The Bank of Alexandria v. Herbert

• Decision Date: 14 February 1814
• Citation: 3 L.Ed. 479,12 U.S. 36,8 Cranch 36
• Parties: THE BANK OF ALEXANDRIA v. HERBERT
• Court: U.S. Supreme Court

12 U.S. 36

8 Cranch 36

3 L.Ed. 479

THE BANK OF ALEXANDRIA v. HERBERT.

Feb. 14, 1814

Absent. WASHINGTON, J.

THIS was an appeal from the Circuit Court for the district of

Columbia, sitting in chancery, at Alexandria.

A bill in chancery was brought by W. Herbert, junior, trustee for the creditors of John Potts, an insolvent debtor under the act of congress for the relief of insolvent debtors within the district of Columbia, against the bank of Alexandria, to recover the proceeds of a tract of land, the property of Potts, which had been sold by consent and the money deposited in the bank. This land had been conveyed by Potts to Ludwell Lee in trust to secure the payment of money borrowed of the bank by Potts, but the deed of mortgage had not been recorded within the time limited by the law of Virginia, which governs this case, and which declares that all deeds of mortgage whatsoever, although good between the parties, shall be void as to creditors and subsequent purchasers without notice, unless they be recorded within eight months after their date.

SWANN, for the Appellants.

Although the deed to Lee would be void as to a subsequent purchaser for valuable consideration without notice, yet it is not void as to Herbert, who is the trustee of Potts under the insolvent law for the district of Columbia—(Laws U. S. vol. 6, p. 294.) A trustee under that law is like an assignee under a commission of bankruptcy in England. He stands merely in the place of the insolvent. He takes the estate as the insolvent held it. He is bound by the same equity, and liable to the same obligations. Cooper's B. L. 128, 307, 2 Vez. 633. 1 Atk. 94, 162. 2 Vern. 564, 609, Taylor v. Wheeler. 1 Br. C. C. 269, Russel v. Russel. The deed to Lee being good against Potts, is equally valid against Herbert.

TAYLOR, contra.

No English authority can apply directly to this case. Potts remained in possession ten years after the deed to Lee, and until his insolvency and the execution of the deed to Herbert, when he delivered to Herbert the possession.

But the deed is void as to creditors as well as purchasers, and creditors are not affected by notice, although purchasers are. The fact that Herbert had notice does not appear; but if it did, he represents the creditors; and their rights are his. If there had been no deed to Herbert, the creditors might have obtained a decree in their own names to vacate the deed to Lee and compel a sale.

But if this cause depends upon the decisions under the bankrupt law, yet the assignee of a bankrupt represents the creditors, and can take advantage of defects which the bankrupt himself could not. Cooper 307. In the case of Taylor v. Wheeler, 2 Vern. 564, it does not appear that the creditors had a right to avail themselves of the defect in the mortgage. If Herbert represents the creditors, the fourth section of the statute of Virginia is conclusive. 1 P. P. Rev. Co. 157. If he does not represent the creditors, then all the provisions of the insolvent law are of no avail. If the deed cannot be set aside by a bill in the name of the trustee, the judgment creditors may file a bill in their own names and set it aside.

SWANN, in reply.

The assignee of a bankrupt also represents the creditors, but yet it has been decided (1 Atk. 94) that although creditors might vacate a deed, yet an assignee could not.

The case of Taylor v. Wheeler is very strong. The mortgage was void at law for want of a surrender of the copy-hold in due time, yet it was decreed that it should be made good against the assignee of the mortgagor, who, it was admitted, represented the creditors. But the...