Empire State Trust Co. v. Trustees of Wm. F. Fisher & Co.
| Decision Date | 08 April 1905 |
| Parties | EMPIRE STATE TRUST CO. v. TRUSTEES OF WM. F. FISHER & CO. et al. |
| Court | New Jersey Supreme Court |
(Syllabus by the Court.)
Appeal from Court of Chancery.
Bill by the Empire State Trust Company against the trustees of William F. Fisher & Co. and the Broadway Trust Company. From a judgment of the Court of Chancery (57 Atl. 502) for plaintiff, the trustees appeal. Reversed.
Robert Adrian, for appellants. Sherrerd Depue, for respondent.
The leading facts in this case are stated in the opinion of Vice Chancellor Pitney, on which the decree now appealed from was rendered. The controversy arises from the claim of the trustees in bankruptcy of a New Jersey corporation styled William F. Fisher & Co. that the mortgage made by the corporation to the Broadway Trust Company on September 10, 1902, to secure a debt created on May 20, 1902, was invalid against the creditors of the corporation, and should be so adjudged at the instance of the trustees. The decree complained of sustained the mortgage, and the trustees appeal.
The rights of the appellants must be ascertained by the provisions of the federal bankrupt act of July 1, 1898, c. 541, 30 Stat. 544 [U. S. Comp. St 1901, p. 3418]. Dudley v. Easton, 104 U. S. 99, 26 L. Ed. 668. We agree with the learned vice chancellor in the opinion that when the mortgage was executed the corporation was not insolvent, within the meaning of that term as defined in the federal statute, and that there is no provision of the statute which of its own force would invalidate the mortgage. But clause "e" in section 70 of the act is as follows: "The trustees may avoid any transfer by the bankrupt of his property which any creditor of such bankrupt might have avoided, and may recover the property so transferred or its value from the person to whom it was transferred, unless he was a bona fide holder for value prior to the date of the adjudication." 30 Stat. 566 [U. S. Comp. St 1901, p. 3452]. This brings up for consideration the question whether the creditors of the Fisher Company might have avoided the mortgage.
The sixty-fourth section of the New Jersey corporation act (P. L. 1896, pp. 277, 298) declares that "whenever 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 estate, effects, choses in action, goods, chattels, rights or credits, lands or tenements: nor shall they or either of them make any such sale, conveyance, assignment or transfer in contemplation of insolvency; and every such sale, conveyance, assignment or transfer shall be utterly null and void as against creditors: provided, 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 impeached." In enforcing this statute we are not controlled by the definition of insolvency contained in the bankrupt act, but must accord to that term the meaning ascribed to it in the courts of this state. Here it denotes a general inability to meet pecuniary liabilities as they mature, by means of either available assets or an honest use of credit National Bank of Metropolis v. Sprague, 21 N. J. Eq. 530, 538; Skirm v. Eastern Rubber Mfg. Co., 57 N. J. Eq. 179, 184, 40 Atl. 769. In this sense the Fisher Company was undoubtedly insolvent when the mortgage was executed. It then owned $12,943.57 of the accounts payable, $29,252.26 of promissory notes, of which notes amounting to $8,995 had been protested and $39,000 of business debts secured by mortgages upon its manufacturing plant. Its available assets were insignificant, its legitimate...
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