prefer such creditors over his other creditors," constitutes an act of bankruptcy on the part of the person so doing." A transfer of the debtor's property to his creditor is essential."

Where at the

time of the transfer there were no creditors, a subsequent creditor cannot complain." The payment by an insolvent debtor, within the four months period, of substantial sums of money to certain of his creditors in full satisfaction of their claims, while denying payment to others whose claims are due and equally entitled to payment, constitutes an act of bankruptcy. His payments under such circumstances inevitably result in giving the creditors so favored a preference over the others. The debtor is presumed to intend the necessary results of his own intelligent act.9 The elements of preference under this subsection are: (1) insolvency, (2) intent to prefer, and (3) a transfer of property.10 The judicial definition of preference11 is not controlling in this connection, for a preference which will be an act of bankruptcy is something other and more than one voidable under section 60b. The intent to prefer on the part of the debtor may not be accompanied by reasonable cause to believe that it was intended as a preference on the part of the creditor, as required by the latter section.12

5. Bankr. Act, 1898, § 3a (2). See also Rumsey, etc., Co. v. Novelty, etc., Mfg. Co., 3 Am. B. R. 704, 99 Fed. 699; Beers v. Hanlin, 3 Am. B. R. 745, 99 Fed. 695; In re Pearson, 2 Am. B. R. 482, 95 Fed. 425.

The transfer of notes secured by a chattel mortgage, more than four months prior to the petition in bankruptcy, the assignment being endorsed on the mortgage, which was duly filed, does not constitute an act of bankruptcy. In re Bogen, 13 Am. B. R. 529, 134 Fed. 1019.

6. In re Rome Planing Mill, 3 Am. B. R. 123, 96 Fed. 812.

7. Brake v. Callison (C. C. A.), 11 Am. B. R. 797, 129 Fed. 201.

8. Rex Buggy Co. v. Hearick, 12 Am. B. R. 726.

9. In re Gilbert, 8 Am. B. R. 101, 112 Fed. 951; In re Bloch, 6 Am. B. R. 300, 109 Fed. 790; In re Grant, 5 Am. B. R. 837, 106 Fed. 496; In re Rome Planing Mill, supra; Johnson v. Wald, 2 Am. B. R. 84, 93 Fed. 640.

10. See In re Rome Planing Mill, 3 Am. B. R. 123, 96 Fed. 812, for analysis of this subsection; Goldman v. Smith, 1 Am. B. R. 266, as to what evidence will establish this act of bankruptcy.

11. See sections 1 and 60, Bankr. Act, 1898; In re Wright Lumber Co., 8 Am. B. R. 345, 114 Fed. 1011. See also Definitions, § 7, supra.

12. In re Wright Lumber Co., supra; Crooks v. The People's Nat. Bank, 3 Am. B. R. 238, 46 App. Div. (N. Y.) 335. See also Hussey v.

Insolvency at the time of the giving of the preference is essential.13 It is also essential that the property transferred be that of the bankrupt.14 A petition, charging as an act of bankruptcy the giving of a chattel mortgage by an insolvent corporation within the four months period must allege facts sufficient to show that the mortgage was given either with intent to hinder, delay, and defraud creditors, or with intent to prefer the mortgagee over other creditors; it should also allege that there were other creditors and that the debt secured by the mortgage was pre-existing, or if then incurred or made, that the mortgage was for an inadequate consideration, as the case may be.15

§ 18. Intent to prefer. Where the transaction consists of a transfer of personal property by way of payment, the intent to prefer will be presumed.16 The question of intent is one for the jury." The doctrines held under the former law are summarized in the note below, the cases cited probably being still controlling. 18

Richardson-Roberts Dry Goods Co., 18
Am. B. R. 511, 148 Fed. 598.

13. Acme Food Co. v. Meier (C. C. A.), 18 Am. B. R. 550, 153 Fed. 74.

14. Hartman v. Peters & Co., 17 Am. B. R. 61, 146 Fed. 82, a transfer by a partner of individual propfirm erty, with intent to prefer a creditor, although an act of bankruptcy as against such partner, does not constitute an act of bankruptcy by the firm.

