Second, as to the assignment of the conditional sale agreement: The New Jersey Chattel Mortgage Act (Revision of 1892; 1 Comp. Stat. N. J., p. 463) in section 4, declares:
Every mortgage or conveyance intended to operate as a mortgage of goods and chattels hereafter made, which shall not be accompanied by an immediate delivery, and followed by an actual and continued change of possession of things mortgaged, shall be absolutely void as against the creditors of the mortgagor, and as against subsequent purchasers and mortgagees in good faith, unless the mortgage, having annexed thereto an affidavit or affirmation made and subscribed by the holder of said mortgage, his agent, or attorney, stating the consideration of said mortgage and as nearly as possible the amount due and to grow due thereon, be recorded as directed in the succeeding section of this Act.
To constitute a mortgage the right of redemption must exist, and where such right is established the form of the conveyance is not controlling. Wilmerding, Heguet & Co. v. Mitchell, 42 N. J. L. (12 Vr.) 476; Hastings v. Fithian (E. & A.), 71 N. J. L. (42 Vr.) 311. An assignment of a chose in action, even if it be a security for the payment of a debt, is not a chattel mortgage within the meaning of the New Jersey Chattel Mortgage Act. Bleakley v. Nelson, 56 N. J. E. (11 Dick. Ch.) 674. This Act applies only when the goods mortgaged are capable of such open and visible possession that their holding by a mortgagor, who had given a secret mortgage, might tempt someone to deal with him as the absolute owner. Cumberland National Bank v. Baker, 57 N. J. E. (12 Dick. Ch.) 231, 242.
The assignment now under consideration was not given as a security. It was an absolute transfer of the sellers property and interest in the conditional sale agreement and the automobile mentioned therein, without right of redemption. By this assignment The Peoples Trust became the legal successor in interest referred to in section one of the Uniform Conditional Sales Act, supra; and the reservation of property contained in the conditional sale agreement was transferred to it by the assignment. The assigned agreement recited that the automobile had been delivered to the buyer, and the assignment expressly recited that it had been sold to Jones (the buyer); and the assignor at the time of the assignment was not in a position to retain the automobile, or to deliver it to the assignee. What the assignor could deliver to The Peoples Trust was the conditional sale agreement, and that was done. Had the transfer been to secure a debt, the delivery of the conditional sale agreement would savor more of a pledge than a chattel mortgage, but, as the assignment was absolute and not conditional, it was neither.
Such a transaction is not contemplated by the Chattel Mortgage Act, which covers transactions where the title, but not possession, is transferred; but by the Uniform Conditional Sales Act, supra, which operates upon transactions where the possession, but not the title, is transferred. The right of The Peoples Trust to the automobile is fixed by the assigned conditional sale agreement, and is superior to the rights of the bankrupt or its creditors—here represented by the receiver.
As opposed to this view, and in support of the Masters finding, the case of David Straus Co. v. Commercial Delivery Co. (N. J. Ct. Ch.), 113 Atl. 604, affirmed by the Court of Errors and Appeals, 112 Atl. 417, is cited by the receiver. That case, made up of facts which existed before the Uniform Conditional Sales Act went into effect, presents many features similar to the instant case. However, the differences, and not the similarities, are controlling. The pertinent facts were: Coincident with the agreement (called a lease) relating to the delivery and use of the automobile truck, the lessee (driver) entered into a service contract with the lessor (Commercial Delivery Company). In that contract the driver agreed to work the truck under the direction of the lessor for two years, and in no other way than as directed by it, and to deliver to the lessor the entire gross monthly earnings. The contract also provided that out of these moneys the latter was to retain a certain percentage for its services, pay the wages of the drivers, storage charges, repairs, etc., and credit the balance to the driver; and that the truck should at all times be stored in a garage furnished by the lessor. The lessor assigned to the Morris Plan Company all its right, title and interest in the lease and the property therein described, and agreed, in the event of any resale, release, or repossession of said property, to pay to the assignee any deficiency between the net proceeds of such resale and the amount necessary to pay the unpaid installments. At the time of this assignment the assignee took a note made jointly by the assignor and the driver for the sum advanced by the assignee as consideration for the assignment. Subsequently an equity receiver in insolvency proceedings was appointed for the lessor, and the receiver found it in possession of the truck. The Morris Plan Company petitioned that the truck be delivered to it as the legal owner thereof. The Vice-Chancellor held that the assignor was a debtor of the assignee; that the assignment was not an absolute sale of the truck, but collateral security for the payment of the debt; that while the lease apparently gave the right of possession to the driver (lessee), the actual possession, by reason of the service contract, was always in the lessor; that the assignment of the lease was in legal effect a chattel mortgage; and that not having been recorded it was void as against the receiver and creditors of the assignor. As already stated this finding was affirmed by the Court of Errors and Appeals.
In the cited case, as noted, it was held that the possession, as well as the title, of the truck was in the lessor at the time of the assignment of the lease or sale agreement; and that the assignment was not an absolute sale of the agreement, but a security for the payment of the advances made by the assignee for which payment the assignor was jointly liable with the driver. In the instant case, the actual, as well as the right of possession of the truck, was not in the bankrupt, but in a third person—the buyer—and the assignment was an absolute transfer of the bankrupts property in the conditional sale agreement, without right of redemption. These differences are essential, and distinguish the cases.
The fact that the truck was taken from the buyer by the bankrupt subsequent to the latters assignment of the conditional sale agreement, gave it not property or right in the truck as against its assignee, The First Peoples Trust. Whatever rights such possession gave it as against the buyer, they were subordinate to the assignees right of possession on the buyers default in the terms of the conditional sale agreement then held by the assignee. Such default having taken place, the assignee is entitled to the possession of the truck.
The Masters findings are disapproved, and an order will be made giving The First Peoples Trust the possession of the truck in question.