Chattel Mortgage

When an interest is given on moveable property other than real property (in which case it is usually a 'mortgage'), in writing, to guarantee the payment of a debt or the execution of some action.

When a lien is given on goods, chattels, moveable or personal property (other than real property in which case it is referred to as just a mortgage), in writing, to guarantee the payment of a debt or the execution of some action.

Contrary to mortgages which only rarely transfer any interest until there is a default, chattel mortgages are more likely to transfer ownership until the debt is paid off.

The chattel mortgage automatically becomes void when the debt is paid or the action is executed.

The description of the chattels purportedly mortgaged should be detailed and sufficient such that it can be easily known and distinguished by third parties; that a person looking at the chattel mortgage document could determine by proper inquiries whether or not a chattel in question was encumbered.

A sample text of a chattel mortgage follows:

"In return for us lending you money under the Promissory Note secured by this Chattel Mortgage, you give, mortgage, and grant a security interest to us in the following property (this means you transfer your interest in this property to us) as of the date of the Promissory Note, to all your home furnishings and equipment as follows ....(list)."

The term "chattel mortgage" is being gradually discontinued by legislators and contemporary legal drafters as is evidenced by BC's former Chattel Mortgage Act, now repealed, and the presence of the Personal Property Security Act, which is self-explanatory.

In Miller v. Eagle Star, the pledged the following as chattel mortgage to secure a $150 loan:

"My one-half interest in five acres of tobacco and eight acres of cotton and all interest in four acres of corn to be grown on the land of E. W. Miller. Also one bay mare horse about seven years old, named Bell.”

In the process of rendering judgment, the Court took the occasion to state that "a chattel mortgage is a conveyance of some present legal or equitable right in personal property, as security for the payment of money, or for the performance of some other act."

Chattel mortgages are often negotiated between a vendor and purchaser where the purchaser has to finance the purchase; the vendor not wishing to fully release his interest in the property being sold until he's been fully paid, takes a chattel mortgage. Examples might be the purchase of an airplane, car or other recreation vehicle.

Many jurisdictions either allow or require the registration of chattel mortgages at a central registry.

French: nantissement or hypothèque mobilière.

References:

• BC's Personal Property Security Act at qp.gov.bc.ca/statreg/stat/P/96359_01.htm
• Miller v. Eagle Star British Dominions Ins. Co. Limited of London, England 143 SE 663 (1928, Supreme Court of South Carolina)