Dealers Discount Corp. v. Vantar Properties, Inc.

• Decision Date: 16 October 1964
• Citation: 45 Misc.2d 49,256 N.Y.S.2d 257
• Parties: DEALERS DISCOUNT CORPORATION v. VANTAR PROPERTIES, INC.
• Court: New York Supreme Court

Page 257

256 N.Y.S.2d 257

45 Misc.2d 49

DEALERS DISCOUNT CORPORATION v.VANTAR PROPERTIES, INC.

Supreme Court, Special Term, Kings County, Part I.

Oct. 16, 1964.

Parker, Chapin & Flattau, New York City, for plaintiff.

Wiesenthal & Wiesenthal, New York City, for defendantBENJAMIN BRENNER, Justice.

Plaintiff, assignee of a chattel mortgage, moves for summary judgment in an action to foreclose same.The defendant purchased the chattels securing the mortgage at a trustee's sale in bankruptcy proceedings, the sale being subject to certain liens, including the chattel mortgage in question.

The defendant challenges the validity of said mortgage on the initial ground that said chattel mortgage was not issued in conformity with section 16, subd. 1 of the Stock Corporation Law because of the absence of the necessary consent of stockholders and the failure to properly file same.There is little question here that there was consent by a majority of the stockholders since an officer of a corporation, which was the sole stockholder in the mortgagor corporation, has submitted an affidavit attesting to that fact.And where, as here, consent has actually been given, the failure to file the certificate does not render the mortgage invalid (Black v. Ellis, 129 App.Div. 140, 113 N.Y.S. 558) as the purpose of the filing is merely to perpetuate evidence thereof (Rochester Savings Bank v. Averell, 96 N.Y. 467).The defendant contends, however, that the consent of the corporate stockholder is invalid since the stockholders of this corporate stockholder did not consent thereto, but it cites no case to support that contention, and I find no provision in the Stock Corporation Law to such effect.

In any case, section 16, subd. 1 of the Stock Corporation Law specifically exempts purchase money mortgages from the requirement for the consent to its execution by two-thirds of the stockholders and it is clear that the mortgage here involved is such purchase money mortgage.Therefore, even if the consent and the filing of a certificate thereof are in question, I find that the mortgage is not thereby invalidated.

The second ground asserted by the defendant as a basis for invalidating the mortgage is that the mortgage was fraudulently made and executed and that, as the trustee's transferee, it has the right to challenge its validity.Clearly, one who takes title from a fraudulent conveyor cannot assert the fraud since the fraudulent conveyor would be estopped from such an attack and the grantee receives no greater rights than those of the fraudulent conveyor.(Moseley v. Moseley, 15 N.Y. 334;Robertson v. Sayre, 134 N.Y. 97, 31 N.E. 250;Senica v. Neidhardt, Sup., 72 N.Y.S.2d 387.)

The defendant, however, asserts that its title was derived not from the mortgagor but from the title of the trustee in bankruptcy from whom the purchase was made and that therefore it stands in the shoes of the trustee and has all rights which the trustee might have had.U.S. Code, tit. 11, Section 110, sub. a of the Bankruptcy Law provides that the trustee of the estate of a bankrupt is vested with the title to, among other things, all property transferred by the bankrupt in fraud of his creditors.Section 110, sub. e(3) provides that a trustee may bring plenary proceedings to set aside a fraudulent conveyance.Additionally, under section 70, sub. e of the Bankruptcy Law the trustee is given the power to set aside fraudulent transfers or obligations voidable by creditors under state or federal law.The defendant thus contends that these rights to set aside a fraudulent conveyance involve a question of fact which must be tried and, in support of this position, cites the case of In re Downing, 2 Cir., 192 F. 683, affd.201 F. 93.There the creditors, prior to the bankruptcy, had sought to set aside the conveyance as fraudulent and the court specifically ordered that the trustee could convey his right to do so.But the special circumstances which obtained in the cited case are here lacking and it is also...