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IN RE FERRO CONTR. CO.

July 5, 1966

In the Matter of FERRO CONTRACTING CO., Inc.


The opinion of the court was delivered by: WORTENDYKE

 The trustee in bankruptcy of Ferro Contracting Co., Inc., a New Jersey corporation, has petitioned this Court for review of an order of the Referee, Honorable William Lipkin, dated July 29, 1965, sustaining the validity of a claimed lien, asserted by Livingston National Bank, upon the proceeds of sale of chattels of the bankrupt, mortgaged to the Bank on June 19, 1963 to secure an indebtedness evidenced by the bankrupt's promissory note for $32,325 of the same date.

 The chattels scheduled in the mortgage were the following:

 
One 1957 Michigan front end loader model 125A S/N 13772 Wavkesha 195 GK Gas, 2 yd. bucket with recap 1400 X 2412 ply tires;
 
One 1956 International Model TD-18 (181 Series) diesel crawler tractor, wide gauge, complete with International hydraulic bulldozer, canopy cab, Serial No. TD181-35815, Bulldozer No. B-18D-1038;
 
One 1957 International Model TD-18 (182 Series) diesel crawler tractor, wide gauge, complete with International Model 18D-2 hydraulic bulldozer, Serial No. 7D182-37262, Bulldozer No. 18D2-945.
 
One 1956 model TD-24 International Diesel crawler tractor with torque converter, cable operated bulldozer, model P-29 power control unit, and Skeleton Cab. Serial No. TD-241-697, Engine No. TDEM-781, Dozer No. B12D-693, PCV No. P-29-1365.
 
One new model 22-B Bucyrus-Erie backhoe with D318 Caterpillar diesel engine, 30" treads long frames 7/8 cubic yard dipper; with H & L teeth and side cutters 1/2 cubic yard hoe dipper with H & L teeth and side cutters machine serial No. 122159, engine serial No. 5V19610.

 On the date of the note and mortgage (June 19, 1963), the Bank filed a Financing Statement in the office of the Secretary of State of New Jersey, setting forth the name and address of the bankrupt as the debtor, the name and address of the Bank as the secured party, and the foregoing five items of personal property listed in the purported chattel mortgage. No Financing Statement was filed in the office of the Director of the Division of Motor Vehicles of New Jersey.

 The promissory note and mortgage given by the bankrupt to the Bank provided that the loan was payable in 30 monthly installments of $1,077.50 each, commencing on July 19, 1963, and 13 of these installments were paid as of July 31, 1964, leaving an unpaid balance of $18,317.50 as of the latter date. Upon the occurrence of the default in the August 1964 installment, the Bank employed a constable to seize the chattels and advertise them for public sale. Three of the articles were located in Matawan and two in Wayne. They were transported by an independent contractor to its place of business in Whippany, where the sale was advertised to take place on September 21, 1964. The sale was initially enjoined by this Court, but held on November 9, 1964 by the bankrupt's Receiver, pursuant to the Referee's order. The total sum realized from this sale was $26,900. The sale was confirmed on November 12, 1964, subject to the Bank's proof of lien upon the proceeds. Upon the hearing thereon of February 11, 1965, the Trustee challenged the validity of the Bank's claimed lien on two grounds, one of which is urged upon the present review, i.e., that the lien is ineffective because the chattels listed in the mortgage were "motor vehicles" within the intendment of N.J.S.A. 39:1-1 et seq. and the Bank failed to file the notice of lien in accordance with the requirement of N.J.S.A. 39:10-11, subd. C. The trustee asserts that the sole question before this Court is whether the chattels involved herein are "vehicles" within the intent and meaning of the New Jersey Motor Vehicle Act and, if the mortgaged chattels are vehicles, that the lien should be perfected in accordance with N.J.S.A. 39:10-11, subd. C by notation on the Certificate of Title issued by the Division of Motor Vehicles. The Trustee also seeks review of the allowances to the Bank for expenses and disbursements and counsel fees, maintaining that such expenses were incurred and such services performed primarily after the bankruptcy petition was filed.

 A Financing Statement covering the subject chattels was filed on June 19, 1963 in the office of the Secretary of State. If these chattels may be properly deemed "equipment" under the Uniform Commercial Code, N.J.S.A. 12A:9-109(2), then such place of filing would be proper and effective under N.J.S.A. 12A:9-401(1)(c). However, if these chattels are "motor vehicles" within the intendment of N.J.S.A. 39:1-1 and 39:10-2 and each chattel is "* * * a motor vehicle required to be licensed" under N.J.S.A. 12A:9-302(1)(c) and (d) and thereby subject to the provisions of N.J.S.A. 12A:9-302(3)(b), then the proper place of filing in order to perfect a security interest would be with the Director of the Division of Motor Vehicles in accordance with N.J.S.A. 39:10-11, subd. C as read together with the pertinent section of the Uniform Commercial Code, N.J.S.A. 12A:9-302(4).

 It is necessary to examine pertinent provisions of the Motor Vehicle Certificate of Ownership Law, N.J.S.A. 39:10-1 et seq. and the Uniform Commercial Code, N.J.S.A. 12A:1-101 et seq. As an introduction to such examination, the following observations should be made:

 
1. The general purpose of the Motor Vehicle Certificate of Ownership Law, as set forth in Title 39:10-3, is "* * * to regulate and control titles to, and possession of, all motor vehicles in this state, so as to prevent the sale, purchase, disposal, possession, use or operation of stolen motor vehicles, or motor vehicles with fraudulent titles, within this state."
 
2. Title 39:1-1 defines a "motor vehicle" as including "* * * all vehicles propelled otherwise than by muscular power, excepting such vehicles as run only upon rails or tracks." Title 39:10-2, under the definition of "New Motor Vehicle", defines motor vehicle as including "* * * all such vehicles propelled otherwise than by muscular power, and motor ...

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