Opinion ID: 1503815
Heading Depth: 1
Heading Rank: 1

Heading: After-Acquired Merchandise.

Text: The mortgagee contends that, even though the mortgage did not specifically refer to after-acquired merchandise, a person dealing with the mortgagors would know or  since the chattel mortgage was recorded  should have known that the stock would continually have to be replaced with new merchandise, and therefore the mortgage impliedly covered the after-acquired merchandise. Apparently there is a lay belief that mortgages of stock-in-trade necessarily include after-acquired merchandise, but the courts have universally rejected this theory. This Court has held repeatedly that a chattel mortgage which provides that after-acquired merchandise shall be substituted for the original stock of merchandise, although not void as fraudulent, is a nullity at law. Hamilton v. Rogers, 8 Md. 301 (1855); Rose v. Bevan, 10 Md. 466 (1857); Wilson v. Wilson, 37 Md. 1 (1872); Crocker v. Hopps, 78 Md. 260, 28 A. 99 (1893); First National Bank v. Lindenstruth, 79 Md. 136, 28 A. 807 (1894). [2] But it has also been held that a similar provision in a mortgage is valid and enforceable in equity under some circumstances. Butler v. Rahm, 46 Md. 541 (1877); First National Bank v. Lindenstruth, supra . Thus it appears that the law on this question is not as clear and settled in Maryland as might be desired. But apparently other jurisdictions have had difficulty with the same problem. [3] As stated, the mortgagee earnestly contends  in fact, he devoted nearly the whole of his brief and oral argument to the question  that he had an equitable lien on the after-acquired merchandise. However, it is clear that we do not reach the question he has stressed for the simple reason that there is no mention whatever in the chattel mortgage of after-acquired property to which a lien of any sort could have attached. Generally, if the mortgage fails to specify an intention to create a lien on after-acquired merchandise, no lien will arise. Or, stated conversely, if there is an intention that after-acquired merchandise shall feed the lien of the mortgage, a specific provision to that effect must be included in the mortgage. See Cohen and Gerber, Mortgages of Merchandise, 39 Colum. L. Rev. 1338, 1350-51 (1939). Cases in other jurisdictions stating this rule include: Snow v. Cody, 96 Okla. 81, 220 P. 578 (1923); In re Thompson, 164 Iowa 20, 145 N.W. 76 (1914); Ryan v. Rogers, 14 Idaho 309, 94 P. 427 (1908); Godfrey & Sons Co. v. Citizens' Nat. Bank, 64 Neb. 477, 90 N.W. 239 (1902); Bergman v. Jones, 10 N.D. 520, 88 N.W. 284 (1901); Kane v. Lodor, 56 N.J. Eq. 268, 38 A. 966 (1897); Pinkstaff v. Cochran, 58 Ill. App. 72 (1894); Wilcox v. Jackson, 7 Colo. 521, 4 P. 966 (1884); People v. Bristol, 35 Mich. 28 (1876); Partridge v. White, 59 Me. 564 (1871); and see additional cases cited in 1 Jones, Chattel Mortgages and Conditional Sales (6th ed. 1933), § 173a. In the pleadings, the mortgagors stated that all of the original stock of merchandise had been sold by them, except for a very few items. Since the mortgagee did not offer any proof to the contrary or otherwise rebut this fact, it must be presumed that he waived whatever rights he may have had as a secured creditor to the proceeds of the sale of such part of the original stock of merchandise as remained unsold by the mortgagors.