property, as in the case where the sale is procured by fraud, the title is still capable of being transmitted to an innocent purchaser, and as to him the title can no longer be avoided. By an innocent purchaser is meant one who takes the property for value and in good faith, and who does not know, nor has information which would reasonably lead him to know, of the claims of some other person to the property. The reason for this is that as the title of the first purchaser was only voidable, it was still sufficient to enable him to transmit it, and being so transmitted to one in good faith, for value, it cannot thereafter be affected by the rights of the original seller. In order, however, that such may be the case, all the elements that constitute one a purchaser in good faith must be present. It is not enough to constitute one a holder in good faith that he pays for the property. He must do so in the usual course of business, and without knowing, or having reasonable grounds to believe, that the title is voidable at the election of another. Assignees, trustees in bankruptcy, execution and attachment creditors, as they do not part with value for the property taken by them, are not bona fide holders, and a title which may be avoided against the one under whom they claim may be avoided while the property is in their hands. A bona fide holder of property must also part with value for the property acquired by him. If he buys on credit or partly on credit, he cannot claim to be such so far as the credit extended goes. The taking of personal property in payment of a pre-existing debt does not constitute one a bona fide holder. It is for the purpose of protecting bona fide holders that the law requires chattel mortgages of personal property, conditional sales, etc. when the person acquiring an interest in the property does not take actual possession, to be filed with a city, village or town clerk.

The rule that one cannot confer a better title than he has is also open to exception in the case of negotiable instruments. This subject is treated at length in the chapter on Negotiable Instruments and the sections on warehouse receipts and bills of lading in the chapter on Bailments.

CHAPTER XVI.

CHATTEL MORTGAGES AND CONDITIONAL SALES.

SECTION 1.

CHATTEL MORTGAGES.

A chattel mortgage is a conditional transfer of personal property, to secure the payment of a debt, or performance of some obligation, which becomes absolute at law by the failure of the mortgagor to observe the condition. "The law appears to be well settled that the execution of a chattel mortgage transfers to the mortgagee a defeasible title to the mortgaged property, which becomes absolute at law by the failure to pay the debt at the stipulated time; but notwithstanding the mortgagor is divested of all interest in the property at law, he still has an equity of redemption which a court of equity will protect and enforce.' Any agreement by which title to personal property is transferred as security for debt is a chattel mortgage. The actual wording of the contract is immaterial. If it can be ascertained that the transaction was one for giving security, it will amount to a mortgage. A chattel mortgage is practically a sale of property, with a defeasance agreement, or in other words the right on the part of the person transferring the property to redeem it and take it back by paying a certain amount, or discharging a certain obligation. A chattel mortgage differs from a pledge mainly in this, that a pledgee does not take title to the property pledged; he obtains only a limited interest in it. The subject of pledges is discussed in the chapter on Bailments. It differs also from a conditional sale. A mortgagor of chattels has a right to redeem the property mortgaged, the title to which once vested in him, whereas in case of a conditional sale the buyer has never had title, but purposes to acquire title by com

plying with the conditions of the contract of sale. Thus, an agreement by which the title to personal property is to remain in the seller until paid, but the buyer is to have possession, is a conditional sale, and if the law in regard to the execution and filing of conditional sale contracts is not complied with, is void as against third persons. Agreements by which stock certificates, life insurance policies, judgments, open accounts, notes, or other similar choses in action are given as security for a debt, are not chattel mortgages in the strict sense of the term, as in this state only property capable of manual delivery can be the subject of a chattel mortgage, such as the statutes refer to. An agreement whereby such intangible property is transferred as security for debt is, however, valid and is enforced in the same manner that a chattel mortgage is.

Bills of sale and other instruments which appear to be absolute on their face, but are given simply for security, are often construed by the courts to be chattel mortgages. Thus, an instrument recited that in consideration of $340 P sold and conveyed to M a certain horse, harness and piano, in the possession of P and then stated "Provided.....that if said P shall on or before six months.....pay to M the sum of seventy-five dollars and ten per cent interest for said piano, or one hundred and fifty dollars and ten per cent interest for said horse..." etc., "then this instrument...shall be void...." It was decided that this was a chattel mortgage and not a conditional sale. Again, an attorney borrowed $600 from a bank and gave the bank a bill of sale of his law library. The agreement was that he should hold the library in his office as agent for the bank and upon payment of the sum loaned, the bank would give him a bill of sale. After the bill of sale was given, a creditor of the attorney levied an attachment on the library. The bank had not filed the bill of sale as a chattel mortgage. The court says: "Taking the whole transaction together, it is too clear for argument that this was a mere credit or loan to be secured by this instrument and a pretended possession of the property, in lieu of filing it with the city clerk according to the statute relating to chattel mortgages. This pretended bill of sale, being, in fact, a mortgage....and there never having been any delivery of the possession of the mortgaged property to the bank, and the instrument never having been filed with