15. In re Flint Hill Stone & Construction Co., 18 Am. B. R. 81, 149 Fed. 1007, to give a mortgage, while insolvent, to secure an honest debt incurred in his business, or to secure an indorsement made at the time of giving a note which is for a present full consideration in carrying on his business, the mortgage being given at the same time, even if these acts are done within four months of the filing

of the petition, is not necessarily an act of bankruptcy, as in such case there may not exist either an intent to hinder, delay, or defraud, or to prefer one creditor over another.

The execution of a chattel mortgage for part of the purchase price of certain goods, the mortgage ultimately covering said goods and goods on hand, does not constitute an act of bankruptcy, there being no intent to prefer. Martin v. Hulen & Co. (C. C. A.), 17 Am. B. R. 510, 149 Fed. 982.

16. See cases cited in note 9 to preceding section. Also Githens, etc., Co. v. Schiffler Bros., 7 Am. B. R. 453, 112 Fed. 505.

17. In re Bloch, 6 Am. B. R. 300, 109 Fed. 790.

18. Traders' Bank v. Campbell, 14 Wall. (U. S.) 87, as one is presumed to know the law, he is presumed to know the legal results of his acts,

acts. 19

Every one is presumed to intend the legal consequences of his Where, within the four months period, an insolvent debtor makes a payment to a particular creditor, the presumption is that he intends the necessary, natural and legal consequences of his act, that is, to enable the creditor to obtain a greater percentage of his debt than will enure to other creditors, and such payment constitutes an act of bankruptcy under section 3a (2).20 It is possible that, under the new definition of insolvency, one may not always know the fair valuation of his property, and, therefore, may not be able to show that he knew whether he was solvent or not. But the presumption is not so much one of actual knowledge as that a person is chargeable with knowledge of his financial condition.21 Payments made within the four months period by a debtor who did not regard himself as insolvent, but was so in fact, in the sense in which the word is used in the Bankruptcy Act, to bona fide creditors in the ordinary course of business, which the evidence shows he expected to continue and meet his obligations as they fell due, will not be held to have been made with "intent to prefer" within section 3(2), and are not acts of bankruptcy.22

and there is a consequent presumption that he intends the legal results of those acts; In re Dibblee, Fed. Cas. No. 3,884, one intends the legal consequences which would naturally follow; Driggs v. Moore, Fed. Cas. No. 4.083, and Rison v. Knapp, Fed. Cas. No. 11,861, payments by one knowing himself to be insolvent raise a conclusive presumption of intent to prefer; In re Silverman, Fed. Cas. No. 12,855, a debtor is presumed to know his financial condition and, if in fact insolvent, the burden is on him to establish his want of knowledge; Toof v. Martin, 13 Wall. (U. S.) 40, but if a debtor honestly believes himself solvent, the burden shifts from him to the creditors.

19. In re McGee, 5 Am. B. R. 262, 105 Fed. $895.

20. Macon Grocery Co. v. Beach, 19 Am. B. R. 558, such presumption, however, presupposes that said payment is injurious to other creditors, and so where such payment amounts only to 60 cents for soda water, cocacola, and a bar of soap, and $2.15 for a "dressed doll," which the alleged bankrupt, an old bachelor, testines was a present, which perhaps made happy the heart of some tiny maiden whose lovely face and graceful form brought back to his veteran and hapless heart the memory of features which "love used to weas," "sweet and sad to the soul, like the memory of joys that are gone," a presumption of intent to prefer does not arise.

21. Collier, Bankr., 6th ed., p. 44. 22. Goodlander-Robertson Lumber

There must be a design to give an advantage. Where the transfer is in pursuance of an effort to extricate the transferrer from his embarrassments, it will not be held a preference.23 Where, within four months prior to a petition, in pursuance of a contract, valid and equitable, theretofore executed, a creditor exercised his rights in possessing himself of the bankrupt's property and making sale of it under such subsisting contract, he is not guilty of securing a preference.24 But a transfer is not the less a preference because given in answer to a request or in fulfillment of a prior promise made at the time of contracting the debt.25 Evidence of a failure to record a mortgage until several months after its execution may justify a finding that it was given with an intent to prefer.26 But a renewal in good faith within the four months period of a chattel mortgage, given as security for a preexisting debt, is not an illegal preferential transfer.27 An agree ment to insure goods and assign the policies to secure a creditor is not necessarily prejudicial to the other creditors, and an assignment of such policies made in pursuance thereof after the debtor became insolvent, is not an act of bankruptcy.28 The specific fact as to the preference relied on must be alleged, with time, place, person and circumstances. Issuable facts, not conclusions, should be alleged.29 The petition alleging a preferential payment should set out specifically the amounts paid and to whom.30 An involuntary petition is good where it specifies the time of the making of an alleged preferential payment and its amount, and sufficiently accounts for failure to state the names of the preferred

