Aristo Hosiery Co. v. Ramsbottom , 1 R.I. Dec. 102 ( 1925 )

TANNER, P. J.

This case is ’heard upon demurrer to a hill in equity which seeks to set aside .a mortgage upon thq greater portion of. a stock in trade given as security for an antecedent debt. It is soqght to set this mortgage aside as being in contravention of the Sales of Merchandise in Bulk Act, Chapter 311 General Laws, 1923.

No notice was given as required by statute. The whole question in the case is whether or not a mortgage of the majority part in value of the whole stock of the mortgagor amounted to a sale under the act.

The weight of authority seems to be that such a transaction is not' a sale within the act. It is sought to nullify’the effect of some of the decisions upon the ground that in the States where made mortgages do not pass the title to property and constitute only a lien, and that in this State mortgages do pass the- legal title, but it seems to us that a mortgage which passes legal title does not' • thereby constitute a sale. In all the authorities we have examined a sale • transfers the absolute property and must be distinguished from a mere legal title subject to-defeasance, as is the cas-e with a mortgage.

“A sale includes the transfer of absolute property in the thing.”

35 Cyc. 28.

“A sale is to be distinguished from a chattel mortgage, which is a transfer of title to -personal property as security for the -payment of money or the performance of some act subject to. the condition that upon performance by the transferrer the title shall re-vest in him.”

35 Cyc. p. 34, Note 5.

“A security title * * * requires a careful discrimination from absolute sales.”

1st Williston on Sales 13.

“Provisions of the -Sales Act relating’ to contracts to sell and to sales do not apply, unless so stated, to any transáetion in the form of -a contract to- sell or a sale which is intended to operate by way of mortgage, pledge, charge or other security.”

2nd Williston on Sales, p. 1554, Sec. 75.

Other text books' definitions are to the same effect.

It is argued that to omit mortgages from the operation of the statute would open an easy way to fraud, but it may be that the Legislature thought that creditors were protected in the matter of mortgages by the other provisions of the statute, which require a record of the mortgage within five dáys, thus giving-creditors a speedy notice and opportunity t'o contest the validity of the mortgage. Mortgages usually leave the property in the possession of the mortgagor, while creditors can protect their rights, but an absolute sale would'permit'the buyer to’remove the goods at once and place them beyond the reach of creditors. Even if the necessity of including mortgages in the operation of the statute were more apparent than it is, we should still feel that we were not at liberty to extend the operation' of the statute but should leave this to the Legislature.

For these reasons we feel .that the demurrer must be sustained.