Sawyer Et Al v. Turpin Et Al

• Decision Date: 01 October 1875
• Citation: 91 U.S. 114,23 L.Ed. 235
• Parties: SAWYER ET AL. v. TURPIN ET AL
• Court: U.S. Supreme Court

91 U.S. 114

23 L.Ed. 235

SAWYER ET AL. v. TURPIN ET AL.

October Term, 1875

APPEAL from the Circuit Court of the United States for the District of Massachusetts.

On the fifteenth day of May, 1869, J. C. Bacheller, in order to secure a debt due by him to Novelli & Co., executed a bill of sale conveying his chattel interest in certain property to Turpin, one of the defendants below.

This conveyance was not recorded, nor was possession had thereunder.

On the 31st of July, 1869, Turpin having surrendered the bill of sale, Bacheller, in exchange therefor, executed to him a mortgage upon the same property. This mortgage was recorded on the 17th of the following September.

Bacheller filed his petition in bankruptcy the twenty-second day of October then next ensuing; and the appellants, his assignees, filed their bill in the District Court to set aside the mortgage as a fraudulent preference of a creditor, alleging that Bacheller was insolvent when the mortgage was given, and that Turpin, and Novelli & Co., the other defendants, knew of the fact.

The District Court passed a decree dismissing the bill, which was affirmed by the Circuit Court. The assignees appealed to this court.

The recording statutes of Massachusetts which apply to the case are set forth in the opinion of the court.

Mr. Benjamin Dean and Mr. J. G. Abbott for the appellants.

The question presented in this case is, whether the chattel mortgage of July 31, 1869, given by the bankrupt Batcheller to the defendant Turpin, is void as against the assignees, as being a fraudulent preference of a creditor under the Bankrupt Act.

The defendants cannot claim under the absolute conveyance of May 15, because it is admitted by them that it was surrendered. They took the mortgage under which they claim as collateral security for a pre-existing debt due from the mortgagor. He was then insolvent, and they knew it. The case comes exactly within the provisions of the Bankrupt Act, avoiding such transactions as fraudulent; and it is entirely immaterial that a prior conveyance of the same property was given up.

The conveyance of May 15 was null and void against creditors or their representatives, as it was never recorded, nor was possession of the mortgaged property given or taken under it. Stat. of Mass., ch. 151, sect. 1.

The Bankrupt Act substantially provides that a mortgage, to be valid against assignees, must be recorded according to the laws of the State where it is made. Bankrupt Act, sect. 14, prov. 2.

No sale or delivery was intended. The instrument of May 15 was given only as security for a debt, not to make an absolute sale of the property; so that, even between the parties, no title had passed before it was surrendered.

It has been repeatedly held, in reference to questions of bankruptcy and insolvency, that the validity of any instrument claimed under against an assignee must be determined by the state of facts existing at the time of its execution. Forbes v. Howe, 162 Mass. 427; Blodgett v. Hildreth, 11 Cush. 311; Paul v. Waite, 11 Gray, 190; Simpson v. Carlton, 1 Allen, 109; Denny v. Same, 2 Cush. 160.

Every conveyance by a bankrupt, which by the laws of the State where it is made is void against creditors, is also void against the assignee in bankruptcy. Allen v. Massey, 17 Wall. 357; Bank of Leavenworth v. Hunt, 11 id. 391; Kane, Assignee, v. Rice, Nat. Bank Reg., vol. x. 469; Edmondson v. Hyde, id. vol. vii. 1; Thornhill v. Link, id. vol. viii. 521; In re Wynne, id. vol. iv. 5, Chase, C. J.

The assignee takes what any creditor could take; otherwise the creditors, instead of gaining by the Bankrupt Act, are losers.

Mr. Joshua D. Ball for the appellees.

The surrender of the deed was a sufficient consideration for the mortgage.

Even if never recorded or exchanged for the mortgage, and if no possession had been taken, the deed, being valid as against Bacheller, would have been valid as against his assignees in bankruptcy.

