Marsh v. Leseman

WARD, Circuit Judge. The plaintiff, as trustee in bankruptcy of Henry D. Drewes, brought this suit in ecpiity to set aside a conveyance by him and wife to the defendant Louis D. Leseman of certain real estate at Richmond Hill, Eong Island, dated January 19, 1915, on the ground that it was a preference under section 60b- of the Bankruptcy Act; Drewes being then insolvent, Eeseman haying reasonable cause to believe that he was insolvent, and that the conveyance would effect a preference, and Drewes having been adjudicated a bankrupt within four months, on a voluntary petition filed March 5, 1915. The evidence is that Eeseman loaned Drewes, who was his brother-in-law, $3,500 September 17, 1912, payable on demand. In November, 1912, he demanded payment, and Drewes gave him two demand notes, together with a deed for the premises at Queens, Long Island, in which he was conducting his grocery business, as security. This deed was not recorded by Eeseman, but it was good between the parties and against all the world, except subsequent purchasers in good faith and for a valuable consideration fróm the same vendor, whose conveyance is first recorded. Section 291, Real Property Law. In January, 1915, Drewes secured an offer for his business, stock on hand, and premises at Queens from one Sedorf of $1,625 in cash and [486] certain premises at Richmond Hill, Hong Island. Leseman consented to take these premises in exchange for the demand notes and the unrecorded deed for the Queens premises which he had received from Drewes as security. The transaction was carried out as follows: January 18, 1915, Christine Sedorf conveyed the Richmond Hill premises to Henry D. Drewes. On the same day Henry D. Drewes conveyed the Queens premises to Christine Sedorf. January 19th, Leseman surrendered the demand notes and unrecorded deed to the Queens premises to Henry D. Drewes, who with his wife, in consideration thereof, conveyed the Richmond Hill premises to him. [ 1 ] It is admitted that the deed to the Queens premises was really a mortgage; that on January 19, 1915, Drewes was insolvent; that Leseman had reasonable cause to believe that he was insolvent; and that the transaction of that date was within four months of the filing of the petition. Still we discover no preference, but merely the exchange of valid securities, viz., the unrecorded deed delivered as security for a loan in 1912 for the deed to the Richmond Hill premises delivered in 1915. [2] It is objected that parol testimony should not have been admitted as to the contents of the deed and of the notes delivered by Drewes to Leseman in 1912 and of the terms on which the deed was delivered; but, in view of the testimony that the deed and notes had been destroyed, secondary evidence was plainly admissible. [3] The trustee relies further on section 258 of the Tax Law, which reads: “S,ec. 258. Effect of Nonpayment of Taxes. No mortgage of real property sliaíl be recorded by any county clerk or register, unless there shall be paid the tax imposed by and as in this article provided. No mortgage of real property which is subject to the taxes imposed by this article shall be released, discharged of record or received in evidence in any action or proceeding, nor shall any assignment of or agreement extending any such mortgage be recorded.” This provision of the state law as to evidence applies to actions in its own courts, not to actions in the federal courts. Blodgett v. Zinc Co., 120 Fed. 893, 897, 58 C. C. A. 79; Groton Bridge Co. v. American Bridge Co. (C. C.) 151 Fed. 871, 876; Johnson v. New York Breweries Co., 178 Fed. 513, 101 C. C. A. 639. Then it is argued that, notwithstanding the testimony to the contrary, the unrecorded deed must have been surrendered January 18th, because Drewes on that date gave a full warranty deed of the Queens premises to Sedorf. But the unrecorded deed, in the absence of notice, would not affect Sedorf’s title, and it is not only more consistent with all probabilities that Sedorf had no such notice, but also with the express testimony that Leseman surrendered it to Drewes in exchange for the deed to the Richmond Hill premises the next day, and that the deed and the notes were then destroyed. , [4] At all events the trustee is not within the protection of section 60a of the Bankruptcy Act, because, not being a subsequent purchaser in good faith for a valuable consideration, and not representing any such person, the conveyance was not by law required to be recorded [487] against him. See our decision in Re Boyd, 213 Fed. 774, 130 C. C. A. 288, and Carey v. Donohue, 240 U. S. 430, 36 Sup. Ct. 386, 60 L. Ed. 726. The decree is affirmed.