Court Opinion

ID: 4936360
Source: CourtListenerOpinion
Date Created: 2021-09-24 01:15:57.72381+00
Date Added: 2024-06-11T08:14:42.129723
License: Public Domain

Powers, J.
On January 6, 1898, one Littlefield gave to the defendant, Partridge, a mortgage of real estate to secure a prior existing debt represented by three notes of $400.00 each payable in one, two and three years respectively from that date. The mortgage was recorded May 2, 1898, and on June 4, 1898, Partridge sold and assigned two of the notes to an innocent purchaser, *443Herbert Black, the other defendant. A petition in insolvency was filed against Littlefield June 8, 1898; he was duly adjudged insolvent and his estate conveyed to his assignee in insolvency, the complainant, who brings this bill praying to have the mortgage discharged and cancelled. The defendants appeal from the decree of the presiding justice declaring the mortgage null and void and ordering its discharge.
They contend that, the assignment of the notes being in equity an assignment pro tanto of the mortgage, Black, the bona fide assignee, had a right to rely upon the record and should be protected against unknown and latent defects in the title. Pierce v. Paunce, 47 Maine, 507. This is- true were it not for R. S., c. 70, § 33, which provides that in insolvency proceedings the assignment from the judge to the assignee “shall relate back to the commencement of pi'oceedings in insolvency and vest the title to all the property and estate of the debtor, not exempt from attachment and seizure on execution in the assignee, although the same is then attached on mesne process as the property of the debtor, or is claimed under a mortgage given by the debtor to secure a debt to a prior existing creditor, which has not been recorded at least three months prior to commencement of insolvency proceedings, and such assignment dissolves any such attachment made within four months, and any such mortgage which has not been recorded at least three months preceding the commencement of such proceedings.” The question here is not as to the rights of the defendant Black if no such statute existed, but whether by its terms and intent this statute applies to such a mortgage in the hands of a bona fide assignee.
The main purpose of the insolvent law was to secure to all the creditors of the insolvent an equal participation in the distribution of his estate, not only against zealous creditors who might seek to enforce their claims by attachment, but also against those whom the insolvent might seek to prefer by giving security for their debts. “Among creditors equality is equity.” Yet the law rewards the vigilant. There should be some period of time beyond which other creditors could not safely sleep upon their rights. The statute has *444fixed this at four months in the case of attachments and three months after record, which is notice to other creditors, in the case of mortgages given to secure, prior existing debts. Its words are clear and comprehensive. It contains no exception. Nothing is said about the mortgagee or the assignee of the mortgagee, but it declares without limitation or qualification that the mortgage given to secure a prior existing debt, and which has not been recorded three months a,t the time of commencement of insolvency proceedings, shall be dissolved and the title to the property vest in the assignee in insolvency. No plainer terms could be employed, and we believe if the legislature had intended to limit the application of the statute so as to exclude from its operation mortgages assigned to innocent purchasers, it would have said so as in the case of innocent purchasers of notes given for intoxicating liquors. R. S., c. 27, § 56. As we have already said, the genius and purpose of the insolvent law is equality among creditors. It should be so construed as to further the object for which it was enacted. To interpolate into it the exception, contended for by the defendants, would be to defeat its obvious policy and deprive it of all substantial force and effect. There is in regard to such mortgages no other limitation or condition except that of three months record. If this does not embrace mortgages in the hands of a bona fide assignee, then no lapse of time would be necessary. The debtor might at any time mortgage all his assets to one of his creditors, and as soon as he learned that the mortgage had passed into the hands of a bona fide assignee, file his petition in insolvency, and the only title which would vest in his assignee in insolvency would be that to a worthless equity of redemption. New cases would be found in which the innocent purchaser real or pretended would be wanting. Such a construction would prevent equality among creditors, foster litigation, and promote fraud, and cannot receive the sanction of this court.
The innocent indorsee takes the note knowing that the contract has been entered into by the parties with reference to the existing law, and that the debt may be discharged by proceedings in insolvency. He takes the mortgage which secures the note with equal *445knowledge that that contract also has been entered into with reference to the existing law and that the mortgage, if given for a prior existing debt, will be dissolved by insolvency proceedings commenced within three months from the date of its record. We perceive no greater hardship in the one case than the other. The law gives him notice, that if he sees fit to purchase mortgages which have not been recorded three months, he must ascertain at his peril the consideration upon which they were given.

Decree below affirmed with costs.

Execution to issue therefor.