Opinion
11-16-1926
FINKEL et al. v. FAMOUS LUNCH ROOM CO.
George J. Chryssikos, of Jersey City, for applicants. Green & Green, of Newark, for receiver.
(Syllabus by the Court.)
Suit by Bernard Finkel and another, trading as B. Finkel & Son, against the Famous Lunch Room Company. On application for funds in court. Judgment against the applicant and for the receiver of the defendant company.
George J. Chryssikos, of Jersey City, for applicants.
Green & Green, of Newark, for receiver.
BACKES, Vice Chancellor. Upon the appointment of a receiver in insolvency for the defendant company, its goods and chattels were sold free and clear of a chattel mortgage made by the company to William H. Zois to secure $9,956, upon which there was due $7,602.26. The sale was by consent of the mortgagee, and the property was struck off to him for an amount equal to his debt, and he has agreed to pay the receiver the purchase price if his mortgage shall be declared invalid, and has given a bond as security. By agreement between the parties the matter was submitted to the receiver to pass upon the legality of the mortgage, and he determined that the mortgage is void. The question is before the court de novo and it is agreed that the testimony taken before the receiver be used on this application.
The mortgage bears date January 9, 1925, and in the affidavit annexed, dated on the same day, the mortgagee stated that the true consideration of the mortgage was "for moneys advanced and loaned to the party of the first part by deponent on the day and times mentioned and evidenced by the promissory notes described in the body of this mortgage and for which this mortgage is given as security. The deponent further says that there is due on said mortgage the amount of $9,956 besides lawful interest from the date of said notes." The body of the mortgage recites 24 notes as follows:
| one, for $300, bearing date July 24, 1924 | $ 300 |
| One, for $300, bearing date August 24, 1924 | 300 |
| One, for $400, bearing date November 24, 1924 | 400 |
| Two, aggregating $777, bearing date December 4, 1924 | 777 |
| Thirteen, for $400 each, aggregating $5,200, bearing date December 12, 1924 | 5,200 |
| Five, for $500 each, aggregating $2,500, bearing date January 8, 1925 | 2,500 |
| One, for $479, bearing date January 8, 1925 | 479 |
| $9,956 |
The evidence establishes that as to the two notes aggregating $777 only $700 was advanced. It appears that the company was in financial distress and the mortgagee undertook to help it out of its difficulty. The company owed Javas Bread Company $777. The mortgagee paid the bill by his check for $700. He claims the difference as discount, but by what supposed right is not disclosed. Whatever may be his rights, it is the fact that but $700 was "advanced and loaned."
As to the item of 13 notes of $400 each, aggregating $5,200: The company owed Irving Glaser $4,800. The mortgagee settled with him for $4,100, claiming the difference as discount. He also advanced the company $400. The $5,200 is made up of Glaser's bill of $4, 800 and the cash $400. The actual amount advanced was $4,500.
The item of 5 notes of $500 each, aggregating $2,500, bearing date January 8, 1925, and the one of a note for $479, bearing date January 8, 1925, aggregating $2,979, were made up in this manner: $1,479, the amount of Buchanan & Grace's bill, which the mortgagee paid by his three months' note for $1,300, due April 9, 1925, and paid at maturity; $500 in cash, January 9, and a promise of two checks for $500 each, which he gave the company January 17 and February 4. The note for $1,300 was not money advanced and loaned, and only on payment at maturity could it be so defined.
The affidavit is false to the extent of the "discounts," the amount of the note of $1,300, and the promised $1,000. The moneys actually advanced and loaned at the making of the affidavit was $6,700.
The law does not require technical nicety, but it does exact that the affidavit to a chattel mortgage truthfully set forth the consideration. The mortgage is void. Hunt v. Ludwig, 93 N. J. Eq. 314, 116 A. 699, affirmed 94 N. J. Eq. 158, 118 A. 839; Felin v. Arrow Motor Machine Co., 96 N. J. Eq. 44, 124 A. 448; Stanber v. Sims Magneto Co., 98 N. J. Eq. 38, 129 A. 710; In re Novelty Web Co. (D. C.) 228 F. 1007, affirmed 236 F. 501, 149 C. C. A. 553.