## Facts

- John Hancock, a tanner, borrowed money from James Clow and James Sharp and gave them a chattel mortgage on bark, tools, and hides/skins/leather in his tanyard, described in general terms.
- Hancock retained possession of the mortgaged items and continued using them in the tanning process.
- The mortgage was not recorded or otherwise publicly disclosed.
- After Hancock’s partnership dispute with George Poe, arbitration resulted in an award for Poe, and judgment was entered against Hancock for more than $2,250.
- Poe obtained a writ of fieri facias, and Sheriff William Woods levied on and sold the tanyard property; Poe had no notice of the mortgage when his claim was fixed by arbitration and reduced to judgment.
- The sale proceeds exceeded the mortgage debt; Clow and Sharp demanded payment from the proceeds, but Woods paid the proceeds to Poe on the judgment.
- Clow and Sharp sued Woods for levying on and distributing proceeds from property they claimed was subject to their prior mortgage.

## Issues

1. Whether an unrecorded chattel mortgage is enforceable against a subsequent judgment creditor and execution sale when the mortgagor retains possession and the creditor lacked notice when the lien attached.
2. Whether, under the Statute of 13 Elizabeth, a “secret” separation of ownership from possession is fraudulent in law and void as to creditors and purchasers without notice.

## Decision

- The Supreme Court of Pennsylvania affirmed judgment for the sheriff.
- The court treated the undisclosed chattel mortgage, with possession retained by the mortgagor, as fraudulent in law under the Statute of 13 Elizabeth as to subsequent creditors and purchasers without notice.
- The sheriff could lawfully levy on and sell the chattels as Hancock’s apparent property and apply proceeds to Poe’s judgment.
- The mortgagees had no priority enforceable against Poe or the sheriff with respect to the execution sale proceeds.

## Legal Principles

- A transfer or security interest in personal property that leaves the debtor in possession, without delivery or public notice, is presumptively fraudulent and void as to later creditors and bona fide purchasers without notice under the Statute of 13 Elizabeth.
- Fraud may be found “in law” from the transaction’s structure; proof of actual intent to defraud is not required where undisclosed separation of title and possession misleads creditors.
- Such a mortgage may remain effective between mortgagor and mortgagee but is unenforceable against third-party creditors who, without notice, rely on the debtor’s apparent ownership created by possession.

## Conclusion

The court held that a chattel mortgage kept secret by leaving the mortgagor in possession without public notice is void against later judgment creditors without notice, allowing an execution creditor’s levy and distribution of sale proceeds to prevail over the prior mortgagee’s claim.


Clow v. Woods, 5 Serg. & Rawle 275 (Pa. 1819)