Page:North Dakota Reports (vol. 3).pdf/246

 apparent situation, and so be damnified by postponing action, or extending the time of credit already given, or possibly in some other manner.” Unless we interpret the word “creditors” in the light of the spirit of the statute as applicable to purchasers and mortgagees, we will ultimately find ourselves involved in the most absurd distinctions. One who takes a second mortgage to secure an existing debt is not entitled to protection as against a prior unfiled mortgage of which he had no notice, although he puts his mortgage on file before the first mortgage is filed; but, if the same creditor will refuse to accept what would seem to be a good security, he may, by suing upon his debt, and by levying upon the property before the mortgage is filed, secure a lien which will be paramount to that of the mortgage. This result is inevitable unless we look at the spirit of the law in construing the word “creditors.”

Again, a subsequent mortgagee for present value is not protected if he has notice of the existence of the unfiled mortgage when he takes his security and extends the credit; but if he will lend on the general credit of the mortgagor, and refuse the proffered security, he may, it is contended, by suing on his claim, and attaching the mortgaged property before the filing of the mortgage, obtain a superior lien. Some of the courts seem to hold that notice of the chattel mortgage at the time of the making of the seizure will defeat the creditor's right to assail it as void. But why should this notice work to his prejudice if he gave credit while the mortgage was withheld from record? The criticism on this doctrine in Crooks v. Stuart, 7 Fed. Rep. 800-803, meets our approval. Said the court: “One who gives credit to a merchant in the open and exclusive possession of a stock of merchandise upon which there is no recorded lien has a right to assume that he is dealing with the owner of such stock, and to rely upon such ownership in extending credit. If he is to be affected by any secret lien upon such stock which may be recorded before he secures a lien by levy or otherwise, it will generally happen that the first notice to him upon which he can make an affidavit for