In re Traut's Estate

• Decision Date: 27 March 1924
• Docket Number: 6482.
• Citation: 297 F. 458
• Parties: In re TRAUT'S ESTATE. v. PRICE. FARMERS' & MERCHANTS' SAV. BANK
• Court: U.S. Court of Appeals — Eighth Circuit

297 F. 458

In re TRAUT'S ESTATE.

FARMERS' & MERCHANTS' SAV. BANK v. PRICE.

No. 6482.

United States Court of Appeals, Eighth Circuit.

March 27, 1924

R. S Galer, of Mt. Pleasant, Iowa (Galer & Galer, of Mt. Pleasant Iowa, on the brief), for appellant.

La Monte Cowles, of Burlington, Iowa, for appellee.

Before SANBORN, Circuit Judge, and BOOTH and REEVES, District Judges.

REEVES District Judge.

From an order disallowing its claim as a secured debt, the claimant has appealed.

On the 7th day of March, 1921, Henry Traut, subsequently becoming a bankrupt, was heavily indebted to the appellant bank, and on that day agreed orally to execute a mortgage on a certain farm as security for said debt. This oral agreement was renewed from time to time until the execution and delivery of the mortgage on September 13, 1921, but the mortgage was not recorded until September 30, 1922.

An involuntary petition in bankruptcy was filed against Traut on November 28, 1921, and an adjudication made August 12, 1922. The mortgage having been executed within four months prior to bankruptcy, appellant does not base its claim thereon, but rather upon the equitable lien created, as it is alleged, by Traut's agreement of March 7, 1921.

Opinion.

It is obvious that the legal title to the property became vested in the bankrupt long prior to bankruptcy and remained so vested until a date within four months of bankruptcy. Under such circumstances, though subject to an equitable lien created by an agreement made prior to the four months to give a mortgage thereon, yet such title would pass unincumbered for the benefit of creditors and the mortgage executed pursuant to such an agreement was voidable by the trustee under Section 9644b, U.S. Comp. Statutes, 1918. Hayes v. Gibson (C.C.A.) 279 F. 812, 22 A.J.R. 1372; In re New York & Baltimore Inland Transportation Co. (D.C.) 276 F. 145; In re Hayes v. Gibson, certiorari denied by the United States Supreme Court, 259 U.S. 581, 42 Sup.Ct. 464, 66 L.Ed. 1074; In re Pittman (D.C.) 275 F. 681; In re Great Western Mfg. Co., 152 F. 123, loc. cit. 127-128, 81 C.C.A. 341; Wilson v. Nelson, 183 U.S. 191, 22 Sup.Ct. 74, 46 L.Ed. 147. It was said in Hayes v. Gibson supra, that:

'While an equitable lien arising from express contract, as here, may be enforceable against the specific property embraced in the contract in the hands of the contractor and subsequent purchasers and incumbrancers

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