Section 5242 of the Revised Statutes of the United States, 12 U.S.C. § 91 provides that payments made by a national bank 'in contemplation' of the commission of an act of insolvency, 'with a view to the preference of one creditor to another' 'shall be utterly null and void.'
This suit was brought in the federal court for northern Illinois by the receiver of the Manufacturers National Bank & Trust Company of Rockford, in that state, to recover, as such preference, the proceeds of a check for $42,761.12 drawn on the bank by the Mechanics Universal Joint Company of that city and paid to it. The answer denied that the bank was then insolvant; that it was known by its officers and directors to be so; that they contemplated the imminent necessity of its closing; and that the payment was made with a view to a preference. On these issues much evidence was introduced. The District Court, making detailed findings of fact, found on all those issues for the plaintiff, and entered a decree accordingly. The Court of Appeals, accepting the findings made by the trial court, affirmed the decree. 80 F.(2d) 147. We granted certiorari, because of the importance of the question whether the relation of the parties was such as to render the payment unlawful. 298 U.S. 648, 56 S.Ct. 749, 80 L.Ed. 1378. We accept the findings, as there was ample evidence to support them, and none of the objections to the admission of evidence is substantial. Pick Manufacturing Co. v. General Motors Corporation, 299 U.S. 3, 57 S.Ct. 1, 81 L.Ed. 4, decided October 26, 1936.
On Friday, June 12, the balance in the company's account in the Manufacturers Bank was $65,224.30. On that day, the check for $42,761.12 was drawn, payable to the Third National Bank of Rockford, where it also had a general checking account, and was sent for deposit in that account. On Saturday, the 13th, the check was paid through the clearing house. Never before had the company transferred money from its checking account in the Manufacturers Bank to its general checking account in the Third National. On June 12 and 13, 1931, the Manufacturers Bank conducted its business as usual. It accepted deposits; honored all checks, whether presented through the clearing house or otherwise; and paid all demands upon it. It had not committed any 'act of insolvency.' But it was, in fact, insolvent; and was known by its officers to be so. On June 13, it closed its doors at the conclusion of regular banking hours and it did not thereafter open them. On June 16, the Comptroller of the Currency certified that the bank was insolvent and appointed a receiver.
The check was executed by Ekstrom, the president and manager of the company, who then was, and for two years had been, a director of the Manufacturers Bank. He knew its precarious condition. He knew that for some time prior to June 12 the bank had been on the special list of the Comptroller of the Currency for frequent examination and report. As early as January 8, 1931, the Comptroller had called the bank's attention to its unsatisfactory condition. In a letter dated May 28, 1931, he pointed out 'its present dangerous situation' and 'potential losses that threaten its solvency.' Ekstrom, as director, had examined the reports of the bank's condition made by the National Bank Examiner; had read the letters from the Comptroller; and had been present at an informal meeting of the board, held upon request of the Examiner, on June 12 between 11 and 12 o'clock in the morning. The Examiner attended the meeting; discussed the bank's condition; advised its officers and the directors that there would be a run on the Rockford banks on the following Monday; and told them 'that the cash position of the Manufacturers Bank was so low that it could not stand a run of one business day.' The directors authorized him 'to talk over the affairs of the Manufacturers Bank with a view to having said bank taken over by some other bank in Rockford'; and appointed a committee to that end. Ekstrom participated in that action. Shortly after leaving the meeting, he signed the check and caused it to be sent by mail for collection.