232 A.D. 63 | N.Y. App. Div. | 1931
It will suffice to state our conclusions.
The transaction of January 27, 1928, was a completed rescission of the prior agreements and transactions of the parties thereto. It was not a purchase by the Long Beach Company of its stock from the McCarty group. This record contains no credible or legal proof that either the Long Beach Lumber Company or the Nostrand Lumber Company was insolvent on February 1, 1928, or shortly prior thereto. Insolvency is determined by section 271 of the Debtor and Creditor Law (as added by Laws of 1925, chap. 254). Inability to pay current obligations as they mature does not establish insolvency. The acts of the McCarty group and of
No creditors as such are involved in this action. The defendants, on this phase of the case, are the Long Beach Lumber Co., Inc., Nostrand Lumber Co., Inc., and Whitbread, who owns the Long Beach Lumber Co., Inc., and owns or controls the Nostrand Lumber Co., Inc. If the rights of any creditor as such are involved, they must be enforced in an appropriate action. The execution by the
As to defendants Kelly Lumber Company, Inc., and MidwoodTrust Company, the liens of these two defendants are superior to the hen of the plaintiff’s mortgage. The subordination provision in the lease of the Kelly Lumber Company, Inc., was not self-executing. It appears that that company never executed any instrument subordinating its lease to the hen of the plaintiff’s mortgage. Moreover, the plaintiff’s mortgage on the date of its execution was in excess of sixty-five per cent of the value of the property under lease to the Kelly Lumber Company, Inc. The percentage provision is to be apphed as of the date of the inception of the mortgage and the amount thereof at that time. Any other rule would engender injustice and endless confusion.
For the same reasons, the hen of the Midwood Trust Company to the extent that its mortgage is unpaid was never subordinated to the hen of the plaintiff’s mortgage. In any event, that subordination of the Midwood Trust Company’s mortgage to the lease of the Kelly Lumber Company only regulated priorities as between the Kelly Lumber Company and the Midwood Trust Company.
The judgment should be reversed upon the law and the facts, with costs, and judgment of foreclosure directed in favor of the plaintiff as against the defendants Long Beach Lumber Co., Inc., and Nostrand Lumber Co., Inc., and in favor of defendants KeUy Lumber Company, Inc., and Midwood Trust Company, with costs, by way of subordinating the hen of plaintiff’s mortgage to the hens of the lease and the mortgage, respectively, of these two defendants.
Young, Kapper, Hagarty and Scudder, JJ., concur.
Judgment reversed upon the law and the facts, with costs, and judgment of foreclosure directed in favor of the plaintiff as against
Since amd. by Laws of 1929, chap. 653.— [Rep.