Year: 1867




A variety of interesting questions under
the bankrupt act recently passed by Con-
gress, and among which of paramount i'm
portance TO holders Of mortgages on real es-
tate is mooted by the New Orleans Times of
recent date, which says:


The question is asked in some circles,
whether under the bankrupt act, in cases of
parties availing of act surrendering proper
ty which may be under mortgage, the Judge
of the United States Court can order all
moi tgages standing against the bankrupt,
or any one petitioning for the benefit there
of, can order the erasure of mortgages on
the records of the mortgage office 1t will
be remembered, that under the act of 1912,
or the last national bankrupt act, the presi-
ding Judge could direct the erasure of all
mortgages that the mortgages merely
could have a privilege on the assets or pro-
ceeds of the property realized. 1t will be
real estate, sold under the order
Of bankruptcy, under that law, did
not command one-fourth or half the
sum for which it was valued, or
cost. 1t will be remembered that the real
estate of the late Thomas Banks, who built
and erected many stores and buildings in
the now first district, went into court with
bilan of 81 100000, comprising the City
Hotel, the Arcade on Magazine street, the
National Hotel, on Tchoupitouslas street,
between Gravier and Natchez, now occu-
pied by four stores the Commercial Hotel,
and other property now the most valuable
in the city. In ine Mr.. Banks never i'm
proved property only in the best locations;
and what is il supposed all this valuable
real estate now worth seven to eight mil
lions of dollars, sold for under decree of
bankruptcy of the United States? Merely
for four hundred and fifty thousand dol
lars (S450,O00). Thomas Banks died
broken hearted man. There was no neces-
sity for his being forced into bankruptcy"


The New York Times comments upon
the above as follows:


The merits of the question are not sill on
one side. If the owner of encumbered
property becomes bankrupt, and the whole
ef his assets pass into the hands of a re-
seiyer for the benefit Of the creditors,
should the existence Of a mortgage upon
the real part of the estate relieve it from
forced sale? The creditors are entitled to
the entire body of assets and to secure the
benefit of all, the power to anticipate
the conditions of q mortgage, and even
10 direct its erasure must rest somewhere
OF this authority the Judge is the proper
custodian.


On the other hand, the exercise Of the
authority may, in seasons of business de-
preston or disaster, operate prejudicially
TO the rights of the mortgage. True, his
privilege as a creditor of the mortgage
might remain a first charge upon the pro-
ceeds Of his estate, into which the availa-
bic price Of the real property would enter.
But forced sales of lands or houses in the
midst OF panic are not likely to realize
more than a small portion of their real
value. AT such time, hundreds of dollars
buy what is intrinsically worth-and what
may be actually mortgaged for-thousands.
The case cited IN the statement we have
copied, where less than half a million re-
suited from the sale Of property valued at
millions, is fair illustration oil the sacri-
fees that would follow an unyielding exer-
else Of the right Of a Judge in bankruptcy
10 order a sale. OF course, as compared
with ordinary creditors, the mortgage re-
tains his advantage. But in the instance
supposed, a sale in pursuance of the mort
eager's bankruptcy might easily be equiva-
lent to the forfeiture Of a large part Of the
amount covered BY the mortgage.


The contingency is rendered more than
usually important by reason Of the diff
Guilty which is already experienced in bor-
rowing money on mortgage. Before the
war. a mortgage on improved real estase,
At A reasonable valuation, was considered
one of the best forms of inyestmept lt
met the two conditions desired By prudent
investors-a remunerative rate Of Interest,
aud a security superior TO nearly all others.
One Of these conditions has been reversed
by the war. Taking the element Of Taxa
lion into the account the mortgage rate
OF interest in New York OF New Jersey Is
on an average two per cent below the rate