Court Opinion

ID: 8637518
Source: CourtListenerOpinion
Date Created: 2022-11-24 19:47:43.948109+00
Date Added: 2024-06-11T16:55:58.821002
License: Public Domain

FOX, District Judge
(orally). I find the consideration of Godfrey’s note was in part money then loaned and the balance was received in discharge of a note upon which he then had full security, first by the partnership of Stowe & Waldron and second by and through the mortgage on Stowe’s stock, held to be sure by Waldron, but which in equity would inure to Godfrey’s benefit as the holder of the liability thereby protected. Under these circumstances, it does not appear to me that Godfrey and Stowe can be deemed to have intended a fraudulent preference of this demand; under the provisions of the bankrupt law there was a full present consideration for this mortgage qua this note, and the estate has not been in any way defrauded thereby. Whether the Dilling-ham claim is equally pure and protected it is not in my view necessary to determine, as Dillingham makes no claim to payment from the mortgaged property, and the case of Denny v. Dana, 2 Cush. 160, I think is not to control the rights of Godfrey. If Dilling-ham had taken the mortgage charged, with a fraudulent motive and preference of his debt, under the bankrupt law, it may be that this case would control, but Godfrey himself is found by me entirely innocent, and so far as he is concerned, is a bona fide holder for present value. I think the case falls within that class of which U. S. v. Bradley, 10 Pet. [35 U. S.] 360 is an illustration, that a contract may be good in part and void for the residue, where the residue is founded in illegality, but not malum in se. Now extra the provisions of the bankrupt act Dilling-*201ham had a perfect right to take this security, and as all proceedings in bankruptcy are based on principles of equity, I think we are justified in severing the conditions of the mortgage and sustaining it so far as one of the claims in behalf of the sole mortgagee, entirely innocent of all violation of the law, is concerned.
The following decree was subsequently entered by the court:
FOX, District Judge. The assignee named in the foregoing petition having acknowledged notice, and the ease having been argued by counsel in behalf of the respective parties, it is by the court now ordered, adjudged and decreed, that the security by mortgage of September twenty-seventh, eighteen hundred and seventy, on the bankrupt’s stock of goods and merchandise, as set forth in said petition, for the payment to said Godfrey of the note of said bankrupt for seven hundred and ninety-three dollars and seventeen cents, on six months with interest, (said note being in part for a present consideration then advanced by said God-frey to said bankrupt, and the residue thereof being in payment of a demand held by said Godfrey against said bankrupt, payment of which before that time had been and then was fully secured to said Godfrey,) constituted a valid and legal incumbrance on the property mortgaged to the extent of the amount due upon said mote and was not in fraud of any of the provisions of the bankrupt act, and that said stock in trade passed to said assignee in bankruptcy, charged with and subject to said lien and incum-brance. And it is therefore further ordered, that said assignee pay to said Godfrey, forthwith. from the net proceeds of the sale of said mortgaged property, if the same shall be sufficient for that purpose after satisfaction of any previous liens, if any there be, the amount due upon said note with legal interest at six per cent, from the time said note became due and payable.