Reilly v. Penn Cordage Co.

• Decision Date: 18 August 1899
• Citation: 44 A. 161,58 N.J.E. 459
• Parties: REILLY et al. v. PENN CORDAGE CO.
• Court: New Jersey Court of Chancery

44 A. 161

58 N.J.E. 459

REILLY et al.

v. PENN CORDAGE CO.

Court of Chancery of New Jersey.

Aug. 18, 1899.

(Syllabus by the Court.)

Suit by Lewis A. Reilly and others against the Penn Cordage Company. The defendant company has been decreed to be insolvent, and a receiver has been appointed, who has qualified and entered upon the performance of his duties. The property which has come into his possession and ownership as receiver consists of a lot of land near Beverly, in Burlington county, and buildings, engines, boilers, shafting, gearing, and belting, and also machines, on the property, there in use for the making of rope, twine, and cordage. When the property came to the receiver, it was subject to several classes of liens: First. Unpaid local taxes. Second. A mortgage made by the Penn Cordage Company to the Knickerbocker Trust Company of New York on February 1, 1896, on its face purporting to cover all the real, personal, and mixed property of the mortgagor then owned, and upon all personalty thereafter to be acquired, etc., to secure bonds of the mortgagor to the amount of $100,000, with interest, etc., recorded as a real-estate mortgage only on the 10th day of April, 1896. This mortgage was neither executed, proven, nor recorded as a chattel mortgage. Third. A mortgage made by the Penn Cordage Company to Constantine P. Ralli to secure its bond for $50,000 and interest, purporting to cover the company's land, improvements, franchises, and income, and all real, personal, and mixed property then owned by the mortgagor, recorded October 12, 1897, as a real-estate mortgage only, and assigned on October 5, 1897, by Ralli to the Guarantor Finance Company of Philadelphia. The last-named mortgage was not executed, proven, or recorded as a chattel mortgage. The debt secured by it is disputed, and, when proven by the Guarantor Finance Company before the receiver, was by him disallowed and rejected, and no appeal has been taken. Fourth. Numerous Judgments recorded and entered in the supreme court and in the Burlington county courts against the Penn Cordage Company; the earliest on the 11th day of October. 1897, and the latest on the 1st day of December, 1897. Under all these judgments levies were made upon all the property of the Penn Cordage Company previous to the appointment of the receiver. After the receiver had for some time been managing the affairs of the insolvent company, looking to the liquidation of its debts by the disposition of its property, he instituted an inquiry as to the property of the insolvent company, to ascertain what portions of it were real estate covered by the real-estate mortgage, and what personal property not affixed to the freehold. Pursuing this examination, the receiver inspected the property, and made a division of the personalty from the realty, by lists and schedules; naming each piece of personal property, and declaring all the remainder to be part of the realty. He then filed his petition, setting forth the above-stated facts, and alleging that he is advised that the said real and personal property cannot be sold subject to the liens thereon, because the bidders would not be able to determine what title they would get, or what valid lien the same might be subject to, and that for this reason both the rea 1 and personal property should be sold, by the direction of this court, free of all liens, and the money should be paid into this court, subject to distribution by the decree of this court after the validity and priority of the several liens thereon shall have been determined, and praying that his determination as to what constituted the realty and what the personalty may be ratified, and that the personalty may be sold free from the liens of the judgments and executions, and the purchase money be paid into this court, to abide its further order, and that the real estate and its appurtenances be likewise sold clear of all liens, and the purchase money be brought Into this court, and that the validity of the mortgages and claims of creditors may be here determined, and the purchase money distributed as equity may require. On this petition an order was allowed upon the mortgage holders, and judgment and other creditors who had proved claims, that they show cause why the prayer of the receiver's petition should not be granted. Under this order all the parties representing each of the above-stated interests appeared, and proof has been taken. While the receiver's petition for an order to sell clear of the Hens of the mortgages and levies was pending, the Knickerbocker Trust Company of New York, trustee for the first mortgage bondholders, filed its petition in this court in this cause, showing a default in the payment of the moneys due on its mortgage, alleging that it was about to foreclose, and praying leave to make the receiver a party defendant. This petition and that of the receiver above referred to were directed to be heard at the same time, and counsel for all the parties interested consented, and have been heard. Petition refused.

J. E. Howell, for receiver.

Eugene Stevenson, for first mortgagee, Knickerbocker Trust Co. Mr. Lawrence, for bondholders under Knickerbocker Trust Co. J. H. Gaskill, for judgment creditor Pennsylvania R. Co. C. V. D. Joline, for judgment creditors Fries and others.

William H. Carson, for second mortgagee.

GREY, V. C. (after stating the facts). These two matters, by consent of counsel, and for their convenience, have been heard together. The one, the petition of the receiver of the Penn Cordage Company, alleged that the company was, at the time of the appointment of the receiver, seised of both real and personal property, incumbered by mortgages, Judgments, executions, and tax liens, and that the validity and extent of...