National Bank v. Herkimer County Bank - 225 U.S. 178 (1912)
U.S. Supreme Court
National Bank v. Herkimer County Bank, 225 U.S. 178 (1912)
National Bank of Newport, New York v.
National Herkimer County Bank of Little Falls
Argued February 28, 29, 1912
Decided May 27, 1912
225 U.S. 178
To constitute a preference under the Bankruptcy Act, it is not necessary that the transfer be made directly to the creditor; it may be made to another for his benefit, and, if preferential, circuity of arrangement will not avail to save it.
Unless, however, the creditor takes by virtue of a disposition by the insolvent debtor of his property for the benefit of the creditor so that the estate is diminished, the creditor cannot be charged with receiving a preference.
Where the endorser of the bankrupt's note, which is under discount at a bank and secured by the endorser's own collateral, pays the note, thereby recovering his collateral, and charges the payment to the bankrupt to whom he is indebted in a larger sum on open account, there is no preferential payment to the bank which the trustee can recover from it as such, it not appearing that the bank was concerned with, or had any knowledge of, the relation between the endorser and the maker of the note.
172 F. 529 affirmed.
The facts, which involve the question of whether a payment was an illegal preference under the Bankruptcy Act of 1898, are stated in the opinion.