Chattel Mortgage. A transfer of personal property as security for a debt or obligation in such form that upon failure of the mortgagor to comply with the terms of the contract, the title to the property will be in the mortgagee. Thomas, Mort. 427.
An absolute pledge, to become an absolute interest if not redeemed at a fixed time. Cortelyou v. Lansing, 2 Caines, Cas. (N.Y.) 200, per Kent, Ch.
Strictly speaking, a conditional sale of a chattel as security for the payment of a debt or the performance of some other obligation. Jones, Chat. Mort. Section 1. The condition is that the sale shall be void upon the performance of the condition named. If the condition be not performed, the chattel is irredeemable at law; but it may be otherwise in equity or by statute; id. The title is fully vested in the mortgagee and can be defeated only by the due performance of the condition; upon a breach, the mortgagee may take possession and treat the chattel as his own; id.; Porter v. Parmly, 34 N.Y. Sup. Ct. 398. See Flanders v. Thomas, 12 Wis. 413.
At common law a chattel mortgage may be made without writing; it is valid as between the parties; Bank of Rochester v. Jones, 4 N.Y. 497, 55 Am. Dec. 290. A verbal chattel mortgage is valid between the parties; Gilbert v. Vail, 60 Vt. 261, 14 Atl. 542; Stearns v. Gafford, 56 Ala. 544; Bardwell v. Roberts, 66 Barb. (N.Y.) 433; Bates v. Wiggin, 37 Kan. 44, 14 Pac. 442, 1 Am. St. Rep. 234; Carroll Exch. Bank v. Bank, 50 Mo. App. 92; and as to third parties with notice; Sparks v. Wilson, 22 Neb. 112, 34 N.W. 111; contra, Lazarus v. Bank, 72 Tex. 359, 10 S. W. 252; Knox v. Wilson, 77 Ala. 309; and even as against third parties if accompanied by possession in the mortgagee; Bardwell v. Roberts, 66 Barb. (N.Y.) 433; but delivery is not essential in all cases to the validity of a chattel mortgage; Morrow v. Turney's Adm'r, 35 Ala. 131; but see Bardwell v. Roberts, 66 Barb. (N.Y.) 433. It differs from a pledge in that in case of a mortgage the title is vested in the mortgagee, subject to defeasance upon the performance of the condition; while in the case of a pledge, the title remains in the pledgor, and the pledgee holds the possession for the purposes of the bailment; White v. Cole, 24 Wend. (N.Y.) 116; Conner v. Carpenter, 28 Vt. 237; Day v. Swift, 48 Me. 368; Heyland v. Badger, 35 Cal. 404; Badlam v. Tucker, 1 Pick. (Mass.) 389, 11 Am. Dec. 202; Sims v. Canfield, 2 Ala. 555. By a mortgage the title is transferred; by a pledge, the possession; Jones, Mort. Section 4.
Upon default in cases of pledge, the pledgor may recover the chattel upon tendering the amount of the debt secured; but in case of a mortgage, upon default the chattel, at law, belongs to the mortgagee; Porter v. Parmly, 43 How. Pr. (N.Y.) 445. In equity he may be held liable to an account; Stoddard v. Denison, 38 id. 296. Apart from statutes, no special form is required for the creation of a chattel mortgage. A bill of sale absolute in form, with a separate agreement of defeasance, constitute together a mortgage, as between the parties; Carpenter v. Snelling, 97 Mass. 452; Taber v. Hamlin, 97 Mass. 489, 93 Am. Dec. 113; Davis v. Hubbard, 38 Ala. 185; Polhemus v. Trainer, 30 Cal. 685; Soell v. Hadden, 85 Tex. 182, 19 S.W. 1087; State v. Bell, 2 Mo. App. 102; or a note with an endorsement on the back that at any time the maker agreed to make a chattel mortgage; Riddle v. Norris, 46 Mo. App. 512. And in equity, the defeasance may be subsequently executed; Locke's Ex'r v. Palmer, 26 Ala. 312. A parol defeasance is not good in law; Harper v. Ross, 10 Allen (Mass.) 332; Bryant v. Crosby, 36 Me. 562, 58 Am. Dec. 767; Montany v. Rock, 10 Mo. 506; contra, Fuller v. Parrish, 3 Mich. 211; but it is in equity; Coe v. Cassidy, 72 N.Y. 133; Laeber v. Langhor, 45 Md. 477; Stokes v. Hollis, 43 Ga. 262; National Ins. Co. v. Webster, 83 Ill. 470; Bartel v. Lope, 6 Or. 321; Hurford v. Harned, 6 Or. 363; even as to third parties with notice; Omaha Book Co. v. Sutherland, 10 Neb. 334, 6 N.W. 367. See Conway v. Iron Co., 33 Negb. 454, 50 N.W. 326. The question whether a bill of sale was intended as a chattel mortgage is for the jury; King v. Greaves, 51 Mo. App. 534.
