet. 178; Tompkins v. Wheeler, 16 Pet. 106; Grover v. Wakeman, 11 Wend. 187, 194; Tillou v. Britton, 4 Halsted, (9 N. J. Law,) 120, 136; Blakey's Appeal, 7 Penn. St. 449, 451; Burrill on Assignment, 160; Jones on Chat. Mtges. § 356. The tendency of courts in modern times has been, not to hold instruments of this character to be fraudulent and void upon their face, unless they contain provisions plainly inconsistent with an honest purpose, or the instrument indicates with reasonable certainty that it was executed, not to secure bona fide creditors, but to enable the debtor to continue to carry on his business under cover of another's name. So early Opinion of the Court. as 1805, it was held by this court in United States v. Hooe, 3 Cranch, 73, that the mortgage of a part of his property, made by a collector of revenue to the surety upon his official bond, to indemnify him for his responsibility, and to secure him for endorsements at the bank, was valid against the United States, though it turned out that the mortgagor was unable to pay all his debts at the time the mortgage was given, and the mortgagee also knew at that time that he was largely indebted to the United States. It was contended that the mortgage was fraudulent upon its face, but the case was distinguished from Twyne's case, 3 Rep. 81, in the fact that in Twyne's case the deed was of all the property; was secret; was of chattels, and purported to be absolute, yet the vendor remained in possession and exercised ownership over them; while in the case then under consideration the deed was of a part of the property; was of record; was of lands, and purported to be a conveyance which left the property conveyed in the possession of the grantor. The case was also distinguished from Hamilton v. Russell, 1 Cranch, 309, in which this court declared an absolute bill of sale of a personal chattel, of which the vendor retained possession, to be a fraud. In Lukins v. Aird, 6 Wall. 78, an absolute deed of land, with a secret reservation to the grantor to possess and occupy it for a limited time, was held to lack the element of good faith, though made upon a valuable consideration; for, while it purported to be an absolute conveyance on its face, there was a secret agreement between the parties inconsistent with its terms, securing a benefit to the grantor at the expense of those he owed. The deed was held to be void by reason of the trust thus secretly created. So in Robinson v. Elliott, 22 Wall. 513, 524, a chattel mortgage, which provided that until default was made in the payment of the notes, the mortgagor might remain in possession of the goods, sell the same as theretofore and supply their places with other goods, which should become subjected to the lien of the mortgage, was held to be a fraud upon its face, although the mortgage was recorded according to law. The decision was put upon the ground that both the possession and the right of disposition were to remain with the mortgagors; "they are to Opinion of the Court. deal with the property as their own; sell it at retail, and use the money thus obtained to replenish their stock. There is no covenant to account with the mortgagees, nor any recognition that the property is sold for their benefit. Instead of the mortgage being directed solely to the bona fide security of the debts then existing, and their payment at maturity, it is based on the idea that they may be indefinitely prolonged. It is very clear that the instrument was executed upon the theory that the business could be carried on as formerly by the continued endorsement of Robinson, and that Mrs. Sloan was indifferent about prompt payment." There was no ruling in this case, however, that a mere retention of possession would have avoided the mortgage. Upon the other hand, it was held in Stewart v. Dunham, 115 U. S. 61, that in the absence of fraud a transfer by a debtor in Mississippi of all his property to one of his creditors in satisfaction of his debt was valid. The case was disposed of as one of general law. And in Estes v. Gunter, 122 U. S. 450, a deed by an insolvent debtor in Mississippi to secure sureties upon his note, though made in advance of, and in contemplation of, a general assignment for the benefit of creditors, was held to be valid under the laws of that State, though containing a provision that the creditor should remain in possession until the maturity of the note. In this case, also, the common law did not seem to have been affected by any local statute. So, too, in Smith v. Craft, 123 U. S. 436, a bill of sale of a stock of goods, by way of preference of a bona fide creditor, was held not to be fraudulent as matter of law, by reason of a stipulation that the purchaser should employ the debtor at a reasonable salary to wind up the business. The latest expression of this court upon the subject is contained in the case of Etheridge v. Sperry, 139 U. S. 266, in which certain creditors of one Hamilton were secured by chattel mortgages upon a stock of goods levied upon by an execution creditor. There was no reservation of interest to the mortgagor, but an express provision that if he defaulted in payment, or attempted to remove from the country any part of the mortgaged property, the mortgagee might take immedi |