Liebowitz v. Arrow Roofing Co.

• Decision Date: 19 July 1932
• Citation: 259 N.Y. 391,182 N.E. 58
• Parties: LIEBOWITZ v. ARROW ROOFING CO., Inc., et al.
• Court: New York Court of Appeals Court of Appeals

259 N.Y. 391

182 N.E. 58

LIEBOWITZ

v.ARROW ROOFING CO., Inc., et al.

Court of Appeals of New York.

July 19, 1932.

Action by Rose Liebowitz against the Arrow Roofing Company, Incorporated, the Dillon-Parker Corporation, and others, in which defendant Dillon-Parker Corporation filed a counterclaim. From a judgment of the Appellate Division (234 App. Div. 826, 253 N. Y. S. 996), affirming a judgment of the Special Term decreeing foreclosure and sale of mortgaged realty, defendant Dillon-Parker Corporation appeals.

Reversed, and new trial granted.Appeal from Supreme Court, Appellate Division, First Department.

Max Corin and Maurice B. Blumenthal, both of New York City, for appellant.

Michael H. Grae, of St. George, S. I., and Louis Baron, of West New Brighton, for respondents.

HUBBS, J.

The defendants Roth and Weber were engaged in the roofing business as copartners under the name Arrow Roofing Company. Between December 1, 1928, and May 28, 1929, they became indebted to the appellant, Dillon-Parker Corporation.

The Dillon-Parker Corporation commenced two separate actions on account of such indebtedness, which actions resulted in judgments totaling $3,947.63, entered and docketed against the partners on April 15, 1930. By deed dated January 2, 1929, and recorded January 14, 1930, the defendants Roth and Weber conveyed to the defendant Arrow Roofing Company, Inc., the real property which is the subject of this action. The record does not disclose when the deed was acknowledged.

Arrow Roofing Company, Inc., was incorporated in 1927, and the defendants Roth and Weber were its sole stockholders. It does not appear that the corporation did any business before it took title to the real property in question. Subsequent thereto and at least as late as May, 1929, when they gave a note to the appellant, Dillon-Parker Corporation, the defendants Roth and Weber were doing business under the partnership name.

On the date of recording of the deed there was also recorded a bond and mortgage dated December 30, 1929, given by Arrow Roofing Company, Inc., to Arthur Buxenbaum as security for the sum of $5,000, which mortgage covered the premises so conveyed by the defendants Roth and Weber to Arrow Roofing Company, Inc. Buxenbaum transferred that mortgage to the plaintiff, the assignment being recorded on May 5, 1930. The plaintiff immediately entered into passession of the premises and two days thereafter instituted this action to foreclose the mortgage, the cause of action being based upon a default which occurred prior to the assignment to plaintiff. The appellant, Dillon-Parker Corporation, was made a party defendant. It answered, setting up as a counterclaim that the property in question was originally owned by Roth and Weber, copartners, trading under the firm name of Arrow Roofing Company, against whom it had claims reduced to judgment April 15, 1930; that the transfer of all the assets of the copartnership, including the property in question, was fraudulent as to partnership creditors under sections 276 and 277 of the Debtor and Creditor Law (Consol. Laws, c. 12); that the mortgage in question had no inception until its assignment on April 25, 1930; and that the plaintiff took the mortgage subject to the latent equities of appellant's judgments. It demanded judgment that the deed, bond, and mortgage and assignment thereof to plaintiff be declared fraudulent and void; that the bond and mortgage be canceled and discharged of record; that the title to the premises be adjudged to be in Roth and Weber, subject to the rights of valid incumbrances and of the appellant, Dillon-Parker Corporation, as a judgment creditor.

[1] At the trial the court ruled that lack of consideration for the mortgage was immaterial and refused to permit the appellant, Dillon-Parker Corporation, to offer testimony upon that question. It also refused to receive evidence as to the consideration paid by the corporation for the deed to the property. When the real property was transferred to the corporation, it included office fixtures and other equipment of the partnership so that nothing was left to the partnership.

That the transfer of the real property to the corporation and the execution and delivery of the mortgage to Buxenbaum was in pursuance of a fraudulent scheme to defeat the rights of creditors of Roth and Weber is...