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ly, 1905, he conveyed the stable and contents and the lease of the realty to the complainant, Longley, and to one William E. Brock (who is the fraud doer in the case), jointly, for the sum of $3,000. Of this sum $2,000 was paid in cash, $1,500 being paid by Longley and $500 by Brock, and for the balance of $1,000 they delivered to Smith their several promissory notes for $500 each—one made by Longley, indorsed by Brock, payable 6 months after date, and one made by Brock, indorsed by Longley, payable 12 months after date. Mr. Austin, a lawyer practicing at Cranford, seems to have attended to this mat. ter professionally, and he swears that he promptly lodged the mortgage for record, and it so appears, and that it was duly returned to him from the office of the register, and that he mailed it immediately to Mr. Smith at Cranford. Mr. Smith swears that immediately after the sale, and while Brock was in possession managing the business for himself and Longley, his (Smith's) mail continued to be delivered at the stable. The fair inference from all the evidence, and this is Mr. Smith's theory, is that this mortgage was delivered from the post office to the livery stable, and there taken and kept by Brock. It is certain that it never came to the hands of Mr. Smith, and was next seen in the hands of Brock under circumstances presently to be stated. Mr. Longley left the management of the business at the livery stable mainly, if not entirely, to Brock; but the bill and letter heads of the concern were printed, and the bills made out, in the name of William E. Brock & Company. Mr. Longley paid his note at maturity, which made him the owner of twothirds interest in the plant. Mr. Smith procured the note of Brock, with Smith's indorsement, in addition to that of Longley, to be discounted at the Cranford Bank.
Some time shortly before the 1st of June, 1906 (two months before maturity of Brock's note), Brock applied to the defendant Sperry (who was engaged in business in New York City, but seems to have lived and been acquainted in Cranford) for a loan of $2,250 to be secured by a chattel mortgage on the stable. Sperry seems from his carefully pre. pared ex parte affidavit (received in evidence by consent without cross-examination) to have been satisfied to loan that amount, and for the purpose of carrying the affair through employed his regular New York attorney, Mr. John Hall Jones, with an office at 320 Broadway. Sperry learned from Brock that Smith held a chattel mortgage on the premises to secure $500, and instructed Jones to procure an assignment of that mortgage. Jones thereupon communicated by telephone with Smith, and arranged with him for a meeting on June 4th at Jones' office. On that day Sperry, Smith, and Brock met in Jones' office and it then appeared and was stated that the original mortgage could not be produced, and that the $500 note of Brock was held by the Cranford Bank, Sperry thereupon drew
his check for $525.33—the amount of the note with interest-to the order of the bank; and another check for $1,724.67 (the balance of the $2,250 to be loaned) to the order of Brock, and delivered the same to a Mr. Nolan, apparently an attorney, but who was called in the case assistant to Mr. Jones, and whom I will call his clerk, with instructions that the same were to be delivered upon receiving from Mr. Smith an assignment of his mortgage, and upon the execution by Brock of a chattel mortgage to Sperry. Mr. Jones caused to be prepared and executed by Smith an assignment of Smith's mortgage, in which it is erroneously described as a mortgage dated August 1, 1905, and made by Brock alone, without stating the name of the mortgagee, and that assignment was executed on the same 4th day of June before Jones as a notary, and recorded that same afternoon. On the same afternoon-according to Sperry's theory of the facts—Nolan, Brock, and Smith proceeded to the bank at Cranford, and there Nolan handed the $525.33 check to the proper officer of the bank, who produced Brock's note, indorsed by Longley and Smith, accepted the check, stamped the note paid, and handed it to Brock, the maker, and thereupon Smith delivered his assignment to Nolan, who caused the same to be recorded promptly.
