on the point, nor even that they should, in fact, have had any belief on the subject. It is only required that they should have had reasonable cause to believe that such was the fact. And reasonable cause they must be considered to have had, when such a state of facts was brought to their notice in respect to the affairs and pecuniary condition of the bankrupts as would have led prudent business men to the conclusion that they could not meet their obligations as they matured in the ordinary course of business." And the transferee is not only charged with notice of facts within his knowledge, but of all such as he could have discovered upon inquiry, if reasonable prudence required inquiry. Rice v. Melendy, 41 Iowa, 399; Scammon v. Cole, 3 Cliff. 472, Fed. Cas. No. 12,432; Ex parte Mendell, 1 Low. 506, Fed. Cas. No. 9,418. And although the general business transactions and condition of the bankrupt, at the time of making a deed of preference, may not have been sufficient to raise a reasonable belief that he was insolvent, yet if the especial facts and circumstances passing between the particular parties, and out of which the deed grew, were such as to give a reasonable cause for such belief, the creditor is chargeable with notice. Alderdice v. Bank, 1 Hughes, 47, Fed. Cas. No. 154. Ignorance of the law cannot avail creditors who are possessed of facts that show the insolvency of the debtor, and a preference received under such circumstances is fraudulent and void. Martin v. Toof, 1 Dill. 203, Fed. Cas. No. 9,167. But "it is not enough that a creditor has some cause to suspect the insolvency of his debtor; he must have such a knowledge of facts as to induce a reasonable belief of his debtor's insolvency, in order to invalidate a security taken for his debt." Grant v. Bank, 97 U. S. 80; Stucky v. Bank, 108 U. S. 74, 2 Sup. Ct. 219; May v. Le Claire, 18 Fed. 164. The reasonable cause must be such as would induce a belief in the mind

of an intelligent and capable business man. Otis v. Hadley, 112 Mass. 100; Graham v. Stark, 3 N. B. R. 357, Fed. Cas.

No. 5,676. Hence a preference may be avoided under the bankrupt law whenever the creditor has knowledge of facts calculated not merely to raise a suspicion, but to produce a reasonable belief of the debtor's insolvency. What facts are necessary to produce such belief must be determined in each particular case. Claridge v. Kulmer, 1 Fed. 399. And see Metcalf v. Officer, 2 Fed. 640. When it is sought to affect a second vendee (of the bankrupt's stock in trade) with fraud, such fraud must be shown; and the mere fact, without more, that he knew that the sale by the bankrupt to the first vendee embraced all of the stock of the seller, will not make the purchase of the second vendee fraudulent in law. Babbitt v. Walbrun, 1 Dill. 19, Fed. Cas. No. 694. As in other matters, knowledge may be brought home to the creditor by the possession of information on the part of those who are bound to communicate it to him. Thus, where two members of an insolvent firm are president and cashier of a bank, their knowledge of the insolvency of their firm is the knowledge of the bank. Nesbit v. Macon Co., 12 Fed. 686. Where the creditor employs an attorney to collect his debt by suit, and all the facts made necessary by the bankrupt law to invalidate a preference gained by such suit are made known to the attorney after he enters on such employment, the knowledge of the attorney is the knowledge of the creditor. Mayer v. Hermann, 10 Blatchf. 256, Fed. Cas. No. 9,344; Rogers v. Palmer, 102 U. S. 263. But where the creditor sent an account to a collection agency with directions to collect the debt, and the agency placed the claim in the hands of their attorney (who was not the attorney of the creditor), and the attorney, knowing the debtor to be insolvent, procured a confession of judgment from him, and within four months thereafter the debtor was adjudged a bankrupt, it was held that the knowledge of the attorney was not imputable to the creditor, under these circumstances, so as to make him liable to the trustee in bankruptcy for the money collected on

