HOLT, District Judge.
The provisions of the bankrupt act (Act July 1, 1898, c. 511, § 60b, 30 Slat. 562 [U. S. Comp. St. 1901, p. 3-145]), making preferences created under certain circumstances within four months of the bankruptcy proceedings vo;d, have obviously no application to this case. The transactions alleged to have constituted a preference took place more than four months before the petition was filed. But I think that the alleged assignment of the mortgages and liquor tax certificates on June 26, 1907, was void under section 48 of the New York stock corporation law (Raws 1890, c. 564), which prohibits any stock corporation from making any transfer of its property when insolvent with intent to give a preference to any creditor. The evidence satisfies me that the bankrupt was insolvent at that time, and admittedly the intent and effect of the transfer was to give the directors a preference over other creditors.
Even if there had been no such state statutes, I think the transfer would have been invalid! under general principles of law. Directors *912of a corporation can loan money or credit to it and take security for such loan from it, even when such corporation is temporarily embarrassed, when acting in good faith, in order to enable the corporation to overcome temporary embarrassments and to carry on its business, and in the expectation that the corporation will ultimately continue as a solvent concern. . But directors of a corporation who have loaned it money or credit cannot, when they find the danger of insolvency impending, transfer its property to themselves as security for their claims. In my opinion this was what was done in this case. The indebtedness to the directors existed!. No new debt was created. The renewal of the not§s and their indorsement was a mere extension of ■an existing liability. Nor was the transaction done in good faith in the legal sense. The only entry of the transaction in the company’s books was the resolution authorizing the assignment in the directors’ minutes. No entry of the execution of the assignment was made. The mortgages and certificates appeared as assets on the books. They were entered as assets in the auditor’s balance sheet in December, 1907. The mortgages and certificates remained in the company’s safe and were dealt with freely by the company. The alleged delivery of them to Meyer was merely colorable, and was, in my opinion, no delivery at all. All the other tangible assets were mortgaged. The price of malt had suddenly nearly doubled, and the term of credit on which it could be bought had been reduced from 90 to 30 days. The company was selling its beer at ruinously low prices. The balance sheet for the year showed a heavy loss. From every point of view the future of the business looked dark. All these circumstances indicate, in my opinion, that the directors, in attempting to take, as security for their liability as indorsers, all the remaining free assets of the company, were acting, in apprehension of the possible insolvency of the company, in their personal interest, in order to obtain a preference over other creditors, and were not, in good faith, simply affording temporary aid to enable the company to go on and establish ultimately a successful business.
The report of the special master is confirmed, with costs.