28 N.J. Eq. 90 | New York Court of Chancery | 1877
This suit is brought to set aside the cancellation of a mortgage on land in Hudson county, given by Alfred Berney and his wife to the American Plate G-lass and Eire
The hill alleges that this cancellation was fraudulent on the part of all parties concerned therein, and that the company, in fact, received no consideration whatever therefor. By resolution of the 1st of April following, passed after the mortgage had actually been cancelled under the former resolution, it was declared that the company held the mortgage for $77,500 as security for only $66,500, and that it had accepted in lieu of it a new mortgage on the premises for $27,000; a mortgage on Smith’s Island, in Virginia, for $35,000; the acceptances of the company for $1,500 and $3,000 in cash. On the 28th of March, 1872, Berney and his Avife gave-to Thomas D. Armstrong a mortgage on .part of the premises covered by the mortgage for $77,500, to secure the payment of $27,000 with interest. The consideration of it was $18,500 paid by him to them, $7,000 for the par value of his stock in the company, then sold to them, and the above mentioned acceptances, then held by him, which were the company’s acceptances of two drafts, each for $750, drawn upon it by Daniel Messmore. The taking of this mortgage by Armstrong Avas dependent on the cancellation of the $77,500 mortgage, or the release therefrom of the part of the premises covered by the mort
The bill seeks to establish the $77,500 mortgage and to foreclose it, and claims for it priority over the mortgage to Armstrong, on the ground thatwhenthat mortgage was given the company was insolvent, and that he, being a director of it, knew or ought to have known that it was insolvent, and that he knew of and was a party to the withdrawing by that transaction from the assets of the company of the $77,500 mortgage, and the cancellation thereof without any .consideration whatever, and in fraud of the creditors and stockholders. It alleges that the conveyance to Dutton was without consideration and in furtherance of the fraud.
The first question to be considered is, whether the complainant has the right to sue, which he claims, seeing that he prosecutes as, and mérely as, assignee in bankruptcy of the American Plate Glass and Fire Insurance Company, whereas the name of that corporation was, by an act of the legislature of this state, approved April 4th, 1872, changed to the “ America Insurance Company.” P. L. 1872, p. 1301. That act is entitled “ An act to amend an act entitled an act to incorporate the American Plate Glass and Fire Insurance Company of Yew Jersey.” It provides for the change of the name, for the increase of the capital stock, and for increasing the number of directors, &c.,&c. Though-the act declared that it was to take effect immediately, it 'appears that the fees required by law to be paid before it could take effect were not paid until on or about the 30th of June, 1872, and it had not the force or effect of a law until then. P. L. 1858, p. 220. It appears, indeed, that on the 16th of April of that year the card of the America Insurance Company was published in a Jersey City paper, and was continued therein for a while, but that card was signed by Mr. Moies as president, and he, on the 21st of that month, receipted for the securities of the company as president of the American Plate Glass and Fire Insurance Company of New Jersey.
That the company was fraudulently conducted, almost if not quite from the beginning of its operations, there is no room to doubt. Some of the directors appear to have been dissatisfied with the way in which it was managed, and to have suspected Berney, the president, of the fraud of which he. was undoubtedly guilty. They left the company on an agreement by which the company returned to them, on surrender of their stock, the money and securities paid and given by them for the stock they held, and so the management of the concern was practically turned over to Berney. It appears that he designed to obtain possession of and cancel the $77,500 mortgage, which represented at the time so much of the assets, (though estimated only at $66,500, .because that valuation had been put upon it by the insurance commissioner of New York,) and in the effort he had the acquiescence and active co-operation, so far as their votes were concerned, of a majority at least of the other members of the hoard; though as to some, and perhaps all of them, it was probably through undue confidence in him and the consequent acceptance as true of his repre
To the extent of the amount of money actually paid by him, including the amount of the acceptances and interest, Armstrong’s executors are entitled to the protection of equity. But not beyond that amount. His sale of his stock to the Berneys was not, under the circumstances, a consideration which ought to be recognized. The stock was then,
It remains to consider the defence of Mrs. Berney and Mr. Dutton. She insists that the $77-,500 mortgage was on her own separate property; that it never was delivered to the company, and that she never received any consideration for it. The evidence is that that mortgage was upon land bought by her husband, though the conveyance was taken in her name, and that the entire purchase money, $15,000, was secured to be paid by his bonds, with mortgages on the premises executed by him and her. These mortgages were paid off with money borrowed by Berney and his wife from the company, and repaid with the loan from Armstrong. The testimony makes it evident that she was merely the depositary of the title, in trust for her husband, and that the property was his in fact. But, however that may be,
The cancellation was obtained by a gross fraud, anch ought to be absolutely set aside, unless Mr. Dutton is entitled to protection. The conveyance to him was made on the 1st of April, 1872, the day on which the resolution was passed under which the Armstrong mortgage was given. He is Mrs. Berney’s father. He gave his note for $25,000, payable in a year, for the consideration. He had paid nothing on it when the bill was filed. He was a laboring man, worth hut little, comparatively, at his own estimate. After this suit was commenced he took up this note, he says, by giving smaller notes and a patent-right for some invention of his own. He cannot tell the amount of these notes, nor the consideration of the assignment of the patent-right. He says he gave the new notes as long as six months after the note for $25,000 became due. That was payable in one year. He gave the other notes for it, then, not earlier than October, 1873. The bill was filed on the 25th of February in that year. Mrs. Berney’s account of the matter is no more satisfactory. She says she does not know how many notes her father gave her for the property; that she has them at home; that she does not remember whether they were all given at the same time, and that she does not remember when the first note was given, nor what its amount was. Again, she says that she has not given to her husband all that she received from that conveyance; that she did not-give him all the notes that she had; that she is not positive, that she gave him' the first note she received, but thinks she did. On cross-examination she says that the note given by her father was for $25,000, and that she still holds it. When Dutton was examined in this suit, in March, 1873, he had never received any of the rents of the property, nor paid anything upon it. Berney had collected the rents. Dutton, when he was examined, did not know in what county or town the land was situated, what the annual taxes on the property were, nór what rate of interest the mortgages,