The error in the description in Smith's assignment being detected—just when does not directly appear-a new assignment was prepared in Jones' office, executed, dated, and recorded on the 5th day of June, wherein the mortgage was properly described, both as to date and the names of the mortgagors, Longley and Brock. On the same 4th day of June Brock executed a chattel mortgage, prepared by Jones, to secure the whole sum of $2,250 to which is annexed an affidavit made by Brock, the mortgagor, and not by Sperry, the mortgagee, stating that the true consideration was a loan of $2,250, and that mortgage was acknowledged on the same day before Mr. Jones as a notary public, and was recorded on the same day, and the check of Sperry for $1,724.67 was duly delivered to Mr. Brock, and paid on that day by the bank. Mr. Jones, on being informed that the original note of Brock had been handed to Brock and kept by him, required and received from Brock a substituted note for $500 to the order of Sperry and due on August 1, 1906, with interest from August 1, 1905. Jones also prepared and required Brock to sign a statement under date of June 6, 1906, that he (Brock) had destroyed the $500-note, and also the chattel mortgage given to secure it.
The foregoing facts are abstracted from the several affidavits of Sperry, Jones, Smith, and Nolan, carefully prepared for use in contesting a motion by complainant for interim restrain against Sperry pending suit, and admitted in evidence by consent without cross-examination. In this condition of affairs on the 9th day of June Brock proposed to Longley, who resided in Elizabeth, to pur
chase out his (Longley's) interest in the stable, been paid off, without mentioning the name and in that connection produced and showed of such other party; and that there was a to him the chattel mortgage given by the two chattel mortgage upon said property held by to Smith, duly canceled by tearing off the James Z. Smith to secure the payment of seal, and the promissory note made by Brock $500.” Then the affidavit proceeds to state and ind sed by Longley, duly stamped “paid" the negotiations with Smith. by the bank. The chattel mortgage did not Here I find distinct notice to Sperry that bear any evidence of having been satisfied of Longley had previously had an interest in the record. A week later, on the 16th day of property, and direct notice to his attorney emJune, Longley and Brock concluded the con ployed by him to transact the business that tract of purchase and sale. Longley gave some other party did have an interest, but Brock a bill of sale, and Brock gave Longley that he had been paid off. On this point of his note at one year for $2,328.04 and a chat previous notice to Sperry of Longley's intertel mortgage covering the stable and having est there is another little piece of evidence annexed an affidavit by Longley describing furnished by the exhibits on the part of Sperthe note and stating that the note was ex ry which was not noticed by counsel in arguecuted and delivered for property purchased. | ment, and which is not consonant with the The note and mortgage were dated back to order of events which I have previously givJune 1st in order to render it more easy to en. Two checks, as we have seen, were drawn settle the partnership accounts between them. by Sperry, both dated June 4, 1906, on the Mr. Longley testified, and is not contradicted Cranford National Bank; one for $1,724.67, therein, that he had no notice of any facts in favor of Brock, and one for $535.53, in or circumstances which could lead him to favor of the bank. Now the theory of Spersuspect, and he did not in fact suspect, that ry's counsel is that the check to the order of the Smith mortgage and note were paid by the bank was presented and accepted by the anybody but Brock, or that the mortgage had bank, and the promissory note for $500 debeen assigned to anybody by Smith, or that livered over to Brock on June 4th, and that Brock had executed any other mortgage to the mistake in the description of the mortany other person. On the other hand, Mr. gage found in the first assignment was not Sperry swears that he had no notice that discovered until the next day (June 5tb) when Longley had any interest in the business or a new assignment was prepared. Now the in the stable. But not only was be a cus chattel mortgage from Brock to Sperry was tomer of the stable, whose billheads were filed for record on June 4th at 29 minutes printed “William E. Brock & Company,” but after 3 in the afternoon, and the first assignhis affidavit before referred to contains a ment from Smith to Sperry was lodged for clause which is significant. It is as follows: record on the same day at 28 minutes after "Throughout this transaction deponent verily 3. Now the larger check to Brock's order believed that said Brock was the individual was stamped paid by the bank June 4, 1906. owner of the chattels described in said mort
Hence we may fairly infer from all the depogage, and that the same were free and clear