the city clerk until long after the attachment was served, it follows that the instrument or conveyance, as a mortgage, was void as to the creditor....in the attachment...." "A bill of sale of chattels, or an absolute deed or lease of real estate, may be shown to have been given as a mortgage security, by parol or other competent evidence; and when the evidence satisfactorily shows that fact, then the conveyance, whatever its nature or form, will be treated as a mortgage; and the rights of the parties under such contract will be such, and such only, as they would have been had the writing on its face created the relation of mortgagor and mortgagee."

Parties to a mortgage.-The person who gives a mortgage is called the mortgagor and the one who takes it is called mortgagee. As a chattel mortgage is a contract, only persons who are capable of making a contract can make a chattel mortgage. A person may mortgage any interest which he has in the title to property. Thus, a partner may given a mortgage on his interest in partnership property, and an owner in common may mortgage his share. A husband may give a chattel mortgagage to his wife and vice versa. A chattel mortgage given by an infant is voidable as his other contracts. There must be a consideration for a mortgage as for any other contract. As will be seen hereafter, a married man cannot give a chattel mortgage on exempt property without the signature of his wife, properly witnessed. Before a mortgage can become effective it must be delivered to the mortgagee or some one for him. Thus, a mortgage made and filed by a debtor, given to a creditor without the creditor's knowledge and consent, is not valid.

What may be mortgaged.-Generally speaking, any kind of personal property capable of manual delivery may be mortgaged. In some states it has been held that any personal property, whether tangible or intangible, may be mortgaged; thus, it has been decided that certificates of deposit issued by a bank, insurance policies, corporate stock, etc. may be mortgaged, but in Wisconsin the law is that while such property may be given as security for debt and the contract is in the nature of a chattel mortgage, it is not such a chattel mortgage as is contemplated by the statutes. Thus, in a case in which a partner's interest in a firm was evidenced by a certificate issued by the partnership, and the partner assigned his certificate as security, the court says: "The

chattel mortgage statute refers only to personal property capable of delivery, as its words clearly indicate, and not to defeasible assignments of mere rights or choses in action...It has been held that assignments by way of security for a debt of mere rights or choses in action, such as rights under a lease, or insurance policy, or certificates of corporate stock, or a legacy or a judgment, or open account, are chattel mortgages in effect, but are not the chattel mortgages which are covered by the registry statutes because these statutes only apply where the mortgaged property is capable of manual delivery."

It has been decided in this state a number of times that a chattel mortgage cannot be given on property which is to be bought or made in the future. The property must be actually in existence at the time the mortgage is given. The courts have decided, however, that a mortgage on after acquired property gives a license to the mortgagee to take such property and subject it to the terms of the mortgage, if that is done by a seizure before the rights of third parties have intervened. The following are some Wisconsin decisions; H sowed a crop of oats, and before the same was up or presented the appearance of growing grain, gave a chattel mortgage on it. In a contest between the chattel mortgagee and another creditor the court decided that the chattel mortgage was void. "In our opinion a chattel mortgage can only operate upon property in actual existence at the time of execution, and cannot be given, as was attempted to be done in this case, upon a crop before it can be said to be in existence. A crop is in existence after the seed sown has sprouted and made its appearance above the ground as a growing crop." A chattel mortgage was given on "all my stock of harnesses, whips, saddles....now on hand, manufactured, or such as shall be manufactured, or bought, and contained in the shop or store occupied by me.." The court held that the morgagee acquired no title to the after acquired property, but that as to such property the mortgage conferred a revocable license on the mortgagee to take such property, and if he does so he will acquire title. If the license is revoked by the mortgagor before possession is taken, the mortgagee acquires no right under the license. S gave M a chattel mortgage on a certain lot of pine logs "cut and to be cut." After the mortgage was given a creditor of S levied an attachment on some logs