Year: 1869

Important Decision In Bnnkruptcy-validity


ofChattei Mortgages for Pre.existins Debts


Rights Of Assignees In Bankruptcy.


The following opinion has Just been given by
Judge Blatchford:-


The bankrupt filed his voluntary petition in bank
rupcy in this court on the 2sth OF December, 1868
Horace Bedell was appointed his assignee on the 80
OF February 1859. In October, 1865 Mrs Adela Gil-
be loaned to the bankrupt the sum OF $780, no time
Of epayment being agreed upon. on the nth OF
December, 1868, She loaned to the bankrupt the
given, OF chattei mortgage executed by the bank
rupl to her. on certain household furniture OF his.
The loan Of the $1,000 was made ON condition that
the mortgage should secure the payment not only
of the $1,000, but OF the $3.50 previously lent. The
mortgage was so drawn and the amount secured
by It was made payable on demand, and II was duly
flied In the proper o1lce. On the 9th OF February,
1859, the mortgage demanded payment from the
bankrupt OF the amount Sec secured oy the morgage
the mortgage to Joseph A. Sal0m0n, and salomon
then and there paid to her as the consideration
obtained possession of the mortgaged property, 1t
having been removed from the possession OF the
bankrupt without The consent or knowledge Of The
the property does not appear. The assignee 10
bankruptcy now presents petition to tins court,
claiming that the mortgage Is void as to the credi
tors Of the bankrupt aud praying that Is may be set
ASIDE as fraudulent and void and that the property
may be put INTO his possession and be sold tor the
benefit OF the creditors OF the bankrupt. Mrs. Gil
bert and Saiomon and the bankrupt have appeared
and answered the petition, and proofs have been
taken on reference for thai purpose.


The mortgage TO Mrs. Gilbert, so far as concerns
the $1,000, secured by it, is not shown not to have
mace n a1 M was aas for aa
given as security for The debt thus created and 1t
was in all respects otherwise valid, and 1t was re-
corded pursuant to the statute OF the State OF New
York. II must therefore, under the fourteenth sec
ton OF the Bankruptcy act pe held to be valid mort
gage az aga nst the assignee IN bankruptcy so far
$1,000 OF the amount secured by 1t Is concerned. AS
TO the 500 covered by the mortgage think the
dence iais 10 show that Mrs Gilbert had reasonable
cause TO believe, when she received the mortgage,
that 1t was made In fraud Oh any provision Of tine
Bankruptcy act 1t must, therefore, stand as valid
mortgage for the whole amount secured by 1t.


But while the amount secured by the mortgage
must be paid out OF the proceeds OF the property II
they sufficient for that purpose the property It.
SELF must be sold in such manner as to realize the
largest possible amount. II passed to the assignee
In bankruptcy and the title to it vested in hun OF
the oath OF December 1883. The debt was not de-
manded from the bankrupt nor was any action
taken by the mortgage to disturb the status Of the
property, until after the assignee was appointed.
From the time OF tile fling OF the bankrupts petition
the property was In the hands OF the Court ana at
least from the time OF the appointment of the assg
nee the possession OF it by the bankrupt was in law
the possession of 1t by the assignee. The taking OF
any OF 1t under the mortgage was after that time
unlawful, and taking or it from the custody oil
be accounted for as OF the time 1t was taken. II
appears by the bankrupts schedules that the value
Of theiprOpery exceeds the amount OF the mortgage
The assignee in bankruptcy has right to sell the
retain the surplus Of It's proceeds after paying the
mortgage. Ii 1t or any part OF 1t snail not be re-
or such part OF 1t must account to the assignee III
bankruptcy for Its value or for the value Of such
part OF 1t as OF the time 1t was taken. II reference
10 necessary ascertain such value It must be had
to the register IN charge OF the case. When his re-
port thereon shall be made the Court Will make such
order as shall be proper as to the payment OF the
mortgage.


T. Burwell for the assignee in bankruptcy.


n. j. Friedlander for the defendants.