70 N.J. Eq. 558 | New York Court of Chancery | 1905
The questions presented on the final hearing of this cause having been disposed of in accordance with the situation then existing, application is now made for a rehearing, and an order permitting the defendant Dickinson to amend his answer so that it may set out that, as receiver of the defendant corporation, he represents creditors whose debts are unpaid, and also for permission to submit testimony in support of such amendment, it
This mortgage, in tire absence of the statute,' would be void as to every creditor of a subsequent owner of the goods who might obtain a lawful lien thereon, because possession of the goods had not been taken by the mortgagee, unless such non-transfer was satisfactorily explained, for such neglect to take possession was held to be prima facie fraudulent. We must therefore consider to what extent the Recording act has changed the relation of the parties to such a contract. By its terms, a mortgage on chattels, unaccompanied by possession, is made absolutely void as to the creditors of the mortgagor, the purpose of the act being to protect persons in extending credit to one having the visible possession and ownership of chattels, unless the mortgagee saw fit to make public, in the manner required by law, his claim against such goods. To read the act in the restricted sense now contended for would aid in the perpetration of the very fraud which at common law was so strongly condemned, for the mortgagee with his secret claim could stand by and permit the original mortgagor to dispose of the chattels in bulk, subject to his mortgage, and thus allow the purchaser to deal with his creditors as the owner of unencumbered property. As the mortgagee with knowledge of the transfer by the mortgagor to a third party, as is the case here, could reduce the goods to its possession, it has, in my opinion, no greater protection for its unrecorded mortgage against the creditors of the purchaser than it would have had against the creditors of the mortgagor, and having permitted a new owner to retain the possession of the goods, that owner becomes, within the meaning of the statute, a mortgagor.
My conclusion is that, under the conditions present here, this mortgage is void as against the creditors of the purchaser from the mortgagor, and that the Recording act does not remove the imputation of fraud which the common law attached to a chattel mortgage of goods unaccompanied by change of possession, and that while it may not be void as to the purchaser because of notice, such notice is not chargeable to his creditors. It therefore follows that if this applicant can support with, evidence the allegations he proposes to incorporate in his amended answer, this mortgage would be void as to such creditors, and I will allow the motion.