de Yoe v. Harper Bros., Inc.

• Decision Date: 30 April 1937
• Docket Number: No. 209.,209.
• Citation: 191 A. 851
• Parties: DE YOE et al. v. HARPER BROS., Inc., et al.
• Court: New Jersey Supreme Court

191 A. 851

DE YOE et al.

v. HARPER BROS., Inc., et al.

No. 209.

Court of Errors and Appeals of New Jersey.

April 30, 1937.

DONGES, Justice, and COLE, Judge, dissenting.

HEHER, Justice, dissenting in part.

Appeal from Court of Chancery.

Action by J. Williard De Yoe and George F. Myers, trustees of George A. Myers & Company, Incorporated, against Harper Brothers, Incorporated, wherein William Henig and John C. Lewis appeared as receivers of Harper Brothers, Incorporated, and wherein the American Discount Company, a secured creditor of Harper Brothers, Incorporated, filed a claim. From an adverse order, the American Discount Company, opposed by the receivers of Harper Brothers, Incorporated, appeals.

Affirmed.

On appeal from an order of the Court of Chancery advised by Vice Chancellor Egan, who filed the following opinion:

"The American Discount Company claims to hold two chattel mortgages on the property of the defendant. They are dated September 13, 1934, and May 16, 1935, and in the amounts of $6,000 and $2,250, respectively. Their validity was questioned by the receivers of the defendant herein. The question arising upon argument before the court, it was on September 6, 1935, referred to John J. Fallon, one of the special masters of this court, to determine the legality and priority of the mortgages. On May 8, 1936, the special master filed his report wherein he declared that the affidavits attached to the said mortgages did not truthfully recite the consideration, and that in consequence, the said mortgages were voided against creditors of the mortgagor, Harper Brothers, Inc. Ehler v. Turner, 35 N.J.Eq. 68; Finkel v. Famous Lunch Room Co., 100 N.J.Eq. 85, 135 A. 51; McDonald v. H. B. McDonald Const. Co., 117 N.J.Eq. 181, 175 A. 87; Locke Cotton Mills Co. v. Flasket, 119 N.J.Eq. 598, 183 A. 682.

"The testimony and proof submitted at the hearing before the special master show that the true consideration of the mortgage dated September 13, 1934, was $5,000, and not $6,000 as stated in the mortgage; and the true consideration of the mortgage dated May 16, 1935, was $1,000, and not $2,250 as therein set forth.

"The affidavits in both mortgages did not truthfully state the consideration. That circumstance vitiates the instruments. In the case of Hunt v. Ludwig, 93 N.J.Eq. 314, 116 A. 699, 700, affirmed in 94 N.J. Eq. 158, 118 A. 839, the court said: 'The affidavit must truthfully state the consideration, and that a substantial deviation from the truth, however honestly made, will invalidate the mortgage as against creditors.'

"Section 4 of 'An Act concerning mortgages on chattels (Revision of 1902)' (1 Comp.St.1910, pp. 463, 464, § 4), as amended by P.L.1928, p. 131, c. 61 (Comp.St. Supp. 1930, § 36—4), provides that every chattel mortgage 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 the 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.

"In the instant case the affidavit in the chattel mortgage dated September 13, 1934 recites, among other things, the following: '* * * the true consideration of the said mortgage is $5000.00 this day advanced by the mortgagee to the mortgagor upon the stipulation to repay said sum as well as the additional sum of $1000.00 in consideration of the hazards taken and the interest, services rendered, and disbursements made by and for the mortgagee in and about making appraisal of the within mentioned motor vehicles, making credit investigation of mortgagor, searching records for liens on said motor vehicles, examining documentary title of the mortgagor, and drawing and recording this mortgage, making a total of $6,000.00. There is now due and to become due on this mortgage the sum of $6000.00.'

"There is no way of ascertaining from the evidence submitted at the hearing before the master how the 'additional sum of $1,000 in consideration of the hazards taken,' etc., was arrived at; and the indebtedness in such sum is not established or substantiated by proofs. The testimony as to the consideration is conflicting and is not convincing.

"The affidavit annexed to the mortgage dated May 16, 1935, recites inter alia that: '* * * the true consideration of said mortgage is $1000.00, this day advanced by check, from the mortgagee to the mortgagor; the sum of $600.00 in consideration for the extension of time in the payment of installments due and to become due under a certain chattel mortgage executed between the same parties hereto, covering chattels other than herein set forth in the schedule, which chattel mortgage is dated the 13th day of September, 1934, * * * and which chattel mortgage is at present in default, both as to principal and interest; upon the stipulation of the mortgagor to repay the aforementioned sums of $1000.00 and $600.00 as well as the additional sum of $650.00 in consideration of the hazards taken and the interest, services rendered and disbursements made by and for the mortgagee in and about making appraisals of the within mentioned motor vehicles, making credit investigation of the mortgagor, searching record for liens on said motor vehicles, examining documentary title of the mortgagor, and drawing and recording this chattel mortgage, making a total of $2250.00. Deponent further says that there is due on said mortgage the sum of $2250.00.'

"The special master in his report on this last-mentioned mortgage says:

"'It will be observed that while in the affidavit annexed to the mortgage of September 13, 1934, it is said—"There is now due and to become due on this mortgage," the affidavit annexed to the mortgage dated May 16, 1935, says—"Deponent further says that there is due on said mortgage." The statute, supra, provides that in stating the consideration of the mortgage the affiant must as nearly as possible state the amount due and to grow due thereon.

"'The solicitor for the mortgagee, in a brief submitted to me wherein he undertakes to uphold the validity of the aforesaid mortgages, says in part that—

"'The proofs manifest that on September 13, 1934, the date of the execution of the earlier mortgage, the mortgagee through its President, Joseph Levine, delivered to the mortgagor a check for $5000.00 (pp. 119, 134) and that on May 16, 1935, the date of the execution of the later mortgage,...