Secured Transactions History: The Impact of Southern Staple Agriculture on the First Chattel Mortgage Acts in the Anglo-American World

The development of secured transaction law in colonial America was spurred by a litigious conflict between the recognizance and the chattel mortgage. The recognizance was the admission and recording of a debt before the court in order to secure credit. However, court hearings were infrequent in the colonies and often logistically impractical to the average farmer or merchant. The chattel mortgage was a more informal and practical solution to providing lines of credit on personal property. Without a system for recording chattel mortgages, lenders could not be sure in their investments. In the southern colonies, the emergence of staple crops, the infrequent use of recognizances, and the planter-merchant’s influence and control of local governments led to the adoption of chattel mortgage acts. If a southern colony developed a staple agricultural product, such as rice, tobacco, or tar and pitch, then merchants were willing to extend lines of credit on indentured servants and various goods in exchange for an interest in an equivalent value of the staple product by years end. The use of a recognizance by some lenders, only after they realized their borrowers were on the verge of default, created the opportunity for subsequent lender to take a chattel mortgage on the borrower’s personalty before the original lender recorded the recognizance. Because English common law recognized a first in time right for mortgages, courts held that the earlier recorded chattel mortgage would be recognized after litigation. In an effort to streamline the process and protect the interests of the lenders who also served as sheriffs and legislators, many southern colonies passed the chattel mortgage acts requiring filing of the mortgage within a designated period of time, which voided all unrecorded interests

Secured Transactions History: The First Chattel Mortgage Acts in the Anglo-American World

The chattel mortgage acts first arose in the southern mainland English-American colony of Virginia in 1643. Other colonies followed suit over the next 100 years. The function of the earliest chattel mortgage acts was not to legalize the transaction, but to declare it void if not registered, or to provide a priority rule favoring the registered transaction. Legislatures did not pass these colonial chattel mortgage acts to legalize an otherwise fraudulent transaction because reported cases indicate that the common law upheld the nonpossessory secured transaction prior to the passage of the earliest act in the southern states. The Northeastern States’ Industrial Revolution had nothing to do with spawning these chattel mortgage acts. The southern economy of plantation agriculture led to the creation of the acts because planters seeking riches through expansion granted nonpossessory interests in their plantations, its labor contracts, and its agricultural products to obtain borrowings. The nonpossessory secured transactions interfered with other transactions, primarily the judgment lien on the debtor’s property and sales of the debtor’s property. The nonpossessory secured transaction would defeat a subsequent judgment lien under the derivation principle as a sale. The chattel mortgage registration act would now alert the sheriff and the judgment lienor

Secured Transaction History: The Impact of English Smuggling on the Chattel Mortgage Acts in the Spanish Borderlands

Spanish colonies, including the territories of Florida, Louisiana, and southwestern America, acknowledged the jurisdiction of Spanish royal decrees. The colonies approached the registration of mortgages in a similar but more tentative fashion, recognizing the distances between the borderlands and the registrar’s offices. The law developed differently in Florida and Louisiana, which were administered by a different governmental body. While the registration process was required for chattel mortgages on slaves, there is no evidence the rules were enforced or applied to other types of mortgages on personalty. However, in 1770, Louisiana adopted a filing requirement for chattel mortgages for all slaves and ships in order to protect against fraud and cheaper English black market goods. Although France assumed power in Louisiana, the territory followed Spanish law rather than French law by judicial decision. Mexico’s cessation from Spain had little effect on the orchestration of government, but Spain’s former southwestern territories continued to follow Spanish law. Mexico recognized chattel mortgages, but made no effort to enforce filing requirements in the Spanish borderlands. Several historical theories propose the origin of the spanish chattel mortgage acts. A royal tax was placed on the sale of most goods. These sales were to be recorded by a notary and any sale not recorded was invalid, thereby encouraging the recording of sales of personal property. However, O’Reilly, charged with imposing the Spanish mercantile system on the French inhabitants of Louisiana, introduced a recording statute preceding Spain’s land registration or ship registration. Another theory suggests that O’Reilly’s Spanish chattel mortgage act was the response to an isolated economic issue in Louisiana. Because Louisiana was not self-sufficient, trade dominated by the Spanish mercantile system failed to encourage economic independence. The act created assurances of property interests and thereby allowed creditors to be secure in their transactions when offering lines of credit. The adoption of the Spanish chattel mortgages in various forms in the Spanish borderland territories precedes the common belief that chattel mortgages developed in the Northeast in the 1820s

Secured Transactions History: The Impact of English Smuggling on the Chattel Mortgage Acts inthe Spanish Borderlands

This Article begins to correct the view that chattel mortgage acts began in the northeastern United States. First, this Article investigates whether Spanish law recognized chattel mortgages against third persons. Finding that Spanish law did, this Article then examines whether Spanish officials developed any filing requirements for them. Concluding that these officials did not, this Article next delineates the application of this law in the various Spanish-Borderland provinces. Several of these provinces, at various times, did have filing requirements for some types of chattel mortgages, contrary to the Spanish law otherwise applicable. Next, this Article investigates the survival or replacement of these chattel mortgage acts under the Anglo-American regime. Finally, this Article provides the source for the colonial Spanish chattel mortgage acts-namely, the effort to eradicate English smuggling in a newly acquired province and thereby render the province a viable component in the Spanish mercantile system

Secured Transactions History: The First Chattel Mortgage Acts in the Anglo-American World

The chattel mortgage acts first arose in the southern mainland English-American colony of Virginia in 1643. Other colonies followed suit over the next 100 years. The function of the earliest chattel mortgage acts was not to legalize the transaction, but to declare it void if not registered, or to provide a priority rule favoring the registered transaction. Legislatures did not pass these colonial chattel mortgage acts to legalize an otherwise fraudulent transaction because reported cases indicate that the common law upheld the nonpossessory secured transaction prior to the passage of the earliest act in the southern states. The Northeastern States’ Industrial Revolution had nothing to do with spawning these chattel mortgage acts. The southern economy of plantation agriculture led to the creation of the acts because planters seeking riches through expansion granted nonpossessory interests in their plantations, its labor contracts, and its agricultural products to obtain borrowings. The nonpossessory secured transactions interfered with other transactions, primarily the judgment lien on the debtor’s property and sales of the debtor’s property. The nonpossessory secured transaction would defeat a subsequent judgment lien under the derivation principle as a sale. The chattel mortgage registration act would now alert the sheriff and the judgment lienor