Assignees in bankruptcy take, except in cases of fraud only, the rights of the bankrupt, and subject to all the equities and incumbrances which exist against the bankrupt; and an unrecorded mortgage of chattels, being valid as against the bankrupt, is valid as against his assignees. In re J. Dow, 6 N. B. R. 11; In re Griffiths, 3 id. 179; Sawyer v. Turpin, 5 id. 339, 346; Winslow v. McLellan, 2 Story, 495, 500; Mitchell v. Winslow, id. 630; Fletcher v. Morey, id. 555; Ex parte Newhall, id. 363; Fiske v. Hunt, id. 584; Parker v. Muggridge, id. 334.

An exchange of security, even after the debtor is known to be insolvent, is perfectly valid if the creditor by the exchange receives no more in value than he gives up. Stevens v. Blanchard, 3 Cush. 169.

The validity of the mortgage depends not upon the state of facts existing at its date; but, as it was exchanged for another form of security on the same property, its validity will be upheld because the security for which it was an exchange was valid, and made and delivered more than four months before proceedings in bankruptcy were commenced. Stevens v. Blanchard, supra; Winslow v. McLellan, 2 Story, 495, 500; Clark v. Iselin, 21 Wall. 360; Cook v. Tullis, 18 id. 340; Watson v. Taylor, 21 id. 378; Burnhisel v. Firman, 11 Nat. Bank Reg. 505; Catlin v. Hoffman, 9 id. 342.

The deed which was given up might have been recorded by Turpin at any moment. He could at any time have taken possession of the property, and exercised full and absolute control over it.

It is said, that, before the exchange, no possession had been taken under the deed, and that it had not been recorded.

Such a deed as between the parties was valid without possession or record. Gen. Stat. of Mass., ch. 151, sect. 1.

No rights of creditors had intervened when the exchange took place.

The Supreme Judicial Court of Massachusetts, in one of their leading decisions made in the year 1856, say, 'The time when the record shall be made is not specially prescribed; though it must undoubtedly precede the possession by others subsequently acquiring an interest in the mortgaged property. Rev. Stat., ch. 74, sect. 5. To prevent it passing to them, it will be sufficient that the record is made at any time before such possession is taken, though it be long after the execution of the mortgage.' Mitchell et al. v. Black et al., 6 Gray, 106. Briggs v. Parkman, 2 Metc. 258; Adams v. Wheeler, 10 Pick. 199; Seaver v. Spink, 8 Nat. Bank Reg. 218; Cragin v. Carmichael 11 id. 511; In re Wynne, 4 id. 23; Gibson v. Warden, 14 Wall. 244.

MR. JUSTICE STRONG delivered the opinion of the court.

The only question presented by this appeal is, whether the mortgage given by the bankrupt on the thirty-first day of July, 1869, to Edward Turpin, the agent of Novelli & Co., was a fraudulent preference of creditors within the prohibition of the Bankrupt Act, and therefore void as against the assignees in bankruptcy. That it was a security given for the protection of a pre-existing debt, and that it was given within four months immediately preceding the filing of the petition in bankruptcy, are conceded facts. It may also be admitted that the bankrupt was insolvent when the mortgage was made, and that the creditors had then reason to believe he was insolvent.

The petition in bankruptcy was filed on the 22d of October, 1869. On the 15th of May next preceding that date, Bacheller, the bankrupt, who was indebted to Novelli & Co. in the large sum of $27,839 in gold, conveyed to Turpin, who was their agent, as a security for the debt, the building described in the subsequent mortgage of July 31. It was a frame building, erected upon leased ground; and Bacheller had, therefore, only a chattel interest in it. The conveyance was by a bill of sale absolute in its terms, having no condition or defeasance expressed; but it was understood by the parties to be a security for the debt due. It was in substantial legal effect, though not in form, a mortgage. Having been executed more than four months before the petition in bankruptcy was filed, there is nothing in the case to show that it was invalid. True, it was not recorded; and it may be doubted whether it was admissible to record. True, no possession was taken under it by the vendee; but for neither of these reasons was it the less operative between the parties. It might not have been a protection against attaching creditors, if there had been any; but there were none. It was in the power of Turpin to put it on record any day, if the recording acts apply to such an instrument; and equally within his power to take possession of the property at any time before other rights against it had accrued. These powers were conferred by the instrument itself,...