79 N.J. Eq. 176 | N.J. | 1911
The opinion of the court was delivered by
The learned vice-chancellor held that the mortgage was invalid as far as it attempted to secure the then existing debts of the amusement company, but that, although the company was insolvent, the mortgage was valid security for the subsequent advances, notwithstanding section 64 of the Corporation act, for the reason that the trustees, particularly Van Clief, who advanced the money, had no notice of the insolvency. He did not consider whether or not the mortgage was invalid under section 12 of our statute of frauds. If we thought it necessary to consider the effect of section 64 of the Corporation act, we should have some difficulty in finding, as the vice-chancellor did, from the facts in the case, that Van Clief was without notice of the insolvency; but it is unnecessary to pass upon that question, for the reason that the case can be disposed of under the twelfth section of the statute of frauds. The above recital of facts suffices to show that as to antecedent creditors the case comes within the rule of Owen v. Arvis, 26 N. J. Law (2 Dutch.) 22, and National Bank of the Metropolis v. Sprague, 21 N. J. Eq. (6 C. E. Gr.) 530. Notwithstanding what Vice-Chancellor Pitney said in Sipley v. Wass, 49 N. J. Eq. (4 Dick.) 463 (at p. 473). the authority of these cases has not been at all shaken by the later decisions of Muchmore v. Budd, 53 N. J. Law (24 Vr.) 369, and Clinton Bank v. Cummins, 39 N. J. Eq. (12 Stew.) 577. Muchmore v. Budd turned upon the question whether the bill of sale amounted to an assignment for the benefit of creditors within the meaning of our statute relating to such assignments, and it was held it did not. If not, the case was an ordinary one of preference of creditors. In neither that case nor in Clinton Bank v. Cummins was the question of fraudulent intent involved. In the present case, it was clearly the intent of the parties to the mortgage that creditors who did not assent should he deprived of any right to share in the security, which covered all the property of the amusement company, so that the effect was that creditors unwilling to assent to the terms proposed -by the debtors were shut out. This was exactly the scheme condemned in National Bank of the Metropolis v. Sprague. The present case
It is urged that the state of the record prevents creditors from profiting by this appeal because a decree pro confesso has been taken against them in the court of chancery. It is conceded that there were creditors who did not assent to this scheme; the receiver represents them; he raised the issues by proper pleading in the court of chancery, and is entitled to press the objections to the mortgage in this court. The fact that some of the creditors, whose counsel signed the brief in behalf of the appellant, assented to the arrangement, is of no moment. The receiver is tile appellant, representing the rights of non-assenting creditors. The question of equities that may have arisen by reason of the assent of-many creditors to the scheme is not now before us. That will naturally arise in the court of chancery upon the distribution of the fund now in the hands of the receiver. ■
For the reasons stated, the decree is reversed and the record remitted to the court of chancery for further proceedings in accordance with this opinion. The decree in favor of the Commonwealth Eoofing Company is affirmed for the reasons stated by the vice-chancellor.