In a conditional sale, the purchaser has merely a right to purchase, and no debt or obligation exists on the part of the vendor; this distinguishes such a sale from a mortgage; Weathersly v. Weathersly, 40 Miss. 462, 90 Am. Dec. 34; Gomez v. Kamping, 4 Daly (N.Y.) 77.
Where there is an absolute sale and a simultaneous agreement of resale, the tendency is to consider the transaction a mortgage; Barnes v. Holcomb, 12 Sm. & M. (Miss.) 306; Fowler v. Stoneum, 11 Tex. 478, 62 Am. Dec. 490; Folsom v. Fowler, 15 Ark. 280; but not when the intention of the parties is clearly otherwise; Forkner v. Stuart, 6 Gratt. (Va.) 197; Bracken v. Chaffin, 5 Humph. (Tenn.) 575.
It is not necessary that a written chattel mortgage should be under seal; Gerry v. White, 47 Me. 504; Sherman v. Fitch, 98 Mass. 59; Ping. Chat. Mort. 45; Gibson v. Warden, 14 Wall. (U.S.) 244, 20 L.Ed. 797; Sweetzer v. Mead, 5 Mich. 107.
A chattel mortgage of a crop must designate the land; W. L. Hurley & Sons v. Ray, 160 N.C. 376, 76 S.E. 234.
At common law a mortgage can be given only of chattels actually in existence, and belonging to the mortgagor actually or potentially; Pierce v. Emery, 32 N.H. 484; Roy v. Goings, 6 Ill. App. 162; Looker v. Peckwell, 38 N.J.L. 253; Williams v. Briggs, 11 R.I. 476, 23 Am. Rep. 518; Cook v. Corthell, 11 R.I. 482, 23 Am. Rep. 518; Bouton v. Haggart, 6 Dak. 32, 50 N.W. 197; and even though the mortgagor may afterwards acquire title, the mortgage is bad against subsequent purchasers and creditors; but it is otherwise between the parties; Ludwig v. Kipp, 20 Hun (N.Y.) 265; claims for money not yet earned may be the subject of a chattel mortgage; Sandwich Mfg. Co. v. Robinson, 83 Ia. 567, 49 N.W. 1031, 14 L.R.A. 126, and an elaborate note thereto.
In equity the rule is different; the mortgage, though not good as a conveyance, is valid as an executory agreement; the mortgagor is considered as a trustee for the mortgagee; Williams v. Briggs, 11 R.I. 476, 23 Am. Rep. 518; 10 H. L. Cas. 191; Mitchell v. Winslow, 2 Sto. 630, Fed. Cas. No. 9,673; Beall v. White, 94 U.S. 382, 24 L.Ed. 173; Schuelenburg & Boeckler v. Martin, 2 Fed. 747; Ellett v. Butt, 1 Woods, 214, Fed. Cas. No. 4,383; Perry v. White, 111 N.C. 197, 16 S.E. 172. But see Moody v. Wright, 13 Metc. (Mass.) 17, 46 Am. Dec. 706; Hunter v. Bosworth, 43 Wis. 583. Under this principle all sorts of future interests in chattels may be mortgaged; Jones, Chat. Mort. Section 174.
The crops of specified land or the future young of animals could at one time be sold or mortgaged on the ground that seller had potential possession and passed legal title; Hob. 132, but the English Sale of Goods Act, Section 5, provides that where by a contract of sale the seller purports to effect a present sale of future goods, the contract operates as an agreement to sell goods, the contract operates as an agreement to sell goods. No exception is made in favor of property which at common law was the subject of potential possession. This seems to change the rule in England. The mere agreement to mortgage personalty subsequently to be acquired gave the mortgagee a lien upon the property; 10 H. L. Cas. 191;  2 K. B. 367. It is essential that the mortgagee shall have actually advanced his money; 13 App. Cas. 523.