the judgment. Hoover v. Wise, 91 U. S. 308. A banker who allows his drafts to go to protest, suspends payment, and closes his doors against depositors, proclaims to the world that he is insolvent, and a creditor who, with knowledge of these facts, receives payment of his debt, secures an illegal preference. Markson v. Hobson, 2 Dill. 327, Fed. Cas. No. 9,099. So where a merchant stops payment of his commercial paper, and the holder, being compelled to bring suit on the same, encounters no defense, he has reasonable cause to believe that the merchant is insolvent. Dunning v. Perkins, 2 Biss. 421, Fed. Cas. No. 4,180. But the simple fact that a man doing a large business obtains renewals of his commercial paper or pays, under special circumstances, a large discount, is not notice of insolvency to a creditor, it being shown that at that time similar commercial paper was selling at equal rates in the market. Golson v. Niehoff, 2 Biss. 434, Fed. Cas. No. 5,524. As it has been decided repeatedly that inability to meet debts as they mature in the ordinary course of business constitutes insolvency within the meaning of the bankrupt act, a creditor who holds unpaid protested paper of the bankrupt at the time he accepts a preference must be presumed to have actual knowledge of the insolvency of the bankrupt; and any contract by which such preference is attempted to be secured is thereby made void. Swan v. Robinson, 5 Fed. 287. A creditor may also be affected by rumors which he has heard concerning the debtor's embarrassment. Post v. Corbin, 5 N. B. R. 11, Fed. Cas. No. 11,299. And the existence of a financial crisis constitutes of itself reasonable cause for believing doubtful men to be insolvent. In re Clarke, 10 N. B. R. 21, Fed. Cas. No. 2,843. Where an execution must necessarily stop the debtor's business, the execution in general is reasonable cause to believe the debtor insolvent. Hood v. Karper, 5 N. B. R. 358, Fed. Cas. No. 6,664; Zahm v. Fry, 9 N. B. R. 546, Fed. Cas. No. 18,198: So again, the debtor's remonstrance, that the giving

of the security demanded will injure his business, is sufficient to put the creditor upon inquiry. Wager v. Hall, 16 Wall. 584. "If it appears that the party making the conveyance was actually insolvent, and that the means of knowledge upon the subject were at hand, and that such facts and circumstances were known to the party receiving the conveyance as clearly put the assignee, transferee, or grantee of the property upon inquiry, it would seem to be just to hold that the party receiving the assignment, transfer, or conveyance, even if he omitted to make inquiries, had reasonable cause to believe that his assignor or grantor was insolvent." Scammon v. Cole, 3 Cliff. 472, Fed. Cas. No. 12,432. Hence it will not do to ask protection on account of ignorance, when a small amount of inquiry would have given all the necessary information. In re Wright, 2 N. B. R. 490, Fed. Cas. No. 18,071. And when the facts and circumstances are such as to put a reasonable man upon inquiry, that duty is not satisfied by an inquiry addressed to the chief actor in the suspected fraud, who has every motive for concealing the truth, when better and reliable sources of information are open to the inquirer. Singer v. Jacobs, 11 Fed. 559.

Meaning of "Transfer."

This section of the act provides that, under certain circumstances, a "transfer" of any of the debtor's property may constitute a preference. That this term is to be taken in a very wide sense is apparent on reference to the first section of the act (clause 25) wherein it is declared that "transfer shall include the sale and every other and different mode of disposing of or parting with property, or the possession of property, absolutely or conditionally, as a payment, pledge, mortgage, gift, or security."

Intention of Debtor.

Under former laws on the subject of bankruptcy, it was not only necessary that the creditor should have had reasonable cause to believe that a preference was intended, but such must have been the actual intention of the debtor. The present statute, however, only makes it necessary that "the effect of the enforcement of such judgment or transfer" should be "to enable any one of his creditors to obtain a greater percentage of his debt than any other of such creditors of the same class." This appears to make the intention of the debtor immaterial, provided a preference actually results; or rather, perhaps, it applies the rule that a man must be presumed to have intended the necessary consequences of his own acts. But since there may be some cases in which the intention of the insolvent may become an actual and material issue, we append notes of the decisions on this point rendered under the former statutes.

When the question at issue is whether a particular thing was given or done with a view to create a preference, it is the intention of the debtor which must be scrutinized, for that is the turning-point of the case. Little v. Alexander, 21 Wall. 500; In re Craft, 2 Ben. 214, Fed. Cas. No. 3,316. If the debtor did not intend to give a preference, and the creditor did not have reasonable cause to believe the debtor to be insolvent, the transfer is valid, although in fact the debtor was then insolvent. Mays v. Fritton, 20 Wall. 414. The motives of the bankrupt, as well as all the peculiar circumstances connected with the transaction, must be taken into consideration in order to determine whether he thereby gave a fraudulent preference to one creditor over others; and if he believed, and such was the fact, that money received by him from such creditor was in the nature of trust-funds, so that it would not create the ordinary relation of debtor and creditor between the parties, but a claim upon which there was a special and peculiar obligation, on his part, in the nature of a trust, to settle,