Did the payments made by the bankrupt upon the note constitute a voidable preference as contemplated and defined by the National Bankruptcy Act?
The pertinent elements of a voidable preference are discussed in Bridgers v. Trust Co., 198 N. C., 494, 152 S. E., 393. In the case at bar it is clear that the bankrupt was insolvent when the payments were made, and that all the payments were made within the four months period. Therefore, the determinative question is whether the defendant bank had reasonable cause to believe at the time the payments were made that such payments would effect a preference.
In the Bridgers case, supra, this Court said: “All the authorities concur in declaring that actual knowledge is not required, but reasonable cause to believe that a preference would result is sufficient to impose liability. Hence, a creditor receiving a payment or Transfer’ within the period of four months must exercise ordinary care to ascertain the facts, and, if the facts are sufficient to put him upon inquiry, he is chargeable with all the knowledge that such reasonable inquiry would have disclosed.” The phrase “reasonable cause to believe” has been discussed and applied by many courts and textwriters. Manifestly, there is no hard and fast rule or inflexible standard known to the law by which the phrase may be applied with certainty and precision to a given state of facts. For this reason ea'ch case is viewed and interpreted in the light of the surrounding circumstances. Mr. Justice Bradley, in Grant v. Bank, 97 U. S., 80, 24 Law Ed., 971, wrote: “Hundreds of men constantly continue to make payments up to the very eve *263of their failure, which it would be very unjust and disastrous to set aside. And yet this could be done in a large proportion of cases if mere grounds of suspicion of their solvency were sufficient for the purpose.
“The debtor is often buoyed up by the hope of being able to get through with his difficulties long after his case is in fact desperate; and his creditors, if they know anything of his embarrassments, either participate in the same feeling, or at least are willing to think that there is a possibility of his succeeding. To overhaul and set aside all his transactions with his creditors, made under such circumstances, because there may exist some grounds of suspicion of his inability to carry himself through, would make the bankrupt law an engine of oppression and injustice. It would, in fact, have the effect of producing bankruptcy in many cases where it might otherwise be avoided.” Boone v. Merchants and Farmers Bank, 285 Fed., 183 (opinion delivered by District Judge Henry G. Connor); Talty v. Rosenthal, 14 Fed. (2d), 239; Miller v. Martin, 17 Fed. (2d), 291; Everett v. Warfield Mining Co., 37 Fed. (2nd), 328.
The evidence does not disclose that the defendant bank received a copy of the letter which the bankrupt sent to certain creditors on 24 December, nor did it have any actual knowledge or information with reference to the suits instituted in a court of a justice of the peace, and all the evidence tends to show that the bankrupt and the bank were dealing in the ordinary and usual course of business. Therefore, we are of the opinion that the trial judge ruled correctly.
Perhaps the evidence would have been sufficient to put the bank upon notice at the time it applied the deposit of the bankrupt upon the indebtedness. However, it has been held that the right of setoff by a bank against an insolvent depositor is not a preference. Bank v. Massey, 192 U. S., 138, 48 Law Ed., 380; U. S. v. Butterworth, 267 U. S., 387, 69 Law Ed., 672; Hodgin v. Bank, 124 N. C., 540, 32 S. E., 887; Coburn v. Carstarphen, 194 N. C., 368, 139 S. E., 596.
Affirmed.