Mortgages of future acquired chattels where the mortgagor is in possession are held invalid against an attachment or levy by creditors; American Surety Co. v. Mfg. Co., 100 Fed. 40; Tatman v. Humphrey, 184 Mass. 361, 68 N.E. 844, 63 L.R.A. 738, 100 Am. St. Rep. 562; Francisco v. Ryan, 54 Ohio St. 307, 43 N.E. 1045, 56 Am. St. Rep. 711; Girard Trust Co. v. Mellor, 156 Pa. 579, 27 Atl. 662; contra, Riddle v. Dow, 98 Ia. 7, 66 N.W. 1066, 32 L.R.A. 811; Cunningham v. Woolen Mills, 69 N.J.Eq. 710, 61 Atl. 372. The general rule is that a chattel mortgagee has title, and so a mortgage on animals covers the increase, though not mentioned in the mortgage on the property, partus sequitur ventrem; Northwestern Nat. Bank v. Freeman, 171 U.S. 620, 19 Sup. Ct. 36, 43 L.Ed. 307; but in those states where such a mortgage gives only a lien, then it is limited to the property actually described; Demers v. Graham, 36 Mont. 402, 93 Pac. 268, 14 L.R.A. (N.S.) 431, 122 Am. St. Rep. 384, 13 Ann. Cas. 97; contra First Nat. Bank v. Investment Co., 86 Tex. 636, 26 S.W. 488. See 19 Harv. L. Rev. 557, by Samuel Williston.
A chattel mortgage on growing crops, given as security for a note and for future advances and merchandise sold, is valid; Souza v. Lucas, (Cal.) 100 Pac. 115.
The registration statutes simply provide a substitute for change of possession. Between the parties, a change of possession is unnecessary; if there is a change of possession, registration is not required. Morrow v. Reed, 30 Wis. 81; Janvrin v. Fogg, 49 N. H. 340; Fordice v. Gibson, 129 Ind. 7, 28 N.E. 303. At common law an unrecorded chattel mortgage is prima facie fraudulent and void as to creditors, where there is no change of possession, but such presumption may be rebutted; Pyeatt v. Powell, 51 Fed. 551, 2 C.C.A. 367; Frankhouser v. Worrall, 51 Kan. 404, 32 Pac. 1097; See Frost v. Mott, 34 N.Y. 253; Kleine v. Katzenberger, 20 Ohio St. 110, 5 Am. Rep. 630.
Possession by the mortgagee cures defects in the form of the mortgage, or its execution; Springer v. Lipsis, 209 Ill. 261, 70 N.E. 641; Farmers' & Merchants' Bank v. Orme, 5 Ariz. 304, 52 Pac. 473; so of defects in acknowledgment when possession is taken before a third party's lien attaches; Garner v. Wright, 52 Ark. 385, 12 S.W. 785, 6 L. R. A. 715; and so as to the affidavit accompanying the mortgage; Chicago Title & Trust Co. v. O'Marr, 18 Mont. 568, 46 Pac. 809, 47 Pac. 4; and as to any insufficiency in the description of the chattels; Frost v. Bank, 68 Wis. 234, 32 N.W. 110; Kelley v. Bank, 68 Wis. 234, 32 N.W. 110; Kelley v. Andrews, 102 Ia. 119, 71 N.W. 251. But if the mortgage is not recorded and is thereby invalid, it is not validated by the mortgagee's possession as to the mortgagor's creditors whose debts were created or whose rights attached after execution and before possession taken; In re Bothe, 173 Fed. 597, 97 C. C. A. 547; Stephens v. Perrine, 143 N. Y. 476, 39 N.E. 11. Where the mortgagee takes contemporaneous possession and retains it, recording is not essential; Fordice v. Gibson, 129 Ind. 7, 28 N.E. 303; Brockway v. Abbott, 37 Wash. 263, 79 Pac. 924; and, though not recorded, a chattel mortgage is good against all the world if, after condition broken, the mortgagee takes possession; Garrison v. Carpet Co., 21 Okl 643, 97 Pac. 978, 129 Am. St. Rep. 799.
A mortgage not filed under the statute is good against a subsequent bill of sale made by the mortgagor after the mortgagee was in possession; Smith v. Connor, (Tex.) 46 S.W. 267. So of a subsequent chattel mortgage made by the mortgagor; National Bank of Metropolis v. Sprague, 21 N. J. Eq. 530; and an attachment subsequently levied against the mortgagor; Baldwin v. Flash, 59 Miss. 61; Isenberg v. Fansler, 36 Kan. 402, 13 Pac. 573.
