McDonald v. H. B. McDonald Const. Co., Inc.

• Decision Date: 27 October 1934
• Citation: 175 A. 87
• Parties: MCDONALD v. H. B. McDONALD CONST. CO., Inc.
• Court: New Jersey Court of Chancery

175 A. 87

MCDONALD

v. H. B. McDONALD CONST. CO., Inc.

Court of Chancery of New Jersey.

Oct. 27, 1934.

Syllabus by the Court.

1. Where the bona fides of the transaction surrounding the giving of a chattel mortgage are not questioned, it is the aim of the courts to preserve and not to destroy such mortgage.

2. The rule is quite uniform that, to give articles personal in their nature the character of real estate: (1) The annexation must be of a permanent character; (2) that they were applied to the use or purpose to which that part of the realty, with which they were connected, was appropriated; and (3) that the person who annexed them intended to make a permanent accession to the freehold.

Proceeding by Henry B. McDonald against the H. B. McDonald Construction Company, Incorporated, wherein Harold A. Price, receiver of the defendant, filed petition for an order to show cause.

Decree in accordance with opinion.

Harold A. Price, of Morristown, pro se.

Frank H. Pierce, of Boonton, for respondent Boonton Nat. Bank.

Beam & Kelley, of Boonton" (Frank S. Kelley, of Boonton), for respondent Harry M. Ball.

Jerome Alper, of Newark, for Phillips Oil Co.

STEIN, Vice Chancellor.

The petition of Harold A. Price, receiver of H. B. McDonald Construction Company, Inc., upon which an order to show cause was made directed to stockholders and creditors of the defendant corporation, and the Boonton National Bank, the holder of a chattel mortgage covering chattels of the H. B. McDonald Construction Company, Inc., and Harry M. Ball, the holder of a mortgage upon real estate, alleges: (1) That certain of the creditors of the corporation claim that the affidavit annexed to the chattel mortgage is defective under section 4, P. L. 1902, p. 487 (1 Comp. St. 1910, p. 463, § 4); and (2) that the chattel mortgage, among other things, covers a sand and gravel washing plant erected upon the real estate owned by Helen M. McDonald, which real estate is also covered toy a mortgage executed by her and Henry B. McDonald, her husband, to Harry M. Ball, who claims that the stone crushing plant is a part of the real estate and covered by his mortgage. The matter is now before me on the return of the order to show cause.

The chattel mortgage in question is dated August 18, 1932, and recites that it is made in consideration of $1. In addition to the sand and gravel washing plant, the mortgage covers three automobile trucks and two Erie shovels. The affidavit annexed to the mortgage says it was given for money loaned by the Boonton National Bank to the mortgagor, "as evidenced by two certain promissory notes made by said H. B. McDonald Construction Co. Inc., to the order of said Boonton National Bank, which notes bear date December 30, 1931, and May 2, 1932, respectively, upon which two notes there is now due and owing to said Boonton National Bank the aggregate sum of Eight Thousand Two Hundred Forty-one and 72/100 ($8,241.72) Dollars, and the agreement of said Boonton National Bank to further extend the time of the said H. B. McDonald Construction Co. Inc., to pay the amount due on the note of May 2, 1932, to November 2, 1932, and deponent further says that there is due on said mortgage the sum of Eight Thousand Two Hundred Forty-one and 72/100 ($8,241.72) Dollars, with interest on $3,000.00 from May 2, 1932, and with adjusted interest on $5,241.72 from December 30, 1931." (Italics mine.)

John B. Howell, vice president of the Boonton National Bank, the affiant named in the affidavit annexed to the mortgage, testified that the note dated December 30, 1931, was a demand note upon which there was a balance due of $5,241.72, and the note of May 2, 1932, was a time note for $3,000, payable in three months.

I. It is contended that the affidavit does not truthfully set forth the consideration for the mortgage because the balance due on the note of December 30, 1931, of $5,241.72 includes interest, and since interest is not part of the money loaned, the affidavit is untrue. The affidavit must, of course, truthfully state the consideration, and a substantial deviation from the truth, however honestly made, will invalidate the mortgage as against creditors. Hunt v. Ludwig et al., 93 N. J. Eq. 314, 116 A. 699, affirmed 94 N. J. Eq. 158, 118 A. 839. The contention that interest is included in this item, however, rests upon a conclusion of counsel not Supported by the evidence.

Next it is argued that "adjusted interest on $5,241.72 from December 30,...