UNITED STATES SUPREME COURT DECISIONS ON-LINE

In order to invalidate, as a fraudulent preference within the meaning of the Bankrupt Act, a security taken for a debt, the creditor must have had such a knowledge of facts as to induce a reasonable belief of his debtor's insolvency. It is not sufficient that he had some cause to suspect such insolvency.

This case arises upon a bill in equity, filed by Charles E. Grant, assignee in bankruptcy of John S. Miller, to set aside a mortgage or deed of trust executed by him about two months prior to his bankruptcy. Miller was indebted to the First National Bank of Monmouth, Illinois, in about $6,200, of which $4,000 consisted of a note which had been twice renewed, and the balance was the amount which he had overdrawn his account in the bank. Wanting some cash for immediate purposes, the bank advanced him $300 more on his giving them the deed of trust in question, which was made for $6,500, and was given to secure the indebtedness referred to. The question below was whether, at the time of taking this security, the officers of the bank had reasonable cause to believe that Miller was insolvent. The circuit court came to the conclusion that they had not, and dismissed the bill. From that decree the assignee appealed. clubjuris

Page 97 U. S. 81