The English Bill of Sales Acts only required written chattel mortgages to be recorded, but they need not be written. The mortgage statutes on recording are collected in Jones, Chattel Mortgages, Section 190 et seq. Some make the mortgagor's place of residence the place of record; others the place where the property is situated at the time; others require them to be refiled every year, and so on. In general, innocent third parties will prevail over the holder of a chattel mortgage or conditional bill of sale, unless the instrument has been recorded or the goods have been delivered; Funk v. Paul, 64 Wis. 35, 24 N.W. 419, 54 Am. Rep. 576. As a general rule, where a judgment is not a lien upon personal property, a mortgage recorded after judgment, but before execution, has priority; Jones, Chatt. Mortg. Section 245d. It is held that where a mortgage is not recorded nor possession taken by the mortgagee, it is good as against general, but not judgment, creditors; Stephens v. Meriden Britannia Co., 160 N.Y. 180, 54 N.E. 781, 73 Am. St. Rep. 678. A mortgagee who has not taken possession or recorded his mortgage immediately cannot protect himself against the mortgagor's creditors; Roe v. Meding, 53 N. J. Eq. 350, 30 Atl. 587, 33 Atl. 394.
An unrecorded chattel mortgage is valid against a general assignment by the mortgagor for his creditors; Jones, Chatt. Mortg. Section 244; but is invalid as to a receiver of the mortgagor because he represents creditors; In re Wilcox & Howe Co., 70 Conn. 220, 39 Atl. 163; Fidelity Trust Co. v. Clay Co., 70 N. J. Eq. 550, 67 Atl. 1078 (there being creditors whose debts are a lien upon the chattels); contra; Berline Machine Works v. Trust Co., 60 Minn. 161, 61 N. W. 1131; Ryder v. Ryder, 19 R. I. 188, 32 Atl. 919.
Where statutes provide that a mortgage of chattels shall be void unless the mortgage is filed or there shall be an actual and continued change of possession, it is essential that such provisions be strictly complied with; Buckstaff Bros. Mfg. Co. v. Snyder, 54 Neb. 538, 74 N.W. 863; McTaggart v. Rose, 14 Ind. 230. See Mower v. McCarthy, 79 Vt. 142, 64 Atl. 578, 7 L.R.A. (N.S.) 418, 118 Am. St. Rep. 942.
The removal of the mortgaged chattels from the county where the mortgage on them was recorded does not require it to be recorded in the new place; Jones, Chatt. Mortg. Section 260; National Bank of Commerce v. Jones, 18 Okl. 555, 91 Pac. 191, 12 L.R.A. (N.S.) 311, 11 Ann. Cas. 1041.
Statutes regulating chattel mortgages exist in all of the states except Louisiana.
Under the old Bankrupt Act it was held that a bankrupt assignee took only the debtor's title to good's in the case of an unrecorded mortgage; Stewart v. Platt, 101 U.S. 731, 25 L.Ed. 816; and so in England; 12 M. & W. 855. The rule was generally otherwise in insolvency; Jones, Chatt. Mortg. Section 242. The present Bankrup Act (Section 67a) provides that liens which are invalid against creditors shall be invalid against the trustee. See Knapp v. Trust Co., 216 U.S. 545, 30 Sup. Ct. 412, 54 L.Ed. 610. It leave open to the individual states to allow the acquisition of a lien by the mortgagee by taking possession at any time before actual bankruptcy, and it is immaterial that possession is taken with the mortgagor's consent; Humphrey v. Tatman, 198 U.S. 91, 25 Sup. Ct. 567, 49 L. Ed. 956; Thompson v. Fairbanks, 196 U.S. 516, 25 Sup. Ct. 306, 49 L.Ed. 577.
A chattel mortgage void by a state statute as to creditors of the mortgagor, for want of change of possession, is invalid as to his trustees in bankruptcy.
A chattel mortgage with power of sale and a deed of trust are practically one and the same instrument, as understood in the District of Columbia; Hunt v. Ins. Co., 196 U.S. 47, 25 Sup. Ct. 179, 49 L.Ed. 381.
No mortgage of a vessel is valid against third parties without notice, unless recorded in the office of the collector of customs of the port where the vessel is enrolled; Rev. Stat. Section 4192, etc. As between parties and those who have notice, registration is not required; Moore v. Simonds, 100 U.S. 145, 25 L.Ed. 590; Best v. Staple, 61 N.Y. 71; The John T. Moore, 3 Wood 61, Fed. Cas. No. 7,430. As to the Extraterritoriality of Chattel Mortgages, see Conflict of Laws.
Bouvier's Law Dictionary, 3rd Revision, 1914, Vol. I, p. 471-474.