Farmers' Bank of Edgefield, S. C. v. C. D. Carr & Co.

SIMONTON, Circuit Judge. We are thus confined to the single question whether this mortgage is valid as to the April and June notes. The essential principle of the bankrupt law is that all of the bankrupt’s property be divided equally, without preference, to the payment of his debts. It abhors preferences. But if bona fide an advance in prassenti be made to one who afterwards within four months becomes a bankrupt, that will be sustained, and a lien therefor held valid. And it has been held that if a debtor and creditor, both bona fide, believe that the *691 debtor is solvent, and neither have cause to believe otherwisé, a mortgage given when an actual advance is made securing as well the sum advanced as antecedent debts will be held valid, although four months thereafter the debtor be declared bankrupt. McNair v. McIntyre, 113 Fed. 113 , 51 C. C. A. 89 ; Pirie v. Trust Co., 182 U. S. 446 , 21 Sup. Ct. 906, 45 L. Ed. 1171 . But the fact that neither the debtor nor the creditor knew, or had reason to know, that the debtor was in failing circumstances or insolvent, must be made to appear clearly and without question. McNair v. McIntyre, supra. We have examined the testimony in this case in the record. It is impossible to escape the conclusion, after reading that testimony, that the bankrupts certainly knew their precarious condition as to insolvency; and that, if the president of the Edgefield Bank did not know it, he had every reason to do so if lie had used his opportunities, and that certainly other officers of the bank knew it. The bare fact that, before he would make the September loan, he required a mortgage of all the stock in trade of the bankrupts as security for the antecedent loans is strong proof of this. We see no error in the decree of the District Court. It is affirmed.