In re Webster Loose Leaf Filing Co.

• Decision Date: 29 December 1916
• Citation: 240 F. 779
• Court: U.S. District Court — District of New Jersey
• Parties: In re WEBSTER LOOSE LEAF FILING CO.

240 F. 779

In re WEBSTER LOOSE LEAF FILING CO.

United States District Court, D. New Jersey.

December 29, 1916

Raymond Mountain, Van Blarcom & Marsh, of Newark, N.J., for trustee.

Randolph Perkins, of Jersey City, N.J., for Anita L. Pearson.

DAVIS District Judge.

This cause is before this court on review of an order made by the referee in bankruptcy sustaining in part the validity of a chattel mortgage for $10,000 executed by the Webster Loose Leaf Filing Company, a corporation, on March 15, 1915, to Anita L. Pearson, one of the directors of said company.

I find it unnecessary to consider all of the errors assigned and exceptions taken to the order.

The referee found that the mortgage was not recorded immediately in accordance with the requirements of the New Jersey statute which provides:

'That every mortgage or conveyance intended to operate as a mortgage of goods and chattels hereafter 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, and as against subsequent purchasers and mortgagees in good faith, unless the mortgage, having annexed thereto an affidavit or affirmation made and subscribed by the holder of said mortgage, his agent, or attorney, stating the consideration of said mortgage and as nearly as possible the amount due and to grow due thereon, be recorded as directed in the succeeding section of this act. ' Compiled Stat. of N.J. vol. 1, p. 463.

The force of the word 'immediate' extends throughout the sentence in the statute and applies to the word 'recorded' as well as to 'delivery.' Immediate possession and immediate recording mean as soon as may be by reasonable dispatch under the circumstances of the case. Roe v. Meding, 53 N.J.Eq. 350, 368, 30 A. 587, 33 A. 394; Dunham v. Cramer, 63 N.J.Eq. 151, 51 A. 1011; Hardcastle v. Stiles et al., 69 N.J.Law, 551, 55 A. 104; Brockhurst v. Cox, 71 N.J.Eq. 703, 64 A. 182; Gulden v. Lucas, 81 N.J.Eq. 106, 85 A. 902; Bollschweiler v. Packer House Hotel Co., 83 N.J.Eq. 459, 91 A. 1027.

The requirements of the statute are absolute, and delay reasonably explained and satisfactory to the parties is not a compliance with the statute. Bollschweiler v. Packer House Hotel Co., supra.

The mortgage in question was executed on March 15, 1915, by the bankrupt corporation to Anita L. Pearson, who was at that time confined to her home in New York by illness. The mortgage was delivered to her by Gerard Roberts, her attorney, between 4 and 5 o'clock in the afternoon of the same day, at which time Mrs. Pearson took the statutory affidavit to the mortgage. The following morning, Roberts secured a certificate from the county clerk of New York county, N.Y., of authority of the commissioner before whom Mrs. Pearson took the affidavit. This certificate was attached to the mortgage, which was sent by mail the morning of the 16th to the register of Hudson county, N.J., with a letter of which the following is a copy:

'I send you herewith for record, chattel mortgage from Webster Loose Leaf Filing Company to Anita L. Pearson. If you will let me know what your fees are, I will promptly remit.'

Roberts received a postal on March 18th telling him that the recording fee was $2.75. He at once mailed check for that amount to the register, and the mortgage was recorded on the following morning, March 19, 1915, at 9:33 o'clock. This was not an immediate recording as soon as might have been by reasonable dispatch under the circumstances of the case. A messenger might have reached the office of the register on the morning of March 16, 1915, after securing the said certificate, or the mortgage would probably have reached the office by mail in the afternoon of that day, or at the latest the morning of the following day, and would have been immediately thereafter recorded, if it had been accompanied by a check to pay the recording fees. Mr. Roberts knew by his past experience with this same office a month before, the testimony shows, that the register would not record the mortgage until the fees for so doing were paid. The statute provides that registers may demand payment of fees for recording before the work is actually done.

'The said surrogates and county clerks, and the said registers of deeds and mortgages, shall be personally liable to their respective counties for the payment of all such fees and costs as are mentioned in the first section of this act, and for their own protection it shall be lawful for them to exact the payment of such fees and costs before filing any paper, entering and docketing any writ, order or judgment, recording any paper, making a copy or search, or performing any other services in their said offices for which costs, fees or compensation is allowed. ' Comp. Stat. vol. 4, p. 4642.