sitions that the check to Brock was not de from all incumbrances, except the lien of $500 livered to him until the chattel mortgage was held by said Smith, and had no information lodged for record, so that he had time, after to the contrary until after the 18th day of the recording of the mortgage, to get from June, 1906; deponent having been informed Elizabeth to Cranford before the bank closed by said Brock that a claim formerly held by for business. And if Brock could get to the said Longley had been paid off. Deponent bank, so could the clerk Nolan. But the acted in entire good faith throughout the en smaller check given to pay the note in the tire transaction, desiring to help said Brock, bank is stamped as having been paid on June and making the loan as an accommodation to 5th, a day later: Now the clerk, Nolan, fails him.” The witness here undoubtedly refers in his affidavit to state or give the date or to the circumstance that shortly after Long hour for any of these transactions. He simley sold to Brock the latter in turn sold to ply says that he carried out his instructions Grau and absconded with some of the chat from Mr. Jones as to the giving of the check tels conveyed. Sperry's information from to the bank in payment of Brock's note, and Brock as to the state of the title of the goods neglected to get possession of the note itself. was obtained in connection with the negotia- | Jones swears that on June 4th an appointtion for his loan to Brock. Moreover, the ex ment was made to close the transactions at parte affidavit of Jones, the attorney of Sper the Cranford bank on the afternoon of that ry, states that on the 1st day of June Sperry day, but he says that on the 5th of June he brought Brock to him and gave him instruc sent Nolan over to the register's office at tions to prepare the necessary papers for a Elizabeth to verify the description of the asloan upon the Golf Stables. The affidavit then signment in the mortgage, and Nolan found proceeds: “Deponent asked said Brock if the description incorrect; that he (Jones) then he was the individual owner of the goods and prepared another assignment, and procured chattels in said Golf Stables, and whether the execution of it by Smith and its record. there was any incumbrance upon them. Said A careful examination of these carefully Brock replied that he was the owner thereof, prepared affidavits on the part of Sperry fail as the interest of another party therein had to state, except by inference, just when it
was discovered that the description in the by his co-mortgagor, Brock, with the seals first assignment by Smith to Sperry of the torn off, and with the note which it was Longley-Brock mortgage was erroneous. Now given to secure stamped paid by the bank. if we ask why the smaller check given to the Now it seems to me that such production of bank directly was not stamped paid at the the mortgage and the note was the very best same time that the larger check was evidence that the whole had been actually stamped, we find the answer in the circum-paid and discharged. The case might have stance that Nolan discovered the error when been different if the note had not been prohe went to the clerk's office to lodge the pa duced stamped "paid" by the bank. In this pers for record and embraced that opportuni- respect the case is in marked contrast with ty to examine the record of the missing the famous case of Harrison v. Johnson, 18 mortgage. And this he would naturally do, for N. J. Eq. 420, s. c. on appeal Harrison v. New he was aware undoubtedly of the nonproduc- Jersey Railroad & Transportation Company, tion of the older mortgage by Smith when he 19 N. J. Eq. 488, where the mortgage was attempted to assign it to Sperry. And then produced without the bond which it secured, having discovered this error, he declined to or any proof of its payment, and under ciruse the smaller check until a new assignment cumstances which the court thought put the was prepared and executed. This being done | party relying upon its cancellation upon inon the morning of the 5th of June, that sec quiry. The rule is there stated with great ond assignment was executed and recorded clearness, and acted upon, that, if the debt and the Brock note paid and stamped accord. is paid the mortgage is gone as a lien. In ingly. It is well to note in this connection the case on appeal, at page 500 of 19 N. J. that the stamp used by the bank in marking Eq., Chief Justice Beasley uses this language: notes and checks paid is changed every morn “For it is clear, I think, that the exhibition ing, and it seems quite impossible to account of the mortgage did not show that the debt for the smaller check bearing the stamp of secured by it was paid. On the contrary, it June 5th while the larger check bears the evinced that there was a bond outstanding stamp of June 4th on the supposition that which was the legitimate evidence of such they were both paid on the same day. Here, indebtedness. The mortgage is the mere then, is evidence tending to show that the adjunct of the bond, which is the obligation clerk Nolan discovered that the mortgage manifesting the debt, and which, wherever which was the subject of the assignment was it may reside, draws its adjunct to it. It is executed by Longley, and that it contained common knowledge that when the bond the clause describing the notes accurately, is assigned it carries in equity the mortgage adding "which notes were given for a part of security with it, and the consequence is that the purchase price for said goods and chat the mortgage is often in one hand and the tels,” and the same expression occurs in the equitable right in the other." affidavit of Mr. Smith in that mortgage; It follows in this case that the assignand that this information was probably re ment of the mortgage without the transfer ceived by Nolan at the moment of the deliv. of the note unpaid with it amounted to nothery of the chattel mortgage and the larger | ing. Nor can I perceive that the fact that check to Brock. This was in ample time for the note and mortgage were presented by him to have halted the transaction, either by Brock to Longley, the one with the seals withholding the check from Brock, or stop torn off and the other marked paid, two ping its payment at the bank.
