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Northern Illinois Univeristy Law Review





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Nonpossessory secured transactions evolved as a competitor to collusive judgments as a means to protect creditors from the loss of their investments in colonial America. A collusive judgment involved the debtor recognizing his debt before the court, while the creditor held equitable title to the debtor’s personalty as collateral while the debtor retained possession. The 1677 Statute of Frauds destroyed the priority of the collusive judgment presenting opportunities for other parties to seek the debtor’s collateral. The chattel mortgage, predecessor of the secured transaction, developed from the standard shipping practices during colonial times. The shipping industries extended lines of credit on exports and imports, employing chattel mortgages as security devices so that trading continued smoothly. Courts in these jurisdictions adopted a rebuttable rule allowing a third party with a chattel mortgage to present evidence at trial to rebut the presumption that the judgment lien holder was entitled to the collateral.

As the English and American systems became more complex and involved more middlemen, the shipping industry also invested in equipment manufacturing. The rebuttable rule could no longer protect the guarantor’s interests, which could be lost to an adverse jury decision. A political conflict between the desires of equipment manufacturers, preferring a rule upholding the nonpossessory secured transaction without jury trial, and retailers who prefered the per se fraud rule, was set to play out state by state at the beginning of the nineteenth century. With the exception of several states with interests adverse to the manufacturing industry’s interests, a majority of northern states adopted the chattel mortgage acts in the 1830s in an effort to defeat the preeminence of the judgment lien on mortgaged personal property.

Recommended Citation

George Lee Flint, Jr., Secured Transactions History: The Northern Struggle to Defeat the Judgment Lien in the Pre-chattel Mortgage Act Era, 20 N. Ill. U. L. Rev. 1 (2000).

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