Opinion
05-21-1934
WARNER v. CRANFORD PRINTING & PUBLISHING CO.
Carl H. Warsinski, of Cranford, for receiver. Nichols & Snevily, of Westfield, for Cranford Trust Co. Nicholas A. Tomasulo, of Roselle Park, for creditor.
Syllabus by the Court.
A mere recital in an affidavit to a chattel mortgage that the consideration of the mortgage is to secure notes or bonds or any other certificate of indebtedness described in the body of the mortgage, without disclosing the consideration for their execution, does not meet the requirements of section 4 of the Chattel Mortgage Act (1 Comp. St. 1910, p. 463, § 4, as amended by P. L. 1928, c. 61, p. 131 [Comp. St. Supp. § 30—4]) that the affidavit must state the consideration of the mortgage and as nearly as possible the amount due and to grow due thereon.
Suit by Edna B. Warner, individually, etc., against the Cranford Printing & Publishing Company, wherein receiver was appointedfor the defendant. On petition by the receiver for instructions.
Decree in accordance with opinion.
The Cranford Printing & Publishing Company executed a chattel mortgage to the Cranford Trust Company, which contains this recital:
"Whereas pursuant to a resolution duly adopted at a meeting of the Board of Directors of the Mortgagor Company, duly held on the 12th day of August, 1931, the officers of the mortgagor were authorized to issue its several bonds or obligations in the aggregate amount of $15,000, all bearing even date herewith, maturing ten years from their date, bearing interest at Six per cent per annum payable semi-annually at the office of the Trustee, to wit, fifty bonds in the sum of One Hundred Dollars each, numbered 1 to 50, both inclusive, and twenty bonds in the sum of Five Hundred Dollars each, numbered 51 to 70 both inclusive, in substantially the following form:
"Know all men by these presents, that the Cranford Printing & Publishing Company, a Corporation duly organized and existing under the Laws of the State of New Jersey with its principal office in the Township of Cranford in said County and State hereby acknowledges itself indebted and promises to pay to the registered owner hereof the principal sum of—— Dollars on the first day of September, 1941, together with interest thereon at the rate of 6% per annum payable semi-annually on March 1st and September 1st of each year till the whole of said principal sum is paid, both prnicipal and interest payable at the Cranford Trust Company, agent of the obligor for their bonds.
"This bond is one of a series of 80 bonds of like tenor and effect to wit, 50 bonds in the sum of $100.00 each, numbered 1 to 50 inclusive, and 20 bonds in the sum of $500. each, numbered 51 to 70 both inclusive, and amounting in the aggregate to $15,000, secured by a first mortgage bearing even date herewith made, executed and delivered by said the Cranford Printing & Publishing Company, to said Cranford Trust Company, as trustee upon all the property of said The Cranford Printing and Publishing Company as more particularly described in said mortgage to which reference is hereby made for the provisions thereof, and is liable to be redeemed at par plus 5% and accrued interest at any time before maturity on its being called, for the purpose of redemption and notice given for ninety days as is in the said mort gage more fully provided. The registration of ownership of this bond shall be indorsed thereon by the transfer agent of the obligor and no transfer thereof shall be valid except upon the books of the said transfer agent.
"This bond shall not be valid until the certificate indorsed thereon shall have been duly executed by the said trustee.
"In witness whereof the said obligor has caused these presents to be signed by its President and Treasurer and its corporate seal to be hereto affixed attested by its Secretary this 1st day of September, 1931.
"And that for the purpose of securing the payment of said bonds and interest, this Company make, execute and deliver to said trustee, a chattel mortgage upon all the personal property of said mortgagor owned and used by it in the conduct of its business as job printers and publishers of the Cranford Citizen and Chronicle, the lease of the premises at #13 Union Avenue North, Cranford, New Jersey, between mortgagor and Peter Ratti dated October 2, 1928, the good will, trade marks, trade names and copy rights, owned and used by the mortgagor in said business or either of them, and also all other goods and chattels mentioned in the schedule hereto annexed."
The affidavit reads:
"Henry W. Whipple being duly sworn deposes and says: that he is Trust Officer and Treasurer of the Cranford Trust Company, the mortgagee named in the foregoing mortgage, that the true consideration for said mortgage was to secure the payment of the principal and interest due and to become due on the bonds mentioned in said mortgage, which bonds have been duly issued and deponent further says, that there is due on said mortgage the sum of $15,000. with lawful interest thereon from the first day of September, 1931, according to the tenor of said bonds.
