Prefer

To bring any matter before Beach v. Miller, 130 111. 162, 22 N. E. 464, a court: as, — A. preferred a charge of as- 17 Am. St. Rep. 291; Haywood v. Lumber sault against B. Co., 64 Wis. 639, 26 N. W. 184; Ltppincott v. 59 Am. Rep. 461; Foster y. Mill Co., 92 Mo. 79, 4 S. W. 260; it is held that it may prefer its directors and its creditors on whose claims its directors are sureties; Nappanee Canning Co. v. R. M. & Co., 159 Ind. 614, 64 N. E. 870, 1115, 59 L. R. A. 199. After suspension and insolvency no preference will be allowed; Richards v. Ins. Co., 43 N. II.

263; Olney v. Land Co., 16 R. I. 597, 18 Atl. 181, 5 L. R. A. 361, 27 Am. St. Rep. 767.

The directors may advance money to a corporation in difficulties and secure themselves by mortgage of its property; Twin-Lick Oil Co. v. Marbury, 91 U. S. 587, 23 L. Ed. 328; Mullanphy Sav. Bk. v. Schott, 135 III.

655, 26 N. E. 640, 25 Am. St. Rep. 401.

If the preferred creditor be one of its officers, he must show that the preference was fair and conscionable and not collusive for the mere purpose of preference; Cowan v. Glass Co., 184 Pa. 1, 38 Atl. 1075. The liquidation in good faith of debts due to directors with the hope of continuing business, is not invalid; Dutcher v. Bank, 59 N. Y. 5. Judge Thompson takes very strong ground against the right of a corporation to prefer any creditor, but especially an officer, or stockholder; Thompson, Corp. § 6492; 32 Am. L. Rev. 138.* The opposite ground is taken on principle in 2 No. W. L. Rev. by Prof. Harriman. In New York, by statute, a failing corporation cannot transfer any of its property to an officer, director or stockholder. In some states assignments which attempt to create a preference are void and the assignment is for the equal benefit of all creditors. In other states they are allowed. Preferences are usually invalidated by bankrupt acts. By the bankrupt act of July 1, 1S9S, as amended Feb. 5, 1903, and June 25, 1910, it was provided as follows: (a) A person shall be deemed to have given a preference if, being insolvent, he has, within four months before the filing of the petition, or after the filing of the petition and before the adjudication, procured or suffered a judgment to be entered against himself in favor of any person or made a transfer of any of his property, and the effect of the enforcement of such judgment or transfer will be to enable any one of his creditors to obtain a greater portion of his debt than any other of such creditors of the same class. Where the preference consists of a transfer, such period of four months shall not expire until four months after the date of the recording or registering of the transfer, if by law such recording or registering is required. (b) If a bankrupt shall have procured or suffered a judgment to be entered against him in favor of any person or have made a transfer of any of his property, and if at the time of the transfer, or of the entry of the judgment or <5f the recording or registerwithin four months before the filing of the petition in bankruptcy, or after the filing thereof and before the adjudication, the bankrupt be insolvent, and the judgment or transfer then operate as a preference, and the person receiving it or to be benefited thereby, or his agent, shall then have reasonable cause to believe that the enforcement of such judgment or transfer would effect a preference, it shall be voidable by the trustee and he may recover the property or Its value from such person. Concurrent jurisdiction is in the bankruptcy court and the proper state court. (c) If a creditor has been preferred and afterward in good faith gives the debtor further credit without security of any kind for property which becomes part of the debtor’s estates, the amount of such new credit remaining unpaid at the time of the adjudication in bankruptcy may be set off against the amount which would otherwise be recoverable from him. (d) If a debtor, in contemplation of the filing of a petition by or against him, shall pay money or transfer property to his attorney for services to be rendered, the transaction shall be re-examined by the court and held valid to the extent of a reasonable amount and the excess may be recovered by the trustee. To constitute a preference It must appear that, at the time, the debtor was insolvent, that he intended a preference, and that the transferee had reasonable ground to believe that a preference was intended; In re Leech, 171 Fed. 625, 96 C. C. A. 424; In re First N. Bk., 155 Fed. 100, 84 C. C. A. 16; there must be a parting with the bankrupts’ property for the benefit of the creditor and a subsequent diminution of his estate; Continental & Commercial T. & S. Bk. v. Trust Co., 229 U. S. 435, 33 Sup. Ct. 829, 57 L. Ed. 1268; N. Bk. of Newport v. Bank, 225 U. S. 178, 32 Sup. Ct. 633, 56 L. Ed. 1042. There is a difference between intent to defraud and intent to prefer — the former is malum, per se and the latter malum prohibit turn and only to the extent forbidden; Van Iderstine v. Discount Co., 227 U. S. 575, 33 Sup. Ct. 343, 57 L. Ed. 652. The mere knowledge of the creditor that the debtor could not pay all his debts unless he could collect all his accounts is not notice of insolvency; Off v. Hakes, 142 Fed. 364, 73