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In re Rock Spring Water Co.


January 25, 1944


Appeal from the District Court of the United States for the District of New Jersey; William F. Smith, Judge.

Author: Biggs

Before BIGGS, GOODRICH, and McLAUGHLIN, Circuit Judges.

BIGGS, Circuit Judge.

The question presented by the appeal at bar is whether a chattel mortgage executed and delivered on February 19, 1942 by the bankrupt, Rock Spring Water Co., to the appellant, Louis J. Singer, is valid or void. We find it to be void for the reason that the appellant failed to comply with the provisions of Revised Statutes of New Jersey, 1937, 46:28-5, N.J.S.A. 46:28-5, which we have set out below.*fn1 The statute requires the affidavit of consideration attached to the mortgage to state truthfully and completely the consideration for the mortgage.

The case of American Soda Fountain Company v. Stolzenbach, 75 N.J.L. 721, 68 A. 1078, 16 L.R.A., N.S., 703, 127 Am.St.Rep. 822, liberalized the statute and established, in the absence of fraud, that an honest and veractious compliance with its terms is sufficient. In the recent case of Atzingen v. Ottolino, 124 N.J.Eq. 510, 514, 2 A.2d 652, 654, Vice Chancellor Egan stated, "The consideration must not only be truthfully set out in the affidavit attached to the chattel mortgage, but it must be completely set forth,", citing Wisner Manufacturing Co. v. Second Nat. etc., Co., 111 N.J.Eq. 535, 162 A. 917, and similar decisions. The affidavit accompanying the mortgage to Singer was executed by one Jack J. Tiger as agent for Singer. The affidavit in its recital of consideration for the mortgage stated among other things that Singer simultaneously with the execution of the chattel mortgage dated February 19, 1942 cancelled a prior chattel mortgage dated October 10, 1941 held by him upon which there was owing the sum of $5,340. The statement contained in the affidavit was untrue for the mortgage of October 10, 1941 was not cancelled and had not been delivered up for cancellation even at the time of the hearing of June 4, 1942 before the referee in bankruptcy as special master.*fn2 The consideration for the mortgage was neither truthfully nor completely set out in the affidavit. It follows that the mortgage was "absolutely void" as against the creditors of the mortgagor represented by the trustee in bankruptcy.

Other grounds of invalidity are asserted by the trustee but since they were not passed upon by the learned District Judge we will not refer to them.

The appellant contends also that the validity of the chattel mortgage should not have been determined in the proceeding in the District Court because he, the appellant, assertedly held the chattels adversely to the bankrupt and the trustee. There is ample evidence, however, to support a conclusion that the chattels were not in the possession of the appellant but were taken over by Osborne, the receiver in bankruptcy and subsequently the trustee, from the agents of the bankrupt. Even if this were not the case, however, the claim of the appellant to the chattels is purely colorable and involves no fair doubt or reasonable reason for controversy. Cf. Harrison v. Chamberlin, 271 U.S. 191, 46 S. Ct. 467, 70 L. Ed. 897, and the decision of this court in Moonblatt, Trustee, v. Kosmin, 3 Cir., 139 F.2d 412.

The order of the District Court is affirmed.

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