Deeds and mortgages sent to the county clerks or registers not accompanied with the fees for recording are not properly lodged with them for that purpose. In the case of Dickerson v. Bowers, 42 N.J.Eq. 295, 296, 11 A. 142, the court said:

'I am not satisfied that the deeds were 'lodged' with the clerk for record within the true meaning of the act. * * * I do not discover by the act that the clerk can refuse to record until the fees are paid.'

This case was decided before the passage of the act enabling the clerk to demand payment for his fees before deeds and mortgages are recorded. Since the passage of the act, it is all the more true that deeds and mortgages are not properly lodged with registers for recording until the fees for so doing are paid. The mortgage therefore was not immediately recorded as required by the chattel mortgage act and is void as against the trustee, in so far as the creditors of the bankrupt company on March 19, 1915, are concerned.

But a more serious question arises regarding the validity of this mortgage: Did a quorum of the directors qualified to act accept on January 12, 1915, the proposition submitted on behalf of Anita L. Pearson, mortgagee, and pass the resolution authorizing the execution of the mortgage for $10,000 to her? Some time prior to January 12, 1915, Anita L. Pearson transferred, without consideration, sufficient stock in the bankrupt company to Gerard Roberts to make him eligible for director in said company. At the annual meeting of the stockholders, January 12, 1915, Anita L. Pearson, Gerard Roberts, and Bradford Webster were elected directors of the bankrupt company, by the stockholders. Immediately after the close of the meeting of the stockholders on said day, a directors' meeting was held at which only Gerard Roberts and Bradford Webster, two of the three directors, were present. At that meeting, a proposition was submitted on behalf of Anita L. Pearson, by Gerard Roberts, one of the three directors of the company, by the terms of which she agreed to loan the company $10,000 on a chattel mortgage on certain property of the corporation. This proposition was accepted by Roberts and Webster, and the following resolution passed by them:

'Resolved that the proper officers of this company be and they are hereby authorized and directed to execute and deliver to Mrs. Pearson a chattel mortgage covering the property of the company now in existence or hereafter to be acquired by the company of the sort named above, upon the execution by Mrs. Pearson jointly with said company of notes to the amount of $10,000.'

While according to the minutes of the meeting Anita L. Pearson appears to have been present, yet as a matter of fact it is admitted that she was not present.

It is alleged that at this time and in all matters pertaining to the mortgage, so far as Anita L. Pearson is concerned, she was represented by Gerard Roberts as attorney. In order to determine the question of whether or not a quorum of directors qualified to act in accepting the proposition submitted on behalf of Mrs. Pearson and in passing the resolution authorizing the execution of the mortgage for $10,000 was present, it is necessary to determine whether or not Gerard Roberts was acting as attorney for Mrs. Pearson and for and in behalf of her interest. If he was, the legal effect of such action is the same as if Mrs. Pearson herself had voted instead of Roberts.

It is admitted that Gerard Roberts was the attorney of Mrs. Pearson at this time. Mrs. Pearson was the administratrix of the estate of her husband, who had died some time in the year 1914. Mr. Roberts was the attorney of the husband of Mrs. Pearson during his lifetime, and also represented Mrs. Pearson as administratrix of the estate of her husband, which was in process of settlement.

The corporation was financially embarrassed at this time, and Mrs. Pearson was interested in the corporation to the extent of about $20,000, and, as I understand it, was the largest stockholder. In order to protect her interest in the corporation, she doubtless wanted the ability and advice of her attorney in directing its affairs. He was not a stockholder, which was necessary in order to become a member of the board of directors. She, accordingly, transferred to him certain shares of stock, without consideration, and at the annual meeting of the stockholders, on the second Tuesday of January, 1915, Gerard Roberts was elected a director. At this meeting, Roberts held a proxy for Mrs. Pearson. At the meeting of the board of directors, immediately following that of the stockholders, a proposition was submitted by Gerard Roberts, for and on behalf of Anita L. Pearson, by the terms of which she agreed to loan the company $10,000 upon a chattel mortgage upon its property named in the resolution subsequently passed. Roberts and Webster voted on the...