In re BIRCK & CO. McKEY v. TORPEY, 142 F. 438

SEAMAN, Circuit Judge (after stating the facts). The question whether the respondent, Torpey, obtained a valid lien upon the property of the bankrupt, through the alleged chattel mortgage and seizure, arises out of a special provision of the Illinois statute (2 Starr & C. Ann. St. 1896, c. 95, par. 26) and does not involve the general inquiries of bona fides, preference, or want of record. The bona fides of the transaction is not challenged, and it is conceded on behalf of the petitioner that the failure to record the mortgage was cured by the seizure before the commencement of proceedings in bankruptcy. The statute referred to is

an act of the General Assembly of Illinois, approved June 21, 1895 (Laws 1895, p. 260), which provides: “That all notes secured by chattel mortgages shall state upon their face that they are so secured, and when assigned by the payee therein named, shall be subject to all defenses existing between the payee and the payor of said notes the same as if said notes were held by the payee therein named, and any chattel mortgage securing notes which do not state upon their face the fact of such security shall be absolutely void.” In the case at bar the chattel mortgage under which the lien is claimed secured a note made by the mortgagor, and both instruments were assigned — in the first place to Birck, and finally to the respondent, Torpey, as collateral security for 'his loans — while the note contained no mention upon its face “of the fact of such security.” The alleged chattel mortgage, therefore, is within the express terms of this enactment, and likewise within its object as defined in Hogan v.

Akin, 181 Ill. 448, 454, 55 N. E. 137, and Sellers v. Thomas, 185 Ill. 384, 388, 57 N. E. 10, and is thus declared, upon such assignment, to “be absolutely void.” Such enactment is plainly within the legislative power and is unaffected by any provision of the bankruptcy law. The instrument which came to the hands of the respondent as security, though in the form of a chattel mortgage, became void and without force when it was assigned, not only as against creditors but between the parties, so that no lien was obtained, and the possession taken thereunder was wrongful.

We are constrained to the opinion that the orders of the referee and District Court were erroneous in upholding the respondent’s claim to a lien, and each is reversed accordingly, with direction to proceed in conformity herewith.