229 U. S. Opinion of the Court. here the element of fraud and mistake which entitles it to cancel the credit; insisting that the Macon Bank, having notice that Plant was insolvent, could not collect the check for $3,000 without notifying the Nashville Bank of such insolvency so that it might assert its superior right under its banker's lien and set off the $3,000 deposit against Plant's debt of $50,000. The law undoubtedly permits an insolvent to prefer one creditor over another and allows such creditor to retain such preferential payment against all persons,except the Trustee in Bankruptcy, when the payment has been made within four months of the filing of the petition in bankruptcy and with reasonable cause to believe that a preference would be effected. We do not enter upon the question as to whether this right to be preferred is modified by principles of equity or whether the holder of a check, in presenting it to a bank for payment, is bound to give information that the bank's depositor and debtor was insolvent. For in this case it distinctly appears that the officers of the Macon Bank I did not know that Plant was insolvent at the time he gave the check, at the time they mailed the check or at the time it was received by the Nashville Bank, nor did they know that Plant was indebted to the Nashville Bank. Such notice, however, is sought to be imputed to the Macon Bank because Plant was its President, and it is argued that what he knew the bank must be considered as knowing. This presents another phase of the oft-recurring question as to when and how far notice to an agent is notice to his principal. In view of the many decisions on the subject it is unnecessary to do more than to apply them to the facts of this case. If Plant, within the scope of his office, had knowledge of a fact which it was his duty to declare and not to his interest to conceal, then his knowledge is to be treated as that of the bank. For he is Opinion of the Court. 229 U.S. then presumed to have done what he ought to have done and to have actually given the information to his principal. But if the fact of his own insolvency and of his personal indebtedness to the Nashville Bank were matters which it was to his interest to conceal, the law does not by a fiction charge the Macon Bank, of which he was President, with notice of facts which the agent not only did not disclose, but which he was interested in concealing. Plant was a private banker in Macon and as such indebted to the First National Bank of Macon, of which he was President and so far dominated as to compel it to take care of the large balances against him in the clearing house, frequently more than 50 per cent. of the $200,000 capital of the Macon Bank. On May 13th Plant was indebted to the Macon Bank on this account between $75,000 and $100,000. A National Bank Examiner was in the city and it was expected that he would examine the books of the Macon Bank within a few days, when this illegal overdraft by the President would appear. Rev. Stat., § 5200; Evans v. United States, 153 U. S. 584. Plant thereupon gave the Bank checks and commercial paper to pay the balance. It was to his personal interest to conceal any fact which would prevent the Macon Bank from receiving paper in satisfaction of a debt which had been unlawfully contracted by reason of his official position. An element of that interest was that he should conceal not only the fact of his insolvency but the fact of his indebtedness to the Nashville Bank, lest the Macon Bank should thereby refuse to take the $3,000 check at its face value. Without, therefore, inquiring as to what would have been the duty of the Macon Bank had it known of Plant's insolvency and indebtedness on the $50,000 drafts, we hold that as it had no such knowledge in fact it was not charged with such knowledge in law. The judgment is Affirmed. STUDLEY, TRUSTEE IN BANKRUPTCY OF COLL VER TOURS COMPANY v. BOYLSTON NATIONAL BANK. APPEAL FROM THE CIRCUIT COURT OF APPEALS FOR THE FIRST CIRCUIT. No. 899. Argued April 14, 1913.-Decided June 9, 1913. Nothing in the Bankruptcy Act deprives a bank with which the insolvent is doing business of the rights of any other creditor taking money without reasonable cause to believe that a preference will result. In this case it having been found that the deposits and payments of notes were not made to enable the bank to secure a preference by the right of set-off, the bank had a right under its agreement to set off the deposits against the notes within four months of the bankruptcy. New York County Bank v. Massey, 192 U. S. 138. Section 68a of the Bankruptcy Act did not create the right of set-off but recognized its existence and provided a method for its enforcement even after bankruptcy. The right of set-off is recognized by the Bankruptcy Act and it cannot be taken away by construction because of possibility of its abuse; nor will the act be so construed by denying such right as to make banks hesitate to carry on business and thus produce evils of serious consequence. 