A creditor, dealing with a debtor whom he may suspect to be in
failing circumstances, but of which he has no sufficient evidence,
may receive payment or take security without necessarily violating
the bankrupt law. When such creditor is unwilling to trust a debtor
further or feels anxious about his claim, the obtaining additional
security, or the receiving payment of the debt is not prohibited if
the belief which the act requires is wanting. Grant v. National
Bank, 97 U. S. 80
approved and followed.
MR. JUSTICE MILLER delivered the opinion of the Court.
This suit originated in a bill in equity brought in the district
court by Stucky, as assignee of Melter, a bankrupt, against the
bank and against Jacob Krieger, Sr., for the purpose of having two
mortgages made by the bankrupt declared void, and the real estate
covered by them sold free of the lien of those mortgages. The
ground of this relief is the allegation that the mortgages were
made by Melter when insolvent, and were preferences in
contemplation of bankruptcy, void by the bankrupt law, and that, by
virtue of the bankrupt proceedings commenced within two months
after they were made, they are void.
The case was decided in favor of the assignee in the district
court, but on appeal the circuit court reversed this decree and
dismissed the bill. It is shown that both mortgages were taken to
secure renewal notes for preexisting debts, one note and mortgage
being made to the bank directly and the other to Mr. Krieger, who
was president of the bank, the note being endorsed by him to the
bank. They were for $6,000 each.
Page 108 U. S. 75
The whole matter turns upon the question whether Krieger, who
acted almost alone for the bank, had reasonable ground to believe
that Melter was insolvent at the time the mortgages were made.
The district judge, who decided that he had such reasonable
ground, does not seem to have given due weight to the principles of
the case of Grant v. National Bank,
decided by this Court
and reported in 97 U. S. 80
, a case
which was fully considered, and which has since been followed by us
as a leading one on the subject.
That case establishes the doctrine that a creditor dealing with
a debtor whom he may suspect to be in failing circumstances, but of
which he has no sufficient evidence, may receive payment or
security without violating the bankrupt law.
"He may be unwilling to trust him further; he may feel anxious
about his claim and have a strong desire to secure it, yet such
belief as the act requires may be wanting. Obtaining additional
security or receiving payment of a debt under such circumstances is
not prohibited by law."
In the case before us, the testimony of Krieger himself, as the
one who best knows the strength of the suspicion (if any) on which
he acted, and what evidence was before him, must chiefly control.
We have examined his deposition very carefully.
We think it bears the impress of candor, and it negatives the
idea that he had reasonable ground to believe Melter insolvent, or
that he actually did believe it.
The evidence, outside of this, as to the various estimates of
the value of Melter's property and the amount of his debts, while
it shows that Melter was probably insolvent, does not show that
this was known to Melter himself or to Krieger, or that the latter
had reasonable grounds to believe him so.
It would serve no useful purpose to give in this opinion a full
examination of all the evidence. It is sufficient to say that in
looking it all over, we concur with the circuit judge, and his
decree dismissing the bill is