In re Bennett
| Citation | 338 F.2d 479 |
| Decision Date | 25 November 1964 |
| Docket Number | No. 15703.,15703. |
| Parties | In the Matter of James E. BENNETT, Bankrupt, MANUFACTURERS NATIONAL BANK OF DETROIT, Appellant, v. Donald W. KRELING, Trustee, Appellee. |
| Court | United States Courts of Appeals. United States Court of Appeals (6th Circuit) |
James D. Ritchie, Detroit, Mich. (A. Hilliard Williams, Maurice E. Williams, Detriot, Mich., on the brief; Butzel, Eaman, Long, Gust & Kennedy, Detroit, Mich., of counsel), for appellant.
Stephen C. Bransdorfer, Grand Rapids, Mich. (Arthur R. Snell, James A. Engberg, Grand Rapids, Mich., on the brief; Miller, Johnson, Snell & Cummiskey, Grand Rapids, Mich., of counsel), for Michigan Nat. Bank as amicus curiae.
David Davidoff, Kalamazoo, Mich. (Stanley, Davidoff & Long, Kalamazoo, Mich., of counsel), for appellee.
Before CECIL and PHILLIPS, Circuit Judges, and BOYD, District Judge.
This appeal presents the question of the validity, under Michigan law, of an affidavit affixed to an automobile chattel mortgage, which was signed by the mortgagor and notarized by a notary public.1
The trustee in bankruptcy contends, and both the referee in bankruptcy and district court held, that the chattel mortgage was void as against general creditors in the bankruptcy proceeding, because the notary public did not administer the oath in accordance with requirements of the applicable Michigan statutes.2
The notary public was a salesman for the automobile dealer that sold the automobile in question to the mortgagor. The proof showed that the notary and mortgagor sat face to face across a table; that the notary required the mortgagor to read the "entire contract," referring to both the chattel mortgage and the affidavit; that the mortgagor read the chattel mortgage and the affidavit and the notary watched him read them; that the mortgagor signed both the chattel mortgage and affidavit in the presence of the notary; and the notary signed the jurat in customary form at the foot of the affidavit. The notary testified that he informed the mortgagor that he was signing as notary public and was notarizing the signature — "a formality that you have to do." The notary did not comply literally with the provisions of the Michigan statute in that he did not require the mortgagor to hold up his right hand and swear expressly that the consideration of the instrument was actual and adequate and that the same was given in good faith for the purposes in the instrument set forth.
The appellant bank purchased the chattel mortgage from the automobile dealer on June 21, 1961, and it was filed in the office of the register of deeds of Calhoun County on the same day. The bank took possession of the automobile on December 21, 1961, and sold it at a chattel-mortgage foreclosure sale on January 18, 1962. The mortgagor had filed a voluntary petition in bankruptcy and had been adjudicated a bankrupt on January 2, 1962. Two creditors extended credit to the bankrupt in the interim between the execution of the chattel mortgage on June 15, 1961, and December 21, 1961, when the bank took possession of the automobile. Both creditors remained unpaid at the time the bankruptcy petition was filed.
The referee held that the notary public failed to require the bankrupt to hold up his right hand and take a formal oath at the time the good faith affidavit on the chattel mortgage was signed and notarized, and therefore the chattel mortgage was void as against the trustee in bankruptcy. The referee ordered appellant bank to turn over to the trustee the sum of $1,851.87, which it realized from the sale of the automobile over and above the expenses of $158.13 incident to the foreclosure sale. The bank was permitted to file its proof of claim only as an unsecured creditor.
The district court affirmed the findings of fact and conclusions of law of the referee.
The appellant bank contends that the notarization was an adequate compliance with the Michigan statutes, and that in all events any defect was cured by Act No. 106, Public Acts 1961, M.S.A. § 26.929, which provides that no defect in an affidavit "shall make any mortgage heretofore or hereafter filed void as against the creditors of the mortgagor * * * if the consideration of the instrument was actual and adequate and was given in good faith for the purposes set forth in the instrument." The Michigan National Bank filed a brief amicus curiae, contending that the holding of the district judge, if affirmed, would cast a cloud upon a vast number of financial transactions, and impose impossible burdens upon financial institutions in establishing the validity of chattel mortgages.
No question was raised in the bankruptcy court or the district court that the consideration for the chattel mortgage was not actual and adequate or that the mortgage was not given in good faith for the purposes set forth in the instrument, and the trustee makes no contention in this court as to lack of good faith and actual and adequate consideration. There is no claim of fraud, either actual or constructive in the transaction.
If the holding of the referee and district court is permitted to stand, it will mean that any chattel mortgage, executed in good faith and for an actual and adequate consideration, with an affidavit annexed thereto which on its face meets all statutory requirements, is void against creditors under Michigan law if the notary public fails to have the affiant raise his right hand and make a formal oath and does not have the affiant expressly swear that he executed the instrument in good faith and that the consideration was actual and adequate. No Michigan case squarely in point is cited by either party for or against this holding. Appellant bank and the amicus curiae cite decisions from other states3 in support of the proposition that such statutory formalities are not mandatory, that the notary public in the instant case substantially complied with the statute and that the oath therefore was legally sufficient.
We do not find it necessary on this appeal to go further than to construe and apply the amendatory language which was added to the Michigan chattel-mortgage-filing act by the enactment of Chapter 106, Public Acts of 1961. This statute was approved May 26, 1961, and was in effect at the time of the execution of the chattel mortgage and affidavit here in question. We hold that the statute cured the defects alleged to have existed in the execution of the affidavit under the facts of this case. Under the express provisions of this amendatory statute, no defect in the affidavit shall make any chattel mortgage void as against creditors of the mortgagor "if the consideration of the instrument was actual and adequate and was given in good faith for the purposes set forth in the instrument."
The new language added by the 1961 statute is remedial. Under Michigan law, remedial statutes are liberally construed. Closser v. Remley, 195 Mich. 313, 162 N.W. 120; Pike v. Richardson, 136 Mich. 414, 99 N.W. 398.
We construe this statute to cure any infirmity that may have resulted from the failure of the notary public to require the bankrupt to hold up his right hand and make a formal oath. In placing this construction upon the statute, we apply well-settled rules of statutory construction.
In People v. Gould, 237 Mich. 156, 163, 211 N.W. 346, 348, the Supreme Court of Michigan said:
"It is an old and well-recognized rule that, when omissions, defects, or imperfections in a previously existing law have been supplied or corrected in subsequent legislation, they should be liberally construed for the advancement of the remedy and suppression of the mischief against which they are directed."
In Boyer-Campbell Co. v. Fry, 271 Mich. 282, 297, 260 N.W. 165, 171, 98 A.L.R. 827, the Supreme Court of Michigan quoted with approval the following from 2 Lewis' Sutherland Statutory Construction (2d ed.) § 490:
"Statutes will be construed in the most beneficial way which their language will permit to prevent absurdity, hardship or injustice; to favor public convenience and to oppose all prejudice to public interests."
In Smith v. City Commission, 281 Mich. 235, 240, 274 N.W. 776, 778, the Supreme Court of Michigan said:
June v. School District, 283 Mich. 533, 278 N.W. 676, 116 A.L.R. 581, involved the validity of a school teacher's contract which had been sworn to, but the jurat was missing. The Michigan statute expressly required that the oath "shall be embodied in and made a part of said contract." The Supreme Court of Michigan held the contract to be valid and enforceable despite the defect in the oath. Speaking through Mr. Justice McAllister, the court said:
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