If a bank as chattel mortgagee fails to register the mortgage of a car, which of the following is false?
A) If the chattel mortgagor would sell the car to a third party and not pay the chattel mortgagee, the third party's claim would override that of the chattel mortgagee.
B) If a trustee in bankruptcy seizes the car from the chattel mortgagor, the trustee's claim would override that of the chattel mortgagee.
C) A potential purchaser of the car from the chattel mortgagor would not find the bank's interest recorded in the central registry.
D) The chattel mortgagee has lost his security and thus all his legal rights.
E) The failure to register would not affect the rights of the chattel mortgagee against the chattel mortgagor if no third party is involved.

Question

Quizplus · Accepted Answer

The statement that the chattel mortgagee has lost all their legal rights is false. While the failure to register the mortgage means the bank's interest would not be recorded in the central registry (Option C), and the claim of a third party or trustee in bankruptcy may override that of the chattel mortgagee (Option A and B), the bank still has legal rights against the chattel mortgagor (Option E). However, the bank's failure to register the mortgage means they may have difficulty enforcing their legal rights in the event of a default by the chattel mortgagor.

If a Bank as Chattel Mortgagee Fails to Register the Mortgage