months before their maturity, ought to have For all these reasons I come to the con put Longley on any inquiry or excitable susclusion that Sperry had notice of such facts picion that they had been stolen. My reaand circumstances as clearly to put him on
son is that the exhibition of these papers inquiry as to Longley's interest in these was accompanied by à proposition to buy chattels, and the case must be considered on Longley out, and Longley may well have supthat basis. But Sperry, in his affidavit pre
posed that Brock had prepared himself to pared for use on the motion for injunction, deal with him by first paying the note on states that he first commenced foreclosure which Longley was endorser. And here it proceedings on the $500 mortgage, and short may be well to mention that if anybody was ly after also proceeded under the mortgage in fault, in permitting Brock to be in posdirect from Brock to him, and that shortly session of the mortgage it was Smith, for, after that, ascertaining that the mortgage
as we have seen, he knew that his mail was given by Brock was fatally defective, he being handled by Brock, and yet it never had abandoned proceedings under that and occurred to him that Brock might have been had fallen back on his assignment of the tempted to get possession of the mortgage. smaller mortgage. But it is proper to say And Sperry, taking title from Smith, not that in his answer he claims under both in only was put on inquiry as to the actual struments.
possession of the mortgage, but he took it, We come now to the situation of the com so to speak, subject to whatever negligence plainant, Longley, and inquire whether he Smith had been guilty of up to the date of is chargeable with notice that the older the assignment. Bút, be all that as it may, mortgage had been assigned to anybody. there can be no doubt that Sperry, through And in the first place it was brought to him bis attorney, is responsible for the note
coming to the hands of Brock, who was constructive notice. Their examination verl. thereby enabled to practice the fraud.
fies that contention, and it remains to be But counsel for Sperry rely on the eighth determined what effect must be given to it section of the chattel mortgage act of 1902 The chattel mortgage revision of 1902 in (P. L. 1902, p. 489), which provides that its sixth section provides that no chattel chattel mortgages duly recorded shall be mortgage shall be recorded until its execution valid against the creditors of the mortgagors "shall be first acknowledged or proved, and and against subsequent purchasers and mort. such acknowledgment or proof certified gagees from the time of the recording there thereon in the manner prescribed by the act of until the same be canceled of record. respecting conveyances." That "act respectThat section is a repetition of section 9 of ing conveyances” is found in Pamph. Laws the chattel mortgage act of 1885 (P. L, 1885, 1898, p. 670 et seq., and the twenty-first sec p. 319; Gen. St. p. 2114), and the object of tion provides what deeds and instruments its insertion in the original act, as is well may be acknowledged and recorded, among known, was to change the old law which pro which are "chattel mortgages, assignments, vided that chattel mortgages must be filed releases, and discharges thereof." The twenand refled, or in some way renewed, every ty-second section provides how these inyear. Besides it is quite impossible to sup struments shall be acknowledged and the pose that the Legislature meant to validate acknowledgment certified. After enumera mortgage that had been actually paid. ating certain officers to take acknowledgAnd this view is strengthened when we ob- ments, it proceeds as follows: "Such officer serve that the language used is "creditors, having first made known the contents thereof subsequent purchasers, and mortgagees," to such party making such acknowledgment, omitting the words “in good faith," which and being also satisfied that such party is are found in section 4 of the revision and the grantor in such deed or instrument, of the corresponding section in the original all which the officer shall make his certifistatute. That this is the correct exposition cate on, under or annexed to said deed or of this section of the statute was held in instrument.” The certificates here in ques Roe v. Meding, 53 N. J. Eq. 350, at page 358, tion fail in both of these respects. Then the near the bottom, 30 Atl. 587, at page 590. fifty-third section provides "that any deed, But the counsel for the defendant relies etc., which shall have been duly executed, upon the fact that there was an assignment acknowledged or proved and certified as of the mortgage on record before Longley aforesaid, and shall have been duly recorded, dealt with Brock on the strength of his pos etc., such record shall be notice to all subsession of these securities and that Longley sequent judgment creditors, purchasers and is chargeable with notice of that assignment. mortgagees of the execution of said deed or