200 Fed. Rep. 249, affirmed. THE facts, which involve the right of a bank to accept in good faith payments from an insolvent, are stated in the opinion. Mr. J. Butler Studley, with whom Mr. William H. Dunbar and Mr. Stewart C. Woodworth were on the brief, for appellant. Mr. Hollis R. Bailey for appellee. MR. JUSTICE LAMAR delivered the opinion of the court. The Collver Tours Company was engaged in the business of conducting touring parties around the world, charging a lump sum for the tickets, which were paid for in advance. It had expended about $40,000 in advertising, which it carried on its books as an asset, and since the character of its business did not involve the possession of tangible property, it had nothing except cash on hand, good-will and its earning capacity as a means of paying debts. In 1907 the company opened an account with the Boylston National Bank, with which it subsequently did all of its banking business of depositing, checking and borrowing. It notified the Bank in 1909 that it had no other liabilities except what was due to the Bank, and it was given a line of credit of $25,000. It borrowed that sum on the promise to repay it that year, but as it used a part of its funds to open a Letter-of-Credit Account in the Bank, it was permitted to renew the notes. In December, 1909, it made a statement to the Massachusetts Corporation Commission which showed that the company did not have assets sufficient to pay its liabilities, and an officer of the Bank saw this statement, but the representative of the Collver Company went over the matter with the bank officers, made an explanation and borrowed an additional sum of $5,000 in the spring or summer of 1910. During the year 1910 the debt of $25,000 was reduced to $10,000, went back to $25,000, was reduced again to $15,000 and increased to $30,000-the Collver Company making to the Bank encouraging statements of its prospects and of an anticipated large sale of tickets for round-the-world tours. One note for $5,000 was paid and the then debt of $25,000 was represented by five notes for $5,000 each, maturing Sept. 12, 20, 30, Oct. 3 and 14th. The balances in bank to the credit of the Collver Company fluctuated greatly from time to time, varying from almost nothing up to as high as $54,000. As a result of sales of tickets, the company deposited large sums in August and September and smaller sums in October and November. During that period $22,500 was paid to the 229 U. S. Opinion of the Court.. Bank, the three notes due September 12, 20 and 30 being paid by checks on the Boylston National Bank. The note for $5,000 due Oct. 3, was charged to the Company's account and on the same day a renewal note for $2,500 was discounted. The note for $5,000 which fell due on October 14 was also charged to the deposit account according to the custom of the Bank, of which the Collver Company had notice and to which it assented. On the date of the payment by such charging of the last note to the account the Company had $19,000 left to its credit. The Collver Company continued to make deposits and to draw checks, and applied for a new loan, which was refused by the Bank. On Dec. 16, 1910, a petition in bankruptcy was filed against the Company and after his election the Trustee brought suit against the Bank to recover the $22,500, claiming that it had notice of the Collver Company's insolvency and that the payments of $22,500 were transfers which had operated to give the Boylston Bank a preference within four months of filing the petition. In its answer the Bank alleged that it was informed and believed that the Company was doing a large and constantly increasing business and was in every way responsible; that the Company for a long time kept its general deposit with the Bank and was constantly making deposits therein, some large, some small, upon all of which the Bank had a lien and a right of set-off and that "this right of set-off was not affected by the fact, if it be a fact, that the Company was at any of the times of the exercise of said right of set-off, insolvent;" and it claimed that the exercise of its right of set-off did not and could not constitute a preference within the meaning of the Bankruptcy Act or any amendment thereto. The case was tried by the Referee, who sustained the Bank's claim of set-off, holding that the payments were not transfers; or, if transfers-that the Trustee could not |