Albert & Kernahan, Inc. v. Franklin Arms, Inc.

• Decision Date: 20 May 1929
• Docket Number: No. 99.,99.
• Citation: 146 A. 213
• Court: New Jersey Supreme Court
• Parties: ALBERT & KERNAHAN, Inc., v. FRANKLIN ARMS, Inc.

146 A. 213

ALBERT & KERNAHAN, Inc.,

v. FRANKLIN ARMS, Inc.

No. 99.

Court of Errors and Appeals of New Jersey.

May 20, 1929.

Appeal from Court of Chancery.

Suit by Albert & Kernahan, Inc., against the Franklin Arms, Inc., for the appointment of a receiver and the sale of defendant's assets and distribution of proceeds. The Hudson & Essex Building & Construction Company and the Service Trust Company of New Jersey were made parties, and from the decree determining priorities in accordance with the report of a master, they appeal. Appeal of the Service Trust Company of New Jersey dismissed, and order reversed on the appeal of the Hudson & Essex Building & Construction Company.

Isaac Gross, of Jersey City, for appellant Hudson & Essex Bldg. & Const. Co.

Weinberger & Weinberger, of Passaic, for appellant Service Trust Company of New Jersey.

Edward R. McGlynn, of Newark, for respondents.

GUMMERE, C. J. The bill in this case was filed by a creditor of the Franklin Arms, Inc., for the purpose of obtaining a decree adjudging it to be insolvent, for the appointment of a receiver, and for an order directing the receiver to sell the property and assets of the bankrupt corporation and distribute the proceeds of such sale among its creditors. No answer being filed to the bill of complaint, an ex parte hearing was had, which resulted in an adjudication of insolvency and the appointment of a receiver. An order was subsequently made directing the receiver to sell the property and assets of the defendant corporation; and, pursuant to this mandate, the receiver made such sale, the purchase price received by him thereon being $110,000. The receiver having reported the sale, an order was then made referring it to a master to take an accounting of the moneys due to the various holders of incumbrances upon the defendant corporation's property and to state the order in which they were entitled to be paid. It appeared on the hearing had before the master that there were two mortgages upon the property, one for $215,000, made to Rollin J. Francis, as trustee (for whom Service Trust Company of New Jersey was afterwards substituted) to secure an issue of bonds to be made by the mortgagor, and that the purpose of making this mortgage and the issuing of the bonds was to raise money to enable the Franklin Arms to erect a large apartment house upon a tract of land owned by it in the town of Bloomfield. The other mortgage was for $9,500, and was held by the Hudson & Essex Building & Construction Company. It further appeared that there were certain mechanics' liens upon the property, amounting altogether to about $70,000. The mortgage of the Hudson & Essex Building & Construction Company was concededly prior in point of time to the trust mortgage, and also prior to the several mechanics' liens. The proofs further showed that, when the making of the trust mortgage of $215,000 for the purpose above stated was under consideration, the Hudson & Essex Company entered into a written agreement with the owners of the property, by the terms of which their mortgage was to be postponed and subordinated to that to be given to the trustee, who agreed that the money to be advanced thereon should be appropriated to the payment of expenses incurred in the erection of the apartment house. The proofs submitted by the trustee showed that he had advanced moneys to the Franklin Arms to the extent of $44,700, to be used in the payment of moneys due and to become due to contractors engaged in the erection of the...