In re John Hoos Co.

• Decision Date: 22 March 1962
• Docket Number: No. 11142.,11142.
• Citation: 203 F. Supp. 641
• Parties: In the Matter of The JOHN HOOS CO., Bankrupt.
• Court: U.S. District Court — District of Maryland

203 F. Supp. 641

In the Matter of The JOHN HOOS CO., Bankrupt.

No. 11142.

United States District Court D. Maryland.

March 22, 1962.

Irving B. Grandberg, Baltimore, Md., for trustee.

Proctor, Royston & Mueller, Towson, Md., for Mercantile-Safe Deposit & Trust Co.

WINTER, District Judge.

The Trustee's petition to review an order of the Referee questions the validity of a chattel mortgage on certain personal property given by the Bankrupt, a body corporate engaged in the sale of hotel and restaurant supplies and equipment in Baltimore County, Maryland, to Mercantile-Safe Deposit and Trust Company (hereinafter called "Mercantile") to secure a $15,000.00 loan.

After the Bankrupt consented to an adjudication, Mercantile filed its proof of claim as a secured creditor, exhibiting the chattel mortgage, the note it secured, and a statement showing an unpaid balance of $10,230.28, with 5½% interest from December 9, 1959. A sale of the mortgaged personalty was conducted by the Trustee under an order of the Referee which transferred the lien of the mortgage to the proceeds of sale; and, after a hearing and the filing of formal findings of fact and conclusions of law, the Referee sustained the validity of the mortgage and directed the Trustee to pay Mercantile the sum of $10,230.28, less its proportionate share of the expenses of the proceeding, a net sum of $9,667.61.

The chattel mortgage, which was duly recorded among the Chattel Records of Baltimore County, and which was otherwise in standard and usual form, recites that as security for the prompt payment of the principal sum, the Bankrupt

"* * * does hereby bargain and sell unto the Mortgage, its successors and assigns, any and all personal property now located at 9221 Harford Road, Baltimore County, Maryland, including but not limited to, all silverware, dishes, china, commercial cooking utensils, glassware, fixtures, office furniture, etc.

"The Mortgagor hereby covenants that it shall not during the term of this mortgage reduce the wholesale value of the personal property herein mortgaged below the sum of Fifty Thousand ($50,000.00) Dollars.

"The Mortgagor further covenants that it is the legal owner of the personal property above described, and that it is free and clear of any lien, claim or encumbrance, and that it will not convey its interest therein or remove it from the premises where it is now located (9221 Harford Road, Baltimore County, Maryland) or from the State of Maryland, without the written consent of the Mortgagee. * * *"

The Trustee contends that the Referee was in error in two regards. First, that the description of the mortgaged personalty was legally insufficient to meet the standards of the law of Maryland, the place where the mortgage was executed and the situs of the personalty¹ and, second, that the mortgage was intended to apply to a moving and shifting stock of merchandise, including after-acquired property, and as such was void as to the Bankrupt's creditors. The Trustee argues that on either or both of the grounds, title to the mortgaged personalty passed to the Trustee,² and Mercantile is relegated to a claim as a general, and not a secured, creditor.

There is no merit in the Trustee's first contention. The Maryland cases concerning the sufficiency of property descriptions in chattel mortgages have been recently reviewed in Phillips v. J. F. Johnson Lumber Co., 218 Md. 531, 147 A. 2d 843 (1959). See also, Note, XX Md.L. Rev. 282 (1960). In view of the careful analysis in the Phillips case, extensive discussion here is unnecessary, except to say that the general test for determining the adequacy of a description is met if (p. 542, 147 A.2d p. 849) "* * having in mind the nature of the property, the description is such as to enable third persons, aided by inquiries which the mortgage itself suggests, to identify the property." In the course of its opinion in the Phillips case, the Maryland Court of Appeals cited with approval the opinion of Judge Chesnut in In re Oliver C. Putney Granite Corporation, 14 F. Supp. 31 (D.C.Md.1936), a case closest on its facts to the description in the case at bar. In the Putney case, Judge Chesnut held sufficient a description which read: "* * * all the tools, machinery, appliances and other personal property now used by the mortgagor in the operation of its stone-cutting plant located upon the real estate hereinbefore described, including specifically one Electric Crane one Electrically driven Compressor one Gang Saw Carborundum Saw Polishing Mill Surfacing machine and Pneumatic tools," and the essence of Judge Chesnut's opinion rested upon the recital of the location of the premises where the articles thereby subjected to the lien were to be found. In the case at bar, the mortgage makes clear that only those items of silverware, dishes, china, commercial cooking utensils, glassware, fixtures and office furniture located at 9221 Harford Road, Baltimore County, Maryland, are the items subjected to the lien. By far the greater majority of them are such that a more precise description would be impossible. In any event, it seems clear that as to them, the description is such as to enable third persons, having in mind the address 9221 Harford Road, Baltimore County, Maryland, to identify the property.

Conversely, the use of "etc.," even in connection with a street address, does not constitute a sufficient description of anything. However, the use of "etc." gives rise to a contention on the part of the Trustee that the entire description is thereby rendered invalid. The severability of the portions of a mortgage description has not been considered by the Maryland Court of Appeals as such, but at least two Maryland cases have clearly indicated what the answer would be.

In the first, First National Bank, etc. v. Lindenstruth, 79 Md. 136, 28 A. 807 (1894), the mortgage was made on a stock in trade with the provision that "all stock of goods replaced after the sale of any or all of the stock, goods, merchandise, and other property hereby granted shall be substituted for those hereby granted," a so-called after-acquired property clause. First National Bank became a judgment creditor of Lindenstruth and, after a fi fa was returned nulla bona, brought a bill in equity praying that the mortgage be set aside as a fraudulent conveyance, inter alia, because of the after-acquired property clause, although the prayer for ultimate relief was that the judgment be paid after the debt secured by the mortgage had been first satisfied. In dealing with the after-acquired property clause, the Court made this significant statement (p. 140, 28 A. at p. 809): "* * * such a provision, whilst not, of itself, rendering the mortgage void, as fraudulent, is at law, simply a nullity." (Italics supplied.) Later, the Court added (p. 141, 28 A. at p. 809): "Inasmuch,...