Co. v. Atwood (C. C. A.), 18 Am. B.
R. 510.

23. In re Wolf, 3 Am. B. R. 555, 98 Fed. 84.

24. Sabin v. Camp, 3 Am. B. R. 578, 98 Fed. 974. See Winter v. Railway Co., Fed. Cas. No. 17,890, and In re Hapgood, Fed. Cas. No. 6,044, analogous cases under the law of 1867.

25. Arnold v. Maynard, Fed. Cas.

No. 561. See also Collier, Bankr., 6th ed., p. 44.

26. In re Edelman (C. C. A.), 12 Am. B. R. 238, 130 Fed. 700.

27. In re Cutting, 16 Am. B. R. 751, 145 Fed. 388.

28. Wilder v. Watts, 15 Am. B. R. 57, 138 Fed. 426.

29. In re Nelson, 1 Am. B. R. 63, 98 Fed. 76.

30. In re Blumberg, 13 Am. B. R. 343, 133 Fed. 845.

creditors.31

An omission of the specific date of the transfer does not render the petition demurrable.32 When a debtor with knowledge of his insolvent condition transfers property to his creditors, an intent to prefer will be conclusively presumed.33 The precedents as to alleging and proving intent to prefer under the former laws are summarized in the note below.34

19. Transfer of property.-The word "transfer" as used in this subsection has the enlarged meaning given it by section 1(25). It is immaterial how the transfer is made. A duly recorded assignment of money coming due to an alleged bankrupt, made within the four months period, while he was insolvent, to an accommodation indorser of his note, is a preferential payment and constitutes an act of bankruptcy under subsection b.35 The giving of a chattel mortgage, within the four months period, with intent to prefer a creditor,36 the transfer of his property by an insolvent to another who executes a mortgage thereon in favor of a creditor,3 37 the transfer of firm property by one partner to the other to give individual creditors a preference,38 the transfer of

31. In re Lackow, 14 Am. B. R. 514, 140 Fed. 573.

32. In re Vastbinder, 11 Am. B. R. 118, 126 Fed. 417.

33. In re Billing, 17 Am. B. R. 80; In re Gilbert, 8 Am. B. R. 101, 112 Fed. 951.

34. Any fact which tends to establish the existence or non-existence of intent is admissible evidence. Linkman v. Wilcox, Fed. Cas. No. 8,374; Giddings v. Dodds, Fed. Cas. No. 5,405. The testimony of the party himself is entitled to little weight. Oxford Iron Co. v. Slafter, Fed. Cas. No. 10,637. Transfers of one's prop erty afford a violent, almost conclusive, presumption of intent to prefer, if there are creditors unprovided for. in re Waite, Fed. Cas. No. 17,044. Proof of an antecedent indebtedness is, in general, necessary to establish

that a payment or security is a preferential transfer. Clark v. Iselin, 21 Wall. (U. S.) 360; Burnhisel v. Firman, 22 Wall. (U. S.) 170; Sawyer v. Turpin, 91 U. S. 114. But where the proof is that the property was transferred to a mortgagee, who was a creditor in an amount larger than the value of the property transferred, the presumption of intent to prefer will be negatived. Livingston v. Bruce, Fed. Cas. 8,410; Catlin Hoffman, Fed. Cas. 2,521.

V.

35. In re O'Donnell, 12 Am. B. R. 621.

36. Matter of Riggs Restaurant Co. (C. C. A.), 11 Am. B. R. 508, 130 Fed. 691.

37. Gilson v. Dobie, Fed. Cas. No. 5,394.

38. Collins v. Hood, Fed. Cas. No. 3,015.