Mr. Justice Strong
delivered the opinion of the court.
The only question presented by this appeal is, whether the ■mortgage given by the bankrupt on the thirty-first day of July, 1869, to Edward Turpin, the agent of Novelli ■& Co., was a fraudulent preference of creditors within the prohibition of the Bankrupt Act, and therefore void as against the assignees in bankruptcy. That it was a security given for the protection of a pré-existing debt, and that it was given within four months immediately preceding the filing of the petition in bankruptcy, are conceded facts. It may also be admitted that the bankrupt was insolvent when the mortgage was made, and that the creditors had then reason to believe he was insolvent.-
The petition in bankruptcy was filed on the 22d of October, 1869. On the 15th of May. next preceding that date, Bacheller, the bankrupt, who was indebted to'Novelli & Co. in the large sum of $27,839 in gold, conveyed to Turpin, who was their agent, as a security for the debt, the building described in the subsequent mortgage of July 31. It was a frame building, erected upon leased ground; and Bacheller had, therefore, only a chattel interest in it. The conveyance was by a bill of sale absolute in its terms, having no -condition or defeasance expressed ; but it was understood by the parties to be a security for the debt due. It was in substantial legal effect, though not in form, a mortgage. Having been executed more than four months before the petition in bankruptcy was filed, there is nothing in the case to show that it’ was invalid. True, it was not recorded; and it may be doubted whether it was admissible to record.- True, no possession was taken under it by the vendee ; but for neither of these reasons was it the less operative between the parties. It might not have been a protection against attaching creditors, if there had.been any; but there ■were none. It was in the power of Turpin to put it on record any day, if the recording -acts apply to such an instrument; and ■equally within his power to take possession of the property at any time before other rights against it had accrued. These powers were conferred by the instrument itself, immediately on
its execution. In regard to chattel mortgages, the recording statutes of Massachusetts, enacted in 1886, provide as follows: “ No mortgage of personal property hereafter made shall be valid against any other pérson than the parties' thereto, unless possession of the mortgaged property be delivered to and retained by^the mortgagee* or unless the mortgage be recorded by the clerk of the,town where the mortgagor resides.” Rev. Stat. 473, ch. 74.:. ; The statute contains a clear recognition of the validity of 'an unrecorded chattel mortgage, as between the parties to it; though nó possession be taken under it. And the General Statutes' of the State, enacted in 1860 (Gen. Stat. 769,f ch. 161), contain the same recognition. Their language is tite following: “ Mortgages Of personal property shall be recorded on the iecords of the town where the mortgagor resides When the mortgage is made, and on the records of the city or town in which he then principally transacts his business, or follows his:trade or calling. If. the mortgagor resides without the State, his mortgage of personal property within the State, when the mortgage is made, shall be recorded on the records of the city or town where the property then is. Unless a mortgage is so recorded,'or the property mortgaged is delivered to and retained by the ihortgageé,- it shall not be valid against any person,
other than the parties thereto,
except as provided in the following section.” The . exception1 extends only to mortgage contracts of bottomry, or
respondentia,
to transfers,' assignments, or hypothecations, of ships or vessels, and to transfers in mortgage of goods at sea or abroad. Neither of these actsi prescribes when the record must. be made, or the possession be taken; but, when made, the instrument takes effect, as against third persons as well as between the parties,, from the time of its execution, unless intervening ■ rights have been obtained. In
Mitchell et al. v. Black et al.,
6 Gray, 100, it was ruled by the Supreme Court of - Massachusetts that one who had taken bills of sale of merchandise from his debtor’ as a security for money advanced, and who had allowed the debtor to sell .portions ,of the merchandise in the usual course of his businéss as if1 he were the owner thereof, might take possession of it at any time in order to secure his debt; and that such taking of possession, though at a . time when the
debtor was known by bimself and the creditor to be insolvent, was effectual, notwithstanding the State Insolvent Law, which contained provisions very like those of the Bankrupt Act. The court held unqualifiedly that the bills of sale, absolute as they were in terms, though in fact intended only as a security, and though unattended by possession of the property, and though not placed upon record, vested a complete title in the creditor, ‘subject only to be defeated by the discharge of the debt, or by some intervening right. acquired before the possession was taken. This was a case of bills of sale, liké the present, not a case of a technical mortgage. In speaking of the registration of mortgages, the court said, “The time when the record shall .be made is not specifically prescribed by the statute, though it must undoubtedly precede the possession by others subsequently acquiring an interest' in. the mortgaged property. T° prevent it‘from passing to them, it will be sufficient that the record is made -at any time- before such possession is taken, though .it ,be long, after the execution of the mortgage;”
Xt- should not be doubted, then; that the bill of sale of May 15; 1869, conveyed to Turpin- all BacheSller’s interest in the frame building; that it was.' effective for the purposes for which it was made; and, -no other rights having intervened, that it was a valid security, to the extent of the value of. the .property, for the ..debt due Noyelli..& Co. on the 31st of July, .1869, when the mortgage impeached by the bill was made. The mortgage covered the same property. It embraced nothing more. It"withdrew nothing from the control of the bankrupt, or from the reach of the bankrupt’s creditors,.that had not been withdrawn by the bill of sale. Giving the mortgage in lieu of the bill of sale, as- wa,s done, was, therefore, a mere exchange in the form-.of the’'security. In no sense can it be regarded as a new preference; The preference, if any, was obtained on the 15th of May, when the bill of sale was. given, more than four months before the petition in bankruptcy was filed, It is too well . settled to require' discussion, that an exchange of securities within -the- four months is not a fraudulent preference within the meaning of . the Bankrupt Law, even when the creditor and the debtor know that the latter is insolvent, if the security given up is a valid one when the exchange is made, and
if it be undoubtedly of equal value with the security substituted for it. This was early decided with reference to tbe Massachusetts insolvent laws
(Stevens
v.
