Case Name: WILLOUGHBY LYNCH v. C. R. JOHNSON et als.
Court: Supreme Court of North Carolina
Jurisdiction: North Carolina
Decision Date: 1915-11-17
Citations: 170 N.C. 110
Docket Number: 
Parties: WILLOUGHBY LYNCH v. C. R. JOHNSON et als.
Judges: 
Reporter: North Carolina Reports
Volume: 170
Pages: 110–111

Head Matter:
WILLOUGHBY LYNCH v. C. R. JOHNSON et als.
(Filed 17 November, 1915.)
Bankruptcy — Trustee’s Title — Purchaser for Value — Registration—Notice— Interpretation of Statutes.
Since the amendment to the Bankrupt Act of 1910 the trustee of a bankrupt acquires the bankrupt’s property on the same basis as creditors and purchasers for value against unrecorded instruments; and where the lands have theretofore been conveyed to the bankrupt to be 'held in trust for himself and another purchaser, the title taken to himself, and he had forwarded a deed to the other .person for his part of the lands, but which deed was not received or recorded, the purchaser at the trustee’s sale acquires a good title, though he was aware of the previous transaction.
Appeal by defendants from Whedbee, J., at April Term, 1915, of TYRRELL.
T. H. Woodley and Aydlett & Simpson for plaintiff.
Small, MacLean, Bragaw & Rodman for defendants.

Opinion:
Clark, C. J.
In 1896 C. R. Johnson purchased a tract of land in Tyrrell from W. E. Shallington. The plaintiff Lynch alleges in his complaint that he paid half of the purchase money under an agreement with. Johnson that he would hold half of the land in trust for the plaintiff, the deed for the entire tract being taken in Johnson's name. In 1911 Johnson was adjudged a bankrupt in Yirginia and the defendant H. W. Davis was appointed trustee in bankruptcy. The tras-tee, by order of court, advertised the lands for sale and they were purchased by the Juniper Corporation. The plaintiff alleges that at the time of such purchase the Juniper Corporation had knowledge of his claim. This was denied by the defendants, but the jury found with the plaintiff on that issue. Johnson, as witness for the plaintiff, testified that shortly after the purchase from Shallington he executed a deed to the plaintiff for a half interest in the land and placed the same in the postoffice in a stamped envelope bearing his re turn address, and beard nothing more from it. Tbe plaintiff testified that be bad never received tbe deed.
Assuming tbe facts to be as contended by tbe plaintiff, tbe defendants acquired a good title to tbis property. (1) Under tbe Bankrupt Act as amended 25 June, 1910, tbe trustee in bankruptcy acquired tbis property free from tbe claims of tbe plaintiff. (2) Kegardless of tbe title acquired by tbe trustee, tbe defendants took tbe property free from any lien or claim of tbe plaintiff.
It is settled by tbe Connor Act, Eev., 980, by its express terms, and tbe numerous decisions thereunder cited in Pell's Eevisal, 980; Burwell v. Chapman, 159 N. C., 211, that even if Johnson bad executed and delivered tbe deed for tbe half interest in tbe land to tbe plaintiff Lynch, tbe latter having failed for any reason to record tbe same, its subsequent purchaser from Johnson, or under execution sale against him, even with notice of tbe outstanding conveyance to Lynch, "however full and complete" such notice might be, would acquire tbe title. Tbe evidence for Johnson that be mailed tbe deed to Lynch and tbe latter's evidence that be did not receive it cannot change tbis.
Under tbe amendment to tbe Bankrupt Act, 25 June, 1910, tbe trustee in bankruptcy acquires exactly tbe same title as any purchaser for value. Tbe United States Supreme Court in Mfg. Co. v. Cassell, 201 U. S., 304, held that "Tbe trustee in bankruptcy is vested in no better right or title to tbe property than tbe bankrupt bad when tbe trustee's title accrued." Tbe amendment to tbe Bankrupt Act, 25 June, 1910, was enacted to change tbis, and tbe effect has been to put trustees in bankruptcy on tbe same basis as creditors and purchasers for value as against unrecorded instruments. Tbis has been held in many cases in tbe Federal Court, among them Mfg. Co. v. Arthur (C. C. A.), 220 Federal, 846; Collier on Bankruptcy (9 Ed.), 658, 662, 999, citing many eases in tbe notes.
Tbis precise point has been fully discussed in Hinton v. Williams, post, 115, to which we refer. Tbe court should have given tbe defendants' prayer for instruction that "On all tbe evidence and admissions in tbe cause tbe plaintiff was not entitled to recover any interest in tbe land, and tbe jury should answer tbe sixth issue No.' "
Error.