32 Ind. 299 | Ind. | 1869
The intestate executed to the appellant a mortgage on real estate, to secure the purchase money therefor, to be paid by the former to the latter. The mortgage was not recorded, and the administrator, having no knowledge of its existence, sold the land under an order of court, to make assets. The purchaser, who was also ignorant of the mortgage, paid the whole purchase-money (a full and fair price), and took a proper conveyance. The estate was insolvent. The question presented is, whether the appellant is entitled to payment out of the proceeds of the real estate in preference to general creditors. The inquiry is somewhat novel, and the industry of counsel has failed to bring to our attention any very satisfactory authority upon the subject.
It is only subsequent purchasers and incumbrancers in good faith and for value who are protected against an unrecorded mortgage. As against all the world besides, the registry imparts no virtue or force whatever to the instru
But it is urged, that if the mortgagor had sold the land to an 'innocent purchaser and received the purchase-money during his 'lifetime, the mortgagee could not have pursued the fund in his hands, but must be content with the result of his remedy at law, in personam, and therefore he cannot follow the proceeds in this casé. The argument has appar-' ent force, and, indeed, it would be convincing if the administrator held the fund as the mortgagor would hold it in the case supposed. In the absence of fraud, the latter would hold it in his own right,' but the administrator holds it as a mere trastee, to be disposed of under the control of the court, in the payment of debts, and any surplus by distribution. If the existence of the mortgage had been stated in the petition for the sale of the land, as it should have been, if known, the court would have ordered the sale sub-. ject to the mortgage, or else for the páyment thereof, as might have been adjudged best. 2 Gr. & H. 512, sec. 89. In the latter case, the administrator’s duty would have required him to apply the proceeds of the sale, so far as necessary, to the payment of the moi’tgage debt; and the court would have enforced this duty. . But in the present case, the administrator, in applying for power to sell,- did not inform the court of the mortgage, and consequently the decree made no provision for it, and the purchaser, being without notice, took title free from the mortgage, paying a corresponding price. The money is in the hands of the administrator, and no equities have intervened in behalf of other creditors. There is no reason, therefore, why the court should not, for the purposes of justice, follow the proceeds, still in reach, and subject them to the lien which originally subsisted against the land, as is habitually'done in other cases of trusts where the trustee has either wilfully or ignorantly violated his duty by disposing of the trust estate.
But in the present case it appears that the administrator had paid, the appellant the sum of four hundred dollars out
Judgment reversed, with costs,; cause remanded, with directions to render judgment upon the finding according to this opinion.