Empire State Trust Co. v. William F. Fisher Co.
| Citation | 57 A. 502,67 N.J.E. 88 |
| Parties | EMPIRE STATE TRUST CO. v. WILLIAM F. FISHER CO. et al. |
| Decision Date | 20 February 1904 |
| Court | New Jersey Court of Chancery |
Suit by the Empire State Trust Company against the William F. Fisher Company, the Broadway Trust Company, and others, to foreclose a mortgage, in which the trustees in bankruptcy of the William F. Fisher Company appeared and alleged that the mortgage executed by the bankrupt to the Broadway Trust Company was void. Decree in favor of validity of mortgage.
The complainant filed a bill to foreclose a mortgage given to it by the William F. Fisher Company, a corporation, upon property in Middlesex county. It made several holders of subsequent incumbrances parties thereto. Among them, and next in order of priority, was the Broadway Trust Company, which held and holds a mortgage for $15,000. Next below that mortgage are two to William F. Fisher and one to Frieda Hart. Subsequently to the giving of these mortgages the Fisher Company was thrown into involuntary bankruptcy, and Messrs. Samuel F. Wylie and Frederick Weigel were appointed trustees. The Broadway Trust Company filed no answer at first, but gave notice, under the rule, that it desired to have its mortgage reported upon. Subsequent to this Wylie and Weigel, the trustees, applied for and obtained leave to appear as parties defendant and to answer. By their answer they attacked the validity of all the mortgages above mentioned, on the ground that they were given under circumstances which rendered them voidable at the instance of the trustees. The issue between the trustees and the complainant as to its mortgage was brought to a hearing and determined in favor of complainant shortly before June 18, 1903, and decree made for foreclosure and sale. The execution on that decree was stayed by order of the federal court. In the meantime the Broadway Trust Company filed its answer to the bill of complaint, which answer included an answer to so much of the answer of the trustees as attacked its mortgage. An issue in this irregular manner was made up between the Broadway Trust Company and the trustees in bankruptcy, and brought to a hearing November 17 and December 2, 1903.
Sherrerd Depue and Ira Leo Bamberger, for Broadway Trust Co. Robert Adrain, for the trustees.
PITNEY, V. C. (after stating the facts). The mortgage of the Broadway Trust Company was made and executed September 10, 1902, and recorded September 13, of that year, to secure the sum of $15,000, with interest, in three months from that date. Three days later the Fisher Company executed three other mortgages—one to Fisher, its president, to secure an amount not exceeding $10,000; another to Frieda Hart to secure an amount not exceeding $10,000; and a third to Fisher to secure an amount not exceeding $20,000. On October 4, 1902, two small judgments were docketed against the Fisher Company in the Middlesex common pleas. Shortly after that a creditor took proceedings in bankruptcy against the said company in the federal court, with the result that on October 27, 1902, it was duly adjudged a bankrupt.
I shall first state the facts, as I find them, bearing on the question of the validity of the mortgage here in question:
The William F. Fisher Company was the owner of a valuable tract of clay land, of which 250 acres were practically available for making brick, situate at and near the village of Sayreville, on the south side of the Raritan river, between New Brunswick and South Amboy. It also owned a proper proportion of sand-bank land, producing sand fit for use in molding bricks. It also owned a large and complete brick manufacturing plant, furnished with the best modem machinery, located on the banks of the river, with wharfing which enabled it to float its bricks to all the water-front towns and cities in the neighborhood. Its plant was capable of producing over 30,000,000 bricks a year. Besides, it had the reputation of making a superior article of common building bricks, known as "Adamantine Brick," which enabled it to find a ready market. This plant had cost over $200,000, and could not be replaced for $250,000. The average profit on the bricks manufactured and sold was $1 per thousand, and it had been manufacturing and selling from 20,000,000 to 30,000,000 a year. It was capitalized at $185,000, of which $156,000 were owned by William F. Fisher, and the balance by friends and relatives of his; and of that balance he controlled a considerable portion, by having advanced money upon it. The only incumbrance upon this property was a mortgage for $24,000 to one of the New Brunswick banks. The president of the company, Mr. William F. Fisher, was himself the owner of considerable real estate in New Brunswick, and elsewhere in Middlesex and Monmouth counties, most of it unincumbered, and he was reputed to be a man of wealth. Some time previous to May, 1902, he had been drawn into some outside speculative operations, apparently through the influence of one Max Hart; and although he was receiving, and was credited on the books of the company with, a large salary—for the last year or two, $10,000—he had, at the date of the mortgage here in question, overdrawn his account to the extent of about $00,000. There was also a debit account on the books of the company against Max Hart to the extent of $25,000. All the foregoing appears by the evidence of Mr. Wylie, one of the trustees, who had been for years a trusted and trustworthy employé of the company, and thoroughly familiar with its affairs. In May, 1902, Mr. Fisher and Mr. Hart, being, as I have said, engaged heavily in transactions outside the brick business, applied to Mr. Moses May, president of the Broadway Trust Company, for a loan. Mr. Hart had been introduced some two or three years previously to Mr. May, by a responsible business acquaintance of Mr. May, as a wealthy and entirely reliable contractor in New York City; and Mr. May knew nothing to the contrary of the truth of his friend's statement at the time Mr. Hart called with and introduced Mr. Fisher, in May, 1902. Before making any loan, Mr. May made the usual inquiries as to the standing of Mr. Fisher and the Fisher Company, for which the loan was asked. He inquired of their standing of the mercantile agencies, and found them rated very high. He also required the usual statements of the financial standing of both the company and its president, and they were furnished. In the statement of the company, its real estate was estimated at $150,000; the plant and movables, at $55,000; the outstanding accounts, at $12,000; making $217,000. The liabilities were stated as a mortgage held by the New Brunswick bank, $24,000; notes, $7,000; and open accounts, $3,000; making a total indebtedness of $34,000, and leaving a net value of over $180,000. A certificate was also given that the company had no other debts or liabilities of any kind. Mr. Fisher's personal statement gave a list of his real estate and stock in the Fisher Company, etc., and states himself to be worth $250,000. Fisher and Hart at the same time also presented to Mr. May a letter purporting to be written by Mr. Parker, cashier of the New Brunswick bank, addressed to Mr. May, as follows:
Parker, Cashier.
No direct or positive proof of the geniuneness of that letter was introduced, but I have no doubt that it was a genuine letter. It certainly had every appearance of being genuine, and Mr. May had every reason to believe, and did in fact believe, it was genuine. On the streugth of those representations, Mr. May discounted for the Fisher Company two notes, of $7,500 each, dated May 20, 1902?one at three months, and the other at four months. The first note being unpaid at maturity, August 20, 1902, action was immediately commenced thereon by the Broadway Trust Company against the Fisher Company. Immediately after the service of process, negotiations for a settlement were entered into, excuse was made for the nonpayment on the ground of Mr. Fisher's personal illness, and on September 12th, the mortgage here in question was given to secure as well the $7,500 which was past due, as the $7,500 note which would come due September 20th. Mr. May and the officers of the Broadway Trust Company had no notice or information as to the financial condition of the Fisher Company, besides what has already been stated, except that its counsel learned that another mortgage—one to the Empire Trust Company —had been put on the property.
Let us see what was the exact financial condition of the company, as disclosed by a careful examination of its affairs made by Mr. Wylie. It was indebted to the New Brunswick bank $24,000; to the Empire Trust Company, $15,000; and to the Broadway Trust Company, $15,000; making $54, 600. It was indebted to the laborers, who are preferred by our laws, in the sum of about $7,000. Besides that, it was indebted to divers other individuals...
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