Cappa v. MacArthur

• Decision Date: 19 January 1943
• Docket Number: 129/390.
• Citation: 29 A.2d 718,133 N.J.Eq. 7
• Parties: CAPPA v. MacARTHUR.
• Court: New Jersey Court of Chancery

29 A.2d 718

133 N.J.Eq. 7

CAPPA

v. MacARTHUR.

129/390.

Court of Chancery of New Jersey.

Jan. 19, 1943.

Syllabus by the Court.

Where a chattel mortgage was given to secure both an antecedent indebtedness and further credit, it will not be set aside as in fraud of creditors where further credit was in fact extended and the mortgagee had no knowledge of the insolvency.

Action by Joseph Cappa, as receiver of Central Cleaning & Dyeing Co., Inc., a corporation of New Jersey, against Joseph A. MacArthur, trading as MacArthur Petroleum & Solvent Company, to set aside a chattel mortgage.

Decree of dismissal advised in accordance with opinion.

Harry Eisenberg, of Newark, for complainant.

Samuel S. Black, of Paterson, for defendant.

LEWIS, Vice Chancellor.

This suit is brought by the receiver of a corporation to set aside as fraudulent a chattel mortgage covering certain of the machinery and equipment of the corporation. The mortgage was executed July 17, 1939, and by its terms was to secure a debt then due to the mortgagee in the amount of $198.72, together with any further indebtedness that might be due and owing not to exceed the amount of $400. In December, 1939, the defendant mortgagee took possession of most of the articles covered by the mortgage and sold them for the sum of $284. It is contended by complainant that the corporation was hopelessly insolvent at the time of the execution of the mortgage; that defendant had notice of this condition and that the mortgage was wholly for an antecedent consideration. He relies upon the Revised Statutes 14:14-2, N.J.S.A. 14:14-2, which read as follows:

"Conveyance after insolvency void as to creditors; bona fide purchaser. When any corporation shall become insolvent or shall suspend its ordinary business for want of funds to carry on the same, neither the directors nor any officer or agent of the corporation shall sell, convey, assign or transfer any of its real or personal property, choses in action, rights or credits, nor shall they or any of them make any such sale, conveyance, assignment or transfer in contemplation of insolvency.

"Any such sale, conveyance, assignment or transfer shall be null and void as against creditors, except that a bona fide purchase for a valuable consideration, before the corporation shall have actually suspended its ordinary business, by any person without notice of such insolvency or of the sale being made in contemplation of insolvency, shall not be invalidated or...