City Nat. Bank v. Bruce

• Decision Date: 07 May 1901
• Docket Number: 388.
• Citation: 109 F. 69
• Parties: CITY NATIONAL BANK OF GREENVILLE v. BRUCE.
• Court: U.S. Court of Appeals — Fourth Circuit

109 F. 69

CITY NATIONAL BANK OF GREENVILLE v. BRUCE.

No. 388.

United States Court of Appeals, Fourth Circuit.

May 7, 1901

L. O Patterson (H. J. Haynsworth, on the brief), for appellant.

John H Earle, for appellee.

Before SIMONTON, Circuit Judge, and PURNELL and WADDILL, District judges.

WADDILL District Judge.

The question presented by this appeal is the correctness of the decision of the lower court in disallowing a certain portion of a lien, to wit, the sum of $919, asserted by the appellant, the City National Bank of Greenville, S.C. against the appellee, J. H. Bruce, trustee of the bankrupt estate of Alverson Bros. The facts are briefly these: On the 30th of January, 1900, an involuntary petition in bankruptcy was filed against the said firm, and in due time it was adjudicated a bankrupt. Among the liens asserted was one to collect a debt secured by mortgage in favor of the appellant, the City National Bank of Greenville. The mortgage was executed on the 9th of January, 1900, to secure a note of $3,600 of that date on the stock of merchandise then on hand belonging to the said firm, and was recorded on the 26th day of January, 1900. Prior to that time, to wit, on the 7th of October, 1899, the said firm had executed a mortgage to one S. J. Wilson to secure three notes, aggregating $2,500, with the said Wilson as surety, and payable at 30, 60 and 90 days from date, respectively. This mortgage was never recorded, but was indorsed by Wilson, and transferred to the bank as collateral security for the notes. The first two mortgage notes were paid, and on the 9th of January, 1900, when the third note, being for $919, fell due, the said mortgage of that date for $3,600 was executed; the appellant bank taking up the note it then held, included in the unrecorded mortgage of the 7th of October, 1899, and paying in cash the residue, to wit, $2,681. The referee and the court below each held the mortgage of the 9th of January, 1900, to be valid only to the extent of $2,681, being the present consideration paid thereon, and that us to the pre-existing debt of $919 it was invalid, and they both found nothing in the evidence to warrant the conclusion that the mortgage was not given and accepted in good faith, or that it was made in contemplation of, or in fraud of, the bankruptcy act.

By section 67d of the bankruptcy act, it is provided that 'liens given or accepted in good faith, and not in contemplation of or in fraud upon this act, and for a present consideration, which have been recorded according to law, if record thereof was necessary in order to impart notice, shall not be affected by this act. ' To the extent, therefore, of the consideration paid at the time of the execution of the note and mortgage, there can be no doubt of the correctness of the decision of the lower court, and it would seem equally clear therefrom that the decision was correct as to the portion of the claim rejected, unless the mortgage of the 7th of October, also securing that portion, constituted a valid lien which entitled appellant, by reason of one security being a mere exchange for the other, to be paid that part of the claim. Clark v. Iselin, 21 Wall. 360, 22 L.Ed. 568; Cook v. Tullis, 18 Wall. 332, 21 L.Ed. 933. This mortgage, it will be observed, was never recorded, and under the statute of South Carolina (Act 1898, p. 747, Act No. 464), as well as the present bankruptcy act (section 67a), was invalid as to a subsequent creditor of the bank. In re Leigh (D.C.) 96 F. 806.

The referee heard the evidence, and passed upon the question of the existence of subsequent creditors, which, being a question of fact, this court will not interfere with, unless the same appears to be plainly unsupported by the evidence. Appellant relies in support of its...