Blanchard,
3 Cush. 169); and the same thing has been determined with reference to the Bankrupt Act.
Cook
v.
Tullis,
18 Wall. 340;
Clark
v.
Iselin,
21 id. 360;
Watson
v.
Taylor,
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Mr. Justice Strong
delivered the opinion of the court.
The only question presented by this appeal is, whether the ■mortgage given by the bankrupt on the thirty-first day of July, 1869, to Edward Turpin, the agent of Novelli ■& Co., was a fraudulent preference of creditors within the prohibition of the Bankrupt Act, and therefore void as against the assignees in bankruptcy. That it was a security given for the protection of a pré-existing debt, and that it was given within four months immediately preceding the filing of the petition in bankruptcy, are conceded facts. It may also be admitted that the bankrupt was insolvent when the mortgage was made, and that the creditors had then reason to believe he was insolvent.-
The petition in bankruptcy was filed on the 22d of October, 1869. On the 15th of May. next preceding that date, Bacheller, the bankrupt, who was indebted to'Novelli & Co. in the large sum of $27,839 in gold, conveyed to Turpin, who was their agent, as a security for the debt, the building described in the subsequent mortgage of July 31. It was a frame building, erected upon leased ground; and Bacheller had, therefore, only a chattel interest in it. The conveyance was by a bill of sale absolute in its terms, having no -condition or defeasance expressed ; but it was understood by the parties to be a security for the debt due. It was in substantial legal effect, though not in form, a mortgage. Having been executed more than four months before the petition in bankruptcy was filed, there is nothing in the case to show that it’ was invalid. True, it was not recorded; and it may be doubted whether it was admissible to record.- True, no possession was taken under it by the vendee ; but for neither of these reasons was it the less operative between the parties. It might not have been a protection against attaching creditors, if there had.been any; but there ■were none. It was in the power of Turpin to put it on record any day, if the recording -acts apply to such an instrument; and ■equally within his power to take possession of the property at any time before other rights against it had accrued. These powers were conferred by the instrument itself, immediately on
its execution. In regard to chattel mortgages, the recording statutes of Massachusetts, enacted in 1886, provide as follows: “ No mortgage of personal property hereafter made shall be valid against any other pérson than the parties' thereto, unless possession of the mortgaged property be delivered to and retained by^the mortgagee* or unless the mortgage be recorded by the clerk of the,town where the mortgagor resides.” Rev. Stat. 473, ch. 74.:. ; The statute contains a clear recognition of the validity of 'an unrecorded chattel mortgage, as between the parties to it; though nó possession be taken under it. And the General Statutes' of the State, enacted in 1860 (Gen. Stat. 769,f ch. 161), contain the same recognition. Their language is tite following: “ Mortgages Of personal property shall be recorded on the iecords of the town where the mortgagor resides When the mortgage is made, and on the records of the city or town in which he then principally transacts his business, or follows his:trade or calling. If. the mortgagor resides without the State, his mortgage of personal property within the State, when the mortgage is made, shall be recorded on the records of the city or town where the property then is. Unless a mortgage is so recorded,'or the property mortgaged is delivered to and retained by the ihortgageé,- it shall not be valid against any person,
other than the parties thereto,
except as provided in the following section.” The . exception1 extends only to mortgage contracts of bottomry, or
respondentia,
to transfers,' assignments, or hypothecations, of ships or vessels, and to transfers in mortgage of goods at sea or abroad. Neither of these actsi prescribes when the record must. be made, or the possession be taken; but, when made, the instrument takes effect, as against third persons as well as between the parties,, from the time of its execution, unless intervening ■ rights have been obtained. In
Mitchell et al. v. Black et al.,
6 Gray, 100, it was ruled by the Supreme Court of - Massachusetts that one who had taken bills of sale of merchandise from his debtor’ as a security for money advanced, and who had allowed the debtor to sell .portions ,of the merchandise in the usual course of his businéss as if1 he were the owner thereof, might take possession of it at any time in order to secure his debt; and that such taking of possession, though at a . time when the
