Grant v. National Bank

CourtUnited States Supreme Court
Citation97 U.S. 80,24 L.Ed. 971
Decision Date01 October 1877

97 U.S. 80
24 L.Ed. 971
October Term, 1877

Appeal from the Circuit Court of the United States for the Northern District of Illinois.

This case arises upon a bill in equity, filed by Charles E. Grant, assignee in bankruptcy of John S. Miller, to set aside a mortgage, or deed of trust, executed by him about two months prior to his bankruptcy. Miller was indebted to the First National Bank of Monmouth, Illinois, in about $6,200, of which $4,000 consisted of a note which had been twice renewed, and the balance was the amount which he had overdrawn his account in the bank. Wanting some cash for immediate purposes, the bank advanced him $300 more, on his giving them the deed of trust in question, which was made for $6,500, and was given to secure the indebtedness referred to. The question below was, whether, at the time of taking this security, the officers of the bank had reasonable cause to believe that Miller was insolvent. The Circuit Court came to the conclusion that they had not, and dismissed the bill. From that decree the assignee appealed.

Mr. Thomas G. Frost and Mr. H. G. Miller for the appellant.

Where a creditor, who accepts a conveyance to secure a precedent debt, has reason to believe that his debtor is at the time unable to pay his debts as they become due, the conveyance is void as a fraudulent preference within the meaning of the Bankrupt Act. Toof et al. v. Martin, Assignee, &c., 13 Wall. 40; Buchanan v. Smith, 16 id. 308; Wilson v. City Bank, 17 id. 487; Dutcher v. Wright, 94 U. S. 553; Forbes v. Howe, 102 Mass. 437.

Mr. C. B. Lawrence, contra.

If Miller was in fact insolvent when he executed the deed of trust, the officers of the bank had no knowledge of the fact, nor any reasonable cause for believing it.

The deed of trust was given to secure $6,500, of which only

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the sum of $4,000 was a precedent debt, the remaining $2,500 being for money advanced under the provision of the deed. Even if it could be held that the deed was constructively fraudulent as to the $4,000, it must be sustained as to the $2,500.

MR. JUSTICE BRADLEY, after stating the case, delivered the opinion of the court.

Some confusion exists in the cases as to the meaning of the phrase, 'having reasonable cause to believe such a person is insolvent.' Dicta are not wanting which assume that it has the same meaning as if it had read, 'having reasonable cause to suspect such a person is insolvent.' But the two phrases are distinct in meaning and effect. 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...

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222 cases
  • Cumberland Portland C. Co. v. Reconstruction F. Corp., Civ. No. 1798.
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    • United States District Courts. 6th Circuit. Eastern District of Tennessee
    • November 17, 1953
    ...alone enough to create a preference. Stucky v. Masonic Sav. Bank, 108 U.S. 74, 2 S.Ct. 219, 27 L.Ed. 640; Grant v. National Bank, 97 U.S. 80, 24 L.Ed. Mere inability to make payments on demand, if the debtor is at the same time continuing the business, does not constitute in itself "reasona......
  • Miller v. Wells Fargo Bank International Corp., 74 Civ. 3714(MP).
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    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • December 22, 1975
    ..."Collier"). A "mere suspicion" that the transferor is insolvent does not constitute "reasonable cause." Grant v. First National Bank, 97 U.S. 80, 24 L.Ed. 971 (1878); In re Hygrade Envelope Corp., 366 F.2d 584 (2d Cir. 1966). Reasonable cause is established, however, where the creditor has ......
  • Humane Soc. of US v. Brown, Slip Op. 96-38. Court No. 95-05-00631.
    • United States
    • U.S. Court of International Trade
    • February 16, 1996
    ...facts calculated to produce ... a belief in the mind of an ordinarily intelligent man", Grant v. First Nat'l. Bank of Monmouth, Illinois, 97 U.S. 80, 82, 24 L.Ed. 971 (1878), or "knowledge of other facts which, although not amounting to direct knowledge, would cause a reasonable person, kno......
  • In re Camp Rockhill, Inc., Bankruptcy No. 80-00256K
    • United States
    • United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania
    • July 17, 1981
    ...the creditor with reasonable cause to believe the debtor is insolvent. PRS Products, 574 F.2d at 414. See also, Grant v. National Bank, 97 U.S. 80, 81-83, 24 L.Ed. 971 (1877); Green v. A.G. Edwards & Sons, Inc., 582 F.2d 439 (8th Cir. 1978); Mayo v. Pioneer Bank & Trust Co., 297 F.2d 392, 3......
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