Wiencke v. Branch-Bridge Realty Corp.

• Decision Date: 06 February 1939
• Docket Number: No. 235.,235.
• Citation: 4 A.2d 415,125 N.J.Eq. 135
• Parties: WIENCKE v. BRANCH-BRIDGE REALTY CORPORATION et al.
• Court: New Jersey Supreme Court

4 A.2d 415

125 N.J.Eq. 135

WIENCKE

v. BRANCH-BRIDGE REALTY CORPORATION et al.

No. 235.

Court of Errors and Appeals of New Jersey.

Feb. 6, 1939.

Appeal from Court of Chancery.

Suit to foreclose a mortgage by Robert G. Wiencke, successor to Samuel Stock, receiver of the National Bank of North Hudson, at Union City, N. J., a corporation of the United States of America, against the Branch-Bridge Realty Corporation, a corporation of New Jersey, and others wherein certain counterclaims were filed. From an adverse decree, complainant appeals.

Affirmed.

On appeal from a decree of the Court of Chancery advised by Vice Chancellor Fielder, who filed the following opinion:

"The bill of complaint herein was filed by Samuel Stock, receiver of National Bank of North Hudson, to foreclose a mortgage dated February 1, 1932 given by New Jersey Bergen Square Realty Co. (hereinafter called Bergen Square Co.), to John J. McMahon to secure the payment of $150,000, covering a tract of land in Jersey City, which mortgage was assigned by McMahon to a predecessor receiver of said bank, by assignment bearing even date and recorded simultaneously with said mortgage. The bill alleges that the consideration for the assignment was an existing indebtedness due from McMahon to the bank, which indebtedness as well as the full amount of the mortgage is still due. It also alleges as subsequent liens against the mortgaged premises two mortgages for $300,000 each, executed by Bergen Square Co. to McMahon and assigned by him to William E. Hanna; also a judgment recovered February 17, 1933, by United States of America in the U. S. district court for the district of New Jersey against Bergen Square Co. for $40,456.69 on an income tax lien against that corporation; also a judgment recovered May 17, 1935, by Robert L. Stevens and John L. Ridley receivers of Lloyds Insurance Co. against Bergen Square Co. for $47,753.22. The bill further alleges conveyance February 17, 1933 of the mortgage premises by Bergen Square Co. to Branch-Bridge Realty Co. (hereinafter called Branch Bridge Co.) and the appointment of John L. Ridley as receiver of Bergen Square Co. The bill contains other allegations which it is not necessary to state for the purposes of this decision. The defendants (among others) are Branch Bridge Co., Hanna, the receivers of Lloyds Insurance Co. and the receiver of Bergen Square Co. An answer, with counter-claim, was filed by the receivers of Lloyds Insurance Co. and the receiver of Bergen Square Co. attacking the validity of complainant's mortgage as well as the validity of the two $300,000 mortgages assigned to Hanna, on the ground that all three were without consideration and were given to hinder, delay and defraud the counter-claimants and other creditors of Bergen Square Co. and also attacking the validity of the conveyance by Bergen Square Co. to Branch Bridge Co. on the same grounds. An order was subsequently entered directing that Louis H. Pink, superintendent of insurance of the State of New York, as liquidator of Lloyds Insurance Co., be added as a defendant to the bill of complaint and he also filed an answer, with counter-claim alleging an interest in the proceedings by virtue of a payment of $32,834.45 made by him as such liquidator of the United States of America in settlement of a claim on a surety bond on which Lloyds Insurance Co. was liable, given to secure payment of income taxes due from Bergen Square Co. to the United States. He too attacks the validity of the complainant's mortgage and the two $300,000 mortgages set out in the bill of complaint, on the ground of no consideration and fraud. Subsequently Saul Nemser was substituted in place of John L. Ridley as one of the receivers of Lloyds Insurance Co. and as receiver of Bergen Square Co.

"The deed from Bergen Square Co. to Branch Bridge Co. conveyed the premises described in the bill of complaint and another parcel owned by the grantor, thereby divesting the grantor of all its assets and rendering it insolvent. John J. McMahon was president of both corporations and he testified that no consideration passed for that conveyance. The deed will be set aside as prayed for by the counter-claimants, who were at the time of the conveyance creditors of Bergen Square Co., as fraudulent as to them.

"The two $300,000 mortgages given by Bergen Square Co. to John J. McMahon and by him assigned to Hanna will also be set aside as void. McMahon testified that there was no consideration for these mortgages; that they were assigned to Hanna without consideration to hold for him (McMahon) and a decree pro confesso on the counter-claim was entered against Hanna.

"I have no doubt that the $150,000 mortgage complainant seeks to foreclose was given by Bergen Square Co. to McMahon without consideration. McMahon's claim, as a witness, that the mortgage was given as security for money he had advanced from time to time to Bergen Square Co. is not supported by his own testimony. It appears that Bergen Square Co. was incorporated in 1922 and that McMahon and one Kerbaugh owned all its capital stock down to 1929, when McMahon bought Kerbaugh's holdings and became sole owner of all the stock. The company did no business after 1929 and all advances McMahon claimed to have made were prior to that year. He testified that such moneys as he had advanced for which the $150,000 mortgage was executed were given to Kerbaugh for the purpose of another business in which he and Kerbaugh were interested and that none of such sums went into the treasury of Bergen Square Co. The account books of the company are missing and its minute book records nothing concerning any loan by McMahon to the company or concerning any indebtedness of the company to him. The question therefore is, is complainant as assignee of a mortgage given without consideration, a bona fide holder thereof as against the mortgagor's creditors? For the complainant it is argued that in taking the...