debtor was known by bimself and the creditor to be insolvent, was effectual, notwithstanding the State Insolvent Law, which contained provisions very like those of the Bankrupt Act. The court held unqualifiedly that the bills of sale, absolute as they were in terms, though in fact intended only as a security, and though unattended by possession of the property, and though not placed upon record, vested a complete title in the creditor, ‘subject only to be defeated by the discharge of the debt, or by some intervening right. acquired before the possession was taken. This was a case of bills of sale, liké the present, not a case of a technical mortgage. In speaking of the registration of mortgages, the court said, “The time when the record shall .be made is not specifically prescribed by the statute, though it must undoubtedly precede the possession by others subsequently acquiring an interest' in. the mortgaged property. T° prevent it‘from passing to them, it will be sufficient that the record is made -at any time- before such possession is taken, though .it ,be long, after the execution of the mortgage;”
Xt- should not be doubted, then; that the bill of sale of May 15; 1869, conveyed to Turpin- all BacheSller’s interest in the frame building; that it was.' effective for the purposes for which it was made; and, -no other rights having intervened, that it was a valid security, to the extent of the value of. the .property, for the ..debt due Noyelli..& Co. on the 31st of July, .1869, when the mortgage impeached by the bill was made. The mortgage covered the same property. It embraced nothing more. It"withdrew nothing from the control of the bankrupt, or from the reach of the bankrupt’s creditors,.that had not been withdrawn by the bill of sale. Giving the mortgage in lieu of the bill of sale, as- wa,s done, was, therefore, a mere exchange in the form-.of the’'security. In no sense can it be regarded as a new preference; The preference, if any, was obtained on the 15th of May, when the bill of sale was. given, more than four months before the petition in bankruptcy was filed, It is too well . settled to require' discussion, that an exchange of securities within -the- four months is not a fraudulent preference within the meaning of . the Bankrupt Law, even when the creditor and the debtor know that the latter is insolvent, if the security given up is a valid one when the exchange is made, and
if it be undoubtedly of equal value with the security substituted for it. This was early decided with reference to tbe Massachusetts insolvent laws
(Stevens
v.
Blanchard,
3 Cush. 169); and the same thing has been determined with reference to the Bankrupt Act.
Cook
v.
Tullis,
18 Wall. 340;
Clark
v.
Iselin,
21 id. 360;
Watson
v.
Taylor,
21 id. 378; and
Burnhisel
v.
Firman,
22 id. 170. The reason is, that the exchange takes nothing away from the other creditors. It is, therefore, not in conflict with the thirty-fifth section of the act, the purpose of which is to secure a ratable distribution of the property of a bankrupt owned-by him at the time of his becoming bankrupt, and undiminished by any fraudulent preferences given within four months prior thereto.
- It follows that the mortgage of July 31 was not prohibited by the Bankrupt Act when it was given, and that it was valid. Hence, as it was recorded on the seventeenth day of September, 1869, pursuant to the requisitions of the State law, before-any' •rights of the assignees in bankruptcy accrued, it cannot be impeached by them.
It has been argued, however, on behalf of the assignees, that the bill of sale of May 15 was an insufficient consideration for the mortgage, because, as alleged, there was an agreement between Bacheller and Turpin that it should not be recorded, and shoidd be kept secret. If the fact were as alleged, it is not perceived that it would be of any importance; for it is undeniable that the bill of sale rested on a valuable consideration, — to wit, the debt of $27,839 in gold-, due to Novelli & Co.; and it is not denied that it gave to Turpin the right to take possession of the property described in it. It was, therefore, a valuable security, even if there was an agreement not to record it. If it be said failure to put it on record enabled the debtor to maintain a credit which he ought hot to have enjoyed, the answer is that the Bankrupt Act was not intended to prevent false credits. .Its purpose is ratable distribution. But the evidence does hot justify the assertion that there was in fact, any agreement that the bill of sale should not be recorded, or that possession should not be taken under it.
Upon all points, therefore, the case is with the appellees, and the decree of the Circuit Court must he affirmed.