The complainant's counsel makes two an instrument and the contents thereof." The swers to this. In the first place, that the original act providing for the assignment of possession under the circumstances of those mortgages of real estate (Gen. St. p. 2108, securities, especially the note, was a dis § 31) provided that, where a mortgage of pensation to Longley of any duty on his lands is assigned and the assignment re part to examine the records. He knew that corded, such record shall be notice to all his own note, secured by the mortgage, was persons concerned that said mortgage is so paid. His co-mortgagor brings him the other assigned; and further that if the assignment note stamped paid, accompanied with the is not recorded, payments made to the asmortgage, and the question is, why should signor in good faith and without notice of he look further on the records? I am unable the assignment and releases of mortgaged to understand on what principle he could premises shall be valid in the absence of be called upon to inquire any farther. And actual notice. It will be observed that the on this subject much of what was said by language above quoted from sections 53 and Knapp, J., in Heyder v. Excelsior Building 54 of that act respecting conveyances (1898) & Loan Association, speaking for the Court of do not, strictly speaking, apply to the case Errors and Appeals (42 N. J. Eq. 403, at page in hand, and, further, the chattel mortgage 407, 8 Atl. 310, at page 311, 59 Am. Rep. 49), ap act of 1902, respecting chattel mortgages, plies. The opinion of Advisory Master Wil contains no clauses such as I have quoted liams in that case and the opinion of Wilson, relating to assignments of land mortgages. Master, in Harrison v. Johnson, supra, contain But granting that the sections from the act all the authorities up to that date. The respecting conveyances are broad enough to other answer made by counsel for Longley apply to the present case, we are then met to the argument of the counsel for Sperry, with the old question whether an instrument, based on the assignment, is this: That nei deed, mortgage, or contract, not properly ther of those assignments as recorded were proved or acknowledged, but nevertheless re entitled to record because not acknowledged corded, is constructive notice binding on a according to the laws of New Jersey, in that party who has no actual notice, because he the certificates of acknowledgment do not thinks it not worth while to examine the pubcontain the statement that the contents were lic record. My examination of that subject made known to the party acknowledging leads me to the conclusion that the great the execution, and hence their record is not weight of authority and reason is that such
record is not constructive notice. I shall not might be due from Sperry to the partnership take time or space to cite the authorities. upon a winding up. But counsel for Sperry They are largely gone into by Mr. Wade in puts himself upon the proposition that each his treatise on the law of notice, and in the partner has the power to sell and dispose of various treatises on mortgages. Jones on the partnership property. It is familiar law Chattel Mortgages, 88 247–248. In the Amer that the power of one partner over the propican notes to Le Neve v. Le Neve, 2 White & erty of the partnership is that of an agent, Tudor's Leading Cases in Equity (4th Am. and is confined to the scope of the partnerEd., from 4th London Ed.) p. 206, the doctrine ship business. It would be absurd to hold is thus stated: "So a purchaser need not that one partner in the business of keeping a take notice of an instrument which does not livery stable would have the implied right, appear to have been proved or acknowledged from the mere fact that he was keeping a in accordance with the statute"-citing a livery stable, to sell out the whole plant and large number of cases.
