Summary
In Stanber v. Sims Magneto Co. (N. J. Ch.) 129 A. 710 (later affirmed in 132 A. 922), the court set aside a mortgage because of a delay of four days in recording.
Summary of this case from Pincus v. U. S. Dyeing & Cleaning WorksOpinion
06-24-1925
STANBER v. SIMS MAGNETO CO.
Lum, Tamblyn & Colyer, of Newark, for complainant. William Harris, of Newark, for receivers.
(Syllabus by the Court.)
Suit by Ernest Stanber against the Sims Magneto Company. On motion for payment of chattel mortgage. Mortgage held void.
Lum, Tamblyn & Colyer, of Newark, for complainant.
William Harris, of Newark, for receivers.
BACKES, V. C. The receivers of the insolvent defendant company dispute a chattel mortgage given by the company to William G. Sargent as security for a loan of $25,000, on the grounds that the affidavit annexed to the mortgage is untrue; that the consideration was not paid until after the making of the affidavit, and that the mortgage was not immediately recorded as required by the Chattel Mortgage Act (1 Comp. St. 1910. pp. 463—170). The chattels covered by the mortgage were sold, pendente lite, free of the mortgage, and the mortgage, if valid, is pay able out of the proceeds in the hands of the receivers.
Charles Hayden and Fergus Reid, directors of the insolvent corporation, agreed to procure a loan to the company of $25,000, provided that adequate security be given for the loan in the form of a chattel mortgage to be made by the company, satisfactory to the attorneys of Hayden and Reid. On January 11, 1924, the company made its six months' note to Sargent, and executed to him the chattel mortgage to secure its payment. The following day, Saturday, it was left with Sargent at the office of Hayden, Stone & Co., bankers, in New York, of which firm Hayden was a partner and Sargent an employee. Sargent, after the mortgage was approved by Hayden's lawyer, upon direction of Hayden, drew the check of Hayden, Stone & Co. to the company for the amount of the loan, and mailed it to the company's office in New Jersey, and sent the mortgage, after making the affidavit, to Reid's lawyer for his approval, and at the same time indorsed the note and assigned the chattel mortgage to Hayden and Reid. Reid's lawyer received the mortgage Monday, sent it to the New York county clerk for his certificate authenticating the notarial jurat, and dictated a letter of direction to his Newark correspondent to have it recorded. Tuesday the letter w, as transcribed and mailed, and the following morning it reached Newark, and was recorded at 10:49 a. m.
1. The affidavit made by Sargent attached to the mortgage reads:
"State of New York, County of New York—ss.:
"William G. Sargent, the mortgagee in the foregoing mortgage named, being duly sworn on his oath, says that the true consideration of the said mortgage is as follows, viz.:
"$25,000 in cash this day loaned by the mortgagee to the mortgagor as evidenced by the mortgagor's promissory note described in said mortgage.
"Deponent further says that there is due on said mortgage the sum of $25,000, besides lawful interest thereon from the 12th day of January, 1924. William G. Sargent.
"Sworn and subscribed to before me this 12th day of January, A. D. 1924, at New York, N. Y. Chas. Finkler,
"Notary Public, Kings County, No. 56.
"Certificate filed in New York County, No. 82.
"Commission expires March 30, 1924."
The statement in the affidavit that the true consideration was "$25,000 in cash this day loaned by the mortgagee to the mortgagor" is untrue. Hayden and Reid made the loan, not Sargent. The consideration for the mortgage came from them, not from him. It is urged that they provided him with the money to make the loan. That is not the fact. The consideration did not even pass through him; he simply handled it as clerk to his employer. He was Hayden and Reid's conduit or dummythrough whom only the evidence of the debt and the security—the note and the mortgage —passed from the company to them. Untruth in this respect voids the mortgage. Hunt v. Ludwig, 93 N. J. Eq. 314, 116 A. 699; In re Novelty Web Co., 236 P. 501, 149 C. C. A. 553; Miller v. Gourley, 65 N. J. Eq. 237, 55 A. 1083; Boice v. Conover, 54 N. J. Eq. 531, 35 A. 402; Tingley v. International Dynelectron Co., 74 N. J. Eq. 538, 70 A. 919; Bollschweiler v. Packer House Hotel Co., 83 N. J. Eq. 459, 91 A. 1027.
2. The loan was made two days after the affidavit was sworn to, but before the recording of the mortgage. The affidavit is not objectionable if it be true as of the date of the recording of the mortgage. Tingley v. International Dynelectron Co., supra.
3. The mortgage is void as to creditors, also, because it was not immediately recorded. The mortgage, previously approved by Hayden's lawyer, was approved by the lawyer of Reid Monday following its delivery to Sargent Saturday, who sent it to the county clerk that day, and upon its return dictated his forwarding letter, which was not posted with the mortgage until the following evening, arriving in Newark the next morning. It could conveniently have been mailed Monday. The cause of the delay, 24 hours, was put on the stenographer. That is an explanation, but not an excuse for not complying with the requirement of the statute that a chattel mortgage must be immediately recorded; that is, as soon as may be by reasonable dispatch under the circumstances of the case. Bollschweiler v. Packer House Hotel Co., supra.