"Henry W. Whipple."
The mortgage bears date September 1, 1931, the acknowledgment, February 15, 1931 (2), and the jurat to the affidavit of consideration, July 19, 1932. The mortgage was recorded July 26, 1932.
On petition by receiver for instructions.
Carl H. Warsinski, of Cranford, for receiver.
Nichols & Snevily, of Westfield, for Cranford Trust Co.
Nicholas A. Tomasulo, of Roselle Park, for creditor.
BACKES, Vice Chancellor.
The Cranford Printing & Publishing Company was declared insolvent and the receiver sold its assets including those covered by the chattel mortgage. The receiver now petitions for instructions as to the distribution of the proceeds, and in his petition attacks the legality of the mortgage on the grounds that: (a) It was not immediately recorded; (b) the affidavit of consideration was not made by the holder of the mortgage, its agent, or attorney; (c) the affidavit fails to state the consideration of the mortgage.
The mortgage is not open to attack because it was not immediately recorded. It does not appear that any of the debts of the creditors represented by the receiver (Graham Button Co. v. Spielmann, 50 N. J. Eq. 120, 24 A. 571) were in existence before the mortgage was recorded, and under the eighth section of the Chattel Mortgage Act (1 Comp. St. 1910, p. 469, § 8) a recorded chattel mortgage is valid as against subsequent creditors (Roe v. Meding, 53 N. J. Eq. 350, 30 A. 587, 33 A. 394).
The affidavit made by the trust officer and treasurer of the trust company, who, it appears from the body of the mortgage, was also vice president, sufficiently shows it was made by an executive officer of the mortgagor company and, in legal contemplation, was the act of the corporation. American Soda Fountain Co. v. Stolzenbach, 75 N. J. Law, 721, 68 A. 1078, 16 L. R. A. (N. S.) 703, 127 Am. St. Rep. 822; Lessler v. Paterson National Bank, 97 N. J. Eq. 396, 128 A. 800.
The affidavit fails to state the consideration of the mortgage. The averment is that it was given to secure the bonds mentioned in the chattel mortgage. That is not enough unless the mortgage shows the consideration, and upon looking into the mortgage we find nothing more than that the board of directors authorized an issue of bonds amounting to $15,000, and a copy of a bond. For what purpose, what consideration, the bonds were issued—to liquidate past duly verified debts, to purchase property, or to secure advances—is not stated. The affidavit does not meet the proof of consideration approved in Camden Safe-Deposit & Trust Co. v. Burlington Carpet Co. (N. J. Ch.) 33 A. 479, 481, upon which the trust company relies. In that case the affidavit stated that the true consideration of the mortgage was "the issue of four hundred thousand dollars ($400,000) in the bonds of the mortgagor, for the purpose specially set forth in the mortgage." The mortgage disclosed that the Burlington Carpet Company resolved to "fund a loan" of $400,000 by a bond issue secured by its real and chattel mortgage, and the bonds being commercial, and the security for future advances upon the bonds attaching upon the execution and recording of the mortgage (Central Trust Co. v. Continental Iron Works, 51 N. J. Eq. 605, 28 A. 595, 40 Am. St Rep. 539), the consideration was the future advances, as and when made. The statement of the lawful method of raising money was held to be a compliance with the fourth section of the Chattel Mortgage Act (1 Comp. St. 1910, p. 463, § 4, as amended by P. L. 1928, c. 61, p. 131 [Comp. St. Supp. § 36-4]). The mortgage here involved, to which the affidavit refers, fails to disclose the purpose or any consideration for the bond issue or the mortgage. That the bonds are negotiable instruments does not imply that they were issued for a consideration present or future. In fact, it appears from a statement by the receiver, who speaks from his record of claims presented to him, that the bonds were issued to a former president of the company and that most of them have been hypothecated by him as collateral security for his own debt.
A mere recital in an affidavit to a chattel mortgage that the consideration of the mortgage is to secure notes or bonds or any other certificate of indebtedness described in the body of the mortgage, without disclosing the consideration for their execution, does not meet the requirements of section 4 of the Chattel Mortgage Act as amended, that the affidavit must state the consideration of the mortgage and as nearly as possible the amount due and to grow due thereon. The mortgage falls within the decision of Wisner Mfg. Co. v. Second National, etc., Co., 111 N. J. Eq. 535, 162 A. 917, where some of the earlier cases are discussed. We have nothing to add to what was there said.
The receiver is advised that the mortgage is not valid, for want of proper affidavit