In re Bennett

• Decision Date: 14 November 1963
• Docket Number: No. 20547.,20547.
• Citation: 223 F. Supp. 423
• Parties: In the Matter of James E. BENNETT, Bankrupt.
• Court: U.S. District Court — Western District of Michigan

223 F. Supp. 423

In the Matter of James E. BENNETT, Bankrupt.

No. 20547.

United States District Court W. D. Michigan, S. D.

November 14, 1963.

Maurice E. Williams, Detroit, Mich., for petitioner.

Stanley, Davidoff & Long and David Davidoff, Kalamazoo, Mich., for respondent.

STARR, Senior District Judge.

The Manufacturers National Bank of Detroit has filed a petition for review of an order of the referee in bankruptcy entered August 3, 1962, ordering the bank to turn over to the trustee of the bankrupt's estate the sum of $1,851.87.

It appears that on June 15, 1961, the bankrupt, a resident of Calhoun county, Michigan, purchased a Chevrolet automobile from Merollis Chevrolet Sales and Service in Detroit and executed and delivered to the seller a chattel mortgage on the automobile. The chattel mortgage contained an affidavit reading as follows:

"State of Michigan | > ss County of Wayne | "James E. Bennett being first duly sworn deposes and says that he is the Buyer and Mortgagor named in the above instrument and has knowledge of the facts; that the consideration for said instrument was actual and adequate; that the same was given in good faith and for the purposes therein set forth; AND THE UNDERSIGNED ACKNOWLEDGES DELIVERY AND RECEIPT OF AN EXACT COPY OF THIS INSTRUMENT AT THE TIME OF ITS EXECUTION. "Subscribed and sworn to before me this 15th day of June, 1961. James E. Bennett "Roy W. Peterson, Jr. Buyer." Notary Public, Wayne County, Mich. My Commission expires June 22, 1963."

On June 21, 1961, the Manufacturers National Bank purchased the chattel mortgage from Merollis Sales, and it was filed in the office of the register of deeds of Calhoun county on June 21st. On December 21, 1961, the bank took possession of the automobile and sold it at chattel-mortgage-foreclosure sale on January 18, 1962. The mortgagor, James E. Bennett, had filed a voluntary petition in bankruptcy and been adjudged a bankrupt on January 2, 1962.

It appears that Reish's Shoe Store and Dr. David E. Boswell extended credit to the bankrupt in the interim between the execution of the chattel mortgage in question on June 15, 1961, and December 21, 1961, when the bank took possession of the automobile, and that both creditors remained unpaid at the time the bankruptcy petition was filed.

On February 16, 1962, the trustee in bankruptcy filed a petition alleging that the chattel mortgage in question was void as against the trustee, because the affidavit annexed to the mortgage "that the consideration for said instrument was actual and adequate; (and) that the same was given in good faith for the purposes therein set forth" had not been sworn to, as required by the State law. In pursuance of said petition the referee entered an order February 20, 1962, directing the bank to show cause why the chattel mortgage should not be held invalid as against the trustee and why the bank should not be required to turn over to the trustee the proceeds which it had realized from the sale of the automobile after it repossessed and sold it in foreclosure of the chattel mortgage.

At the hearing on the order to show cause testimony was taken before the referee, and on August 3, 1962, the referee filed findings of fact and conclusions of law, holding that no oath had been administered by the notary public at the time the good-faith affidavit on the chattel mortgage was signed by the bankrupt and, therefore, that the chattel mortgage was void as against the trustee in bankruptcy. The referee ordered the bank to turn over to the trustee the sum of $1,851.87, which it had realized from the sale of the automobile over and above the expenses of $158.13 incident to the foreclosure sale. The referee's order further provided that the bank could file its proof of claim as an unsecured creditor of the bankrupt.

The questions presented on this petition for review are: (1) Did the referee in bankruptcy have summary jurisdiction to order the bank to turn over to the trustee the money in its possession which it had realized from the sale of the automobile? and (2) was the good-faith affidavit annexed to the chattel mortgage sworn to by the mortgagor as required by the State law?

The court holds that the referee in bankruptcy had summary jurisdiction to order the bank to turn over to the trustee the money in its possession which it had realized from the sale of the automobile.

To determine whether the good-faith affidavit annexed to the chattel mortgage was properly sworn to by the mortgagor requires consideration of the State statutes relating to chattel mortgages and the administering of oaths, and also examination of the testimony of the notary public who signed the affidavit.