give a good title to it without the knowledge Counsel for Sperry falls back upon the and consent of his partner, and the same conwell-settled rule that a mortgage that has sideration applies to the mortgaging of it. been paid may be kept alive, notwithstanding The general rule is stated with approximate such payment, to secure another creditor of accuracy by Vice Chancellor Reed in Carr v. the mortgagor, or may be appropriated to oth Hertz, 54 N. J. Eq. 127, at page 131, 33 Atl. er purposes than that for which it was orig. 194, at page 196, a case cited by counsel for inally executed and kept alive as against sub Sperry in his argument. What was said by sequent parties, incumbrancers, or purchas the learned Vice Chancellor must be read in ers, The doctrine is a familiar one, but has connection with the facts of the case, which no application here, where the attempt was was an attack upon certain mortgages givmade to keep it alive by only one of the mort en by one partner to creditors of the firm for gagors, and that one having only a one-third the purpose of preferring such creditors interest in the chattels mortgaged, and that against other creditors of the firm, and those one-third interest subject to the superior lien mortgages were set aside by the Vice Chancelof his co-mortgagor and co-owner for any lor, and his decree was affirmed (Hertz v. balance due to him on a settlement of the Carr, at page 700 of 54 N. J. Eq., page 1117 partnership affairs. Further, in order to up of 37 Atl.). hold the mortgage under such circumstances Turning to the present case, it does not necthe parties to the novation or new delivery of essarily appear that it was a part of the busithe mortgage must be careful not to do or ness of Longley and Brock to buy and sell omit anything which may lead a subsequent horses as dealers. But, presumably, had purchaser or incumbrancer to the just belief Brock sold a horse and carriage apparently that the mortgage has been discharged. Here in the ordinary course of business, he would the parties to the attempted assignment of have passed a good title. That, however, is the mortgage permitted the leading document, quite a different matter from executing a the promissory note which it was given to se chattel mortgage on the whole, and approcure, to come to hands of the mortgagor with priating the proceeds to his own use. This evidence on its face that it had been paid, point taken by counsel for Sperry in my judgand, not only that, but did not secure posses ment completely fails. sion of the mortgage itself. Upon this, the His next point is that, although there is most important part of the case, I conclude what in law amounts to no affidavit at all that Sperry's case fails, and that he can annexed to the mortgage, still, as it was propclaim no relief under the old mortgage. erly acknowledged and recorded, the com
We come now to the larger mortgage from plainant being merely a subsequent purchasBrock to Sperry, given to secure the whole er of Sperry's one-third interest and not a $2,250. The joint ownership of the property creditor, the mortgage is not invalid having been established beyond all peradven-against him, because he has had constructive ture, the question is, what effect has that notice of it through the public record. There mortgage, or what effect could it have had, is undoubtedly a decided difference in the if it had been properly and lawfully execut standing of creditors and subsequent pured? The answer is plain that, as in favor of chasers under the statute here in question, as any person having notice of the joint owner was pointed out in the opinion in this court ship and quasi partnership, its only effect was in Roe v. Meding, 53 N. J. Eq. 350, 33 Atl. to convey to the mortgagee the equitable in- 394, and the cases there cited; and counsel terest wbich Brock had in the chattels coy relies on the case of Boice v. Conover, 54 N. ered by it after the affairs of the partnership J. Eq. 531, 35 Atl. 402. But that was not a were wound up and the actual amount com case where the prior mortgage was attacked ing to Brock ascertained. In other words, for want of any affidavit made according to Sperry obtained the right, and no more, to the statute, or that the affidavit which was have the partnership wound up in an order properly made by one of the mortgagees was ly manner and to receive the part coming to absolutely untrue, but the attack was made Brock. Longley had the superior right, as a on the ground that the affidavit was mislead. partner, to enforce his general lien upon the ing, and the consideration therein stated was partnership assets to secure anything that false in that it treated a mere indorsement by