Factors' & Traders' Insurance v. Murphy

Syllabus

<p>Bankruptcy — Mortgage—Sale.</p> <p>This court has jurisdiction in error over a judgment of the-Supreme Court of Louisana, in a suit by one citizen of that State agtfinst another for the foreclosure of a mortgage on real estate therein, when the only controversy in - the case is as to the effect to be given' to a sale of the property under an order of the District Court of the United States in bankruptcy, to sell the bankrupt’s mortgaged property free from incumbrances.</p> <p>When a mortgagee of real estate becomes owner of the equity of redemption, a court of equity will not regard the mortgage as merged by unity of possession, if it was the evident intent that the two titles should be kept distinct, or if the purchaser has such an interest in keeping them distinct that this intent can be inferred.</p> <p>A sale of real estate of a bankrupt by order of court free from the lien of a mortgage creditor is invalid, as to the creditor and as to the purpose of discharging his lien, unless lie is made a party to the proceedings. Ray v. Norseworthy, 23 Wall. 128 affirmed.</p> <p>In such case it is not sufficient to notify the person who holds the evidences of his debt, and claims to be his agent, if the record represents that person as acting for another party, and makes no mention of the mortgage creditor.</p> <p>The real estate of a bankrupt was sold by order of court free of incumbrances and purchased by A. One of the mortgages on the estate was given to secure four notes of which at the time of the sale A held two, and B held two. A and other mortgage creditors were made parties to the proceedings, but B was not made party. C held B’s notes and claimed to represent him in the proceedings, but the record only showed C as acting for D. B brought suit to foreclose the mortgage as to his two notes, claiming that as to A’s notes the lien was cut off by the purchase of the equity, and as to the rest of mortgage,liens as well as to A’s they were discharged by the sale. Hel