Putnam patriot., 1911-06-02
MEMOPANDUM

mortgage 10 secure S2Z Zs3O0t0 Whlcf he received from Arnold on June 3 1gl8 as security for an actually ex isting debt, must be shared with oth CT creditors of Arnold because Il wal Yoidable preference under the terms Of the bankruptcy act
 There is no question as 10 the ex istence Of the indebtedness Of s22 300 co on June i, 1910 fsee pleddingst
 Tn the absence of an attempt 10 de fraud or delay other creditors, vIgl lance in seeking security by a credi tor Is not looked upon with disfayoI in law, and merely getting security for a debt is not delaying or defraud ing creditors.
 Werner Ys. Zierfuss. 162 Pa. st 360 Let us now consider the facts in this case.
 Arnold. the bankrupt, on June 3d 1910. within four months before the filing of the petition in bankruptcy gave q mortgage for $22.3o8e0 upon real estate to tbe defendant. to se cure n debt then existing from Arnold to Andem
 The trustee in bankruptcy seeks te have the mortgage avoided as pref erenee under tHe provisions of the G s Bankruptcy Aet See. Gp.
 Loveland on Bankruptcy 3d Ed pages 55iz5 sums mp the essential facts that must he proven under the Act as it read on June 3d 1910 in or der Co set aside q mortgage given by debtor to secure his creditor, as follows
 1. The transfer must be made from an insolvent person to a creditor.
 2 The effect ef such transfer must be to enable any one of his creditors 10 obtain a greater percentage Of his debt than any other of such creditors in the same class.
 !. The person receiving it or to be benefited thereby or his agent acting therein must have had reasonable cause to believe that il was intended thereby to give a preference.
 1. The transfer must have been made within four months before filing petition in bankruptcy or after filing the petition and before adjudication
 Tn this case there can be no con troyersy under the evidence that AT mold was hopelessly insolyent al the tune or IIt lIdHNltI anu hlit " It, ttAiN gave the mortgage knowing that II would create a preference; and that ii did in fact create a preference; and that it was given within four months before the filing of the petition.
 The real question at issue is wheth CT Andem, or his agent, if he had one had at the tune Of the conveyance reasonable cause to believe that Ar hold intended thereby to give q pref erence.
 At the outset | shall dispose of the claim that MT Russell was the agent of Andem acting therein as thai term is used in Sec. SO b. of the bank ruptcy act find that Russell was not Andems agent in seeking or get ting security for his debt. l find that what he did in relation to depositlne the mortgage deed for record was merely done as a favor; and that in other respects he was acting solely as Arnold's attorney.
 do not understand that the plain tiff claims that Andem knew Of Ar holds insolvency from Arnold or other sources and knew that Arnold was making a preference. If such claim were made l should find that II was not proven.
 The issue then sifts down to the inquiry Did Andem have reasonable cause to believe that Arnold intended hv the mortgage te give him q pref erence2 That is were there etreum stances surrounding the transaction which caused Andcm 10 believe thai Arnold intended Co give him prefer ence. or II he did mol 70 believe were there cjre8ms aHees surrounding the transaction which would have ied at ordinarily prudent business man tf his Sjmauau .o believe chat a prefer tuca WIS intended
 Collier. Nth I'd r. b6fS.
 In dealing With this question w must bear m miad had notice o facts which would iucite man ot 0r dnary prudence to an Inquiry Unde similar gUeumstaugts is notice of at facts which reasonably dllgeut n euiry would disclose.
 Goder vs McPhersou, 152 F. 95l, r Am B. R 521
 Also that there must be something more than mere guess or suspicion . Aruolds condition on Andem.s part
 Sharpe vs AAeuder. 22 Am. B. R 431. l10 Y aN9
 Collier Stb Ed D. 66S.
 What acts dtd Audem know Q have nouce ol when he took the nor gage in question Mere they faei which caused him Co believe or gay hfm reasonable cause to believe that Arnold was msoNlnl and that preference was mtended2 Here " must recall that II is }he situation 2 ia Arnold which Audem knew or lea notice of on and before 1uue &d lsl that we are deauug with. aud not Jh actual condition ot Arneids 8talfs 3 disclosed ln the bankruptcy ptoeee' ings.
 Andem know or had notice au an about June Sd 1910 of the lel3eWW facts among others, and the ioHoN ing occurrences took place
 1. Arnold had begun business Putnam in 1902 as agent for a Ne York brokerage house.
 ?. In l9Q4-5 he gave m this agenc and began business on his own a count buying and selling seeuriue
 8. Arnold besides acting merely s broker in the purchase and sale of s eurltes, also conducted what termed a participation account bu iness and also what he termed .speeial account" business.
 i. The participation account bus ness was conducted as follows; A holds customers on this account loal cd him their money taking his Gns