213 F. 147 | 4th Cir. | 1914
(after stating the facts as above).
Therefore this case, being a South Carolina one, must be governed, in its decision, by these rules; and such cases as Ritchie County Bank v. McFarland, 183 Fed. 715, 106 C. C. A. 153, are not applicable. In this connection it is sufficient to say that the lower court has stated that:
“There is no testimony whatsoever that there was any actual fraud about the transaction. The deed was made more than four months before the adjudication in bankruptcy, and, if a good mortgage, is not invalid as a preference. The bank appears to have given value for it as a mortgage and relied upon it as such.”
These statements have not been and cannot be controverted.
The bankrupt law is supreme and its practical and plenary administration is more and more demonstrating the fact that it must, to a very great extent, be exclusive. This, among other reasons, because the insolvent laws of so mány of the- states are in conflict with the bankrupt act as to the method and order of distribution; because distribution by state courts curtail creditors’ rights as to hearings, selection of administering trustees, and other details, secured to them by the bankrupt act; and because of costs, delays, and confusion arising from a dual administration.
The bankrupt law being supreme, and the District Judge of the United States being constituted the especial judicial expounder of it. the responsibility is primarily upon him to determine, in each case, whether its administration shall be shared with another. His discre
The determination of this case, therefore, resolves itself into answers to three questions: (1) Is this paper writing in form and fact the chattel mortgage of the bankrupt corporation? (2) If so, was it legally admitted to record? (3) Is its terms sufficient to pass, by way of assignment, to the bank, its accounts receivable? The validity of this paper as a mortgage is assailed upon two grounds: First, because there is nothing on its face to indicate that it was executed by, or on behalf of, a corporation and lacks a corporate seal; and, second, its execution was not legally authorized by its directors.
“Tine term ‘mortgage,’ used in the statutes, does not import or imply that a seal is necessary. In regard to chattels, it is a mortgage, and not a deed of mortgage, that is required. The distinction between real and personal property and between the means which are necessary to affect them is well settled. Personal property, according to the common law, could always be transferred or incumbered without the use of a deed for that purpose. A seal has never been held necessary to the validity of a bill of sale. A chattel*152 mortgage Is only a bill of sale with a defeasance incorporated in it. Tbe presence or absence of that formality is wholly immaterial.”
“It does appear from the testimony that both parties to the transaction acted upon the assumption that the deed was a good mortgage. The mortgagor, E. L. Moore & Co., received and utilized the proceeds of the loan made on the paper as a mortgage. The Bank of Dillon, relying upon the security, made the loan. It would be impossible now to restore the parties to the positions held when the deed was executed. The corporation of E. L. Moore & Co., having enjoyed all the benefits of the transaction, would not be permitted in equity to recede therefrom at this date because of irregularities and insufficiencies in the deed. As equity would now require the E. L. Moore & Co. to cure the defects of the deed, so it will hold that company stopped as against the Bank of Dillon to deny the instrument to be a mortgage.
“Such being the case, no outside creditor existing when the mortgage was given would Have any greater rights than the corporation under the circumstances of this particular case. No fraud is shown to have been practiced upon such creditors and none of them are shown to have acquired any lien rights upon the mortgaged property which would entitle them to dispute the mortgage when neither the corporation nor its stockholders can now do so.”
In this conclusion we fully concur, but because the learned court below was further of opinion that this instrument “was not sufficiently and definitely phrased and framed, even if properly probated and recorded, to notify subsequent creditors that there was a prior mortgage made by the corporation styled E. L. Moore & Co.,” and because the probate of it was not “sufficient to admit it to record so as, when recorded, to constitute constructive notice to such creditors,” he held it to be null and void as to such subsequent creditors.
The law of South Carolina (volume 1, § 1352, Code 1912), provides that:
“Before any deed or other instrument in writing can be recorded in this state, the execution thereof shall be first proved by the affidavit of a subscribing witness to said instrument, taken before some officer within this state competent to administer an oath.”
“The usual affidavit to prove the execution by a corporation is an affidavit of a witness that he saw the corporate officers, whoever they were, sign and affix the corporate seal and as the act and deed of the corporation deliver -the instrument.”
This manifestly,.as to a mortgage of real estate, a sealed deed, is true, but, as we have seen, a chattel mortgage need not be a sealed instrument; therefore this probate, it must be conceded, did not require proof of sealing and would have undoubtedly been sufficient if it had set forth that he saw the officers sign the instrument. He does say that “he saw the within E. E. Moore & Co. sign, seal and as their act and deed deliver the within written deed.” Inasmuch as he could only see the officers sign, and the corporation could only sign by and through such officers, is not the position taken too technical? We think so. The sole necessity for any affidavit by a witness is to show the verity of the instrument to the recording tribunal, so that it and the public,might not be imposed upon by the recordation of a false or fraudulent instrument. The sole reason for the recording acts is to give notice to the public of such instrument. Could any one, turning to the record of this one in controversy, fail to be put upon notice that E. E. Moore & Co. had given a chattel mortgage on its stock of goods fully described and located, signed by its president and secretary and treasurer, and -that Graham had sworn to its verity of execution ? We think not. Finally, with such knowledge conveyed to him by this record, was it material that he might have taken E. E. Moore & Co. to be a partnership instead of a corporation? We think not, for such inquiry would disclose that E. E. Moore & Co. was the mortgagor, the Bank of Dillon the mortgagee, and the stock of goods described and located was the res mortgaged. In this position we feel ourselves fully sustained by Kelly v. Calhoun, 95 U. S. 710, 24 L. Ed. 544, and the many authorities cited in Cyc. and the text-writers. We conclude, therefore, that this instrument was sufficiently probated and properly recorded, and that the court below erred in holding it null and void as to subsequent creditors.
“As .against creditors of any class, dioses in action, such as accounts receivable, cannot be transferred by general loose language of the character used in this instrument without any notice to the account debtor or delivery of any evidence of debt.”
At least two things are to be borne in mind in this connection: First, that it is admitted that the stock of goods mortgaged is sufficiently described and located in this chattel mortgage; and, second, .as said in Gibson v. Warden, 14 Wall. 244, 20 L. Ed. 797:
“A chattel mortgage is only a bill of sale with a defeasance incorporated in it. The presence or absence of that formality is wholly immaterial.”
This being true, as to general-accounts or choses in action not receivable from and on account of sales made of this stock of goods
It follows that the decree of the court below must be reversed.
Reversed.