
    Lewis J. Phillips and Asher L. Phillips, as Trustees under the Will of Matilda Phillips, Deceased, for Henry Phillips, Plaintiffs, v. Isaac Kahn and Others, Defendants. Max Radt, Trustee in Bankruptcy of Abraham M. Eisenberg Appellant; Bertha Kahn, Respondent.
    
      Bankruptcy—when a mortgage given on the surrender of the note of the mortgagor, who is subsequently adjudged bankrupt, is valid as against his trustee.
    
    In January, 1903, one Eisenberg borrowed from one Kahn $1,400 and on the 15th day of April, 1903, $600 additional, making a. total of §2,000, for which sum Kahn was given a note. On the maturity of the note, Eisenberg offered to pay the same, or, if Kahn would advance an additional sum of $500, less interest on the note, he would give her a mortgage of $2,500, Kahn accepted the latter proposition, paying Eisenberg $441.77 in cash and surrendering the $2,000 note. The bond and mortgage were executed August 6, 19Q3.
    November 3, 1903, Eisenberg was adjudged ¿ bankrupt. At the time of the execution and delivery of the $2,500 bond and mortgage, Kahn had no knowledge or information or reasonable cause to believe that Eisenberg was insolvent, nor did it appear, as a matter of fact, that Eisenberg was then insolvent.
    
      Held, that as against the trustee in bankruptcy the mortgage was a valid lien for the full amount thereof, and not simply for the $441.77 paid to Eisenberg in cash.
    Appeal by Max Radt, trustee in bankruptcy of Abraham M. Eisenberg, from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 27th day of May, 1904, confirming the report of a referee appointed in surplus-money proceedings.
    
      I. Gainsburg, for the appellant.
    
      Emanuel Jacobus, for the respondent.
   Van Brunt, P. J.:

It appears that the claimant, respondent, Bertha Kahn, held a third mortgage upon premises, subsequent to the second mortgage foreclosed in this action, in the sum of $2,500. Abraham M. Eisenberg, the mortgagor, in January, 1903, borrowed from the respondent $1,400, and on the fifteenth day of April an additional sum of $600, making a total of $2,000, for which amount she received a note. At maturity payment was demanded, and Eisenberg offered either to pay, or, if Bertha Kahn would advance an additional sum of $500, less interest due on the notes, he would give her a mortgage of $2,500. The bond and mortgage were duly executed and delivered on the 6th day of August, 1903, and shortly thereafter the note given for the $2,000 was returned to Eisenberg. On the seventh day of August the mortgage was recorded in the office of the clerk of the county of New York. On the 2d day of November, 1903, the mortgagor was adjudged an involuntary bankrupt, and the appellant was appointed trustee.

The referee finds, and the finding is supported by the evidence, that at the time of the execution and delivery of the $2,500 mortgage the respondent had no knowledge or information or reasonable cause to believe that the mortgagor was insolvent; and further, that there was no evidence that Eisenberg was insolvent and unable to pay his debts at the time of the execution and delivery of the mortgage.

It is claimed upon the part of the appellant that the learned referee and the counsel for the respondent have mistaken the provision of the Bankruptcy Law, under which the trustee in bankruptcy claims that the mortgage was not a lien as against him, except for the $441.77 cash, which was actually advanced at the time of the execution of the mortgage; and that he does not rely upon either section 60 of the Bankruptcy Law (80 U. S. Stat. at Large, 562, as amd. by 32 id. 799, § 13) or subdivision e of section 67 thereof (30 id. 564, as amd. by 32 id. 800, § 16), read separately or together, but claims his rights under the provisions of subdivision d of section 67 of said statute (30 id. 564). That provision reads as.follows : “ Liens given or accepted in good faith and not in contemplation of or in fraud upon this act, and for a present consideration, which have been recorded according to law, if record thereof was necessary in order to impart notice, shall not be affected by this act.”

The appellant' claims that the only- present consideration which ivas'received Was the $441.77, paid in cash as above stated.. It may be very well argued, and the fact was probably so, that the mortgagor would not have' given a mortgage had jiot he received the cash payment, and the mortgagee would not have loaned the cash and accepted the mortgage had not the previous indebtedness been considered. If so there was present consideration for the whole. And besides, it appears that she surrendered the $2,000' note, and thuk there was the surrender of a present consideration that certainly affécted the balance over and above the $441.77 paid in cash.

'We think, therefore, that whatever view is taken of- the case, there was a present consideration which made the mortgage a valid lien, and that the order should be affirmed, with-costs.

Patterson, O’Brien, McLaughlin and Hatch, JJ., concurred.

Order affirmed, with costs.  