249 F. 37 | 4th Cir. | 1918
The sole basis of this decision, as the decree discloses, was the testimony of a Mr. Cantrell, who was a member of the loan committee of the bank at the time of the transaction. His entire statement, so far as material, appears in the record as follows:
“Q. Tour idea in making this additional loan was to secure what he already owed you? A. That note was due, and he said it didn’t suit him to take it up, and he gave us a $2,500 note he held against Mr. Bomar, and took up the $1,500 note, and I think we gave him $1,000 in money. Q. You considered the note perfectly good? A. Sure did. Q. How did you consider the notes you already had? A. Well, we didn’t see any chance of collecting them. Q. You took this additional note for what you thought you were in danger of losing? A. That’s my idea. Q. From what you have heard, you thought you were in pretty grave danger of losing? A. Well, we were uneasy.”
It will be observed that no fact or circumstance is mentioned by Cantrell, and no reason given by him for any opinion or belief he may have had respecting the financial condition of Dillard; nor was this belief or opinion, if his state of mind may be so described, communicated to any officer or director of the bank. In point of fact, there was no meeting of the loan committee to pass upon the discount of Dillard’s note; but each member was separately consulted and gave his assent. Moreover, the president of the -bank, its cashier, and another member of the loan committee, all testified in substance that they had no reason to suppose that Dillard was insolvent; and the learned District Judge says he was satisfied that their testimony was true. There was also testimony t9 the same effect by the president of another bank.
“It is not enough that a creditor has some cause to suspect the insolvency of his debtor; but 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. * * * A man may have many grounds of suspicion that his debtor is in failing circumstances, and yet have no cause for a well-gmmded belief of the fact. He may be unwilling to trust him further; he may feel anxious about his claim, and'have a strong desire to secure it; and yet such a 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. * * * Hence the act, very wisely, as we think, instead of making a payment or a security void for a mere suspicion of the debtor’s insolvency, requires, for that purpose, that his creditor should have some reasonable cause to believe him insolvent. He must have a knowledge of some fact or facts calculated to produce such a belief in the mind of an ordinarily intelligent man.”
In the light of these authorities, which appear directly in point, we are of opinion that appellant is entitled to hold the collateral note, or the proceeds thereof, as security for its entire claim against the bankrupt, and that the court below was in error in deciding otherwise. The decree must therefore be reversed, and the cause remanded for further proceedings in accordance with the views herein expressed.
Reversed.