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Bruck v. Credit Corp.

Decided: January 9, 1950.

LEO BRUCK, STATUTORY RECEIVER OF MARLOWE MOTORS, INC., A CORPORATION, PLAINTIFF-APPELLANT,
v.
THE CREDIT CORPORATION, A CORPORATION, DEFENDANT-RESPONDENT



On appeal from the Superior Court, Appellate Division, whose opinion is reported in 3 N.J. Super. 177.

For affirmance -- Justices Case, Heher, Oliphant, Burling and Ackerson. For affirmance on the opinion below -- Chief Justice Vanderbilt, and Justice Wachenfeld. For reversal -- None. The opinion of the court was delivered by Burling, J.

Burling

This is an appeal from a judgment of the Superior Court, Appellate Division, reversing a judgment of the Superior Court, Chancery Division. Certification was granted on the petition of the plaintiff.

The litigation stems from certain chattel mortgage transactions between Marlowe Motors, Inc., which was engaged as a dealer in new and used automobiles, and the defendant, an automobile finance company. At the time of the mortgage transactions, each of said corporations had its principal place of business in Essex County, New Jersey.

In March, 1947, Marlowe Motors, Inc., as mortgagor, and the defendant, as mortgagee, executed and recorded a statement that thereafter "the mortgagor may execute and the mortgagee may accept a series of chattel mortgage transactions arising out of the business of the mortgagor," in accordance with R.S. 46:28-5.1. During the months of March through September, 1947, numerous loans were made by the defendant to Marlowe Motors, Inc., and chattel mortgages were executed as security therefor.

On February 11, 1948, the plaintiff having been appointed as statutory receiver of Marlowe Motors, Inc., in a proceeding instituted in the former Court of Chancery on October 14, 1947, filed a complaint in which he attacked the validity of four chattel mortgages executed, pursuant to the foregoing recorded statement, during the months of August and September, 1947. The four chattel mortgages under attack had not been recorded but each was accompanied by an affidavit stating that the consideration therefor was a loan in the specified amount evidenced by a promissory note. The Chancery Division, 2 N.J. Super. 196, decided that while R.S. 46:28-5.1 set up a procedure making it no longer necessary to record chattel mortgages of the type therein delineated, it did not obviate the necessity of affidavits of consideration as required by R.S. 46:28-5 and, upon a determination that the affidavits executed by the defendant were legally insufficient, decided that the four chattel mortgages were void.

On appeal, the Appellate Division, 3 N.J. Super. 177, reversed the judgment of the Chancery Division. The Appellate Division, while indicating that it did not approve the decision of the Chancery Division that the affidavits were insufficient, based its decision upon the ground that R.S. 46:28-5.1 not only dispenses with the necessity of recording chattel mortgages of the type therein described but also eliminates the necessity of affidavits of consideration in connection with such chattel mortgages.

The present appeal is by the plaintiff from the latter judgment. The defendant urges in limine that the plaintiff, as a statutory receiver, has no authority to maintain this appeal without direction or leave of court for that purpose and cites Mortgage Security Corporation of New Jersey v. Townsend, 108 N.J. Eq. 268 (E. & A. 1931), in support of that contention. It is sufficient to say, in disposing of this question of adjective law adversely to the defendant, that the cited case is inapplicable because it involved an initial appeal by the receiver. The initial appeal in the instant case was filed by the defendant to the Appellate Division. We know of no rule which prevents the receiver, under such circumstances, from appealing from the judgment of the latter court. Moreover, certification was granted by this court permitting the present appeal.

The substantive question requires a construction of R.S. 46:28-5.1 and a determination as to whether the statute dispenses with the necessity of affidavits of consideration in conjunction with chattel mortgages executed pursuant thereto. If such determination is in the negative, a further question relating to the adequacy of the affidavits of consideration executed in conjunction with the four chattel mortgages constituting the subject matter of this litigation must be resolved.

R.S. 46:28-5.1 (source material L. 1936, c. 257) is a supplement to R.S. 46:28-5 (source material L. 1902, c. 153, as amended L. 1928, c. 61) and provides as follows:

"Whenever the mortgage or instrument mentioned in section 46:28-5 of this title is of goods, merchandise or other chattels acquired or held by a mortgagor ...


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