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.