Schwartz v. Maguire

• Decision Date: 22 April 1941
• Docket Number: 124/294.
• Parties: SCHWARTZ v. MAGUIRE et al.
• Court: New Jersey Court of Chancery

21 A.2d 670

130 N.J.Eq. 152

SCHWARTZ

v. MAGUIRE et al.

124/294.

Court of Chancery of New Jersey.

April 22, 1941.

Suit by Edward Schwartz, receiver of the Film Automatic Machine Corporation, against Edwin H. Maguire and others to set aside a distraint and for other relief.

Decree in accordance with opinion.

Joseph L. Lippman, of Newark, for complainant.

James P. Mylod, of Newark, for defendants Edwin H. Maguire and Charles Maguire.

Philip Goodell, of Montclair, for defendant, Bloomfield Tool Corporation.

William J. Egan, of Newark (Robert L. Hood, of Newark, of counsel), for defendant, Wallace & Tiernan Products, Inc.

KAYS, Vice Chancellor.

The Film Automatic Machine Corporation, a corporation of this State, was formerly engaged in the business of assembling automatic film cutting and splicing machines. Parts of these machines were made by other manufacturers. The corporation leased the completed machines to various film exchanges on a weekly rental basis. Complainant was appointed receiver of the corporation by the United States District Court for the District of New Jersey.

The bill of complaint was filed to set aside certain transactions involving the corporate property.

The first cause of action is to set aside a distraint levied on the corporation's chattels by its landlords, Edwin H. Maguire et al, and to set aside the sale under the levy. The alleged reasons for the relief is that the distress was inequitable, illegal, excessive, unreasonable and a result of a collusive agreement to effect an illegal and improper preference in fraud of creditors.

It is not disputed that on March 16, 1938, the Film Company was indebted to its landlords, the Maguires, in the sum of $500 for rent for the months of December, 1937, and January, February, and March, 1938. The landlords' bailiff, on said March 16, levied on the assets of the corporation consisting of machines and tools. On April 5, 1938, the April rent having become due, a second distraint was made for the additional sum of $125. The bailiff held a sale on May 2, 1938, under the first levy and the defendant, Bloomfield Tool Corporation, bid in the goods and chattels at said sale for $548.20. The sale was made subject to the second levy. Thereafter the Bloomfield Tool Corporation paid the landlords an additional $125 for a release from the lien of the second levy. The bailiff's bill of sale purports to convey title to more machines than were actually on the premises at the time of the levy. The Bloomfield Tool Corporation concedes that it acquired no title to machines which were not on the premises of the Film Company at the time.

From the evidence I am satisfied that the distraint and sale was not the result of any collusive agreement between the landlords and the Bloomfield Tool Corporation or the Film Company which might be construed in fraud of creditors. The landlords were privileged to proceed against the tenant either under R.S. 2:60-229 et seq. N.J.S.A. 2:60-229 et seq, or under R. S. 2:58-1, N.J.S.A. 2:58-1, as supplemented by R.S. 2:58-34, N.J.S.A. 2:58-34. They chose to proceed under the latter statute which they were privileged to do. Blanos v. Eastwood Realty Co., 116 N.J.L. 1, 181 A. 144. A landlord's claim for unpaid rent is not a lien by virtue of Section 4, N.J.S. A. 2:58-1, but will ripen into a lien when a distraint is actually made. Franz Realty Co. v. Welsh, 86 N.J.Eq. 228, 98 A. 387. A landlord's lien, so perfected, has priority to the claims, of general creditors provided the distraint was made prior to the receivership. Glaser v. Achtel-Stetter's Restaurant, 106 N.J.Eq. 150, 149 A. 44; Whitehead v. Whitehead Pottery Co., 115 N.J.Eq. 257, 170 A. 830. I believe the landlords acted in good faith.

The next question is whether or not the restraint was reasonable. An expert called by the receiver testified that at a forced sale the machinery and equipment would have brought $6,300 as of the date of the distraint. He also testified that the machinery and equipment would have brought more than said amount in the spring of 1938. The former president of the Film Company, who testified on behalf of the complainant, valued the machinery and equipment at $50,000. This witness appeared to base his value on the cost of the machinery and equipment as shown by the company's books and his estimate, therefore, is of little value. There was no other evidence relative to the value of the machinery and equipment.

I have concluded the value of the said property was about $6,300 which would appear to make the distraint excessive. See Lipinski v. Frank, 170 A. 608, 12 N.J.Misc. 174. The sale of all of the machinery and equipment for about one-tenth of their value is at least a...