McCullough v. McCrea

• Decision Date: 13 February 1923
• Docket Number: 2880.
• Citation: 287 F. 342
• Parties: McCULLOUGH v. McCREA et al. In re WHITE.
• Court: U.S. Court of Appeals — Third Circuit

287 F. 342

McCULLOUGH v. McCREA et al.

In re WHITE.

No. 2880.

United States Court of Appeals, Third Circuit.

February 13, 1923

Treacy & Milton and John L. Ridley, all of Jersey City, N.J., for appellant.

Stein Stein & Hannoch, of Newark, N.J. (Herbert J. Hannoch, of Newark, N.J., of counsel), for Commercial Investment Trust.

Pierre F. Cook, of Jersey City, N.J., for trustee.

Before BUFFINGTON, WOOLLEY, and DAVIS, Circuit Judges.

DAVIS Circuit Judge.

This is an appeal from an order of the District Court dismissing the petition of William McCullough to review an order of the referee in bankruptcy, setting aside and declaring invalid a chattel mortgage on the ground that the affidavit of the mortgagee did not adequately state the true consideration of the mortgage.

On October 4, 1920, George White made his promissory note in favor of William McCullough for $24,525, secured by a chattel mortgage for a like amount on machinery, furnaces, ovens electric plant, etc., in White's machine shop. The Chattel Mortgage Act of New Jersey of 1902 (1 Comp.St.p. 463 Sec. 4) provides that every mortgage or conveyance intended to operate as a mortgage of goods and chattels, 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 subsequent purchasers and mortgagees in good faith, unless the mortgage having annexed thereto an affidavit or affirmation made and subscribed by the holder of the mortgage 'stating the consideration of said mortgage, and as nearly as possible the amount due and to grow due thereon, be recorded,' etc. The following affidavit made by William McCullough, mortgagor, was annexed to the mortgage:

'William McCullough, of full age, being duly sworn according to law, on his oath deposes and says: That he is the holder of this mortgage; that the amount due and to grow due on said mortgage is the sum of twenty-four thousand five hundred twenty-five dollars ($24,525.00), together with interest on said sum at the rate of 6 per cent. per annum, payable monthly, from the date herein. That the consideration of said mortgage is as follows: One promissory note, in the sum of $24,525.00, which is given by George White to William McCullough, to secure for him the cash on said amount, together with interest.' On March 26, 1921, White was adjudged a bankrupt. The property covered by the chattel mortgage was thereafter sold by the trustee in bankruptcy free and clear of the lien of the mortgage under agreement that the lien, if any, of the mortgage was to attach to the proceeds of the sale. Subsequently the trustee filed a petition to have the fund realized from the sale declared to be free from the lien of the mortgage and to be part of the assets of the bankrupt estate. At the hearing on the petition, McCullough testified that he insisted that an appraisal of the mortgaged property be made at the time of the loan; that he was to pay the appraiser, who was his tenant, for making the appraisal $2,000 or $2,050, of which he paid $250 at the time the appraisal was made, and the tenant was to deduct $50 each month from his rent until the balance was paid. The appraisal was offered in evidence, but the affidavit to it was made April 6, 1921, 6 months after the mortgage was executed, and 11 days after White was adjudged a bankrupt. No credits were given on account of the rent until October 1, 1921, one year after the appraisal was made, more than 6 months after the adjudication in bankruptcy, and

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