Martin v. Hulen & Co.
149 F. 982
8th Cir.
1906
Check Treatment
HOOK, Circuit Judge.

The question presented by .this appeal is whether Hulen & Co., a copartnership, committed an act of bankruptcy in mortgaging, whilst insolvent, a stock of goods owned by them. Within the four months preceding the filing of the petition against them they purchased of one Lemaster another stock of goods for the sum of $3,000, paying $100 in cash and giving their notes for the remainder. At the same time they gave a chattel mortgage upon the goods so purchased to secure the payment of the notes. By its terms the mortgage extended to and covered all additions to the stock of goods and all stocks that might thereafter be consolidated with it.

Immediately after the purchase and the execution of the mortgage Hulen & Co. consolidated the Lemaster stock with that which they previously owned, and .it is claimed by appellant that, as they were then insolvent, they committed an a.ct of bankruptcy. The goods purchased from Lemaster were worth the purchase price, and'the master found that Hulen & Co. acted in good faith, and that there was in fact no intention to give a preference. While transactions of that: *983character by an insolvent should be closely scrutinized we are of the opinion that no act of bankruptcy was committed. The fact that the goods purchased were worth the price to be paid for them, and the good faith of the parties, repel all inference of intent to prefer. The reasonable presumption from the findings of the master is that both Uulen & Co. and Lemaster contemplated the union of the two stocks of goods, and that the mortgage should cover all of them. Therefore it cannot well be said that the latter was a creditor who after the creation of his claim secured a mortgage upon his debtor’s property. What they did should be fairly regarded as a single transaction, and when it was consummated the estate of Hulen & Co. was in no worse plight so far as unsecured creditors were concerned than it was before.

The order of the District Court is affirmed.