Davis v. Harlow

Const-Abke, J., delivered the opinion of the Court. The appeal in this case is from a decree declaring the title to the property in question to be vested in the appellee free and clear of a mortgage claim, and enjoining the appellants from prosecuting the foreclosure proceedings instituted. The cause was heard upon bill and answer, and the facts, thus admitted and conceded, are that Percy W. Page was seized of the fee simple title to' a piece of property which was conveyed unto him on the 1st day of October, 1912, by Llewellyn F. Davis and wife, and that on the same day the said Page and wife conveyed, by way of mortgage, the same property to the said Davis, reciting therein that the said mortgage was a purchase money mortgage, it not appearing on the face of the deed that any part of the purchase money was unpaid. Article 66, section 31 of the Code.

The deed and mortgage were not recorded until more than six months after their date and there was no affidavit endorsed upon the mortgage, as. required by section 32 of Article 21, in order to make it valid, except as between the parties. In addition there was no order of Court obtained to admit said mortgage to record. Code, Art. 16, sec. 34. After the date of the execution of the mortgage, the said Page became indebted to numerous persons, who had no knowledge of the said mortgage; and which debts having been proved in the Bankruptcy Court the said Page was thereupon adjudicated a bankrupt on the 9th day of November, 1914.

Leo P. Harlow, the appellee, was duly appointed trustee, and is now administering his estate. Davis, the mortgagee, assigned the mortgage to William J. Bacon, Jr., for purposes of foreclosure. Upon the said assignee commencing foreclosure proceedings, the appellee filed his bill to ¹⁶⁷ have the title to the property declared vested in himself as trustee and to enjoin the foreclosure. We are of the opinion that the lower Court was correct in the decree passed by it.

The Bankrupt Act was amended by the Act of June 25th, 1910, II. S. Stat. at Large, Ch. 412, sec. 8, in which additions were made to section 47 a (2). The amendment to that section provides as follows: “Such trustees, as to all property in the custody or coming into the custody of the bankruptcy Court, shall be deemed vested with all the rights, remedies and powers of a creditor holding a lien by legal or equitable proceedings thereon; and also-, as to all property not in the custody of the Bankruptcy Court, shall be deemed vested with all the rights., remedies and powers of a judgment creditor holding an execution duly returned unsatisfied.” It would be thought that naturally this amendment would have been made to section 70 a, the section dealing with the vesting of title in the trustees rather than to a section dealing with the duties of trustees. Mr. Collier in the 9th edition of his work on Bankruptcy, p. 1005, discussing section 70a, as to whether property of the bankrupt vests in the trustee or not, says: “It must appear that the property in the possession of the bankrupt is subject to claims or liens valid as against his creditors, otherwise it passes to his trustee.

For instance, the validity of a chattel mortgage or contract of conditional sale depends upon State statutes; ordinarily the title to property mortgaged or conditionally sold is retained by the mortgagee or vendor; but if there is a failure to comply with a State law which affects the validity of the transfer, the property passes to the trustee of the mortgagor or vendee in the same plight and subject to the claims of general creditors, as though bankruptcy had not intervened.” It is said in the same work in discussing the purpose and effect of the amendment of 1910 at page 659: “A further