The Michigan chattel-mortgage-filing statute, Comp.Laws 1948, § 566.140 as amended by Act No. 106, Pub.Acts 1961, provides as follows:

"Every mortgage or conveyance intended to operate as a mortgage of goods and chattels which shall hereafter be made which shall not be accompanied by an immediate delivery and followed by an actual and continued change of possession of the things mortgaged, shall be absolutely void as against the creditors of the mortgagor * * * unless the mortgagor or mortgagee named in such mortgage or conveyance intended to operate as a mortgage, or some person having knowledge of the facts shall, before the filing of the same, make and annex thereto an affidavit setting forth that the consideration of said instrument was actual and adequate, and that the same was given in good faith for the purposes in such instrument set forth; except that no defect in the 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. No officer shall receive such instrument or file the same in his office until such affidavit is made and annexed thereto."

The State statute relating to oaths and affidavits, Comp.Laws Mich.1948, § 617.83, provides as follows:

"Whenever any oath or affidavit is or may be required or authorized by law in any cause, matter or proceeding, except oaths to witnesses and jurors in the trial of a cause, and such other oaths as are or may be required by law to be taken before particular officers, the same may be taken before any justice, judge or clerk of any court of record, circuit court commissioner, notary public, or justice of the peace."

Comp.Laws Mich.1948, § 617.80, relating to the administering of oaths, provides as follows:

"The usual mode of administering oaths now practiced in this state, by the person who swears holding up the right hand, shall be observed in all cases in which an oath may be administered by law except in the cases herein otherwise provided."

Roy W. Peterson, Jr., a salesman for Merollis Chevrolet Sales and Service, who sold the automobile in question to the bankrupt, was a duly authorized notary public. He testified as to what he did as a notary public at the time the bankrupt signed the chattel mortgage and the good-faith affidavit annexed thereto, as follows:

"Q. (Mr. Peterson) will you describe the transaction to the court briefly as to what took place at that time?

"A. * * * Mr. Bennett came in — I believe this was on a Saturday — Saturday a. m., and, of course, prepared to take delivery on his car and transfer the plates from his old car to the new car which he purchased, which was a demonstrator, a 1961 Chevrolet convertible. Then, of course, he signed the Secretary of State's form, which is called RD-108. He signed his title application and then signed his mortgage contract, which I tore off the top part, which is the original copy, and notarized his signatures.

"Q. * * * As to that specific point, as to notarization, let's cover that. Exactly how did that take place?

"A. Well, right in front of the customer. We don't swear a customer in. We let the customer know we are the notary and we are notarizing his signature, and that it is his signature. * * *

"Q. Mr. Peterson, do you recall exactly whether Mr. Bennett raised his hand at this particular occasion?

"A. * * * No, he did not.

"Q. Did you indicate to him in any way that you were a notary public or did you make a statement to him, and if so, tell the court what was said.

"A. Well, upon the signing of these signatures, when I signed it, I said, `I am signing as notary public and notarizing your signature, and that is your signature, James?' And he says, `Yes.' * * *

"Q. And you did not swear him as to the contents of Exhibit 1, as to the truth of those statements?

"A. Well, all I did was notarize his signature. The truth of what statements? He hasn't made any statements. * * *

"I was a notary and I was signing that this is his official signature and he had signed it. * * *

"Q. Did you ask him whether or not he was making affidavit that the instrument was given in good faith?

"A. No, but I did tell him to read it and know what he was signing, and pointing to the fact he doesn't have insurance on the car. He read it. After he got through reading it, then I signed my signature.

"Q. Did you ask him whether or not he was signing that the consideration for the instrument was actual and adequate?

"A. No, I did not. I just had him read it, that's all. * * *

"Q. As a matter of fact, Mr. Peterson, you didn't ask him to swear to anything, did you?

"A. No. * * *

"Q. (By the Court): * * * Did you discuss with him any of the contents of that affidavit?

"A. No, sir, I just told him to read it. * * *

"MR. DAVIDOFF: Would it make any difference to you as a notary public whether he read it or not?

"A. Not as long as he knows what he is getting. I insist they know the balance and the payment, and of course, they have already seen the car they're purchasing before they sign these. * * *

"Q. (By the Court): In this particular instance, do you remember if you asked Mr. Bennett to

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