Can anybody help me on the rules of split pots in texas holdem poker.

This is what happened.

Player A,  went all in with 19,500 chips, player B and player C, call him, player B+C still had about 80,000 chips each.

Pot 1 was made,it was checked by player B+ C, on the turn, player C, check on the river then player B, went all in, thus creating pot 2, player C, folded.

Player B won pot 2 and had better cards than player A for the  pot 1  but player C  had better cards than player B.

Does player C take pot 1 as he had better cards or since he had folded from pot 2 is he out of pot 1.

Please can you help me on this as one of my mates says i should have won pot 1 and one of my mates say that i lost both pots.

 Thank`s Marcus.