Court Opinion

ID: 8486034
Source: CourtListenerOpinion
Date Created: 2022-11-18 04:03:03.681284+00
Date Added: 2024-06-11T16:49:59.837110
License: Public Domain

RICHMOND, J.,
dissenting:
I would reverse the decision of the trial court and remand this case with directions to recognize the validity of the appellant’s prior, recorded chattel mortgage with respect to appellees’ judgment-creditor status and to accordingly distribute the proceeds of the execution sale of KMST’s property.
As the trial court and the majority of this court recognize, their decisions will bring consternation to inventory financing in the Territory unless and until there is corrective legislation. It would be a practical impossibility to update a chattel mortgage with specific descriptions of every item of the inventory of a functioning business every day; as such, chattel mortgages have effectively been eliminated in American Samoa, for the time being. It should not be necessary and is not appropriate to inflict this harsh restriction, however temporary, on business practices in the community.
The majority rule under common-law and pre-Uniform Commercial Code statutes clearly upholds "all" of a certain kind or type of mortgaged personal property as sufficiently specific. A description in this manner in a recorded chattel mortgage, even if inquiries are necessary to fully identify the property, adequately notifies subsequent creditors of the encumbrance. Security First Nat’l Bank v. Haden, 211 Cal. App. 2d 459, 27 Cal. Rptr. 282, (1962); Evans v. Stewart, 66 N.W.2d 442 (Iowa 1954); First Nat’l Bank v. First Nat’l Bank, 106 So. 422 (Fla. 1925); In re Beede, 126 F. 853 (N.D.N.Y. 1903); see also cases cited in Annotation, Sufficiency of Description in Chattel Mortgage as Covering All Property of a Particular Kind, 2 A.L.R.3d 839, 840-51 (1965). For inventory financing, particularly when, as here, "all" of the inventory is mortgaged, the instrument itself does raise the inquiries necessary to discover the exact scope of the mortgage and thus adequately notifies third parties of the mortgage. When subsequent *11creditors have actual notice of a prior recorded chattel mortgage, the majority rule is even more universal. Annotation, supra, 2 A.L.R.3d at 850-51.
Reversal, in my view, would not violate any principle leaving policy-making to the Legislature. As the court stated in Bennett v. Green, 119 S.E. 620, 622 (1923), "[a] general description of this kind is tantamount to a specific description of each unit composing the whole." Such a description of "aH" of a particular thing actually makes it easier for a subsequent creditor to determine what is mortgaged than if only some (or all) items are specifically described, because a creditor need not determine which of the particular items are mortgaged, and which are not — they all are.
Additionally, the other territorial recording statutes, A.S.C.A. §§ 37.0210 and 37.1002(b), embody the concept of constructive notice through recordation in land-alienation and mortgage transactions. Consistency would indicate a similar legislative intent with respect to inventory and other business financing using personal property as security, but the majority’s interpretation makes the description and the notice it affords into a substantive requirement that voids the mortgage even between the parties themselves. This narrow and crippling construction is unnecessary. Interpreting the statute to permit a mortgage of "all" of a particular thing, such as inventory, is plausible under the statute as it is written, is a much more practical construction of the Legislature’s intent, and is more consistent with other territorial recording statutes.
Perhaps those involved in the legislative process will quickly take up the banner of reform.