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

To give priority or advantage, as to creditor above creditor;

1. To bring or lay a matter before a court: as, to prefer a criminal charge, a petition in divorce. 3. To give advantage, priority (q. v.), or privilege to. Specifically, to favor one or more creditors over others, wlien the debtor has not the means with which to pay all alike. In this sense are used the expressions preferred or preferential — assignment, bonds, creditors, dividend, shares, stock. See Dividend, 3; Stock, 3 (8). "Preferred " means that the thing to which it is attached has some advantage over another thing of the same character, which but for this advantage would be like the other." 1 R. S. §§ 2257-^1. 2 The Tosemite Valley Case, 15 Wall. 77 (1872), cases. Field, J. » Bohall V. Dilla, 114 U. S. 51 (1886), Field, J. " Fletcher, Appellant, 136 Mass. 342 (1884). Preference. A payment to one creditor which will or, possibly, may give him an advantage over others. 1 In the absence, of a bankrupt law, a failing debtor may prefer one creditor to another by a deed, a judgment, or other means, except, in some States, by an assignment in trust. The effect may be to delay a creditor not preferred, in fact to prevent his obtaining payment at all; but if the honest intent was to pay ^he preferred debt, the transaction is not invalidated bj the statute of 13 Elizabeth. That statute Is aimed at intended fraud, — at transfers of property or preferences which are not bona fide, but collusive arrangements " to delay, hinder, or defraud " particular creditors.' The mere existence of a desire that a particular creditor may succeed by suit,, judgment, execution, and levy, in obtaining a preference, is not sufficient to establish that the debtor "procured or suffered" his property to be taken on legal process with intent to prefer such creditor, if the proceedings were the usual proceedings in a suit, unaided by any act of the debtor, either by facilitating the proceedings as to time or method, or by obstructing other creditors who Otherwise would obtain priority." If debtors could not give preferences to bona fide creditors, while they yet retain dominion over their property, the transaction of business would be embarrassed.* See Conveyance, 2, Fraudulent; Suffer.

1. To bring a matter before a court of justice; as in saying that A preferred a charge of assault against B. 2. To apply; to move for. Thus "to prefer for costs " is a phrase meaning to apply for costs. 3. To give advantage, priority, or privilege; to select for first payment, as to prefer one creditor over others. Preference. A priority of payment given by a debtor to one or more creditors, over others, when he cannot pay all in full. Preferences are allowable by the general law of debtor and creditor, but have been forbidden by statute in several of the states; and are contrary to the policy and express provisions of the bankrupt laws. Preference, or preferential shares. New shares in a company, created as a means of raising money, and which have priority over the original shares. Such shares entitle their holders to a preferential dividend; so that a holder of them is entitled to have the whole of his dividend (or so much thereof as represents the extent to which his shares are, fore any dividend is paid to the ordinary shareholders. Preferential assignment. A conveyance of a debtor's property for benefit of creditors, which directs that one or some shall be paid in full before others receive any thing; an assignment giving preferences. Preferred, or preferential debt. A demand which has priority; which is payable in full before others are paid at all. Preferred creditor. A creditor or a demand which the debtor has directed shall be paid before others.